BBVA in 2012

The easing of financial tensions in the closing months of 2012 has prompted a reduction of thefunds requested from the ECB to €313,109m in December, after a high of €388,736m in August.15The health of thebanking systemcontinues toimprove in theUnited StatesIn Latin America,the sector remainsvery soundIn Turkey therehas been a notablegrowth in creditwhile NPA ratioshave remainedlow. Reformscontinue in ChinaIn the United States, the banking system continues to recover, and there are now fewerinstitutions facing problems. The NPA ratio of commercial banks has decreased over the courseof 2012 in all segments, although it flared up slightly in the residential real-estate segment in thethird quarter. Lending conditions are likely to remain strict in 2013, particularly for residentialloans, in light of the high financial burden of households.In Mexico, the financial system is in an enviable situation, with a capital ratio far above therequired minimum of 10%. As a result, it will be one of the first countries to adopt the Basel IIIaccords. Lending is growing strongly, and has reported 20 successive months of double-digityear-on-year growth. Growth is evident in all components of bank lending, and this dynamicmood is expected to continue due to the favorable macroeconomic environment. Growth hasslowed in traditional customer funds, due to the less dynamic role played by time deposits in thelight of the strong growth in investment companies (SID, non-banking savings instruments whichare a substitute for time deposits). However, there are no liquidity tensions.In South America, the financial system in most countries remains sound and there is stronggrowth in lending, fueled by monetary policies geared towards boosting economic activity.Faced with external monetary expansion and the ensuing increase in capital flows, many centralbanks have chosen to apply macroprudential measures to discourage capital inflows and tocontrol the rise in domestic lending (particularly in Brazil and Peru).In Turkey, lending to the private sector has risen considerably (+16.0 year to year), although thepercentages are lower than the figures of 2011. This is, mainly, due to the increase in the officialinterest rates in the second half of the year (for the first time in over a year). Finally, the NPA ratioremains at low levels.Lastly, in China, the authorities have launched several reforms since the start of the year,including measures designed to liberalize interest rates and provide greater flexibility inexchange rates. In June and July, the Central Bank broadened the range of discounts permittedin interest rates for loans to 30%, and introduced a 10% premium on the benchmark interestrate for deposits. It also reduced the reserve requirement by 150 basis points. In September, thefinancial sector plan was published, following on from the Five-Year Plan (2011-2015), restating theintention of abolishing interest rate controls, opening the capital account, promoting financialinnovation and reinforcing the financial regulation framework. The Plan also sets quantitativetargets for the added value of the financial sector (up to 5.0% of GDP in 2015, compared with4.4% in the last decade). In this context, growth in bank lending remains relatively stable,although the proportion of long-term loans has increased, showing that credit flows are beingdrawn to public infrastructure projects and business investments.40 Executive summary