2019 Annual Report
Contents
01. Letters from the Group Executive Chairman and the CEO
02. Management Report
Non-financial information report
Group financial information
Business areas
Risk management
Alternative Performance Measures (APMs)
Annual Corporate Governance Report
03. Consolidated Financial Statements and Auditors´Report
Consolidated Financial Statements
Notes to the accompanying consolidated Financial Statements
Appendices
Auditor´s Report
Letter from the Group Executive Chairman
Dear shareholders,
In 2019 we achieved excellent financial results on a recurring basis, the best of the last ten years, and we also made
major progress in our transformation journey.
Net attributable profit excluding non-recurring impacts reached €4,830 million in 2019, thanks to record-high core
revenues and strict cost management. Book value per share rose 11.5 percent and the return on tangible equity
(ROTE) was 11.9 percent, which placed us ahead of the financial industry in terms of profitability. The Group’s fully-
loaded CET1 capital ratio ended the year at 11.74 percent, 40 basis points higher than in 2018.
All of this in a year marked by a highly complex economic environment, with deceleration in the global economy due to
geopolitical conflicts, trade tensions and a low interest-rate environment. This led to global growth of 3.1 percent in 2019,
the lowest since 2009.
These results are clear evidence of the success of our transformation and of our commitment to digitization. A
commitment that has made us the unquestionable leaders of the financial sector’s digital transformation in recent
years.
Proof of this is the fact that since 2015, the number of customers banking with us on digital channels has doubled, and the
number of customers doing it through their mobile phones has tripled. Mobile customers now represent more than 50
percent of our customer base. Digital sales in both units and value now represent 59 percent and 45 percent of sales,
respectively.
Not only have we seen the number of mobile and digital customers evolve in recent years, our total base of active
customers has increased by nearly nine million. And what is even more important, our customers are more loyal and
more satisfied, as shown by our leading position in the net promoter score (NPS) in most places where we operate.
All of this is the result of a unique value proposition across all channels, especially digital channels. The consulting firm
Forrester Research recognized BBVA Spain’s mobile banking app as the best in the world for the third consecutive
year, followed by BBVA’s app in Turkey in the second place.
Furthermore, in 2019, we adopted a single brand and new logo globally. This change underscores our goal of offering a
unique value proposition and uniform user experience, characteristic of a global digital company.
Without a doubt, one of the most remarkable aspects of 2019 is the rising awareness and social mobilization with
regards to climate change and the sustainability challenges facing humankind. The fight against climate change
represents one of the biggest disruptions in history, with very significant economic consequences to which we all
(governments, regulators, companies, consumers, society as a whole) need to adapt immediately.
The climate transition will require significant investment in the short term in many industries. At BBVA, we are aware of the
important role banks may play in this transition providing financings and advice to our customers. We firmly believe that
the future of banking is financing the Future, with a capital F.
For this reason, two years ago, we defined our Pledge 2025 in order to achieve the United Nations Sustainable
Development Goals and aligned with the Paris Climate Agreement. We set the goal of mobilizing €100 billion by 2025,
and in just two years we have already allocated over €30 billion, which represents a significant progress.
In addition, at BBVA, we have made the commitment to be neutral in direct CO2 emissions from our activities starting
this year, 2020. Also, as we announced at the United Nations Climate Change Conference COP 25 in Madrid, we have set
an internal price for CO2 emissions. This encourages all of BBVA’s areas and businesses to reduce their emissions. We
hope that in the near future, a global CO2 market will be established to also incentivize all economic actors to make the
necessary reductions.
But it is important to highlight that for us, sustainability goes beyond climate change. For this reason, at BBVA we support
global initiatives, such as the United Nations Global Compact, which help join efforts in the pursuit of sustainable
development. For us, it is essential that this sustainable development be inclusive for each and every person in society.
With this goal in mind, in 2019, BBVA allocated over €100 million to social initiatives and support for education,
culture and science as well as entrepreneurship, benefitting over 11 million people.
In particular, at BBVA, we feel especially proud of the great work of our foundations through numerous initiatives, such as
the BBVA Foundation Frontiers of Knowledge Awards, which recognize fundamental contributions to the development
of knowledge and research. BBVA Microfinance Foundation’s financing for development is also noteworthy, particularly
through microloans to low-income entrepreneurs and programs for environmental sustainability and the economic
empowerment of women. An endeavor for which it was recognized by the Organization for Economic Cooperation and
Development (OECD), as the second largest philanthropic initiative on a global level, and the largest in Latin
America.
Furthermore, paying taxes is a fundamental part of BBVA’s commitment to society. For this reason, BBVA voluntarily
publishes its global tax contribution report, an example of good governance and transparency. In 2019, BBVA contributed
a total of €9.29 billion in taxes derived from our activities in all of our markets, including both our own taxes and third-
party taxes paid by the Group. These taxes make it possible to foster development in these countries by investing in
infrastructure or healthcare, but especially by helping to promote equal opportunities through better education.
The year 2019 also served to carry out a strategic reflection process, based on the enormous accomplishments that we
have achieved over the past five years, and with the goal of continuing to work to attain our Purpose: to bring the age of
opportunity to everyone.
Looking forward we want to help our customers make better financial decisions and to support them in their
transition to a more sustainable world. This aspect is crucial for all of us, taking into account the important social and
environmental challenges we are facing.
To this end, we have evolved our strategy and defined six new strategic priorities that seek to broaden the impact of
our transformation journey on our clients and society, with the team, data and technology playing a key role to achieve
our Purpose. The first four priorities are directed towards:
1.
Improving our clients financial health, helping them in their decision-making and daily management of their
finances through personalized advice.
2. Helping our clients transition toward a sustainable future, not just from an environmental standpoint, but also
striving for inclusive economic development.
3. Reaching more clients, leveraging digital channels to achieve profitable and sustainable growth in the most
attractive segments.
4. Driving operational excellence, with simple, automated processes. We will also continue to focus on risk
management, an optimal capital allocation and promoting a culture of ethics and compliance.
To achieve these objectives we will leverage the two remaining priorities, the true foundation upon which we are building
the BBVA of the future:
5. The best and most engaged team, promoting the commitment and performance of each of us who are part of
BBVA in order to achieve our purpose.
6. Data and technology, which increasingly are key ingredients for any aspect of our activity, and which will help us
accelerate the achievement of the rest of priorities.
I am convinced that these six new strategic priorities will help us to address the challenges we must face and will determine
our success in the coming years as we continue leading the Future of banking.
Finally, I would like to thank each and every one of the more than 126,000 people that are part of BBVA for their excellent
work and commitment, and encourage them to continue working to fulfill our Purpose, and to always do so according to
our values, “The customer comes first”, “We think big” and “We are one team.”
And to you, our esteemed shareholders, thank you once again for your confidence and your constant support, which drives
us to continue giving our best every day.
Carlos Torres Vila
BBVA´s Group Executive Chairman
Letter from the Chief Executive Officer
Dear shareholders,
In 2019, we witnessed a slowdown in global growth resulting from geopolitical risks and trade tensions, which in turn led to
weaker international trade, less investment, and reduced industrial activity. In addition, the major central banks continued
to support measures in favor of low interest rates. Despite this challenging environment, BBVA has proven once again
the strength of its diversified business model and its ability to generate strong results with double-digit returns.
The world economy grew 3.1 percent in 2019, representing the lowest growth rate since 2009. At the national level,
economic performance varied by country across the BBVA footprint. On one hand, Spain achieved 2 percent growth,
jumping ahead of the eurozone. And, in the United States, despite a slight downturn, growth stood at 2.3 percent, bolstered
by expansive fiscal policies. Even so, growth across the Sunbelt region, where BBVA mainly operates, outpaced the
national average, standing at 3.2 percent. Colombia and Peru also posted solid growth at 3.2 percent and 2.1 percent,
respectively. Mexico experienced sluggish growth in 2019 owing to, among other factors, the delayed ratification of the
new trade deal with the United States and Canada and a slowdown in employment and private consumption. In Turkey,
economic policies adopted over the course of the year contributed to putting growth on the path to recovery. By contrast,
in Argentina we are facing a situation of real uncertainty.
Despite this challenging environment, BBVA Group’s 2019 net attributable profit, excluding non-recurring impacts,
was €4,830 million, representing a 2.7 percent year-on-year increase. This equates to the Bank’s highest net
attributable profit, without non-recurring impacts, since 2009. Including the goodwill impairment related to our unit in the
United States, the net attributable profit totals €3,512 million. The goodwill accounting impact, generated in 2009 as a
consequence of the acquisition of our main assets in the U.S., is due to the descending interest rate trends and economic
slowdown in the country. The goodwill impairment has no effect on the tangible net equity, capital, liquidity nor BBVA
Group’s ability to pay out dividends.
As for shareholder value creation, the tangible book value per share plus dividends reached €6.53 at the close of the year,
representing an 11.5 percent increase from the year before. And for another year, our profitability metrics place us ahead
of our peers. Excluding the goodwill impairment, return on equity stood at 9.9% and the return on tangible assets at 11.9%.
I would also like to highlight that our strong capital position once again came to the fore in 2019. The fully-loaded CET1 ratio
stands within our target range and closed the year at 11.74 percent, representing an increase of 40 basis points in the year,
despite negative impacts related to accounting standards and other regulatory adjustments.
The recurring revenues trend is also worth noting: despite low interest-rate environments in some of our major markets,
recurring revenues grew more than 5 percent at constant exchange rates — meaning without factoring in exchange rate
impacts — thus reaching a record high in absolute terms. Cost containment is also worth mentioning, with expenses
growing around 2.2 percent, well below the average rate of inflation across our footprint. As a result, the efficiency ratio
improved by 92 basis points reaching 48.5 percent, which once again positions us well ahead of our peer group.
And we have achieved all this while maintaining strong risk indicators, with a significant improvement in the NPL ratio,
which stood at 3.8 percent, 15 basis points better than the 2018 figure. The NPL coverage ratio improved 349 basis points
in the year, ending up at 77 percent. The results for both indicators are the best they have been in the last ten years. The
Group's cost of risk also remained low, near 1 percent.
With respect to our primary business units, I would like to especially point out the following:
● In Spain, the net attributable profit stood at €1,386 million, 1 percent less compared to the previous year,
weighed down from the drop in net interest income, which was as expected, and by the results from net trading
income, which was partially countered by the positive performance of commissions, a significant reduction in
costs, and lower impairments from the sale of NPL portfolios throughout the year. From a risk perspective, we
saw a positive trend with the NPL ratio dropping to 4.4 percent and the cost of risk to 0.12 percent.
● In the United States, the net attributable profit for 2019 reached €590 million, 23.9 percent less than in 2018 in
constant exchange rates. This was fundamentally due to the drop of interest rates and the increase in
impairment losses on financial assets as a consequence of greater one-time provisions in the commercial and
consumer portfolio and the adjustment in the macroeconomic scenario.
● In Mexico, the net attributable profit for the unit was €2,699 million, representing a year-on-year increase of 8.2
percent at constant exchange rates, driven by the net interest income and improved efficiency. It is also worth
pointing out the unit’s solid risk indicators.
●
●
In Turkey, the net attributable profit reached €506 million. Without taking into account the depreciation of the lira
throughout the year — meaning in constant terms — this result is similar to the previous year, with a slight decline
of 0.5 percent. I would like to emphasize the positive performance in net interest income, as a result of an
outstanding price management, which compensated for the drop in contribution from inflation-linked bonds.
In South America positive trends stand out in leading markets: Argentina, Colombia, and Peru. The net
attributable profit for the area rose to €721 million in 2019, which represents year-on-year growth of 64 percent
(excluding the BBVA Chile business from the annual comparison) in constant terms.
Finally, I don't want to miss this opportunity to thank the more than 126,000 Group employees for their ongoing effort, their
commitment, and for their contribution to our outstanding results, each day demonstrating the real value that comes from
working together as one team. And, of course, thank you to all of you, our shareholders, for your constant support which
inspires us to realize our purpose: to bring the age of opportunity to everyone.
Onur Genç
BBVA´s Chief Executive Officer
Contents
About BBVA
Non-financial information report
Strategy and business model
Customer relationship
Technology and innovation
Staff information
Ethical behavior
Sustainable Finance
Contribution to society
Other non-financial risks
Contents index of the Law 11/2018
Group financial information
BBVA Group highlights
Relevant events
Results
Balance sheet and business activity
Solvency
The BBVA share
Business areas
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Corporate Center
Risk management
Subsequent events
Alternative Performance Measures (APMs)
Annual Corporate Governance Report
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About BBVA
BBVA is a customer-centric global financial services group founded in 1857 that operates in more than 30 countries.
The Group has a strong leadership position in the Spanish market, is the largest financial institution in Mexico, it has
leading franchises in South America and the Sunbelt Region of the United States, being also the leading shareholder in
Turkey’s BBVA Garanti.
BBVA’s purpose is to bring the age of opportunities to everyone, based on the customers’ real needs: provide the best
solutions, helping them make the best financial decisions, through an easy and convenient experience. BBVA rests in
solid values: Customer comes first, we think big and we are one team.
Its diversified business is based on high-growth markets and it relies on technology as a key sustainable competitive
advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion,
and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best
practices.
This Management Report includes information on the Group's performance in 2019, the definition of the strategy and the
activity more related to it and to the stakeholders, in the sections of the chapter Non-financial information report; the
financial performance in the Group Financial Information chapter and the different countries and business areas in the
corresponding Business Areas; and all risk management information in its corresponding chapter.
3
Non-financial information report
Pursuant to Law 11/2018 of December 28, modifying the Commercial Code, the revised text of the Capital Companies
Law approved by Royal Legislative Decree 1/2010 of July 2, and Law 22/2015 of July 20 on Accounts Auditing, regarding
non-financial information and diversity (hereinafter, Law 11/2018), BBVA presents a non-financial information report
that includes, but is not limited to: the information needed to understand the performance, results, and position of the
Group, and the impact of its activity on environmental, social, respect for human rights, and the fight against corruption
and bribery matters, as well as employee matters.
In this context, BBVA prepares the Consolidated Non-financial information report in the Group's Management Report,
which is attached to the Consolidated Financial Statements for the 2019 fiscal year as covered in the article 49.6 of the
Commercial code introduced by Law 11/2018.
Reporting of the non-financial key performance indicators included (KPI) in this consolidated non-financial information
report is performed using the GRI (Global Reporting Initiative) guide as an international reporting framework in its
exhaustive option.
In addition, for the preparation of the non-financial information contained in this Management Report, the Group has
considered the Communication from the Commission of July 5, 2017 on Guidelines on non-financial reporting
(methodology for reporting non-financial information, 2017/C 215/01).
The information included in the consolidated non-financial information report is verified by KPMG Auditores, S.L., in its
capacity as independent provider of verification services, in accordance with the new wording given by Law 11/2018 to
article 49 of the Commercial Code.
4
The Group’s organizational chart
In 2019, the organizational structure of the Group remains in line with that approved by the Board of Directors of BBVA at
the end of 2018. This structure aimed at fostering the Group’s transformation and businesses, while further specifying
responsibilities for executive functions.
The main aspects of the organizational structure are as follows:
The Group Executive Chairman is responsible for the management and well-functioning of the Board of
Directors, the supervision of the management of the Group, the institutional representation, and leading and
boosting the Group’s strategy and its transformation process.
The areas reporting directly to the executive chairman are those related to the transformation’s key levers:
Engineering & Organization, Talent & Culture and Data; those related to the Group’s strategy: Global Economics
& Public Affairs, Strategy & M&A, Communications & Responsible Business and the figure Senior Advisor to the
Chairman; and the Legal-related and Board-related areas: Legal and General Secretary.
The Chief Executive Officer (CEO) is in charge of the daily management of the Group’s businesses, reporting
directly to BBVA’s Board of Directors.
The areas reporting to the CEO are the Business Units in the different countries and Corporate & Investment
Banking, as well as the following global functions: Client Solutions, Finance and Global Risk Management.
Additionally, there are two control areas with direct reporting of their heads to the Board of Directors through the
corresponding committees. These control areas are Internal Audit and the new Regulation & Internal Control, area that is
in charge of the relationship with regulators and supervisors, the monitoring and analysis of regulatory trends and the
development of the Group’s regulatory agenda, and the management of compliance-related risks.
5
Environment
Macro and industry trends
Global growth decelerated in 2019 to growth rates slightly below 3% in annual terms in the second half of the year, below
the 3.6% of 2018. Increased trade protectionism and geopolitical risks had a negative impact on economic activity,
mainly on exports and investment, additionally to the structural slowdown in the Chinese economy and the cyclical
moderation of the US and Eurozone economies. However, the counter-cyclical policies announced in 2019, led by central
banks, along with the recent reduction in trade tensions between the United States and China and the disappearance of
the risk of a disorderly Brexit in the short term, are leading to some stabilization of global growth, based on the relatively
strong performance of private consumption supported by the relative strength of labor markets and low inflation. Thus,
global growth forecasts stand around 3.1% for both 2019 and 2020.
GLOBAL GDP GROWTH AND INFLATION IN 2019 (REAL PERCENTAGE GROWTH)
World
Eurozone
Spain
The United States
Mexico
South America (1)
Turkey
China
Source: BBVA Research estimates.
(1) It includes Argentina, Brazil, Chile, Colombia and Peru.
GDP
3.1
1.2
2.0
2.3
0.0
0.9
0.8
6.1
Inflation
3.7
1.2
0.7
1.8
3.6
10.8
15.5
2.9
In terms of monetary policy, the major central banks took more loosening measures last year. In the United States, the
Federal Reserve reduced interest rates between July and October by 75 basis points to 1.75%. In the eurozone, the
European Central Bank (ECB) announced in September a package of monetary measures to support the economy and
the financial system, including: (i) a deposit facility interest rate reduction of ten basis points, leaving them at -0.50%, (ii)
the adoption of a phased interest rate system for the previously mentioned deposit facility, (iii) a new debt purchase
program of €20 billion per month, and (iv) an improvement in financing conditions for banks in the ECB's liquidity
auctions. The latest signs of growth stabilization contributed to the decision of both monetary authorities to keep interest
rates unchanged in recent months, although additional stimulus measures are not ruled out in the event of a further
deterioration of the economic environment. In China, in addition to fiscal stimulus decisions and exchange rate
depreciation, a cut in reserve requirements for banks was recently announced and base rates have been reduced.
Accordingly, interest rates will remain low in major economies, enabling emerging countries to gain room for maneuver.
Spain
In terms of growth, the latest data confirms that GDP continues to grow at a higher rate than in the rest of the eurozone,
though it has slowed to 0.4% quarterly in the second quarter of 2019 from an average growth of around 0.7% since 2014,
and stabilized in the third quarter. This result reflects a moderation in domestic demand, in both private consumption
and investment, as well as some fading stimuli and the negative effect of uncertainty.
As for the banking system, the total volume of credit to the private sector continues to decline while asset quality
indicators improve (the non-performing loan ratio was 5.1% in October 2019). Profitability remained under pressure
(ROE of 5.2% in the first nine months of 2019) due to low interest rates and lower business volumes. Spanish institutions
maintain comfortable levels of capital adequacy and liquidity.
United States
In the third quarter of 2019, growth remained stable at 2.1% on an annualized quarterly basis, following the slowdown
observed in the previous quarter from rates of 3.1% at the beginning of last year, confirming a period of economic
moderation and dispelling, for the time being, fears of a recessionary scenario. The strength of private consumption,
based on the soundness of the labor market, continues to contrast with weak investment, negatively affected by political
uncertainty and lower global growth, coupled with poorer performance of net exports. In this context, the Federal
Reserve points to a pause in interest-rate cuts to 1.75% as long as there are no significant changes in the scenario,
although additional stimulus measures are not ruled out in the event of a further deterioration in the economic
environment, nor an upward adjustment if inflation rises more than expected.
In the banking system, as a whole, the most recent activity data (November 2019) show that credit and deposits in the
system are growing at year-on-year rates of 4.0% and 10.6%, respectively. Non-performing loans remain under control:
thus the non-performing loan ratio stood at 1.46% at the end of the third quarter of 2019.
6
Mexico
In terms of growth, the economy stagnated in the third quarter of 2019 after three quarters of slight contraction (about -
0.1% per quarter) and no signs of recovery were visible in the last quarter of the year, especially in terms of investment.
Several factors were behind this behavior: the delay in ratifying the new trade agreement between the United States and
Canada, the continuing uncertainty due to external and internal factors, the slowdown in the manufacturing sector in the
United States, as well as the slowdown in employment and private consumption. In this context, inflation declined rapidly
and significantly from annual rates of just over 4% in mid-year to 2.8% in December 2019, promoting the central bank to
initiate an interest rate-cut cycle, with four cuts of 25 basis points between August and December, to 7.25%.
The banking system continued to grow year-on-year. According to data from November 2019, lending and deposits
grew by 4.7% and 4.0% year-on-year respectively, with increases in all portfolios. The non-performing loan ratio
remained under control (2.24% in November 2019, compared to 2.18% twelve months previously) and capital indicators
were comfortable.
Turkey
In terms of growth, the Turkish economy technically emerged from the recession in the first quarter of 2019, growing by
1.7% on a quarterly basis, and the recovery continued although at a more moderate rate in the second and third quarters
(1.0% and 0.4%, respectively). The correction in domestic demand seems to have ended in the third quarter with the
recovery of private consumption and investment, although support for net exports dissipated and slightly hampered
growth. The economy is expected to have grown by 0.8% in 2019. Inflation slowed significantly during the second half of
the year, from rates of just over 20% to around 12% in December. In this context, the central bank cut the interest rate by
425 basis points in July, 325 basis points in September, 250 basis points in October, 200 basis points in December down
to a 12.00% interest rate at the end of the year. In January 2020, the central bank reduced the interest rate 75 basis
points to 11.25%.
With data from November 2019, the total volume of credit in Turkish liras is the banking system increased by 11.4%
year-on-year while credit in foreign currency grew by 4.9% in the same period. The NPA ratio stood at 5.3% at the end of
November 2019.
Argentina
With regards to economic growth, following the outcome of the primary elections in mid-August 2019, capital outflows
led to a sharp exchange rate depreciation, a situation that the government attempted to alleviate with a highly restrictive
monetary policy and capital control measures. All this resulted in a rapid deterioration in confidence, a sharp increase in
inflation, a fall in real wages and consequently a sharp contraction in consumption and investment. The external sector is
the sole support for the activity, prompted by the boost of depreciation on exports along with a considerable adjustment
of imports. There is uncertainty about the measures and policies that will be implemented to tackle the crisis.
In the banking system, lending and deposits are growing at high rates, albeit with the notable influence of high inflation.
Profitability indicators are very high (ROE: 42.9% and ROA: 4.8% in October 2019) and non-performing loans increased,
with a non-performing loan ratio of 4.9% in October 2019.
Colombia
The economy continued to recover in 2019, with growth slightly above the 3.0% year-on-year average level until the third
quarter, after advancing 2.6% in 2018. The recovery continues to be driven by consumption as well as investment in
machinery and equipment. Private consumption is expected to moderate somewhat in light of the deterioration of the
labor market and weak confidence, although this will be partly offset by higher expenditure linked to the increase in
immigration, while investment in construction should start to show signs of recovery, supported by some public policies.
Nevertheless, growth is expected to remain relatively stable in the coming quarters. Inflation increased in the second half
of the year to levels around 3.8% due mainly to the effect of the exchange rate depreciation, but still within the target
range of the Bank of the Republic, which kept the reference interest rate at 4.25%.
Total credit in the banking system grew by 9.1% year-on-year in September 2019, with a non-performing loan ratio of
4.4%. Total deposits increased by 8.5% year-on-year in the same period.
Peru
Activity slowed in 2019, with annual growth of about 2% from rates of around 4% in 2018. This weak growth responded
to the worse performance of primary activities, and to a lower public investment that was noted in construction and some
manufacturing. In this context, with inflation below the 2% target, the central bank lowered the interest rate by 50 basis
points between August and November to 2.25%. In 2020, the growth of the Peruvian economy could gain traction once
some of the temporary factors that affected primary activities disappear, once public investment returns to normal and
reconstruction efforts resume in some areas of the north of the country.
The banking system showed moderate year-on-year growth rates in lending and deposits (+7.3% and +12.0%
respectively, in September 2019), with reasonably high levels of profitability (ROE: 18.9%) and contained non-performing
loans (NPL ratio: 2.7%).
7
INTEREST RATES (PERCENTAGE)
Official ECB rate
Euribor 3 months (1)
Euribor 1 year (1)
USA Federal rates
TIIE (Mexico)
CBRT (Turkey)
(1) Calculated as the month average.
31-12-19 30-09-19 30-06-19 31-03-19
0.00
0.00
0.00
0.00
31-12-18 30-09-18 30-06-18 31-03-18
0.00
0.00
0.00
0.00
(0.39)
(0.26)
1.75
7.25
(0.42)
(0.34)
2.00
7.75
(0.33)
(0.19)
2.50
8.25
(0.31)
(0.11)
2.50
8.25
(0.31)
(0.13)
2.50
8.25
(0.32)
(0.17)
2.25
7.75
12.00
16.50
24.00
24.00
24.00
24.00
(0.32)
(0.33)
(0.18)
(0.19)
2.00
7.75
17.75
1.75
7.50
8.00
EXCHANGE RATES (EXPRESSED IN CURRENCY/EURO)
U.S. dollar
Mexican peso
Turkish lira
Peruvian sol
Argentine peso (1)
Chilean peso
Colombian peso
Year-end exchange rates
Average exchange rates
31-12-19
1.1234
21.2202
6.6843
3.7205
67.29
841.13
3,681.54
∆ % on
31-12-18
1.9
∆ % on
30-09-19
(3.1)
6.0
(9.4)
3.8
(35.7)
(5.4)
1.7
1.1
(8.0)
(1.1)
(7.2)
(6.1)
2.4
2019
1.1195
21.5531
6.3595
3.7335
-
786.75
3,673.67
∆ % on
2018
5.5
5.3
(10.3)
3.9
-
(3.8)
(5.2)
(1) According to IAS 29 "Financial information in hyperinflationary economies", the year-end exchange rate is used for the conversion of the Argentina income statement.
8
Economic outlook
BBVA Research’s scenario update takes into account the easing of trade tensions between the United States and China
and the removal of the risk of a disorderly Brexit in the short term (even if a risk remains for the end of 2020), which has
contributed to a fall in economic uncertainty over the global environment. This paves the way for a slowdown in
growth and for the global economy to stabilize, even though increased protectionism will continue to affect world trade.
This prospect of stabilizing global growth has been reinforced by robust activity in the United States and by the most
recent slight upward surprises in growth data in China and the eurozone. Economic policy has also continued to support
growth, and will continue to do so in the coming quarters, at least in the world’s major economies: following the monetary
stimulus actions in 2019, both the Federal Reserve and the European Central Bank are expected to keep interest rates
low for an extended period of time, while in China further fiscal and monetary stimulus measures will bolster the
economy. Increased optimism about the global environment has also led to a marked improvement in the tone of
financial markets. That said, BBVA Research forecasts stable growth in 2020 and 2021 of just over 3%, which is below
the growth of previous years following the slowdown observed in 2019.
By country, the slowdown is becoming more evident and widespread in developed economies in the 2019-2020 period,
but a very gradual recovery is expected in 2021. In the United States, growth is likely to continue to slowdown in the
short term as a result of poor investment performance as well as a brake on exports due to the global slowdown and the
strength of the dollar, despite a more accommodative monetary policy. However, over the course of 2020, growth could
return to rates close to potential (2%) as uncertainty subsides. As a result, the US economy is expected to decelerate
from 2.9% in 2018 to 2.3% in 2019 and 1.8% in 2020, with a slight improvement in 2021 to 2%. Growth in the eurozone
suffered throughout 2019 due to weaker global demand and deteriorating industrial production, as well as the burden of
reversing the uncertainty associated with the UK’s exit from the European Union. Slightly more accommodative
economic policies helped to contain the slowdown in the second half of 2019 and maintain domestic demand, while
decreased uncertainty surrounding trade and Brexit tensions could contribute to somewhat stronger growth this year.
As a result, growth in the eurozone appears to have slowed significantly from 1.9% in 2018 to 1.2% in 2019 and could slow
somewhat more gradually in 2020 to 0.9%, before picking up slightly to 1.2% in 2021. This trend will also have an impact
on growth in Spain, although it will still be higher than that recorded in the eurozone, with a slowdown from 2.4% in 2018
to 1.9% in 2019 and 1.6% in 2020, before rising slightly to 1.9% in 2021.
Growth in emerging economies was hampered by the downturn in the global environment. For the 2020-2021 period,
the slowdown expected in Asian countries, which are burdened by China’s downward trend (from 6.6% in 2018 to 6.1%
in 2019, 5.8% in 2020 and 5.5% in 2021), will continue to contrast with the gradual recovery projected for Latin American
economies. In 2019, the slowdown was most pronounced in Mexico (0.0% compared to 2.1% in 2018) and Peru (2.1%
after 4.0% in 2018), although a somewhat stronger recovery is expected in 2020 to 1.5% and 3.1%, respectively. In
contrast, the strength of domestic demand in Colombia allowed the country to better withstand global uncertainties and
maintain relatively stable growth in 2019-2021, which is expected to be slightly above 3%. In Argentina, the sharp
depreciation of the exchange rate and the outflow of capital following the election result led to strong monetary policy
restrictions and capital controls, which will lead to a sharp correction in both consumption and investment. In Turkey, the
recovery that began in early 2019 will be further strengthened by a less restrictive monetary policy following the
adjustment of inflation and current account imbalances, which will be reflected in growth of 0.8% in 2019, 4.0% in 2020
and 4.5% in 2021.
Overall, the global scenario predicts a degree of stabilization of growth, supported by the countercyclical policies
implemented in most regions, as well as a reduction in uncertainty over 2019, although trade tensions and fears of a
disorderly Brexit could resurface during 2020. Moreover, geopolitical and structural risk remain high.
Digitalization, new consumers and sustainability
Digitalization is transforming financial services at a global level. Consumers are changing their purchasing habits
through the use of digital technologies, which increase their ability to access financial products and services at any time
and from anywhere. Greater availability of information is creating more demanding customers, who expect swift, easy
and immediate responses to their needs. And digitalization is what enables the financial industry to meet these new
demands.
In this way, the role of technology in the day-to-day life of people and companies is growing steadily, causing notable
changes in the technological landscape in areas such as retail banking, artificial intelligence and big data, behavioral
economics, the creation of startups, quantum computing or blockchain.
On the other hand, technology is the lever for change which allows value proposition to be redefined to focus on the real
needs of customers and to provide them with a simple and user-friendly experience without jeopardizing security. In this
sense, the mobile is presented as the preferred, and often the only tool, enabling customers to interact with their
financial entity.
In retail banking, the main change is in the way in which clients will access financial services in the future. Regarding
access channels, the mobile is essential and will continue to grow, but voice-activated banking services may also become
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more frequent, which will pose a set of challenges. The automation of financial decisions will be possible through a series
of staggered changes in the way in which banks provide services to people, such as automatic savings by rounding up
transactions or separating a percentage of the payroll or, autonomous operation, in which the bank does everything for
the client to ensure that their savings are managed in the most effective and efficient way possible. Currently, the
emergence of large technology companies and digital companies are obliging the financial sector to rethink user
experience, with customer trust being fundamental.
Artificial intelligence (AI) and big data are two of the technologies that are driving the transformation of the financial
industry. Their adoption by entities translates into new services for customers that are more accessible and agile, and
into the transformation of
internal processes. AI allows, among other things, personalized products and
recommendations to be offered to customers, and decisions to be made more intelligently. Data is the cornerstone of
the digital economy. The use of algorithms based on big data can lead to the development of new advisory tools for
managing personal finances and access to products, which until recently were only available to high-value segments.
Additionally, with behavioral economics, tailor-made experiences could be built for each client, with the objective of
helping them with their finances, and that they can make better informed decisions according to their needs. It is about
integrating what is known about how people make decisions—the real mechanics of what it means to make a decision—
into the way of working.
As for the creation of startups, financial services could evolve by becoming more closely integrated with other digital
experiences. The evolution towards models of platforms and/or ecosystems is consolidated, so that smaller companies
can access customers.
Quantum computing will mean a drastic change for financial services, and for broader aspects of the global economy
and society in general. The biggest impact is in the field of communications, cybersecurity, as well as in detection
equipment, Internet operation, supply chain logistics and other aspects related to scientific research and finance.
Finally, developments in open finance, decentralized finance (DeFi) and blockchain have a significant and positive
impact on how banking can be increasingly inclusive and at the same time contribute more to sustainability. For example,
blockchain and new digital assets could favor sustainability by guaranteeing the traceability of carbon emissions and the
equitable distribution of value through digital platforms among all participants (not only among rights holders).
On the other hand, the digital native generation, or the millennials, are one of the main drivers of this transformation.
Millenials are changing their consumption patterns and even the business culture itself because a significant majority of
them put the values of the company where they aspire to work above a salary. They also demand a different way of
dealing with banks and the rest of financial institutions. Mobile banking apps are their favorite channel of interaction, as
they allow them to manage their accounts remotely, whenever and from wherever they want. According to an Accenture
study, The Future of Payments, 2017, 69% of millennials use them daily or weekly, compared to only 17% of members of
the previous generations. 70% are interested in digital payment advisory services and expense management that can
provide them a better understanding and control of their personal expenses.
Likewise, according to the CB Insights report, 2019, Millenials, more than any other generation, are interested in the idea
that their investments have a positive impact in sustainability and climate change. With a real awareness of these
problems, millennials seek to collaborate with those companies that have these premises as part of their ideology.
In this regard, it is important to connect digitalization and sustainability to unleash the full potential of the banking
sector and the financial system in contributing to the UN’s Sustainable Development Goals (SDGs) and the Paris
Agreement. One of the main areas in which digitalization is essential for banks to promote sustainable development is
financial inclusion. Furthermore, the use of sustainability-related data is important if there is to be a progressive
integration of environmental and social risks into banks’ risk management processes. The use of big data is crucial as
data may be used to provide social initiatives that address new challenges for society.
In addition, technological transformation provides an opportunity for the financial sector, to the extent that sustainability
can no longer be seen as a cost. Traditionally, sustainable solutions offered to customers were more expensive than
standard solutions. These solutions can now be more efficient and affordable, moving from a market with limited
potential to a larger and effective one. Specifically, the fundamental technological changes in the fields of energy
efficiency, renewable energy, efficient mobility and the circular economy, with digitalization as a common denominator
and the use of digital information and tools as a key element for improving efficiency in all sectors.
However, these opportunities also bring challenges that are important to face, such as the ability to narrow the digital
divide, which will allow for the inclusion of disadvantaged social groups or the reduction of biases that favor fairer
situations. In this new scenario it is necessary to work on improving financial and digital education, improving
technological infrastructures and an adequate regulatory framework.
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Regulatory Environment
The regulatory environment of the financial industry during the financial year 2019 was characterized by continuity and
focused on completing and implementing previous regulatory initiatives, most of them related to the Basel and crisis
management frameworks; the debate on the major ongoing European projects such as the banking union, the capital
market union and the single digital market continued. Progress was made in regulating reference indices and reforming
the EURIBOR, in sustainable finance, and in developing adequate regulation for the use of new technologies in the
banking sector. In the European Union (EU), the institutions were renewed as a result of the European Parliament
elections held in May and the establishment of a new European Commission.
1. Progress in measures to reduce risks in the banking sector
Prudential Framework
The banking package for risk reduction, which includes a set of new measures and the revision of other measures
already in force, was approved in 2019 with the aim of continuing to reduce risks in the EU banking sector. The new
legislative package reviews both the prudential framework (CRR2 and CRD IV) and the framework that governs the
restructuring and resolution of banks (BRRD2 and SRMR2), and includes: (i) the incorporation of the latest Basel
standards (excluding the completion of Basel); ii) the requirement for Total Loss-Absorbing Capacity (TLAC), which
requires that institutions of global systemic importance have a greater capacity for loss absorption and recapitalization;
and iii) the incorporation of technical adjustments identified in previous years. There will be a transposition period of 1.5
to 2 years, depending on the regulation, although some regulations will come into force immediately (TLAC for the G-
SIIs). The review is reflected in two regulations and two directives, which have been in force since June.
Non-Performing Loans
The European Commission introduced a new prudential requirement that affects loans granted as of April 26, 2019 and
in the event that at some point they become considered doubtful. A capital requirement is established for the difference
between the prudential requirement and the amount of the provisions constituted, which depends on the age in which
the exposures are classified as doubtful and the value of the guarantees provided in the operations.
Measures to reduce risks in banks
In 2019, work was carried out at a technical level so that (i) political negotiations resumed on the European Deposit
Insurance Scheme (EDIS); (ii) the legislative text of the European Stability Mechanism (ESM) was drafted, which is likely
to become the common backstop to the Single Resolution Fund (SRF) with a maximum allocation of €60,000m; (iii) the
first approaches on the harmonization of the national insolvency laws were completed; and iv) initial discussions were
held on creating a common risk-free asset, the so-called Sovereign Bond-Backed Security (SBBS). These measures will
contribute to reducing risks in EU banks and completing the banking union.
Foreign banking organizations in the United States
The two most important standards published in 2019 for foreign banking organizations (FBOs) operating in the United
States are the adjustment of reinforced prudential regulations and the reform of the Volcker rule. With regards to the
adjustment, considering the bank’s exposure in the United States primarily as a measure to decide applicable
requirements, smaller entities will benefit from a lower regulatory and supervisory burden, being exempt from standard
liquidity requirements, or stress tests, for example. The change in the Volcker rule will mean a lower burden for banks to
show they comply with reporting regulations.
2. Progress in the union of capital markets
The European Commission made progress in 2019 in some of its outstanding Capital Markets Union (CMU) action plans.
The STS Regulation on securitization was adopted, and the Revision of the Directive and the Covered Bonds Framework
(known as cédulas in Spain) was passed to boost both markets. In addition, the European Banking Authority (EBA)
issued advice on a proposal to create an STS framework for synthetic securitization. Finally, a set of measures that will
affect the prudential supervision of investment services companies and strengthen the coordination and powers of the
European Supervisory Authorities were adopted.
On the other hand, sustainable finance is part of the capital markets union’s efforts to connect finance to the specific
needs of the EU’s agenda on a carbon neutral economy. In 2018, the European Commission published its Action Plan on
Sustainable Finance, and continued its development in 2019 with the presentation of the Reflection Paper: Towards a
Sustainable Europe by 2030, the preparation of the first reports and the agreement of a common taxonomy. This
initiative establishes a common language and is likely to become a classification tool to help investors and companies
11
identify
make environmentally friendly decisions. This taxonomy, which classifies economic activities, can be used for green
investment products and strategies that actually finance sustainable activities.
products and also to
Furthermore, the European Parliament approved the proposed regulation to establish a framework that enables
sustainable investment (on a provisional basis), and the Network of Central Banks and Supervisors for Greening the
Financial System (NGFS) of which the European Central Bank (ECB), the Bank of Spain and the European Banking
Authority (EBA), among others, are members, published its first report and its Sustainable and Responsible Investment
Guide.
3. Regulation of digital transformation in the financial sector
The digital transformation of the financial sector continued to be a priority for the authorities in 2019, who continued to
develop and implement the action plans and strategies outlined in 2018. In Europe, the EBA revised its guidelines on
outsourcing, which together with other initiatives led by the European Commission, aim to create a harmonized
framework at a European level to adopt cloud computing technology in the financial sector. In addition, the EBA and the
other European supervisory authorities launched the European Forum for Innovation Facilitators, a network that aims to
improve cooperation between national authorities on technological innovation issues in the financial sector. The new
cybersecurity regulation, which strengthens the powers of the European Union Agency on this topic, also came into
force. Furthermore, in Mexico, the financial authorities developed the bulk of a set of laws derived from the Fintech Law
this year.
In addition, in 2019 most of the implementation of the technical standards of the new internal market Payment Services
Directive in the internal market (PSD2) was carried out. This directive regulates access to customer payment accounts
by third parties that may offer information-aggregation services and initiate payments. The main regulatory milestone in
2019 was the entry into force of third-party authentication and access obligations in September, resulting in increased
security for electronic payments. However, some financial institutions will have a transitional period until December 31,
2020.
Another relevant development related to payments in Europe was the adoption of a new regulation to increase
transparency in cross-border payments. This initiative is joined by the ECB and the European Commission’s main
concern on how to develop pan-European payment solutions based on the instant payment infrastructure. In Spain, the
regulatory framework that establishes the obligation of banks to offer basic payment accounts was completed in the first
quarter of the year, and in December the transposal of PSD2 to the national legal framework was completed with the
publication of a Royal Decree Law that establishes the legal framework for payment companies and a Ministerial Order
that establishes the transparency requirements.
Digitization makes the storage, processing and exchange of large volumes of data possible. Once the regulatory
framework for ensuring data privacy and integrity was implemented, which in Europe came into fruition with the General
Data Protection Regulation (GDPR) - in force since May 2018, in 2019 the discussion focused on how to take advantage
of data opportunities. Furthermore, the European Commission identified Artificial Intelligence (AI) as a priority, with the
aim of increasing the competitiveness of the EU, for which a guide, with principles to ensure that European AI
developments are reliable, was published.
Finally, in the field of crypto assets, the International Financial Action Group issued recommendations in June 2019 to
address the risks of money laundering in this type of activity, especially as new players, including some financial
institutions and large technology companies, announced their intention to join the market. In October, a working group
led by the G7 published a report that analyzed the impact and regulatory fit of emerging initiatives in the field of so-called
stable currencies or stablecoins, which share many traits with traditional crypto assets but seek to stabilize the price of
the currency in different ways. Finally, in December, the European Commission and the Basel Committee issued
consultation papers on a possible regulatory framework for crypto assets and on the prudential treatment of exposures
of financial entities to them, respectively.
4. Reference indices
In 2019, the European institutions continued to work on reforming interest rate indices and transitioning to new
alternative indices that are in line with the Reference Index Regulation (EU) 2016/1011. In October, the ECB began
publishing the €STR (Euro short-term rate)1, a short-term interest rate of the euro, reflecting the funding cost of euro-
zone credit institutions for overnight deposits on the wholesale market. With regard to the EURIBOR, a new hybrid
calculation methodology, which includes real transactions, was developed in 2019 to adapt to the new regulatory
requirements. This new methodology was approved by the relevant authorities and there will be no need to modify
existing contracts.
1 The €STR will gradually replace the EONIA and will be calculated as a volume-weighted average of individual transactions in the
European monetary market that 50 entities must report to the ECB on a daily basis under the Money Market Statistical Reporting
Regulation (MMSR) 1333/2014.
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In the United Kingdom, the Bank of England has already reformed the SONIA (Sterling Overnight Index Average), and the
term-SONIA (still pending) is expected to replace LIBOR GBP. Other countries such as the United States, Switzerland
and Japan, also began to choose alternative indices to facilitate the transition toward an environment with a lower
dependence on IBORs (interbank offered rates). For more information, see the section Regulatory and reputational risks
- IBOR Reform within the Risk Management chapter of this Management Report.
5. Brexit
With regards to the outlook of the effect of Brexit on the European financial system, in 2019 work was carried out to
develop contingency plans for both financial institutions and regulators (recognition of clearing houses, eligibility of debt
instruments, among others).
After the approval of the withdrawal agreement between the United Kingdom and the European Union, the risk of a short-
term No-deal Brexit has been eliminated, since the transition period will allow the institutions to operate under the
current conditions. After having finished this period (December 31, 2020 or later if an extension, something that the
British side has ruled out, will be agreed), the risk of a No-deal Brexit will occur again.
Therefore, 2020 will be a key year for determining how the future relationship between the United Kingdom and the
European Union will be. As the time to negotiate a comprehensive trade deal, it is expected that the future relationship
regarding financial services is based on an equivalence framework. The political statement that goes along with the
withdrawal agreement includes references to the commitment from both sides to evaluate by the middle of the year the
possibility to use equivalencies where it should be possible. This could be important to mitigate some of the
consequences for the financial system, especially for such sensitive topics like the recognition of clearing houses.
Strategy and business model
BBVA’s Transformation Journey
BBVA boosted its transformation in 2015 with the definition of its purpose, six strategic priorities and the values that
have led its strategy in the last years. BBVA’s aspiration was focused on strengthening the relationship with the
customer, in order to obtain its trust, managing its finances through a simple and digital value proposition, offering the
best customer experience.
13
In developing its transformation strategy, BBVA has achieved a relevant progress in the last years, which has been
translated into excellent results in its main metrics.
The client base has increased and today BBVA has more clients who are even more satisfied and loyal. Its commitment
to the client is reflected in a growth of almost nine million (2015-2019) and in the leadership position in the satisfaction
index (NPS) in most of the geographies.
BBVA has also made significant advances in the digitization of its clients, relationship model and value proposition.
Today, more than 50% of the clients regularly use the mobile channel to interact with BBVA, which indicates 2015’s
figure has tripled.
Digital channels are accelerating sales growth and client acquisition. Digital sales represented in 2019, in terms of value,
45% of total sales, and almost 60% in units, versus levels of 10% and 16% respectively at the beginning of 2016.
Additionally, BBVA’s app has been considered the best mobile app globally in 2019, the third year in a row, according to
Forrester Research, followed by Garanti BBVA’s app in second place.
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BBVA is transforming its way of doing business and its corporate culture. The values are at the core of the strategy
guiding the Group towards achieving its purpose. Also, BBVA has implemented tools for higher productivity, such as the
Single Development Agenda, for the prioritization of resources in the execution of projects, and a new “Agile”
organization model. Additionally, in 2019 BBVA adopted a common global brand in order to unify its name and
corporate identity in its franchises and offer all its clients a unique value proposition and a homogeneous customer
experience, which are distinctive aspects of a global company.
15
Evolution in the Strategic Priorities
In 2019, BBVA carried out a strategic review process to continue going in depth into its transformation and adapting itself
to the major trends that are reshaping the world and the financial services industry:
● A challenging macroeconomic outlook, characterized by a rising uncertainty at a global level, lower economic
growth, low interest rates, increasing regulatory requirements, geopolitical tensions and the emergence of new
risks (cybersecurity, etc.).
● An evolution in clients’ behaviors and expectations. Clients demand more digital, simple and personalized
value propositions, based on greater advice to make the best decisions.
● A strong competitive environment, where digitization is already a common priority for banks and the role of
BigTech companies and ecosystems is rising as they are offering financial services within their global solutions
with an excellent customer experience.
● The general concern in society is to achieve a sustainable and inclusive world. Climate change is a reality
and all the stakeholders (consumers, companies, investors, regulators and public institutions) have set
achieving a more sustainable world as a priority. The transition towards that sustainable world has major
economic implications and the financial sector must play a very active role to ensure success of this evolution.
● Data has become a key differentiation factor and data management generates solid competitive advantages as
it enables offering a customized value proposition, improves processes’ automation to enhance efficiency and
reduces operational risks. Data also entails the management of new risks with relevant implications (privacy,
security, ethics, etc.).
In this context, BBVA’s strategy has evolved with six strategic priorities which aim to accelerate and deepen the
Group’s transformation and the achievement of its purpose.
BBVA’s new strategy is composed of three blocks and six strategic priorities.
1. Improving our clients’ financial health
Digitization allows a greater capacity to help clients manage their finances and, overall, to make better financial decisions,
through personalized advice based on the use of data and artificial intelligence. BBVA aspires to be the trusted financial
partner for its clients in the day-to-day management and control of their finances in order to help them improve their
financial health and achieve their goals.
2. Helping our clients transition towards a sustainable future
The transition towards a sustainable economy is today a priority for all stakeholders. BBVA aims to play a relevant role in
developing a more sustainable and inclusive world, as society demands, and helping its clients in the transition towards a
more sustainable future.
Specifically, BBVA aims to make a significant contribution in the fight against climate change, helping its clients in the
transition towards a low carbon emissions economy. Besides, BBVA is committed to support an inclusive economic
development, both through its business and the various social programs fostered by the Group.
16
From a business standpoint, BBVA aspires to have an impact on its clients’ behavior, mainly focusing on the United
Nations’ Sustainable Development Goals (SDGs) in which it can have more impact.
BBVA, as an organization, also aims to lead by example and is committed to meet its sustainable goals (“2025 Pledge”).
3. Reaching more clients
BBVA aims to accelerate its growth, positioning itself by being where clients are. In the current environment, growth
requires a higher presence in digital channels, both its own channels and from third parties. Profitability will be a key
factor, looking for profitable and sustainable growth in the most attractive segments.
4. Operational excellence
BBVA aims to provide an excellent customer experience at an efficient cost.
BBVA is focused on a relationship model leveraged on digitization, with the goal to have all its products and services
digitally available so the commercial network can focus on advice and high value operations. Besides, BBVA is focused on
an efficient and productive operating model with automated and simple processes from the use of new technologies
and data analytics.
Operational excellence also implies strong management of all risks, both financial and non-financial, a relevant factor in
the current dynamic environment.
The optimal capital allocation continues being a key factor in an environment in which capital is still an expensive and
scarce resource with increasing regulatory requirements.
5. The best and most engaged team
The team continues to be a strategic priority for the Group. BBVA wants to continue boosting employee engagement
and performance to achieve its purpose. By this, BBVA positions itself as an attractive place to work and for talent
attraction.
BBVA is an organization which aspires to have its purpose and values at the core of its strategy and the employees’ day-
to-day, with focus on topics such as diversity, equality and work-life balance.
6. Data and technology
Data management and new technologies are two clear accelerators to achieve the strategy and two generators of
opportunities and competitive advantages.
On the one hand, data is key in generating a tangible impact in the business and the development of the value
proposition. BBVA is carrying out several initiatives to achieve its objective of being a data driven organization. On the
other hand, technology is an accelerator of value added solutions at an efficient cost.
17
Values
BBVA is engaged in an open process to identify the Group's values, which took on board the opinion of employees from
across the global footprint and units of the Group. These Values define BBVA identity and are the pillars for making its
purpose a reality:
Customer comes first
BBVA has always been customer-focused, but the customer now comes first before everything else. The Bank aspires to
take a holistic customer vision, not just financial. This means working in a way which is empathetic, agile and with
integrity, among other things.
o We are empathetic: we take the customer's viewpoint into account from the outset, putting ourselves in their
shoes to better understand their needs.
o We have integrity: everything we do is legal, publishable and morally acceptable to society. We always put
customer interests' first.
o We meet their needs: We are swift, agile and responsive in resolving the problems and needs of our customers,
overcoming any difficulties we encounter.
We think big
It is not about innovating for its own sake but instead to have a significant impact on the lives of people, enhancing their
opportunities. BBVA Group is ambitious, constantly seeking to improve, not settling for doing things reasonably well, but
instead seeking excellence as standard.
o We are ambitious: we set ourselves ambitious challenges to have a real impact on people's lives.
o We break the mold: we question everything we do to discover new ways of doing things, innovating and testing
new ideas which enables us to learn.
o We amaze our customers: we seek excellence in everything we do in order to amaze our customers, creating
unique experiences and solutions which exceed their expectations.
We are one team
People are what matters most to the Group. All employees are owners and share responsibility in this endeavor. We tear
down silos and trust in others as we do ourselves. We are BBVA.
o
o
o
I am committed: I am committed to my role and my objectives and I feel empowered and fully responsible for
delivering them, working with passion and enthusiasm.
I trust others: I trust others from the outset and work generously, collaborating and breaking down silos
between areas and hierarchical barriers.
I am BBVA: I feel ownership of BBVA. The Bank's objectives are my own and I do everything in my power to
achieve them and make our Purpose a reality.
The values are reflected in the daily life of all BBVA Group employees, influencing every decision.
The implementation and adoption of these values is supported by the entire Organization, including senior management,
launching local and global initiatives which ensure these values are adopted uniformly throughout the Group.In 2019, the
values and behaviors were included in all professional development model processes and the Talent & Culture policies,
as well as actively present in the quarterly demos (SDA 2.0), both at the global scale and locally, reaching more than 500
shared initiatives to foster corporate culture.
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One of the main hallmarks of BBVA is its purpose and values, as well as its status as a data-driven organization, which is
to say that decisions are made based on data, ultimately in order to improve the customer experience. In 2019, the Bank
made progress in strengthening its distinguishing features by holding the second edition of global Values Day, a
milestone in BBVA’s culture that aims to celebrate, internalize and live its values. More than 82,000 employees
participated in this online conference, via its web app, and 37,000 endeavored to showcase the Bank’s values with
specific behaviors linked to the purpose, thereby compiling more than 10,000 case studies on how to apply the corporate
culture. This edition of the conference was also used to reach out to customers, with over 16,000 opinions received,
helping to understand the extent to which BBVA meets their current needs and how it can continue helping them in the
future.
A new initiative was also created in 2019 to encourage an entrepreneurial attitude in the Group, which emerged from
employee feedback on Values Day 2018. The name of this initiative is Values Challenge and it is a program aimed at
making employees take an active part in the transformation of the Group, cooperating in the development of projects
over a period of two months so that their ideas can be implemented at the Group. The first edition of the program held
was attended by 500 employees from around the world.
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Materiality
In 2019, BBVA updated its materiality analysis with the intention of prioritizing the most relevant issues for both its key
stakeholders and its business. The materiality matrix is one of the sources that feeds the Group's strategic planning and
determines the priority issues to report on.
This analysis included this year, specifically issues relevant to BBVA in Turkey. Therefore, the 2019 analysis includes the
material issues of Spain, Mexico, the United States, Turkey, Argentina, Colombia, Peru and Venezuela.
The materiality analysis phases have been as follows:
1. Verification of the validity of the list of relevant issues that were identified last year, based on information from
the usual listening and dialog tools.
2. Prioritization of issues according to their importance for stakeholders following last year’s methodology. BBVA
carried out a series of interviews and ad-hoc surveys in the countries covered by the study in order to learn the
priorities of various stakeholders (customers, employees, investors). Datamaran was used as a data analysis
tool for other stakeholders in all countries except Turkey, where local Turkish sources were used. Together, the
sources that made it possible to complete the analysis of stakeholders, global trends and key issues in the
sector are:
3. Prioritization of issues according to their impact on BBVA’s business strategy. The strategy team has assessed
how each issue impacts the six Strategic Priorities. The most relevant issues for BBVA are those that help to
achieve its strategy as well as possible.
The result of this analysis is contained in the Group's materiality matrix.
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Therefore, the six most relevant issues are:
Solvency and sustainable results: Stakeholders expect BBVA to be a robust and solvent bank with sustainable
results, thus contributing to the stability of the system. They demand a business model that responds to
changes in the context: disruptive technologies, new competitors, geopolitical issues, etc.
Ethical behavior and consumer protection: Stakeholders expect BBVA to behave in a comprehensive manner
and to protect clients or depositors by acting transparently, offering products that are appropriate to their risk
profile and managing the ethical challenges presented by certain new technologies with integrity.
Easy, fast and do it yourself (DIY): Stakeholders expect to work with BBVA in an agile and simple way, at any
time and from anywhere, leveraging the use of new technologies that will allow for greater operational efficiency,
generating value for shareholders.
Adequate and timely advice to customers: Stakeholders expect BBVA to provide appropriate solutions to
customers’ personal needs and circumstances and to proactively help them in the management of their
finances and their financial health while providing proactive and excellent customer service.
Cybersecurity and responsible use of data: Stakeholders expect their data to be secure at BBVA and for it to
be used only for agreed purposes, always complying with current law. This is essential to maintain trust.
Corporate governance: Stakeholders expect BBVA to have strong corporate governance with an adequate
composition of governance bodies, solid decision-making processes, accountability and control processes,
which are all well documented.
Information on the Group's performance in these relevant matters in 2019 is reflected in the various chapters of this
Management Report.
21
Responsible banking
At BBVA we have a differential banking model, based on seeking out a return adjusted to principles, strict legal
compliance, best practices and the creation of long-term value for all stakeholders. It is reflected in the Bank's Corporate
Social Responsibility Policy. The policy's mission is to manage the responsibility for the Bank's impact on people and
society, which is key to the delivery of BBVA's purpose.
All the Group’s business and support areas integrate this policy into their operational models. The Responsible Business
Unit coordinates the implementation and basically operates as a second line for defining standards and offering support.
The four pillars of BBVA's responsible banking are as follows:
Balanced relations with its customers, based on transparency, clarity and responsibility.
Sustainable finance to combat climate change, respect human rights and achieve the UN Sustainable
Development Goals (SDGs).
Responsible practices with employees, suppliers and other stakeholders.
Community investment to promote social change and create opportunities for all.
In 2018, BBVA approved its 2025 Pledge to climate change and sustainable development to contribute to the
achievement of the Sustainable Development Goals (SDGs) and aligned with the Paris Agreement. This commitment is
described in the Sustainable finance chapter.
22
Customer relationship
Solutions for customers
In recent years, BBVA has focused on offering the best customer experience, distinguished by its simplicity,
transparency and speed, and increasing the empowerment of customers and offering them a personalized advice.
In order to continue improving customer solutions, the Group’s value proposition evolved throughout the year 2019
around seven axis on which global programs were developed, related to both retail projects and companies projects:
Growth in customers through own and third-party channels.
Growth in revenue with a focus on profitable segments.
Value proposition - Differentiation through customer advice.
Operational efficiency.
Data-focused capabilities and enablers.
New Business Models.
A Global Entity.
These solutions can be divided into two large groups: Those that allow the customer to access the services in a more
convenient and simple way (Do it yourself - DIY) and those that provide customers with personalized advice, offering
them products or information specific to their current situation. These last two items are particularly important in the
new strategic related to the commitment to improve customers’ financial health.
Solutions for customers in 2019 include the following:
The DIY mobile banking platform GLOMO stands out in the retail banking (individuals and SMEs) area. This
solution is constantly being improved by features such as 100% digital registration: Using biometrics, the user
can be identified from one of their unique physical characteristics, such as the face, voice or fingerprint, and this
makes the digital registration process simpler and easier. At the same time, this platform allows us to offer
advice solutions, maximizing the number of customers reached. Examples of these solutions include Program
your account, which allows customers to set rules in managing their finances, or My Travel, a digital solution
available in Spain and Uruguay, which allows customers to control their travel expenses via a custom
dashboard.
BBVA has solutions for companies, which allow clients to interact with the Bank as legal entities in the manner
that most suits their needs. One of these solutions is the Digital Client Acquisition (DCA), a fully digital enterprise
registration process for SMEs, that allows opening a fully operational account and digital channel in just 10
minutes, thanks to the use of the Spanish legal digital certificate or “Netcash”, an application that has been
launched in several countries.
BBVA’s customer solutions are leveraged on the improvement of design capabilities and the use of data for analysis.
They also contribute positively to increasing digital sales and improving the main customer satisfaction indicators, such
as the Net Promoter Score (NPS), shown in the following section, and the drop-out ratio.
BBVA therefore occupies the first positions in the NPS, which is reflected in the retention data, which show a positive
evolution in the levels of customer drop-outs (retail customers and SMEs) and a greater commitment from digital
customers, whose drop-out rate is 49.7% lower than non-digital customers.
