BBVA in 2012
BBVA in 2012
BBVA in 2012
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Structural risksStructural <strong>in</strong>terest-rate riskIn <strong>2012</strong> the economic slowdown became more pronounced, particularly <strong>in</strong> the Euro Zone,where the crisis was aggravated by the doubts regard<strong>in</strong>g the capacity of the peripheralcountries to undertake fiscal and structural reforms. This situation led to new falls <strong>in</strong> <strong>in</strong>terestrates <strong>in</strong> Europe, where they stood at all-time lows, as well as <strong>in</strong> the United States and Mexico.In South America, central banks ma<strong>in</strong>ta<strong>in</strong>ed an expansive policy, despite upward pressure on<strong>in</strong>flation.The changes <strong>in</strong> market <strong>in</strong>terest rates affect net <strong>in</strong>terest <strong>in</strong>come and the book value of entities. Thispotential impact is <strong>in</strong>cluded <strong>in</strong> the structural <strong>in</strong>terest-rate risk. Its ma<strong>in</strong> source of risk arises fromdifferent maturities or depreciation <strong>in</strong> assets and liabilities <strong>in</strong> the bank<strong>in</strong>g book and off-balancesheetpositions. The accompany<strong>in</strong>g chart shows the gaps <strong>in</strong> <strong>BBVA</strong>’s structural balance sheet <strong>in</strong>euros.31Maturity and repric<strong>in</strong>g gaps of <strong>BBVA</strong>’s structural balance sheet <strong>in</strong> euros(Million euros)25,00015,0005,000–5,000–15,000–25,0001-3 months 3-6 months 6-9 months 9-12 months 2 months +3 yearsA f<strong>in</strong>ancial <strong>in</strong>stitution’s exposure to adverse changes <strong>in</strong> market rates is a risk <strong>in</strong>herent to itsbus<strong>in</strong>ess, while at the same time represents an opportunity to generate value. That is whystructural <strong>in</strong>terest-rate risk should be managed effectively and reta<strong>in</strong>s a reasonable relation to itsequity and expected earn<strong>in</strong>gs.The management of structural risks <strong>in</strong> <strong>BBVA</strong> Group is handled by the Balance-SheetManagement unit, with<strong>in</strong> the F<strong>in</strong>ancial Management area. Through the Asset and LiabilityCommittee (ALCO), the unit is <strong>in</strong> charge of maximiz<strong>in</strong>g the Bank’s economic value, preserv<strong>in</strong>g net<strong>in</strong>terest <strong>in</strong>come and guarantee<strong>in</strong>g the generation of recurrent earn<strong>in</strong>gs. With this aim, the F<strong>in</strong>ancialManagement area assesses possible alternatives and proposes the most appropriate actions basedon its expectations, balanc<strong>in</strong>g expected economic results and the impact on the risk level. This isdone while adapt<strong>in</strong>g to the established risk profile, as well as the strategy and policies def<strong>in</strong>ed bythe Group’s management bodies. <strong>BBVA</strong> has a transfer pric<strong>in</strong>g system that centralizes the Bank’s<strong>in</strong>terest-rate risk on ALCO’s books and is designed to facilitate this task.With<strong>in</strong> the Global Risk Management corporate area, the Corporate Risk Management (CRM) unitis responsible for controll<strong>in</strong>g and monitor<strong>in</strong>g structural <strong>in</strong>terest-rate risk with the aim of keep<strong>in</strong>gthe Group’s solvency, support<strong>in</strong>g its strategy and ensur<strong>in</strong>g the successful development of itsbus<strong>in</strong>ess. To do so, it acts as an <strong>in</strong>dependent unit, which guarantees a proper separation betweenStructural risks111