BBVA in 2012
BBVA in 2012
BBVA in 2012
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the risk management and control functions, as recommended by the Basel Committee on Bank<strong>in</strong>gSupervision. CRM designs the measurement models and systems, develops the monitor<strong>in</strong>g,<strong>in</strong>formation and control policies, and prepares the structural <strong>in</strong>terest-rate risk measurements usedby the Group’s management. At the same time and through the Risk Management Committee(RMC) carries out the function of risk control and analysis, report<strong>in</strong>g to the ma<strong>in</strong> managementbodies such as the Executive Committee and the Board of Directors’ Risk Committee.<strong>BBVA</strong> Group’s structural <strong>in</strong>terest-rate risk management procedure has a sophisticated set of metricsand tools that enable its risk profile to be monitored precisely. The model is based on a series ofdeeply analyzed assumptions designed to characterize the balance sheet more accurately. Interestraterisk measurement <strong>in</strong>cludes probabilistic metrics as well as sensibility measures <strong>in</strong> response to aparallel shift of +/- 100 basis po<strong>in</strong>ts of the market <strong>in</strong>terest rate curves. The model regularly measuresthe Bank’s earn<strong>in</strong>gs at risk (EaR) and economic capital (EC), def<strong>in</strong>ed as the maximum adversedeviations <strong>in</strong> net <strong>in</strong>terest <strong>in</strong>come and economic value, respectively, for a particular confidence leveland time horizon. These deviations are obta<strong>in</strong>ed by apply<strong>in</strong>g a simulation model of <strong>in</strong>terest-ratecurves that takes <strong>in</strong>to account other sources of risks apart from directional movements, such aschanges <strong>in</strong> the slope and curvature, and also the diversification between currencies and bus<strong>in</strong>essunits. The model is regularly subjected to <strong>in</strong>ternal validation that <strong>in</strong>cludes backtest<strong>in</strong>g.Chart 32 shows the sensitivity profile of the ma<strong>in</strong> franchises of <strong>BBVA</strong> Group.32<strong>BBVA</strong> Group. Structural <strong>in</strong>terest-rate risk profileSVE<strong>BBVA</strong> CompassEuropeVenezuelaMexicoColombiaSMFArgent<strong>in</strong>aPeruChileNIIS: Net <strong>in</strong>terest <strong>in</strong>come sensitivity (%) of the franchise to +100 basis po<strong>in</strong>ts.EVS: Economic value sensitivity (%) of the franchise to +100 basis po<strong>in</strong>ts.Size: Core capital to each franchise.The risk appetite of each franchise is determ<strong>in</strong>ed by the Executive Committee through thelimits structure. Thus the maximum negative impacts, <strong>in</strong> terms of both earn<strong>in</strong>gs and value, arecontrolled <strong>in</strong> each entity. In <strong>2012</strong> active balance-sheet management has enabled exposure torema<strong>in</strong> aligned with the Group’s target risk profile, as shown <strong>in</strong> Chart 33.33Structural <strong>in</strong>terest-rate risk. Average use of limits <strong>in</strong> <strong>2012</strong>100%Limit on net<strong>in</strong>terest<strong>in</strong>come80%60%Limit oneconomicvalue40%20%0%Europe <strong>BBVA</strong> Bancomer <strong>BBVA</strong> Compass <strong>BBVA</strong> Francés <strong>BBVA</strong> Chile <strong>BBVA</strong> Colombia <strong>BBVA</strong> Cont<strong>in</strong>ental <strong>BBVA</strong> Prov<strong>in</strong>cial112 Risk management