Likewise, the data of Group total active customers is also showing a positive trend with an increase of 3.1 million in 2019
(+8.8 million since 2015), with positive developments in all the countries in which BBVA is present.
Net Promoter Score
The
internationally recognized Net Promoter Score (NPS) methodology, measures customers’ willingness to
recommend a company and therefore, the level of satisfaction of BBVA’s customers with its different products, channels
and services. This index is based on a survey that measures on a scale of zero to ten whether a bank’s customers are
promoters (a score of nine or ten), passives (a score of seven or eight) or detractors (a score of zero to six) when asked if
they would recommend their bank, a specific channel or a specific customer journey to a friend or family member. This
information is vital for checking for alignment between customer needs and expectations and implemented initiatives,
establishing plans that eliminate detected gaps and providing the best experiences.
The Group’s consolidation and application of this methodology over the last nine years has led to a steady increase in
customers’ level of trust, as they recognize BBVA to be one of the most secure and recommendable banking institutions
in every country where it operates.
23
As of December 2019, BBVA ranked first in the retail NPS indicator in six countries: Spain, Mexico, Argentina, Colombia,
Peru and Paraguay, and second in Turkey and Uruguay, while in the commercial NPS indicator BBVA ranked the leading
position in six countries: Mexico, Argentina, Colombia, Peru, Paraguay and Uruguay.
Transparent, Clear and Responsible Communication
Transparency, Clearness and Responsibility (TCR) are three principles that are systematically integrated into the design
and implementation of the main solutions, deliverables and experiences for customers.
The objectives pursued are designed to help customers make good life decisions, maintain and increase their
confidence in the Bank and increase their recommendation rates.
Three work lines have been developed to turn these principles into reality:
Implementing the TCR principles in new digital solutions through the participation of TCR experts in the
conceptualization and design of these solutions, especially in massive impact solutions for retail customers
(mobile apps, digital contracting processes, consumer finance solutions, etc.).
Incorporating the TCR principles into the creation and maintenance of key content for customers (product
sheets, contracts, sales scripts and responses to claim letters).
Awareness raising and training on TCR throughout the Group, through workshops, online training and a virtual
community.
After the advances in transparency and clarity in recent years, the emphasis in 2019 was on promoting financial health,
particularly in new digital solutions. Financial health is defined as the dynamic relationship between health and personal
finance and is reached when the individual makes decisions and adopts behaviors, routines and habits that allow them to
be in a better financial situation to overcome crises and achieve their objectives. Financial and economic resources affect
physical and social wellness.
The project is coordinated by a global team working together with a network of local owners located in the main
countries in which the Group is present, and various departments and individuals from the Entity participate in its
implementation.
Indicators
BBVA uses an indicator, the Net TCR Score (NTCRS), which is calculated following the same methodology of the NPS
and allows measuring the degree to which customers perceive BBVA as a transparent and clear bank, compared to its
peers, in the main countries where the Group is present. As of December 2019, BBVA ranked first in the NTCRS indicator
in five countries: Spain, Argentina, Peru, Uruguay and Paraguay, and the second in Mexico, Turkey and Colombia.
In 2019, a financial health indicator, Net Financial Health Score (NFHS) was incorporated, which, like the previous one, is
calculated following the same methodology of the NPS and allows measuring the degree to which customers perceive if
BBVA supports them in looking after their personal finances compared to its peers. As of December 2019, BBVA ranked
first in the NFHS indicator in four countries: Spain, Mexico, Colombia and Peru, and second in Turkey and Argentina. This
indicator is on implementation phase in Uruguay and Paraguay.
24
Customer care
Complaints and claims
BBVA has a claims management model based on two key aspects: the agile resolution of claims and, most importantly,
the analysis and eradication of the causes’ origin. This model is part of the BBVA Group’s overall customer experience
strategy, having a very significant impact on improving the different customer journeys and positively transforming the
customer experience.
In 2019, the Group’s various claims units worked to reduce response times, improve clarity of such responses and
proactively identify potential problems to prevent them from becoming a cause of large claims. BBVA seeks to find a
quick solution to problems with the aim of improving customer confidence through a simple and agile experience and
with a clear and personalized response.
In short, the management of complaints and claims at BBVA is an opportunity to strengthen customers’ confidence in
the Group.
MAIN INDICATORS OF CLAIMS (BBVA GROUP)
Number of claims before the banking authority for each 10.000 active customers
Average time for setting claims (natural days)
Claims settled by First Contact Resolution (FCR) (% over total claims)
2019
8.69
6
23
2018
9.40
7
26
The volume of claims for every 10,000 active customers registered in 2019 decreased by 2.7% compared to the 2018
figure, basically as a result of the improvements implemented in the claims management process in the Group, especially
in Spain and in Mexico. The latter country, as a consequence of its largest customer base, is the one that records the
largest number of claims.
CLAIMS BEFORE THE BANKING AUTHORITY BY COUNTRY (NUMBER FOR EACH 10.000 ACTIVE CUSTOMERS) (1)
Spain
The United States
Mexico
Turkey
Argentina
Colombia
Peru
Venezuela
Paraguay
Uruguay
Portugal
Scope: BBVA Group.
2019
1.48
4.08
14.63
4.46
0.09
33.51
4.05
0.16
0.07
0.40
14.52
2018
3.54
4.56
17.94
4.03
1.11
21.56
1.19
0.47
1.19
0.68
21.92
(1) The banking authority refers to the external body in which the customers can complain against BBVA.
The Group’s average claim resolution time improved at 6 days in 2019, with an improvement of 1 day, specifically in
Spain, the United States and Peru.
AVERAGE TIME FOR SETTING CLAIMS BY COUNTRY (NATURAL DAYS)
Spain
The United States
Mexico
Turkey
Argentina
Colombia
Peru
Venezuela
Paraguay
Uruguay
Portugal
25
2018
10
5
5
2
7
5
9
14
6
7
3
2019
8
3
6
4
8
6
7
16
11
8
3
Claims settled by the First Contact Resolution (FCR) model, which consists in the resolution of the claim in the first
notice, and account for 23% of total claims, thanks to the fact that the management and handling of these claims aims to
reduce resolution times and increase the service quality, thus improving the customer experience.
CLAIMS SETTLE BY FIRST CONTACT RESOLUTION (FCR. PERCENTAGE OVER TOTAL CLAIMS)
Spain (1)
The United States
Mexico
Turkey (2)
Argentina
Colombia
Peru
Venezuela
Paraguay
Uruguay
Portugal (3)
n.a. = not applicable.
2019
n.a.
46
21
35
48
37
5
n.a.
n.a.
14
n.a.
2018
n.a.
54
30
38
21
69
8
n.a.
39
14
n.a.
(1) In Spain, a FCR type called IRR (Inmediate Resolution Response) applies to credit card incidents, but not to claims.
(2) In turkey, the weighting is calculated by the total number of customers.
(3) This kind of management does not apply in Portugal.
Customer Care Service and Customer Ombudsman in Spain
In 2019, the activities of the Customer Care Service and Customer Ombudsman were carried out in accordance with the
stipulations of Article 17 of the Ministerial Order (OM) ECO/734/2004, dated March 11, of the Ministry of Economy,
regarding customer care and consumer ombudsman departments of financial institutions, and in compliance with the
competencies and procedures outlined in BBVA Group’s Regulation for Customer Protection in Spain, approved on July
23, 2004 by the Bank’s Board of Directors, and subsequent modifications, the last one being at the end of 2019 with
regard to regulation of the activities and competencies, complaints and claims related to the Customer Care Service
and Customer Ombudsman.
Based on the above regulations, the Customer Care Service is in charge of handling and resolving customers’
complaints and claims regarding products and services marketed and contracted in Spanish territory by BBVA Group
entities.
On the other hand, and in accordance with the aforementioned regulation, the Customer Ombudsman is made aware of
and resolves, in the first instance, all complaints and claims submitted by the participants and beneficiaries of the
pension plans. It also resolves those related to insurance and other financial products that BBVA Group Customer Care
Service considers appropriate to escalate, based on the amount or particular complexity, as established under article 4
of the Customer Protection Regulation. And in the second instance, the Customer Ombudsman is made aware of and
resolves the complaints and claims that the customers decide to submit for their consideration after their claim or
complaint has been dismissed by the Customer Care Service.
26
Activity report on the Customer Care Service in Spain
The Customer Care Service works to detect recurring, systemic or potential problems in the Entity, in compliance with
European claims guidelines established by the relevant authorities, the ESMA (European Securities Market Authority)
and the EBA (European Banking Authority). Its activity, therefore, goes beyond merely managing claims, but rather, it
works to prevent them and in cooperation with other BBVA departments.
The main types of claims received in 2019 have been, as in previous years, related to mortgage loans. Furthermore, the
Customer Care Service team conducted a training course this year on Law 5/2019 of March 15, which regulates real
estate credit contracts. The aim was to gain an understanding of the new features of the law and thus ensure the
managers have an adequate understanding of it.
Claims of customers admitted to BBVA’s Customer Care Service in Spain amounted to 85.879 cases in 2019, 82.531 of
which were resolved by the Customer Care Service itself and concluded in the same year, which represents 96% of the
total. As of December 31, 2019, 3.348 were pending analysis. On the other hand, 17.128 claims were not admitted for
processing as they did not meet the requirements set out in OM ECO/734. 35% of the claims received corresponded to
mortgage loans, mainly mortgage arrangement expenses.
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE BY COMPLAINT TYPE (PERCENTAGE)
Type
Resources
Assets products
Insurances
Collection and other services
Financial counselling and quality service
Credit cards
Securities and equity portfolios
Other
Total
2019
2018
35
24
3
5
5
16
1
11
29
39
3
5
4
13
1
6
100
100
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE ACCORDING TO RESOLUTION (NUMBER)
In favor of the person submiting the complaint
Partially in favor of the person submitting the complaint
In favor of the BBVA Group
Total
Activity report of the Customer Ombudsman in Spain
2019
38,045
11,449
33,037
82,531
2018
25,970
18,563
37,093
81,626
One more year, the Customer Ombudsman, along with the BBVA Group, once more achieved the objective of unifying
criteria and favoring customer protection and security, making progress in compliance with transparency and customer
protection regulations. In order to efficiently translate their observations and criteria on the matters submitted for their
consideration, the Ombudsman promoted several meetings with the Group’s areas and units: Insurance, Pension Plan
Management, Business, Legal Services, etc.
In this sense, the Customer Ombudsman has been holding a Claims follow-up committee on a monthly basis, with the
main objective of keeping a permanent dialog with the BBVA Services that contribute to positioning the Group in relation
to its customers. The Directors of Quality, Legal Services and the Customer Care Service attend this committee.
Likewise, the Customer Ombudsman participates in the Transparency and good practices committee, in which the
Bank’s actions are analyzed, in order to adapt them to the regulations on transparency and good banking practices and
standards.
In 2019, 3,330 customer claims were filed at the Customer Ombudsman Office (compared to 3,020 in 2018). Of these,
70 were not admitted to processing due to a failure to comply with the requirements of OM ECO/734/2004 and 207
were pending as of December 31, 2019.
COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE BY COMPLAINT TYPE (NUMBER)
Type
Insurance and welfare products
Assets operations
Investment services
Liabilities operations
Other banking products (credit card, ATMs, etc.)
Collection and payment services
Other
Total
27
2018
753
709
146
753
437
106
116
2019
808
794
173
515
707
140
193
3,330
3,020
The categorization of the claims managed in the previous table follows the criteria established by the Complaints
Department of the Bank of Spain, in its requests for information.
COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE ACCORDING TO RESOLUTION (NUMBER)
In favor of the person submiting the complaint - Formal resolution
Partially in favor of the person submitting the complaint - Estimate (in whole or in part)
In favor of the BBVA Group - Dismissed
Processing suspended
Total
2019
-
1,794
1,259
-
3,053
2018
-
1,482
1,290
1
2,773
57.4% of customers who brought claims before the Customer Ombudsman during the course of the year obtained some
type of satisfaction, total or partial, by resolution of the Customer Ombudsman Office in 2019. Customers who are not
satisfied with the Customer Ombudsman’s response can go to the official supervisory bodies (the Bank of Spain, the
CNMV and General Directorate of Insurance and Pension Funds). 274 claims were filed by customers to supervisory
bodies in 2019.
The BBVA Group continues making progress in the implementation of the different recommendations and suggestions of
the Customer Ombudsman with regard to adapting products to the customer profiles and the need for transparent, clear
and responsible information throughout the year. In 2019, these recommendations and suggestions focused on raising
the level of transparency and clarity of the information that the Group provides for its customers, both in terms of
commercial offers available to them for each product, and in compliance with the orders and instructions thereof, so that
the following is guaranteed:
an understanding by customers of the nature and risks of the financial products offered to them,
the suitability of the product for the customer profile, and
the impartiality and clarity of the information that the Entity targets at customers, including advertising
information.
In addition, and with the advance in the digitalization of the products offered to customers together with the increasing
complexity thereof, special sensitivity is required with certain groups that, due to their profile, age or personal situation,
present a certain degree of vulnerability.
28
Technology and innovation
BBVA aspires to be the most trusted Bank to give financial advice to all of its customers. To achieve this goal, technology
plays a key role, making available to the business areas the necessary capacities to meet this challenge and offering
customers reliable and secure solutions. Thus, technology allows to offer reliable and secure solutions to all customers,
from the most digitized to the most traditional. This strategy is focused on incorporating the new capabilities that
technology offers in BBVA to make them available to customers while operating in the most efficient and reliable way
possible. All this through four lines of action:
Reliability and productivity, that is, to obtain the best technological performance and to do it reliably,
guaranteeing the highest quality standards,
Based on our new technological stack that allows us to offer customers the most advanced technology and the
most adjusted service to their needs in a timely manner,
Dispose of a strong cybersecurity strategy to face the increase in cybercrime threats,
Help BBVA achieve operational excellence through initiatives to streamline and automate processes.
Reliability and productivity
One of the main results of BBVA's digital transformation is to improve the reliability of the services provided to customers
and increase the productivity of both day-to-day operations and the ability to create new products. For this, the
technology with which the Bank works is transformed in terms of:
Processing
o Reliability and cost infrastructure pieces based on the cloud paradigm were created. In 2019, Spain
processed half of its activity in said infrastructure.
o These parts are already available, being used globally, and have been optimized to ensure that they can
continue to operate reliably during their lifetime and with decreasing unit costs.
Software development: global and multilocal functionalities have been developed, which are reused by different
banks of the Group, and the degree of automation is increasing the technological stack.
In addition, the creation of a network of strategic alliances that contribute to the progress of the transformation continues
to be promoted from the Engineering & Organization area. In this sense, an ecosystem of strategic agreements with
some of the reference companies in their respective fields has been established, ensuring the adoption of innovative
technologies, the digitalization of the business, the speed of action, and a global deployment of solutions. In recent years,
alliances have been established with industry leaders, who have helped to operate and optimize BBVA's current
technology globally, and with start-up companies that, due to their potential, aimed to become market leaders in specific
capacities.
New technological stack: cloud paradigms
Due to the increasing use of digital channels by customers and, consequently, the exponential increase in the number of
interactions with them, BBVA has evolved and continues to evolve its information technology (IT) model towards a more
homogeneous, global and scalable one, that drives cloud technologies.
In 2019, the new platform has become a reality for five countries, which enables BBVA to launch developments in new,
more global and reusable technologies, increasing thereby productivity. This new technological stack shares with the
cloud the attributes of flexibility and stability that the digital world demands, but in perfect harmony with the strict
compliance of the regulation.
Cybersecurity
In the current context of increased threats associated with cybersecurity, BBVA focused on protecting both, the
information systems of the business areas and data.
In this sense, traditional capabilities that focus on the protection of the perimeter and information systems have been
maintained, and advanced threat intelligence and adaptive cybersecurity capabilities have been introduced to protect the
human factor (employees, customers and other stakeholders), which are considered the weakest links in any cyber
defense system, and implement security systems with a holistic approach that cover the entire life cycle of business
processes.
For its part, data protection is an element in BBVA. To this aim, defense, resilience and recovery strategies have been
defined in three axes: data as representation of financial assets, bank processes and as a record of the identities and
personal information of customers and employees.
29
For more information about cybersecurity, refer to the section “Customer security and protection” below.
Operational excellence
Engineering & Organization area helps to transform the way of working in BBVA, through projects of transformation of
processes, operations and culture. Since 2017, initiatives, that are reporting solid improvements, are being carried out
throughout the Group to reduce the operating load in the business areas. The objective is to achieve the automation of
end-to-end processes as from 2020. Additionally, the area led the agile transformation in the Bank, which allows it to be
more productive while reducing time to market in the development of solutions.
Customer security and protection
BBVA’s Corporate Security area is responsible for ensuring the adequate management of information security,
establishing security policies, procedures and controls relating to the security of the Group’s global infrastructures,
digital channels and payment methods through a holistic and intelligence-based approach to dealing with threats.
BBVA’s information security strategy is based on three fundamental pillars: Cybersecurity, data security and fraud. A
program has been designed for each of these three pillars, with the aim of reducing the risks identified in the developed
taxonomy. These programs are reviewed to assess progress and the effective impact on the Group’s risks.
In 2019, the security measures adopted continued to be reinforced in order to guarantee the effective protection of the
information and assets that support the Bank’s business processes. The implementation of these measures, which are
necessary to mitigate the security risks to which the Group is exposed, was carried out from a global perspective and
with a comprehensive approach, considering not only the technological field, but also those related to people, processes
and security governance.
This reinforcement of security measures includes measures designed to protect business processes in a comprehensive
manner, addressing issues related to logical and physical security, privacy and fraud management. They are also
designed to ensure compliance with security and privacy principles in the design of new services and products, and to
improve access control and customer authentication services associated with the provision of online services, both from
the point of view of security and from that of the customer experience, with a focus on cell phones, in line with BBVA’s
digital transformation strategy.
Some of the initiatives undertaken over the year to improve security and customer protection at BBVA include:
the deployment of the new global tokenization platform, which allows for improved security for mobile payments
by protecting card numbers,
the implementation of strong authentication (using two of the three available factors: something you have,
something you know, and something you are) for account access and payment initiation, in line with the
requirements of the Payment Services Directive (PSD2),
the implementation of behavioral biometrics to improve analytical and fraud detection capabilities across
mobile channels, and
launching a section with security tips in order to raise awareness and train customers on the main cybersecurity
risks so that they know how to prevent or manage potential threats.
Communication and training activities in the area of security and privacy have also continued, through training and
awareness activities aimed at all employees, customers and the general public through the online channels of bbva.com
and the social networks.
Cybersecurity
Regarding cybersecurity, the Global Computer Emergency Response Team (CERT) is the Group’s first line of detection
and response to cyber-attacks targeting global users and the Group’s infrastructure, combining information on cyber
threats from our Threat Intelligence unit. The Madrid-based Global CERT is made up of approximately 200 people and
provides services in all the countries in which the Group operates. CERT operates according to a service catalog model
for each country, under a managed security services scheme for the Group, comprising around 60 different
competencies within the catalog. Global CERT is operational 24x7, with lines of operation dedicated to fraud and cyber
security.
In 2019, the Group detected an increase in the number of attacks, accentuated by the presence of organized crime
groups specializing in the banking sector and working across several countries. The Group also detected a large increase
in phishing attacks on retail customers, involving attempted fraud and identity theft.
As cyber-attacks evolve and become more sophisticated, the Group has strengthened its prevention and monitoring
efforts.
30
Accordingly, system monitoring capabilities have been increased, with particular attention being paid to the critical
assets that support business processes in order to prevent threats from materializing and, where appropriate, to
immediately identify any security incidents that may occur. Incident prevention, detection and response capabilities have
also been strengthened through the use of integrated information sources, improved analytical capabilities and the use
of automated platforms.
The implemented measures allow for improved information security management through a predictive and proactive
approach, based on the use of digital intelligence services and advanced analytical capabilities. These measures are
designed to ensure an immediate and effective response to any security incident that may occur, with the coordination of
the different business and support areas of the Group involved, the minimization of possible negative consequences and,
if necessary, timely reporting to the relevant supervisory or regulatory bodies.
BBVA also reviews, reinforces and tests its security processes and procedures through simulation exercises in the areas
of physical security and digital security. The outcome of these exercises forms a fundamental part of a feedback process
designed to improve the Group’s cyber security strategies.
Data protection
In the area of personal data protection, 2019 has seen BBVA consolidate the integration of new regulatory
requirements for data protection in all areas and processes of the Bank. Among other actions, corporate tools were
implemented in order to effectively facilitate compliance with specific requirements arising from the General Data
Protection Regulations; new specific internal rules on this matter, which are mandatory at BBVA, were also adapted and
approved.
Work has been carried out since last year on the adaptation processes of Organic Law 3/2018, of December 5, on
Personal Data Protection and the guarantee of digital rights, an effort that culminated in 2018 with the project for the
implementation of the General Data Protection Regulations (GDPR), in the Group’s companies and branches and, in
2019, progress was made with the implementation of the necessary IT developments and procedures that confirm
BBVA’s determination to comply with the data protection regulations integrated into the Bank’s day-to-day operations.
It is a continuous and living process, which means that each new product or service must comply with privacy
requirements in its design, requiring a firm commitment to ensure respect for the fundamental right to the protection of
personal data. The protection of personal data in other areas related to suppliers and employees was also reinforced with
protocols in line with this regulation.
In its role as a control specialist, in 2019 the Data Protection Officer developed and launched a testing plan to
periodically review the processes with the greatest impact on data protection in the Group, as identified by the unit itself.
This unit intensified communication and awareness activities for the entire Organization, aiming to promote and
recognize the importance of this matter within the purpose of our entity as a Data Driven Bank, and actively participated
in international forums and events where data protection issues are addressed from a multinational and multidisciplinary
perspective, with representation from supervisory and regulatory bodies.
Fraud prevention
Cyber security efforts are often closely coordinated with fraud prevention efforts and there are considerable interactions
and synergies between the relevant teams. As part of the efforts to monitor the evolution of fraud and actively support
the deployment of appropriate anti-fraud policies and measures, a Corporate Fraud Committee exists to monitor the
evolution of all types of external and internal fraud in all countries in which the Group operates. Its functions include: (i)
actively monitoring fraud risks and fraud mitigation plans; (ii) assessing the impact of fraud risks on the Group’s
businesses and customers; (iii) monitoring relevant fraud facts, events and trends; (iv) monitoring cumulative fraud
cases and losses; (v) conducting internal and external benchmarking; and (vi) monitoring relevant fraud incidents in the
financial industry.
The Corporate Fraud Committee is chaired by the head of Engineering & Organization. The Committee is convened three
times a year. The composition of this committee includes representatives from several units (in particular, Global Risk
Management - Retail Credit, Global Risk Management - Non-Financial Risks, Finance, Internal Audit, Corporate Security,
Client Solutions - Payments, Country Monitoring and Engineering Deployment).
Lastly, the area of Business Continuity, ensures BBVA’s capacity to continue delivering products and services to its
customers in case of a serious security incident or disaster occurs. In 2019, work was carried out along several working
lines, including the improvement of the Group’s continuity management system, the review of numerous business
impact analyses, the publication of the updated Corporate Business Continuity Management Standards and progress in
the analysis of technological dependencies, especially in the study of essential critical services. Each year, BBVA carries
out simulation exercises in order to increase awareness and prepare certain key employees, including e-surveillance
services for the fingerprints of key employees, in order to minimize these risks.
31
Staff information
People management
BBVA’s most important asset is its team, the people that make up the Group. For this reason, the team continues to be a
strategic priority (the best and most committed team). In this sense, BBVA continues promoting the commitment and
performance of employees to achieve its purpose, accompanying its transformation strategy with different initiatives in
matters related to staff, such as:
The creation of a professional development model in which BBVA’s employees are the main players, and
which is more transversal, transparent and effective, in such a way that each employee can play the role that
best suits their profile in order to contribute the greatest value to the Organization, in a committed manner and
with a focus on their training and professional growth.
The strengthening of the agile organization model, in which teams are directly responsible for what they do,
working based on customer feedback, and are focused on delivering the solutions that best meet current and
future customer needs.
The reinforcement of new knowledge and skills that were not previously common in the financial sector, but
which are key to the new phase in which the Group finds itself (data specialists, customer experience, etc.).
The strengthening of a corporate culture of collaboration and entrepreneurship, which revolves around a set of
values and behaviors that are shared by all those who make up the Group and which generate certain identity
traits that differentiate it from other entities.
All this makes BBVA a purpose-driven organization, that is, a company that defines its position in order to improve the
world and that encourages its employees to feel proud in their workplace, guiding them in the practice of the Bank’s
values and behaviors in order to achieve its purpose.
As of December 31, 2019, the BBVA Group had 126,973 employees located in more than 30 countries, 54% of whom
were women and 46% men. The average age of the staff was 39.8 years. The average length of service in the
Organization was 10.6 years, with a turnover of 7.6% in the year.
The workforce of the BBVA Group remains in 2019 at similar levels as in the previous year (+1.1%). By areas, there were
greater growths in Mexico (+ 4.7%) and in Turkey (+1.3%) that were offset by decreases in the United States (-1.5%) and
South America (-1.6%), staying almost without variation in Spain (- 0.2%) and in the rest of Eurasia (+ 0.2%).
32
Professional development
The people development model was consolidated and rolled out in 2018, a process that culminated with the global
launch of a new people assessment system. All Group employees were invited to participate in this system in a 360º
review. The assessments resulting from this process were the basis for building the BBVA talent map, on which the
BBVA employees differentiated management policies rests.
The above together with the identification and assessment of the existing roles in the Group makes it possible to get to
know the professional possibilities of the employees even better, as well as to establish individual development plans,
which promote functional mobility and professional growth in an open environment.
Recruitment and development
In 2019, 20.494 professionals joined the Group as part of a strategy to attract, recruit and incorporate profiles with the
new skills required by BBVA as part of its transformation process.
Programs developed in several countries using this approach throughout the year stand out, such as the second edition
of the global Young Data Professionals #YDP program, in which 100 young people from Spain, Argentina, Colombia and
Mexico participated. This program allowed participants to apply their knowledge and learn new skills in real projects with
strong, multidisciplinary teams. They receive top-level training, both in their specialty and in transversal skills, and are
accompanied at all times by mentors who drive their development. Using this same format of attraction other programs
were developed such as Future Designers in Spain, which trained 5 designers for 5 months, as well as other programs for
young engineering talent in Mexico and Peru, in which 50 young people participated.
Thanks to brand positioning actions and the promotion of available professional opportunities at BBVA through various
channels, it was possible to attract over 200.000 candidates. All this is carried out under a global reference model for
attracting talent, with clear policies that strengthen transparency, trust and flexibility for all stakeholders involved in the
process.
In 2019, a global scorecard was introduced to measure compliance levels with each of the internal mobility policies,
ensuring their follow-up and commitment to compliance in each of the geographical and global areas in which BBVA
operates.
Training
During 2019, BBVA’s training focused on promoting a culture of continuous learning. To this end, the B-Token model
was developed in which each employee of the Group is able to select and access training of their choice. The
transformation of the training model represented a genuine revolution in training, allowing the employee to be the true
protagonist of their development.
In 2019, the training resources catalog was updated with the inclusion of content linked to new skills required in BBVA.
Thus, more than 62.000 employees were online trained on subjects top in the development of new capabilities, such as
Agile, Behavioral Economics, Data or Design Thinking, while training on values and legal requirements continued to be a
core aspect of the Group’s training. In addition, the training linked to the MIFID or Real State Credit Contracts (LCCI)
Directives standing out, with 12,813 and 11,288 employees trained in the year, respectively.
The online channel continued to be the preferred training channel, accounting for 66% of training in 2019. Its flexibility
allows the professional to choose what, when and how they want to be trained. BBVA has a unique platform within the
Group that allows for instant access to the entire staff and which features resources in different formats: courses, videos,
materials, gamification, MOOCs (Massive Open Online Course) available in English and/or Spanish.
BASIC TRAINING DATA (BBVA GROUP)
Total investment in training (millions of euros)
Investment in training per employee (euros) (1)
Hours of training per employee (2)
Employees who received training (%)
Satisfaction with the training (rating out of 10)
Average participations per employee
Amounts received from FORCEM for training in Spain (millions of euros)
(1) Ratio calculated considering the Group´s workforce at the end of each year (126,973 in 2019 and 125,627 in 2018).
(2) Ratio calculated considering the workforce of BBVA with access to the training platform.
2019
47.8
376
42,4
90
9.2
26
3.2
2018
49.5
394
47.3
88
9.3
21
3.3
33
Female
13,895
104,643
523,724
TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. 2019)
Number of employees with training
Training hours
Male
Female
Total
Male
Total
1,395
7,183
28,152
35,940
21,236
1,071
4,310
14,068
16,517
7,991
324
2,873
61,020
254,386
14,084
1,109,995
47,125
149,743
586,271
19,423
2,398,443
1,055,769
1,342,673
13,245
671,504
259,553
411,951
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Total
93,906
43,957
49,949 4,495,348
2,098,462
2,396,886
(1) The management team includes the highest range of the Group´s management.
Diversity and inclusion
At BBVA, diversity and inclusion are firmly aligned with the purpose and are in keeping with our values. BBVA is
committed to diversity in its workforce as one of the key elements in attracting and retaining the best talent and offering
the best possible service to its customers.
In terms of gender diversity, women make up 53.7% of the Group’s workforce and hold 22.9% of management positions,
30.6% of technology and engineering positions, and 56.6% of business and profit generation positions.
In 2019, several initiatives were launched to support gender diversity:
Making female talent more visible, with the aim of identifying and supporting high-potential women more
effectively through training, networking, coaching and mentoring programs. An Employee Resource Group
(ERG) was also launched to support gender diversity, made up of male and female Group employees.
Eliminating biases in key processes, through online and face-to-face training on unconscious biases and analysis
of internal and external interview processes and promotion processes.
Leveling the playing field in order to balance the professional possibilities between men and women, for which a
new model for conciliation was promoted, policies regarding maternity and paternity were reviewed, and
collaboration with external communities was encouraged.
Furthermore, in order to ensure a diverse and inclusive working environment, BBVA is working on various initiatives to
support the LGTBI (lesbian, gay, bisexual, transgender and intersex people) community through the ERG Be Yourself
campaign, which is driven by the employees themselves. Among the initiatives launched this year are the joining of REDI,
the Corporate Network for Diversity and LGBTI inclusion in Spain, the commitment to the United Nations rules of
conduct for the LGBTI group and the adaptation of the company’s diversity policies.
BBVA’s efforts to promote diversity have earned it for second consecutive year a place in the Bloomberg Gender Equality
Index, a ranking of the top 100 global companies in terms of gender diversity, and in the Equileap Global Report on
Gender Equality, which selects the 200 best companies in the world in terms of gender equality. BBVA is also a signatory
of the Diversity Charter at European level and of the United Nations Women’s Empowerment Principles.
In Spain, BBVA renewed the “Company Equality” Seal of Distinction in 2019, granted by the Ministry of the Presidency,
Parliamentary Relations and Equality to companies that are a benchmark for good practices in this area. Likewise, the
Equal Treatment and Opportunities Plan signed with the workers’ representation allowed for progress in women’s access
to positions of greater responsibility in the Organization. BBVA also renewed the Family-friendly Company certificate
granted by the Más Familia Foundation for the practices and regulations in place at BBVA involving equal treatment and
labor, work-family and personal life balance and was also included in the Variable D2019 report that recognizes the 30
companies in Spain with best practices in diversity and inclusion.
In addition, the Talent&Culture management team was trained in inclusive job offers, reaching an agreement for the
implementation of the Rooney Rule; and a volunteer work agreement was signed with the Inspiring Girls Foundation so
that, during the 2019-2020 school year, more than 80 women from BBVA will be able to act as role models for school-
age girls and demonstrate that the fact of being a woman is not a limitation for holding leadership positions in areas
related to Science, Technology, Engineering and Mathematics (STEM subjects).
In the United States, BBVA launched its first employee support group Women in Leadership to promote diversity,
earning the recognition of being ranked 47th in the Diversity Index among the 50 most important companies supporting
diversity in 2019.
The Bank also obtained the highest score (100%) in the 2019 Corporate Equality Index that evaluates corporate
practices and policies for employees from the LGTBI community, which also serves as a national benchmark among the
most influential companies in the United States.
34
In Mexico, BBVA has aligned itself with a culture of global diversity where difference is encouraged and respected, with a
focus on gender equality and disability. To this end, various initiatives were implemented in 2019 to support a culture of
diversity and provide women with access to management positions and raise awareness of the issue of diversity,
standing out the Women’s Day event.
In Turkey, the Bank has a Gender Equality Committee, active since 2015, which includes high-level male and female
representatives, and coordinates programs, processes and initiatives aimed at Bank employees or all external
stakeholders in the areas of female inclusion in the financial system, women’s empowerment and gender equality. The
Women’s Leadership Mentorship Program for branch managers and headquarters executives was also launched with
the objective of empowering female leaders and increasing their recognition across internal networks.
As a result of all these initiatives and gender equality practices it undertakes for employees, customers and society in
general, Garanti BBVA is one of the two Turkish companies included in the Bloomberg Gender Equality Index.
Lastly, all the Group’s banks throughout the various countries in which it operates have protocols for the prevention of
sexual harassment. In Spain and the United States these have been in place for some years and in the rest of the world
they were developed in 2018. In 2019, BBVA in Mexico published its protocol on harassment and sexual harassment
through electronic media, while Garanti BBVA published its policy against harassment and discrimination.
Specifically, in the Bank’s protocol in Spain, the Bank and signatory trade union representatives expressly state their
rejection of any conduct of a sexual nature or with a sexual connotation that has the purpose or effect of violating a
person’s dignity, particularly when an intimidating, degrading or offensive environment is created, and they undertake to
apply this agreement as a means of preventing, detecting, correcting and punishing this type of conduct within the
company.
Different capabilities
BBVA is committed to the integration of people with different capabilities in the workplace, with the conviction that
employment is a fundamental pillar in the promotion of equal opportunities for all people. Accordingly, BBVA has
alliances with the leading Spanish organizations in the disability sector with the aim of promoting accessibility, fostering
labor integration and increasing knowledge and awareness of the needs and potential of disabled people.
In Spain, BBVA continued its in-branch internship program for people with intellectual disabilities, in which 31 young
people participated in 2019, and 3,605 have participated since 2015.
In Mexico, a first job evaluation format for the labor inclusion of persons with disabilities requested under the authority of
NOM034 of the Ministry of Labor and Social Welfare was developed, and a guide containing advice for supervisors who
have persons with mental disabilities in their teams was prepared, which included an infographic on how to deal with and
address persons with disabilities.
As of December 31, 2019, BBVA had 662 people with different capabilities on the Group’s staff, of which 148 are located
in Spain, 108 in the United States, 25 in Mexico, 288 in Turkey and 93 in South America.
Additionally, progress is being made in the accessibility of the branches of the different banks that make up the Group.
The corporate headquarters of BBVA in Madrid, Mexico and Argentina have all been made accessible.
EMPLOYEES BY COUNTRIES AND GENDER (BBVA GROUP)
2019
Number of employees
Male
Female
2018
Number of
employees
Male
Female
35
Spain
The United States
Mexico
Turkey (1)
South America
Argentina
Colombia
Venezuela
Peru
Chile
Paraguay
Uruguay
Bolivia
Brazil
Cuba
Rest of Eurasia
France
United Kingdom
Italy
Germany
Belgium
Portugal
Switzerland
Ireland
Finland
Hong Kong
China
Japan
Singapore
United Arab Emirates
Russia
India
Indonesia
South Korea
Taiwan
Total
30,283
10,825
37,805
22,275
24,644
6,402
6,899
2,532
6,420
956
428
576
424
6
1
1,141
71
120
51
43
23
458
116
-
112
85
28
3
9
2
3
2
2
2
11
14,914
4,516
17,614
9,626
11,423
3,423
2,867
884
3,106
15,369
6,309
20,191
12,649
13,221
2,979
4,032
1,648
3,314
436
221
314
169
2
1
638
45
86
27
25
14
231
73
-
68
46
9
2
2
1
2
1
1
1
4
520
207
262
255
4
-
503
26
34
24
18
9
227
43
-
44
39
19
1
7
1
1
1
1
1
7
30,338
10,984
36,123
21,994
25,050
6,262
6,803
3,384
6,267
923
430
578
396
6
1
1,138
72
126
52
41
24
469
122
4
83
89
25
3
8
2
3
2
2
2
9
14,930
4,566
16,843
9,505
11,492
3,372
2,819
1,148
3,027
15,408
6,418
19,280
12,489
13,558
2,890
3,984
2,236
3,240
436
219
314
154
2
1
637
46
87
29
24
15
235
77
3
54
46
9
2
1
1
2
1
1
1
3
487
211
264
242
4
-
501
26
39
23
17
9
234
45
1
29
43
16
1
7
1
1
1
1
1
6
126,973
58,731
68,242
125,627
57,973
67,654
(1) Includes the employees of Garanti BBVA in Netherlands, Romania, Malta and Chipre.
PROMOTED EMPLOYEES BY GENDER (BBVA GROUP)
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
2019
2018
Number of promoted
employees
Male
Female
Number of promoted
employees
Male
Female
3,583
1,612
9,000
3,268
2,429
86
1,726
624
4,354
1,378
1,030
55
1,857
988
4,646
1,890
1,399
31
4,827
1,049
11,422
4,284
3,266
75
2,172
461
3,844
1,749
1,243
36
2,655
588
7,578
2,535
2,023
39
19,978
9,167
10,811
24,923
9,505
15,418
EMPLOYEES AVERAGE AGE AND DISTRIBUTION BY AGE STAGES (BBVA GROUP. YEARS AND PERCENTAGE)
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
Average age
43.2
41.5
33.6
35.0
37.9
43.4
39.8
2019
<25
1.0
5.9
11.2
5.4
6.9
1.5
5.3
25-45
61.1
57.8
75.2
84.7
67.7
54.3
66.8
>45
37.9
36.3
13.6
9.9
25.4
44.3
27.9
Average age
42.8
41.1
33.8
34.3
37.8
43.1
37.6
2018
<25
0.9
6.7
10.8
4.8
7.3
1.5
6.2
25-45
63.7
58.0
75.1
87.9
67.3
56.0
71.4
AVERAGE LENGTH OF SERVICE BY GENDER (BBVA GROUP. YEARS)
2019
2018
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
Total
16.9
7.3
7.6
7.9
11.2
12.7
10.6
Male
17.3
6.1
7.5
9.6
11.9
12.0
9.1
Female
16.4
8.2
7.6
6.1
10.7
13.6
10.4
Total
16.3
6.6
7.4
8.1
10.8
12.1
10.3
Male
17.0
5.3
7.4
8.2
11.4
11.4
10.7
36
>45
35.4
35.2
14.1
7.2
25.4
42.5
22.4
Female
15.5
7.5
7.4
7.9
10.2
13.0
10.0
EMPLOYEES DISTRIBUTION BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. PERCENTAGE)
2019
2018
Total
Male
Female
Total
Male
Female
Spain
Management team (1)
Middle controls
Specialists
Sales force
Base positions
The United States
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Mexico
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Turkey
Management team (1)
Middle controls
Specialists
Sales force
Base positions
South America
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Rest of Eurasia
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Group average
Management team (1)
Middle controls
Specialists
Sales force
3.6
7.0
34.6
44.1
10.8
0.4
18.7
18.0
40.0
22.9
0.4
2.3
34.8
28.2
34.2
0.1
22.6
24.1
45.5
7.8
0.6
10.2
34.1
38.6
16.4
4.5
9.3
50.0
33.7
2.6
1.2
10.0
31.4
38.1
19.3
Base positions
(1) The management team includes the highest range of the Group´s management.
76.2
62.3
50.5
43.8
50.1
92.5
58.0
43.2
47.3
16.6
82.8
66.4
49.4
51.4
37.9
84.6
44.0
39.2
36.6
94.5
70.4
56.6
51.1
40.7
42.5
86.3
71.7
51.2
57.6
16.7
77.2
53.6
48.4
43.8
42.1
23.8
37.7
49.5
56.2
49.9
7.5
42.0
56.8
52.7
83.4
17.2
33.6
50.6
48.6
62.1
15.4
56.0
60.8
63.4
5.5
29.6
43.4
48.9
59.3
57.5
13.7
28.3
48.8
42.4
83.3
22.8
46.4
51.6
56.2
57.9
3.5
6.4
30.7
45.2
14.2
0.4
18.7
17.8
35.9
27.3
0.5
2.1
34.1
29.4
33.9
0.1
29.2
34.9
28.0
7.8
0.7
8.0
39.2
38.7
13.4
5.2
9.7
45.8
33.7
5.6
1.2
10.6
33.1
35.4
19.6
76.6
63.1
51.5
44.2
47.3
93.0
59.3
43.0
49.4
17.4
84.4
66.4
49.4
52.4
37.1
85.7
40.9
35.3
41.0
95.2
72.1
54.5
51.5
40.3
38.9
86.4
70.0
51.8
57.8
26.6
77.9
50.8
47.5
45.4
40.7
37
23.4
36.9
48.5
55.8
52.7
7.0
40.7
57.0
50.6
82.6
15.6
33.6
50.6
47.6
62.9
14.3
59.1
64.7
59.0
4.8
27.9
45.5
48.5
59.7
61.1
13.6
30.0
48.2
42.2
73.4
22.1
49.2
52.5
54.6
59.3
EMPLOYEES DISTRIBUTION BY TYPE OF CONTRACT AND GENDER (BBVA GROUP. PERCENTAGE)
Total
Male
Female
Total
Male
Female
2019
2018
Spain
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
The United States
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
Mexico
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
Turkey
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
South America
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
Rest of Eurasia
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
Group average
Permanent employee. Full-time
Permanenet employee. Part-time
Temporary employee
92.5
3.5
4.0
98.8
1.2
0.0
90.8
0.0
9.2
99.6
-
0.4
90.3
2.8
6.9
99.6
0.1
0.3
93.4
1.5
5.1
51.5
6.5
35.1
42.0
14.5
50.0
46.3
28.6
49.4
43.2
-
57.6
47.2
34.0
40.3
55.8
100.0
66.7
46.8
17.3
44.5
48.5
93.5
64.9
58.0
85.5
50.0
53.7
71.4
50.6
56.8
-
42.4
52.8
66.0
59.7
44.2
-
33.3
53.2
82.7
55.5
92.6
3.1
4.3
97.2
2.7
0.0
90.7
0.0
9.3
99.6
-
0.4
89.1
2.8
8.1
99.6
0.1
0.4
93.1
1,5
5.4
51.3
6.1
35.2
42.2
19.5
100.0
46.3
20.0
50.2
43.2
-
54.5
46.8
34.3
39.4
56.0
100.0
50.0
46.7
18.3
44.1
38
48.7
93.9
64.8
57.8
80.5
-
53.7
80.0
49.8
56.8
-
45.5
53.2
65.7
60.6
44.0
-
50.0
53.3
81.7
55.9
EMPLOYEE DISTRIBUTION BY TYPE OF CONTRACT AND AGE STAGES (BBVA GROUP. PERCENTAGE)
2019
2018
Total
<25
25-45
>45
Total
<25
25-45
>45
Spain
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
The United States
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
Mexico
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
Turkey
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
South America
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
Rest of Eurasia
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
Group average
Permanent employee. Full-time
Permanent employee. Part-time
Temporary employee
92.5
3.5
4.0
98.8
1.2
0.0
90.8
0.0
9.2
99.6
-
0.4
90.3
2.8
6.9
99.6
0.1
0.3
92.1
1.8
6.1
0.5
-
13.4
5.6
23.7
100.0
8.4
-
38.4
5.4
-
6.5
4.3
16.6
37.6
1.4
-
33.3
4.8
7.7
33.5
59.2
88.5
81.6
58.1
40.5
-
76.7
85.7
60.8
84.7
-
79.3
68.0
77.5
60.2
54.3
-
66.7
67.3
81.1
64.6
40.3
11.5
5.0
36.3
35.9
-
14.9
14.3
0.7
9.9
-
14.1
27.7
5.9
2.2
44.3
100.0
-
27.9
11.2
1.9
92.6
3.1
4.3
97.2
2.7
0.0
90.7
0.0
9.3
99.6
-
0.4
89.1
2.8
8.1
99.6
0.1
0.4
93.1
1.5
5.4
0.5
-
10.1
5.8
39.4
100.0
7.7
-
40.8
4.8
-
11.7
4.2
19.6
36.2
1.4
-
25.0
4.5
13.1
33.2
61.8
89.8
86.1
58.6
37.7
-
76.8
80.0
58.7
88.0
-
76.6
67.8
75.1
59.2
56.0
-
75.0
71.7
76.4
64.3
39
37.7
10.2
3.8
35.6
22.8
-
15.5
20.0
0.5
7.2
-
11.7
27.9
5.3
4.6
42.6
100.0
-
23.7
10.5
2.5
EMPLOYEE DISTRIBUTION BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. PERCENTAGE)
Permanent employee
Full-time
2019
Permanent
employee Part-
time
Temporary
employee
Permanent employee
Full-time
2018
Permanent
employee Part-
time
Temporary
employee
40
Spain
Management team (1)
Middle controls
Specialists
Sales force
Base positions
The United States
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Mexico
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Turkey
Management team (1)
Middle controls
Specialists
Sales force
Base positions
South America
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Rest of Eurasia
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Group average
Management team (1)
Middle controls
Specialists
Sales force
99.6
98.5
86.8
96.0
90.6
100.0
99.8
99.9
99.8
95.1
100.0
97.9
95.2
95.1
82.2
100.0
99.9
98.9
99.4
99.6
96.9
99.6
98.5
90.9
66.0
98.0
100.0
99.8
99.5
100.0
99.3
99.1
93.8
94.9
Base positions
(1) The management team includes the highest range of the Group´s management.
81.9
0.4
1.5
5.8
2.2
3.4
-
0.2
-
0.1
4.9
-
0.2
-
-
-
-
-
-
-
-
3.1
0.2
0.4
4.1
6.4
2.0
-
-
-
-
0.7
0.6
1.9
1.8
2.2
-
-
7.4
1.8
6.0
-
-
0.1
0.1
-
-
1.9
4.8
4.9
17.8
-
0.1
1.1
0.6
0.4
-
0.2
1.2
4.9
27.6
-
-
0.2
0.5
-
-
0.3
4.4
3.2
15.9
99.9
98.5
88.3
96.5
84.9
100.0
99.8
99.6
99.9
90.3
100.0
98.9
95.8
94.9
81.2
100.0
99.8
99.4
99.7
99.9
97.7
99.5
98.4
87.6
59.3
98.3
100.0
99.6
99.7
98.4
99.6
99.5
95.6
95.0
81.4
0.1
1.5
4.9
1.9
4.6
-
0.2
0.3
0.1
9.7
-
0.1
0.0
-
0.0
-
-
-
-
-
2.3
0.1
0.4
4.1
7.4
1.7
-
-
-
-
0.4
0.3
1.2
1.5
3.0
-
-
6.8
1.6
10.5
-
-
0.1
-
-
-
0.9
4.2
5.1
18.7
-
0.2
0.6
0.3
0.1
-
0.3
1.2
8.2
33.3
-
-
0.4
0.3
1.6
-
0.2
3.1
3.6
15.6
41
Work environment
BBVA carries out, on a general and biennial basis, a survey to measure its employees’ commitment and to gage their
opinions. In the 2019 survey, 90% of the people who are part of the Group gave their opinion, 3 percentage points more
than in 2017 (87%). One of the highlights of the results is the average of the twelve main questions of the survey, which
was 4.11 out of 5 (4.02 in 2017). The level of commitment of BBVA employees also improved, standing at 6.63 (4.45 in
2017) and calculated by dividing the percentage of committed employees by the percentage of actively non-aligned
employees.
Work organization
As part of the transformation of work practices at the Bank, in 2019 the ‘Work Better. Enjoy Life’ global plan was
launched, which was established to reflect a culture based on high performance, productivity, team empowerment and
balance between professional and personal life, i.e. work-life balance. This plan consists of a set of measures aimed at
promoting a new mindset and equal opportunities, which are always focused on objectives as opposed to time spent in
the office.
Initially, the plan was divided into two categories: i) good practices, such as effective time management, and ii) shock
measures related to changing work practices. The first of these measures was implemented in November, when all the
Bank’s corporate and regional offices in Spain began to close at 7:00PM, offering a 30-minute margin to leave the
premises. Another specific measure included in the plan is the avoidance of excessive meetings, which is one of the
greatest obstacles to productivity. To this end, effective meeting management is being pursued, incorporating rules such
as limiting their duration to 45 minutes, avoiding the use of unnecessary presentations, encouraging the use of video
conferences—physical presence is not the most important factor in a meeting–and sharing the objectives of the meeting
in advance.
BBVA in Spain has also signed an agreement with leading trade union representatives in September 2019 on working
time registration and the right to digital disconnection, being the first financial institution to sign a collective agreement
under these terms. The agreement was reached within the framework of the legal obligation established for companies in
Royal Decree-Law 8/2019, of March 8, on urgent measures for social protection and the fight against precariousness in
the workplace, and with the aim of moving toward an organizational culture of work based on efficiency and results, as
opposed to attendance and staying at work beyond established working hours.
In order to fulfill this agreement, an ad-hoc tool was created, Register your working day, an application where every
employee in Spain registers their working hours on a daily basis, by entering the time they start and finish work. In order
to increase the knowledge of what it means to register the working day and how to use the tool, all employees have an
online training course on this subject. For BBVA, the creation of this tool represents a means of promoting, strengthening
and taking a further step toward cultural change and changes to work practices.
With regard to the right to digital disconnection, the agreement with trade union representation also recognizes this
right to workers as a fundamental element in achieving better organization of working time in order to respect private and
family life, to improve the balance between personal, family and working life and to contribute to the optimization of
workers’ occupational health. This right takes the form of specific measures, such as:
No communications between 7PM and 8AM the next day, nor during weekends and holidays.
From Monday to Thursday, avoiding meetings that end after 7PM, or after 3PM on Fridays and the day before a
public holiday.
Freedom of association and representation
In accordance with the different regulations in force in the countries in which BBVA is present, the working conditions and
the rights of the employees, such as freedom of association and union representation, are included in the rules,
conventions and agreements signed, in their case, with the corresponding representations of the workers. Dialog and
negotiation are part of how to address any dispute or conflict within the Group, for which there are specific procedures
for consultation with trade union representatives across different countries.
In BBVA Spain, the banking sector collective agreement is applied to the entire workforce, complemented by the
company collective agreements which build upon and improve the provisions of sector agreement, and which are
entered into on behalf of workers. Employee representatives are elected every four years by personal, free, direct and
secret ballot, and are informed of the relevant changes that may occur in the organization of work in the Entity, under the
terms provided in accordance with the legislation in force.
In Mexico, freedom of association and local representation are respected. In accordance with the reform of the Federal
Labor Law, in force as of May 2019, the Bank has a process to comply, in accordance with the parameters indicated by
the legislation itself, with the requirements on collective matters that were incorporated for trade union organizations
42
consisting of free, secret and direct voting. By the end of the year, 100% of the workforce was covered by a collective
agreement.
In Argentina, freedom of association and commitment to labor rights are respected, and dialog and collective negotiation
are much valued when it comes to reaching consensus and conflict resolution. All staff are covered by agreement,
maintaining a seamless communication with the internal trade commissions at the local level and with sections of the
banking association at the national level.
In other South American countries, the Group’s employees are covered by some form of collective agreement, and 100%
of the workforce is covered by an agreement in Colombia, Peru, Venezuela and Paraguay. As an example, in BBVA
Uruguay, the banking sector collective agreement is applied to the entire workforce, complemented by the company
collective agreements which build upon and improve the provisions of sector agreement, and which are entered into by
representatives on behalf of workers. Trade union representatives sitting on work councils are informed of any relevant
changes that may occur to the organization of work within the Bank, under the terms set out in the legislation in force.
On the other hand, the regulations in force in the United States and Turkey do not require the same application of
agreements to their workforces.
Health and labor safety
BBVA considers the promotion of health and safety as one of its basic principles and fundamental goals, which is
addressed through the continuous improvement of working conditions.
In this regard, the work risk prevention model in BBVA Spain is legally regulated and employees have the right to consult
and participate in these areas, which they exercise and develop through trade union representation on the different
existing committees, where consultations are presented and matters relating to health and safety in the workplace are
dealt with, monitoring any and all activity related to prevention.
The Bank has a preventive policy applicable to 100% of its staff, which is carried out primarily by the Occupational Risk
Prevention Service. This service has two lines of action: a) the technical-preventive line, which involves, among other
activities, the carrying out of evaluations of occupational risks, which are periodically updated, the preparation of action
plans to eliminate/minimize the risks detected, the monitoring of the implementation of action plans, the preparation and
implementation of emergency and evacuation plans, training in health and safety, and the coordination of preventive
activities; and b) occupational medicine, which involves carrying out staff medical examinations, providing protection
for particularly sensitive employees and equipping workplaces with appropriate ergonomic equipment, as well as
carrying out preventive activities and campaigns to maintain and improve workers’ health and contributing to the
development of a culture of prevention and the promotion of healthy habits.
OCCUPATIONAL HEALTH MAIN DATA (BBVA SPAIN. NUMBER)
Number of technical preventive actions
Number of preventive actions to improve working conditions
Appointments for health checks
Employees represented in health and safety committees (%)
Abseentism rate (%)
2019
2,706
3,306
16,796
100
2.9
2018
3,078
3,854
15,590
100
2.8
In other geographical areas in which the Group is present, progress has also been made in 2019 in the field of
occupational health and safety, much of which is the result of the activity of health and safety committees in which
employees are fully represented in most countries.
In the United States, BBVA USA’s Wellthy for Life wellness program provides employees with a comprehensive wellness
program that they can customize according to their needs and interests (physical, medical, and socioeconomic) no
matter where they may be. Over the year, 570 technical-preventive actions were taken and the absenteeism rate was
1.77%.
In Mexico, where the workforce is fully represented on health and safety committees, various campaigns were carried
out to promote awareness and prevention in the field of health and safety at work, specifically the national campaigns for
the prevention of breast and prostate cancer and the prevention and control of seasonal flu. During the year, 27
technical-preventive actions were taken and an absenteeism rate of 1.19% was recorded.
In Turkey, the Bank uses occupational health and safety (OHS) software to track various activities, including risk
assessment, training programs, and corrective and preventive actions, etc. During the year, 472 technical-preventive
actions were taken, 653 preventive actions were taken to improve working conditions and an absenteeism rate of 1.00%
was recorded. 100% of employees are represented on health and safety committees.
43
In South America, there is no standard occupational health and safety management model for the entire region.
In Argentina, a health portal was created and made available to all employees, and occupational safety workshops related
to workplace ergonomics, commuting accidents, voice training for call center operators, etc. were launched. In Colombia,
risk prevention actions were carried out such as job inspections, emergency drills and medical examinations, and a
comprehensive health policy was implemented which involved the new spaces available (catering areas and gymnasium)
for building healthy lifestyles. In Peru, the Bank’s staff, with a participation of close to 60% of the employees, were
measured for psychosocial risk in order to implement prevention and control measures for such risks.
By country, 1,076 technical-preventive actions were taken in Argentina, 2,256 in Colombia, 42 in Peru, 21 in Venezuela, 6
in Paraguay and 1 in Uruguay over the year. Preventive actions to improve working conditions were 1,614, 4,112, 150, 28, 7
and 3, respectively, and an absenteeism rate of 1.44%, 2.71%, 0.86%, 13.56%, 1.06% y 1.70% was recorded. Overall,
9,854 health check-up appointments were made. 100% of employees in Colombia, Peru and Paraguay are represented
on health and safety committees.
VOLUME AND ABSENTEEISM TYPOLOGY OF EMPLOYEES (BBVA GROUP)
Number of withdrawn
2019
2018
Total
28,338
Male
9,107
Female
19,231
Total
30,696
Male
10,181
Female
20,515
Number of absenteeism hours (1)
3,469,056
1,299,504
2,169,552
4,027,728
1,335,408
2,692,320
Number of accidents with medical withdrawn
Frequency index
Severity index
Absenteeism rate (%)
(1) Total withdrawn hours by medical leave or accident during the year.
316
2.01
1.46
1.0
108
1.63
1.08
0.8
208
2.34
1.79
1.2
437
2.36
2.05
1.2
147
1.69
1.49
0.8
290
2.93
2.52
1.5
In 2019, BBVA recorded a total of 316 cases of work-related accidents involving medical leave across the entire Group
(only one out of every hundred cases of leave are due to accidents), most of them involving commuting accidents, which
is 27.7% less than the previous year.
No cases of occupational disease were registered in Spain in the last year. The number of work-related accidents was
346 over the year, of which 155 entailed medical leave and 191 did not, indicating a very low degree of severity, under the
sector rate. Thus, the Bank’s severity index is 0.15 (0.06 men and 0.09 women) in 2019, while the frequency index is 3.58
(1.25 men and 2.33 women).
VOLUNTARY RESIGNATIONS (TURNOVER) (1) AND BREAKDOWN BY GENDER (BBVA GROUP. PERCENTAGE)
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
2019
2018
Total workforce
turnover
Male
Female
Total workforce
turnover
1.1
14.2
13.9
4.9
6.1
4.2
7.6
65.0
41.5
49.9
42.7
47.9
52.1
48.0
35.0
58.5
50.1
57.3
52.1
47.9
52.0
1.3
13.0
13.3
3.9
7.7
4.5
7.6
Male
62.6
41.2
50.7
41.2
42.7
46.0
47.1
Female
37.4
58.8
49.3
58.8
57.3
54.0
52.9
(1) Turnover= [Resignations (excluding early retirement)/Number of employees at start of the period] * 100
RECRUITMENT OF EMPLOYEES BY GENDER (BBVA GROUP. NUMBER)
2019
2018
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
Of which new hires are (1):
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Total
(1) Including hires through consolidations.
Total
3,156
2,423
9,237
2,938
3,009
149
20,912
914
2,417
6,597
2,752
2,654
130
15,464
Male
1,405
1,062
4,601
1,321
1,447
85
9,921
537
1,058
3,309
1,242
1,287
72
7,505
44
Female
1,748
1,473
3,949
1,236
1,817
59
Female
1,751
1,361
4,636
1,617
1,562
64
Total
3,242
2,657
8,133
2,223
3,386
155
Male
1,494
1,184
4,184
987
1,569
96
10,991
19,796
9,514
10,282
377
1,359
3,288
151
1,367
58
1,252
2,650
5,951
2,186
2,521
142
6,600
14,702
786
1,177
2,997
973
1,213
88
7,234
466
1,473
2,954
1,213
1,308
54
7,468
DISCHARGE OF EMPLOYEES BY DISCHARGE TYPE AND GENDER (BBVA GROUP. NUMBER)
2019
2018
Total
Male
Female
Total
Male
Female
45
Spain
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1)
The United States
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1)
Mexico
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1)
Turkey
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1)
South America
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1) (2)
Rest of Eurasia
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1)
Total Group
Retirement and early retirement
Voluntary redundancies
Resignations
Dismissals
Others (1) (2)
(1) Others include permanent termination and death.
