BBVA in 2012

Operational risk capitalThe methodology used by BBVA to calculate capital using advanced internal models (AMA) isthe so-called loss distribution approach (LDA), considered the most robust from a statistical pointof view among those permitted by the Basel Committee. This methodology is fed by three datasources: the Group’s internal operational loss database (SIRO, the Integrated Operational RiskSystem), events occurring in the domestic and international financial sector (external databases),and simulated events (also called scenarios). BBVA’s application of AMA models has been approvedfor Spain and Mexico.The capital resulting from the application of the advanced models is adjusted by factors related tothe country environment and by internal control factors that depend on the level of mitigation ofthe weaknesses identified by the controls.Economic operational risk capital(Million euros)Risk class Capital MethodSpain 701 AMAMexico 441 AMAOthers 867 StandardOthers 205 BasicTotal 2,214Approval of new Businesses, productsand servicesIn 2012, the Corporate Operational Risk Management (Gestión Corporativa de Riesgo Operacional,GCRO) function prepared a new procedure for approval of new businesses, products and servicesas part of its work focused on the continuous improvement of the operational risk admissionphase. It will be fully implemented in 2013. The new procedure allows BBVA to integrate operationalrisk management more fully into the Group’s day-to-day business and adopt best practices andrecommendations made recently by European organizations and regulators. The improvementsintroduced into the approval of businesses, products and services are as follows:• A clearer distinction between business and product and/or service.• Simpler governance through committees with a greater level of representation, which unifiesthe global overview of businesses and products in the business and geographical areas.• A definition of the stages and tasks that the approval processes must achieve, as well as thepeople responsible for them.• Enhanced monitoring of new businesses and products after their approval.• A leading role for the operational risk function as a coordinator and guarantor of the applicationof criteria and processes, and the involvement of different specialists who make decisions withintheir fields of expertise.124 Risk management