(2) Including the sale of BBVA Chile in 2018.
585
105
346
93
2,082
57
3
1,565
93
864
228
30
5,015
1,092
1,190
153
132
1,074
21
1,179
27
950
1,520
358
560
12
3
48
11
72
405
40
225
62
694
15
3
650
39
402
138
14
2,502
555
614
84
50
459
13
452
17
354
728
170
255
5
3
25
8
43
180
65
121
31
525
71
406
79
1,388
2,407
42
-
915
54
462
90
16
2,513
537
576
69
82
615
8
727
10
596
792
188
305
7
-
23
3
29
59
2
1,420
101
1,019
385
105
4,931
2,613
1,183
90
110
883
19
1,742
54
416
2,273
334
4,682
3
10
50
10
43
366
33
254
48
960
10
1
585
45
447
190
59
2,499
1,193
671
46
57
364
13
721
29
231
971
164
2,067
2
4
23
6
35
159
38
152
31
1,447
49
1
835
56
572
195
46
2,432
1,420
512
44
53
519
6
1,021
25
185
1,302
170
2,615
1
6
27
4
8
19,468
9,024
10,444
26,025
12,095
13,930
1,062
1,223
9,568
1,668
5,947
664
464
4,589
847
2,460
398
759
4,979
821
3,487
1,116
714
9,963
3,156
11,076
643
385
4,696
1,469
4,901
473
329
5,267
1,687
6,175
DISMISSALS BY PROFESSIONAL CATEGORY AND AGE STAGES (BBVA GROUP. NUMBER)
2019
2018
Total
<25
25-45
>45
Total
<25
25-45
>45
46
Spain
Management team (1)
Middle controls
Specialists
Sales force
Base positions
The United States
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Mexico
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Turkey
Management team (1)
Middle controls
Specialists
Sales force
Base positions
South America
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Rest of Eurasia
Management team (1)
Middle controls
Specialists
Sales force
Base positions
Total Group
Management team (1)
Middle controls
Specialists
Sales force
Base positions
13
1
53
18
8
-
4
7
61
21
7
14
336
592
143
-
-
3
18
-
1
28
52
227
50
2
-
4
5
-
1,668
23
47
455
921
222
-
-
-
-
-
-
-
-
11
4
-
-
2
13
19
-
-
1
4
-
-
-
1
10
19
-
-
-
-
-
84
-
-
4
38
42
-
-
43
12
5
-
2
5
46
13
1
7
239
421
112
-
-
2
14
-
1
18
39
181
29
1
-
2
3
-
1,196
3
27
330
677
159
13
1
10
6
3
-
2
2
4
4
6
7
95
158
12
-
-
-
-
-
-
10
12
36
2
1
-
2
2
-
388
20
20
121
206
21
12
3
23
27
14
-
4
3
44
50
10
23
1,338
824
418
-
3
11
5
-
3
20
77
178
56
2
1
4
3
-
-
-
1
-
-
-
-
-
6
13
-
-
39
35
44
-
-
2
-
-
-
-
2
12
20
-
-
-
-
-
2
-
15
18
8
-
2
-
28
34
1
6
897
602
340
-
3
9
5
-
-
8
45
132
27
-
-
3
1
-
3,156
174
2,186
27
54
1,456
1,081
538
-
-
44
53
77
3
19
969
786
409
10
3
7
9
6
-
2
3
10
3
9
17
402
187
34
-
-
-
-
-
3
12
30
34
9
2
1
1
2
-
796
24
35
443
242
52
(1) The management team includes the highest range of the Group´s management.
47
Volunteer work
In the Corporate Volunteer Work Policy, BBVA expresses its commitment to this type of activity and facilitates the
conditions for its employees to carry out corporate volunteer work actions that generate social impact. This policy is
applied in all countries in which the Group is present.
Corporate volunteer work activities empower the development of employees, channeling their spirit of solidarity, allowing
them to make a personal contribution of their time and knowledge in order to help the people who need it most. This
results in an improvement of self-esteem, increasing the sense of pride in belonging to the company, and, consequently,
in the attraction and retention of talent. It also generates a positive impact in terms of the Group’s level of social
responsibility.
Overall, about 11,000 BBVA employees participated in volunteer work initiatives promoted by the different banks of the
Group in 2019, having dedicated more than 168,000 hours (32% during working hours and 68% outside working hours).
The impact of these actions has directly benefited 10,806 people.
In Spain, more than 1,000 employees participated in about 185 volunteer work activities organized by the Bank in Spain,
focusing on the following lines of action: financial education, training in new technologies, training for employment, the
environment and sustainability, and community investment.
In the United States, more than 5,000 employees have participated in volunteer activities such as BBVA Week of Service
for the achievement of the Sustainable Development Goals, Volunteer Program to set annual volunteer goals, Blue Elf to
promote financial education, and 2019 Volunteer Chapter Orientation.
In Mexico, activities were carried out to support the environment through reforestation days, the donation of glasses for
visually impaired children, and seven volunteer work days in schools rebuilt after the 2017 earthquakes organized by the
Foundation, whose activities focused on
interactive whiteboards and
refurbishing classrooms. Likewise, employees in Mexico participate as mentors accompanying scholars from the BBVA
Foundation program in Mexico. The total number of volunteers amounted to 4,544.
improving green areas, painting murals,
In Turkey, Garanti BBVA employees created the voluntary clover club, whose mission is to improve social and
environmental awareness and responsibility, chiefly through projects related to education, children, animals and the
environment, of different social organizations in the country.
In certain South American countries such as Peru, 142 employees took part in various BBVA volunteer work activities in
2019, including the “Put a heart into it” campaign, visits to animal shelters and the “Donate a bottle cap, uncap a smile”
campaign, while in Uruguay 20 training grants were renewed for low-income young people in innovation and robotics
programs, in which volunteer employees acted as sponsors.
48
Remuneration
BBVA has a remuneration policy designed within the framework of the specific regulations applicable to credit
institutions, and geared toward the recurring generation of value for the Group, seeking also the alignment of the
interests of its employees and shareholders, with prudent risk management. This policy is adapted at all times to what is
established under applicable legal standards, and incorporates the standards and principles of national and international
best practices.
This policy is part of the elements designed by the Board of Directors as part of the BBVA corporate governance system
to ensure proper management of the Group, and meets the following requirements:
it is compatible and promotes prudent and effective risk management, not offering incentives to assume risks
that exceed the level allowed by the Group,
it is compatible with BBVA’s business strategy, objectives, values and long-term interests, and will include
measures intended to avoid conflicts of interest,
it clearly distinguishes the criteria for the establishment of fixed remuneration and variable remuneration;
it promotes equal treatment for all staff, not discriminating due to gender or other personal reasons; and
it ensures that remuneration is not based exclusively or primarily on quantitative criteria and takes into account
adequate qualitative criteria that reflect compliance with the applicable standards.
The remuneration model applicable in general to the entire staff of the BBVA Group contains two different elements:
A fixed remuneration, which takes into account the level of responsibility, the functions performed, and the
professional trajectory of each employee, as well as the principles of internal equity and the value of the function
in the market, constituting a relevant part of the total compensation. The grant and the amount of the fixed
remuneration are based on predetermined and non-discretionary objective criteria.
Variable remuneration constituted by those payments or benefits additional to the fixed remuneration, whether
monetary or not, that are based on variable parameters. This remuneration must be linked, in general, to the
achievement of previously specified objectives, and will take current and future risks into account.
AVERAGE REMUNERATION (1) BY PROFESSIONAL CATEGORY (2), AGE STAGES AND GENDER (BBVA GROUP. EUROS)
< 25 years
2019
25-45 years
> 45 years
< 25 years
2018
25-45 years
> 45 years
Male
Female Male
Female Male
Female Male
Female Male
Female Male
Female
Management team (3)
Middle controls (3)
-
-
- 66,065 46,223 94,319 60,126
- 48,929 30,566 59,177 37,813
-
-
- 61,013 43,501 89,478 55,040
- 47,608 28,724 58,097 35,399
Specialists
12,311 10,508 23,668 20,598 26,166 22,359
11,695
9,837 22,762
19,803 24,939 21,222
Base positions
9,653
8,494
17,149
17,189 21,033
19,682
9,159
7,859
16,830
16,852 20,683
19,072
(1) In 2019, a methodology change was made, using for this table only the average salary and not the average total remuneration.
(2) The Sales force category does not constitute a category and has been broken down into each of the four remaining categories.
(3) There is no information both in the Management team and the Middle controls in the segment under 25 years as it is not significant.
The remuneration of the members of the Board is set out in Note 54 of the Annual Report corresponding to the Group’s
Consolidated Annual Accounts, on an individual basis and by remuneration category. For senior management members,
the average total remuneration was €1,562 thousand for men and €1,156 thousand for women.
Pensions and other benefits
BBVA maintains a social welfare system, which is ordered according to the geographies and coverage it offers to
different groups of employees. In general, the social welfare system is a defined contribution system for the retirement
provision. The Group’s pension policy is compatible with the Company’s business strategy, objectives and long-term
interests.
Contributions to the social welfare systems of the employees of the Group will be carried out within the framework of the
labor regulations in force, and of the individual or collective agreements of application in each entity, sector or geography.
Calculation bases on which benefits are based (commitments for retirement, death and disability) reflect fixed annual
amounts, with no temporary fluctuations derived from variable components or individual results being present.
With regard to other benefits, the Group has a local implementation framework, according to which each entity, in
accordance with its sector of activity and the geographical area in which it operates, has a package of employee benefits
within its specific remuneration scheme.
49
In 2019, the Bank in Spain made a payment of €27.8m in savings contributions to pension plans and life and accident
insurance premiums, of which €15.8m corresponded to contributions to men and €12.0m to those of women. This
payment accounts for more than 95% of Spain’s pension expenditure, excluding unique systems. On average, the
contribution received by each employee is €1,074 for the year (€1,234 for men and €917 for women).
Wage gap
Group’s remuneration policy promotes equal opportunities for men and women, and does not set or encourage wage
differentiation. The remuneration model is designed to promote responsibility and career development, while ensuring
internal fairness and external competitiveness.
The wage gap is the percentage obtained by dividing the difference between the median remuneration of men minus the
median remuneration of women, among the median remuneration of men. Additionally, a change in the methodology for
calculating the wage gap was made using a higher level of disaggregation and matching positions of equal value (same
function and responsibility level) in 2019. As of December 31, 2019 the wage gap by homogeneous professional
categories in the Group is 1.3% (1.6% in the prior year). Due to the change in the methodology the information related to
the fiscal year 2018 has been reexpressed to make the figures comparable to those of 2019.
To balance professional opportunities between men and women, BBVA launched various initiatives to continue making
progress toward a gender equality such as: make women's talent visible, eliminate biases in key processes and match the
playing field (see more detail in the “Diversity and Inclusion” section). These initiatives are contributing to the increase of
women occupying positions of greater responsibility.
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Ethical behavior
Compliance system
The Group’s compliance system is one of the bases on which BBVA consolidates the institutional commitment to
conduct all its activities and businesses in strict compliance with current legislation at all times and in accordance with
strict standards of ethical behaviour. To achieve this, the cornerstones of the BBVA compliance system are the Code of
Conduct, which is available on the BBVA corporate website (bbva.com), the internal control model and the Compliance
function.
The Code of Conduct establishes the behavioural guidelines that, according to the principles of the BBVA Group, ensure
that conduct adheres to the internal values of the organization. To this end, it establishes the duty of respect for
applicable laws and regulations for all its members in an integral and transparent manner, with the prudence and
professionalism that correspond to the social impact of the financial activity, and to the trust that shareholders and
clients have placed in BBVA.
BBVA’s internal control model, built in accordance with the guidelines and recommendations of regulators and
supervisors and the best international practices, with three differentiated levels of control (three-lines defense model), is
intended to identify, prevent and correct the situations of risk inherent to the performances of its activity in the areas and
locations in which BBVA operates. For more information on the three-line defense model, see Note 1.6 of the attached
Consolidated Financial Statements.
Compliance is a global unit integrated within the second line of defense, that is entrusted by the Board of Directors with
the function of promoting and supervising, with independence and objectivity, measures to ensure that BBVA acts with
integrity, particularly in areas such as the prevention of money laundering, conduct with customers, behaviour in the
securities market, prevention of corruption and others that may represent a reputational risk for BBVA.
Mission and scope of action
Compliance functions include:
promoting a culture of compliance within BBVA, as well as the knowledge by its members of the rules and
regulations applicable to the above matters, through advisory, dissemination, training and awareness actions;
and
defining and promoting the implementation and total ascription of the organization to the risk management
frameworks and measures related to compliance issues.
For an adequate performance of its functions, Compliance maintains a configuration and systems of internal
organization in accordance with the principles of internal governance established under the European guidelines for this
matter and in its configuration and development of the activity is attached to the principles established by the Bank for
International Settlements (BIS), as well as the reference regulations applicable to compliance issues.
In order to reinforce these aspects and, specifically, the independence of the control areas, BBVA has the Regulation &
Internal Control area which includes the Compliance unit, which reports directly to the Board of Directors through the
Risk and Compliance Committee.
Organization, internal government and management model
The Compliance function is handled globally at BBVA, and is composed of a corporate unit, with a transversal scope for
the entire Group, and local units that, sharing the mission entrusted, carry out the function in the countries where BBVA
carries out its activities. For this purpose, it has a global compliance manager, as well as those who are responsible in the
local units.
The function carried out by the Chief Compliance Officers relies on a set of departments specialized in different activities,
which, in turn, have their own designated officers. Thus, among other, the function is addressed by individuals
responsible for each discipline related to compliance issues, for the definition and articulation of the strategy and the
management model of the function or for the execution and continuous improvement of the area’s internal operational
processes.
Included among the main functions of the compliance units at BBVA are the following:
Review and periodic analysis of the applicable laws and regulations.
51
Issue, promotion or updating of compliance-related policies and procedures.
Advice to the organization in the interpretation of the Code of Conduct or compliance policies.
Continuous supervision of activities with compliance risk.
Management of whistleblowing channels.
Participation in committees that deal with issues related to compliance matters.
Participation in independent review processes on the subject.
Periodic reporting to the senior management and to governing bodies.
Representation of the function before regulatory bodies and supervisors in matters of compliance.
Representation of the function in national and international forums.
In 2019, the structure of the compliance units across different countries evolved to better align with these foundations.
The scope and complexity of the activities, as well as the international presence of BBVA, give rise to a wide variety of
regulatory requirements and expectations of the supervisory bodies that must be addressed in relation to risk
management associated with compliance issues. This makes it necessary to have internal mechanisms that establish
transversal mechanisms for managing this risk in a homogeneous and integral manner.
For this purpose, Compliance has a global model for estimating and managing said risk, which, with an integral and
preventive approach, has evolved over time to reinforce the elements and pillars on which it is based and to anticipate the
developments and initiatives that may arise in this area.
This model starts from periodic cycles of identification and assessment of compliance risk, upon which its management
strategy is based. The aforementioned results in the revision and updating of the multi-year strategy and its
corresponding annual action lines, both of which are aimed at strengthening the applicable mitigation and control
measures, as well as improving the model itself.
The basic pillars of the model are the following elements:
A suitable organizational structure with a clear assignment of roles and responsibilities throughout the
Organization.
A set of policies and procedures that clearly define positions and requirements to be applied.
Mitigation processes and controls applied to enforce these policies and procedures.
A technology infrastructure, focused on monitoring and geared toward ensuring the previous objective.
Communication and training systems and policies implemented to raise employee awareness of the applicable
requirements.
Metrics and indicators that allow for the supervision of the global model implementation.
Independent periodic review of effective model implementation.
Throughout 2019, work continued on strengthening the documentation and management of this model. Thus, the
Compliance Unit continued with the review and update of the global typologies of compliance risks, both at a general level
and in different geographies. The framework for behavioural indicators has also been strengthened in order to improve
the early detection of this type of risk.
The effectiveness of the model and compliance risk management is subject to extensive and different annual verification
processes, including the testing activity carried out by the compliance units, BBVA’s internal audit activities, the reviews
carried out by prestigious auditing firms and the regular or specific inspection processes carried out by the supervisory
bodies in each of the geographies.
Throughout the year, the Compliance function also reinforced its compliance testing activities at a global level,
continuously improving the corresponding methodological framework in order to keep it in line with applicable
regulations, industry best practices and BBVA’s internal needs.
On the other hand, in recent years, one of the most relevant axes of application of the compliance model focuses on the
digital transformation of BBVA. For this reason, in 2019 the Compliance Unit continued to maintain governance,
supervision and advisory mechanisms for the activities of the areas that promote and develop business initiatives and
digital projects in the Group.
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Anti-money laundering and financing of terrorism
Anti-money laundering and the financing of terrorism (AML) is a constant factor in the objectives that the BBVA Group
associates with its commitment to improving the various social environments in which it carries out its activities, and a
requirement that is indispensable in preserving corporate integrity and one of its main assets: the trust of the people and
institutions with which it works on a daily basis (mainly customers, employees, shareholders and suppliers) in the
different jurisdictions where it operates.
In addition, the Group is exposed to the risk of breaching the AML regulation and the restrictions imposed by national or
international organizations to operate with certain jurisdictions and individuals or legal entities, which could entail
sanctions and/or significant economic fines imposed by the competent authorities of the various geographical locations
in which the Group operates.
As a result of the above, as a global financial group with branches and subsidiaries operating in numerous countries,
BBVA applies the compliance model described above for AML risk management in all the entities that make up the
Group. This model takes into account all regulations of the jurisdictions in which BBVA is present, the best practices of
the international financial industry regarding this matter, and recommendations issued by international bodies, such as
the Financial Action Task Force (FATF).
This management model is constantly evolving. Thus, the risk analyses that are carried out annually allow us to tighten
controls and to establish, where appropriate, additional mitigating measures to enhance it. In 2019, the regulated entities
of the Group carried out this AML risk assessment exercise, under the supervision of the corporate AML area.
The BBVA Code of Conduct, in Sections 4.1 and 4.2, establishes the basic guidelines for action in this area. In line with
these guidelines, BBVA has established a series of corporate procedures that are applied in each geographical area,
including the Corporate Procedure of Action for the Establishment of Business Relations with Politically Exposed Persons
(PEPs), the Corporate Procedure of Action for the Prevention of Money Laundering and the Financing of Terrorist
Activities in the Provision of Cross-Border Correspondent Services or the Standard that establishes the Operational
Restrictions with Countries, Jurisdictions and Entities designated by National or International Organizations. All
applicable standards are available for consultation by employees in each country.
BBVA continued to roll out its monitoring tool in Turkey and Mexico, which has already been implemented in Spain.
Likewise, the Group continued with its strategy to apply new technologies to its AML processes (machine learning,
artificial intelligence, etc.), in order to reinforce both the detection capabilities of suspicious activities of the different
entities that make up the Group, as well as the efficiency of the said processes. For this reason it participated in the IIF
Working Group Machine Learning Application to AML, among others. One result of the above has been improvements, in
various countries, in the processes and systems that have allowed for increases in efficiency in AML equipment.
In 2019, the BBVA Group handled 156,422 investigation files that resulted in 79,215 reports of suspicious transactions
sent to the corresponding authorities in each country.
In terms of training related to AML, each of the BBVA Group entities offers an annual training plan for employees. This
plan, defined according to the needs identified, establishes training actions such as classroom courses or via e-learning,
videos, brochures, etc. Likewise, the content of each training action is adapted to the target group, including general
concepts derived from the regulation of applicable AML standards, both internal and external, as well as specific issues
that affect the functions developed by the target group for the training. In 2019, 78,122 attendees participated in AML
training activities, of which 23,355 belonged to the most sensitive groups, from the perspective of AML.
The AML risk management model is subject to a continuous independent review. This review is complemented by
internal and external audits carried out by local supervisory bodies, both in Spain as well as in other jurisdictions. In
accordance with Spanish regulations, an external expert performs a yearly review of the Group’s parent. In 2019, the
external expert concluded that the AML system is in line with existing regulations and that it helps to minimize the risk of
being used as a vehicle for money laundering or the financing of terrorism. In turn, the internal control body, which BBVA
maintains at the corporate level, meets periodically and oversees the implementation and effectiveness of the AML risk
management model. This supervision scheme is replicated at the local level as well.
It is important to mention BBVA’s collaboration work with the different government agencies and international
organizations in this field: attendance at the meetings of the AML & Financial Crime Committee and the Financial
53
Sanctions Expert Group of the European Banking Federation, member of the AML Working Group of the IIF, participation
in initiatives and forums to increase and improve exchanges of information for AML purposes, as well as contributions to
public consultations issued by national and international organizations (European Commission, FATF/GAFI, European
Supervisory Authorities).
Conduct with customers
BBVA’s Code of Conduct places its customers at the center of its activities, with the aim of establishing lasting
relationships, based on mutual confidence and the contribution of value. Thus, BBVA aspires to be the trusted partner of
its clients in the management and control of their finances on a day-to-day basis, based on personalized advice. The
objective is to improve the financial health of its clients, as a factor of differentiation of the Group's new strategy.
In order to achieve this objective, BBVA has implemented policies and procedures aimed at getting to know its
customers better, with the purpose of being able to offer them products and services in line with their financial needs, as
well as providing them with clear and accurate information, sufficiently in advance, on the risks of the products in which
they invest. BBVA has also implemented processes geared toward prevention, or, when this has not been possible,
management of the possible conflicts of interest that might arise in the marketing of its products.
In 2019, progress continued on a global customer compliance model, which aims to establish a minimum framework of
standards of conduct to be respected in the relationship with customers, applicable in all jurisdictions of the Group and
aligned with the principles of the Code of Conduct. This model contributes to a better customer experience at BBVA in
line with increasingly standardized regulations on customer safety and protection at a global level and best practice
standards in commercial relations with customers.
To this end, the Compliance Unit focused its activity on reinforcing the plans for adapting the Entity’s internal processes
to the obligations derived from the regulations. Among these, the following European regulations are of particular
importance for customer protection:
Markets in Financial Instruments Directive (MIFID II);
Packaged Retail and Insurance-Based Investment Products (PRIIPs);
Private Insurance Distribution Directive; and
The Directive on Real-estate Loans.
In 2019, BBVA continued with the deployment of the plan to adapt to MIFID II through the implementation of policies and
procedures on different areas. Specifically, regarding the knowledge and skills of the personnel that inform or advise,
BBVA continued to develop a training program that concluded with the accreditation of practically all of the employees
and agents affected. In the Group, the number of certified sales representatives, following the requirements of local
regulations in each country, amounts to 26,675 employees for investment and services products and 25,451 employees
for the rest of products, as of December 31, 2019.
In addition, BBVA continues to strengthen processes aimed at prevention or, failing that, the management of possible
conflicts of interest that may arise in the marketing of its products. To this end, in 2019 a total of 15,591 Group employees
were trained in the identification, management and recording of potential conflicts of interest situations during the
provision of services to customers.
Other measures geared toward customer protection during 2019 were the following:
Analysis of the characteristics, risks and costs of BBVA’s new products, services and activities from a customer
perspective through a number of new product committees operating within the Group. Over the course of the
year, these committees analyzed 358 new Group products, services or activities.
Continuous collaboration with wholesale and retail product and business development units, focusing on digital
banking initiatives, with the aim of including the customers’ point of view, and investor protection in its projects
from the outset.
The expansion of a global incentive project to the sales forces with a focus on customer experience and which
considers not only the quantity but also the quality of sales, in line with best practices in the sector.
Progress on a set of behavioral risk management indicators to strengthen the customer, investor and user
protection for banking or financial services.
Internal governance to align the contribution and use of indexes to the recent regulation on reference indexes.
The promotion of communication and training activities for commercial networks and the departments that
support them, both through direct communications on products or services, as well as through specific courses
such as banking transparency, MIFID or insurance distribution.
54
Conduct on securities markets
The BBVA Code of Conduct includes the basic principles for action aimed at preserving the integrity of the markets,
setting the standards to be followed aimed at preventing market abuse, and guaranteeing transparency and free
competition in the professional activity carried out on the market by the BBVA collective.
These basic principles are specifically developed in the Policy on Conduct in the Field of Securities Markets, which applies
to all the individuals who form a part of the BBVA Group. Specifically, this policy establishes the minimum standards that
are to be respected with the activity carried out in the securities markets in terms of privileged information, market
manipulation, and conflicts of interest; furthermore, it is complemented in each jurisdiction with an internal code or
regulation of conduct (ICC) addressed to the subject group with the greatest exposure in the markets. The ICC
develops the contents established in the policy, adjusting them, where appropriate, to local legal requirements.
BBVA’s policy and ICC were updated in 2017 and extended to the entire Group in 2018. In order to carry out the
management of this regulation, the Group has the GESRIC tool, which is in continuous development and has been
implemented in virtually the entire Group for over a decade. The degree of adhesion to the new ICC approached 100% of
the individuals (approximately 7,000) in question.
In relation to the market abuse prevention program, the improvement of tools for detecting operations suspected of
market abuse continued, strengthening their analytical capabilities. Specifically, the process of detecting operations
suspected of market abuse was reinforced in Mexico, with the implementation of a new tool for detecting suspicious
operations that has already been proven in Europe. The market area communications control framework was also
strengthened, thereby enhancing the process of detecting suspicious transactions based on transaction analysis.
These measures enable the further improvement of the process of detecting suspicious transactions, leading to the
communication of possible market abuse practices to the relevant authorities in each country.
In 2019, the training on market abuse was strengthened, with courses on inside information and market manipulation,
focusing especially on Mexico and South America, in which 607 market employees participated; and on training aimed at
teams dedicated to trading derivatives to customers, considered as US Person in the condition of swap dealer, in line
with the American Dodd-Frank act. The annual Volcker Rule training was also provided to a group of 2,046 Group
employees, representing virtually the entire target group.
Other standards of conduct
One of the main mechanisms for managing conduct risk in the Group is its whistleblowing channels. As set out in the
Code of Conduct, BBVA employees have the obligation not to tolerate any conduct that is contrary to the Code, or any
conduct in the performance of their professional duties that may bring harm to the reputation or good name of BBVA.
The whistleblower channel is used to help employees report observed or reported breaches of human rights by
employees, customers, suppliers or colleagues; it is available 24 hours a day, 365 days a year and is also open to Group
suppliers. All reports are processed diligently and promptly. They are reviewed, and measures are taken to resolve any
issues. The information is analyzed in an objective, impartial and confidential manner.
BBVA has 16 complaints channels accessible to employees in all its main countries, which can be accessed through email
and telephone. In 2019, 1,745 complaints were received in the Group, whose main complaint aspects refer to the
categories of behavior with our colleagues (48.5%), and behavior with the company (37.2%). Approximately 44% of the
complaints processed during the year ended with the imposition of disciplinary penalties.
Among the work carried out in 2019, ongoing advice on the application of the Code of Conduct is particularly noteworthy.
Specifically, the Group formally received 456 different kinds of individual, written and telephone queries, such as the
resolution of possible conflicts of interest, the management of personal assets, or the development of other professional
activities. Over the year 2019, BBVA continued with the work of communication and dissemination of the new Code of
Conduct, as well as the training on its contents, whose online course has been carried out by a total of 118,897
employees.
In addition, since the introduction in Spain of the new criminal liability regime of the legal entity, BBVA has developed a
model of criminal risk management, framed within its general internal control model, with the aim of specifying
measures directly aimed at preventing criminal acts through a government structure suited to this purpose. This model,
which is periodically subject to independent review processes, is intended to be a dynamic process in continuous
evolution, so that the experience in its application, the changes in the activity and the structure of the Entity and, in
particular in its control model, as well as the legal, economic, social and technological developments that occur will
facilitate their adaptation and improvement.
55
Among the possible crimes included in the crime prevention model are those related to corruption and bribery, as there
are a number of risks that could arise in this respect in an entity of the nature of BBVA. Among such risks are those
related to activities such as the offering, delivery and acceptance of gifts or personal benefits, promotional events,
payments for facilitating activity, donations and sponsorships, expenses, hiring of personnel, relationships with suppliers,
agents, intermediaries and business partners, the processes of mergers, acquisitions and joint ventures or the
accounting and inadequate recording of operations.
In order to regulate the identification and management of the aforementioned risks, BBVA has a body of internal
regulations made up of principles, policies and other internal arrangements. Regarding the principles, the followings
applicable to the disinvestment processes for BBVA Group goods or services in favor of Group employees, and those to
be applied to those involved in BBVA’s procurement process stand out.
Among the most prominent policies are the following:
Anti-corruption policy,
Policy for the prevention and management of conflicts of interest within BBVA,
Responsible procurement policy,
Event policy and policy for the acceptance of gifts related to major sporting events,
Corporate travel policy, and
Corporate event management policy.
Likewise, regarding to other internal developments, the following stand out:
Management model for corporate and travel expenses for personnel.
Management model for expenses and investment.
Code of ethics for the recruitment of personnel.
Code of ethics for suppliers.
Rules relating to the acquisition of goods and services.
Rules relating to gifts for employees from persons/entities outside the bank.
Rules for delivery of gifts and organization of promotional events.
Rules for authorizing the hiring of consultancy services.
Rules on dealing with individuals of public importance in matters of finance and guarantees.
Rules for delegating credit risk.
Requirements for establishing and maintaining business relations with politically exposed persons (PEP).
Manual for management of donations in the Responsible Business Department.
Procedural manual (treatment and registration of communications in the whistleblower channel).
Corporate rules for managing the outsourcing life cycle.
Disciplinary regime (internal procedural rules).
The BBVA Group’s anti-corruption policy develops the principles and guidelines contained, primarily, in section 4.3 of
the Code of Conduct and conforms to the spirit of national and international standards on the subject, taking into
consideration the recommendations of international organizations for the prevention of corruption and those established
by the International Organization for Standardization (ISO).
The BBVA anti-corruption framework is not only composed of the aforementioned regulatory body, but also, in
compliance with the crime prevention model, has a program that includes the following elements: i) a risk map, ii) a set of
mitigation measures aimed at reducing these risks, iii) action procedures to face emergent risk situations, iv) training and
communication programs and plans, v) indicators aimed at understanding the situation of risks and their mitigation and
control framework, vi) a whistleblower channel, vii) a disciplinary regime, and viii) a specific government model.
In this context, it should be noted that BBVA takes into account the corruption risk present in the main jurisdictions in
which it operates, based on the valuations published by the most relevant international organizations in this area.
Within the general training program in this area, there is an online course that describes matters such as the basic
principles related to the Group’s prevention framework on anti-corruption that reminds employees of BBVA’s policy with
respect to any form of corruption or bribery in its business activities.
BBVA was also awarded the AENOR certificate in 2017, which accredits that its criminal compliance management
system conforms to Standard UNE 19601:2017. The certification was reviewed by this external entity in 2018 and 2019,
with successful results.
Lastly, in July 2019 BBVA’s competition policy was approved, which, if extended to the entire Group, represents a step
forward in the development of standards of conduct in this area. The policy elaborates on principle 3.14 of the BBVA
Code of Conduct on free competition and covers the most sensitive risk areas identified by national and international
bodies, horizontal agreements with competitors, vertical agreements with non-competitive companies, as well as
possible abusive practices (in the case of a dominant market position).
56
Additionally, the Group has taken other basic commitments including:
Corporate Social Responsibility Policy (CSR),
Human rights commitment,
Sectorial rules for environmental and social due diligence,
Environmental commitment,
Rules of conduct in defense,
Responsible procurement policy and
Tax and fiscal principles.
Notwithstanding what is provided in "Other non-financial risks" of the Non-financial information report and "Risk factors"
sections, during 2019 a number of criminal proceedings have been initiated against Group entities for various alleged
offenses. Notwithstanding the above, up to the date of issuance of this Management Report, none of the BBVA Group
entities has not been convicted by a final judgement of criminal responsibility.
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Commitment to human rights
BBVA adheres to a Commitment to Human Rights that seeks to guarantee respect for the dignity of all people and the
rights that are inherent to them. Under this perspective, the Bank decided to identify the social and labor risks that derive
from its activity in the different business areas and countries in which it operates. Once these risks have been identified,
the Group manages its possible impacts through processes specifically designed for this purpose (for example, the due
diligence processes in Project finance under the Equator Principles or through existing processes that integrate the
Human Rights perspective such as the supplier approval process or the diversity policy). On the other hand, the
methodology for the identification, evaluation and management of BBVA's reputational risk is a crucial element to this
management, since the assessment of reputational risks highlights the fact that human rights issues have the potential
to have an impact on the bank's reputation.
In order to comply with the United Nations Guiding Principles on Business and Human Rights and with the responsibility
of preventing, mitigating, and remedying the potential impacts on human rights in 2017 a due diligence process was
carried out. The procedure used to identify and evaluate these risks or impacts was based on the aforementioned
Principles and contributed to strengthen to detection and assessment of risks from the perspective of human rights.
As a result of the aforementioned process, the potential impacts of the operations on human rights were identified and
mechanisms were designed within the Entity to prevent and mitigate them, making the adequate channels and
procedures available to the affected party in order to ensure that, in case of any violation, the appropriate mechanisms
remain in place to ensure all necessary repairs. In this process, certain key issues were identified that could potentially
serve as levers for the improvement of the management system within the Group.
These issues are grouped into four areas that serve as the basis and foundation of the Group's Action Plan on Human
Rights 2018-2020, which is public and is updated every year.
1. Policy and structure
The updating of the Human Rights Commitment, which was renewed in 2018, was recommended in the due diligence
process. For this update, the Guiding Principles of Business and Human Rights guidelines, backed on June 16, 2011 by the
United Nations Human Rights Council and, on the other hand, the results of the global process itself, were taken as
reference markers for due diligence.
This commitment is articulated around the stakeholders with which BBVA is related: employees, customers, suppliers
and society; and it includes the three pillars on which the aforementioned Guiding Principles are based, which are:
state duty to protect,
corporate responsibility to respect human rights,
and the joint duty to implement mechanisms that ensure the remedy of possible human rights abuses.
All the individuals employed in the Group are responsible for making this commitment a reality on a day-to-day basis.
Each area and employee has the duty to be familiar with all matters that pertain to them that may imply a violation of
human rights, and implement the measures of due diligence to avoid it. However, BBVA has a structured governance
model following the internal control model, composed of three lines of defense:
The first line of defense consists of the Group's units directly responsible for the management of these risks.
The second line of defense lies with the Responsible Business Department, which is also responsible for
designing, implementing and improving commitment as well as acting as a second line of defense.
The third line of defense is the Internal Audit Area.
2. Training and cultural transformation
With regard to the due diligence process, it is advisable to integrate the human rights perspective into:
Internal and external communication plan,
Plan on diversity and conciliation, and
General and specialized training plan for employees.
Respect for the equality of people and their diversity is reflected in the corporate culture and management style, is a
guiding principle of employee policies, especially those of selection, development and compensation, which guarantee
non-discrimination based on gender, race, religion or age, and, as such, is included in the BBVA Code of Conduct.
Thus, this Code, among other matters, includes the treatment of discrimination, harassment or intimidation in labor
relations, objectivity in the selection, hiring and promotion that avoids discrimination or conflicts of interest, among other
58
issues, as well as safety and health in the workplace, employees must communicate any situation they understand that
poses a risk to safety or health at work.
In addition, BBVA’s Commitment to Human Rights assumes the commitment to the application, for example, of the
content of the fundamental conventions of the International Labor Organization (ILO) such as those related to the
elimination of all forms of forced labor; the effective abolition of child labor (minimum age and worst forms of child labor);
and the elimination of discrimination in employment and occupation, among other commitments.
3. Processes improvement
After the analysis, the importance of strengthening the process of approval and evaluation of suppliers, and the operation
and scope of the repair mechanisms was concluded.
From the point of view of suppliers, BBVA has a responsible purchasing policy and an ethical code of suppliers and,
during 2018, reinforced compliance with the Commitment to Human Rights with the integration of the prism of human
rights in the evaluation of suppliers in the approval process.
BBVA works to establish remedy mechanisms in the role of corporate lender, employer or as a company that hires
services to others. As such, it is open to managing any issue raised by any of its stakeholders regarding its credit activity
and in relation to performance in the field of human rights through two channels: the official listening channels of the
Bank, aimed at clients, and external channels. An example of an external channel is the OECD's national contact points,
whose objective is to admit and resolve claims related to losses of the OECD Guidelines for Multinational Enterprises.
In relation to employees, suppliers and society in general, the BBVA Code of Conduct includes an express mention of the
commitment to human rights and provides a whistleblower channel to report possible breaches of the code itself.
4. Business and strategy alignment
The analysis recommended the inclusion of human rights criteria in strategic projects of the Group, such as the due
diligence process in the acquisition of companies or the social and environmental framework.
In addition, as signatories to Equator Principles, BBVA complies with the requirement to conduct a due diligence
analysis of potential human rights impacts in project finance operations. In case of detecting potential risks, the
operation must include an effective form of management of these risks, as well as operational mechanisms to support
claims management.
Also within the framework of the Equator Principles, BBVA actively promotes the inclusion of free prior informed consent
(FPIC), not only in emerging countries, but also in projects in countries where a robust legislative system is presupposed
as well, which guarantees the protection of the environment and the social rights of its inhabitants.
BBVA is also a signatory of the United Nations Global Compact Principles, maintaining a constant dialog and
exchange of experiences with other signatory entities (companies, SMEs, third sector entities, educational institutions
and professional associations). Along the same lines, BBVA promotes a dialog with NGOs concerning its fiscal
responsibility, and participates in various meetings with investors and stakeholders in which it follows up on issues
related to human rights.
BBVA participates in different work groups related to human rights and is in constant dialog with its stakeholders. At a
sectoral level, BBVA makes up part of the Thun Group, a group of global banks that works to understand how to better
apply the United Nations Guiding Principles on Business and Human Rights in the practices and policies of financial
institutions, and across various banking businesses.
In 2019, the Responsible Banking Principles have been signed officially after their launch in 2018 to which BBVA has
adhered as one of the sponsors and founding banks for the initiative together with other 131 entities from all over the
world. Under the auspices of the United Nations, these Principles are put forth with the aim of providing a sustainable
financing framework and supporting the sector in a manner that shows its contribution to society. In this sense, the
implementation guidelines expressly mention the importance of integrating the Guiding Principles of Business and
Human Rights, in the implementation of the six principles, which are: 1. Alignment. 2. Impact and target setting, 3. Clients
and Customers, 4. Stakeholders , 5. Governance and culture , and 6. Transparency and accountability.
Finally, in addition to these initiatives, and taking the relevance of the mortgage market in Spain into account, BBVA
generated a social housing policy.
Social Housing Policy in Spain
BBVA's Social Housing Policy aims to offer solutions tailored to customers with mortgages that have difficulties in
meeting their repayments. BBVA is looking at every re-financing option available in accordance with the customers’
ability to pay, in order to allow them to keep their homes, what has been done for 81,000 customers so far. In addition,
59
any situation can be referred to the Committee for the Protection of Mortgage Debtors for review, which analyzes cases
in which the customers or their families face the risk of exclusion without legal protection, while providing individual
solutions in accordance with each family’s specific circumstances (refinancing, debt remission, payments in kind, rented
social housing in the debtor’s own home or the Bank’s available homes, etc.).
In this regard, since the beginning of the crisis in Spain, BBVA has accepted more than 29,500 payments in kind from its
customers.
In February 2012, BBVA decided voluntarily to adhere to the Code of Good Practices approved by the Government,
which had the objective of granting benefits to certain families who had contracted a mortgage loan and who were at risk
of exclusion. In light of the approval of Royal Decree-Law (RDL) 27/2012, of Law 1/2013 and, finally, of RDL 1/2015 and
Law 9/2015, BBVA determined, in a proactive manner, to inform all of its customers currently involved in a foreclosure
process of the existence of the aforementioned standards, and the extent of their effects, so that they might take
advantage of the benefits described therein.
In 2018, BBVA transferred its real estate business to Cerberus Capital Management. The scope of the Social Housing
Policy in Spain has adapted to this new situation, although it continued and is aimed at offering solutions that are tailored
to mortgage holders who are experiencing difficulties in meeting their repayments.
In 2019, with the entry into force of Law 5/2019, of March 15, on the regulation of real estate credit contracts, the bank
decided to reaffirm its adherence to the Code of Good Practice in the wording set out in this law, which extends the scope
of application of the special protective measures to all loan or credit contracts secured by a real estate mortgage whose
debtor is at the exclusion threshold and which are in effect on the date of entry into force or are subsequently entered
into. The measures provided for in this Royal Decree-Law are also applicable to the guarantors of the principal debtor, as
regards their habitual residence and with the same conditions as those established for the mortgagor.
BBVA has signed cooperation agreements with public entities for more than 1,000 houses.
60
Sustainable Finance
Banks play a crucial role in the fight against climate change and in achieving the United Nations Sustainable
Development Goals thanks to their unique position in mobilizing capital through investments, loans, issues and advisory
functions. They have effective measures in place to help tackle these challenges: On the one hand, providing innovative
solutions to its customers to help them in the transition to a low-carbon economy and promoting sustainable financing;
and on the other, integrating environmental and social risks in decision-making in a systematic manner.
BBVA’s commitment to sustainable development is reflected in its global Environmental Commitment. Along these lines,
in 2018, BBVA approved its climate change and sustainable development commitment to contribute to the achievement
of the United Nations Sustainable Development Goals and to addressing the challenges arising from the Paris Climate
Agreement. This 2025 Pledge will help the Bank progressively align its activity with the Paris Agreement on climate
change and achieve a balance between sustainable energy and investments in fossil fuels. The strategy is based on a
threefold commitment:
1.
To finance: BBVA is pledging to mobilize €100,000m in green finance, social infrastructure and sustainable
agribusiness, social entrepreneurship and financial inclusion.
2. To manage the environmental and social risks associated with the Bank’s activity in order to minimize its
potential direct and indirect negative impacts.
3. To engage all stakeholders to collectively promote the financial sector’s contribution to sustainable
development.
In view of the activities in which BBVA Group engages, it has no environmental liabilities, expenses, assets, provisions or
contingencies that are significant in relation to its net worth, financial position and results. For this reason, as of
December 31, 2019, the attached consolidated Annual Accounts do not include any item that warrants inclusion in the
environmental information document set out in Order JUS/318/2018, of March 21, which approves the new model for the
entry of the consolidated annual accounts in the Mercantile Register for those obliged to publish them.
However, the transition to a sustainable economy is today a priority for all stakeholders and BBVA wants to play a
relevant role in developing a more sustainable and inclusive world, as demanded by society, and helping its customers in
the transition to that more sustainable future.
Specifically, BBVA wants to make a significant contribution to the fight against climate change, helping its customers in
the transition to a low carbon economy. In addition, BBVA is committed to supporting inclusive economic development,
both through its business and through the various social programs promoted by the Group.
61
Sustainable financing
Sustainable finance products are instruments that channel funds to finance customer transactions in sectors such as
renewable energy, energy efficiency, waste management and water treatment, as well as access to social goods and
services, including housing, education, health and employment. BBVA strives to contribute to creating the mobilization of
capital needed to halt climate change and achieve the Sustainable Development Goals mentioned before. To this end, it
has pledged to mobilize €100,000m in sustainable financing between 2018 and 2025.
BBVA used the activities included in the Green Bond Principles and the Social Bond Principles of the International Capital
Markets Association as a benchmark to meet the objectives arising from its 2025 Pledge, under which the following types
of sustainable financing were defined:
Green financing for the transition to a low-carbon economy, which includes:
o
o
o
Certified green loans: those in which the object of the financing has positive environmental impacts and is
certified by an accredited independent third party.
Loans linked to green indicators: when the price of the loan is linked to the improvement of certain pre-
established indicators of environmental performance by the client.
Corporate finance to customers that undertake more than 80% of their activities in “green” sectors,
according to the Green Bond Principles: renewable energy; sustainable water and wastewater
management; clean transportation; and energy efficiency.
Financing of projects related to some of the aforementioned categories.
o
o Green bonds intermediated: those issued by companies that channel funds to finance projects with a
positive environmental impact (the Bank acts as a bookrunner).
o Green solutions for retail customers.
Social infrastructure and sustainable agribusiness:
o
o
o
Loans linked to social indicators: when the price of the loan is linked to the improvement of certain pre-
established indicators of social performance by the client.
Corporate finance for customers with over 80% of their activity in sectors classified as social, according to
the Social Bond Principles: health, education, community support and social housing.
Financing of high impact social infrastructure projects.
Sustainable agribusiness.
o
Financial inclusion and entrepreneurship: loans to low-income communities, vulnerable micro-entrepreneurs,
female entrepreneurs, as well as new digital models and impact investments.
Other sustainable actions:
o
o
o
Loans linked to the KPI rating: those in which the price of the loan is linked to the overall performance of the
client in terms of sustainability, taking as a reference the rating granted by an independent sustainability
analysis agency.
Sustainable bonds intermediated: those issued by companies that channel funds to finance projects with a
positive environmental and social impact (the Bank acts as a bookrunner).
Socially responsible investment, captured through vehicles with these characteristics marketed by BBVA.
Since the launch of its 2025 Pledge, BBVA has mobilized a total of €29,902m in sustainable financing, of which
€18,087m in 2019, distributed as follows:
FUNDS MOBILIZED THROUGH THE 2025 PLEDGE (MILLIONS OF EUROS)
2019 production
Green financing
Certified green loans
Green KPI- linked loans
Green corporate financing
Green projects finance
Green bonds
Green retail financing
Social Infrastructures and agribusiness
Social KPI- linked loans
Social corporate finance
Social infrastructures project finance
Financial inclusion and entrepreneurship
Financial inclusion
Loans to vulnerable entrepreneurs
Loans to female entrepreneurs
Impact investment
Other sustainable mobilization
ESG- linked loans
Sustainable bonds
Socially responsible investment
Total
Total 2025 Pledge (accumulated to 2019)
Sustainable solutions for customers
62
(%)
64
9
13
15
11,511
394
2,687
4,379
1,120
2,886
45
1,601
78
1,501
22
2,319
685
1,426
92
116
2,656
1,137
497
1,022
18,087
29,902
100
In the sustainable bonds market, BBVA has been a highly experienced advisor when it comes to helping its customers
issue green bonds since it took part in the first green bond issue by the European Investment Bank in 2007 and, more
recently, as a leading institution in this type of initiative. BBVA has also been a signatory of the Green and Social Bond
Principles since their
inception, which are voluntary guidelines that establish the requirements for emissions
transparency and promote integrity in the development of the green and social bond market.
In 2019, the Bank issued a second green bond for €1,000m, following its debut in the markets with its first issue of a
green bond in 2018 for the same amount, the largest ever issued by a Eurozone entity, both in accordance with the
framework for the issue of bonds linked to the Sustainable Development Goals published in 2018, which allows it to
channel funds to finance projects in sectors that are in line with its 2025 Pledge. For its part, the Bank published the first
follow-up report on its inaugural green bond, which helped reduce its carbon footprint by nearly 275,000 tonnes of CO2
and generate 558 gigawatts/hour of renewable electricity by financing renewable energy and sustainable transport
projects.
Overall, BBVA participated in 30 issues as a bookrunner, which involved the placement of €23,198m in total (with a BBVA
market share of €3,383m).
In the area of sustainable corporate loans, in 2019, the Bank granted a total of €4,296m between certified green loans,
green and social KPI- linked loans and ESG- linked loans.
In 2019, the Bank financed sustainable projects for a total amount of €1,142m, mainly in the renewable energy sector.
Among the operations carried out during the year were the financing of 3 wind farms in Italy, 11 in Spain and the first
offshore wind farm in France.
BBVA has a Corporate Finance (M&A) team dedicated to renewable energy operations, one of the most active in the
sector. It is for this reason that BBVA is a leader in providing advice to energy companies, for their disinvestment in coal
plants and the capital increase to finance and develop renewable energy projects.
63
In 2019, BBVA updated the sustainable transactional product framework that was published in 2018, to expand its reach
to a greater number of sectors and customers that establish strategies to curb climate change and boost sustainable
development.
Likewise, BBVA offers sustainable solutions for retail customers in various countries.
In Spain, it offers credit facilities to small businesses and individuals to purchase hybrid and electric vehicles, install
renewable energy solutions and improve energy efficiency in buildings. In 2019, the catalog of available sustainable
solutions was expanded, both in the area of mobility and energy efficiency. On the one hand, a specific SME funding line
was launched for the replacement of their vehicle fleet with plug-in electrical or hybrid models. On the other hand, in the
area of housing, a line of loans to property developers was launched, specifically aimed at developments with high energy
certifications, which includes the innovative possibility that retail customers who purchase these homes will be able to
benefit from an interest rate subsidy on their mortgage. Sustainable financing operations with Spanish companies of
smaller segments also increased. In the retail investment sector, BBVA has a range of sustainable funds, such as the
conservative multi-asset fund BBVA Futuro Sostenible ISR and the international equity fund BBVA Bolsa Desarrollo
Sostenible. In addition, in 2019 the Bank has launched its first individual pension plan managed with SRI criteria, the
BBVA Plan Sostenible Moderado.
In other areas, advances in equipment leasing linked to sustainability in Mexico, where an agreement was signed with the
International Finance Corporation (IFC) to promote this product in 2019, and green mortgages, also marketed within the
framework of the IFC agreement, and lines of loans for electric and hybrid vehicles in Turkey stand out.
Financial inclusion and entrepreneurship
BBVA is aware that greater financial inclusion has a favorable impact on the welfare and sustained economic growth of
countries. The fight against financial exclusion is therefore consistent with its ethical and social commitment, as well as
with its medium- and long-term business objectives. For this purpose, the Group has developed a financial inclusion
business model to cover the low-income population in emerging countries within its global footprint. This model is based
on the development of a responsible business model that is sustainable in the long term, shifting from a model that is
intensive in human capital and of limited scalability to a scalable strategy that is intensive in alternative and digital
channels with a multi-product focus. In short, this model is based on the use of new digital technologies, an increase in
products and services offered through non-branch platforms and innovative low-cost financial solutions designed for this
segment.
At the close of 2019, BBVA had 10 million active customers in this segment. Regarding the Group's initiatives in different
geographies, in Mexico, work is underway to promote banking penetration for beneficiaries of family remittances and to
digitize the segment, which currently has 23% of digital users.
In Colombia, zero-cost transfers can be made via cell phones and the Internet, with the aim of eliminating barriers and
encouraging greater access to the financial system and online banking.
In Peru, the BIM electronic wallet continues to be strengthened with new features, such as payment for services such as
electricity, water or gas, and at selected establishments.
Furthermore, Garanti continues to support the inclusion of women in the Turkish labor market within the framework of
its Female Entrepreneur program.
Socially responsible investment
BBVA assumed its commitment to Socially Responsible Investment (SRI) in 2008 when it joined the UN Principles for
Responsible Investment (PRI) through the employee pension plan and one of the Group’s major asset managers in
Spain, Gestión de Previsión y Pensiones. The goal then was to start building BBVA’s own responsible investment model
from the ground up, with the initial implementation focused on employment pension funds. At present, the objective is to
extend the scope of this model to all managed portfolios.
In 2019, BBVA Asset Management (BBVA AM) continued to adapt to the market and the changes within it, working to
extend and improve the SRI solutions offered. The strategies implemented by the BBVA AM SRI model are the following:
The Integration of ESG (environmental, social and governance) criteria into the investment process, carried
out by developing a proprietary model that incorporates extra-financial criteria into a model portfolio,
constructed according to fundamental analysis. This model, initially implemented in variable income and
subsequently in fixed income, has been fully incorporated into the management of employment plans and SRI
investment funds in Spain. In this regard, BBVA AM is working to incorporate ESG criteria into the investment
process of all investment solutions handled in Spain.
Exclusion: The Rules of Conduct in Defens eapply to all units and subsidiaries of the BBVA Group, and therefore
to all vehicles that are managed within the AM business in all geographical areas. For its application, BBVA uses
exclusion lists of companies and countries, drawn up and updated periodically, with the help of an independent
expert advisor. These lists include companies involved in controversial weapons and countries with high risk of
violating human rights, which are automatically excluded from the list of companies in which BBVA can invest.
ESG analysis of third-party funds, which also includes issues relating to their SRI performance.
Engagement and exercise of political rights, through the attendance of 200 general shareholders’ meetings
(Spanish companies and foreign European companies) in 2019, whose shares are in the portfolios of the various
investment vehicles managed by BBVA AM.
ASSETS UNDER MANAGEMENT WITH SRI CRITERIA (BBVA ASSET MANAGEMENT. MILLIONS OF EUROS)
64
Total assets under management
Europe
Mexico
South America
Turkey
SRI strategy applied
Exclusion (1)
Vote (2)
Integration (3)
31-12-19
113,651
75,645
27,708
6,341
3,957
113,651
75,645
8,844
(1) The exclusion strategy applies to 100% of the assets under management.
(2) The vote strategy applies to 100% of the assets under management in Europe for those instruments, in BBVA AM portfolios, that generate voting rights and their issuers are in the
European geographical area.
(3) The integration strategy is applied in ISR pension plans and mutual funds of the Europe business.
65
Social and environmental impact management
As a financial institution, BBVA exerts an impact on the environment and society directly, through the use of natural
resources and the relationship with its stakeholders; and indirectly, through its credit activity and the projects it finances.
In terms of environmental and social risks, BBVA’s strategy aims to gradually integrate its management into the Group’s
Risk Management Framework, in order to mitigate them based on the principle of prudence.
Environmental risks
As part of its 2025 Pledge, BBVA committed to aligning its objectives with the Paris agreements. They envisage a
reduction in emissions to limit the increase in temperature to 2ºC relative to the pre-industrial era. This commitment
results in different actions aimed at mitigating these risks.
In analyzing the risks that may impact its business, BBVA identified two types of risk:
Transition risks, both direct and indirect, resulting from changes in legislation, the market, consumers, etc.
Physical risks arising from climate change, which may have acute effects due to specific climatic phenomena,
or chronic effects due to changes in weather patterns over time.
BBVA has implemented various initiatives and plans in order to manage these risks. The objective is to reduce BBVA’s
impact on the environment, either directly or indirectly, and thus limit its exposure to this type of risk. For this reason,
initiatives have been launched to try to assess these risks and incorporate them into the Bank’s management framework.
This process includes the management of direct and indirect environmental impacts and the analysis of environmental
risks, as described in the following sections.
Management of direct environmental impacts
As part of its commitment to reduce the direct environmental impact of its activity, BBVA continued to work in 2019 to
reduce its environmental footprint through the Global Eco-efficiency Plan (GEP). This plan establishes the following
strategic vectors and global objectives for the 2016-2020 period:
These objectives are in line with those set out in 2025 Pledge: on the one hand, a 68% reduction in emissions; and on the
other, 70% of the energy contracted by 2025 must come from renewable sources and 100% by 2030. In line with this
last objective, BBVA is a member of the RE100 initiative, through which the world’s most influential companies undertake
to make their energy 100% renewable by 2050.
Moreover, BBVA was the first Spanish bank to adhere to the Science Based Targets initiative whose purpose is for
member companies to set greenhouse gas emission reduction targets aligned with the level of decarbonization
necessary to keep the global temperature rise below 2ºC on pre-industrial levels, as established by the Paris Agreement.
Together with these commitments, BBVA announced, within the framework of the UN Conference on Climate Change
(COP25) held in Madrid in December 2019, the introduction of an internal price to CO2 emissions from 2020, and the goal
of being carbon neutral that same year.
MAIN INDICATORS OF THE GLOBAL ECO-EFFICIENCY PLAN
People working in the certified buildings (%) (1)
Electricity usage per person (MWh)
Energy coming from renewable sources (%)
Co2 emissions per person (T) (2)
Water consumption per person (m3)
People working in buildings with alternative sources of water supply
(%)
Paper consumption per person (T)
People working in buildings with separate waste collection certificate
(%)
Note: indicators calculated based on employees and external staff.
(1) Including ISO 14001 and LEED certifications.
(2) Emissions calculated according to the market-based method.
66
2018 (3)
45
5.70
39
1.97
19.07
13
0.05
44
2019
49
5.43
39
1.82
14.70
15
0.04
46
(3) The data has been updated with respect to those published in previous reports due to post-2018 adjustments as well as the exclusion of Paraguay and Venezuela from the eco-
efficiency data.
In 2019, the evolution of the Group’s environmental footprint was very positive compared to the previous year, with
reductions of 8% in CO2 emissions (according to the market-based method), of 5% in electricity consumption, of 23%
in water consumption and of 19% in paper (each per person). The percentage of renewable energy consumption
has remained at 39%, and the percentage of people working in buildings with environmental certification reached 49%
by the end of the year.
The measures taken by BBVA to reduce its environmental footprint in 2019 are:
Environmental management in buildings: 1,026 branches and 78 corporate buildings have their Environmental
Management Systems certified under ISO 14.001:2015 in Argentina, Colombia, Spain, Peru, Uruguay, Mexico
and Turkey. Furthermore, 15 buildings in Spain also have their Energy Management System certified under ISO
50.001:2018. The Group’s 22 buildings and 9 branches are LEED certified for sustainable construction, including
the Bank’s main headquarters in Spain, Mexico, the United States, Argentina and Turkey. And 12 buildings and 2
branches have achieved this year the Energy Star certification in the United States, a program developed by the
U.S Environmental Protection Agency created in 1992 to promote energy efficiency, thereby reducing the effect
of greenhouse gas emission.
Energy and climate change: 100% of the energy consumed in Spain comes from renewable sources, and in
Mexico and the United States it has already reached 23 and 34%, respectively. Also, in 2019 construction began
on the BBVA-sponsored wind farm, which will supply 30% of the bank’s energy consumption in Spain from
2020, under the long-term power purchase agreement (PPA) signed last year. Mexico also signed a similar
agreement for the supply of 65% of its energy consumption. Several countries such as Turkey, Uruguay and
Spain have also committed themselves to the self-generation of renewable energy in their buildings, through the
installation of solar photovoltaic and solar thermal panels. Lastly, the Group maintains its continuous effort to
implement energy saving measures in its buildings. We should also note the time adjustments made with
respect to the use of natural light in facilities.
Water: Water is one of the resources with the greatest impact, and in order to reduce this impact initiatives have
been implemented in Spain and Mexico, such as the installation of dry urinals in corporate headquarters, which
will generate savings of 25,000 m3.
Paper and waste: The #BBVAPlasticFree project was launched with the aim of eliminating most of the single-use
plastics in corporate headquarters, which has been replaced with biodegradable materials. Plastic bottles from
catering services were also replaced with purified water fountains and digital freshwater stations in several
buildings in Spain. These measures have helped to reduce the number of plastic bottles by more than 500,000
a year.
Awareness campaigns: As in previous years, BBVA joined the “Earth Hour” initiative, during which 114 buildings
and 183 Bank branches in 113 cities in Spain, Portugal, Mexico, Colombia, Argentina, Turkey, Peru, Uruguay and
the United States turned off their lights to support the fight against climate change. Many awareness-raising
activities were also carried out with employees in several countries to mark World Environment Day.
ENVIRONMENTAL FOOTPRINT (BBVA GROUP)
Consumption
Public water supply (cubic meters)
Paper (tons)
Energy (Megawatt hour) (1)
CO2 emissions
Scope 1 emissions (tons CO2e) (2)
Scope 2 emissions (tons CO2e) market-based method (3)
Scope 2 emissions (tons CO2e) location-based method (4)
Scope 3 emissions (tons CO2e) (5)
Waste
Hazardous waste (tons)
Non-hazardous waste (tons)
67
2019
2018 (6)
2,061,431
5,747
855,938
16,899
195,590
297,920
56,699
168
5,054
2,696,274
7,114
898,265
17,781
209,362
307,827
65,289
99
6,010
(1) Includes the consumption of electricity and fossil fuels (diesel oil, natural gas and LP gas), except fuels consumed in fleets.
(2) Emissions from direct energy consumption (fossil fuels), calculated based on the emission factors of the 2006 IPCC Guidelines for National Greenhouse Gas Inventories. The IPCC
Fifth Assesment Report and the IEA were used as sources to convert these to CO2e.
(3) Emissions from electricity consumption, calculated based on the latest emission factors available from the IEA for each contry.
(4) Emissions from electricity consumption, calculated based on contractural and data or, failing this, on the latest emission factors available from the IEA for each country.
(5) Emissions from business trips by plane and from journeys made by employees in central services to the work place, using DEFRA 2017 factors. Emissions from journeys made by
employees to the workplace were calculated for the first time in 2017 based on surveys conducted on a sample of employees and extrapolating the data to the total number of
employees in central services. These emissions are not taken into account for the Global Eco-efficiency Plan.
(6) The data has been updated with respect to those published in previous reports due to post-2018 adjustments as well as the exclusion of Paraguay and Venezuela from the eco-
efficiency data.
Regarding the direct impacts chapter, the Bank established a goal of reducing 68% of its emissions of scope 1 and 2, as
well as a 70% consumption of renewable energy, in the framework of its 2025 Pledge.
Indirect environmental impacts
Managing the environmental impacts generated by its customers is part of 2025 Pledge. In order to manage these
impacts, BBVA launched a series of initiatives and tools.
Sector norms
In 2018, BBVA launched sector-specific norms that allow it to perform enhanced due diligence on its customers, manage
stakeholder expectations, mitigate risks and ensure compliance with the Corporate Social Responsability policy. The
in sectors with the greatest
norms provide guidance for decision-making
environmental and social impact, such as defense, mining, energy, agriculture and infrastructure. They are available for
consultation on the website of shareholders and investors of BBVA.
in relation to customers operating
In addition, this year BBVA carried out an analysis of sectoral standards for updating and adapting to best market
practices and new standards. The most important changes were the reduction from 40% to 35% of the coal threshold in
the energy mix and the inclusion of the transport, exploration and production of oil sands among banned activities. In the
rules on energy and agriculture, the mention of biofuels as an alternative in the fight against climate change was
eliminated and new restrictions related to tobacco advertising were incorporated.
Equator Principles
Energy, transport and social service infrastructures, which drive economic development and create jobs, can have an
impact on the environment and society. BBVA’s commitment is to manage the financing of these projects to reduce and
avoid negative impacts and enhance their economic, social and environmental value.
All decisions to finance projects are based on the criterion of principle-based profitability. This implies meeting
stakeholder expectations and the social demand for adaptation to climate change and respect for human rights.
In line with this commitment, since 2004 BBVA has adhered to the Equator Principles (EP), which include a series of
standards for managing environmental and social risk in project financing. The EPs were developed on the basis of the
International Finance Corporation’s (IFC) Policy and Performance Standards on Social and Environmental Sustainability
and the World Bank’s General Guidelines on Environment, Health and Safety. These principles have set the benchmark
for responsible finance.
The analysis of the projects consists of subjecting each operation to an environmental and social due diligence process,
starting with the allocation of a category (A, B or C), which reflects the project’s level of risk. Reviewing the
documentation provided by the customer and independent advisers is a way to assess compliance with the requirements
68
established in the EPs, according to the project category. Financing agreements include the customer’s environmental
and social obligations. The application of the EPs at BBVA is integrated into the internal processes for structuring,
acceptance and monitoring of operations, and is subject to regular checks by the Internal Audit Department.
BBVA has strengthened due diligence procedures associated with financing projects whose development affects
indigenous communities. Where this is the case, free, prior and informed consent (FPIC) is required from these
communities, regardless of the geographic location of the project. This implies extending the current EP requirement to
all countries. In 2019, BBVA actively contributed to the development of the fourth version of the Principles through its
participation in two working groups. At the global level, for projects that meet these new circumstances, the Equator
Principles Financial Institution (EPFI) requires an independent environmental and social consultant to evaluate the
consultation process with indigenous peoples, and the outcomes of this process. The voting process for the final
document took place in October 2019 and was launched at the annual meeting in November. Members will have one year
to adopt the new principles.
OPERATIONAL DATA ANALYZED ACCORDING TO THE EQUATOR PRINCIPLES CRITERIA
Number of transactions
Total amount (millions of euros)
Amount financed by BBVA (millions of euros)
2019
39
15,287
2,437
2018
29
13,613
1,289
Note: of the 39 transactions analyzed, 16 fail under the Equator Principles, and the remaining 23 were analyzed voluntarily by BBVA using the same criteria in 2019 (29, 16 y 15,
respectively, in 2018).
PACTA Methodology Used to Evaluate Loan Portfolios and Their Alignment with the Paris Agreement
One of the objectives of BBVA’s climate change strategy is to gradually align the bank’s activity with the Paris Agreement.
To this end, it has joined other European banks in a joint commitment to develop methodologies for evaluating
portfolios in sectors with the greatest impact and to align them progressively with the objectives set out in the Paris
Agreement on climate change. The initial methodology that is going to be used is PACTA, developed by the think tank
2degree Investing Initiative.
This methodology consists of gaining a better understanding of the climate change strategy used by customers in these
sectors, the technological changes required and the plans to reduce their carbon dioxide emissions. These simulations
can be used to make a five-year projection of the customer’s technological transition in a given industry and provide a
comparison, in line with the scenarios offered by the International Energy Agency. In 2019, a test of the methodology was
carried out in order to identify requirements and make a first analysis of the portfolio.
Environmental risk analysis
Analysis of transition risks with climate scenarios
BBVA participated in the pilot project developed by UNEP FI in 2018 2018 about the application of its methodology to
establish scenarios and analyze the impact of the transition risk. From the results obtained in that project, the Bank
decided to place special focus on scenario analysis. This analysis helps to identify specific risks within each sector
(especially those most exposed to risk).
Physical risk analysis
The effect of these risks depends on the sector analyzed. BBVA decided to focus its pilot on the analysis of physical risks
in the mortgage market, with an initial study of the Mexican market. The methodology proposed by Acclimatise (a
consultant collaborator in the UNEP FI project).
Social Risks
BBVA addresses social risks from a perspective of prevention and mitigation of impacts. For this purpose, it uses tools
such as sectoral rules or the Equator Principles, as described in the section on environmental risks above, which also
have a social focus in certain aspects. BBVA also has a regulatory system for defense, which is described below.
Rules of conduct in defense
Since 2005, this standard has summarized BBVA’s position on the defense industry, arguing that there are certain
activities and products related to this sector that may be contrary to corporate principles and its own business rules. In
2019, BBVA updated this standard, the scope of which was extended in response to various demands from a number of
stakeholders, mainly NGOs, standing out the following:
Depleted uranium munitions and white phosphorus munitions were included in the definition of controversial
weapons along with existing categorizations (anti-personnel mines, biological weapons, chemical weapons,
cluster weapons, and nuclear weapons in certain cases).
The scope was extended to all BBVA Group divisions and subsidiaries and to all services. Thus, the standard will
also apply to third-party funds (Quality Funds) and will continue to be implemented in BBVA’s advisory,
investment and financing services for companies and projects related to the defense sector.
As for customer bans, the ban on manufacturers of military assault weapons for civilian use was added.
69
70
Engagement with global initiatives
In 2019, BBVA maintained its involvement with the main international initiatives for sustainable development and
sustainability: from global initiatives such as the United Nations Global Compact to those focused on environmental
issues or the fight against climate change such as the Carbon Disclosure Project (CDP), the Katowice Commitment, the
RE100, and the Science Based Targets. At the sectorial level, BBVA remains committed to groups such as the Thun
Group on Banks and Human Rights, the Green Bond Principles, the Social Bonds Principles, the Green Loan Principles,
the Equator Principles, the Principles for Responsible Investment (PRI) and the United Nations Environment Program
Finance Initiative (UNEP FI).
It should be noted that in 2019, BBVA signed the Principles of Responsible Banking, promoted by UNEP FI, as a founding
signatory. In addition, and within the framework of these principles, BBVA joined the Collective Commitment to Climate
Action launched by 31 international financial institutions as part of the United Nations climate summit held in New York in
September 2019. This commitment aims to align its products and services with a collective strategy to the climate crisis.
Sustainable Development Goals (SDG)
The SDGs were launched in 2015 within the framework of the United Nations and signed by 193 countries. The 17
objectives are framed within the Agenda 2030 on sustainable development, in order to protect the planet, to fight against
poverty in an attempt to eradicate it and to secure a prosperous world for future generations. Each goal has a specific
purpose and different targets to achieve it. Each target also has its own indicators to determine the degree of
achievement of each goal. Similarly, this initiative aims to involve all stakeholders, from governments and businesses to
civil society.
Based on the SDGs and the Paris Agreement, in 2018 BBVA announced its strategy for climate change and
sustainable development in order to contribute to these two global initiatives. This strategy focuses on the mobilization
of capital aimed at halting climate change and contributing to the achievement of the SDGs, as well as on the
management of the environmental and social risks derived from its activity in order to minimize potential direct and
indirect negative impacts. BBVA has also focused on involving all its stakeholders to collectively promote the financial
sector’s contribution to sustainable development. Due to the magnitude of this, the challenges arising from the SDGs and
global warming can only be overcome with firm commitment from all. This requires awareness, shared knowledge, call to
action, dialog and alliances with all stakeholders, as well as participation in international and sectorial initiatives that join
forces.
Principles for Responsible Banking
BBVA is one of the 28 founding banks around the world that have worked on the preparation of Principles of Responsible
Banking since April 2018. In 2019, these principles were officially signed and BBVA joined 131 other global financial
institutions. This is an initiative coordinated by UNEP FI, the United Nations program for the environment and financial
entities, and aims to respond to the growing demand of our different stakeholders to have a comprehensive framework
that covers all dimensions of sustainable banking.
In this sense, BBVA believes that these Principles will help reaffirm its Purpose, enhance its contribution to both the
United Nations Sustainable Development Goals and the commitments derived from the Paris Climate Agreements, and
align its business strategy with these Principles.
The Katowice Commitment
BBVA, together with other European banks, has signed up to the Katowice Commitment, an initiative aimed at
developing an impact assessment methodology to adapt our loan portfolio to the commitments of the Paris Agreement.
In an open letter addressed to world leaders and heads of state gathered at the 24th UN Climate Change Conference in
Katowice, Poland, these banks committed to finance and design the financial services needed to support customers as
they transition to a low-carbon economy.
71
Contribution to society
Investment in social programs
Through its social programs, BBVA acts as an engine of opportunity for people, seeks to generate a positive impact on
their lives, and delivers its aim of making the opportunities of this new era available to those who face the most difficulty,
the vulnerable. In 2019, the BBVA Group allocated €113.8m to social initiatives that benefited 11.5 million people. This
figure represents 2.4% of net attributable profit.
In accordance with the Corporate Social Responsibility Policy, which was approved by the Board of Directors in 2018 and
is available for inspection on the bbva.com website, BBVA implements its community involvement by supporting the
development of the societies in which the Group operates through financial activity, as well as through social programs
focusing on education, financial education, entrepreneurship, and knowledge. To this end, in 2019 BBVA continued to
promote the main lines of action established in the Community Investment Plan, which it believes are still significant to
the societies in which it operates, extending its scope to cover:
Financial education, to improve people’s financial health through training in financial skills and competencies,
through face-to-face and digital channels.
Social entrepreneurship, by supporting the most vulnerable entrepreneurs and those who generate a positive
social impact via their companies, as well as raising the visibility of their initiatives.
Knowledge, education and culture, through support for initiatives that promote the sustainable development
of societies and enable the creation of opportunities for people.
Other initiatives, which include support for social entities, volunteer work/community service, and the promotion of
corporate responsibility, both from corporate areas and from individual local banks, are developed to address different
social challenges.
INVESTMENT IN SOCIAL PROGRAMS BY
FOCUS OF ACTIONS. 2019
BENEFICIARIES OF SOCIAL PROGRAMS BY
FOCUS OF ACTIONS. 2019
Investment in BBVA’s social programs is channeled through its local banks and certain foundations. They play a
fundamental role in the development of the societies in which the Group has a presence.
The BBVA Foundation focuses on knowledge enhancement, culture, the dissemination of science and art, as well as the
recognition of talent and innovation. Its activity is grouped into five strategic areas: Environment, Biomedicine and
Health, Economy and Society, Basic Sciences and Technology, and Culture. In each one of these, it designs, develops
and finances research projects, either individually or in teams; facilitates advanced and specialized training through
scholarships, courses, seminars and workshops; awards prizes to researchers and professionals who have contributed
significantly to the advancement of knowledge; and communicates and disseminates this knowledge through
publications and conferences.
INVESTMENT IN SOCIAL PROGRAMS (MILLIONS OF EUROS AND PERCENTAGE)
Spain and corporative areas
The United States
Mexico
Turkey
South America
Other foundations (1)
Total
(1) It mainly includes the BBVA Foundation.
Financial education
2019
28.9
14.1
30.9
4.7
4.8
30.4
113.8
%
25
12
27
4
4
27
100
2018
28.1
11.1
25.3
5.2
3.9
30.9
104.5
72
%
27
11
24
5
4
30
100
Its global objective is to promote a concept of financial education in a broad sense through the Global Financial
Education Plan, which is based on three lines of action:
Financial education for society: promote the acquisition of knowledge, skills and attitudes in all countries in
which BBVA has a presence, through its own programs and in collaboration with third parties, with the aim of
achieving greater knowledge of financial concepts and a change in behavior in financial decision-making,
enabling the improvement of people’s financial health. In 2019, a total of 1.9 million children and young people,
adults and SMEs benefited from local initiatives. This year, the Group began to reduce its initiatives involving
financial education for children, resulting in a 6% decrease in the number of beneficiaries.
Financial education in customer solutions: Integrate financial capabilities into the customer experience. In order
to facilitate informed decision-making and improve their financial well-being, financial education content was
integrated into customer solutions in 2019.
In 2019, 20,110 users accessed financial education content published on bbva.com and 288 people attended
events held by the Center for Education and Financial Capabilities.
In 2019, €7.7m were spent on financial education. BBVA’s commitment to financial education is long-term, with €89m
invested and 15.5 million people benefiting from different programs since 2008.
Entrepreneurship
In 2019, BBVA allocated €9.8m to entrepreneurship initiatives that benefited 2.2 million people. The following are among
the global initiatives related to entrepreneurship:
BBVA Momentum is a global program that helps social entrepreneurs grow and broaden their impact. It
includes training, strategic accompaniment, networking and access to funding. 167 entrepreneurs from
Colombia, the United States, Mexico and Turkey participated in 2019.
BBVA Open Talent is a fintech startups competition that aims to foster innovative technological solutions and
raise awareness of emerging projects capable of transforming the financial sector. In 2019, 770 startups from
95 countries participated, with 290 professionals involved.
Knowledge, education and culture
Regarding the knowledge, education and culture activities, €77.6m were invested, benefiting 7.2 million people in 2019.
BBVA contributes to the dissemination of knowledge through BBVA Research, the BBVA Foundation and BBVA Open
Mind. In 2019, BBVA Research made 1,245 publications available to shareholders, investors and the general public,
including economic studies, reports and analysis, and have been viewed by 363,591 people. For its part, the main
initiatives to support science (research, knowledge spaces, recognition and networking) benefited 3.1 million people.
Education for society is an important aspect of BBVA’s social investment (32%), as it continues to support access to
education, educational quality and the development of 21st century key skills as sources of opportunity, benefiting
672,200 people in 2019.
With the educational project Aprendemos juntos (Let’s learn together), BBVA aims to lead and promote conversation on
education in the 21st century, taking into account the fact that education provides a great opportunity to improve
people’s lives. The project, which was launched in January 2018 with a transformative mission that aims to create
opportunities in more than 3 million homes and their educational community. In two years, the project is followed by
more than 2.5 million people on social networks, with more than 700 million views of its inspiring content, and 55,264
teachers and parents being trained through the online courses.
73
The promotion of cultural creation of excellence is one of BBVA Foundation’s cornerstones for generating knowledge. It
focuses its support on classical music, with an emphasis on contemporary music, plastic arts, video and digital art,
literature and theater. In 2019, 3.4 million people benefited from the cultural initiatives promoted by the BBVA
Foundation. Likewise, the various local banks that make up the Group promote the culture in their respective countries
through a great different range of activities.
Other contributions
BBVA’s community support activity extends to other relevant activities, such as volunteer work/community service
(more information in the Working Environment section of the chapter Questions relating to personnel), support for social
entities and the promotion of corporate responsibility through participation in different working groups (more
information in the section on Involvement in global initiatives in the chapter on Sustainable Finance).
In terms of contributions to foundations and non-profit organizations, the global amount of these contributions in 2019
reached €8.0m.
As a result of all the investments done in the framework of the Community Investment Plan, 11.5 million people benefited
from it in 2019. Continuative objectives have been established for this year as well as management objectives to achieve
an improved quality of the information related to the direct beneficiaries of the social programs.
GOALS AND PROGRESS RELATED TO THE DIRECT BENEFICIARIES OF THE SOCIAL PROGRAMS (MILLION
PEOPLE. 2019)
Goal
Progress
Finance education
Entrepreneurship
Knowledge
Education
Culture
Science
Others
Total
0.7
2.2
0.0
0.6
1.5
1.5
0.0
6.4
1.9
2.2
0.0
0.7
3.4
3.1
0.2
11.5
74
Fiscal transparency
Fiscal strategy
BBVA’s fiscal strategy, which has been approved by its Board of Directors and is available for consultation on the
bbva.com website, is aligned with the Group’s commitment to provide the best solutions for its customers, to offer
profitable and sustained growth to its shareholders and to collaborate in the progress of the societies in which it is
present—in short, to make the opportunities of this new era available to all.
This strategy is also part of BBVA’s corporate governance system and establishes the policies, principles and values that
guide the way the Group behaves with respect to taxes. This strategy is global in scope and affects everyone within the
Group. Compliance with the strategy is very important, given the scale and impact that the tax contributions of large
multinationals such as BBVA have on the jurisdictions in which they operate. Effective compliance with the provisions of
the fiscal strategy is duly monitored and supervised by the Bank’s governing bodies.
Accordingly, BBVA’s fiscal strategy is based on the following basic points:
The payment of taxes in all the countries in which the Group has a presence, as an important contribution to the
sustainability of their various economies.
Economic activities that generate sustainable value for all its stakeholders.
Reasonable interpretations of tax regulations, as well as of the provisions contained in the agreements to avoid
double taxation.
The establishment of a transfer pricing policy for all transactions between related parties and entities, governed
by the principles of free competition, value creation and assumption of risk and benefits.
Adaptation to the digital environment in order to face the fiscal challenges it poses.
The establishment of a cooperative relationship with tax authorities, based on the principles of transparency,
mutual trust, good faith and loyalty.
The promotion of a transparent, clear and responsible reporting strategy on its main fiscal related matters.
Assessing tax implications for customers of new financial products, including relevant information for complying
with tax obligations.
Both the strategy and the resulting fiscal policies are inspired by the OECD’s Base Erosion and Profit Shifting Project
(BEPS) reports and reflect the commitment to comply with and respect the letter and spirit of tax law in the jurisdictions
in which the Group operates, in accordance with Chapter XI of the OECD Guidelines for Multinational Enterprises.
Tax risk management and governance model
BBVA employs a governance model related to tax and fiscal risk control mechanisms.
The fiscal strategy has been developed through tax policies that have been duly communicated to all BBVA employees.
The Group also has whistleblowing channels to report breaches of its Code of Conduct and its fiscal strategy. Fiscal risk
management mechanisms are also in place to ensure that the Group’s tax obligations are being fulfilled.
The head of the Tax Department regularly appears before governing bodies charged with duties in this area, in order to
report on the Group’s main tax figures and the fiscal risk management measures it has adopted.
Cooperation with tax authorities
BBVA has a cooperative relationship with the tax authorities in the countries in which it operates. Notably, as an active
member of the Spanish Large Corporations Forum, BBVA is subject to the CBPT (Código de Buenas Prácticas
Tributarias — Code of Good Tax Practices) adopted by the Forum on July 20, 2010.
The Group has once again voluntarily submitted the Annual Fiscal Transparency Report for Companies Adhering to the
Code of Good Tax Practices and its corporate income tax declaration for the previous year, which included its
performance and proposals to strengthen the good practices on fiscal transparency—adopted in a plenary session of the
Spanish Large Corporations Forum on December 20, 2016—for companies adhering to the Code.
BBVA also adopted the Code of Practice on Taxation for Banks, a United Kingdom initiative that describes the expected
approach from financial institutions in terms of governance, tax planning and engagement with the United Kingdom tax
authorities, in order to promote the adoption of best practices in this area, which is published on the BBVA website.
75
Lastly, as a financial institution, BBVA is classed as a cooperative institution in terms of tax collection in the countries in
which it operates.
Total tax contribution
BBVA is committed to provide transparency in the payment of taxes and this is the reason why for yet another year, as
the Group has been doing since 2011, it voluntarily breaks down the total tax contribution in countries in which it has a
significant presence.
BBVA Group’s total tax contribution (TTC), which uses a method created by PwC, includes its own and third-party
payments of corporate taxes, VAT, local taxes and fees, income tax withholdings, Social Security payments, and
payments made during the year arising from tax litigation in relation to the aforementioned taxes. In other words, it
includes both the taxes related to the BBVA Group companies (taxes which represent a cost to them and affect their
results) and taxes collected on behalf of third parties. The TTC Report provides all the stakeholders with the opportunity
to understand BBVA’s tax payment and represents a forward-looking approach, as well as a commitment to corporate
social responsibility, by which it assumes a leading position in fiscal transparency.
GLOBAL TAX CONTRIBUTION (BBVA GROUP. MILLIONS OF EUROS)
Own taxes
Third-party taxes
Total tax contribution
Offshore financial centers
2019
3,702
5,588
9,290
2018
4,502
5,250
9,752
The BBVA Group maintains an express policy on activities in entities permanently registered in offshore financial
centers, which includes a plan for reducing the number of offshore financial centers in which the Group is present.
As of December 31, 2019, BBVA’s permanent establishments registered in offshore financial centers considered tax
havens by both the OECD and Spanish regulations are securities companies: BBVA Global Finance, Ltd., Continental DPR
Finance Company, Garanti Diversified Payment Rights Finance Company and RPV Company. In 2018, the Group closed
its branch in the Cayman Islands.
Issuers of securities
BBVA Group has four issuers registered in Grand Cayman, two of which belong to the Garanti Group.
BRANCH AT OFFSHORE ENTITIES (BBVA GROUP. MILLIONS OF EUROS)
Securities issuers
Subordinated debts (1)
BBVA Global Finance LTD
Other debt securities
Continental DPR Finance Company (2)
Garanti Diversified Payment Rights Finance Company
RPV Company
Total
(1) Securities issued before the enactment of Act 19/2003 dated 4 July, 2003.
(2) Securitization bond issuances in flows generated from export bills.
31-12-19
31-12-18
178
35
1,604
1,355
3,172
175
48
1,793
1,329
3,345
Supervision and control of the permanent establishments of the BBVA Group in offshore financial
centers
BBVA Group has established the same risk management policies and criteria for all its permanent establishments in
offshore financial centers as for the rest of the entities within the Group.
The BBVA Internal Audit Area, in the annual reviews of all offshore financial centers permanent establishments of the
BBVA Group verifies: i) the adequacy of its operations to the definition of the corporate purpose, ii) compliance with
corporate policies and procedures regarding customer knowledge and prevention of money laundering, iii) the veracity of
the information sent to the parent company, and iv) compliance with tax obligations. In addition, it annually carries out a
specific review of the Spanish regulations applicable to transfers of funds between the Group's banks in Spain and its
entities established in offshore financial centers.
In 2019, both the Internal Audit Area and the BBVA Compliance Department monitored the action plans derived from the
audit reports of each of the establishments
For 2019, as far as external audits are concerned, all of the BBVA Group’s permanent establishments registered in
offshore financial centers have the same external auditor (KPMG), except Continental DPR Finance Company.
76
Other tax information by countries
TAX INFORMATION BY COUNTRIES (MILLIONS OF EUROS)
Subsidies
CIT payment
cash basis
CIT expense consol
2018
2019
CIT payment
cash basis
CIT expense consol
(15)
135
964
246
97
27
205
-
30
11
8
3
-
-
4
5
1
12
-
-
2
-
17
3
21
-
-
1
-
-
6
9
226
123
993
289
128
37
172
1
19
8
3
3
-
-
7
10
3
1
-
-
3
5
11
9
(11)
-
-
1
-
(1)
7
8
PBT (1)
consol
(911)
751
3,544
1,151
438
234
636
(8)
69
53
34
11
-
6
43
46
10
6
(20)
-
45
38
39
26
9
2
(2)
8
1
(2)
31
111
1,792
2,053
6,398
Spain (2)
The United States
Mexico
Turkey
Colombia
Argentina
Peru
Venezuela
Chile
Uruguay
Paraguay
Bolivia
Brazil
Curaçao
Romania
Portugal
Netherlands
Switzwerland
Finland
Ireland
United Kingdom
Hong Kong
France
Italy
Germany
Belgium
China
Singapore
Japan
Taiwan
Chipre
Malta
Total
534
165
903
422
85
32
146
-
365
15
9
2
-
-
1
6
7
9
-
-
3
-
14
8
17
-
-
1
-
-
3
6
307
188
902
269
117
116
163
20
43
6
3
2
-
-
4
27
5
1
-
2
2
1
12
8
1
-
-
1
-
-
7
10
PBT (1)
consol
1,295
977
3,241
1,225
355
66
584
2
205
37
35
9
-
6
38
59
20
4
(12)
10
21
14
36
29
16
2
(1)
7
-
(2)
30
136
Subsidies
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,753
2,219
8,446
Note: the results of this breakdown of the branches are integrated in the financial statements of the parent companies on which they depend.
(1) PBT: Profit before tax.
(2) In 2019, in “CIT payments cash basis”, the methodology for calculating advance payments of the annual tax return provided for in Corporate Income Tax legislation, may lead to
differences between the advance payments made in the current year and the refund of those advance payments made in previous years resulting once the annual corporate income
tax return has been submitted. As a result of these differences, there has been a net cash refund. The amount of “Profit before taxes includes Corporate Center (see "Business Area"
section within this consolidated Management Report).
During 2019, BBVA Group has not received public aid for the financial sector which has the aim of promoting the carrying
out of banking activities and which is significant, as mentioned in the Appendix XIII - Annual Banking Report of the
attached Consolidated Financial Statements.
77
Suppliers
BBVA understands that integrating ethical, social and environmental factors into its supply chain is part of its
responsibility. Thus, in 2019, the Group consolidated the transformation of the purchasing function, which is based on
the three basic pillars of the procurement model:
Service, maximizing the quality and experience of the internal customer, who is accompanied throughout the
process.
Risk, limiting the Group’s operational risk in supplier contracts, thus ensuring compliance with regulations and
processes.
Efficiency, contributing to the Group’s efficiency through the proactive management of costs and suppliers.
ESSENTIAL DATA ABOUT SUPPLIERS (BBVA GROUP)
Number of suppliers (1)
Volume provided by suppliers (millions of euros) (1)
Average payment period to suppliers (days)
Suppliers satisfaction index (2)
Number of approved suppliers
n.a. = not applicable.
(1) Payments to third parties. Suppliers lower than 100.000 euros are not included.
(2) Bienal survey.
2019
4,669
7,696
24
84
5,463
2018
4,620
7,478
22
n.a.
5,819
As part of the procurement process, BBVA strives to correctly manage the real and potential impacts that an entity such
as BBVA may cause, through a series of mechanisms and rules: a responsible purchasing policy, a standardization
process and the Corporate Rules for the Acquisition of Goods and Contracting of Services. These impacts may be
environmental, caused by bad labor practices carried out in supplier companies, a result of the absence of freedom of
association, human rights, and can have either a positive or negative impact on society.
Through the implementation of the Supplier Code of Ethics in the purchasing units of all countries in which the Group is
present, minimum standards of behavior in terms of ethical, social and environmental conduct were established which
suppliers are expected to follow when providing products and services. In addition to the ethical supplier code, BBVA
maintains a responsible procurement policy.
Responsible procurement policy
The Responsible Procurement Policy establishes, among other aspects, that it is necessary to ensure compliance with all
applicable
legal requirements throughout the provisioning process regarding human, labor, association and
environmental rights by all parties involved in this process as well becoming involved in the Group’s efforts aimed at
preventing corruption. In the same way, it is ensured that the selection of suppliers remains in compliance with existing
internal regulations at all times and, in particular, with the values of the Group’s Code of Conduct, based on respect for
legality, commitment to integrity, competition, objectivity, transparency, creation of value and confidentiality. The
following are included among the clauses contained in the specifications and in the contractual model:
Compliance with current legislation in each locality and, in particular, with the obligations imposed on it by its
personnel, Social Security or alternative provision systems, hiring of foreign workers, the Public Treasury,
public records, among others.
Compliance with current legislation on the social integration of individuals with disabilities.
Clauses that ensure that non-discrimination policies are established for reasons of gender, as well as
measures to reconcile work and family life.
Equality clause.
Compliance with all labor, occupational health, and safety legislation.
Anti-corruption declaration.
Adherence to the United Nations Global Compact.
The Responsible Procurement Policy also establishes, as one of its principles, the “raising awareness, in terms of social
responsibility, among staff and other interested parties involved in the procurement processes of the Group”.
Supply chain
BBVA operates a technological platform, the Global Procurement System (GPS), which supports all phases of the
Group’s procurement process, from budgeting to invoice registration, including electronic invoicing. In 2019, the
78
platform is operational in Spain and Mexico (legally), Peru, Colombia, Argentina, Venezuela and the South American
Hub.
Additionally, within the GPS, BBVA also has an electronic catalog procurement tool (SRM), which can be accessed via
the Intranet and is designed to issue decentralized procurement requests, i.e., directly from the user area. SRM is
available in Spain, Mexico, and Peru.
BBVA has a supplier portal that facilitates the Group’s online relationship with its suppliers. It is a collaborative
environment targeted at companies and self-employed workers who work or are interested in working with the BBVA
Group, allowing them to electronically interact with the Bank throughout the supply cycle. The supplier portal consists
of two environments: a public one, accessible from the web (https://suppliers.bbva.com), which provides general
information on the procurement process and on the relevant aspects of their purchasing model; and a private one,
which allows suppliers to operate online, from tendering (electronic auctions) and approval to payment (electronic
invoicing).
In addition to the portal, there is also a supplier directory, an internal tool that can be accessed via the Intranet, allowing
users to consult contact data and general information about the Bank’s suppliers.
Supplier management
BBVA carries out a supplier approval process which consists of assessing the financial, legal, labor and reputational
situation of suppliers, in order to ascertain their basic technical skills and legal responsibilities (labor or environmental
regulations, among others). This allows them to promote their civic responsibilities and confirm that they share the same
values as the Group in terms of social responsibility. In this process, suppliers must comply with the following points:
Compliance with the social and environmental principles of the UN.
Adoption of internal measures to guarantee diversity and equal opportunities in the management of human
resources.
Adoption of measures to promote occupational health and safety and the prevention of workplace accidents
and incidents.
Support for the freedom of affiliation and collective bargaining of its workers in all the countries in which it
operates.
Possession of a code of conduct or policy to avoid forced labor, child labor and other violations of human rights,
both within the company itself as well as in its subcontractors.
Possession of a code of conduct or policy designed to avoid corruption and bribery.
Participation or collaboration in activities related to culture, scientific knowledge, sports, the environment or
disadvantaged sectors, either through direct actions or by means of donations, in collaboration with other
organizations or institutions.
Hiring of persons with disabilities.
Existence of a corporate responsibility policy within the company.
Approval is reviewed periodically and is subject to continuous monitoring. Thus, in 2019, as part of this improvement
process, the alert system for approved suppliers was upgraded in order to provide up-to-date information on certain
events that may affect their solvency or risk. At year end of the year, the percentage of approved suppliers was 45%,
accounting for 88% of the total awarded contracts.
Security companies, especially those critical to these matters, have established compliance with current legislation with
regard to specifications and contracts, with special attention provided to labor legislation and the specific laws applicable
to these types of companies, as well as compliance with human rights obligations, non-discrimination and equality
policies, etc.
In terms of local suppliers, these represent 97% of BBVA’s total suppliers in 2019, and 95% of total turnover, which
facilitates contributions to the economic and social development of the countries in which the Group is present. A local
supplier, in this context, is one whose tax identification matches the country of the company receiving the goods or
services.
On the other hand, the turnover of special employment centers (CEEs, for its acronym in Spanish) in Spain to the Bank
reached €3.1m for the year. The hiring of CEEs favors inclusion and diversity.
In 2019, the Internal Audit Area conducted audits of suppliers on the processes of supply of goods and services from
different areas and on the services provided by certain suppliers, mostly outsourcing. These are risk-based audits, and
reviews are carried out according to a defined internal methodology.
NUMBER OF SUPPLIERS AND TURNOVER BY COUNTRY
2019
2018
Suppliers (1) and annual turnover (2)
Number of
suppliers
Annual turnover
(millions of euros)
Number of
suppliers
Annual turnover
(millions of euros)
79
Spain
The United States
Mexico
Argentina
Chile
Colombia
Peru
Venezuela
Paraguay
Uruguay
Portugal
Total
Total suppliers (3)
Spain
The United States
Mexico
Argentina
Chile
Colombia
Peru
Venezuela
Paraguay
Uruguay
Portugal
1,429
854
1,371
310
-
220
295
55
43
54
38
2,401
732
3,564
369
-
231
270
66
16
29
17
1,308
809
1,258
382
153
213
281
63
51
50
52
2,667
683
3,033
421
93
229
246
34
18
26
27
4,669
7,696
4,620
7,478
25,776
18,333
8,083
2,031
17
2,314
2,318
501
1,078
586
635
2,542
814
3,692
393
0
256
296
68
23
35
22
28,065
12,890
7,703
2,294
980
2,484
3,754
911
1,069
552
732
2,827
755
3,153
455
106
255
273
38
24
33
33
Total
Excluding Turkey.
(1) Including suppliers and creditors.
61,672
8,142
61,434
7,952
(2) Payments made to third parties (not including suppliers with amounts less than €100,000). Cash flow criterion.
(3) Including all suppliers, creditors and third parties invoicing to BBVA without a limit to the amount.
AVERAGE PAYMENT PERIOD TO SUPLLIERS (1) (DAYS)
2019
2018
Spain
The United States
Mexico
Argentina
Chile
Colombia
Peru
Venezuela
Paraguay
Uruguay
Group average (2)
Excluding Turkey and Portuagl.
51
5
14
39
-
28
9
18
30
3
24
46
4
15
34
29
30
11
25
30
3
22
(1) Average payment period calculated as an average resulting from the difference between the payment date and the base date. With no weighing by amount.
(2) Total average payment period is calculated based on a ponderation between the different geographies as is not possible to be done taking the whole invoice data.
80
Other non-financial risks
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt).
Such investigation includes the provision of services by Cenyt to the Bank. On 29th July, 2019, the Bank was named as an
official suspect (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9,
Central Investigating Court No. 6 of the National High Court) for alleged facts which could be constitutive of bribery,
revelation of secrets and corruption. Certain current and former officers and employees of the Group, as well as former
directors have also been named as official suspects in connection with this investigation. The Bank has been and
continues to proactively collaborate with the Spanish judicial authorities, including sharing with the courts the relevant
information from its on-going forensic investigation regarding its relationship with Cenyt. The Bank has also testified
before the judge and prosecutors at the request of the Central Investigating Court No. 6 of the National High Court.
On February 3, 2020, the Bank was notified by the Central Investigating Court No. 6 of the National High Court of the
order lifting the secrecy of the proceedings.
This criminal judicial proceeding is at a preliminary stage. Therefore, it is not possible at this time to predict the scope or
duration of such proceeding or any related proceeding or its or their possible outcomes or implications for the Group,
including any fines, damages or harm to the Group’s reputation caused thereby.
Contents index of the Law 11/2018
81
Brief description of the group’s business model
Strategy and business model
Geographical presence
About BBVA
(cid:3)
General information
Business model
Objectives and strategies of the organization
Main factors and trends that may affect your future
evolution
General
Reporting framework
Description of the applicable policies
Management approach
The results of these policies
Environmental questions
Environmental management
Contamination
Circular economy and waste
prevention and management
The main risks related to these issues involving the
activities of the group
Current and predictable impacts of the company's
activities on the environment and, if applicable, on
health and safety.
Environmental assessment or certification
procedures
Resources dedicated to the prevention of
environmental risks
Application of the precautionary principle
Amount of provisions and guarantees for
environmental risks
Measures to prevent, reduce or repair air pollution
emissions (including noise and light pollution)
Prevention, recycling, reuse, other forms of
recovery and types of waste disposal
Actions to combat food waste
Water consumption and water supply according to
local constraints
Use of raw materials and measures taken to
improve the efficiency of their utilization
Sustainable use of resources
Energy use, direct and indirect
Measures taken to improve energy efficiency
Use of renewable energies
The important elements of greenhouse gas
emissions generated as a result of the company's
activities, including the use of the goods and
services it produces
Measures taken to adapt to the consequences of
climate change
Reduction goals established voluntarily in the
medium and long term to reduce greenhouse gas
emissions and measures implemented for that
purpose
Climate change
Page / Section Management
report BBVA 2019
GRI reporting
criteria
Pages
GRI 102-2
GRI 102-7
GRI 102-3
GRI 102-4
GRI 102-6
GRI 102-14
GRI 103-2
GRI 102-14
GRI 102-15
Strategy and business model
Environment
Evolution in the Strategic
Priorities
Non-financial information report GRI 102-54
Customer security and
protection
Staff information & Professional
development
Ethical behavior
Sustainable finance
Customer security and
protection
Staff information & Professional
development
Ethical behavior
Sustainable finance
Strategy and business model
Customer security and
protection
Staff information & Professional
development
Ethical behavior
Sustainable finance
GRI 102-15
GRI 103-2
13-16
2
15-16
5-12:15-16
3
29-30:31-
34:50-
56:60-64
29-30:31-
34:50-
56:60-64
15-16:29-
30:31-
34:50-
56:60-64
Social and environmental impact
management/Environmental
risks
Social and environmental impact
management/Environmental
risks
Sustainable Finance
Social and environmental impact
management
Social and environmental impact
management
GRI 102-15
65-69
GRI 103-2
66-67
GRI 103-2
60:65-69
GRI 102-11
65-69
Sustainable Finance
GRI 103-2
Social and environmental impact
management
Social and environmental impact
management
BBVA Group considers this
indicator not to be material.
Social and environmental impact
management/Environmental
risks
Social and environmental impact
management/Environmental
risks
Social and environmental impact
management/Environmental
risks
Social and environmental impact
management/Environmental
risks
Social and environmental impact
management/Environmental
risks
GRI 102-46
GRI 103-2
GRI 306-2
GRI 103-2
GRI 306-2
GRI 303-5
(2018 GRI
version)
GRI 103-2
GRI 302-4
GRI 302-1
Social and environmental impact
management/Environmental
risks
GRI 305-1
GRI 305-2
GRI 305-3
GRI 102-46
66-67
GRI 302-1
66-67
60
66
66
66-67
66
66
66-67
Social and environmental impact
management/Environmental
risks
GRI 103-2
65-69
Social and environmental impact
management/Environmental
risks
GRI 305-4
GRI 305-5
65
Protection of biodiversity
Social and personnel questions
Employees
Measures taken to protect or restore biodiversity
Impacts caused by activities or operations in
protected areas
Total number and distribution of employees
according to country, gender, age, country and
professional classification
Total number and distribution of work contract
modalities
Annual average of work contract modalities
(permanent, temporary and part-time) by sex, age,
and professional classification
Number of dismissals by sex, age, and professional
classification
Salary gap
The average remunerations and their evolution
disaggregated by sex, age, and professional
classification or equal value
The average remuneration of directors and
executives, including variable remuneration,
allowances, compensation, payment to long-term
forecast savings and any other perception broken
down by gender
Implementation of employment termination
policies
Employees with disabilities
Work schedule organization
Work organization
Number of hours of absenteeism
82
GRI 102-46
60:67-68
GRI 102-46
60:67-68
Sustainable Finance
Social and environmental impact
management / Principles of
Ecuador
The BBVA offices are in urban
settings, which
therefore have no impact on
protected natural areas and/or
biodiversity.
Sustainable Finance
Social and environmental impact
management / Principles of
Ecuador
The BBVA offices are in urban
settings, which
therefore have no impact on
protected natural areas and/or
biodiversity.
People management
GRI 102-8
GRI 405-1
35-37
Professional development
GRI 102-8
38-39
Professional development
GRI 102-9
38-40
Work environment
Remuneration
Remuneration
Remuneration
Work environment / Work
organization
Professional development /
Different capabilities
Work environment / Work
organization
Work environment / Health and
labor safety
GRI 103-2
GRI 103-2
GRI 405-2
GRI 103-2
GRI 405-2
GRI 103-2
GRI 405-2
GRI 103-2
GRI 405-1
GRI 103-1
GRI 403-9
(2018 GRI
version)
45-46
48-49
48-49
48-49
41
34
41
43
Measures designed to facilitate access to
mediation resources and encourage the
responsible use of these by both parents
Work environment / Diversity
and inclusion
GRI 401-2
32-46
Work health and safety conditions
Work environment / Health and
labor safety
Health and safety
Work accidents, in particular their frequency and
severity, disaggregated by gender
Work environment / Health and
labor safety
Social relationships
Training
Universal accessibility for people
with disabilities
Equality
Occupational diseases, disaggregated by gender
Organization of social dialog, including procedures
to inform and consult staff and negotiate with them
Percentage of employees covered by collective
agreement by country
The balance of collective agreements, particularly
in the field of health and safety at work
Policies implemented for training activities
The total amount of training hours by professional
category
Universal accessibility for people with disabilities
Measures taken to promote equal treatment and
opportunities between women and men
Equality plans (Section III of Organic Law 3/2007,
of March 22, for effective equality of women and
men)
Work environment / Health and
labor safety
Work environment / Freedom of
association and representation
Work environment / Freedom of
association and representation
Work environment / Health and
labor safety
Professional development /
Training
Professional development /
Training
Professional development /
Different capabilities
Professional development /
Diversity and inclusion
Professional development /
Diversity and inclusion
GRI 403-1
GRI 403-2
GRI 403-3
GRI 403-7
(2018 GRI
version)
GRI 403-9
GRI 403-10
(2018 GRI
version)
GRI 403-9
GRI 403-10
(2018 GRI
version)
GRI 103-1
GRI 102-40
GRI 403-3
GRI 103-2
GRI 404-2
GRI 404-1
42-43
42-43
43
41-42
41-42
41-42
32
32-33
GRI 103-2
34
GRI 103-2
33-34
GRI 103-2
33
Measures adopted to promote employment,
Professional development /
GRI 103-3
33-34
protocols against sexual and gender-based
harassment, integration, and the universal
accessibility of people with disabilities
Policy against any type of discrimination and,
where appropriate, diversity management
Diversity and inclusion
Professional development /
Diversity and inclusion
GRI 103-4
33-34
Information about the Respect for human rights
83
Human rights
Application of due diligence procedures in the field
of human rights; prevention of the risks of violation
of human rights and, where appropriate, measures
to mitigate, manage, and repair possible abuses
committed
Claims regarding cases of human rights violations
Promotion and compliance with the provisions
contained in the
related fundamental Conventions of the
International Labor Organization with respect for
freedom of association and the right to
collective bargaining; the elimination of
discrimination in employment and occupation; the
elimination of forced or compulsory labor; and the
effective abolition of child labor
Commitment to human rights
BBVA has not identified any
significant complaints and
impacts with respect to human
rights in its workplaces.
Commitment to human rights
Information about anti-bribery and anti-corruption measures
Corruption and bribery
Information about the society
Commitment by the company to
sustainable development
Subcontractors and suppliers
Consumers
Tax information
Measures adopted to prevent corruption and
bribery
Compliance system
Other non-financial risks
Measures adopted to fight against anti.money
laundering
Anti-money laundering and
financing of terrorism
Contributions to fundations and non-profit-making
bodies
Contribution to society / Other
contributions
Impact of the company’s activities on employment
and local development
The impact of company activity on local
populations and on the territory
The relationships maintained with representatives
of the local communities and the modalities of
dialog with these
Contribution to society
Contribution to society
Materiality
Contribution to society
Actions of association or sponsorship
Investment in social programs
The inclusion of social, gender equality and
environmental issues in the purchasing policy
Consideration of social and environmental
responsibility in relations with suppliers and
subcontractors
Suppliers
Suppliers
Supervision systems and audits, and their results Suppliers
Customer health and safety measures
Claims systems, complaints received and their
resolution
Benefits obtained by country
Taxes on paid benefits
Public subsidies received
Solutions for customers
Commitment to human rights /
Social Housing Policy in Spain
Customer security and
protection
Customer care / Complaints
and claims
Fiscal transparency
Fiscal transparency
Fiscal transparency
GRI 102-16
GRI 102-17
GRI 412-1
GRI 103-2
GRI 406-1
GRI 103-2
GRI 406-1
GRI 407-1
GRI 408-1
GRI 409-1
GRI 103-2
GRI 102-16
GRI 102-17
GRI 205-2
GRI 103-2
GRI 102-16
GRI 102-17
GRI 205-2
GRI 102-13
GRI 201-1
GRI 103-2
GRI 203-2
GRI 413-1
GRI 413-2
GRI 102-43
GRI 413-1
GRI 103-2
GRI 201-1
GRI 103-2
GRI 102-9
GRI 308-1
GRI 102-9
GRI 308-2
GRI 103-2
GRI 103-2
GRI 418-1
GRI 201-1
GRI 201-1
GRI 201-4
57-59
57-59
50-56:80
52-53
73
71-73
71-73
19:71-73
71-73
77-78
77-78
77-78
22-23:57-
59:29-30
24-27
76
76
76
84
Group financial information
BBVA Group highlights
BBVA GROUP HIGHLIGHTS (CONSOLIDATED FIGURES)
Balance sheet (millions of euros)
Total assets
Loans and advances to customers (gross)
Deposits from customers
Total customer funds
Total equity
Income statement (millions of euros)
Net interest income
Gross income
Operating income
Net attributable profit
The BBVA share and share performance ratios
Number of shares (million)
Share price (euros)
Earning per share (euros) (1) (2)
Book value per share (euros)
Tangible book value per share (euros)
Market capitalization (millions of euros)
Yield (dividend/price; %)
Significant ratios (%)
ROE (Adjusted net attributable profit/average shareholders' funds +/- average
accumulated other comprehensive income) (2)
ROTE (Adjusted net attributable profit/average shareholders' funds excluding
average intangible assets +/- average accumulated other comprehensive
income) (2)
ROA (Adjusted profit or loss for the year/average total assets) (2)
RORWA (Adjusted profit or loss for the year/average risk-weighted assets -
RWA) (2)
Efficiency ratio
Cost of risk
NPL ratio
NPL coverage ratio
Capital adequacy ratios (%)
CET1 fully-loaded
CET1 phased-in (3)
Total ratio phased-in (3)
Other information
IFRS 9
IAS 39
31-12-19
∆ %
31-12-18
31-12-17
3.3
2.2
2.2
3.8
3.9
3.5
3.3
4.9
(35.0)
-
7.5
3.4
2.8
7.1
7.5
698,690
394,763
384,219
492,022
54,925
18,202
24,542
12,639
3,512
6,668
4.98
0.66
7.32
6.27
33,226
5.2
9.9
11.9
0.82
1.57
48.5
1.04
3.8
77
11.74
11.98
15.92
676,689
386,225
375,970
474,120
52,874
17,591
23,747
12,045
5,400
6,668
4.64
0.64
7.12
5.86
30,909
5.4
10.2
12.4
0.81
1.56
49.3
1.01
3.9
73
11.34
11.58
15.71
690,059
400,369
376,379
473,088
53,323
17,758
25,270
12,770
3,514
6,668
7.11
0.63
6.96
5.69
47,422
4.2
9.7
12.0
0.84
1.57
49.5
0.89
4.6
65
11.08
11.71
15.51
Number of clients (million)
Number of shareholders
Number of employees
Number of branches
Number of ATMs
General note: as a result of the amendment to IAS 12 "Income Taxes", and in order to make the information comparable, the 2018 and 2017 income statements have been restated.
(1) Adjusted by additional Tier 1 instrument remuneration.
74.8
902,708
125,627
7,963
32,502
78.1
874,148
126,973
7,744
32,658
4.4
(3.2)
1.1
(2.8)
0.5
72.8
891,453
131,856
8,271
32,327
(2) Excluding the goodwill impairment in the United States in 2019, BBVA Chile in 2018 and Telefónica impairment in 2017.
(3) Phased-in ratios include the temporary treatment on the impact of IFRS 9, calculated in accordance with Article 473 bis of the Capital Requirements Regulation (CRR).
Significant ratios including the goodwill impairment in the United States in 2019, BBVA Chile in 2018 and the Telefónica
impairment in 2017 (%)
Earning per share (euros) (1)
ROE (net attributable profit/average shareholders' funds +/- average
accumulated other comprehensive income) (2)
ROTE (net attributable profit/average shareholders' funds excluding average
intangible assets +/- average accumulated other comprehensive income) (2)
ROA (Profit or loss for the year/average total assets)
RORWA (Profit or loss for the year/average risk-weighted assets - RWA)
(1) Adjusted by additional Tier 1 instrument remuneration.
31-12-19
0.47
∆ %
(37.7)
31-12-18
0.75
31-12-17
0.46
7.2
8.6
0.63
1.20
11.7
14.3
0.92
1.76
7.4
9.1
0.68
1.27
(2) The ROE and ROTE ratios include, in the denominator, the Group’s average shareholders’ funds and take into account the item called “Accumulated other comprehensive
income”, which forms part of the equity. Excluding this item, the ROE would stand at 6.3%, in 2019; 10.2%, in 2018; and 6.7%, in 2017; and the ROTE at 7.4%, 12.1% and 8.0%,
respectively.
85
Relevant events
Results
Generalized increase of recurring revenue items (net interest income plus net fees and commissions),
which, in constant terms, grow in all business areas.
Higher contribution from the NTI, which compensates the lower contribution of the other operating
income and expenses line.
Contained growth in the operating expenses and improvement of the efficiency ratio.
Impairment on financial assets increased 4.3% year-on-year, mainly as a result of higher loan-loss
provisions in the United States.
Following the annual evaluation of its goodwills, BBVA has recorded a goodwill impairment in the United
States of €1,318m, mainly due to the evolution of interest rates in the country and the slowdown in the
economy. This impact does not affect the tangible net equity, the capital, or the liquidity of BBVA Group and
is included in the Corporate Center in the line of other gains (losses) of the income statement.
In 2019, the net attributed profit stood at €3,512m, 35.0% less than in 2018. If BBVA Chile (the results
contributed up to its sale and the capital gains generated by the operation) and the goodwill impairment in
the United States are excluded from the year-on-year comparison, the Group's net attributable profit grew
by 2.7% compared to 2018.
NET ATTRIBUTABLE PROFIT (1)
(MILLIONS OF EUROS)
NET ATTRIBUTABLE PROFIT BREAKDOWN (1)
(PERCENTAGE. 2019)
(1)
Excluding BBVA Chile in 2018 and the goodwill impairment in the
United States in 2019.
(1) Excludes the Corporate Center.
Balance sheet and business activity
The number of loans and advances to customers (gross) registered a growth of 2.2% during 2019, with
increases in the business areas of Mexico, and to a lesser extent, in the United States, South America and
Rest of Eurasia.
Good performance of customer funds (up 3.8% year-on-year) thanks to the evolution of demand deposits,
mutual funds and pension funds.
Solvency
As a result of the supervisory review and evaluation process (SREP) carried out by the European Central
Bank (ECB), BBVA received a communication on December 4, that it is required to maintain, on a
consolidated basis and as of January 1, 2020, a CET1 capital ratio of 9.27% and a total capital ratio of
12.77%. On December 31, 2019, the fully-loaded CET1 ratio stood at 11.74%, up 51 basis points in the year
(excluding the impact of IFRS 16 standard’s implementation). Thus, BBVA's capital adequacy ratios at the
end of 2019 remained above the regulatory requirements applicable as of January 1, 2020.
CAPITAL AND LEVERAGE RATIOS
(PERCENTAGE AS OF 31-12-19)
Risk management
Positive performance of the risk metrics. Non-performing loans showed a downward trend similar to
previous years. The NPL ratio stood at 3.8%, the NPL coverage ratio at 77% and the cost of risk at 1.04%.
86
NPL AND NPL COVERAGE RATIOS
(PERCENTAGE)
Transformation
The Group's digital and mobile customer base continues to grow, with more than 50% of customers
operating through mobile channels. Digital sales also evolved positively in 2019.
DIGITAL AND MOBILE CUSTOMERS (MILLIONS)
Other matters of interest
During the 2019 financial year, two restatements of consolidated information were made:
o
o
As a result of the implementation of IAS 29 "Financial information in hyperinflationary economies,"
and in order to make the 2019 information comparable to that of 2018, the balance sheets, the
income statements and ratios for the Group's first three quarters of the 2018 financial year and the
South American business area, were restated to reflect the impacts of hyperinflation in Argentina in
the quarter in which they were generated. This impact was recorded for the first time in the third
quarter of 2018, but with accounting effects as of January 1, 2018.
The amendment to IAS 12 "Income Tax" has meant that the tax impact of the distribution of
generated benefits must be recorded in the "Expense or income for taxes on the profits of the
continuing activities" of the consolidated income statement for the year, when previously recorded
as "Net equity". So, in order for the information to be comparable, the information for the years
shown above has been restated in such a way that a payment of €76m and a charge of €5m have
been recorded in the consolidated profit and loss accounts for the years 2018 and 2017,
respectively, against "Less: Interim dividends." This reclassification has no impact on the
consolidated net assets.
On August 7, 2019, BBVA reached an agreement with Banco GNB Paraguay S.A., for the sale of its stake in
Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (hereinafter BBVA Paraguay), which amounts to 100% of
its share capital. As a result of the above, all items in BBVA Paraguay's balance sheet have been reclassified
into the category of “Non-current assets (liabilities) and disposal groups held for sale”(hereinafter NCA&L).
On January 1, 2019, IFRS 16 “Leases” entered into force, which requires the lessee to recognize the assets
and liabilities arising from the rights and obligations of lease agreements. The main impacts are the
recognition of an asset through the right of use and a liability based on future payment obligations. The
impact of the first implementation was €3,419m and €3,472m, respectively, resulting in a decrease of 11
basis points of the CET1 capital ratio.
87
Results
The BBVA Group generated a net attributable profit of €3,512m in 2019. The good performance of the most recurrent
revenue (net interest income plus net commissions and fees) and the net trading income (NTI), were offset by a greater
adjustment for hyperinflation in Argentina, reflected in the line of other operating income and expenses, a greater
amount of impairment on financial assets, greater provisions and, in particular, the goodwill impairment in the United
States in December 2019 for an amount of €1,318m, reflected in the line of other gains (losses). The comparison with the
previous year (down 35.0%) is influenced, on the one hand, by the above-mentioned goodwill impairment in the United
States and on the other, by the positive impact generated by the capital gains (net of taxes) from the sale of BBVA Chile
in 2018. In a more homogeneous comparison, without taking into account these two impacts and excluding the profit
generated by BBVA Chile until its sale, the net attributable profit from 2019 was 2.7% higher than the previous year (up
2.0% at constant exchange rates).
CONSOLIDATED INCOME STATEMENT: QUARTERLY EVOLUTION (MILLIONS OF EUROS)
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair
value through profit or loss
Provisions or reversal of provisions
Other gains (losses)
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
Earning per share (euros) (1)
Of which:
2019
3Q
4Q
1Q
4,727 4,488 4,566 4,420
2Q
2018
3Q
4Q
2Q
4,692 4,309 4,302
1Q
4,287
1,290
1,273
1,256
1,214
1,226
1,173
1,244
1,236
490
(89)
351
22
116
(18)
426
8
316
(83)
212
38
285
6
410
92
6,418
6,135
5,920 6,069
6,151
5,733
5,838 6,026
(3,082) (2,946) (2,952) (2,922)
(2,981) (2,825)
(2,921) (2,975)
(1,637)
(1,572)
(1,578)
(1,553)
(1,557)
(1,459)
(1,539)
(1,565)
(1,039)
(406)
(971)
(403)
(976)
(398)
3,335
3,189
2,968
(977)
(392)
3,147
(1,119) (1,062)
(1,087)
(1,106)
(305)
(304)
(295)
(304)
3,170
2,908
2,917 3,050
(1,187)
(1,187)
(753)
(1,023)
(1,353) (1,023)
(783)
(823)
(243)
(1,444)
(113)
(4)
(117)
(3)
(144)
(22)
(66)
(183)
(123)
831
(85)
67
(99)
41
460
1,886
2,095
1,957
1,568
2,593
2,116
2,170
(430)
(488)
(595)
31
1,398
1,500
(186)
(155)
(173)
(241)
1,225
1,260
(541)
1,416
(234)
1,182
(411)
(624)
(585)
1,157
1,969
1,531
(145)
(154)
(265)
(599)
1,570
(262)
1,012
1,815
1,266
1,308
(0.04)
0.17
0.17
0.16
0.14
0.26
0.17
0.18
Goodwill impairment in the United States
BBVA Chile (2)
(1,318)
633
35
29
Net attributable profit excluding the goodwill
impairment in the United States and BBVA Chile
1,163
1,225
1,260
1,182
1,012
1,182
1,231
1,279
Earning per share excluding the goodwil impairment
in the United States and BBVA Chile (euros) (1)
General note: the application of accounting for hyperinflation in Argentina was done for the first time in September 2018 with accounting effects from January 1, 2018, recording the
impact of the 9 months in the third quarter. In addition, during 2019 an amendment to IAS 12 "Income Taxes" was introduced with accounting effects from January 1, 2019. Therefore,
in order to make the information comparable, the quarterly income statements for 2019 and 2018 have been restated.
(1) Adjusted by additional Tier 1 instrument remuneration.
(2) Earnings generated by BBVA Chile until its sale on July 6, 2018 and the capital gains from the operation.
0.14
0.16
0.16
0.16
0.17
0.17
0.17
0.17
CONSOLIDATED INCOME STATEMENT (MILLIONS OF EUROS)
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value
through profit or loss
Provisions or reversal of provisions
Other gains (losses)
Profit/(loss) before tax
Income tax (1)
Profit/(loss) for the year (1)
Non-controlling interests
Net attributable profit (1)
Earning per share (euros) (2)
Of which:
Goodwill impairment in the United States
BBVA Chile (3)
∆ % at constant
∆ % exchange rates
4.3
3.5
3.2
13.1
n.s.
3.3
1.7
3.6
(9.4)
32.4
4.9
4.3
65.3
n.s.
(24.2)
(7.5)
(30.2)
0.8
(35.0)
3.6
15.4
n.s.
4.2
2.2
4.2
(8.9)
32.1
6.1
6.0
66.7
n.s.
(23.8)
(7.4)
(29.7)
11.6
(35.3)
2019
18,202
5,033
1,383
(77)
24,542
(11,902)
(6,340)
(3,963)
(1,599)
12,639
(4,151)
(617)
(1,473)
6,398
(2,053)
4,345
(833)
3,512
0.47
(1,318)
Net attributable profit excluding the goodwill impairment in
the United States and BBVA Chile
4,830
2.7
2.0
Earning per share excluding the goodwill impairment in the
United States and BBVA Chile (euros) (2)
(1) As a result of the amendment to IAS 12 "Income Taxes", and in order to make the information comparable, the 2018 income statement has been restated.
0.66
(2) Adjusted by additional Tier 1 instrument remuneration.
(3) Earnings generated by BBVA Chile until its sale on July 6, 2018 and the capital gains from the operation.
88
2018
17,591
4,879
1,223
54
23,747
(11,702)
(6,120)
(4,374)
(1,208)
12,045
(3,981)
(373)
755
8,446
(2,219)
6,227
(827)
5,400
0.75
697
4,703
0.64
Unless expressly stated otherwise, for a better understanding of the evolution of the main items in the Group's income
statement, the variation rates shown below are reported at constant exchange rates and the quarterly changes are
from the last quarter of the year with respect to the previous quarter.
Gross income
Gross income showed a year-on-year growth of 4.2%, supported by the favorable performance of the net interest
income and the NTI and, to a lesser extent, the growth in net fees and commissions.
GROSS INCOME (MILLIONS OF EUROS)
Net interest income grew by 4.3% year-on-year and 4.4% compared to the previous quarter. By business areas, Mexico
and South America had notable year-on-year performance.
(1) At constant exchange rates: +4.2%.
Net fees and commissions also recorded a positive performance showing a year-on-year growth of 3.6%, thanks to the
favorable contribution from all the business areas, in particular Turkey and Spain. In the fourth quarter, they grew by
0.7%.
As a result, the most recurrent revenue items increased by a 4.1% year-on-year (up 3.6% in the quarter).
NET INTEREST INCOME/ATAS (PERCENTAGE)
NET INTEREST INCOME PLUS NET FEES AND
COMMISSIONS (MILLIONS OF EUROS)
89
NTI closed with an increase of 15.4% year-on-year and registered an excellent evolution in the last quarter of the year (up
31.8%) mainly explained by the results generated by Spain and Turkey.
The line of other operating income and expenses closed the year with a negative balance of €77m compared to the
positive balance of €54m recorded in 2018, mainly due to the higher adjustment for hyperinflation in Argentina, as well as
a greater contribution to the SRF (Single Resolution Fund) and the FGD (Deposit Guarantee Fund).
(1) At constant exchange rates: +4.1%.
Operating income
Operating expenses increased 2.2% in 2019 (up 1.7% at current exchange rates) showing a lower growth compared to
inflation in most of the countries where BBVA is present. Spain continued to show notable reduction in costs, resulting
from the cost control plans.
OPERATING EXPENSES (MILLIONS OF EUROS)
(1) At constant exchange rates: +2.2%.
The efficiency ratio continued to improve as a result of operating expenses growing below gross income, which stood at
48.5% at the end of the year, significantly below the level reached in 2018 (down 92 basis points at constant exchange
rates). As a result of the aforementioned, the operating income registered a year-on-year growth of 6.1%.
EFFICIENCY RATIO (PERCENTAGE)
OPERATING INCOME (MILLIONS OF EUROS)
90
(1) At constant exchange rates: +6.1%.
Provisions and other
The impairment on financial assets not measured at fair value through profit or loss (impairment on financial assets)
showed an increase of 6.0% in 2019. By business areas, it was notable the higher loan-loss provisions in the United
States for specific clients of the commercial portfolio and the larger write-offs in the consumer portfolio in South
America, (for Argentina and Peru), and to a lesser extent in Mexico, explained by the growth on this portfolio and the
impact of the macro scenario deterioration. On the contrary, Spain recorded a 43.6% year-on-year reduction for lower
provision requirements mainly due to the positive effect of non-performing and write-off portfolios sales in 2019.
IMPAIRMENT ON FINANCIAL ASSETS (MILLIONS
OF EUROS)
(1)
At constant exchange rates: +6.0%.
Provisions or reversal of provisions (hereinafter, provisions) was 66.7% above the 2018 figure, mainly due to greater
endowments in Turkey and Argentina. Other gains (losses) mainly reflects the already mentioned goodwill impairment in
the United States closing with a loss of €1,473m, compared with the profit of €755m in 2018, which mainly includes the
capital gains from the sale of BBVA Chile.
Results
As a result of the above, the Group's net attributable profit in 2019 was €3,512m, 35.3% lower than the profit obtained
the previous year (down 35.0% at current exchange rates). The comparison with respect to 2018 is influenced by the
goodwill impairment in the United States and by the positive impact generated by the capital gains from the sale of BBVA
Chile. In a more homogeneous comparison, without taking into account these two impacts and excluding the profit
generated by the sale of BBVA Chile the net attributable profit from 2019 was 2.7% higher than the previous year (up
2.0% at constant exchange rates).
NET ATTRIBUTABLE PROFIT (MILLIONS OF EUROS)
NET ATTRIBUTABLE PROFIT EXCLUDING BBVA CHILE
AND THE UNITED STATES GOODWILL IMPAIRMENT
(MILLIONS OF EUROS)
91
(1) At constant exchange rates: -35.3%.
(1) At constant exchange rates: +2.0%.
By business areas, and in millions of euros, Spain generated 1,386, the United States 590, Mexico recorded 2,699 in
profit, Turkey 506, South America 721 and the Rest of Eurasia 127.
TANGIBLE BOOK VALUE PER SHARE AND
DIVIDENDS (1) (EUROS)
EARNING PER SHARE (1) (EUROS)
(1) Replenishing dividends paid in the period.
(1) Adjusted by additional Tier 1 instrument remuneration.
(2) Excluding the goodwill impairment in the United States in 2019.
ROE AND ROTE (1) (PERCENTAGE)
ROA AND RORWA (1) (PERCENTAGE)
(1)
Ratios excluding the impairment of Telefónica in 2017, BBVA Chile in 2018 and
the goodwill impairment in the United States in 2019.
(1)
Ratios excluding the impairment of Telefónica in 2017, BBVA Chile in 2018 and
the goodwill impairment in the United States in 2019.
92
Balance sheet and business activity
The most relevant aspects of the Group's balance sheet and business activity as of December 31, 2019 are summarized
below:
Loans and advances to customers (gross) increased by 2.2% during 2019, with increases in the business
areas of Mexico, and, to a lesser extent, the United States, South America and Rest of Eurasia.
Non-performing loans continued in a downward trend falling by 2.1% during the year, mainly due to the sales of
the non-performing-loan portfolios in Spain.
Customer deposits had a good performance along the year, with an increase of 2.2% compared to December
2018 (up 1.3% in the last quarter), mainly explained by the good evolution of demand deposits (up 7.6% year-
on-year, up 2.8% in the last quarter).
Off-balance sheet funds had an increase of 9.8% compared to December 31, 2018, thanks to the good
performance of both mutual funds and pension funds.
Regarding to tangible assets, the balance as of December 31, 2019 was affected by the implementation of IFRS
16 "Leases," which led to a growth resulting from its first implementation of €3,419m.
Regarding the intangible assets, during the fourth quarter of 2019, the United States goodwill has been
impaired by €1,318m, which does not affect the tangible net equity nor liquidity of BBVA Group.
The figure for other assets/other liabilities at the end of December 2019 includes the assets and liabilities of
BBVA Paraguay, which have been classified as non-current assets and liabilities held for sale (hereinafter
NCA&L) in the consolidated public balance sheet, once the BBVA Group made public through a relevant event
to the Spanish Securities Market Commission (hereinafter CNMV for its acronym in Spanish) the sales
agreement, aforementioned in the relevant events section.
CONSOLIDATED BALANCE SHEET (MILLIONS OF EUROS)
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through accumulated other comprehensive income
Financial assets at amortized cost
Loans and advances to central banks and credit institutions
Loans and advances to customers
Debt securities
Investments in subsidiaries, joint ventures and associates
Tangible assets
Intangible assets
Other assets
Total assets
Financial liabilities held for trading
Other financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Other financial liabilities
Liabilities under insurance and reinsurance contracts
Other liabilities
Total liabilities
Non-controlling interests
Accumulated other comprehensive income
Shareholders’ funds
Total equity
Total liabilities and equity
Memorandum item:
Guarantees given
31-12-19
44,303
102,688
5,557
1,214
61,183
439,162
17,924
382,360
38,877
1,488
10,068
6,966
26,060
698,690
89,633
10,010
516,641
54,700
384,219
63,963
13,758
10,606
16,875
643,765
6,201
(7,235)
55,958
54,925
698,690
∆ %
(23.9)
31-12-18
58,196
14.0
8.2
(7.6)
8.6
4.6
36.8
2.2
19.5
(5.7)
39.3
(16.2)
(9.5)
3.3
11.0
43.1
1.5
(7.7)
2.2
4.7
7.1
7.9
(0.9)
3.2
7.6
0.3
3.0
3.9
3.3
90,117
5,135
1,313
56,337
419,660
13,103
374,027
32,530
1,578
7,229
8,314
28,809
676,689
80,774
6,993
509,185
59,259
375,970
61,112
12,844
9,834
17,029
623,814
5,764
(7,215)
54,326
52,874
676,689
45,952
(3.6)
47,574
LOANS AND ADVANCES TO CUSTOMERS (MILLIONS OF EUROS)
Public sector
Individuals
Mortgages
Consumer
Credit cards
Other loans
Business
Non-performing loans
Loans and advances to customers (gross)
93
31-12-18
28,504
170,501
111,528
34,939
13,507
10,527
170,872
16,348
386,225
∆ %
(1.1)
2.4
(0.9)
4.3
10.3
21.4
3.0
(2.4)
2.2
31-12-19
28,193
174,608
110,500
36,438
14,892
12,778
176,008
15,954
394,763
Allowances (1)
Loans and advances to customers
(1) Allowances include the valuation adjustments for credit risk during the expected residual life of those financial instruments which have been acquired (mainly originated from the
acquisition of Catalunya Banc, S.A., see Note 7 of the consolidated Financial Statements). As of December 31, 2019 and 2018 the remaining amount was €433m and €540m,
respectively.
382,360
2.2
(12,402)
1.7
374,027
(12,199)
LOANS AND ADVANCES TO CUSTOMERS (GROSS.
BILLIONS OF EUROS)
CUSTOMER FUNDS (BILLIONS OF EUROS)
(1) At constant exchange rates: +2.5%.
(1)
At constant exchange rates: +3.8%.
CUSTOMER FUNDS (MILLIONS OF EUROS)
Deposits from customers
Current accounts
Time deposits
Other deposits
Other customer funds
Mutual funds and investment companies
Pension funds
Other off-balance sheet funds
Total customer funds
31-12-19
384,219
280,391
96,583
7,246
107,803
68,639
36,630
2,534
∆ %
31-12-18
2.2
7.6
375,970
260,573
(10.8)
108,313
2.3
9.8
11.8
8.3
7,084
98,150
61,393
33,807
(14.1)
2,949
492,022
3.8
474,120
94
Solvency
Capital base
BBVA's fully loaded CET1 ratio stood at 11.74% at the end of 2019 which, excluding the impact of IFRS 16 standard’s
implementation that entered into force on January 1, 2019 (down 11 basis points), the ratio increased by 51 basis points
during the year. This increase is supported by the profit generation, net of dividend payments and remuneration of
contingent convertible capital instruments (CoCos), notwithstanding the moderate growth of risk-weighted assets. In
addition, the goodwill impairment in the United States recognized by the Group amounting to €1,318m has no impact on
the regulatory capital.
Risk-weighted assets (RWA) increased by approximately €16,100m in 2019 as a result of activity growth, mainly in
emerging markets and the incorporation of regulatory impacts (the application of IFRS 16 standard and TRIM - Targeted
Review of Internal Models) for approximately €7,600m (impact on the CET1 ratio of -25 basis points). It should be noted
that during the second quarter of the year the recognition by the European Commission2 of Argentina as a country whose
supervisory and regulatory requirements are considered equivalent had a positive effect on the evolution of the RWAs.
The fully loaded additional tier 1 ratio (AT1) stood at 1.62% as of December 31, 2019. In this regard, BBVA S.A. carried
out an issue of €1,000m CoCos, registered at the Spanish Securities Market Commission (CNMV) with an annual
coupon of 6.0% and a redemption option from the fifth year, and another issue of the same type of instruments,
registered in the Securities Exchange Commission (hereinafter, SEC) for USD 1,000m and a coupon of 6.5% with a
redemption option after five and a half years.
On the other hand, in February 2020 the CoCos issuance of €1,500m with 6.75% coupon issued in February 2015 will be
amortised. As of December 31, 2019, it is no longer included in the capital ratios.
Finally, in terms of issues eligible as Tier 2 capital, BBVA S.A. issued a € 750m subordinated debt over 10-year period
and a redemption option in the fifth year, coupon of 2.575%; and carried out the early redemption of two subordinated-
debt issues: one for €1,500m with a 3.5% coupon issued in April 2014 and redeemed in April 2019, and another issued in
June 2009 by Caixa d'Estalvis de Sabadell with an outstanding nominal amount of €4.9m and redeemed in June 2019.
With regard to the subsidiaries of the Group, BBVA Mexico carried out a Tier 2 issuance of USD 750m over a 15-year
period with an early redemption option from the tenth year and a 5.875% coupon; and partially repurchased two
subordinated debt issuances (USD 250m due in 2020 and USD 500m due in 2021). Meanwhile, Garanti Bank issued
another Tier 2 issuance of TRY 253m.
All of this, together with the evolution of the remaining elements eligible as Tier 2 capital, set the Tier 2 fully loaded ratio
at 2.06% as of December 31, 2019.
In addition, in January 2020, BBVA, S.A. issued €1,000m of Tier 2 eligible subordinated debt over a ten-year period, with
an early redemption option in the fifth year, with a coupon of 1%. This issue will be included in the capital ratios for the
first quarter of 2020 with an estimated impact of approximately +27 basis points on the T2 capital ratio.
The phased-in CET1 ratio stood at 11.98% at the end of 2019, taking into account the transitional implementation of IFRS
9. The AT1 stood at 1.66% and the Tier 2 at 2.28%, resulting in a total capital ratio of 15.92%. These levels are above
the requirements established by the supervisor in its SREP (Supervisory Review and Evaluation Process) letter,
applicable in 2019. Starting on January 1st, 2020, at the consolidated level, this requirement has been established at
9.27% for the CET1 ratio and 12.77% for the total capital ratio. It should be noted that the Pillar 2 requirement of CET1
remains unchanged from the one included in the previous SREP decision, being the sole difference of the capital
requirement, the evolution of the Countercyclical Capital buffer of approximately 0.01%. Furthermore, as of December
31, 2019, the Group’s capital ratios remain above the regulatory requirements applicable as of January 1, 2020.
2 On April 1, 2019, the Official Journal of the European Union published Commission Implementing Decision (EU) 2019/536, which includes Argentina within the list of third countries
and territories whose supervisory and regulatory requirements are considered equivalent for the purposes of the treatment of exposures in accordance with Regulation (EU) No.
575/2013.
FULLY-LOADED CAPITAL RATIOS (PERCENTAGE)
95
CAPITAL BASE (MILLIONS OF EUROS)
CRD IV phased-in
Common Equity Tier 1 (CET 1)
Tier 1
Tier 2
Total Capital (Tier 1 + Tier 2)
Risk-weighted assets
CET1 (%)
Tier 1 (%)
Tier 2 (%)
31-12-19 (1) (2) 30-09-19 31-12-18
40,313
43,432
43,653
CRD IV fully-loaded
31-12-19 (1) (2) 30-09-19 31-12-18
39,571
42,856
42,635
49,701
51,035
45,947
8,324
8,696
8,756
48,775
7,505
50,112
45,047
7,798
8,861
58,025
59,731
54,703
56,281
57,910 53,907
364,448 368,196 348,264
364,943 368,690 348,804
11.98
13.64
2.28
11.80
13.86
2.36
11.58
13.19
2.51
11.74
13.37
2.06
11.56
13.59
2.12
11.34
12.91
2.54
15.45
Total capital ratio (%)
(1) As of December 31, 2019, the difference between the phased-in and fully-loaded ratios arises from the temporary traetment of certain capital items, mainly of the impact of IFRS9,
to which the BBVA Group has adhered voluntarily (in accordance with article 473bis of the CRR).
(2) Provisional data.
15.71
15.42
16.22
15.92
15.71
In November 2019, BBVA received a new communication from the Bank of Spain regarding its minimum requirement for
own funds and eligible liabilities (MREL), as determined by the Single Resolution Board, that was calculated taking into
account the financial and supervisory information as of December 31, 2017.
In accordance with such communication, BBVA has to reach, by January 1, 2021, an amount of own funds and eligible
liabilities equal to 15.16% of the total liabilities and own funds of its resolution group, on sub-consolidated basis (the
MREL requirement). Within this MREL, an amount equal to 8.01% of the total liabilities and own funds shall be met with
subordinated instruments (the subordination requirement), once the relevant allowance is applied.
This MREL requirement is equal to 28.50% in terms of risk-weighted assets (RWA), while the subordination requirement
included in the MREL requirement is equal to 15.05% in terms of RWA, once the relevant allowance has been applied.
In order to comply with this requirement, BBVA has continued its issuance program during 2019 by closing three public
senior non-preferred debt, for a total of €3,000m, of which one in green bonds by €1,000m. In addition, BBVA issued a
senior preferred debt of €1,000m.
The Group estimates that the current own funds and eligible liabilities structure of the resolution group meets the MREL
requirement, as well as with the new subordination requirement.
Finally, the Group's leverage ratio maintained a solid position, at 6.7% fully loaded (6.9% phased-in), which remains the
highest among its peer group.
96
Ratings
In 2019, Moody's, S&P, DBRS and Scope confirmed the rating they assigned to BBVA's senior preferred debt (A3, A-, A
(high) and A+, respectively). Fitch increased this rating by a notch in July 2019, considering that BBVA's loss-absorbing
debt buffers (such as senior non-preferred debt) are sufficient to materially reduce the risk of default. In these actions,
the agencies highlighted the Group's diversification and self-sufficient franchise model, with subsidiaries responsible for
managing their own liquidity. These ratings, together with their outlooks, are shown in the following table:
RATINGS
Rating agency
DBRS
Fitch
Moody's
Scope Ratings
Long term (1)
A (high)
A
A3
A+
Short term
R-1 (middle)
F-1
P-2
S-1+
Outlook
Stable
Negative
Stable
Stable
Standard & Poor's
(1) Ratings assigned to long term senior preferred debt. Additionally, Moody’s and Fitch assign A2 and A rating respectively, to BBVA’s long term deposits.
Negative
A-2
A-
97
The BBVA share
The main stock market indexes performed positively during 2019. In Europe, the Stoxx Europe 600 index increased by
23.2% in year-on-year terms, with a 5.8% increase in the fourth quarter. In Spain, the rise of the Ibex 35 during 2019 was
more moderate (up 11.8% in 2019 and up 3.3% in the fourth quarter). In the United States, the growth rates remain as
observed throughout the year and the S&P 500 rose 28.9% in 2019.
With regard to the banking sector indexes, particularly in Europe, its performance was worse than the general market
indexes despite the good performance in the fourth quarter. The Stoxx Europe 600 Banks index, which includes banks in
the United Kingdom, and thebanks index for the Eurozone, the Euro Stoxx Banks, revalued by 8.6% and 11.1%,
respectively in 2019. In the United States, the S&P Regional Banks Select Industry Index, on the other hand, increased
24.2% compared to the close of the 2018 financial year.
For its part, the BBVA share price increased by 7.5% during the year, up 4.2% in the fourth quarter, and closing
December 2019 at €4.98.
BBVA SHARE EVOLUTION COMPARED WITH EUROPEAN INDICES (BASE INDICE 100=31-12-18)
THE BBVA SHARE AND SHARE PERFORMANCE RATIOS
Number of shareholders
Number of shares issued
Daily average number of shares traded
Daily average trading (millions of euros)
Maximum price (euros)
Minimum price (euros)
Closing price (euros)
Book value per share (euros)
Tangible book value per share (euros)
Market capitalization (millions of euros)
Yield (dividend/price; %) (1)
(1) Calculated by dividing shareholder remuneration over the last twelve months by the closing price of the period.
31-12-19
874,148
6,667,886,580
30,705,133
31-12-18
902,708
6,667,886,580
35,909,997
153
5.68
4.19
4.98
7.32
6.27
33,226
5.2
213
7.73
4.48
4.64
7.12
5.86
30,909
5.4
Information about common stock and transactions with treasury stock is detailed in Notes 26 and 29 of the
accompanying consolidated Financial Statements.
Regarding shareholder remuneration, on October 15 BBVA paid a cash interim dividend of €0.10 (gross) per share on
account of the 2019 dividend. A cash payment in a gross amount of €0.16 per share, to be paid in April 2020 as final
dividend for 2019, is expected to be proposed for the consideration of the competent governing bodies. Therefore, total
shareholder remuneration in 2019 stands at €0.26 (gross) per share. This payment is consistent with the shareholder
remuneration policy announced by Relevant Event of February 1, 2017.
SHAREHOLDER REMUNERATION
(EUROS PER SHARE)
98
As of December 31, 2019, the number of BBVA shares remained at 6.668 billion, held by 874,148 shareholders, of which
43.40% are Spanish residents and the remaining 56.60% are non-residents.
SHAREHOLDER STRUCTURE (31-12-2019)
Number of shares
Up to 150
151 to 450
451 to 1800
1,801 to 4,500
4,501 to 9,000
9,001 to 45,000
More than 45,001
Total
Shareholders
Number
172,992
174,299
274,137
133,283
61,967
51,300
6,170
%
19.8
19.9
31.4
15.2
7.1
5.9
0.7
Shares
Number
12,164,060
47,783,471
268,797,845
379,651,861
390,206,201
888,557,789
4,680,725,353
%
0.2
0.7
4.0
5.7
5.9
13.3
70.2
874,148
100.0
6,667,886,580
100.0
BBVA shares are included on the main stock market indexes, including the Ibex 35, and the Stoxx Europe 600 index, with
a weighting of 6.7% and 0.4%, respectively at the closing of December of 2019. They are also included on several sector
indexes, including Stoxx Europe 600 Banks, which includes the United Kingdom, with a weighting of 3.8% and the Euro
Stoxx Banks index for the eurozone with a weighting of 7.9%.
Finally, BBVA maintains a significant presence on a number of international sustainability indexes or Environmental,
Social and Governance (ESG) indexes, which evaluates companies' performance in these areas. In September, BBVA
continued to be included in the Dow Jones Sustainability Index (DJSI), the markets leading benchmark index, which
measures the economic, environmental and social performance of the most valuables companies by market
capitalization of the world (in the DJSI World and DJSI Europe), achieving the highest score in financial inclusion and
occupational health and safety and the highest score in climate strategy, environmental reporting and corporate
citizenship and philanthropy.
MAIN SUSTAINABILITY INDICES ON WHICH BBVA IS LISTED AS OF 31-12-19
99
Listed on the DJSI World and DJSI Europe indices
(1)
Listed on the MSCI(1) ESG Leaders Indexes
AAA Rating
Listed on the FTSE4Good Global Index Series
Listed on the Euronext Vigeo Eurozone 120 and Europe 120
indices
Listed on the Ethibel Sustainability Excellence Europe and
Eithebel Sustainability Excellence Global indices
Listed on the Bloomberg Gender-Equality Index
In 2019, BBVA obtained a “A-” rating
(1) The inclusion of BBVA in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a
sponsorship, endorsement or promotion of BBVA by MSCI or any of its affiliates. The MSCI indices are the exclusive property of MSCI. MSCI and
the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.
100
Business areas
This section presents and analyzes the most relevant aspects of the Group's different business areas. Specifically, for
each one of them, it shows a summary of the income statement and balance sheet, the business activity figures and the
most significant ratios.
In 2019, BBVA Group’s business areas reporting structure of the BBVA Group's business areas differs from the one
presented at the end of 2018, as a result of the integration of the Non-Core Real Estate business area into Banking
Activity in Spain, now reported as “Spain”. In order to make the 2019 information comparable to 2018, the figures for this
area have been re-expressed.
BBVA Group's business areas are summarized below:
Spain mainly includes the banking and insurance businesses that the Group carries out in this country.
The United States includes the financial business activity that BBVA carries out in the country and the activity
of the BBVA, S.A branch in New York.
Mexico includes banking and insurance businesses in this country as well as the activity that BBVA Mexico
carries out through its branch in Houston.
Turkey reports the activity of BBVA Garanti group that is mainly carried out in this country and, to a lesser
extent, in Romania and the Netherlands.
South America basically includes banking and insurance businesses in the region. With respect to the
agreement reached with Banco GNB Paraguay, S.A., for the sale of BBVA Paraguay, it is estimated that the
closing will take place during the first quarter of 2020, once all the required authorizations are obtained.
Rest of Eurasia includes the banking business activity carried out in Asia and in Europe, excluding Spain.
The Corporate Center contains the centralized functions of the Group, including: the costs of the head offices with a
corporate function; management of structural exchange rate positions; some equity instruments issuances to ensure an
adequate management of the Group's global solvency. It also includes portfolios whose management is not linked to
customer relationships, such as industrial holdings; certain tax assets and liabilities; funds due to commitments to
employees; goodwill and other intangible assets.
The information by business area is based on units at the lowest level and/or companies that comprise the Group,
which are assigned to the different areas according to the main region or company group in which they carry out their
activity.
As usual, in the case of the different business areas in America and in Turkey, the results of applying constant exchange
rates are given as well as the year-on-year variations at current exchange rates.
101
MAJOR INCOME STATEMENT ITEMS BY BUSINESS AREA (MILLIONS OF EUROS)
BBVA
Group
Spain
The United
States
Mexico
Turkey
South
America
Rest of
Eurasia
∑
Business
areas
Corporate
Center
Business areas
2019
Net interest income
Gross income
Operating income
Profit/(loss) before
tax
Net attributable profit
2018 (1)
Net interest income
Gross income
18,202
24,542
12,639
6,398
3,512
17,591
23,747
3,645
5,734
2,480
1,878
1,386
3,698
5,968
2,395
3,223
1,257
705
590
6,209
8,029
5,384
2,814
3,590
2,375
3,196
3,850
2,276
3,691
1,341
1,396
2,699
506
721
175
454
161
163
127
18,435
24,880
13,933
9,173
6,029
2,276
2,989
5,568
7,193
3,135
3,901
3,009
3,701
175
414
17,860
24,167
(233)
(339)
(1,294)
(2,775)
(2,517)
(269)
(420)
2,634
12,045
Operating income
Profit/(loss) before
tax
Net attributable profit
(2)
(1) The income statements for 2018 were reexpressed due to changes in the reallocation of some expenses related to global projects and activities between the Corporate Center and
the business areas incorporated in 2019.
5,400
8,446
3,269
1,400
2,367
5,743
8,910
1,840
1,444
1,288
920
736
567
578
148
(463)
(343)
96
1,129
4,800
127
13,336
(1,291)
2,654
1,992
(2) As a result of the amendment to IAS 12 "Income Taxes", and in order to make the information comparable, the 2018 income statement has been restated.
GROSS INCOME(1), OPERATING INCOME(1) AND NET ATTRIBUTABLE PROFIT(1) BREAKDOWN
(PERCENTAGE. 2019)
(1) Excludes the Corporate Center.
MAJOR BALANCE-SHEET ITEMS AND RISK-WEIGHTED ASSETS BY BUSINESS AREA (MILLIONS OF EUROS)
Business areas
BBVA
Group
Spain
The
United
States
Mexico Turkey
South
America
Rest of
Eurasia
∑
Business
areas
Corporate
Center
Deletions NCA&L (1)
102
63,162
58,081
66,068
167,341
182,370
384,219
107,803
364,448
382,360
- 24,464
67,525 55,934
88,529 109,079
698,690 365,374
31-12-19
Loans and
advances to
customers
Deposits from
customers
Off-balance sheet
funds
Total
assets/liabilities
and equity
Risk-weighted
assets
31-12-18
Loans and
advances to
customers
Deposits from
customers
Off-balance sheet
funds
Total
assets/liabilities
and equity
Risk-weighted
assets
(1) Non-current assets and liabilities held for sale (NCA&L) from the BBVA Paraguay.
676,689 354,901
82,057 97,432
63,891 50,530
65,170 59,299
- 20,647
348,264
375,970
374,027
104,925
170,438
183,414
104,113
60,808
62,559
98,150
64,175
53,177
51,101
40,500
41,335
3,906
64,416
56,642
41,478
39,905
2,894
66,250
56,486
35,701
19,660 384,445
813
(1,692)
(1,205)
36,104
4,708 387,976
308
(2,598)
(1,467)
12,864
500
107,803
-
-
-
54,996
23,248 705,641
6,787
(12,018)
(1,721)
45,674
17,975 349,684
14,765
-
34,469
16,598 374,893
990
(1,857)
35,842
4,876 378,456
11,662
388
98,150
36
-
(2,523)
-
54,373
18,834 673,848
16,281
(13,440)
42,724
15,476
336,151
12,113
-
-
-
-
-
-
-
Since 2019, a column has been included in the balance sheet, which includes the deletions and balance adjustments
between different business areas, especially in terms of the relationship between the areas in which the parent company
operates, i.e. Spain, Rest of Eurasia and Corporate Center. In previous years, these deletions were allocated to the
different areas, mainly in Banking Activity in Spain. Accordingly, the figures from the previous year have been re-
expressed to show comparable series.
NUMBER OF EMPLOYEES
NUMBER OF BRANCHES
NUMBER OF ATMS
103
Spain
Highlights
Growth in consumer, retail and commercial portfolios.
Net Interest income influenced by the impact of IFRS 16.
Continued decrease in operating expenses.
Positive impact of the sale of non-performing and write-off portfolios on loan loss provisions and risk
indicators.
BUSINESS ACTIVITY(1)
(YEAR-ON-YEAR CHANGE. DATA AS OF 31-12-19)
NET INTEREST INCOME/ATAS
(PERCENTAGE)
(1)
Excluding repos.
OPERATING INCOME
(MILLIONS OF EUROS)
NET ATTRIBUTABLE PROFIT
(MILLIONS OF EUROS)
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
104
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Of which: Insurance activities (1)
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value through profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
(1) Includes premiums received net of estimated technical insurance reserves.
Balance sheets
Cash, cash balances at central banks and other demand deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Inter-area positions
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair value through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Inter-area positions
Other liabilities
Economic capital allocated
Relevant business indicators
Performing loans and advances to customers under management (1)
Non-performing loans
Customer deposits under management (1)
Off-balance sheet funds (2)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Excluding repos.
(2) Includes mutual funds, pension funds and other off-balance sheet funds.
2019
3,645
1,751
239
98
518
5,734
(3,253)
(1,883)
(895)
(476)
2,480
(216)
(386)
1,878
(489)
1,389
(3)
1,386
31-12-19
15,903
122,844
34,175
195,269
167,341
21,621
3,302
6,436
365,374
78,684
41,092
182,370
35,523
-
18,484
9,220
31-12-19
164,150
8,635
182,370
66,068
104,925
56.7
4.4
60
0.12
∆ %
(1.4)
4.1
(54.9)
65.2
6.7
(3.9)
(2.4)
0.1
(22.0)
54.8
(5.8)
(43.6)
(5.9)
2.1
12.0
(1.0)
(16.0)
(1.0)
∆ %
(44.3)
14.5
13.1
(0.1)
(1.8)
54.2
155.2
(22.0)
3.0
10.8
(10.5)
(0.6)
13.3
-
27.3
6.3
∆ %
(1.4)
(14.3)
(0.3)
5.6
0.8
2018
3,698
1,682
529
59
485
5,968
(3,335)
(1,880)
(1,147)
(308)
2,634
(383)
(410)
1,840
(437)
1,403
(3)
1,400
31-12-18
28,545
107,320
30,222
195,467
170,438
14,026
1,294
8,249
354,901
71,033
45,914
183,414
31,352
-
14,519
8,670
31-12-18
166,396
10,073
182,984
62,559
104,113
55.9
5.1
57
0.21
105
Activity
The most relevant aspects related to the area's activity in 2019 have been:
At the end of 2019, lending activity (performing loans under management) was lower year-on-year (down
1.4%), with a reduction in mortgage loans and in the institutional and corporate portfolios (-3.2%, -10.4% and -
5.1%, respectively), partially offset by consumer growth (including credit cards, up 15.8%) as well as retail and
medium-sized businesses (up 3.4% and up 6.4% year-on-year, respectively).
In asset quality, the reduction in non-performing loan balances continued over the quarter, with a positive
effect on the area's NPL ratio, which fell by 66 basis points along the year to stand at 4.4% as of December 31,
2019 (5.1% as of December 31, 2018). This evolution was mainly the result of the sale of non-performing and
write-offs loan portfolios in 2019, as well as a lower level of non-performing loans in mortgage portfolios. The
NPL coverage ratio was 60%, up from the figure at the end of 2018 (57%).
Customer deposits under management stayed flat during the year (down 0,3%) and showed an increase in the
last quarter (up 1.0%) as a result of the evolution of demand deposits (up 1.5%), which managed to offset the
fall in time deposits (down 1.8%).
Off-balance sheet funds showed a positive evolution (up 5.6% since December 31, 2018), in both mutual and
pension funds.
Results
The 2019 net attributable profit generated by BBVA in Spain was €1,386m, slightly below the same period of the
previous year (down 1.0%).
The main highlights of the area's income statement are:
The net interest income registered a slight increase in the quarter (up 1.3%) that allowed the annual rate of
decline to decrease (-1.4%, compared to -1.9% year-on-year at the end of September 2019). This is mainly due
to the smaller contribution from the ALCO portfolios and the effect of IFRS 16, which entered into force on
January 1, 2019.
Net fees and commissions also evolved very positively in the quarter (up 5.0%), mainly due to corporate
banking operations, and also due to the good performance of the commissions charged for asset management.
In the year, they increased by 4.1%.
In the NTI line, the quarterly evolution was very notable, which did not manage to offset the smaller contribution
compared to the previous year (down 54.9%) due to the irregular behavior of the markets in 2019, as well as the
lower portfolio sales.
The evolution of other income and operating expenses improved significantly compared to 2018 (up 65.2%)
despite the increase to The Deposit Guarantee Fund in the last quarter of 2019, and thanks to the positive
evolution of net insurance earnings and the lower costs associated with the real estate business, which are also
included in this line of the income statement.
The excellent trend in operating expenses (down 2.4% year-on-year) continued as a result of the cost
reduction plans. As a result, the efficiency ratio stood at 56.7%.
The impairment on financial assets fell compared to 2018, helped by the positive effect of the sale of non-
performing and written-off mortgage loan portfolios in the year.
Finally, provisions and other results closed at €-386m, or 5.9% lower than the previous year.
The United States
106
Highlights
Activity impacted by Fed’s interest-rate cuts.
Good performance of net fees and commissions and NTI.
Continued improvement of the efficiency ratio.
Net attributable profit affected by the impairment on financial assets.
BUSINESS ACTIVITY (1)
(YEAR-ON-YEAR CHANGE AT CONSTANT EXCHANGE
RATE. DATA AS OF 31-12-19)
NET INTEREST INCOME/ATAS
(PERCENTAGE. CONSTANT EXCHANGE RATE)
(1)
Excluding repos.
OPERATING INCOME
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
NET ATTRIBUTABLE PROFIT
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
(1)
At current exchange rate: +11.4%.
(1) At current exchange rate: -19.9%.
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
107
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value
through profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
Balance sheets
Cash, cash balances at central banks and other demand
deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Inter-area positions
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair
value through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Inter-area positions
Other liabilities
Economic capital allocated
Relevant business indicators
Performing loans and advances to customers under
management (2)
Non-performing loans
Customer deposits under management (2)
Off-balance sheet funds (3)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Figures at constant exchange rate.
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
2019
2,395
644
173
12
3,223
(1,966)
(1,126)
(621)
(219)
1,257
∆ %
5.2
8.1
58.8
31.7
7.8
5.7
7.2
(1.7)
23.1
11.4
∆ % (1)
(0.2)
2.6
51.6
29.3
2.3
0.3
1.7
(6.7)
16.8
5.8
(550)
144.9
132.3
(2)
705
(115)
590
-
590
n.s.
(23.4)
(37.7)
(19.9)
-
n.s.
(27.3)
(40.8)
(23.9)
-
(19.9)
(23.9)
2018
2,276
596
109
9
2,989
(1,861)
(1,051)
(632)
(178)
1,129
(225)
16
920
(185)
736
-
736
31-12-19
∆ %
∆ % (1)
31-12-18
8,293
7,659
261
69,510
63,162
-
914
2,153
88,529
282
4,081
67,525
3,551
3,416
5,831
3,843
71.5
(26.9)
67.1
9.4
3.9
-
36.7
(15.0)
7.9
20.2
21.1
5.7
(1.4)
77.3
3.1
13.6
68.3
(28.3)
63.9
7.3
1.9
-
34.2
(16.6)
5.9
18.0
18.8
3.7
(3.2)
74.0
1.2
11.5
4,835
10,481
156
63,539
60,808
-
668
2,534
82,057
234
3,370
63,891
3,599
1,926
5,654
3,383
31-12-19
∆ %
∆ % (1)
31-12-18
4.0
(9.0)
5.7
-
1.5
2.1
(10.7)
3.7
-
(0.4)
63,241
730
67,528
-
65,170
61.0
1.1
101
0.88
60,784
802
63,888
-
64,175
62.2
1.3
85
0.39
108
Activity
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and earnings, will be
given at constant exchange rates. These rates, together with the changes at the current exchange rates, can be found in
the attached tables of financial statements and relevant business indicators.
The most relevant aspects related to the area's activity in 2019 were as follows:
Lending activity (performing loans under management) increased quarter-over-quarter and year-on-year (up
3.0% and up 2.1%, respectively), mainly due to the dynamism of the corporate banking and commercial
portfolio. The retail portfolio remained practically flat during 2019 (down 0.9%), with slight declines in the
mortgage and consumer portfolios, which were partially offset by the increase in credit cards, mainly due to
BBVA’s commercial effort to promote this product amongst its clients.
With regard to the risk indicators, there was a significant reduction in non-performing loans in the quarter that
caused the NPL ratio to stand at 1.1% at year end. The NPL coverage ratio improved to 101%.
Customer deposits under management increased 3.7% year-on-year, explained by an increase in demand
deposits (+10.6%), which offset the decrease in term deposits (-15.4%).
Results
The United States generated a net attributable profit of €590m during 2019, which is 23.9% lower than the previous
year as a result of the increase in the impairment of financial assets. The most relevant aspects related to the income
statement are summarized below:
The net interest income was stable during the year, since the good performance during the first half of the year
was hampered by the Fed rate cuts in the second half of the year. This line decreased 2.1% in the last quarter of
the year.
Net fees and commissions increased 2.6% in the year mainly due to the increase in those fees and
commissions related to investment banking, cards, commercial establishments and, to a lesser extent, those
associated with syndicated loans.
Significant increase in NTI (up 51.6% in the year) as a result of greater capital gains from the sale of ALCO
portfolios.
Operating expenses remained stable (up 0.3%) in 2019.
There was an increase in the impairment of financial assets during 2019 (up 132.3%), due to provisions for
specific commercial portfolio customers, more write-offs in the consumer portfolio and an adjustment in the
macro scenario. In addition, the comparison was affected by the release in 2018 of hurricane-related provisions
from the previous year. Consequently, the cumulative cost of risk as of December 2019 increased to 0.88%,
compared with 0.39% as of December 2018.
109
Mexico
Highlights
Good performance of the lending activity, boosted by growth in the retail portfolio.
Positive trend of customer funds especially in demand deposits.
Net Interest Income growth in line with activity.
Excellent performance of the NTI.
Cumulative cost of risk at historically low levels.
BUSINESS ACTIVITY (1)
(YEAR-ON-YEAR CHANGE AT CONSTANT EXCHANGE
RATE. DATA AS OF 31-12-19)
NET INTEREST INCOME/ATAS
(PERCENTAGE. CONSTANT EXCHANGE RATE)
(1)
Excluding repos.
OPERATING INCOME
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
NET ATTRIBUTABLE PROFIT
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
(1)
At current exchange rate: +12.2%.
(1) At current exchange rate: +14.0%.
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
110
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value
through profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
Balance sheets
Cash, cash balances at central banks and other demand
deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair
value through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Other liabilities
Economic capital allocated
Relevant business indicators
Performing loans and advances to customers under
management (2)
Non-performing loans
Customer deposits under management (2)
Off-balance sheet funds (3)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Figures at constant exchange rate.
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
2019
6,209
1,298
310
212
8,029
(2,645)
(1,124)
(1,175)
(346)
5,384
(1,698)
∆ %
11.5
7.8
38.7
7.6
11.6
10.6
9.8
5.3
36.6
12.2
9.2
∆ % (1)
5.9
2.3
31.7
2.1
6.0
4.9
4.3
(0.0)
29.7
6.5
3.6
5
(80.4)
(81.4)
3,691
(992)
2,699
(0)
2,699
12.9
10.0
14.0
14.1
14.0
7.2
4.4
8.2
8.3
8.2
2018
5,568
1,205
223
197
7,193
(2,392)
(1,024)
(1,115)
(253)
4,800
(1,555)
24
3,269
(901)
2,368
(0)
2,367
31-12-19
∆ %
∆ %(1)
31-12-18
(21.6)
(26.0)
6,489
31,402
777
66,180
58,081
2,022
2,985
109,079
21,784
2,117
55,934
8,840
15,514
4,889
31-12-19
58,617
1,478
55,331
24,464
59,299
32.9
2.4
136
3.01
20.7
n.s.
14.7
13.7
13.1
(18.0)
12.0
20.8
209.9
10.7
3.2
0.2
18.1
∆ %
14.1
29.9
11.2
18.5
11.5
13.9
n.s.
8.2
7.2
6.7
(22.6)
5.6
14.0
192.3
4.4
(2.6)
(5.5)
11.4
8,274
26,022
72
57,709
51,101
1,788
3,639
97,432
18,028
683
50,530
8,566
15,485
4,140
∆ % (1)
31-12-18
7.6
22.5
4.9
11.8
5.2
51,387
1,138
49,740
20,647
53,177
33.3
2.1
154
3.07
111
Activity
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and earnings, will be
given at constant exchange rates. These rates, together with changes at constant exchange rates, can be found in the
attached tables of financial statements and relevant business indicators.
The most relevant aspects related to the area's activity in 2019 have been:
Lending activity (performing loans under management) showed a strong dynamism in the final quarter of the
year, with growth of 1.7% that boosted the year-on-year variation to 7.6%. It can be seen that even when
economic uncertainty was observed throughout the year and there was a slowdown in credit growth in the
system, BBVA managed to maintain its leadership position in Mexico, with a market share of 22.8% in
performing loans, according to local figures from the National Banking and Securities Commission (CNBV) at
the end of November 2019.
The wholesale portfolio, showed an increase of 5.1% year on year, driven mainly by the positive performance of
business loans which grew by 3.9% in 2019. It should be noted the positive performance of the corporate
banking portfolio in the quarter, which managed to reverse the downward trend observed until September to
end the year with a positive growth compared to 2018. The retail portfolio maintained the dynamism shown
throughout 2019 and closed the year with a year-on-year growth rate of 8.1%, strongly supported by consumer
loans (payroll and those loans used for the purchase of cars, mainly) and mortgages (up 13.1% and up 10.5%
respectively, compared to December 2018). This portfolio also showed a double-digit year-on-year growth rate
in the new loan production.
In terms of asset quality indicators, the NPL ratio stood at 2.4% while NPL coverage ratio stood at 136%.
Total customer funds (customer deposits under management, mutual funds and other off-balance sheet funds)
grew by 7.0%, despite the highly competitive market. The rise can be explained by an increase in the demand
deposits (up 6.2%), and the positive evolution of mutual funds (up 16.7%), driven by the wide range of these
type of investment products. Regarding the funding mix, demand deposits represent 80% of the total customer
deposits under management at the end of 2019.
Results
BBVA in Mexico achieved a net attributable profit of €2,699m in 2019, up 8.2% year-on-year. The most relevant aspects
related to the income statement are summarized below:
The strong performance of the net interest income, with a year-on-year growth of 5.9%, driven by higher
income from the retail portfolio.
Net fees and commissions grew by 2.3%, despite the strong pressures from the competitive environment.
This evolution is mainly explained by the increase in the credit card billing from customers.
NTI showed an excellent performance, with a 31.7% year-on-year growth derived mainly from the gains coming
from portfolio sales.
Other operating income and expenses increased by 2.1% year-on-year, resulting from higher earnings in the
insurance business and despite the higher contribution to the Deposit Guarantee Fund.
Gross income grew by 6.0% in year-on-year terms, exceeding the increase in operating expenses (up 4.9%)
which, despite being heavily influenced by the increase in the contribution to the Foundation, follow a strict cost
control policy. As a result, the efficiency ratio improved in 2019 to 32.9%.
The impairment on financial assets line increased by 3.6% mainly due to the higher requirement derived from
the greater dynamism observed in the retail portfolio, and the negative impact of the deterioration in the macro
scenario. Despite all of the above, the cumulative cost of risk stood at 3.01% in 2019, which is the lowest level of
the last nine years.
In the provisions (net) and other gains (losses) line, the comparison was negative due to extraordinary
income in the first half of 2018 from the sale of holdings in real estate developments by BBVA in Mexico.
112
Turkey
Highlights
In Turkish lira, positive activity performance and relevant improvement in the spread.
Operating expenses growth below the inflation rate.
Positive evolution of net fees and commissions and lower requirements for loan-loss provisions on
financial assets.
BUSINESS ACTIVITY (1)
(YEAR-ON-YEAR CHANGE AT CONSTANT EXCHANGE
RATE. DATA AS OF 31-12-19)
NET INTEREST INCOME/ATAS
(PERCENTAGE. CONSTANT EXCHANGE RATE)
(1)
Excluding repos.
OPERATING INCOME
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
NET ATTRIBUTABLE PROFIT
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATE)
(1)
At current exchange rate: -10.5%.
(1) At current exchange rate: -10.7%
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
113
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value
through profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
Balance sheets
Cash, cash balances at central banks and other demand
deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair value
through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Other liabilities
Economic capital allocated
Relevant business indicators
Performing loans and advances to customers under
management (2)
Non-performing loans
Customer deposits under management (2)
Off-balance sheet funds (3)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Figures at constant exchange rate.
(2) Excluding repos.
(3) Includes mutual funds, pension funds and other off-balance sheet funds.
2019
2,814
717
10
50
3,590
(1,215)
(678)
(359)
(179)
2,375
(906)
(128)
1,341
(312)
1,029
(524)
506
∆ %
(10.2)
4.5
(11.7)
(28.7)
(8.0)
(2.6)
3.3
(20.8)
29.3
(10.5)
(24.6)
n.s.
(7.1)
6.5
(10.6)
(10.4)
(10.7)
∆ %(1)
0.1
16.5
(1.6)
(20.5)
2.6
8.6
15.2
(11.8)
44.1
(0.2)
(16.0)
n.s.
3.5
18.7
(0.3)
(0.2)
(0.5)
2018
3,135
686
11
70
3,901
(1,247)
(656)
(453)
(138)
2,654
(1,202)
(8)
1,444
(293)
1,151
(585)
567
31-12-19
∆ %
∆ %(1)
31-12-18
5,486
5,268
444
51,285
40,500
1,117
1,260
64,416
2,184
4,473
41,335
4,271
9,481
2,672
(30.1)
(22.9)
(4.3)
8.4
1.9
(2.4)
5.5
(16.9)
(2.8)
17.9
(33.6)
3.6
(28.4)
2.3
5.7
5.6
19.6
12.5
7.7
16.4
(8.4)
7.3
30.1
(26.7)
14.3
(21.0)
12.9
16.6
7,853
5,506
410
50,315
41,478
1,059
1,517
66,250
1,852
6,734
39,905
5,964
9,267
2,529
31-12-19
∆ %
∆ %(1)
31-12-18
(3.3)
27.4
3.6
35.0
0.3
6.7
40.5
14.3
48.9
10.6
39,662
3,663
41,324
3,906
56,642
33.8
7.0
75
2.07
40,996
2,876
39,897
2,894
56,486
32.0
5.3
81
2.44
114
Activity
Unless expressly stated and communicated otherwise, rates of changes explained ahead, both for activity and for
income, will be presented at constant exchange rates. These rates, together with changes at current exchange rates, can
be observed in the attached tables of the financial statements and relevant business indicators.
The most relevant aspects related to the area’s activity year-to-date as of December 31, 2019 were:
Lending activity (performing loans under management) rose by 6.7% year-to-date (up 8.2% in quarterly terms)
mainly driven by Turkish Lira loan growth. Significant performance of Turkish Lira loans in the last quarter of
2019 by 6.6% where foreign currency loans remained stable after the contraction in the first nine months of
2019 (in U.S. dollar terms).
Turkish Lira commercial loans grew year-to-date thanks to a strong performance in the first quarter supported
by the Credit Guarantee Fund (CGF) utilization and short term corporate loans. In addition, consumer loans
expanded in year-on-year terms of, explained by the improvement in the last quarter of the year mainly driven
by the General Purpose Loans and thanks to the declining interest rate environment. Additionally, credit cards
continued to show solid performance on a year-on-year basis.
In terms of asset quality, the NPL ratio slightly decreased to 7.0% from 7.2% as of September 30, 2019. The
NPL coverage ratio stands at 75% December 31, 2019.
Customer deposits under management (64% of total liabilities in the area as of December 31, 2019) remained
the main source of funding for the balance sheet and increased by 14.3% on a year-on-year basis. It is worth
mentioning the good performance of demand deposits, which increased by 38.6% year-on-year and 12.3% in
the last quarter. Demand deposits share in total deposits is 38.1%.
Results
Turkey generated a net attributable profit of €506m in 2019 representing a flattish year-on-year evolution (down 0.5%).
The net attributable profit of this business area in the fourth quarter increased by 31.5%. The most significant aspects of
the year-on-year evolution in the income statement are the following:
Net interest income remains stable mainly thanks to the successful price management that led to increase in
both Turkish Lira and Foreign currency spreads offset by a sharp reduction in inflation-linked bonds
contribution.
Income from net fees and commissions grew by 16.5%. This significant increase was mainly driven by the
positive performance in payment systems and backed by money transfers and non-cash loans.
Flat NTI despite the unfavorable market conditions.
Gross income grew by 2.6% in 2019 compared to 2018, thanks to the increase in core banking revenues.
Operating expenses increased by 8.6%, significantly below the average inflation rate during the last 12 months
which stood an average of 15.5%. As a result of strict cost-control discipline, the efficiency ratio remained at low
levels (33.8%).
Impairment on financial assets declined by 16.0% on a year-on-year basis due to lower negative impacts from
the macro scenario update and higher big ticket provisions coming from the wholesale-customer portfolio in
2018. As a result, the cumulative cost of risk of the area stood at 2.07%.
Provisions or reversal of provisions and other results subtracts €128m versus €8m in 2018 due to higher
provisions for contingent liabilities and commitments.
115
South America
Highlights
Positive evolution of activity in the main countries: Argentina, Colombia and Peru.
Improved efficiency ratio, supported by the growth in net interest income and the control in operating
expenses.
Greater NTI contribution in the year due to the positive effect derived from Prisma sale in Argentina and
the positive contribution of foreign exchange transactions.
Net attributable profit impacted by Argentina's inflation adjustment.
Positive contribution of the main countries to the Group’s attributable profit.
BUSINESS ACTIVITY (1)
(YEAR-ON-YEAR CHANGE AT CONSTANT EXCHANGE
RATES. DATA AS OF 31-12-19)
NET INTEREST INCOME/ATAS
(PERCENTAGE. CONSTANT EXCHANGE RATE)
(1)
Excluding repos.
OPERATING INCOME
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATES)
NET ATTRIBUTABLE PROFIT
(MILLIONS OF EUROS AT CONSTANT EXCHANGE
RATES)
(1)
At current exchange rate: +14.3%.
(1) At current exchange rate: +24.8%
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
116
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value
through profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
BBVA Chile (2)
Net attributable profit excluding BBVA Chile
Balance sheets
Cash, cash balances at central banks and other demand
deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair
value through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Other liabilities
Economic capital allocated
Relevant business indicators
Performing loans and advances to customers under
management (3)
Non-performing loans
Customer deposits under management (4)
Off-balance sheet funds (5)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Figures at constant exchange rates.
(2) Earnings generated by BBVA Chile until its sale on July 6, 2018.
(3) Excluding repos.
(4) Excluding repos and including specific marketable debt securities.
(5) Includes mutual funds, pension funds and other off-balance sheet funds.
2019
3,196
557
576
(479)
3,850
(1,574)
(794)
(609)
(171)
2,276
(777)
(103)
1,396
(368)
1,028
(307)
721
-
721
∆ %
6.2
(11.9)
42.3
39.1
4.0
(7.9)
(6.1)
(17.5)
36.7
14.3
21.7
57.8
8.3
(21.6)
25.5
27.1
24.8
-
40.4
∆ % (1)
15.2
(5.0)
58.1
33.6
14.3
1.6
4.2
(9.0)
45.6
25.2
29.4
83.4
20.1
(16.3)
42.3
38.8
43.8
-
64.0
2018
3,009
631
405
(344)
3,701
(1,709)
(846)
(738)
(125)
1,992
(638)
(65)
1,288
(469)
819
(241)
578
64
514
31-12-19
∆ %
∆ %(1)
31-12-18
8,601
6,120
114
37,869
35,701
968
1,438
54,996
1,860
3,656
36,104
3,220
7,664
2,492
(4.3)
8.6
(11.7)
3.3
3.6
19.1
(37.2)
1.1
37.1
18.9
0.7
0.4
(10.3)
5.8
5.3
13.1
(13.2)
7.4
7.5
25.3
(34.1)
6.1
36.0
20.0
6.4
0.9
(4.8)
11.9
8,987
5,634
129
36,649
34,469
813
2,290
54,373
1,357
3,076
35,842
3,206
8,539
2,355
31-12-19
∆ %
∆ % (1)
31-12-18
3.1
6.1
0.4
10.3
6.9
7.0
6.6
6.0
10.7
13.5
35,598
1,853
36,123
12,864
45,674
40.9
4.4
100
1.88
34,518
1,747
35,984
11,662
42,724
46.2
4.3
97
1.44
SOUTH AMERICA. DATA PER COUNTRY (MILLIONS OF EUROS)
Country
Argentina
Chile
Colombia
Operating income
∆ %
213.6
(53.7)
0.2
∆ % (1)
n.s.
(51.9)
5.6
2019
548
134
639
2018
175
289
638
2019
133
55
267
Net attributable profit
∆ % (1)
n.s.
∆ %
n.s.
(60.0)
19.1
827
Peru
Other countries (2)
Total
(1) Figures at constant exchange rates.
(2) Venezuela, Paraguay, Uruguay and Bolivia. Additionally, it includes eliminations and other charges.
SOUTH AMERICA. RELEVANT BUSINESS INDICATORS PER COUNTRY (MILLIONS OF EUROS)
(20.4)
2,276
(16.5)
1,992
24.8
25.2
14.3
13.4
202
730
11.6
160
128
721
5.9
9.2
65
(58.5)
25.5
1.9
19.9
43.8
117
2018
(32)
137
224
191
59
578
Performing loans and advances to
customers under management (1)(2)
Non-performing loans and
guarantees given (1)
Customer deposits under
management (1)(3)
Off-balance sheet funds (1)(4)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Argentina
Chile
Colombia
Peru
31-12-19
31-12-18
31-12-19
31-12-18
31-12-19
31-12-18
31-12-19
31-12-18
2,929
2,716
1,806
1,935
12,853
12,040
15,030
13,859
105
56
4,366
644
6,093
46.9
3.4
161
3,851
504
8,036
73.7
2.0
111
74
6
-
2,121
33.0
3.9
91
2.79
55
10
-
741
782
806
736
12,696
12,761
14,643
13,331
1,389
1,309
1,821
1,729
2,243
14,172
12,680
19,293
15,739
42.1
2.8
93
0.81
36.2
5.3
98
1.67
37.1
6.0
100
2.16
35.8
4.1
96
1.45
36.0
4.0
93
0.98
Cost of risk (%)
(1) Figures at constant exchange rates.
(2) Excluding repos.
(3) Excluding repos and including specific marketable debt securities.
(4) Includes mutual funds, pension funds and other off-balance sheet funds.
4.22
1.60
Activity and results
Unless expressly stated otherwise, all the comments below on rates of change, for both activity and earnings, will be
given at constant exchange rates. These rates, together with the changes at current exchange rates, can be found in the
attached tables of financial statements and relevant business indicators.
The most relevant aspects related to the area's activity as of December 31, 2019 were:
Lending activity (performing loans under management) remained above the end of the previous year,
increasing by 7.0%. It is important to highlight the evolution of the retail portfolio, which continues to show
positive performance especially in credit cards and consumer loans. With regard to asset quality, both the NPL
ratio and NPL coverage ratio closed at 4.4% and 100%, respectively, slightly above the end of the previous year.
On the funding side, deposits from customers under management increased by 6.0% in the year, mainly due to
the growth of time deposits and, to a lesser extent, demand deposits. Off-balance sheet funds grew by 10.7% in
the same period.
With respect to results, South America generated a cumulative net attributable profit of €721m in 2019, amounting to
year-on-year growth of 43.8% (up 24.8% at current exchange rates). The cumulative impact in 2019 of hyperinflation in
Argentina on the area's net attributable profit was €-98m.
The most relevant aspects of the income statement are summarized below:
There was significant income generation from the net interest income, which grew 15.2% in the last twelve
months (up +6.2% at current exchange rates).
Higher contribution from NTI (up 58.1%, up 42.3% at current exchange rates) due to the positive effect derived
from Prisma sale in Argentina and the positive contribution of foreign exchange transactions.
Operating expenses were slightly higher than the previous year (up 1.6%, down 7.9% at current exchange
rates).
Impairment on financial assets increased by 29.4% (up 21.7% at current exchange rates), bringing the
cumulative cost of risk to 1.88% as of the end of December 2019.
Higher provisions (net) and other gains (losses) compared to the previous year (up 83.4%, up 57.8% at
current exchange rates).
118
On homogeneous comparison, i.e. excluding the sale of BBVA Chile that was completed in July 2018, the net attributable
profit grew by 40.4% in 2019 at current exchange rates compared to the previous year (+64.0% at constant exchange
rates).
The most significant countries in the business area, Argentina, Colombia and Peru, performed as follows in 2019 in
terms of activity and earnings:
Argentina
Lending activity grew by 7.9% explained by the performance of retail loans, mainly due to the increased activity
in consumer and credit card portfolios. With regards to asset quality, the NPL ratio increased compared to the
last year and stood at 3.4% as of December 31, 2019. Despite this, it continued to perform better than the
system and showed a decrease of 30 basis points in the quarter.
In terms of funding, deposits from customers under management increased by 13.4%, mainly supported by
demand deposits, while off-balance sheet funds increased by 27.9%, both compared to December 2018 figures.
Net attributable profit was €133m, driven mainly by the strong performance of net interest income (due to the
increased contribution from securities portfolios and a better customer spread) as well as an increase in NTI
(positively impacted by the sale of the stake in Prisma Medios de Pago S.A. in the first quarter of 2019 and to
foreign exchange transactions). This performance was negatively impacted by increased operating expenses,
which were influenced by high levels of inflation and higher impairments on financial assets explained by the
downgrade in the rating and by the situation of the country.
Colombia
Lending activity grew 6.8% in the year explained by the good performance of the retail portfolio, especially
consumer and mortgage loans and of the public sector loans. In terms of asset quality, the NPL ratio fell to 5.3%
as of December 2019.
Deposits from customers under management remained flat compared to the end of 2018.
The net attributable profit stood at €267m, increasing by of 25.5% year-on-year basis, thanks to the
generation of net interest income, the positive performance of the NTI (up 14.1%) due to sales of inflation-linked
asset portfolios and the valuation of the security portfolio, lower level of impairments of financial assets and
provisions and a lower tax rate, as a result of the court ruling declaring the corporate tax surcharge applicable to
financial entities illegal.
Peru
Lending activity increased by 8.5% compared to the end of 2018 mainly explained by the evolution of the
wholesale portfolio and also supported by the strong performance of retail portfolios, especially consumer
lending and mortgages. With regards to asset quality, there was an increase in the NPL ratio, to 4.1%, and in NPL
coverage ratio, which reached 96%.
Customer deposits under management increased by 9.8% in the year, mainly due to growth in the time
deposits (up 27.0%).
Good performance in the net interest income, which grew by 7.3% year-on-year due to higher business
volumes. The NTI also showed an important increase of 25.6% year-on-year due to foreign exchange
transactions. As a result, the net attributable profit stood at €202m, showing a year-on-year growth of 1.9%,
offset by higher operating expenses and a higher level of impairments on financial assets.
Rest of Eurasia
Highlights
119
Flattish recurring revenue and positive performance of the NTI.
Good performance in lending, especially in Asia.
Controlled growth of operating expenses.
Improved risk indicators.
FINANCIAL STATEMENTS AND RELEVANT BUSINESS INDICATORS (MILLIONS OF EUROS AND PERCENTAGE)
Income statement
Net interest income
∆ %
(0.0)
2019
175
2018
175
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value through
profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Non-controlling interests
Net attributable profit
Balance sheets
Cash, cash balances at central banks and other demand deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Inter-area positions
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair value through
profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Inter-area positions
Other liabilities
Economic capital allocated
139
131
9
454
(293)
(144)
(131)
(18)
161
(4)
6
163
(36)
127
-
127
31-12-19
247
477
-
22,224
19,660
-
72
228
23,248
57
1,039
4,708
836
15,336
399
873
0.4
29.2
n.s.
9.6
2.2
5.7
(9.2)
194.2
26.1
n.s.
n.s.
10.0
(31.3)
32.3
-
32.3
∆ %
3.8
(5.2)
-
24.9
18.4
-
81.2
(10.5)
23.4
36.7
(18.2)
(3.5)
292.6
34.5
47.9
15.4
138
101
(0)
414
(287)
(136)
(144)
(6)
127
24
(3)
148
(52)
96
-
96
31-12-18
238
504
-
17,799
16,598
-
39
254
18,834
42
1,271
4,876
213
11,406
270
757
Relevant business indicators
Performing loans and advances to customers under management (1)
Non-performing loans
Customer deposits under management (1)
Off-balance sheet funds (2)
Risk-weighted assets
Efficiency ratio (%)
NPL ratio (%)
NPL coverage ratio (%)
Cost of risk (%)
(1) Excluding repos.
(2) Includes mutual funds, pension funds and other off-balance sheet funds.
Activity and results
∆ %
18.7
(18.7)
(3.5)
29.1
16.1
31-12-19
19,654
350
4,708
500
17,975
64.6
1.2
98
0.02
120
31-12-18
16,553
430
4,876
388
15,476
69.3
1.7
83
(0.11)
The most relevant aspects of the area's activity and earnings in 2019 were:
Lending activity (loans and advances to customers) increased 18.7% in 2019, mainly driven by the strong
performance in Asia.
Credit risk indicators compare positively compared to the end of 2018: the non-performing loan ratio improved
from 1.7% to 1.2 at the end of 2019 and the NPL coverage ratio increased from 83% to 98%.
Customer deposits under management fell by 3.5% in 2019, affected by the negative interest rate environment
in Europe.
As regards to earnings, the NTI performed strongly (up 29.2% year-on-year) due to the contribution of
commercial activity in the Global Markets area, which compensated for the decreased dynamism of the net
interest income and commissions, which remained flat. Continued management of discretionary expenses
resulted in controlled growth of operating expenses (up 2.2% year-on-year). The impairment on financial
assets compares negatively with the previous year, due to the releases made in 2018 explained by the lower
reserve requirement provisions in Europe. As a result, the area's net attributable profit in 2019 was €127m (up
32.3% year-on-year).
Corporate Center
FINANCIAL STATEMENTS (MILLIONS OF EUROS AND PERCENTAGE)
Income statement
Net interest income
Net fees and commissions
Net trading income
Other operating income and expenses
Gross income
Operating expenses
Personnel expenses
Other administrative expenses
Depreciation
Operating income
Impairment on financial assets not measured at fair value through
profit or loss
Provisions or reversal of provisions and other results
Profit/(loss) before tax
Income tax (1)
Profit/(loss) for the year (1)
Non-controlling interests
Net attributable profit (1)
Of which:
The United States goodwill impairment
Capital gains from the sale of BBVA Chile
∆ %
(13.4)
24.0
(65.0)
(66.1)
(19.3)
9.6
12.1
20.3
(4.6)
0.2
(98.4)
n.s.
n.s.
119.3
n.s.
(91.8)
n.s.
2019
(233)
(73)
(54)
21
(339)
(955)
(591)
(173)
(190)
(1,294)
(0)
(1,481)
(2,775)
258
(2,517)
0
(2,517)
(1,318)
Net attributable profit excluding the goodwill impairment in the
United States and the capital gains from the sale of BBVA Chile.
(1,199)
22.8
(1) As a result of the amendment to IAS 12 "Income Taxes", and in order to make the information comparable, the 2018 income statement has been restated.
121
2018
(269)
(59)
(155)
63
(420)
(871)
(527)
(144)
(200)
(1,291)
(2)
830
(463)
118
(346)
3
(343)
633
(976)
Balance sheets
31-12-19
∆ %
31-12-18
Cash, cash balances at central banks and other demand deposits
Financial assets designated at fair value
Of which: Loans and advances
Financial assets at amortized cost
Of which: Loans and advances to customers
Inter-area positions
Tangible assets
Other assets
Total assets/liabilities and equity
Financial liabilities held for trading and designated at fair value
through profit or loss
Deposits from central banks and credit institutions
Deposits from customers
Debt certificates
Inter-area positions
Other liabilities
Economic capital allocated
Shareholders' funds
836
2,458
-
2,480
813
(21,621)
2,240
20,394
6,787
14
718
308
7,764
(32,067)
566
(23,989)
53,474
14.2
(10.2)
-
(6.9)
(17.9)
54.2
42.4
(9.8)
(58.3)
(65.1)
(2.1)
n.s.
(5.5)
40.6
(70.5)
9.9
7.0
732
2,738
-
2,665
990
(14,026)
1,573
22,598
16,281
39
733
36
8,212
(22,808)
1,917
(21,833)
49,985
122
The Corporate Center recorded a negative net attributable profit of €2,517m in 2019, resulting from the goodwill
impairment of the United States for an amount of €1,318m in December 2019. The 2018 net attributable profit was €-
343m, as it included the net capital gains from the sale of BBVA Chile. In addition, the most significant parts of the
change in the 2019 statement was:
The NTI had a positive year-on-year comparison, as the losses generated in 2019 were lower than those in
2018, mainly due to increased capital gains in the portfolio of industrial and financial holdings.
Other operating income and expenses primarily include Telefónica, S.A. dividends, as well as the income of
companies accounted for by the equity method, including holdings in real estate companies. The positive
contribution of this line in 2019 was 66.1% less than in 2018.
Operating expenses include the expenses from the corporate functions and whose year-on-year increase
(+9.6%) is related to the expenses associated with data and cybersecurity.
The line of provisions or reversal of provisions and other gains (losses) shows, in 2019, the goodwill
impairment in the United States, and in 2018, the capital gains generated by the sale of BBVA Chile
123
Risk management
General risk management and control model
The BBVA Group has a general risk management and control model (hereinafter, the “Model”) that is appropriate for its
business model, its organization, the countries where it operates and its corporate governance system. This model
allows the Group to carry out its activity within the risk management and control strategy and policy defined by the
corporate bodies of BBVA and to adapt itself to a changing economic and regulatory environment, facing this
management at a global level and aligned to the circumstances at all times.
This model, which is fully applied in the Group, comprises the following basic elements:
Governance and Organization
Risk Appetite Framework
Assessment, Monitoring and Reporting
Infrastructure.
The Group promotes the development of a risk culture that ensures a consistent application of the Model in the Group,
and that guarantees that the risks function is understood and internalized at all levels of the organization.
Governance and Organization
The risk governance model in the BBVA Group is characterized by a special involvement of its corporate bodies, both in
setting the risk strategy and in monitoring and supervising its implementation on an ongoing basis.
Thus, and as explained below, the corporate bodies are responsible for approving the risk strategy and the corporate
policies for the different types of risks. Global Risk Management (GRM) and Regulation and Internal Control (including,
among other areas, Non-Financial Risks) are the functions responsible for its implementation and development, with the
appropriate reporting to corporate bodies.
Responsibility for day-to-day management of risks falls on business and corporate areas, the activities of which adhere to
the policies, regulation, infrastructures and controls that, based on the framework set by corporate bodies, are defined
by Global Risk Management and Regulation & Internal Control in their corresponding areas of responsibility.
To carry out this work adequately, the financial risks function in the BBVA Group (GRM) has been set up as a single,
global function independent from commercial areas.
The head of the risks function at an executive level, the Group’s Chief Risk Officer (or CRO), is appointed by the Board of
Directors as a member of its senior management, and reports directly on the development of the corresponding
functions to the corporate bodies. The Chief Risk Officer, for the best fulfillment of the functions, is supported by a
structure consisting of cross-cutting risk units in the corporate area and specific risk units in the Group's geographical
and/or business areas.
In addition, and with regard to internal control and non-financial risks, the Group has a Regulation & Internal Control area
independent from the rest of units and whose head (Head of Regulation & Internal Control) is also appointed by the
Board of Directors of BBVA and reports directly to corporate bodies on the performance of its functions. This area is
responsible for proposing and implementing non-financial risks policies and the Internal Control Model of the Group and
it is composed by, among other, the Non-Financial Risks, Regulatory Compliance and Risk Internal Control units.
The Risk Internal Control unit, within the Regulation & Internal Control area and, therefore, independent from the financial
risks function (GRM), acts as a control unit for the activities carried out by GRM. In this regard, and without prejudice to
the functions performed in this regard by the Internal Audit area, Risk Internal Control checks that the regulatory
framework and established measures are sufficient and appropriate for each type of financial risk. It also monitors its
implementation and operation, and confirms that those decisions taken by GRM are taken independently from the
business lines and, in particular, that there’s an adequate segregation of functions between units.
Governance and organizational structure are basic pillars for ensuring an effective risk management and control. This
section summarizes the roles and responsibilities of the corporate bodies in the risks area, of the Group's Chief Risk
Officer and, in general, of the risks function, its interrelation and the group of committees, in addition to the Risk Internal
Control unit.
Corporate Bodies of BBVA
According to the corporate governance system of BBVA, the Board of Directors of the Bank has certain reserved powers
concerning management, through the implementation of the corresponding most relevant decisions, and concerning
124
supervision and control, through the monitoring and supervision of implemented decisions and management of the
Bank.
In addition, and to ensure an adequate performance of the management and supervisory functions of the Board of
Directors, the corporate governance system comprises different committees supporting the Board of Directors with
regard to matters falling within their competence, and according to the specific charters of each committees. For this
purpose, a coordinated work scheme between these corporate bodies has been established.
In terms of risks, the Board of Directors has reserved those powers referred to determining the risk control and
management policy and the supervision and control of its implementation.
In addition, and for an adequate performance of its duties, the Board of Directors is assisted by the Risk and Compliance
Committee (“CRC”), on the issues detailed below, and by the Executive Committee (“CDP”), which is focused on the
strategy, finance and business functions of the Group, for the purposes of which it monitors the risks of the Group.
The involvement of the corporate bodies of BBVA in the control and management of the risks of the Group is detailed
below:
Board of Directors
The Board of Directors is responsible for establishing the risk strategy of the Group and, in this role, it
determines the risks management and control policy, through the following documents:
o The Risk Appetite Framework of the Group, which includes in the one hand the risk appetite statement
of the Group, that is, the general principles governing the risk strategy of the Group and its target
profile; and, on the other hand, and based on the above mentioned risk appetite statement, a set of
quantitative metrics (core metrics, and their corresponding statements, and by type of risk metrics),
reflecting the risk profile of the Group;
o The framework of management policies of the different types of risk to which the Bank is, or could be,
exposed. They contain the basic lines for a consistent management and control of risks throughout the
Group, and consistent with the Risk Appetite Framework and the Model; and
o The model.
All of the above in coordination with the rest of prospective-strategic decisions of the Bank, which includes the
Strategic Plan, the Annual Budget and the capital and liquidity planning, in addition to the rest of management
objectives, whose approval is a responsibility of the Board of Directors.
In addition to defining the risk strategy, the Board of Directors, in the performance of its risks monitoring,
management and control tasks, also monitors the evolution of the risks of the Group and of each main business
and/or geographical area, ensuring compliance with the Risk Appetite Framework of the Group; and also
supervising internal information and control systems.
For the development of all these functions, the Board of Directors is supported by the CRC and the CDP, which
are responsible for the functions detailed below.
Risk and Compliance Committee
The CRC is, according to its own charter, composed of non-executive directors and its main purpose is to assist
the Board of Directors on the establishment and monitoring of the risk control and management policy of the
Group.
For this purpose, it assists the Board of Directors in a variety of risk control and monitoring areas, in addition to
its analysis functions, based on the strategic pillars established by the Board of Directors and the CDP, the
proposals on the risk management, control and strategy of the Group, which are particularly specified in the Risk
Appetite Framework and in this Model. After the analysis, the Risk Appetite Framework and Model proposal is
submitted to the Board of Directors for consideration and, where appropriate, approval purposes.
In addition, the CRC proposes, in a manner consistent with the Risk Appetite Framework of the Group approved
by the Board of Directors, the management and control policies of the different risks of the Group, and
supervises the internal control and information systems.
With regard to the monitoring of the evolution of the risks of the Group and their degree of compliance with the
Risk Appetite Framework and defined policies, and without prejudice to the monitoring task carried out by the
Board of Directors and the CDP, the CRC carries out monitoring and control tasks with greater frequency and
receives information with a sufficient granularity to achieve an adequate performance of its duties.
The CRC also analyzes all measures planned to mitigate the impact of all identified risks, should they
materialize, which must be implemented by the CDP or the Board of Directors, as the case may be.
The CRC also monitors the procedures, tools and measurement indicators of those risks established at a Group
level in order to have a comprehensive view of the risks of BBVA and its Group, and monitors compliance with
the regulation and supervisory requirements in terms of risks.
125
The CRC is also responsible for analyzing those project-related risks that are considered strategic for the Group
or corporate transactions that are going to be submitted to the Board of Directors of the CDP, within its scope of
competence.
In addition, it contributes to the setting of the remuneration policy, checking that it is compatible with an
appropriate and efficient management of risks and that it does not provide incentives to take risks breaching the
level tolerated by the Bank.
In 2019, the CRC has held 21 meetings.
Lastly, the CRC ensures the promotion of the risk culture in the Group.
Executive Committee (CDP)
In order to have a complete and comprehensive view of the progress of the businesses of the Group and its
business units, the CDP monitors the evolution of the risk profile and the core metrics defined by the Board of
Directors, being aware of any potential deviation or breach of the metrics of the Risk Appetite Framework and
implementing, when applicable, the appropriate measures, as explained in this Model.
In addition, the CDP is responsible for proposing the basis for developing the Risk Appetite Framework, which
will be established in coordination with the rest of prospective/strategic decisions of the Bank (e.g., the
Strategic Plan, the Annual Budget and the capital and liquidity planning), in addition to the rest of management
objectives.
Lastly, the CDP is the committee supporting the Board of Directors in decisions related to business risk and
reputational risk, according to the dispositions set out in its own charter.
Chief Risk Officer of the Group
The Group’s Chief Risk Officer (CRO) is responsible for the management of all the financial risks of the Group with the
necessary independence, authority, rank, experience, knowledge and resources. The CRO is appointed by the Board of
Directors of BBVA and has direct access to its corporate bodies (Board of Directors, CDP and CRC), with the
corresponding regular reporting on the risk situation in the Group.
The GRM area has a responsibility as the unit transversal to all the businesses of the BBVA Group. This responsibility is
part of the structure of the BBVA Group, which is formed by subsidiaries based in different jurisdictions, which have
autonomy and must comply with their local regulation, but always according to the risk management and control scheme
designed by BBVA as the parent company of the BBVA Group.
The Chief Risk Officer of the BBVA Group is responsible for ensuring that those risks of the BBVA Group within the scope
are managed according to the established model, assuming, among other, the following responsibilities:
Prepare, in coordination with the rest of areas responsible for risks monitoring and control, and propose to
corporate bodies the risk strategy of the BBVA Group, which includes the Risk Appetite statement of the BBVA
Group, core (and their respective statements) and by type of risk metrics, and the Model.
Define, in coordination with the rest of areas responsible for risks monitoring and control, and propose to
corporate bodies the corporate policies for each type of risk within its scope of responsibility and, as part these,
to establish the required specific regulation.
Prepare, in coordination with the rest of areas responsible for risks monitoring and control, and propose for
approval, or approving if within its competence, the risk limits for the geographies, business areas and/or legal
entities, which shall be consistent with the defined Risk Appetite Framework; it is also responsible for the
monitoring, supervision and control of risk limits within its scope of responsibility.
Submit to the Risk and Compliance Committee the information required to carry out its supervisory and control
functions.
Regular reporting to the corresponding corporate bodies on the situation of those risks of the BBVA Group
within its scope of responsibility.
Identify and assess the material risks faced by the BBVA Group within its scope of responsibility, with an
effective management of those risks and, where necessary, with the implementation of the required mitigation
measures.
Early warning to the relevant corporate bodies and the Chief Executive Officer of any material risk within its
scope of responsibility that could compromise the solvency of the BBVA Group.
Ensure, within its scope of responsibility, the integrity of measurement techniques and management
information systems and, in general, the provision of models, tools, systems and resources to implement the
risk strategy defined by the corporate bodies.
Promote the risk culture of the BBVA Group to ensure the consistency of the Model in the different countries
where it operates, strengthening the cross-cutting model of the risks function.
For decision-making purposes, the Chief Risk Officer of the Group has a governance structure for the function that
culminates in a support forum, the Global Risk Management Committee (GRMC). This committee is the main executive
126
committee for those risks within its competence, and its main purpose is the development of the strategies, policies,
regulation and infrastructure required for identifying, assessing, measuring and managing those material risks within its
scope of responsibility faced by the Group. This committee is composed by the Chief Risk Officer, who chairs the
meetings, and the heads of the GRM corporate disciplines of the Risk Management Group, the four most relevant
geographical risk areas, CIB, South America and Risk Internal Control. The purpose of the GRMC is to propose and
challenge, among other issues, the internal risk regulatory framework and the infrastructures required to identify, assess,
measure and manage the risks faced by the Group in carrying out its businesses and to approve risk limits by portfolio.
The GRMC carries out its functions assisted by various support committees which include:
Global Credit Risk Management Committee: It is responsible for analyzing and decision-making related to
wholesale credit risk admission.
Wholesale Credit Risk Management Committee: its purpose is the analysis and decision-making regarding the
admission of wholesale credit risk of certain customer segments of the BBVA Group.
Work Out Committee: its purpose is to be informed about decisions taken under the delegation framework
regarding risk proposals concerning clients on Watch List and clients classified as NPL of certain customer
segments of the BBVA Group, as well the sanction of proposals regarding entries, exits and changes of Watch
List, entries and exits in non-performing unlikely to pay and turns to written off.
Asset Allocation Committee: The executive authority responsible for analyzing and deciding on credit risk issues
related to processes aimed at achieving a portfolios combination and composition that, under the restrictions
imposed by the Risk Appetite framework, allows to maximize the risk adjusted return on equity.
Risk Models Management Committee: It ensures an appropriate decision-making process regarding the
planning, development, implementation, use, validation and monitoring of the models required to achieve an
appropriate management of the Model Risk in the BBVA Group.
Global Markets Risk Unit Global Committee: It is responsible for formalizing, supervising and communicating the
monitoring of trading desk risk in all the Global Markets business units, as well as coordinating and approving
GMRU key decisions activity, and developing and proposing to GRMC the corporate regulation of the unit.
Operational Risk and Product Governance Corporate Admission Committee: It is responsible for performing the
adequate evaluation of initiatives with a significant operational risk (new business, products, outsourcing,
process transformation, new systems….) under the perspective of operational risk and the approval of the
budget control area.
It identifies, analyzes and assesses the operational risks associated initiatives related with new business,
products or services, outsourcing, process transformation and new systems, prior to its launch. As well, it will
verify that Product Governance normative requirements are met and will decide about the insurance scheme
(global policies).
Retail Credit Risk Committee: It ensures for the analysis, discussion and decision support on all issues regarding
the retail credit risk management that impact or potentially do in the practices, processes and corporate metrics
established in the Policies, Rules and Operating Frameworks.
Asset Management Global Risk Steering Committee: its purpose is to develop and coordinate the strategies,
policies, procedures, and infrastructure necessary to identify, assess, measure and manage the material risks
facing the bank in the operation of businesses linked to BBVA Asset Management.
Global Insurance Risk Committee:
is to guarantee and promote the alignment and the
communication between all the Insurance Risk Units in the BBVA Group. It will do this by promoting the
application of standardized principles, policies, tools and risk metrics in the different regions with the aim of
maintaining proper integration of insurance risk management in the Group.
its purpose
COPOR: its purpose is to analyze and make decision in relation to the operations of the various geographies in
which Global Markets is present.
Risk units of the corporate area and the business/geographical areas
The risks function is comprised of risk units from the corporate area, which carry out cross-cutting functions, and of risk
units of the geographical/business areas.
The risk units of the corporate area develop and submit to the Group’s Chief Risk Officer (CRO) the different
elements required to define the proposal for the Group's Risk Appetite Framework, the corporate policies,
regulation and global infrastructures within the operating framework approved by corporate bodies; they ensure
their application and report directly or through the Group’s Chief Risk Officer (CRO) to the corporate bodies of
BBVA. With regard to non-financial risks and reputational risk, which are entrusted tu Regulation & Internal
Control and Communications & Responsible Business respectively, the corporate units of GRM will coordinate,
with the corresponding corporate units of those areas, the development of the elements that should be
integrated into the Appetite Framework of the Group.
The risk units of the business and/or geographical areas develop and submit to the Chief Risk Officer of the
geographical and/or business areas the Risk Appetite Framework proposal applicable in each geography
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and/or business area, independently and always according to the Group's strategy/Risk Appetite Framework. In
addition, they ensure the application of corporate policies and rules with the necessary adaptations, when
applicable, to local requirements, providing the appropriate infrastructures for risk management and control
purposes, within the global risk infrastructure framework defined by the corporate areas, and reporting to the
corresponding corporate bodies and senior management, as applicable. With regard to Non-financial risks,
which are integrated in the Regulation & Internal Control area, the local risk units will coordinate, with the unit
responsible for the local management of this risk, the development of the elements that should be integrated
into the local Risk Appetite Framework.
Thus, the local risk units work with the risk units of the corporate area with the aim of adapting themselves to the risk
strategy at Group level and pooling all the information required to monitor the evolution of their risks.
As previously mentioned, the risks function has a decision-making process supported by a structure of committees, and
also a top-level committee, the GRMC, whose composition and functions are described in section “Corporate Bodies of
BBVA”.
Each geographical and/or business area has its own risk management committee(s), with objectives and contents
similar to those of the corporate area. These committees perform their duties consistently and in line with corporate risk
policies and rules, and its decisions are reflected in the corresponding minutes.
Under this organizational scheme, the risks function ensures the integration and application throughout the Group of the
risk strategy, the regulatory framework, the infrastructures and standardized risk controls. It also benefits from the
knowledge and proximity to customers in each geographical and/or business area, and conveys the corporate risk
culture to the Group's different levels. Moreover, this organization enables the risks function to conduct and report to the
corporate bodies an integrated monitoring and control of the risks of the entire Group.
Chief Risk Officers of geographical and/or business areas
The risks function is cross-cutting, i.e. it is present in all of the Group's geographical and/or business areas through
specific risk units. Each of these units is headed by a Chief Risk Officer for the geographical and/or business area who,
within the relevant scope of responsibility, carries out risk management and control functions and is responsible for
applying the corporate policies and rules approved at Group level in a consistent manner, adapting them if necessary to
local requirements and with the subsequent reporting to local corporate bodies.
The Chief Risk Officers of the geographical and/or business areas have functional reporting to the Group's Chief Risk
Officer and hierarchical reporting to the head of their geographical and/or business area. This dual reporting system
aims to ensure the independence of the local risks function from the operating functions and enable its alignment with
the Group's corporate policies and goals related to risks.
Risk Internal Control
The Group has a specific Risk Internal Control unit, within the Regulation & Internal Control area, that, among other tasks,
independently challenges and control the regulation and governance structure in terms of financial risks and its
implementation and deployment in GRM, in addition to the challenge of the development and implementation of financial
risks control and management processes. In addition, it is also responsible for validating the risk models.
For this purpose, it has 3 subunits: Risk Internal Control, Risks Technical Secretariat and Risk Internal Validation.
Risk Internal Control. It is responsible for challenging an appropriate development of the functions of GRM units,
and for reviewing that the functioning of financial risks management and control processes is appropriate and in
line with the corresponding regulation, identifying potential opportunities for improvement and contributing to
the design of the action plans to be implemented by the responsible units.
Risks Technical Secretariat. It is responsible for the definition, design and management of the principles,
policies, criteria and processes through which the regulatory risk framework is developed, processed, reported
and disclosed to the countries; and for the coordination, monitoring and assessment of its consistency and
completeness. In addition, it coordinates the definition and structure of Risks Committees, and monitors their
proper functioning, in order to ensure that all risk decisions are taken through an adequate governance and
structure, ensuring their traceability. It also provides to the CRC the technical support required in terms of
financial risks for a better performance of its functions.
Risk Internal Validation. It is responsible for validating the risks models. In this regard, it effectively challenges
the relevant models used to manage and control the risks faced by the Group, as an independent third party
from those developing or using the models in order to ensure its accuracy, robustness and stability. This review
process is not restricted to the approval process, or to the introduction of changes in the models, but it is a plan
to make a regular assessment of those models, with the subsequent issue of recommendations and actions to
mitigate identified weaknesses.
The Head of Risk Internal Control of the Group is responsible for the function and the reporting of the activities and work
plans to the Head of Regulation & Internal Control and to the CRC, with the corresponding support in the issues required.
In addition, the risk internal control function is global and transversal, it includes all types of financial risks and has
specific units in all geographical and/or business areas, with functional reporting to the Head of Risk Internal Control of
the Group.
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Risk Appetite Framework
Elements and development
The Group's Risk Appetite Framework approved by the corporate bodies determines the risks and the risk level that the
Group is willing to assume to achieve its business objectives considering the organic evolution of business. They are
expressed in terms of solvency, liquidity and funding and profitability and income recurrence, which are reviewed
periodically and in case of material changes in the business strategy of the entity or relevant corporate transactions.
The Risk Appetite Framework is expressed through the following elements:
Risk Appetite Statement: sets out the general principles of the Group's risk strategy and the target risk profile:
The BBVA Group aims to promote a multichannel and responsible universal banking business model, based on
values, committed to sustainable development and operational excellence and focused on our customers’
needs.
To achieve these goals, the BBVA risk model is oriented to maintaining a moderate risk profile, a robust financial
position and a sound risk-adjusted profitability through-the-cycle, as the best way to face adverse environments
without jeopardizing our strategic goals.
Risk Management at BBVA is based on prudent management, an integral view of all risks, a portfolio
diversification by geography, asset class and client segment and keeping a long-term relationship with the client;
thereby contributing to sustainable and profitable growth and recurrent value creation.
Statements and core metrics: based on the appetite statement, statements are established that specify the
general principles of risk management in terms of solvency, liquidity and funding and profitability and income
recurrence. Moreover, the core metrics reflect, in quantitative terms, the principles and the target risk profile set
out in the Risk Appetite statement. Each core metric has three thresholds ranging from usual management of
the businesses to higher levels of impairment:
o Management reference: reference that determines a comfortable management level for the Group.
o Maximum appetite: maximum level of risk that the Group is willing to accept in its ordinary activity.
o Maximum capacity: maximum risk level that the Group could assume which, for some metrics, is
associated with regulatory requirements.
Statements and metrics by type of risk: based on the core metrics and their thresholds for each type of risk,
statements are established that set out the general management principles for that risk and a number of
metrics are determined, whose observance enables compliance with the core metrics and the Group's Risk
Appetite statement. These metrics have a maximum risk appetite threshold.
In addition to this Framework, there is a level of management limits that is defined and managed by the areas responsible
for the management of each type of risk in the development of the structure of metrics by type of risk, in order to ensure
that the early management of risks complies with that structure and, in general, with the established Risk Appetite
Framework.
Each significant geographical area3 has its own Risk Appetite framework, consisting of its local Risk Appetite statement,
core metrics and statements, metrics and statements by type of risk, which must be consistent with those set at the
Group level, but adapted to their own reality. These are approved by the corresponding corporate bodies of each entity.
This Appetite Framework is deployed through a structure of limits consistent with the above.
The corporate risks area works with the various geographical and/or business areas to define their Risk Appetite
Framework, so that it is coordinated with, and integrated into, the Group's Risk Appetite Framework, making sure that its
profile is in line with the one defined. Moreover, and for the purposes of monitoring at local level, the Chief Risks Officer of
the geographical and/or business area regularly reports on the evolution of the metrics of the Local Appetite Framework
to the corporate bodies, as well as to the relevant top-level local committees, following a scheme similar to that of the
Group, in accordance with its own corporate governance systems.
Within the issuing process of the Risk Appetite Framework of the Risks area (GRM), Risk Internal Control carries out an
effective challenge of the Framework before being submitted to corporate bodies for analysis and, where applicable,
approval.
3 For the purposes of this model, significant is any geography representing more than 1% of the assets or operating income of the BBVA Group.
129
Monitoring of the Risk Appetite Framework and management of breaches
So that corporate bodies can develop the risk functions of the Group, the heads of risks at an executive level will regularly
report (or more frequently in the case of the CRC, within its scope of responsibility) on the evolution of the metrics of the
Risk Appetite Framework of the Group, with the sufficient granularity and detail, in order to check the degree of
compliance of the risks strategy set out in the Risk Appetite Framework of the Group approved by the Board of Directors.
If, through the monitoring of the metrics and supervision of the Risk Appetite Framework by the executive areas, a
relevant deviation or breach of the maximum appetite levels of the metrics is identified, that situation must be reported
and, where applicable, the corresponding corrective measures must be submitted to the CRC.
After the relevant review by the CRC, the deviation must be reported to the CDP –as part of its role in the monitoring of
the evolution of the risk profile of the Group– and to the Board of Directors, which will be responsible, when applicable,
for implementing the corresponding executive measures. For this purpose, the CRC will submit to the corresponding
corporate bodies all the information received and the proposals prepared by the executive areas, together with its own
analysis.
Notwithstanding the foregoing, once the information has been analyzed and the proposal of corrective measures has
been reviewed by the CRC, the CDP may adopt, on grounds of urgency and under the terms established by law,
measures corresponding the Board of Directors, but always reporting those measures to the Board of Directors in the
first meeting held after the implementation for ratification purposes.
In any case, an appropriate monitoring process will be established –with a greater information frequency and granularity,
if required– regarding the evolution of the breached or deviated metric, and the implementation of the corrective
measures, until it has been completely redressed, with the corresponding reporting to corporate bodies, in accordance
with its risks monitoring, supervision and control functions.
Integration of the Risk Appetite Framework into the management
The transfer of the Risk Appetite Framework to ordinary management is underpinned by three basic elements:
1. The existence of a consistent regulatory framework: the corporate risks area defines and proposes the
corporate policies within its scope of action, and develops the additional internal regulation required for the
development of those policies and the operating frameworks on the basis of which risk decisions must be
adopted within the Group. The approval of the corporate policies for all types of risks is a responsibility of the
corporate bodies of BBVA, while the rest of regulation is defined at an executive level according to the
framework of competences applicable at any given time. The risks units of the geographical and/or business
areas comply with this regulation and performing, where necessary, the relevant adaptation to local
requirements, in order to have a decision-making process that is appropriate at local level and aligned with the
Group's policies.
2. Risk planning, which ensures the integration into the management of the Risk Appetite Framework through a
cascade process established to set limits adjusted to the target risk profile. The risks units of the corporate area
and of the geographical and/or business areas are responsible for ensuring the alignment of this process with
the Group's Risk Appetite Framework in terms of solvency, liquidity and funding and profitability and income
recurrence.
3. A comprehensive management of risks during their life cycle, based on differentiated treatment according to
their type.
Assessment, monitoring and reporting
Assessment, monitoring and reporting is a cross-cutting function at Group level. This function ensures that the model
has a dynamic and proactive vision to enable compliance with the Risk Appetite Framework approved by the corporate
bodies, even in adverse scenarios.
This process is integrated in the activity of the risk units, both of the corporate area and in the geographical and/or
business units, together with the units specialized in non-financial risks and reputational risk within the Regulation &
Internal Control and Communications & Responsible Business areas respectively, in order to generate a comprehensive
and single view of the risk profile of the Group.
This process is developed through the following phases:
Monitoring of the identified risk factors that can compromise the performance of the Group or of the
geographical and/or business areas in relation to the defined risk thresholds.
Assessment of the impact of the materialization of the risk factors on the metrics that define the Risk Appetite
Framework based on different scenarios, including stress testing scenarios.
130
Response to unwanted situations and proposals for redressing measures to the corresponding levels, in order to
enable a dynamic management of the situation, even before it takes place.
Monitoring the Group's risk profile and the identified risk factors, through internal, competitor and market
indicators, among others, to anticipate their future development.
Reporting: complete and reliable information on the evolution of risks to corporate bodies and senior
management, with the frequency and completeness appropriate to the nature, significance and complexity of
the reported risks. The principle of transparency governs all the risk information reporting process.
Infrastructure
For the implementation of the Model, the Group has the resources required for an effective management and supervision
of risks and for achieving its goals. In this regard, the Group's risks function:
Has the appropriate human resources in terms of number, ability, knowledge and experience. The profile of
resources will evolve over time based on the specific needs of GRM and Regulation & Internal Control, always
with a high analytical and quantitative capacity as the main feature in the profile of those resources. Likewise,
the corresponding units of the geographical and/or business areas ensure they have sufficient means from the
resources, structures and tools perspective in order to achieve a risk management process aligned with the
corporate model.
Develops the appropriate methodologies and models for the measurement and management of the different
risk profiles, and the assessment of the capital required to take those risks.
Has the technological systems required to: support the risk appetite framework in its broadest definition;
calculate and measure the variables and specific data of the risk function; support risk management according
to this Model; and provide an environment for storing and using the data required for risk management
purposes and reporting to supervisory bodies.
Promotes an adequate data governance to ensure solid quality standards in the processes aligned with the
relevant internal regulation.
Within the risk functions, both the profiles and the infrastructure and data shall have a global and consistent approach.
The human resources among the countries must be equivalent, ensuring a consistent operation of the risk function
within the Group. However, they will be distinguished from those of the corporate area, as the latter will be more focused
on the conceptualization of appetite frameworks, operating frameworks, the definition of the regulatory framework and
the development of models, among other tasks.
As in the case of the human resources, technological platforms must be global, thus enabling the implementation of the
risk appetite framework and the standardized management of the risk life cycle among all countries.
The corporate area is responsible for deciding on the platforms and for defining the knowledge and roles of the human
resources. It is also responsible for defining risk data governance.
The foregoing is reported to the corporate bodies of BBVA so they can ensure that the Group has the appropriate means,
systems, structures and resources.
Risk culture
The BBVA Group promotes the development of a risk culture based on the observance and understanding of values,
attitudes, and behaviors that allow the compliance with the regulations and frameworks that contribute to an appropriate
risk management.
At BBVA the Risk Governance Model is characterized by a special involvement of social bodies, as they define the risk
culture that permeates the rest of the organization and has the following main elements:
Our Purpose which defines our reason to be and with our values and behaviors guide the performance of our
organization and the people who are part of it.
The Risk Appetite Framework which determines the risks and levels of risks that the Group is willing to assume
in order to fulfill its goals.
The Code of Conduct establishes the behavior guidelines that we must follow to adjust our behavior to the BBVA
values.
The Risk Culture at BBVA is based on these levers:
Communication: The BBVA Group promotes the dissemination of the principles and values that should govern
the conduct and risk management in a comprehensive and consistent manner. To do this, the most appropriate
channels of communication are used, to allow for the Risk culture to be integrated into the business activities at
all levels of the organization.
Training: The BBVA Group favors the understanding of the values, risk management model, and the code of
conduct in all scenarios, ensuring standards in skills and knowledge.
Motivation: The BBVA Group aims to define incentives for BBVA employees that support the risk culture at all
levels. Among these incentives, the role of the Compensation policy and incentive programs stand out, as well
as implementation of risk culture control mechanisms, including the complaint channels and the disciplinary
committees.
Monitoring: The BBVA Group pursues at the highest levels of the organization a continuous evaluation and
monitoring of the risk culture to guarantee its implementation and identification of areas for improvement.
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132
Credit risk
Positive performance of BBVA Group's risk metrics in 2019:
Credit risk increased by 1.9% in 2019. At constant exchange rates the growth was 1.7%, where the decrease in
Spain was offset by growth in the other business areas. In the fourth quarter credit risk increased 0.9% (up 2.1%
at constant exchange rates) Growth was particularly strong in Spain and Mexico; and in the United States and
Turkey, at constant exchange rates.
The balance of non-performing loans fell by 2.1% in 2019 (down 2.2 at constant exchange rates), primarily due
to the sale of non-performing loan portfolios in Spain, partially offsetting the growth in Turkey and, to a lesser
extent, in Mexico. In the fourth quarter if fell by 2.1% (down 0.7% at constant exchange rates).
The NPL ratio stood at 3.8% at the end of 2019 a decrease of 12 basis points compared to September and of 15
basis points in t the year.
Loan-loss provisions increased by 2.6% in the last twelve months (up 3.5% at constant exchange rates).
The NPL coverage ratio closed at 77%, which was an improvement of 349 basis points compared to the close
of 2018.
The cumulative cost of risk stood at 1.04% at the end of 2019, in line with the end of 2018.
NON-PERFORMING LOANS AND PROVISIONS
(MILLONS OF EUROS)
CREDIT RISK (1) (MILLIONS OF EUROS)
Credit risk
Non-performing loans
Provisions
31-12-19 (2) 30-09-19 (2)
438,177
441,964
30-06-19
434,955
16,730
12,817
17,092
12,891
16,706
12,468
31-03-19
439,152
17,297
12,814
31-12-18
433,799
17,087
12,493
NPL ratio (%)
NPL coverage ratio (%) (3)
(1) Include gross loans and advances to customers plus guarantees given.
(2) Figures without considering the classification of non-current assets held for sale (NCA&L).
(3) The NPL coverage ratio includes the valuation adjustments for credit risk during the expected residual life of those financial instruments which have been acquired (mainly
originated from the acquisition of Catalunya Banc, S.A., see Note 7 of the consolidated Financial Statements). Excluding these allowances, the NPL coverage ratio would stand at 74%
in 2019 and 70% in 2018.
74
75
75
77
73
3.8
3.9
3.9
3.8
3.9
NON-PERFORMING LOANS EVOLUTION (MILLIONS OF EUROS)
Beginning balance
Entries
Recoveries
Net variation
Write-offs
Exchange rate differences and
other
Period-end balance
Memorandum item:
Non-performing loans
Non performing guarantees
given
(1) Preliminary data.
4Q19 (1) (2)
17,092
2,484
(1,509)
975
(1,074)
(262)
16,730
15,954
777
3Q19 (2)
16,706
2,565
(1,425)
1,139
(991)
237
17,092
16,337
755
2Q19
17,297
2,458
(1,531)
927
(958)
(561)
16,706
15,999
707
1Q19
17,087
2,353
(1,409)
944
(775)
41
17,297
16,559
738
4Q18
17,693
3,019
(1,560)
1,459
(1,693)
(372)
17,087
16,348
739
(2) Figures without considering the classification of non-current assets held for sale (NCA&L).
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Market risk
For futher information, see Note 7.2 of the Consolidated Financial Statements.
Structural risks
Structural interest rate risk
The aim of managing interest-rate risk is to limit the sensitivity of the balance sheets to interest rate fluctuations. BBVA
carries out this work through an internal procedure following the guidelines established by the European Banking
Authority (EBA), which measures the sensitivity of net interest income and economic value to determine the potential
impact of a range of scenarios on the Group's different balance sheets.
The model is based on assumptions intended to realistically mimic the behavior of the balance sheet. Of particular
relevance are assumptions regarding the behavior of accounts with no explicit maturity and prepayment estimates.
These assumptions are reviewed and adapted at least once a year to take into account any changes in behavior.
BBVA maintains, at the aggregate level, a favorable position in net interest income in the event of an increase in interest
rates, as well as a moderate risk profile, in line with its target, through effective management of structural balance sheet
risk.
By area, the main features of the balance sheets are:
Spain and the United States have balance sheets characterized by a high proportion of variable-rate loans in the
loan portfolio (basically, mortgages in Spain and corporate lending in both countries) and liability composed
mainly of customer deposits. The ALCO portfolios act as hedges for the bank's balance sheet, mitigating its
sensitivity to interest rate fluctuations. The profile of both balances remained stable during 2019, with a
moderate reduction in the sensitivity of net interest income to lower interest rates in the two business areas.
In Mexico, the balance shown throughout 2019 between the balances referenced at the fixed and variable
interest rates was maintained. In terms of the assets most sensitive to interest rate fluctuations, the corporate
portfolio stands out, while consumer loans and mortgages are mostly at a fixed rate. The ALCO portfolio is used
to neutralize the longer duration of customer deposits. The sensitivity of the interest margin remained limited
and stable during 2019.
In Turkey, the interest rate risk (between the Turkish lira and US dollars) was very limited: on the asset side, the
sensitivity of loans, mostly fixed-rate but with relatively short maturities and the ALCO portfolio, including
inflation-linked bonds, is balanced by the sensitivity of deposits, which are re-priced in the short term, in
liabilities. The evolution of the currency balance sheets was positive in the year, showing a reduction in the
sensitivity of the net interest income.
In South America, the interest rate risk remained low due to the fixed/variable composition and maturities being
very similar for assets and liabilities in most countries in the region. In addition, in balance sheets with several
currencies, interest rate risk is managed for each of the currencies, showing a very low level of risk. Balance
sheet profiles in the countries that make up this business area remain stable, maintaining a bounded and near-
constant net interest income sensitivity throughout 2019.
Structural foreign exchange rate risk
Foreign exchange risk management of BBVA's long-term investments, principally stemming from its overseas
franchises, aims to preserve the Group's capital adequacy ratios and ensure the stability of its income statement.
In 2019, the Argentine peso (-36%) and the Turkish lira (-9%) depreciated against the euro, while the Mexican peso
(+6%) and the US dollar (+2%) appreciated on a year-on-year basis. BBVA has maintained its policy of actively hedging
its main investments in emerging markets, covering on average between 30% and 50% of the annual earnings and
around 70% of the excess CET1 capital ratio. Based on this policy, the sensitivity of the CET1 ratio to a depreciation of
10% against the euro of the main emerging-market currencies stood at -4 basis points for the Mexican peso and -2 basis
points for the Turkish lira. In the case of the US dollar, the sensitivity to a depreciation of 10% against the euro is
approximately +11 basis points, as a result of RWAs denominated in US dollars outside the United States. The coverage
level for the expected earnings for 2020 is currently 24% for Mexico and 20% for Turkey.
Structural equity risk
For futher information, see Note 7.3 of the Consolidated Financial Statements.
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Liquidity and funding risk
Management of liquidity and funding at BBVA aims to finance the recurring growth of the banking business at suitable
maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of
financing, always in compliance with current regulatory requirements.
Due to its subsidiary-based management model, BBVA is one of the few major European banks that follows the Multiple
Point of Entry (MPE) resolution strategy: the parent company sets the liquidity policies, but the subsidiaries are self-
sufficient and responsible for managing their own liquidity, (taking deposits or accessing the market with their own
rating), without fund transfers or financing occurring between either the parent company and the subsidiaries, or
between the different subsidiaries. This strategy limits the spread of a liquidity crisis among the Group's different areas,
and ensures that the cost of liquidity and financing is correctly reflected in the price formation process.
The financial soundness of the BBVA Group's banking companies continues to be based on the funding of lending
activity, fundamentally through the use of stable customer funds. During 2019, liquidity conditions remained strong
across all countries in which the BBVA Group operates:
In the eurozone, the liquidity situation remains strong, with a slight increase in the credit gap over the course of
the year. In December, BBVA participated in the second liquidity auction of the European Central Bank's long-
term loan program, TLTRO III, due to its favorable conditions in terms of cost and term. In this respect, the
corresponding part of the TLTRO II program was amortized.
In the United States, the liquidity situation is sound. In 2019, there was a decrease in the credit gap, primarily
due to the increase in deposits, as a result of deposit-taking campaigns and a slowdown in lending activity. It
should be noted that the very short term tensions that occurred in the United States repo market during the
second half of the year, which forced the Federal Reserve to act by providing liquidity, had no impact on BBVA
USA due to its low dependence on this type of transaction and the maintenance of an adequate liquidity buffer.
In Mexico, the liquidity situation remains strong, despite a slight increase in the credit gap during the year due to
a higher growth in credit investment compared to deposits. The liquidity situation reflects the measures that
management carried out during the year to increase deposits, especially in foreign currency, under the pressure
of strong competition.
In Turkey, a good liquidity situation is maintained, despite the wholesale financing maturities recorded during
the year, with an adequate buffer in the event of a possible liquidity stress scenario. The credit gap improved
during the year on both balance sheets, due to the reduction of loans versus the growth of foreign currency
deposits, while in local currency, there is a higher growth of deposits compared to loan growth.
In South America, the liquidity situation remains strong throughout the region. In Argentina, the high volatility
generated in the markets during the mid-year electoral process, resulted in an outflow of US dollar deposits in
the banking system. The rate of outflows, however, had been substantially contained by the end of the year, and
even experienced slight inflows. In this context, BBVA Argentina successfully dealt with this situation, relying on
the solid liquidity position it maintained, as shown by the adequate liquidity ratios.
The BBVA Group's liquidity coverage ratio (LCR) remained well above 100% throughout 2019 and stood at 129% as of
December 31, 2019. It comfortably exceeded 100% in all subsidiaries (eurozone 147%, Mexico 147%, the United States
145% and Turkey 206%). For the calculation of this ratio, it is assumed that there is no transfer of liquidity among
subsidiaries; i.e. no kind of excess liquidity levels in foreign subsidiaries are considered in the calculation of the
consolidated ratio. When considering these excess liquidity levels, the BBVA Group's LCR would stand at 158% (29
percentage points above 129%).
The Net Stable Funding Ratio (NSFR), defined as the ratio between the amount of stable funding available and the
amount of stable funding required, is one of the Basel Committee's essential reforms, and requires banks to maintain a
stable funding profile in relation to the composition of their assets and off-balance-sheet activities. This ratio should be at
least 100% at all times. At the BBVA Group, the NSFR, calculated according to the Basel requirements, remained above
100% throughout 2019 and stood at 120% as of December 31, 2019. It comfortably exceeded 100% in all subsidiaries
(eurozone 113%, Mexico 130%, the United States 116% and Turkey 151%).
The wholesale financing markets in which the Group operates remained stable.
The main transactions carried out by companies that form part of the BBVA Group during 2019 were:
BBVA, S.A. issued three senior non-preferred debt instruments. The first was a €1,000m, five year term bond
with a fixed annual coupon of 1.125%, d; the second, in the form of a green bond (second after the inaugural
bond issued in May 2018), also amounted to €1,000m, with an annual coupon of 1% and a seven-year term; and
the third one was issued in September for €1,000m over a five-year period with a coupon of 0.375%, being the
lowest coupon achieved by a senior non-preferential debt issue in Spain and the lowest paid by BBVA for senior
debt (preferred and non-preferred). In November, BBVA issued a €1,000m seven-year preferred senior debt
instrument with a 0.375% coupon.
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In addition, in January 2020, BBVA, S.A. issued a €1,250m seven-year senior non-preferred debt ars with a
coupon of 0.5%; the lowest achieved by a Spanish issuer of this product with this maturity.
In regards to capital issuances, BBVA, S.A. conducted three public capital issuances: the issuance of preferred
securities that may be converted into ordinary BBVA shares (CoCos), registered with the Spanish Securities
Market Commission (CNMV) for €1,000m, with an annual coupon of 6.0% and an amortization option as of the
fifth year; another issuance of CoCos, registered with the SEC, for USD 1,000m and a coupon of 6.5% with an
amortization option after five and a half years; and a Tier 2 subordinated debt issuance of €750m, with a
maturity period of ten years and an amortization option in the fifth year and a coupon of 2.575%.
In January 2020, BBVA, S.A. issued €1,000m of Tier 2 subordinated debt over a ten-year period, with an option
of early amortization in the fifth year, and a coupon of 1%.
In addition, during 2019 the early amortization option of the CoCos issuance in the amount of €1,500m with a
coupon of 7% and issued in February 2014, was executed, and in February 2020, the amortization of the
€1,500m CoCos issued in February 2015 with a coupon of 6.75%, was announced; a Tier 2 subordinated debt
issuance for €1,500m with a coupon of 3.5% and issued in April 2014, was also amortized. In June 2019, BBVA,
S.A., as the universal successor to Unnim Banc, S.A.U., exercised the early amortization of the issuance of
subordinated bonds, originally issued by Caixa d'Estalvis de Sabadell, for an outstanding nominal amount of
€4,878,000.
In the United States, BBVA USA, during the third quarter of the year, issued USD 600m senior bond with a five-
year maturity and 2.5% coupon. The purpose of this issuance was to renew a maturity of the same amount.
In Mexico, a €471m senior debt instrument was issued in the second quarter of the year in the local market in
two tranches: €236m three year maturity at a rate of TIIE +28 basis points and a €236m 8 years maturity
referenced to Mbono +80 basis points, obtaining the lowest funding cost in the history of the local market in
both maturities. In the third quarter, a Tier 2 issuance was executed in the amount of USD 750m, with a maturity
of 15 years, with an early amortization option in the tenth year and a coupon of 5.875%. The funds obtained were
used to carry out a partial repurchase of two subordinated issuances that were no longer being calculated in
capital (USD 250m with maturity in 2020 and USD 500m with maturity in 2021).
In Turkey, Garanti BBVA, in the first quarter of the year, issued a Diversified Payment Rights (DPR)
securitization for USD 150m with a five year maturity. It also renewed syndicated loans for USD 784m in the first
half of the year and USD 800m in the second half of the year. Garanti obtained financing for an amount of USD
322m through a bilateral loan and issued a USD 50m green bond in December. Additional bilateral funds for
USD 110m were also signed in December 2019.
In South America, during 2019, BBVA Peru issued an equivalent amount of €116m, of which, €66m were issued
during the last quarter of the year. While BBVA Argentina issued marketable bonds on the local market for
approximately €53m (€29m in the last quarter of the year, after the change of government). In Chile, Forum
issued a bond on the local market for an amount equivalent to €107m in the first half of 2019.
Operational Risk
BBVA defines operational risk (“OR”) as any risk that could result in losses caused by human error; inadequate or flawed
internal processes; undue conduct with respect to customers, markets or the institution; failures, interruptions or flaws in
systems or communications; inadequate data management; legal risk; and finally, as a result of external events, including
cyberattacks, third-party fraud, disasters and defective service provided by suppliers.
Operational risk management is oriented towards the identification of the root causes to avoid their occurrence and
mitigate possible consequences. This is carried out through the establishment of mitigation plans and control
frameworks aimed at minimizing resulting losses and their impact on the recurrent generation of income and the profit of
the Group. Operational risk management is integrated into the global risk management structure of the BBVA Group.
This section addresses general aspects of operational risk management as the main component of non-financial risks.
However, sections devoted to conduct and compliance risk and to cybersecurity risk management are also included in
the non-financial information report.
Operational Risk Management Principles
The BBVA Group is committed to preferably applying advanced operational risk management models, regardless of the
capital calculation regulatory model applicable at the time. Operational risk management at the BBVA Group shall:
Be aligned with the Risk Appetite Framework ratified by the BBVA Board of Directors.
Address BBVA's management needs in terms of compliance with legislation, regulations and industry
standards, as well as the decisions or positioning of BBVA's corporate bodies.
Anticipate the potential operational risk to which the Group may be exposed as a result of the creation or
modification of products, activities, processes or systems, as well as decisions regarding the outsourcing or
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hiring of services, and establish mechanisms to assess and mitigate risk to a reasonable extent prior to
implementation, as well as review the same on a regular basis.
Establish methodologies and procedures to enable regular reassessment of the significant operational risk to
which the Group is exposed, in order to adopt appropriate mitigation measures in each case, once the identified
risk and the cost of mitigation (cost/benefit analysis) have been considered, while safeguarding the Group's
solvency at all times.
Promote the implementation of mechanisms that support careful monitoring of all sources of operational risk
and the effectiveness of mitigation and control environments, fostering proactive risk management.
Examine the causes of any operational events suffered by the Group and establish means to prevent the same,
provided that the cost/benefit analysis so recommends. To this end, procedures must be in place to evaluate
operational events and mechanisms and to record the operational losses that may be caused by the same.
Evaluate key public events that have generated operational risk losses at other institutions in the financial sector
and support, where appropriate, the implementation of measures as required to prevent them from occurring at
the Group.
Identify, analyze and attempt to quantify events with a low probability of occurrence and a high impact, which by
their exceptional nature may not be included in the loss database; or if they are, feature with impacts that are
not very representative for the purpose of valuing possible mitigation measures.
Have an effective system of governance in place, where the functions and responsibilities of the corporate areas
and bodies involved in operational risk management are clearly defined.
Operational risk management must be performed in coordination with management of other risk, taking into
consideration credit or market events that may have an operational origin.
Operational risk control and management model
The operational risk management cycle at BBVA is similar to the one implemented for the rest of risks. Its elements are:
Operational risk management parameters
Operational risk forms part of the risk appetite framework of the Group and includes three types of metrics and limits:
Economic capital calculated with the operational losses database of the Group and the industry, considering the
corresponding diversification effects and the additional estimation of potential and emerging risks through
stress scenarios designed for the main types of risks. The economic capital is regularly calculated for the main
banks of the Group and simulation capabilities are available to anticipate the impact of changes on the risk
profile or new potential events.
ORI metrics (Operational Risk Indicator: operational risk losses vs. gross income) broken down by geography,
business area and type of risk.
Additionally, a more granular common scheme of metrics (indicators and limits) covering the main types of
operational risk is being implemented throughout the Group. These metrics will make it possible to intensify the
anticipatory management of risk and objectify the appetite to different sources.
Operational risk admission
The main purposes of the operational risk admission phase are the following:
To anticipate potential operational risk to which the Group may be exposed due to the release of new, or
modification of existing, products, activities, processes or systems, as well as purchasing decisions (e.g.
outsourcing).
To ensure that implementation is only performed once appropriate mitigation measures have been taken in
each case, including risk assurance where deemed appropriate.
The Corporate Non-Financial Risk Management Policy sets out the specific operational risk admission framework
through different committees, at a corporate and Business Area level, that follow a delegation structure based on the risk
level of proposed initiatives.
137
Operational risk monitoring
The purpose of this phase is to check that the target operational risk profile of the Group is within the authorized limits.
Operational risk monitoring considers 2 scopes:
Monitoring the operational risk admission process, oriented towards checking that accepted risks levels are
within the limits and that defined controls are effective.
Monitoring the operational risk "stock" associated with processes. This is done by carrying out a periodic re-
evaluation in order to generate and maintain an updated map of the relevant operational risks in each Area, and
evaluate the adequacy of the monitoring and mitigation environment for said risks. This promotes the
implementation of action plans to redirect the weaknesses detected.
This process is supported by a corporate Governance, Risk & Compliance tool that monitors OR at a local level and its
aggregation at a corporate level.
In addition, and in line with the best practices and recommendations provided by the BIS, BBVA has procedures to
collect the operational losses occurred in the different entities of the Group and in other financial groups, with the
appropriate level of detail to carry out an effective analysis that provides useful information for management purposes
and to contrast the consistency of the Group's operational risk map. To that end, a corporate tool of the Group is used.
The Group ensures continuous monitoring by each Area of the due functioning and effectiveness of the control
environment, taking into consideration management indicators established for the Area, any events and losses that have
occurred, as well as the results of actions taken by the second line of defense, the internal audit unit, supervisors or
external auditors.
Operational risk mitigation
Several cross-sectional plans are being promoted in recent years for the entire BBVA Group to encourage a forward-
looking management of operational risks. To that end, focuses have been identified from events, self-assessments and
recommendations from auditors and supervisors in different geographies, both in the Group and the industry, thereby
analyzing the best practices and fostering comprehensive action plans to strengthen and standardize the control
environment.
One of the core plans is outsourcing management, which is an increasingly important subject in the Group, the industry
and the regulatory environment. Some of the different initiatives launched under this scheme are summarized below:
Strengthening the admission process of these initiatives and their control and monitoring frameworks.
New internal regulation comprising the best practices of the industry.
Integration in the 3 lines of defense control model: roles and responsibilities in each phase of its life cycle.
Risk management of the service and the supplier.
Review of its governance process, which is included in operational risk governance, and escalation criteria.
Adaptation of the model and the management tool to the new requirements, including those coming from the
new EBA guidelines, in force since September 30, 2019.
This plan will still be in place throughout 2020 with a focus on aligning our stock of arrangements with the new standards
introduced by the EBA guidelines.
Insurance of Operational Risk
Insurance is one of the possible options for managing the operational risk to which the Group is exposed, and mainly has
two potential purposes:
Coverage of extreme situations linked to recurrent events that are difficult to mitigate or can only be partially
mitigated by other means.
Coverage of nonrecurrent events that could have significant financial impact, if they occurred.
The Group has a general framework that regulates this area, and allows systematizing risk assurance decisions, aligning
insurance coverage with the risks to which the Group is exposed and reinforcing governance in the decision-making
process of arranging insurance policies.
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Operational Risk Control Model
BBVA Group's operational risk governance model is based on two components:
● Three-line defense control model, in line with industry best practices, and which guarantees compliance with the
most advanced operational risk internal control standards.
● Scheme of Corporate Assurance Committees and Internal Control and Operational Risk Committees at the level
of the different business and support areas.
Corporate Assurance establishes a structure of committees, both local and corporate, to provide senior management
with a comprehensive and homogeneous vision of these significant situations. The aim is to support rapid decision-
making with foresight, for the mitigation or assumption of the main risks.
Each geography has a Corporate Assurance Committee chaired by the Country Manager and whose main functions are:
Monitoring the changes in the non-financial risks and their alignment with the defined strategies and policies and
the risk appetite.
Analyzing and assessing controls and measures established to mitigate the impact of the risks identified, should
they materialize.
Making decisions about the proposals for risk taking that are conveyed by the working groups or that arise in the
Committee itself
Promoting transparency by promoting the proactive participation of the three lines of defense in discharging
their responsibilities and the rest of the organization in this area
At the holding company level there is a Global Corporate Assurance Committee, chaired by the Group's Chief Executive
Officer. Its main functions are similar to those already described but applicable to the most important issues that are
escalated from the geographies and the holding company areas.
The business and support areas have an Internal Control and Operational Risk Committee, the purpose of which is to
ensure the due implementation of the operational risk management model within its scope of action and drive active
management of such risk, taking mitigation decisions when control weaknesses are identified and monitoring the same.
Additionally, the Non-Financial Risk unit periodically reports the status of the management of non-financial risks in the
Group to the Board's Risk and Compliance Committee.
Risk factors
As mentioned earlier, BBVA has processes in place for identifying risks and analyzing scenarios that enable the Group to
manage risks in a dynamic and proactive way.
The risk identification processes are forward looking to ensure the identification of emerging risks and take into account
the concerns of both the business areas, which are close to the reality of the different geographical areas, and the
corporate areas and senior management.
Risks are captured and measured consistently using the methodologies deemed appropriate in each case. Their
measurement includes the design and application of scenario analyses and stress testing and considers the controls to
which the risks are subjected.
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As part of this process, a forward projection of the risk appetite framework variables in stress scenarios is conducted in
order to identify possible deviations from the established thresholds. If any such deviations are detected, appropriate
measures are taken to keep the variables within the target risk profile.
To this extent, there are a number of emerging risks that could affect the Group´s business trends. These risks are
described in the following main sections:
Macroeconomic and geopolitical risks
Global growth decelerated in 2019 to growth rates slightly below 3% in annual terms in the second half of the year, below
the 3.6% of 2018. Increased trade protectionism and geopolitical risks had a negative impact on economic activity,
mainly on exports and investment, additionally to the structural slowdown in the Chinese economy and the cyclical
moderation of the US and Eurozone economies. However, the counter-cyclical policies announced in 2019, led by central
banks, along with the recent reduction in trade tensions between the United States and China and the disappearance of
the risk of a disorderly Brexit in the short term, are leading to some stabilization of global growth, based on the relatively
strong performance of private consumption supported by the relative strength of labor markets and low inflation. Thus,
global growth forecasts stand around 3.2% for both 2019 and 2020.
In terms of monetary policy, the major central banks took more loosening measures last year. In the United States, the
Federal Reserve reduced interest rates between July and October by 75 basis points to 1.75%. In the Eurozone, the
European Central Bank (ECB) announced in September a package of monetary measures to support the economy and
the financial system, including: (i) a deposit facility interest rate reduction of ten basis points, leaving them at -0.50%, (ii)
the adoption of a phased interest rate system for the previously mentioned deposit facility, (iii) a new debt purchase
program of €20 billion per month, and (iv) an improvement in financing conditions for banks in the ECB's liquidity
auctions. The latest signs of growth stabilization contributed to the decision of both monetary authorities to keep interest
rates unchanged in recent months, although additional stimulus measures are not ruled out in the event of a further
deterioration of the economic environment. In China, in addition to fiscal stimulus decisions and exchange rate
depreciation, a cut in reserve requirements for banks was recently announced and base rates have been reduced.
Accordingly, interest rates will remain low in major economies, enabling emerging countries to gain room for maneuver.
Regulatory and reputational risks
Financial institutions are exposed to a complex and ever-changing regulatory environment defined by governments and
regulators. This can affect their ability to grow and the capacity of certain businesses to develop, and result in stricter
liquidity and capital requirements with lower profitability ratios. The Group constantly monitors changes in the regulatory
framework that allow for anticipation and adaptation to them in a timely manner, adopt industry practices and more
efficient and rigorous criteria in its implementation.
The financial sector is under ever closer scrutiny by regulators, governments and society itself. In the course of activities,
situations which might cause relevant reputational damage to the entity could raise and might affect the regular course
of business. The attitudes and behaviors of the Group and its members are governed by the principles of integrity,
honesty, long-term vision and industry practices through, inter alia, internal control Model, the Code of Conduct, tax
strategy and Responsible Business Strategy of the Group.
For more information regarding the model of work risk prevention, the compliance system, the management of the tax
risk as well as social and environmental risks, see sections “ Work environment“, “Ethical behavior“, “Fiscal
transparency“ “Sustainable Finance”, respectively, within the Non-financial statement.
IBOR reform
Regarding the regulatory risks, the global interest rates benchmark reform is a key area of focus for BBVA. Interbank
interest rates (IBORs) are key references that underpin many contracts within the financial sector worldwide. Following
the 2014 recommendations from the Financial Stability Board (FSB), authorities in various countries are promoting
initiatives that enable the financial system to reduce its reliance on IBORs and make a transition to risk-free alternative
interest rates (RFR) by the end of 2021. These RFRs have been designed to overcome the difficulties related to the IBOR
rates, in particular to minimize reliance on expert judgment and ensure greater transparency and understanding during
its definition process. Transitions could occur from the rate that was historically used as a reference to the new RFR (e.g.
the transition from EONIA to €STR in Europe, or the transition from the LIBOR dollar to SOFR in the United States) or by
evolving the existing index methodology, in both cases overnight (e.g. SONIA for the GBP market) or term (e.g.
EURIBOR).
The BBVA Group has a significant number of financial assets and liabilities whose contracts refer to IBOR rates. EURIBOR
is identified as the most relevant reference rate in the Group, and is used, among others, for loans, deposits and debt
issues as well as underlying in derivative instruments. In the case of EONIA, it has a minor presence in the banking book
but it is used as the underlying rate in derivative instruments in the trading book and for the treatment of collaterals,
140
mainly in Spain. In the case of LIBORs, the USD is the most relevant currency for both loans and debt instruments for the
banking book and trading book. Other LIBOR currencies (CHF, GBP and JPY) have a minor presence.
The IBOR transition has been identified as a complex initiative, affecting BBVA in different geographical areas and
business lines, as well as in a multitude of products, systems and processes. For this reason, BBVA has established a
transition project with a robust governance structure. The Executive Steering Committee is represented by the senior
management of the affected areas and reports directly to the Group’s Global Leadership Team. At local level, each
geographical area has established a local governance structure with the participation of the senior management.
Coordination between geographical areas is ensured through the Project Management Office (PMO) and the Global
Working Groups that have a multi-geographic and cross-sectional vision of the Legal, Risk, Regulatory, Finance and
Accounting, Engineering and Communication areas. The project has also been raised in the Corporate Assurance
committees of the geographical areas and businesses as well as in the Group’s Global Corporate Assurance committee.
The project considers the different approaches and timings for transition to the new RFRs when assessing the economic,
operational, legal, financial, reputational and compliance risks associated with the transition, as well as defining the lines
of action to mitigate them. One important aspect is the impact on financial instruments contracts that refer to the IBOR
rates and that expire after 2021. In the case of the EONIA, BBVA will take measures to novate contracts that expire after
2021. The Group already has new clauses that include the €STR as a substitute index as well as clauses that include the
€STR as the main index in new contracts. In the derivatives area (the main use of the EONIA) the actions are leveraged in
the work of ISDA. In the case of LIBOR, uncertainty regarding its future requires identifying the contracts that expire after
2022 in order to prepare for potential contractual novations. At the same time, the clauses that industry associations
suggest as alternatives or substitutes for LIBOR are being analyzed so that they can be included in the contracts. With
regard to the EURIBOR, the European authorities have supported the index’s continuation and the evolution of its
methodology so that it complies with the European Benchmarks Regulation. The authorities have also said that the new
methodology continues to measure the same economic reality. BBVA is actively involved in various working groups such
as the EURO RFR WG, which actively works to define fallback provisions in contracts, amongst other things.
BBVA will make every reasonable effort to treat its customers in a fair and transparent manner and to safeguard their
interests during the transition to the new benchmarks. BBVA also remains committed to market participants, authorities
and our customers to back an orderly transition and mitigate the risks that result from it.
Business, operational and legal risks
New technologies and forms of customer relationships: Developments in the digital world and in information
(new competitors,
technologies pose significant challenges
disintermediation…) but also opportunities (new framework of relations with customers, greater ability to adapt to their
needs, new products and distribution channels...). Digital transformation is a priority for the Group as it aims to lead
digital banking of the future as one of its objectives.
institutions, entailing
financial
threats
for
Technological risks and security breaches: The Group is exposed to new threats such as cyberattacks, theft of internal
and customer databases, fraud in payment systems, etc. that require major investments in security from both the
technological and human point of view. The Group gives great importance to the active operational and technological risk
management and control.
For more information regarding the customer protection, see section “Customer care” within the Non-financial
information report.
The financial sector is exposed to increasing litigation, so the financial institutions face a large number of proceedings of
every kind, civil, criminal, administrative, litigation, as well as investigations from the supervisor or other governmental
authorities, along several jurisdictions, which consequences are difficult to determine (including those procedures in
which an undetermined number of applicants is involved, in which damages claimed are not easy to estimate, in which an
exorbitant amount is claimed, in which new jurisdictional issues are introduced under creative non – contrasted legal
arguments and those which are at a very initial stage).
In Spain, in many of the existing procedures, applicants’ claim, both at Spanish courts and through preliminary rulings
towards the European Union Court of Justice that various clauses usually included under a mortgage loan with credit
institutions are stated abusive (including mortgage fees clauses, early redemption right clause, referenced interest rate
type and opening fee). In particular, with regards to consumer mortgage loan agreements linked to the mortgage loan
reference index (Índice de Referencia de los Préstamos Hipotecarios — mortgage loan reference index) (IRPH), which is
the average interest rate calculated by the Bank of Spain and published in the Official Spanish Gazette (Boletín Oficial del
Estado) for mortgage loans of more than three years for freehold housing purchases granted by Spanish credit
institutions and which is considered the “official interest rate” by mortgage transparency regulations, on 14th December,
2017 the Spanish Supreme Court, in its Ruling No 669/2017 (the Ruling), held that it was not possible to determine that a
loan's interest rate was not transparent simply due to it making reference to one official rate or another, nor can its terms
then be confirmed as unfair under the provisions of Directive 93/13/EEC of 5th April, 1993. As of the date of this Annual
141
Report, a preliminary ruling is pending in which the Ruling is being challenged before the Court of Justice of the European
Union. BBVA considers that the Ruling is clear and well founded.
On September 10, 2019, the Advocate General of the Court of Justice of the European Union issued a report on this
matter.
In that report, the Advocate General of the Court of Justice of the European Union concluded that the bank to which the
preliminary ruling relates (Bankia, S.A.) complied with the requirement of transparency imposed by the applicable
European regulation. The Advocate General also indicated that it is for the national courts to carry out the checks they
consider necessary in order to analyze compliance with the applicable transparency obligations in each individual case.
The Advocate General's report does not bind the decision which the Court of Justice of the European Union may take
finally on this matter in the future.
It is therefore necessary to await the Court of Justice of the European Union’s ruling on the matter referred in the
preliminary ruling in order to determine whether it may have any effect on BBVA.
The impact of any potential unfavorable ruling by the Court of Justice of the European Union is difficult to predict at this
time, but could be material. The impact of such a resolution may vary depending on matters such as (i) the decision of
the Court of Justice of the European Union on what interest rate should be applied to the applicable loans; and (ii)
whether the effects of the judgment are applied retroactively. According to the latest available information, the amount of
mortgage loans to individuals linked to IRPH and up to date with the payment is approximately €2,800m.
In addition, there are also claims before the Spanish courts challenging the application of certain interest rates and other
mandatory rules to certain revolving credit card agreements. The resolutions in this type of proceedings against the
Group or other banking entities may directly or indirectly affect the Group.
The Group is involved in several competition investigations and other legal actions related to competition initiated by
third parties in various countries which may give raise to penalties and claims by third parties.
As mentioned in the section “Other non-financial risks” of the Non-financial information report of this Management
report, Central Investigating Court No. 6 of the National High Court is investigating the activities of Centro Exclusivo de
Negocios y Transacciones, S.L. (Cenyt) in the Preliminary Proceeding No. 96/2017. Piece No. 9 of this proceeding
includes the provision of services to the Bank. It is not possible at this time to predict the scope or duration of such
proceeding or any related proceeding or its or their possible outcomes or implications for the Group, including any fines,
damages or harm to the Group’s reputation caused thereby.
The Group regularly promotes internal investigations into possible violations of its code of conduct or applicable
regulations, including corruption and sanctions, and such investigations could be time-consuming and costly. In addition,
the Group constantly manages and monitors investigations, proceedings and legal or regulatory actions brought by third
parties, making provisions for their coverage where necessary (based on the number of disputes and the status of the
proceedings or actions). However, the outcome of investigations, legal or regulatory proceedings or actions, to which the
Bank is already a party, as well as those which may arise in the future or to which other credit entities are a party, is
difficult to predict and, accordingly, in the event of changes in legal criteria or adverse outcomes of some of these, the
provisions recorded may be insufficient and may have a material adverse effect on the Group's business, financial
position and result of operations.
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Subsequent events
On January 31, 2020 it was announced that it was foreseen to submit to the consideration of the corresponding
government bodies the proposal of cash payment in a gross amount of €0.16 per share to be paid in April 2020 as final
dividend for 2019 (see Note 4 of the accompanying Consolidated Financial Statements).
From January 1, 2020 to the date of preparation of these consolidated financial statements, no other subsequent events
not mentioned above in these financial statements have taken place that could significantly affect the Group’s earnings
or its equity position.
143
Alternative Performance Measures (APMs)
BBVA presents its results in accordance with the International Financial Reporting Standards (EU-IFRS). However, it also
considers that some Alternative Performance Measures (APMs) provide useful additional financial information that
should be taken into account when evaluating performance. These APMs are also used when making financial,
operational and planning decisions within the Entity. The Group firmly believes that they give a true and fair view of its
financial information. These APMs are generally used in the financial sector as indicators for monitoring the assets,
liabilities and economic and financial situation of entities.
BBVA Group's APMs are given below. They are presented in accordance with the European Securities and Markets
Authority (ESMA) guidelines, published on October 5, 2015 (ESMA/2015/1415en). These guidelines are aimed at
promoting the usefulness and transparency of APMs included in prospectuses or regulated information in order to
protect investors in the European Union. In accordance with the indications given in the guidelines, BBVA Group's APMs:
Include clear and readable definitions of the APMs (paragraphs 21-25).
Disclose the reconciliations to the most directly reconcilable line item, subtotal or total presented in the financial
statements of the corresponding period, separately identifying and explaining the material reconciling items
(paragraphs 26-32).
Are standard measures generally used in the financial industry, so their use provides comparability in the
analysis of performance between issuers (paragraphs 33-34).
Do not have greater preponderance than measures directly stemming from financial statements (paragraphs
35-36).
Are accompanied by comparatives for previous periods (paragraphs 37-40).
Are consistent over time (paragraphs 41-44).
Constant exchange rates
When comparing two dates or periods in this management report, the impact of changes in the exchange rates against
the euro of the currencies of the countries in which BBVA operates is sometimes excluded, assuming that exchange
rates remain constant. This is done for the amounts in the income statement by using the average exchange rate against
the euro in the most recent period for each currency of the countries where the Group operates, and applying it to both
periods; for amounts in the balance sheet and activity, the closing exchange rates in the most recent period are used.
Adjusted profit/(loss) for the year
Explanation of the formula: The adjusted profit/(loss) for the year is the profit/(loss) for the year from the Group’s
consolidated income statement, excluding those extraordinary items that, from a management point of view are defined
at any given moment.
Relevance of its use: This measure is commonly used, not only in the banking sector, for homogeneous comparison
purposes.
Adjusted profit/(loss) for the year
Millions of euros
+ Profit/(loss) for the year
- Goodwill impairment in the United States
- Profit of BBVA Chile
- Net capital gains from the sale of BBVA Chile
- Telefónica impairment
2019
4,345
(1,318)
2018
6,227
93
633
= Adjusted profit/(loss) for the year
5,663
5,501
Adjusted net attributable profit
2017
4,757
(1,123)
5,880
Explanation of the formula: The adjusted net attributable profit is the net attributable profit from the Group’s
consolidated income statement, excluding those extraordinary items that, from a management point of view are defined
at any given moment.
Relevance of its use: This measure is commonly used, not only in the banking sector, for comparison purposes.
Adjusted net attributable profit
Millions of euros
+ Net attributable profit
- Goodwill impairment in the United States
- Net attributable profit of BBVA Chile
- Net capital gains from the sale of BBVA Chile
- Telefónica impairment
2019
3,512
(1,318)
2018
5,400
64
633
= Adjusted net attributable profit
4,830
4,703
Book value per share
144
2017
3,514
(1,123)
4,637
The book value per share determines the value of a company on its books for each share held. It is calculated as follows:
Shareholders′ funds (cid:3397) Accumulated other comprehensive income
Number of shares outstanding (cid:3398) Treasury shares
Explanation of the formula: The figures for both ‘’shareholders' funds’’ and ‘’accumulated other comprehensive
income’’ are taken from the balance sheet. Shareholders' funds are adjusted to take into account the execution of the
"dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the publication of the
Group´s results. The denominator includes the final number of outstanding shares excluding own shares (treasury
shares). The denominator is also adjusted to include the capital increase resulting from the execution of the "dividend
options" explained above. Both the numerator and the denominator take into account period-end balances.
Relevance of its use: It shows the company's book value for each share issued. It is a generally used ratio, not only in the
banking sector but also in others.
Book value per share
Numerator
(millions of euros)
Denominator
(million euros)
+ Shareholders' funds
+ Dividend-option adjustment
+
Accumulated other comprehensive
income
+ Number of shares outstanding
+ Dividend-option
- Treasury shares
=
Book value per share
(euros / share)
Tangible book value per share
IFRS 9
IAS 39
31-12-19
55,958
-
31-12-18
54,326
-
31-12-17
53,283
-
(7,235)
(7,215)
(6,939)
6,668
-
13
7.32
6,668
-
47
7.12
6,668
-
13
6.96
The tangible book value per share determines the value of the company on its books for each share held by shareholders
in the event of liquidation. It is calculated as follows:
Shareholders′ funds (cid:3397) Accumulated other comprehensive income (cid:3398) Intangible assets
Number of shares outstanding (cid:3398) Treasury shares
Explanation of the formula: The figures for ‘’shareholders' funds’’, ‘’accumulated other comprehensive income’’ and
‘’intangible assets’’ are all taken from the balance sheet. Shareholders' funds are adjusted to take into account the
execution of the "dividend-option" at the closing dates on which it was agreed to deliver this type of dividend prior to the
publication of the Group´s results. The denominator includes the final number of shares outstanding excluding own
shares (treasury shares). The denominator is also adjusted to include the result of the capital increase resulting from the
execution of the "dividend options" explained above. Both the numerator and the denominator take into account period-
end balances.
Relevance of its use: It shows the company's book value for each share issued, after deducting intangible assets. It is a
generally used ratio, not only in the banking sector but also in others.
145
Tangible book value per share
Numerator
(millions of euros)
Denominator
(millions of euros)
+ Shareholders' funds
+ Dividend-option adjustment
+
Accumulated other comprehensive
income
-
Intangible assets
+ Number of shares outstanding
+ Dividend-option
- Treasury shares
=
Tangible book value per share
(euros / share)
Dividend yield
IFRS 9
IAS 39
31-12-19
55,958
-
31-12-18
54,326
-
(7,235)
(7,215)
6,966
6,668
-
13
6.27
8,314
6,668
-
47
5.86
31-12-17
53,283
-
(6,939)
8,464
6,668
-
13
5.69
This is the remuneration given to the shareholders in the last twelve calendar months, divided by the closing price for the
period. It is calculated as follows:
∑ Dividend per share over the last twelve months
Closing price
Explanation of the formula: The remuneration per share takes into account the gross amounts per share paid out over
the last twelve months, both in cash and through the flexible remuneration system called "dividend option".
Relevance of its use: This ratio is generally used by analysts, shareholders and investors for companies that are traded
on the stock market. It compares the dividend paid out by a company every year with its market price at a specific date.
Dividend yield
Numerator (euros)
∑ Dividends
Denominator (euros)
Closing price
= Dividend yield
Adjusted earning per share
31-12-19
31-12-18
31-12-17
0.26
4.98
5.2%
0.25
4.64
5.4%
0.30
7.11
4.2%
The adjusted earning per share takes the earning per share calculated in accordance to the criteria stablished in the IAS
33 “Earnings Per Share” and takes into account the same adjustments made in the net attributable profit to calculate the
adjusted net attributable profit, previously defined in this alternative performance measures.
Non-performing loan (NPL) ratio
This is the ratio between the risks classified for accounting purposes as non-performing loans and the total credit risk
balance for customers and contingent risks. It is calculated as follows:
Non (cid:3398) performing loans
Total credit risk
Explanation of the formula: ‘’Non-performing loans’’ include those related to loans and advances to customers (gross)
and those related to contingent risk, excluding the non-performing loans of credit institutions and securities. ‘’Total credit
risk’’ includes both pending and contingent risk. Their calculation is based on the headings in the first table of ”Credit
risk” within the “Risk management” section of this report.
146
Relevance of its use: This is one of the main indicators used in the banking sector to monitor the current situation and
changes in credit risk quality, and specifically the relationship between risks classified in the accounts as non-performing
loans and the total balance of credit risk, with respect to customers and contingent liabilities.
Non-Performing Loans (NPLs) ratio
Numerator
(millions of euros)
Denominator
(millions of euros)
NPLs
Credit Risk
31-12-19
31-12-18
31-12-17
16,730
17,087
20,492
441,964
433,799
450,045
= Non-Performing Loans (NPLs) ratio
3.8%
3.9%
4.6%
NPL coverage ratio
This ratio reflects the degree to which the impairment of non-performing loans has been covered in the accounts via
loan-loss provisions. It is calculated as follows:
Provisions
Non (cid:3398) performing loans
Explanation of the formula: ‘’Non-performing loans’’ include those related to lending activity and those related to
contingent risk, excluding non-performing loans from credit institutions and securities. ‘’Provisions’’ are allowances, for
both loans and advances to customer and contingent risk. Their calculation is based on the headings in the first table of
“Credit Risk” within the “Risk management” section of this report.
Relevance of its use: This is one of the main indicators used in the banking sector to monitor the situation and changes
in the quality of credit risk, reflecting the degree to which the impairment of non-performing loans has been covered in
the accounts via loan-loss provisions.
NPL coverage ratio
Numerator
(millions of euros)
Denominator
(millions of euros)
Provisions
NPLs
31-12-19
31-12-18
31-12-17
12,817
12,493
13,319
16,730
17,087
20,492
= NPL coverage ratio
77%
73%
65%
Cost of risk
This ratio indicates the current situation and changes in credit-risk quality through the annual cost in terms of
impairment losses (accounting loan-loss provisions, included in the “impairment on financial assets not measured at fair
value through profit or loss” line) of each unit of loans and advances to customers (gross). It is calculated as follows:
Annualized loan (cid:3398) loss provisions
Average loans and advances to customers (cid:4666)gross(cid:4667)
Explanation of the formula: ‘’Annualized loan-loss provisions’’ are calculated by accumulating and annualizing the loan-
loss provisions of each month of the period under analysis, to standardize the comparison between different periods. For
example, loan-loss provisions for six months (180 days) are divided by 180 to obtain daily loan-loss provisions and
multiplied by 365 to obtain the annualized figure. This calculation uses the calendar days of the period under
consideration.
‘’Loans and advances to customers (gross)’’ refers to the portfolio of financial assets at amortized cost of the Group’s
consolidated balance sheet. The average of loans and advances to customers (gross) is calculated by using the average
of the period-end balances of each month of the period analyzed plus the previous month.
Relevance of its use: This is one of the main indicators used in the banking sector to monitor the situation and changes
in the quality of credit risk through the cost over the year.
147
Cost of risk
Numerator
(millions of euros)
Denominator
(millions of euros)
31-12-19
31-12-18
31-12-17
Annualized loan-loss provisions
4,061
3,964
3,674
Average loans and advances to
customers (gross)
390,494
392,037
414,448
=
Cost of risk
1.04%
1.01%
0.89%
Efficiency ratio
This measures the percentage of gross income consumed by an entity's operating expenses. It is calculated as follows:
Operating expenses
Gross income
Explanation of the formula: Both ‘’operating expenses’’ and ‘’gross income’’ are taken from the Group’s consolidated
income statement. Operating expenses are the sum of the administration costs (personnel expenses plus other
administrative expenses) plus depreciation. Gross income is the sum of net interest income, net fees and commissions,
net trading income dividend income, share of profit or loss of entities accounted for using the equity method, and other
operating income and expenses. For a more detailed calculation of this ratio, the graphs on “Results” section of this
report should be consulted, one of them with calculations with figures at current exchange rates and another with the
data at constant exchange rates.
Relevance of its use: This ratio is generally used in the banking sector.
Efficiency ratio
Numerator
(millions of euros)
Denominator
(millions of euros)
ROE
Operating expenses
(11,902)
(11,702)
(12,500)
2019
2018
2017
Gross income
= Efficiency ratio
24,542
48.5%
23,747
49.3%
25,270
49.5%
The ROE (return on equity) ratio measures the return obtained on an entity's shareholders' funds plus accumulated other
comprehensive income. It is calculated as follows:
Annualized net attributable profit
Average shareholders′funds (cid:3397) Average accumulated other comprehensive income
Explanation of the formula: ‘’Annualized net attributable profit’’ is taken directly from the Group’s consolidated income
statement. If the metric is presented on a date before the close of the fiscal year, the numerator must be annualized. If
extraordinary items (results from corporate operations) are included in the net attributable profit for the months
covered, they are eliminated from the figure before it is annualized, and then added to the metric once it has been
annualized.
‘’Average shareholders' funds’’ are the weighted moving average of the shareholders' funds at the end of each month of
the period analyzed, adjusted to take into account the execution of the "dividend-option" at the closing dates on which it
was agreed to deliver this type of dividend prior to the publication of the Group´s results.
‘’Average accumulated other comprehensive
is the moving weighted average of accumulated other
comprehensive income, which is part of the equity on the Entity's balance sheet and is calculated in the same way as
average shareholders’ funds (above).
income’’
Relevance of its use: This ratio is very commonly used not only in the banking sector but also in other sectors to
measure the return obtained on shareholders' funds.
148
ROE
Numerator
(millions of euros)
Denominator
(millions of euros)
Annualized net attributable profit
IFRS 9
IAS 39
2019
3,512
2018
5,400
2017
3,514
+ Average shareholder's funds
55,699
52,877
52,801
+
Average accumulated other
comprehensive income
(6,732)
(6,743)
(5,167)
= ROE
7.2%
11.7%
7.4%
Adjusted ROE
The adjusted ROE (return on equity) ratio measures the return obtained on an entity's shareholders' funds plus
accumulated other comprehensive income. It is calculated as follows:
Annualized adjusted net attributable profit
Average shareholders′funds (cid:3397) Average accumulated other comprehensive income
Explanation of the formula: The numerator is the adjusted net attributable profit previously defined in this alternative
performance measures.
‘’Average shareholders' funds’’ are the weighted moving average of the shareholders' funds at the end of each month of
the period analyzed, adjusted to take into account the execution of the "dividend-option" at the closing dates on which it
was agreed to deliver this type of dividend prior to the publication of the Group´s results.
‘’Average accumulated other comprehensive
is the moving weighted average of accumulated other
comprehensive income, which is part of the equity on the Entity's balance sheet and is calculated in the same way as
average shareholders’ funds (above).
income’’
Relevance of its use: This ratio is very commonly used not only in the banking sector but also in other sectors to
measure the return obtained on shareholders' funds.
Adjusted ROE
Numerator (millions
of euros)
Denominator
(millions of euros)
ROTE
Adjusted net attributable profit
+ Average shareholder's funds
+
Average accumulated other comprehensive
income
= Adjusted ROE
NIIF 9
NIC 39
2019
4,830
55,699
(6,732)
9.9%
2018
4,703
52,877
(6,743)
10.2%
2017
4,637
52,801
(5,167)
9.7%
The ROTE (return on tangible equity) ratio measures the return on an entity's shareholders' funds, plus accumulated
other comprehensive income, and excluding intangible assets. It is calculated as follows:
Annualized net attributable profit
Average shareholders′funds (cid:3397) Average accumulated other comprehensive income (cid:3398) Average intangible assets
Explanation of the formula: The numerator (annualized net attributable profit) and the items in the denominator
‘’average intangible assets’’ and ‘’average accumulated other comprehensive income’’ are the same items and are
calculated in the same way as explained for ROE.
‘’Average intangible assets’’ are the intangible assets on the balance sheet, including goodwill and other intangible
assets. The average balance is calculated in the same way as explained for shareholders' funds in ROE.
Relevance of its use: This metric is generally used not only in the banking sector but also in other sectors to measure the
return obtained on shareholders' funds, not including intangible assets.
149
ROTE
Numerator
(millions of euros)
Annualized net attributable profit
IFRS 9
IAS 39
2019
3,512
2018
5,400
2017
3,514
+ Average shareholder's funds
55,699
52,877
52,801
Denominator
(millions of euros)
+
Average accumulated other
comprehensive income
(6,732)
(6,743)
(5,167)
- Average intangible assets
= ROTE
8,303
8.6%
8,296
14.3%
9,073
9.1%
Adjusted ROTE
The Adjusted ROTE (return on tangible equity) ratio measures the return on an entity's shareholders' funds, plus
accumulated other comprehensive income, and excluding intangible assets. It is calculated as follows:
Annualized adjusted net attributable profit
Average shareholders′funds (cid:3397) Average accumulated other comprehensive income (cid:3398) Average intangible assets
Explanation of the formula: The numerator (annualized adjusted net attributable profit) and the items in the
denominator ‘’average intangible assets’’ and ‘’average accumulated other comprehensive income’’ are the same items
and are calculated in the same way as explained for the adjusted ROE.
‘’Average intangible assets’’ are the intangible assets on the balance sheet, including goodwill and other intangible
assets. The average balance is calculated in the same way as explained for shareholders' funds in ROE.
Relevance of its use: This metric is generally used not only in the banking sector but also in other sectors to measure the
return obtained on shareholders' funds, not including intangible assets.
Adjusted ROTE
Numerator (millons
of euros)
Adjusted net attributable profit
2019
4,830
2018
4,703
+ Average shareholder's funds
55,699
52,877
Denominator
(millons of euros)
+
Average accumulated other comprehensive
income
- Average intangible assets
= Adjusted ROTE
(6,732)
(6,743)
8,303
11.9%
8,296
12.4%
2017
4,637
52,801
(5,167)
9,073
12.0%
NIIF 9
NIC 39
ROA
The ROA (return on assets) ratio measures the return obtained on an entity's assets. It is calculated as follows:
Annualized profit for the year
Average total assets
Explanation of the formula: ‘’Annualized profit for the year’’ is taken directly from the Group’s consolidated income
statement. If the metric is presented on a date before the close of the fiscal year, the numerator must be annualized. If
extraordinary items (results from corporate operations) are included in the net attributable profit for the months
covered, they are eliminated from the figure before it is annualized and then added to the metric once it has been
annualized.
‘’Average total assets’’ are the moving weighted average of the total assets of the Group’s consolidated balance sheet at
the end of each month of the period under analysis.
Relevance of its use: This ratio is generally used not only in the banking sector but also in other sectors to measure the
return obtained on assets.
150
ROA
Numerator
(millions of euros)
Denominator
(millions of euros)
Annualized profit for the year
IFRS 9
IAS 39
2019
4,345
2018
6,227
2017
4,757
Average total assets
693,750
678,905
702,511
= ROA
0.63%
0.92%
0.68%
Adjusted ROA
The adjusted ROA (return on assets) ratio measures the return obtained on an entity's assets. It is calculated as follows:
Annualized adjusted profit for the year
Average total assets
Explanation of the formula: The numerator is the annualized adjusted profit/(loss) for the year previously defined in
this alternative performance measures.
‘’Average total assets’’ are the moving weighted average of the total assets of the Group’s consolidated balance sheet at
the end of each month of the period under analysis.
Relevance of its use: This ratio is generally used not only in the banking sector but also in other sectors to measure the
return obtained on assets.
Adjusted ROA
Numerator (millions
of euros)
Denominator
(millons of euros)
RORWA
Adjusted profit/(loss) for the year
2019
5,663
2018
5,501
Average total assets
693,750
678,905
= Adjusted ROA
0.82%
0.81%
2017
5,880
702,511
0.84%
NIIF 9
NIC 39
The RORWA (return on risk-weighted assets) ratio measures the accounting return obtained on average risk-weighted
assets. It is calculated as follows:
Annualized profit for the year
Average risk (cid:3398) weighted assets
Explanation of the formula: ‘’Annualized profit for the year’’ is the same figure as explained for ROA.
‘’Average risk-weighted assets’’(RWA) is the moving weighted average of the risk-weighted assets at the end of each
month of the period under analysis.
Relevance of its use: This ratio is generally used in the banking sector to measure the return obtained on RWA.
RORWA
Numerator
(millions of euros)
Denominator
(millions of euros)
Annualized profit for the year
Average RWA
= RORWA
Adjusted RORWA
151
IFRS 9
IAS 39
2019
4,345
2018
6,227
2017
4,757
361,354
353,199
375,589
1.20%
1.76%
1.27%
The adjusted RORWA (return on risk-weighted assets) ratio measures the return obtained on an entity's assets. It is
calculated as follows:
Annualized adjusted profit for the year
Average risk (cid:3398) weighted assetsrage total assets
Explanation of the formula: The numerator is the annualized adjusted profit/(loss) for the year previously defined in
this alternative performance measures.
‘’Average risk-weighted assets’’(RWA) is the moving weighted average of the risk-weighted assets at the end of each
month of the period under analysis.
Relevance of its use: This ratio is generally used not only in the banking sector but also in other sectors to measure the
return obtained on assets.
Adjusted RORWA
Numerator (millions
of euros)
Denominator
(millons of euros)
Adjusted profit/(loss) for the year
Average RWA
= Adjusted RORWA
NIIF 9
NIC 39
2019
5,663
2018
5,501
2017
5,880
361,354
353,199
375,589
1.57%
1.56%
1.57%
Other customer funds
This includes off-balance sheet funds, these are, mutual funds, pension funds and other off-balance sheet funds.
Explanation of the formula: It is the period-end sum on a given date of the mutual funds, pension funds and other off-
balance sheet funds; as displayed in the table on “Balance sheet and business activity” section of this report.
Relevance of its use: This metric is generally used in the banking sector, as apart from on-balance sheet funds, financial
institutions manage other types of customer funds, such as mutual funds, pension funds and other off-balance sheet
funds.
Other customer funds
Millions of euros
+ Mutual funds
+ Pension Funds
+ Other off-balance sheet funds
= Other customer funds
31-12-19
31-12-18
31-12-17
68,639
36,630
2,534
107,803
61,393
33,807
2,949
98,150
59,644
33,985
3,081
96,710
152
Annual Corporate Governance Report
In accordance with the provisions established by Article 540 of the Spanish Corporate Act, the BBVA Group prepared the
Annual Corporate Governance Report for 2019 (which is an integral part of the Management Report for that year)
following the content guidelines set down in Order ECC/461/2013, dated March 20, and in Circular 5/2013, dated June
12, of Comisión Nacional del Mercado de Valores (CNMV), in the wording provided by Circular 2/2018, dated June 12, of
CNMV. It is also included a section detailing the degree to which the Bank is compliant with existing corporate
governance recommendations in Spain. In addition, all the information required by Article 539 of the Spanish Corporate
Act can be accessed on BBVA’s website www.bbva.com.
ANNUAL CORPORATE GOVERNANCE REPORT OF LISTED COMPANIES
ISSUER IDENTIFICATION
YEAR-END DATE
31/12/2019
Tax Identification No.
[C.I.F.] A48265169
Company Name: Banco Bilbao Vizcaya Argentaria, S.A.
Registered Office: 4 Plaza de San Nicolás, 48005 Bilbao (Biscay)
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
153
ANNUAL CORPORATE GOVERNANCE REPORT
OF LISTED COMPANIES
A. OWNERSHIP STRUCTURE
A.1 Fill in the following table on the company's share capital:
Date of last modification
Share capital (EUR)
Number of shares
Number of voting rights
24/04/2017
EUR 3,267,264,424.20 6,667,886,580
6,667,886,580
Indicate if there are different share classes with different rights associated with them:
NO
A.2 Detail the direct and indirect holders of significant shareholdings in your company at financial year-end,
excluding directors:
Name or corporate
name of the
shareholder
% of voting rights
attached to shares
% of voting rights through
financial instruments
Total % of voting
rights
Blackrock, Inc.
5.48%
Direct
Indirect
Direct
0.44%
Indirect
5.92%
Details of indirect participation:
Name or
corporate name
of indirect
shareholder
Name or corporate
name of direct
shareholder
% of voting
rights attached
to shares
% of voting rights
through financial
instruments
Total % of
voting rights
Remarks
State Street Bank and Trust Co., The Bank of New York Mellon S.A.N.V. and Chase Nominees Ltd., as
international custodian/depositary banks, hold, as of 31 December 2019, 11.68%, 2.03% and 6.64% of
BBVA's share capital, respectively. Of said positions held by the custodian banks, BBVA is not aware of any
individual shareholders with direct or indirect holdings greater than or equal to 3% of the BBVA share
capital.
Communication of significant shareholdings to the CNMV (Spanish National Securities Market Commission):
On 18 April 2019, Blackrock, Inc. informed the CNMV that it had an indirect holding of 5.917% of BBVA's
share capital, through the company Blackrock, Inc.
Indicate the most significant changes in the shareholder structure during the financial year:
Name or corporate name of the
shareholder
Date of transaction
Description of transaction
A.3 Fill in the following tables with the members of the company's Board of Directors with voting rights on
company shares:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
154
Name or
corporate name
of the director
% of voting rights
attached to shares
% of voting rights
through financial
instruments
Total % of
voting
rights
% of voting rights
that can be
transferred through
financial
instruments
Carlos Torres
Vila
Direct
Indirect
Direct
Indirect
Direct
Indirect
0.00
0.00
0.00
0.00
0.01
0.00
0.00
Onur Genç
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Tomás Alfaro
Drake
José Miguel
Andrés
Torrecillas
Jaime Félix
Caruana Lacorte
Belén Garijo
López
José Manuel
González-Páramo
Martínez-Murillo
Sunir Kumar
Kapoor
Carlos Loring
Martínez de Irujo
Lourdes Máiz
Carro
José Maldonado
Ramos
Ana Cristina
Peralta Moreno
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Juan Pi Llorens
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Susana
Rodríguez
Vidarte
Jan Paul Marie
Francis
Verplancke
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total % of voting rights held by the Board of Directors
0.02%
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
155
Details of indirect participation:
Name or
corporate
name of the
director
Name or
corporate
name of direct
shareholder
% of voting
rights
attached to
shares
% of voting
rights through
financial
instruments
Total % of
voting
rights
% of voting
rights that can
be transferred
through
financial
instruments
A.4 Where applicable, indicate any family, commercial, contractual or corporate relationships between holders
of significant shareholdings, insofar as the company is aware of them, unless they are of little relevance or due
to ordinary trading or exchange activities, except those described in section A.6:
Name of related person or
company
Type of relationship
Brief description
A.5 Where applicable, indicate any commercial, contractual or corporate relationships between holders of
significant shareholdings and the company and/or its group, unless they are of little relevance or due to
ordinary trading or exchange activities:
Name of related person or
company
Type of relationship
Brief description
A.6 Describe the relationships, unless insignificant for the two parties, that exist between significant
shareholders or shareholders represented on the Board and directors, or their representatives in the case of
proprietary directors.
Explain, as the case may be, how the significant shareholders are represented. Specifically, state those directors
appointed to represent significant shareholders, those whose appointment was proposed by significant
shareholders or who were linked to significant shareholders and/or their group companies, and specify the
nature of the relationships. In particular, indicate, where applicable, the existence, identity and position of board
members—or their representatives—of the listed company who are members—or representatives of members—
of the management body of companies that hold significant shareholdings in the listed company or of
companies of said significant shareholders' groups.
Name or corporate name of
linked director or
representative
Name or corporate name
of linked holder of
significant shareholdings
Name of the
company of the
significant
shareholder's group
Description
of
relationship/
position
A.7 Indicate whether the company has been informed of any shareholder agreements that may affect it, as
set out under Articles 530 and 531 of the Corporate Enterprises Act. Where applicable, briefly describe them
and list the shareholders bound by such agreement:
NO
Indicate whether the company is aware of the existence of concerted actions by its shareholders. If so,
describe them briefly:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
156
NO
If there has been any amendment or breaking-off of said pacts or agreements or concerted actions in the
financial year, indicate this expressly:
A.8 Indicate whether any legal or natural person exercises or may exercise control over the company pursuant
to Article 5 of the Securities Exchange Act. If so, identify them:
A.9 Fill in the following tables regarding the company's treasury shares:
At financial year-end:
NO
Number of direct shares
Number of indirect shares (*)
Total % of share capital
0
12,617,189
0.19%
(*) Through:
Name or corporate name of direct holder of shareholding
Number of direct shares
Corporación General Financiera, S.A.
Total:
12,617,189
12,617,189
Give details of any significant changes that have occurred during the financial year:
Explain the significant changes
In 2019, four communications regarding treasury shares were sent, as the acquisitions had exceeded the
1% threshold. The communications were as follows:
Communication date: 16/01/2019. A total of 5,465,501 direct shares and 44,085,788 indirect
shares were kept as treasury shares, representing a total of 0.743% of the share capital. This
communication was made after acquisitions exceeded the 1% threshold.
Communication date: 27/03/2019. A total of 5,767,796 direct shares and 23,568,447 indirect
shares were kept as treasury shares, representing a total of 0.440% of the share capital. This
communication was made after acquisitions exceeded the 1% threshold.
Communication date: 28/06/2019. A total of 2,056,497 direct shares and 15,633,396 indirect
shares were kept as treasury shares, representing a total of 0.265% of the share capital. This
communication was made after acquisitions exceeded the 1% threshold.
Communication date: 25/09/2019. A total of 534,400 direct shares and 15,616,967 indirect
shares were kept as treasury shares, representing a total of 0.242% of the share capital. This
communication was made after acquisitions exceeded the 1% threshold.
A.10 Describe the conditions and term of the current mandate of the General Meeting for the Board of Directors
to issue, buy back and transfer treasury shares.
BBVA’s Annual General Shareholders' Meeting held on 17 March 2017, under item three of the
agenda, passed a resolution to delegate to the Board of Directors the power to increase share capital
for a period of five years up to a maximum amount corresponding to 50% of BBVA's share capital on
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
157
the date of such authorisation. This can be done on one or several occasions, to the amount that the
Board resolves, by issuing new shares of any kind allowed by law, with or without an issue premium,
the counter-value of said shares comprising cash considerations. The authorisation includes the setting
out of the terms and conditions of the share capital increase in any respect not provided for in the
resolution, and delegation to the Board of a power to wholly or partly exclude pre-emptive subscription
rights in relation to any share capital increase carried out by virtue of the resolution when so demanded
by the corporate interest and in compliance with the applicable legal requirements. However, this
power was limited insofar as the nominal amount of the capital increases resolved upon or actually
carried out with an exclusion of the pre-emptive subscription right by virtue of the above delegation
or resolved upon or executed to accommodate the conversion of ordinarily convertible issues that are
also carried out with an exclusion of the pre-emptive subscription right in the exercise of the delegated
power to issue convertible securities granted by the General Shareholders' Meeting, under item five of
the agenda, may not exceed the maximum nominal amount, as a whole, of 20% of BBVA's share
capital at the time of delegation. This limit does not apply to issues of contingently convertible
securities.
To date, BBVA has not adopted any resolution using this delegated power.
BBVA’s Annual General Shareholders' Meeting held on 17 March 2017, under the fifth item on the
agenda, delegated to the Board of Directors the power to issue securities that are convertible into
newly issued BBVA shares, on one or more occasions within a maximum term of five years, up to a
total combined maximum amount of EUR 8,000,000,000 or its equivalent in any other currency; the
Board may likewise resolve upon, set and determine each and every one of the terms and conditions
of the issues carried out by virtue of that delegated power, determine the basis and mode of
conversion, and resolve upon, set and determine the conversion ratio, which may be fixed or variable.
Moreover, the General Meeting resolved to delegate to the Board the power to totally or partially
exclude pre-emptive subscription rights over any issue of convertible securities that may be made
hereunder, when the corporate interest so requires, in compliance with any legal requirements
established to this end. However, this power was limited in so far as the normal amount of the capital
increases resolved upon or actually carried out to accommodate the conversion of ordinarily
convertible issues executed by virtue of that delegated power with an exclusion of the pre-emptive
subscription right, and those resolved upon or executed also with an exclusion of the pre -emptive
subscription right in the exercise of the delegated power to increase share capital granted by the
General Meeting, under item four of the Agenda, may not exceed the maximum nominal amount, as
a whole, of 20% of BBVA's share capital at the time of delegation. This limit does not apply to issues
of contingently convertible securities.
Through the aforementioned delegation, BBVA made five issuances of contingently convertible
perpetual securities (Additional Tier 1 capital instruments), without pre-emptive subscription rights. In
particular: two issuances were made in 2017, for amounts of EUR 500 million and USD 1 billion; one
issuance were made in 2018, for an amount of EUR 1 billion; and two issuances were made in 2019,
for amounts of EUR 1 billion and USD 1 billion.
BBVA’s Annual General Shareholders' Meeting held on 16 March 2018, under the third item of the
agenda, resolved to grant BBVA the authority, whether directly or through any of its subsidiaries, and
for a period of no more than five years, at any time and on as many occasions as it deems necessary,
to derivatively acquire BBVA shares by any means permitted by law, including charging the acquisition
to the profits for the financial year and/or to freely available reserves, as well as to later divest the
acquired shares by any means permitted by law. The derivative acquisition of shares is to be carried
out, in all cases, in accordance with the conditions established by the applicable legislation or by the
competent authorities and, in particular, with the following conditions: (i) the nominal value of the
treasury stock acquired, whether directly or indirectly, by means of this authorisation, when added to
that already held by BBVA and its subsidiaries, may not exceed 10% of the subscribed share capital
of BBVA or, where appropriate, the maximum amount permitted under the applicable legislation; and
(ii) the acquisition price per share may not be lower than the nominal value of the share, and must be
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
158
under 10% higher than the share price or any other price associated with the shares at the time that
they are acquired. The aforementioned General Shareholders' Meeting also expressly authorised that
the shares acquired by BBVA or any of its subsidiaries may, through the foregoing authorisation, be
partially or totally set aside for workers or directors of BBVA or its subsidiaries, either directly or as a
result of them exercising any option rights that they may hold.
A.11 Estimated floating capital:
Estimated floating capital
%
93.87
Remarks
This estimated floating BBVA capital has been calculated by deducting, from the share capital, the capital
held by the direct and indirect holders of significant shares (section A.2), the members of the Board of
Directors (section A.3) and the capital held in treasury shares (section A.9), as of 31 December 2019, in
accordance with the instructions to complete the Annual Corporate Governance Report.
A.12 Indicate whether there is any restriction (statutory, legislative or of any other kind) on the transferability
of securities and/or any restriction on voting rights. In particular, report the existence of any restrictions that
might hinder the takeover of the company through the purchase of its shares on the market, as well as any
authorisation or prior communication regimes that are applicable to the purchase or transfer of the company's
financial instruments in accordance with sector legislation.
NO
A.13 Indicate whether the General Meeting has agreed to adopt measures to neutralise a public takeover bid,
pursuant to Act 6/2007.
NO
If so, explain the measures approved and the terms under which the restrictions would be rendered effective:
A.14 Indicate whether the company has issued securities that are not traded on a regulated market in the EU.
YES
Where applicable, indicate the different share classes, and the rights and obligations that each share class
confers.
Indicate the different share classes
All the shares in BBVA's share capital are of the same class and series, and confer the same political and
economic rights. There are no different voting rights for any shareholder. There are no shares that do not
represent capital.
The Bank's shares are admitted to trade on the stock exchanges in Madrid, Barcelona, Bilbao and Valencia,
through the Spanish Stock Exchange Interconnection System (Continuous Market), as well as on the stock
exchanges in London and Mexico. BBVA's American Depositary shares (ADS) are traded on the New York
stock exchange.
B GENERAL SHAREHOLDERS' MEETING
B.1 Indicate, giving details where applicable, whether there are any deviations from the minimum standards
established under the Corporate Enterprises Act (CEA) with respect to the quorum for holding the General
Meeting.
YES
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
159
% required for quorum if different
to that set out in art. 193 of the
CEA for general circumstances
% required for quorum if different to
that set out in art. 194 of the CEA for
special
circumstances
Quorum on first
call
0.00%
Quorum on second call
0.00%
66.66%
60.00%
Description of the differences
Article 194 of the Corporate Enterprises Act establishes that in order for a General Meeting (whether ordinary
or extraordinary) to validly resolve to increase or reduce capital or make any other amendment to the
bylaws, bond issuance, the suppression or limitation of pre-emptive subscription rights over new shares, or
the transformation, merger or spin-off of the company or global assignment of assets and liabilities or the
offshoring of domicile, the shareholders present and represented on first calling must own at least 50% of
the subscribed capital with voting rights.
On second calling, 25% of said capital will be sufficient.
Notwithstanding the foregoing, Article 25 of the BBVA Bylaws requires a super quorum of members
representing two thirds of the subscribed capital with voting rights on first calling, and 60% of the subscribed
capital on second calling, for the valid adoption of resolutions on the following matters: re -definition of the
corporate purpose; the transformation, total spin-off or winding up of the Company; and the modification
of the statutory article defining this super quorum.
B.2 Indicate, giving details where applicable, whether there are any deviations from the minimum standards
established under the Corporate Enterprises Act (CEA) for the adoption of corporate resolutions:
NO
B.3 Indicate the rules applicable to amendments to the company bylaws. In particular, report the majorities
established to amend the bylaws, and the rules, if any, to safeguard shareholders' rights when amending the
bylaws.
Article 30 of the BBVA Company Bylaws establishes that the General Shareholders' Meeting is empowered to
amend the Company Bylaws and to confirm or rectify the manner in which they are interpreted by the Board
of Directors.
To such end, the rules established under Articles 285 et seq. of the Corporate Enterprises Act shall apply.
The above paragraph notwithstanding, Article 25 of the BBVA Bylaws establishes that in order to validly adopt
resolutions regarding any change to the corporate purpose, transformation, total spin-off or winding up of the
Company and amendment of the second paragraph of said Article 25, two thirds of the subscribed capital with
voting rights must attend the General Meeting on first calling, and 60% of said capital on second calling.
As regards the procedure for amending the Bylaws, Article 4.2 c) of Spanish Act 10/2014, of 26 June, on the
regulation, supervision and solvency of credit institutions, establishes that the Bank of Spain shall be responsible
for authorising the amendments to the bylaws of credit institutions as set out by regulations.
Hence, Article 10 of Royal Decree 84/2015, of 13 February, implementing Act 10/2014, stipulates that the
Bank of Spain shall make a decision within two months following receipt of the request for amendment of the
Bylaws and that said request must be accompanied by certified minutes recording the agreement, a report
substantiating the proposal drawn up by the board of directors and draft new bylaws, identifying the cited
amendments.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
160
Notwithstanding the foregoing, Article 10 of Royal Decree 84/2015 establishes that no prior authorisation
from the Bank of Spain is required, though the latter must be notified for the purposes of entry in the Registro
de Entidades de Crédito (Spanish register of credit institutions), for amendments with the following purposes:
- Change of the registered office within the national territory.
- Share capital increase.
- Verbatim incorporation into the bylaws of legal or regulatory precepts of a mandatory or prohibitive nature,
or for the purpose of complying with legal or administrative decisions.
- Those amendments for which the Bank of Spain, in response to a prior enquiry made by the affected bank,
deems that authorisation is not required due to their little relevance.
This communication must be made within 15 working days following the adoption of the by-laws amendment
resolution.
Finally, as a significant entity, BBVA is under the direct supervision of the European Central Bank (ECB) in
cooperation with the Bank of Spain under the Single Supervisory Mechanism, so the authorisation of the Bank
of Spain mentioned above will be submitted to the European Central Bank, prior to its resolution by the Bank
of Spain.
B.4 Give details of attendance at General Shareholders' Meetings held during the financial year of this report
and the previous two financial years:
Date of General
Meeting
% physically
present
% present by
proxy
% distance voting
Electronic
vote
Other
Total
Attendance data
15/03/2019
Of which is floating
capital:
16/03/2018
Of which is floating
capital:
17/03/2017
Of which is floating
capital:
1.77%
1.75%
1.71%
1.62%
1.89%
1.81%
38.95%
0.92%
22.79%
64.43%
33.03%
0.92%
22.79%
58.49%
40.47%
0.23%
22.13%
64.54%
34.53%
0.23%
22.13%
58.51%
38.68%
0.19%
22.95%
63.71%
33.07%
0.19%
22.95%
58.02%
B.5 Indicate whether there were any items on the agenda that were not approved by shareholders for any
reason, for all meetings that took place in the financial year.
NO
B.6 Indicate if there is any statutory restriction that sets out a minimum number of shares required to attend
the General Meeting or vote remotely:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
161
YES
Number of shares required to attend the General Meeting
Number of shares required to vote remotely
500
1
Remarks
Article 23 of the BBVA Bylaws establishes that holders of 500 shares or more may attend ordinary and
extraordinary General Shareholders' Meetings, provided that their shares are registered at least five days
prior to such a meeting, in the corresponding accounting record, in accordance with the Securities Exchange
Act and other applicable provisions.
Holders of fewer shares may group together until they have at least that number, and name a representative.
However, there is no minimum number of shares required to vote remotely. Pursuant to the provisions of
Article 8 of BBVA's Regulations of the General Shareholders' Meeting, shareholders may vote by proxy, by
post, electronically or by any other means of remote communication, provided that the voter’s identity is
duly guaranteed. In terms of the constitution of the General Shareholders' Meeting, shareholders who vote
remotely will be counted as present.
B.7 Indicate whether it has been established that certain decisions, other than those set out by law, involving
an acquisition, disposal, the allocation of essential assets to another company or a similar corporate transaction,
must be submitted to the General Shareholders' Meeting for approval.
NO
B.8 Indicate the address and means of access through the company website to information on corporate
governance and other information on the general meetings that must be made available to shareholders on
the company's website.
Information on corporate governance and the Company’s general meetings can be accessed via the Banco
Bilbao Vizcaya Argentaria, S.A. company website, www.bbva.com, in the Shareholders and Investors –
Corporate Governance and Remuneration Policy section (https://accionistaseinversores.bbva.com/gobierno-
corporativo-y-politica-de-remuneraciones/).
C COMPANY MANAGEMENT STRUCTURE
C.1 Board of directors
C.1.1 Maximum and minimum number of directors established in the bylaws and the number set by the
general meeting:
Maximum number of directors
Minimum number of directors
Number of directors set by the general meeting
15
5
15
Remarks
In accordance with the provisions of Article 34, Paragraph 2 of the Bylaws, the General Shareholders'
Meeting, held on 15 March 2019, resolved to set the total number of directors on the Board of Directors
of Banco Bilbao Vizcaya Argentaria, S.A. at 15.
C.1.2 Fill in the following table on the board members:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
162
Name or
corporate
name of the
director
Carlos Torres
Vila
Onur Genç
Tomás Alfaro
Drake
José Miguel
Andrés
Torrecillas
Jaime Félix
Caruana
Lacorte
Belén Garijo
López
José Manuel
González-
Páramo
Martínez-
Murillo
Sunir Kumar
Kapoor
Carlos Loring
Martínez de
Irujo
Lourdes Máiz
Carro
José
Maldonado
Ramos
Ana Cristina
Peralta Moreno
Juan Pi Llorens
Representative
Directorship
type
Position on
the Board
Date of first
appointment
Date of most
recent
appointment
Election
procedure
-
-
-
-
-
-
-
-
-
-
-
-
-
Executive
Chairman
04/05/2015
15/03/2019
Executive
Chief
Executive
Officer
20/12/2018
15/03/2019
Other external
Director
18/03/2006
17/03/2017
Independent
Deputy Chair
13/03/2015
16/03/2018
Independent
Director
16/03/2018
-
Independent
Director
16/03/2012
16/03/2018
Executive
Director
29/05/2013
17/03/2017
Independent
Director
11/03/2016
15/03/2019
Other external
Director
28/02/2004
17/03/2017
Independent
Director
14/03/2014
17/03/2017
Other external
Director
28/01/2000
16/03/2018
Independent
Director
16/03/2018
-
Independent
Lead Director
27/07/2011
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
163
Susana
Rodríguez
Vidarte
Jan Paul Marie
Francis
Verplancke
-
-
Other external
Director
28/05/2002
17/03/2017
Independent
Director
16/03/2018
-
Total number of directors
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
Resolution of the
General
Shareholders'
Meeting
15
Indicate any appointment terminations, as a result of resignation, dismissal or any other reason, that have
occurred on the Board of Directors during the reporting period:
Name or
corporate
name of the
director
Directorship
type at the
time of
termination
Date of most
recent
appointment
Termination
date
Specialist
committees
of which the
director was a
member
Indicate
whether the
termination
occurred
before the
end of the
mandate
Cause of the termination and other remarks
C.1.3 Fill in the following tables on the board members and their directorship type:
EXECUTIVE DIRECTORS
Name or corporate
name of the director
Position within
the company's
organisation
structure
Profile
Chairman of the BBVA Board of Directors.
He was Chief Executive Officer of BBVA from May 2015 to
December 2018, Head of Digital Banking from 2014 to 2015
and Head of Corporate Development & Strategy from 2008 to
2014.
In addition, he previously held positions of responsibility in other
companies, such as Chief Financial Officer, Director of Corporate
Strategy and member of the Executive Committee of Endesa, as
well as partner at McKinsey & Company.
He completed his studies in Electrical Engineering (BSc) at the
Massachusetts Institute of Technology (MIT), where he also
received a degree in Business Administration. He holds a
master's degree in Management (MS) from the MIT Sloan School
of Management and also a Law degree from the National
Distance Education University (UNED).
Chief Executive Officer of BBVA.
He served as President and CEO of BBVA Compass and BBVA
Country Manager in the U.S. from 2017 to December 2018, as
Carlos Torres Vila
Chairman
Onur Genç
Chief Executive
Officer
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
164
well as Deputy CEO and Executive Vice President at Garanti
BBVA between 2012 and 2017.
He has also held positions of responsibility at McKinsey &
Company (in the Turkey, Canada, Netherlands and United
Kingdom offices), having previously been a Senior Partner and
Manager of its Turkish office.
He holds a degree in Electrical Engineering (BS) from the
University of Boğaziçi in Turkey and a master's degree in
Business Administration (MSIA/MBA) from Carnegie Mellon
University in the USA.
Executive Director and Head of Global Economics and Public
Affairs of BBVA.
He is Chairman for Europe of the Trans-Atlantic Business
Council, Chairman of the Fundación Consejo España-Perú,
Chairman of European DataWarehouse GmbH and Professor at
IESE Business School.
He has been a member of various organisations, including the
Executive Committee and the Governing Council of the
European Central Bank, the Governing Council and the
Executive Committee of the Bank of Spain and the Committee
on the Global Financial System of the Bank for International
Settlements.
He has a Ph.D., M.Phil. and M.A. in Economics from Columbia
University in New York and a Ph.D. in Economics from the
Complutense University of Madrid. He has also been awarded
an honorary doctorate by the University of Malaga and is a
member of the European Academy of Sciences and Arts and a
full member of the Royal Academy of Moral and Political
Sciences.
Total number of executive directors
% of all directors
3
20%
José Manuel
González-Páramo
Martínez-Murillo
Head of Global
Economics and
Public Affairs
EXTERNAL PROPRIETARY DIRECTORS
EXTERNAL INDEPENDENT DIRECTORS
Name or corporate name of
the director
Profile
José Miguel Andrés Torrecillas
Deputy Chair of the BBVA Board of Directors.
His professional career began at Ernst & Young as General Managing
Partner of Audit and Advisory Services and Chairman of Ernst & Young
Spain until 2014.
He has been a member of various organisations such as the ROAC
(Registro Oficial de Auditores de Cuentas — official registry of auditors),
the REA (Registro de Economistas Auditores — registry of economic
auditors), the Junta Directiva del Instituto Español de Analistas
Financieros (Spanish Institute of Financial Analysts Management Board),
Fundación Empresa y Sociedad (Business and Society Foundation),
Instituto de Censores Jurados de Cuentas de España (Spanish Institute
of Chartered Accountants), Consejo Asesor del Instituto de Auditores
Internos (Advisory Board of the Institute of Internal Auditors) and the
Institute of Chartered Accountants in England & Wales (ICAEW).
He holds a degree in Economic and Business Sciences from the
Complutense University of Madrid and post-graduate studies in
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
165
Management Programs from IESE, Harvard and IMD.
He has been General Manager of the Bank of International Settlements
(BIS), Director of the Monetary and Capital Markets Department and
Financial Counsellor and General Manager of the International
Monetary Fund (IMF), Chairman of the Basel Committee on Banking
Supervision, Governor of the Bank of Spain and member of the
Governing Council of the European Central Bank, among other
positions. He is a member of the Group of Thirty (G-30) and Trustee of
the Spanish Aspen Institute Foundation.
He holds a degree in Telecommunications Engineering from the
Escuela Técnica Superior de Ingenieros de Telecomunicación (ETSIT) of
the Universidad Politécnica de Madrid and is a Commercial Technician
and State Economist.
She is a member of the Merck Group Executive Board and CEO of
Merck Healthcare, a member of the L'Oréal Board of Directors and
Chair of the International Senior Executive Committee (ISEC) of
Pharmaceutical Research and Manufacturers of America (PhRMA).
She has held various positions of responsibility at Abbott Laboratories,
Rhône-Poulenc, Aventis Pharma and Sanofi Aventis.
She is a graduate in Medicine from the University of Alcalá de Henares
in Madrid and a specialist in Clinical Pharmacology at Hospital de la
Paz, Autonomous University of Madrid. She also holds a master's
degree in Business and Management from the Ashridge Management
School (UK).
He is involved in a range of technology companies in Silicon Valley and
is Operating Partner at Atlantic Bridge Capital,
Europe, and
independent director at Stratio, director at iQuate Limited and mCloud
consultant.
He has been Manager of Business Enterprise EMEA for Microsoft
Europe and Director of Worldwide Business Strategy for Microsoft
Corporation. Among other roles, he was previously Executive Vice
President and Chief Marketing Officer of Cassatt Corporation and Chair
and CEO of UBmatrix Incorporated.
He holds a Bachelor's in Physics from the University of Birmingham and
a Master's in Computer Systems from Cranfield Institute of Technology.
She was Secretary of the Board of Directors and Director of Legal
Services at Iberia, Líneas Aéreas de España until April 2016. She has
also been a director of several companies, including Renfe, GIF
(Gerencia de Infraestructuras Ferroviarias — Railway Infrastructure
Administrator, now ADIF), the ICO (Instituto de Crédito Oficial — Official
Credit Institution), Aldeasa and Banco Hipotecario.
She worked in Research, giving classes in Metaphysics and Theory of
Knowledge at the Complutense University of Madrid for five years. She
became State Attorney and held various positions of responsibility in
Public Administration, including General Director of Administrative
Organisation, Job Positions and I.T. (Ministry of Public Administrations),
General Director of the Sociedad Estatal de Participaciones
Patrimoniales (SEPPA) at the Ministry of Economy and Finance and
Technical General Secretariat of the Ministry of Agriculture, Fisheries
and Food.
She holds degrees in Law and Philosophy and Education Sciences as
well as a Ph.D. in Philosophy.
She is independent director and chair of the Audit and Control
Committee at Grenergy Renovables and independent director of
Inmobiliaria Colonial, Socimi, S.A.
Jaime Félix Caruana Lacorte
Belén Garijo López
Sunir Kumar Kapoor
Lourdes Máiz Carro
Ana Cristina Peralta Moreno
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
166
She was previously Chief Risk Officer and a member of the Bankinter
Management Committee, and Chief Risk Officer and member of the
Banco Pastor Management Committee. She has also held various
positions in a number of financial entities, notably serving as
independent director of Deutsche Bank SAE, as well as Chair of the
Audit and Risk Committee and of the Appointments Committee of this
company, independent director at Banco Etcheverría, Chair of the Risk
Committee and member of the Audit and Regulatory Compliance
Committee of this company, independent director of Grupo Lar
Holding Residencial, S.A.U. and Grupo Lar Unidad Terciario, S.L.U.,
and Senior Advisor at Oliver Wyman Financial Services.
She is a graduate in Economic and Business Sciences from
Complutense University of Madrid. She also has a master's degree in
Economic-Financial Management from the Centro de Estudios
Financieros (CEF), Program for Management Development (PMD) at
Harvard Business School and PADE (Programa de Alta Dirección de
Empresas – senior management programme) at IESE.
Lead Director of BBVA.
He is currently a non-executive director at Oesia Networks, S.L. and
Tecnobit, S.L.U. (Grupo Oesía).
He has had a professional career at IBM holding various senior positions
at a national and international level, including Vice President of Sales at
IBM Europe, Vice President of Technology & Systems at IBM Europe
and Vice President of the Financial Services Sector in the Growth
Markets Units (GMU) in China. He was also Executive Chairman of IBM
Spain.
He holds a degree in Industrial Engineering from the Universidad
Politécnica de Barcelona and completed the PDG (Programa en
Dirección General – general management programme) at IESE.
His has been Chief Information Officer (CIO) and Head of Technology
and Banking Operations at Standard Chartered Bank, Vice President of
Technology and CIO for EMEA at Dell, as well as Vice President and
Chief of Architecture and Vice President of Information of the Youth
Category at Levi Strauss.
He holds a bachelor's degree in Science, specialising in Computer
Science, from the Programming Centre of the North Atlantic Treaty
Organization (NATO) in Belgium.
Total number of independent directors
% of all directors
8
53.33%
Juan Pi Llorens
Jan Paul Marie Francis
Verplancke
Indicate whether any director considered an independent director is receiving from the company or from its
group any amount or benefit under any item that is not the remuneration for their directorship, or maintains
or has maintained over the last financial year a business relationship with the company or any company in its
group, whether in their own name or as a significant shareholder, director or senior manager of an entity that
maintains or has maintained such a relationship.
Where applicable, include a reasoned statement from the board with the reasons why it deems that this director
can perform their duties as an independent director.
Name or corporate name of the director
Description of the
relationship
Reasoned statement
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
167
OTHER EXTERNAL DIRECTORS
Identify all other external directors and explain why these cannot be considered proprietary or independent
directors, and detail their relationships with the company, its executives or shareholders:
Name or
corporate name
of the director
Reasons
Company,
executive or
shareholder to
which related
Profile
Tomás Alfaro
Drake
Tomás Alfaro Drake has
been a director for a
continuous period of
more than 12 years.
Banco Bilbao
Vizcaya
Argentaria, S.A.
Carlos Loring
Martínez de Irujo
Carlos Loring Martínez
de Irujo has been a
director
a
continuous period of
more than 12 years.
for
Banco Bilbao
Vizcaya
Argentaria, S.A.
José Maldonado
Ramos
José Maldonado Ramos
has been a director for a
continuous period of
more than 12 years.
Banco Bilbao
Vizcaya
Argentaria, S.A.
Susana Rodríguez
Vidarte
Susana
Rodríguez
Vidarte has been a
director
a
continuous period of
more than 12 years.
for
Banco Bilbao
Vizcaya
Argentaria, S.A.
He is Director of Internal Development and Professor of
the Finance Department at Universidad Francisco de
Vitoria.
He has held positions such as Director of the bachelor's
degree in Business Management and Administration, of
the Diploma in Business Sciences and of the degrees in
Marketing and
in Business Management and
Administration at Universidad Francisco de Vitoria, among
others.
He holds a bachelor's degree in Engineering from the
Higher Technical School of Engineering (ICAI) at the
Comillas Pontifical University and a master's degree in
Economics and Business Management (MBA) from IESE.
He has been partner and member of the Management
Committee of Garrigues law firm, where he performed the
roles of Director of Mergers and Acquisitions and of
Banking and Capital Markets, and was responsible for
advising large listed companies.
He holds a Law degree from Complutense University of
Madrid.
Over the course of his professional career, he has held
the positions of Secretary of the Board of Directors at a
number of companies, most notably as Secretary General
of Argentaria, before taking up the position of Secretary
General of BBVA. He took early retirement as a Bank
executive in December 2009.
He holds a Law degree from Complutense University of
Madrid. In 1978, he became State Attorney.
She has been Professor of Strategy at the Faculty of
Economics and Business Administration at the University
of Deusto and a non-practising member of the Institute of
Accounting and Accounts Auditing.
She was Dean of the Faculty of Economics and Business
Administration at the University of Deusto, Director of the
Instituto
Postgraduate Area and Director of
Internacional de Dirección de Empresas (INSIDE).
She holds a Ph.D. in Economic and Business Sciences
from Deusto University.
the
Total number of other external directors
% of all directors
4
26.67%
Indicate any changes that may have occurred during the period in the directorship type of each director:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
168
Name or corporate name of the director Date of change Previous type
Current type
Remarks
C.1.4 Fill in the following table with information regarding the number of female directors over the last four
financial years and their directorship types:
Number of female directors
% of all directors of each type
Financial
year
2019
0
0
3
1
4
Financial
year
2018
0
0
3
1
4
Financial
year
2017
0
0
2
1
3
Financial
year
2016
0
0
2
1
3
Financial
year
2019
0.00%
0.00%
37.5%
25%
26.67%
Financial
year
2018
0.00%
0.00%
37.5%
25%
26.67%
Financial
year
2017
0.00%
0.00%
33.33%
25%
23.08%
Financial
year
2016
0.00%
0.00%
25%
25%
20%
Executive
Proprietary
Independent
Other external
Total:
C.1.5 Indicate whether the company has diversity policies for the company's board of directors with regard to
issues such as age, gender, disabilities, or professional training and experience. In accordance with the
definition given in the Spanish Account Auditing Act, small and medium-sized companies will have to report,
at a minimum, the policy that they have agreed in regard to gender diversity.
YES
If yes, please outline these diversity policies, their objectives, their measures, the way in which they have been
applied and the results thereof in this financial year. Any specific measures adopted by the board of directors
and the appointments committee to attain a balanced and diverse representation of directors must also be
indicated.
If the company does have a diversity policy, explain the reason for this.
Outline of the policies, their objectives, their measures, the way in which they have been applied
and the results thereof
The composition of the Board of Directors is a key element of BBVA Corporate Governance System. As
such, it must help the corporate bodies to adequately perform their management and oversight functions,
providing different viewpoints and opinions, fostering debate, analysis and critical review of the proposals
submitted for its consideration.
Thus, the Board of Directors currently consists of a combination of people with wide experience and
knowledge of the financial and banking sector, with directors with experience and knowledge of different
matters that are of interest to the Bank and Group (such as auditing, digital business and technology, legal
and academic fields or multinational businesses), overall achieving adequate balance and diversity in its
composition, allowing for a better operation.
For this purpose, the Regulations of the Board of Directors establishes as a general principle that directors
must meet the suitability requirements to perform their role and they must therefore display a recognised
business and professional reputation, have the adequate knowledge and experience to carry out their duties
and be in a position to exercise good governance of the Company. The composition of the Board shall seek
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
169
to ensure adequate representation of the under-represented gender, an ample majority of non-executive
directors over executive directors and that at least one third of the Board are independent directors.
Similarly, as part of the provisions of the Regulations of the Board of Directors, BBVA has a Policy for the
selection, appointment, rotation and diversity of its Board members (the "Selection Policy"), which has been
approved by the Board of Directors and contains the principles and the specific procedure for selecting,
appointing and rotating the Bank's directors and the requirements for performing the role of BBVA director.
The Selection Policy states that the selection, appointment and rotation procedures for the Board of Directors
will aim to attain a composition of the Company's corporate bodies that enables the duties assigned by law,
Bylaws and its own Regulations to be properly carried out in the best corporate interest.
To this effect, the Selection Policy establishes that the Board of Directors will ensure that these procedures
allow to identify the most suitable candidates at all times, based on the needs of the corporate bodies, and
that they favour diversity of experience, knowledge, skills and gender, and, in general, do not suffer from
implicit biases that may involve any kind of discrimination.
In particular, the Selection Policy states that selection procedures should not entail any discrimination that
may hinder the selection of female directors and that, by 2020, the number of female board members will
represent, at least, 30% of the total number of members of the Board of Directors .
Additionally, it shall ensure that the composition of the Board of Directors has an appropriate balance
between the different categories of board members and that non-executive directors represent an ample
majority over executive directors, and that the number of independent directors accounts for, at least, 50%
of the total board members.
The candidates to be put forward as BBVA directors must have suitable skills, experience and qualifications,
meet the suitability requirements needed to hold the position and possess the required availability and
dedication to carry out their duties. They must also be able to comply with the requirements set out in the
Regulations of the Board of Directors in terms of suitable performance of director duties, in particular those
related to due diligence and loyalty, avoiding conflicts of interest and complying with the required rules for
position incompatibility and limitations for BBVA directors.
To ensure a suitable composition of the Board at all times, in accordance with the provisions of the
Regulations of the Board and with the Selection Policy, and in order to achieve the targets established in the
Selection Policy regarding the needs and the most suitable people to form part of the corporate bodies, the
Bank carries out an ordered refreshment process, based on a suitable planned rotation of the Board
members, ensuring an appropriate composition of the Board at all times.
This process begins with the periodic analysis, performed by the Appointments and Corporate Governance
Committee, of the structure, size and composition of the Board, taking into consideration the required
diversity of gender, knowledge, competence and experience, the results of the evaluation of the status of
Directors and independent judgement and suitability, and also the dedication that the Bank requires to
properly perform the role of director, all in accordance with the needs of the Corporate bodies at the time
and taking into account the Selection Policy. This process also facilitates the identification of the Board's
existing skills, characteristics, experience and diversity, and the areas that need to be improved in the future
to ensure that the Board as a whole possesses the knowledge, skills and experie nce required to enable its
proper composition and operation.
Continued in section H of this Report.
C.1.6 Explain any measures that have been agreed by the Appointments Committee to ensure that the
selection procedures are free from implicit biases that could hinder the selection of female directors, and to
ensure that the company includes and makes a conscious effort to find potential female candidates who match
the professional profile, in order to achieve a balanced representation of men and women:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
170
Explanation of the measures
As of the date of this report, four women sit on the BBVA Board of Directors, making up 26.67% of the
Board, and they are also members of five of the Board committees. The Audit Committee and the
Remunerations Committee include a majority of women, and the latter is chaired by a women.
The General Shareholders' Meeting is responsible for appointing members of the Board of Directors in
accordance with Article 30.b) of the Bylaws and Article 2 of the Regulations of the Board; however, if a seat
falls vacant, the Board has the authority to co-opt members. The role of the Appointments and Corporate
Governance Committee is to assist the Board of Directors in matters relating to the selection and
appointment of directors and, in particular, to submit to the Board of Directors proposals for the
appointment, re-appointment or removal of independent directors and to report on proposals for the
appointment, re-appointment or removal of all other directors.
To this end, Article 5 of the Regulations of the Appointments and Corporate Governance Committee states
that the Committee will assess the balance of knowledge, skills and experience of the Board of Directors,
the conditions candidates must satisfy to fill any vacancies that arise, and the time commitment considered
necessary to enable them to adequately carry out their duties, according to the needs of the corporate
bodies at any given time. The Committee will ensure that selection procedures are not implicitly biased in
such a way that may entail any kind of discrimination and, in particular, that may hinder the selection of
directors of the underrepresented gender, endeavouring that directors of said gender who display the
professional profile sought are included amongst potential candidates .
Furthermore, BBVA has established a Selection Policy that states that the procedures for the selection,
appointment and rotation of the Board of Directors must aim to achie ve a composition of the Bank's
corporate bodies that enables the latter to properly perform the duties assigned to them by the law, the
Company Bylaws and their own Regulations, in the best corporate interest. To this effect, the Board of
Directors will ensure that these procedures enable the identification of the most suitable candidates at any
given time based on the requirements of the corporate bodies, that they promote diversity of experience,
knowledge, skills and gender and, in general, that they are free from implicit biases that could result in any
kind of discrimination.
In particular, the Selection Policy states that selection procedures should not entail any discrimination that
may hinder the selection of female directors and that, by 2020, the number of female board members
should represent, at least, 30% of the total number of members of the Board of Directors. Additionally, it
shall ensure that the composition of the Board of Directors has an appropriate balance between the different
categories of board members and that non-executive directors represent an ample majority over executive
directors.
In addition, to ensure the proper composition and operation of the Board of Directors as a whole at all times,
its structure, size and composition will be analysed regularly, as well as its existing skills, knowledge,
experience and diversity and the areas that need to be improved in the future. For these purposes, the
relevant procedures are in place to identify and select the candidates that may, if required, be proposed as
new members of the Board of Directors, when considered necessary or appropriate. This analysis process
also considers the composition of the different Board committees that assist this corporate body in the
performance of its duties and that constitute an essential element of the BBVA Corporate Governance
System.
In carrying out the above-mentioned selection processes, the Appointments and Corporate Governance
Committee relies on the support of prestigious consultants to select independent directors internationally.
These consultants carry out an independent search for potential candidates that meet the profile defined in
each case by the Committee.
During these processes, the external expert is expressly requested to include women with suitable profiles
among the candidates to be submitted, and the Committee analyses the personal and professional profiles
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
171
of all candidates presented on the basis of the information provided by the external independent expert, in
light of the needs of the Bank's corporate bodies at any given time. For these purposes, it assesses the skills,
knowledge and experience required to be a director of the Bank and takes into account both the rules on
incompatibilities and conflicts of interest and the commitment deemed necessary to carry out the relevant
duties.
Continued in section H of this Report.
When, despite the measures taken, there are few or no female directors, explain the reasons:
C.1.7 Explain the conclusions of the appointments committee regarding the verification of compliance with
the board member selection policy. In particular, explain how this policy is promoting the objective of having
female directors represent at least 30% of the total number of board members by 2020.
Over the course of the financial year, the Appointments and Corporate Governance Committee has
continuously analysed the structure, size and composition of the Board of Directors and the principles and
targets established in the Selection Policy (as previously detailed in sections C.1.5 and C.1.6) on the basis of
the needs of the corporate bodies at any given time, the reality of the Group's structure and businesses and
the regulatory requirements and market best practices.
With regard to the suitability requirements to perform the duties of a director, specifically the requirements for
recognised business and professional reputation, adequate knowledge and experience and the ability to
exercise good governance of the Company (all of which are set out in the Selection Policy), the Appointments
and Corporate Governance Committee considered that the composition of the Board of Directors, as a whole,
is suitably balanced and that the Board has sufficient knowledge of the environment, activities, strategies and
risks of the Bank and the Group, which helps to improve its operation.
Furthermore, it has assessed that the Bank's directors have the necessary reputation to fulfil their roles, the
required skills, and sufficient availability to enable them to dedicate the time required to perform the duties
assigned to them.
Regarding the selection, appointment and rotation procedures for the Board of Directors, which aim to ensure
that the composition of the corporate bodies allows them to properly carry out the duties assigned to them in
the best corporate interest, the Committee deemed it appropriate, throughout the financial year, to continue
the continuous refreshment process of the Board of Directors. This process aims to ensure that the Board
includes directors with experience and knowledge of the financial and banking sector and of the Group's culture
and businesses, gradually including people with different professional profiles and experience to improve the
diversity of its corporate bodies.
The Committee therefore endeavours to ensure that the selection, appointment and rotation procedures
identify the most suitable candidates at any given time based on the needs of the corporate bodies, that they
promote diversity of experience, knowledge, skills and gender and, in general, that they are free from implicit
biases that could result any kind of discrimination. For these purposes, it has worked with a leading international
independent consultancy firm to help select directors.
The Committee also encourages the recruitment of new Board members that enable to fulfil or maintain the
targets set out in the Selection Policy, while ensuring that the selection processes are carried out to the highest
degree of professionalism and independence.
As a result of the above, prior to submitting the corresponding proposals for the appointment and re-election
of directors to the 2019 General Shareholders' Meeting, the Committee al so analysed and took into
consideration the Selection Policy requirements that endeavour that the number of female directors represent
at least 30% of the total number of Board members by 2020, that non-executive directors represent a majority
over executive directors, and that the number of independent directors account for at least 50% of all directors.
It also took into account its analysis of the structure, size and composition of the Board, including its assessment
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
172
of the Board's existing knowledge, experience and diversity and of those areas that need to be improved in
the future to ensure the proper composition and operation of the Board as a whole.
Thus, following the resolutions approved by the 2019 General Shareholders' Meeting, the number of female
directors remained a total of 4, which equals 26.67% of all directors (15) and is close to the 2020 target of at
least 30% set by the Selection Policy. Non-executive directors represent a clear majority on the Board (80%)
and the number of independent directors remains at least 50% of the total, in line with the provisions set out
in the aforementioned Selection Policy.
Similarly, for the purposes of the proposals for the appointment and re -election of directors that will be
submitted to the 2020 General Shareholders' Meeting, and in the framework of the refreshment process of
the Board that led to 2019 selection process, the Committee has analysed the size, structure and composition
of the Board, and concluded that BBVA's corporate bodies maintain a structure, size and composition that
meet their needs, enable best performance of their functions and, as in recent financial years, ensure that non-
executive directors represent a majority on the Board and that at least half of its directors are independent
directors, in line with the Regulations of the Board of Directors and the Selection Policy.
Continued in section H of this Report.
C.1.8 Where applicable, explain why proprietary directors have been appointed at the behest of shareholders
whose holding is less than 3% of the capital:
Name or corporate name of the shareholder
Justification
Indicate whether formal petitions for a seat on the Board have been denied if such request has come from
shareholders whose holding is equal to or greater than that of others at whose behest proprietary directors
were appointed. Where applicable, explain why these petitions were not granted:
NO
C.1.9 Where applicable, indicate the powers and faculties delegated by the Board of Directors to directors or
to board committees:
Name or corporate name of the director
or committee
Brief description
Carlos Torres Vila
Onur Genç
representation and
Holds wide-ranging powers of
administration in line with his duties as Chairman of the
Company.
Holds wide-ranging powers of
representation and
administration in line with his duties as Chief Executive
Officer of the Company.
José Manuel González-Páramo Martínez-
Murillo
Holds powers of representation and administration in line
with his duties as Head of Global Economics & Public Affairs.
Executive Committee
Pursuant to Article 30 of BBVA's Regulations of the Board
of Directors and Article 1.2 of the Regulations of the
Executive Committee, the Executive Committee will deal
with those matters of the Board of Directors that the Board
agrees to delegate to it, in accordance with the law, the
Bylaws, the Regulations of the Board of Directors or the
Regulations of the Executive Committee.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
173
C.1.10 Where applicable, identify any members of the Board who hold positions as directors, representatives
of directors or executives in other companies that belong to the same group as the listed Company:
Name or corporate name of
the director
Corporate name of the group's entity
Position
Carlos Torres Vila
Carlos Torres Vila
Onur Genç
Onur Genç
Onur Genç
BBVA Bancomer, S.A., Institución de
Banca Múltiple, Grupo Financiero BBVA
Bancomer
Grupo Financiero BBVA Bancomer, S.A.
de C.V.
BBVA USA Bancshares, Inc.
BBVA Bancomer, S.A., Institución de
Banca Múltiple, Grupo Financiero BBVA
Bancomer
Grupo Financiero BBVA Bancomer, S.A.
de C.V.
Director
Director
Director
Director
Director
Does the
director
have
executive
duties?
No
No
No
No
No
C.1.11 Where applicable, provide details of any Company directors (or representatives of corporate directors)
who also serve as directors (or representatives of corporate directors) on the boards of other entities that are
listed on a regulated stock market and do not form part of the Company Group, of which the company has
been informed:
Name or corporate name of the director
Corporate name of the listed
entity
Position
José Miguel Andrés Torrecillas
Zardoya Otis, S.A.
Director
Belén Garijo López
L'Oréal Société Anonyme
Director
Ana Cristina Peralta Moreno
Grenergy Renovables, S.A.
Director
Ana Cristina Peralta Moreno
Inmobiliaria Colonial, SOCIMI S.A. Director
Juan Pi Llorens
Ecolumber, S,A.
Chairman
C.1.12 Indicate and, where applicable, explain whether the Company has any agreed rules on the maximum
number of company boards on which its directors may sit, detailing where such rules have been set out:
YES
Explanation of the rules and where they are set out
Article 11 of the Regulations of the Board of Directors provides that, in the performance of their duties,
directors will be subject to the rules on limitations and incompatibilities established under the current
applicable regulations, and in particular, to the provisions of Act 10/2014 on the regulation, supervision and
solvency of credit institutions.
Article 26 of Act 10/2014 stipulates that the directors of credit institutions may not simultaneously hold
more positions than those provided for in the following combinations: (i) one executive position and two
non-executive positions; or (ii) four non-executive positions. Executive positions are understood to be those
that undertake management duties irrespective of the legal bond attributed by those duties. The following
will count as a single position: 1) exec utive or non-executive positions held within the same group; 2)
executive or non-executive positions held within (i) entities that form part of the same institutional protection
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
174
scheme or (ii) trading companies in which the entity holds a significant shareholding. Positions held in non-
profit organisations or entities or companies pursuing non-commercial purposes will not count when
determining the maximum number of positions. Nevertheless, the Bank of Spain may authorise members
of the Board of Directors to hold an additional non-executive position if it deems that this would not interfere
with the proper performance of the director's activities in the credit institution.
In addition, pursuant to the provisions of Article 11 of BBVA's Regulations of the Bo ard of Directors, directors
may not:
Provide professional services to companies competing with the Bank or any of its Group companies,
or agree to be an employee, manager or director of such companies, unless they have received
express prior authorisation from the Board of Directors or from the General Shareholders' Meeting,
as appropriate, or unless these activities had been provided or conducted before the director joined
the Bank, they had posed no effective competition and they had informed the Bank of such at that
time.
Have direct or indirect shareholdings in businesses or companies in which the Bank or its Group
companies hold an interest, unless such shareholding was held prior to joining the Board of Directors
or to the time when the Group acquired its holding in such businesses or companies, or unless such
companies are listed on national or international securities markets, or unless authorised to do so by
the Board of Directors.
Hold political positions or perform any other activities that might have public significance or may
affect the Company's image in any way, unless this is with prior authorisation from the Bank's Board
of Directors.
C.1.13 Indicate the amounts of the following items relating to the total remuneration of the board of directors:
Remuneration of the Board of Directors accrued during the financial year (thousands
of euro)
15.467
Amount of entitlements accrued by current directors in regard to pensions (thousands
of euro)
22.986
Amount of entitlements accrued by former directors in regard to pensions (thousands
of euro)
72.444
The remuneration included under "Remuneration of the Board of Directors accrued during the financial year"
includes the fixed remunerations awarded to all Board members in 2019, as well as the upfront part of the
Annual Variable Remuneration for 2019 for executive directors, in cash and shares, and the deferred part
of the Annual Variable Remuneration for 2016 for executive directors, in cash and shares, together with its
update, whose amounts have been determined in 2020 and will be paid, if conditions are met in the first
quarter of 2020.
C.1.14 Identify the members of senior management who are not also executive directors, and indicate the
total remuneration accrued to them throughout the financial year:
Name or corporate name
Position(s)
María Luisa Gómez Bravo
Global Head of Corporate & Investment Banking
Jorge Sáenz-Azcúnaga Carranza
Country Monitoring
Pello Xabier Belausteguigoitia Mateache
Country Manager Spain
Eduardo Osuna
Country Manager Mexico
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
175
David Puente Vicente
Global Head of Client Solutions
Jaime Sáenz de Tejada Pulido
Global Head of Finance
Rafael Salinas Martínez de Lecea
Global Head of Global Risk Management
Ricardo Forcano García
Global Head of Engineering & Organization
Carlos Casas Moreno
Ricardo Martín Manjón
Global Head of Talent & Culture
Global Head of Data
Victoria del Castillo Marchese
Global Head of Strategy & M&A
María Jesús Arribas de Paz
Global Head of Legal
Domingo Armengol Calvo
General Secretary
Ana Fernández Manrique
Global Head of Regulation and Internal Control
Joaquín Manuel Gortari Díez
Global Head of Internal Audit
Total remuneration of senior management
(thousands of euro)
19.508
C.1.15 Indicate whether there have been any amendments to the Regulations of the Board during the
financial year:
Yes
The Board of Directors, at its meeting held on 29 April 2019, approved a new consolidated text of the
Regulations of the Board, with the following major amendments:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
the reorganisation of the functions of the Board of Directors into five blocks, relating to: (a) the
policies and strategy of the Company and its Group, and its corporate and governance structure; (b)
the organisation and operation of the Board and its delegated and advisory bodies; (c) directors,
senior managers and employees; (d) financial statements, annual financial statements and
information to be provided by the Bank; and (e) other general responsibilities, such as the approval
of operations, the monitoring of adopted resolutions and the supervision and control of the Company
(Article 17);
the formalisation of the separation between the duties of the Group Executive Chairman and those
of the Chief Executive Officer, more clearly determining the duties that correspond to each and
expressly defining their respective areas of responsibility and the reporting carried out by each head
of area to each of them (Articles 18 and 20);
a revision of the duties of the Lead Director, establishing, inter alia, the requirement for the Lead
Director to be aware of the annual meeting schedule and the agenda proposals for Board meetings
before they are called, and to periodically report to the Board on their activity, their term of office
and the procedure for appointment to their role (Article 21);
the creation of the position of Deputy Chair of the Board of Directors, in line with the provisions of
the Bylaws (Article 19);
improvements in the operation of the corporate bodies, such as the reinforcement of the report on
the committees' activity to the Board and greater coordination between the corporate bodies;
changes to the regulations of the Board committees, in accordance with the redrafted Regulations
of each committee, as described in section C.2.3 of this report; and
(vii)
the inclusion that non-executive directors may hold coordination and follow-up meetings, convened
and led by the Lead Director (Article 37).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
176
C.1.16 Indicate the procedures for the selection, appointment, re -appointment and removal of directors.
Provide details of the competent bodies, the procedures to be followed and the criteria to be used in each
procedure.
Selection, appointment and re-appointment procedure:
In accordance with the Policy on the selection, appointment, rotation and diversity of the members of the
Board (the "Selection Policy"), described in sections C.1.5 and C.1.6 above, and with the provisions of the
Regulations of the Board of Directors, the General Shareholders' Meeting is responsible for appo inting the
members of the Board, without prejudice to the Board's authority to co-opt members if a seat falls vacant. This
is carried out based on the proposal submitted by the Appointments and Corporate Governance Committee
with regard to independent directors and subject to a prior report by said committee in the case of other
directors.
In all cases, the proposal must be accompanied by an explanatory report drawn up by the Board of Directors
detailing the skills, experience and merits of the candidate proposed, which will be added to the minutes of
the General Shareholders' Meeting or the Board of Directors meeting.
If the proposal concerns the re-election of a director, the resolutions and deliberations of the Board of Directors
will be carried out without the participation of the director whose re-election is being proposed, and this director
shall also leave the meeting if in attendance.
In any event, the persons proposed for appointment as directors must meet the requirements set out in the
current legislation, in the specific regulations applicable to credit institutions and in the Bank's internal
regulations. In particular, directors must meet the suitability requirements needed to hold the position and
must have recognised business and professional reputation, have the adequate knowledge and experience to
carry out their duties and be in a position to exercise good governance of the Company.
In addition, the Board of Directors will ensure that the procedures for the selection of directors favour diversity
within its membership and, in general, do not suffer from implicit biases that may imply any discrimination. It
will also submit its proposals to the General Shareholders' Meeting, seeking to ensure adequate representation
of the underrepresented gender and that, in its composition, there is an ample majority of non-executive
directors over executive directors and that at least one third of the Board are independent directors. In this
regard, the Selection Policy specifies that it shall ensure that the independent directors make up at least 50%
of the total number of directors.
To this end, and as detailed in sections C.1.15 and C.1.6, the Appointments and Corporate Governance
Committee will assess the balance of knowledge, skills and experience of the Board of Directors to ensure that
its composition allows an adequate performance of its functions. It will also assess the conditions that
candidates must satisfy to fill any vacancies that arise, and the time commitment considered necessary to
enable them to adequately perform their role, according to the needs of the Company's corporate bodies at
any given time. The Committee will ensure that selection procedures are not implicitly biased in such a way
that may entail any kind of discrimination and, in particular, that may hinder the selection of directors of the
underrepresented gender, endeavouring that directors of said gender who display the professional profile
sought are included amongst potential candidates.
Duration of mandate and termination:
The directors will hold their position for the term set out in the company Bylaws (three years, after which they
may be re-elected one or more times for an additional three-year term) or, if they have been co-opted, until
the first General Shareholders' Meeting has been held. They will resign from their positions when the term for
which they were appointed expires, unless they are re-elected.
Directors must also inform the Board of Directors of any circumstances affecting them that could harm the
company's standing and reputation, and any circumstances that may have an impact on their suitability for
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
177
their role. Directors must offer their resignation to the Board of Directors and accept its decision regarding
their continuity in office or not. Should the Board decide against their continuity, they are required to tender
their resignation, in the circumstances listed in section C.1.19 below.
In any event, directors will resign from their positions upon reaching 75 years of age and must submit their
resignation at the first meeting of the Bank's Board of Directors held after the General Shareholders' Meeting
approving the accounts for the financial year in which they reach said age.
C.1.17 Explain the extent to which the annual evaluation of the Board has led to significant changes in its
internal organisation and in the procedures applicable to its activities:
Description of the amendments
Article 17 of the Regulations of the Board of Directors states that the Board will assess the quality and
efficiency of the operation of the Board of Directors, based on the report submitted by the Appointments
and Corporate Governance Committee. This procedure was followed in the 2019 financial year, and, as in
previous years, several measures were implemented as a result, which are described below, and which form
part of the ongoing process of developing and adapting BBVA's Corporate Governance System to the needs
of the corporate bodies, to the environment in which it carries out its activities and to regulatory
requirements and best practices.
The BBVA Board of Directors carried out the self-assessment process for 2019 following a comprehensive
review of the effectiveness of the Corporate Governance System, in order to strengthen its operation and
efficiency. This review took into consideration, as a starting po int, the self-assessment process carried out
in 2018, as well as an analysis of the Bank's corporate governance structures performed by an independent
expert at the end of 2018.
As a result, during 2019, the corporate bodies defined and led the implementation of several improvements
in the Corporate Governance System, which were reflected in the new regulations for the Board and its
committees, approved in April 2019 and whose main changes are described in sections C.1.15 and C.2.3
of this report, in addition to other improvements in the operation and organisation of the corporate bodies;
all of which mainly include the following measures:
(i)
(ii)
(iii)
(iv)
the reinforcement of the structure of checks and balances, in particular, the progress made in the
separation between the duties of the Group Executive Chairman and those of the Chief Executive
Officer, eliminating the reporting line from the Chief Executive Officer to the Chairman; as well as
the revision of the duties of the Lead Director and the appointment of a Deputy Chair of the Board;
the redistribution of the functions of the Board committees and the enhancement of the periodic
report on the activities of the committees to the Board of Directors;
greater interaction between the corporate bodies regarding the decision-making process and the
exercise of their oversight and control functions; and
greater independence for the internal control functions, now under the direct authority of the Board
of Directors.
Identify the evaluated areas and describe the evaluation process conducted by the Board of Directors (assisted,
where applicable, by an external consultant) to assess the operation and composition of the Board, its
committees and any other area or aspect that was evaluated.
Description of the evaluation process and the areas evaluated
In accordance with Article 17 of the Regulations of the Board of Directors, the Board assesses the quality
and effectiveness of the operation of the Board of Directors, as well as the performance of the duties of the
Chairman of the Board, based in each case on the report submitted by the Appointments and Corporate
Governance Committee. The Board of Directors also assesses the performance of the Chief Executive Officer,
based on the report submitted by the Appointments and Corporate Governance Committee, which will
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
178
include the assessment made by the Executive Committee. Finally, the Board of Directors also assesses the
operation of its committees, based on the reports submitted thereby.
The assessment process carried out in relation to the 2019 financial year consisted of a comprehensive
analysis and evaluation of the quality and efficiency of the operation of the corporate bodies and the
performance of the Chairman and the Chief Executive Officer. Thi s assessment was carried out by the
Appointments and Corporate Governance Committee, taking into account several aspects, such as the
analysis of the Bank's corporate governance structures performed by an independent expert at the end of
the 2018 financial year, the Board's self-assessment for 2018, the directors' view of the operation of the
Board, as well as the different reports described below.
In the framework of the foregoing, the Board of Directors has assessed: (i) the quality and efficiency of the
operation of the Board of Directors; (ii) the performance of the duties of the Chairman and the Chief Executive
Officer; and (iii) the operation of the Board committees; as detailed below.
-
The Board of Directors analysed the quality and efficiency of its operation during the 2019 financial
year, on the basis of the report submitted by the Appointments and Corporate Governance Committee
on the quality and efficiency of the Board's operation and on its structure, size and composition. This
report contained a detailed analysis of the following: the structure, size and composition of the Board of
Directors, including the diversity of knowledge, skills, experience and gender required of its members;
the organisation, preparation and conduct of the meetings o f the Board; the independence and
suitability of directors, and the degree of commitment the Bank requires of Board members (in particular,
the chair of each of the committees) to ensure the proper performance of the duties of director and the
proper operation of the corporate bodies; taking into account the needs of the corporate bodies at any
given time and the Selection Policy.
- The performance assessment of the duties of the Chairman of the Board of Directors, led by the Lead
Director in accordance with Article 21 of the Regulations of the Board, was carried out by the Board on
the basis of the report submitted by the Appointments and Corporate Governance Committee, in
accordance with Article 5 of the Regulations of the Appointments and Corporate Governance
Committee, which details the key features of the Chairman's performance in 2019.
-
The performance assessment of the duties of the Chief Executive Officer was carried out by the Board
on the basis of the report submitted by the Appointments and Corporate Governance Committee,
including the assessment carried out in this respect by the Executive Committee , in accordance with
Article 17 of the Regulations of the Board, which details the key features of the Chief Executive Officer's
performance in 2019.
The Board has also assessed the quality and efficiency of the operation of the Executive Committee, and of
the Audit Committee, the Risk and Compliance Committee, the Appointments and Corporate Governance
Committee, the Remunerations Committee and the Technology and Cybersecurity Committee, on the basis
of reports submitted by their respective Chairs.
Continued in section H of this Report.
C.1.18 For those financial years in which an external consultant provided assistance for the evaluation, provide
details of any ongoing business relationships that the consultant or any entity in their group maintains with this
Company or any company in this Group.
The assessment carried out by the Board of Directors in 2019 regarding its quality and operation, its
committees and the performance of the duties of the Chairman of the Board and the Chief Executive Officer
took into account the analysis of the Bank's corporate governance structures performed by an independent
expert at the end of the 2018 financial year; without any knowledge of significant business relationships
between the Company and the external independent expert or any other company of its group.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
179
C.1.19 Indicate the circumstances under which directors are obliged to resign.
In addition to the circumstances established in applicable law, directors will cease to hold office when the term
for which they were appointed has expired, unless they are re-elected.
Accordingly, as set forth in Article 12 of the Regulations of the Board of Directors, directors must offer their
resignation to the Board of Directors and accept its decision regarding their continuity in office or not. Should
the Board decide against their continuity, they are required to tender their resignation in the following
circumstances:
If they find themselves in circumstances deemed incompatible or prohibited under current legislation,
in the Bylaws or in the Regulations of the Board of Directors.
When significant changes occur in their personal or professional situation that affect the status by
virtue of which they were appointed as directors.
In the event of serious breach of their duties in the performance of their role as directors ;
When, for reasons attributable to the directors in their status as such, serious damage has been done
to the Company's equity, standing or reputation; or
When they are no longer suitable to hold the status of director of the Bank.
C.1.20 Are supermajorities, other than those provided for in law, required for any type of decision?
Where applicable, describe the differences.
NO
C.1.21 Explain whether there are specific requirements, other than those relating to directors, to be appointed
Chairman of the Board of Directors.
NO
C.1.22 Indicate whether the Bylaws or Regulations of the Board establish an age limit for directors:
Age limit for the Chairman
0
YES
Age limit for the Chief
Executive Officer
0
Age limit for the directors
75
Remarks
As stipulated in Article 4 of the BBVA Regulations of the Board of Directors, directors will resign from their
position, in any event, upon reaching 75 years of age, and must submit their resignation at the first meeting
of the Bank's Board of Directors held after the General Shareholders' Meeting approving the accounts for the
financial year in which they reach said age.
C.1.23 Indicate whether the Bylaws or Regulations of the Board of Directors establish a limited mandate or
other stricter requirements for independent directors in addition to those provided for in law:
NO
C.1.24 Indicate whether the Bylaws or the Regulations of the Board of Directors establish specific rules for
proxy voting within the Board of Directors, how this is carried out and, in particular, the maximum number of
proxies that a director may have and whether there are any restrictions as to what categories may be appointed
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
180
as a proxy, beyond the limitations provided for in law. Where applicable, provide a brief description of these
rules.
Article 5 of the BBVA Regulations of the Board of Directors establishes that directors are required to attend
meetings of the corporate bodies on which they sit, except for a justifiable reason, and to participate in the
deliberations, discussions and debates held on matters submitted for their consideration. Directors should
personally attend the meetings that are held.
Notwithstanding the foregoing, as set forth in Article 26 of the Regulations of the Board of Directors, should it
not be possible for a director to attend any of the meetings of the Board of Directors, he or she may grant
proxy to another director to represent and vote on his or her behalf , through a letter or email sent to the
Company with the information required for the proxy director to be able to follow the absent director's
instructions. Applicable legislation states, however, that non-executive directors may only grant proxy to
another non-executive director. The same applies to attendance at meetings of Board co mmittees.
C.1.25 Indicate the number of meetings that the Board of Directors has held during the financial year. Where
applicable, indicate how many times the Board has met without the Chairman in attendance. The Chairman
will be considered to have been in attendance if represented by a proxy provided with specific instructions.
Number of Board meetings
Number of Board meetings without the Chairman in attendance
14
0
Indicate how many meetings were held by the Lead Director with the other Board members, without any
executive director in attendance or represented:
Number of meetings
64
Remarks
BBVA's Board of Directors has a Lead Director who performs the duties set forth in the applicable legislation,
as well as those stipulated by Article 21 of the Regulations of the Board of Directors.
In the performance of the functions assigned to this position, during the financial year, the Lead Director
maintained ongoing contact, held meetings and had conversations with other Bank directors in order to
seek their opinions on the corporate governance and operation of the Bank's corporate bodies.
In addition, in accordance with Article 37 of the Regulations of the Board, the Lead Director coordinated
various meetings of non-executive directors, which were held after each meeting of the Board of Directors.
Likewise, the Lead Director also serves, as of the date of this report, as Chair of the Risk and Compliance
Committee and sits on the Appointments and Corporate Governance Committee, both of which are
composed of non-executive directors and have a majority of independent directors. These positions
additionally allowed the Lead Director, in the course of his duties, to meet regularly with the Bank's non-
executive directors on the occasion of these meetings, which are added to the aforementioned meetings,
enabling the Lead Director to perform the duties.
José Miguel Andrés Torrecillas, who held the position of Lead Director until 29 April 2019, also held periodic
meetings and had conversations with other non-executive directors; however these meetings have not been
included in the number provided in this Section
Indicate how many meetings of the Board Committees were held during the financial year:
Number of meetings of the Executive Committee
Number of meetings of the Audit Committee
18
15
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
181
Number of meetings of the Appointments and Corporate Governance Committee
Number of meetings of the Remunerations Committee
Number of meetings of the Risk and Compliance Committee
Number of meetings of the Technology and Cybersecurity Committee
8
7
21
6
C.1.26 Indicate how many meetings were held by the Board of Directors during the financial year and provide
details on the attendance of its members:
Number of meetings attended by at least 80% of the directors
% of in-person attendance of the total number of votes cast during the financial
year
Number of meetings where all directors, or proxies granted with specific
instructions, attended in person
% of votes cast, with directors attending in person and with proxies granted with
specific instructions, of the total number of votes cast throughout the financial
year
14
100%
14
100%
Remarks
The Board of Directors holds meetings on a monthly basis, in accordance with the annual calendar of
ordinary meetings drawn up before the beginning of the financial year, and holds extraordinary meetings
as often as deemed necessary. The Board of Directors held 14 meetings during the 2019 financial year. All
directors attended all of the Board's meetings.
C.1.27 Indicate whether the individual or consolidated annual financial statements that are presented to the
Board for approval are certified beforehand:
NO
Where appropriate, identify the person(s) who has/have certified the company's individual and consolidated
annual financial statements prior to Board approval:
C.1.28 Explain the mechanisms, if any, established by the Board of Directors to prevent the individual and
consolidated statements from being presented at the General Shareholders' Meeting with a qualified auditors'
report.
Article 32 of the Regulations of the Board of Directors specifies that the Audit Committee, composed exclusively
of independent directors, shall assist the Board of Directors in overseeing the preparation of the financial
statements and public information, and the relationship with the external auditor and the Internal Audit function.
In this regard, in accordance with Article 5 of the Regulations of the Audit Committee, the duties of this
Committee include: oversee the effectiveness of the Company's internal control and risk management systems
in the preparation and reporting of financial information, including fiscal risks; discussing with the auditor any
significant weaknesses in the internal control system detected during the audit, without undermining its
independence; and overseeing the preparation and reporting of financial information and submitting
recommendations or proposals to the Board of Directors aimed at safeguarding the integrity thereof.
Moreover, said Article of the Regulations of the Audit Committee establishes that the Committee will verify,
with the appropriate frequency, that the external audit program is being carried out in accordance with the
contract conditions and is thereby meeting the requirements of the competent official authorities and the
corporate bodies. The Committee will also periodically—at least once per year—request from the auditor an
evaluation of the quality of the internal control procedures regarding the preparation and reporting of the
Group's financial information.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
182
The Committee will also be apprised of any infringements, situations requiring adjustments or anomalies that
may be detected during the course of the external audit, provided that these are relevant, i.e. those that, in
isolation or as a whole, may cause significant and substantive harm to the Group's equity, earnings or
reputation. Discernment of such matters will be at the discretion of the external auditor, who, if in doubt, must
opt to report on them.
In the performance of these duties, the Audit Committee maintains direct and ongoing contact with the external
auditors through monthly meetings, without the attendance of the Bank's executives. At these meetings, the
auditors provide detailed information on their work and the results thereof, which enables the Committee to
continuously monitor said work, ensuring that it is performed under optimal conditions and without
interference from management.
C.1.29 Is the Secretary of the Board a director?
NO
If the Secretary is not a director, complete the following table:
Name or corporate name of the secretary
Domingo Armengol Calvo
Representative
-
C.1.30 Indicate the specific mechanisms established by the Company to preserve the independence of the
external auditors, and, if any, the mechanisms to preserve the independence of financial analysts, investment
banks and rating agencies, including how legal measures have been implemented in practice.
As set forth in the Regulations of the Audit Committee, one of the Committee's functions, described in section
C.2.1, is to ensure the independence of the auditor through a dual approach:
Avoiding that the auditor's warnings, opinions or recommendations may be adversely influenced. To
this end, the Committee must ensure that compensation for the auditor's work does not compromise
either its quality or independence, in compliance with the account auditing legislation in force at any
given moment.
Establishing incompatibility between the provision of audit and consulting services, unless they are tasks
required by supervisors or the provision of which by the auditor is permitted by applicable legislation,
and there are no alternatives on the market that are equal in terms of content, quality or efficiency to
those provided by the auditor, in which case, agreement by the Committee will be required, and this
decision may be delegated in advance to its Chair. The auditor will be prohibited from providing
unauthorised services outside the scope of the audit, in compliance with the auditing legislation in force
at any given moment.
This matter is carefully considered by the Audit Committee, which holds meetings with the auditor's
representatives at each of the monthly meetings held, without Bank executives in attendance, to gain a detailed
understanding of any issues that may hinder the audit process, the progress and quality of the work carried
out, and to confirm independence in the performance of its work. The Committee also continuously oversees
the engagement of additional services to ensure compliance with the Regulations of the Audit Committee and
with applicable legislation and thus the independence of the auditor, in accordance with the Bank's internal
procedure.
Moreover, in accordance with the provisions of point f), section 4 of Article 529 quaterdecies of the Spanish
Corporate Enterprises Act and Article 5 of the Regulations of the Audit Committee, each year before the audit
report is issued, the Committee must issue a report expressing its opinion on whether or not the independence
of the auditor has been compromised. This report must, in all cases, contain a reasoned assessment of the
provision of each and every kind of additional service provided to the Group companies, considered individually
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
183
and collectively, different from the legal audit and relating to independence or the regulations on audit activity.
Each year, the auditor must issue a report confirming its independe nce via-à-vis BBVA or entities linked to
BBVA, either directly or indirectly, with detailed and itemised information on any kind of additional services
provided to these entities by the external auditor, or by the individuals or entities linked to it, as s et out in the
consolidated text of the Spanish Account Auditing Act.
The relevant auditor and Audit Committee reports confirming the auditor's independence were issued for the
2019 financial year, in compliance with the legislation in force. The Audit Committee report confirming the
independence of the auditor is available on the BBVA corporate website.
In addition, as BBVA's shares are listed on the New York Stock Exchange, it is subject to compliance with the
Sarbanes Oxley Act and its implementing regulations.
The Board of Directors also has a policy in place for communication and contact with shareholders and
investors. The policy is governed by the principle of equal treatment for all shareholders and investors who
are in the same position in terms of information, participation and the exercise of their rights as shareholders
and investors, inter alia.
This policy also contains the principles and channels established in relation to shareholders and investors,
which govern, where applicable, BBVA relations with other stakeholders, such as financial analysts,
management companies and custodians for the Bank shares, and proxy advisors, among others.
C.1.31 Indicate whether the Company has changed its external auditor during the financial year. If so, identify
the incoming and outgoing auditors:
NO
If there were any disagreements with the outgoing auditor, explain these disagreements:
NO
C.1.32 Indicate whether the auditing firm does any other work for the Company and/or its Group other than
the audit. If so, declare the amount of fees received for such work and the percentage that these f ees represent
of the total fees billed to the Company and/or its Group:
YES
Company
Group
companies
Amount of non-audit work (thousands of euro)
3
284
Total
287
Amount of non-audit work/total amount billed by
the auditing firm (%)
0.02%
1.68%
0.96%
C.1.33 Indicate whether the audit report of the annual financial statements for the previous financial year
contained reservations or qualifications. If so, indicate the reasons given by the Chair of the Audit Committee
to the shareholders at the general meeting to explain the content and scope of such reservations or
qualifications.
NO
C.1.34 Indicate the number of consecutive financial years during which the current audit firm has been auditing
the annual financial statements for the Company and/or its Group. Likewise, indicate the total number of
financial years audited by the current audit firm as a percentage of the total number of years in which the
annual financial statements have been audited:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
184
Number of consecutive financial years
Number of financial years audited by the current audit
firm/number of financial years the Company or its Group
have been audited (%)
Individual
3
Consolidated
3
15.79%
15.79%
C.1.35 Indicate whether there is a procedure in place (and provide details, where applicable) whereby directors
are provided with the information they need with sufficient time to be able to prepare for meetings of the
management bodies:
YES
Details of the procedure
As set forth in Article 5 of the Regulations of the Board of Directors, directors will be provided in advance
with the information needed to form an opinion with respect to the matters within the remit of the Bank's
corporate bodies, and may ask for any additional information and advice required to perform their duties.
They may also request the Board of Directors for external expert assistance for any matters submitted to
their consideration whose special complexity or importance so requires .
These rights will be exercised through the Chairman or Secretary of the Board of Directors, who will attend
to requests by providing the information directly or by establishing suitable arrangements within the
organisation for this purpose, unless a specific procedure has been established in the regulations governing
the Board of Directors' committees.
Furthermore, as set forth in Article 28 of the Regulations of the Board of Directors, the directors will be
provided with such information or clarifications as deemed necessary or appropriate with regards to the
matters to be discussed at the meeting, either before or during the progress thereof.
In addition, BBVA has an information model that ensures that decisions are made on the basis of complete,
comprehensive, appropriate and consistent information, prepared in accordance with common principles
so that analyses carried out by the corporate bodies are based on the correct data, thus allowing directors
to better perform their duties.
Thus, the Bank's corporate bodies have a procedure in place for verifying the information submitted for
consideration, coordinated by the Board's General Secretariat with the departments responsible for the
information, in order to provide directors with complete, comprehensive, appropriate and consistent
information in sufficient time for the meetings of the Bank's various corporate bodies. Information on the
meetings is made available to the Bank's corporate bodies via an online system, to which all members of
the Board have access.
C.1.36 Indicate and, where applicable, provide details of whether the Company has set out rules that require
directors to inform and, where applicable, resign under circumstances that may damage the Company's
standing and reputation:
YES
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
185
Explanation of the rules
As set forth in Article 12 of the Regulations of the Board of Directors, directors must also inform the Board
of Directors of any circumstances that may affect them and harm the Company's standing and reputation,
and any circumstances that may have an impact on their suitability to perform their role.
Directors must offer their resignation to the Board of Directors and accept its decision regarding their
continuity in office or not. Should the Board decide against their continuity, they are required to tender their
resignation when, for reasons attributable to the directors in their status as such, serious damage has been
done to the Company's equity, standing or reputation or when they are no longer suitable to hold the status
of director of the Bank, among other circumstances referred to in section C.1.19 of this report.
C.1.37 Indicate whether any members of the Board of Directors have informed the Company that they have
been accused or ordered to stand trial for any offences stated in Article 213 of the Spanish Corporate
Enterprises Act:
NO
Indicate whether the Board of Directors has examined the case. If so, explain the grounds for the decision
taken as to whether or not the director should retain the directorship post or, where applicable, describe the
actions taken or that are intended to be taken by the Board of Directors on the date of this report.
C.1.38 Detail any significant agreements reached by the Company that come into force, are amended or
concluded in the event of a change in the control of the Company stemming from a public takeover bid, and
its effects.
The Company has not reached significant agreements that come into force, are amended or concluded in the
event of a change in the control of the company stemming from a public takeover bid.
C.1.39 Identify on an individual basis, when referring to directors, and in aggregate form for all other cases,
and indicate in detail any agreements between the Company and its directors, managers or employees that
provide for severance pay (guarantee or golden parachute clauses) for when such persons resign or are
wrongfully dismissed or if the contractual relationship comes to an end owing to a public takeover bid or other
kinds of transactions.
Number of beneficiaries
65
Beneficiary type
65 managers and
employees
Description of the agreement
The Bank has no commitments to provide severance pay to directors.
As at 31 December 2019, a group of 65 managers and employees are
entitled to receive severance pay in the event of dismissal on grounds other
than their own will, retirement, disability or serious dereliction of duties. Its
amount will be calculated by factoring in the salary and length of service of
the employee, and will not be paid in the event of lawful dismissal at the
employer's decision on grounds of the employee's serious dereliction of
duties.
Indicate whether, in addition to the circumstances provided for by law, the corporate bodies and Group bodies
must be notified of and/or approve these contracts. If so, specify the procedures, the circumstances provided
for and the nature of the bodies responsible for approval or notification:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
186
Board of Directors
General meeting
Body that authorises the clauses
Yes
Is the general meeting informed of these clauses?
No
NO
YES
X
Remarks
The Board of Directors approves resolutions relating to the basic contractual conditions of members of
Senior Management, pursuant to the provisions of Article 17 of the Regulations of the Board of Directors,
hereby notified to the General Shareholders' Meeting through this Report and through the information
contained in the Annual Financial Statements, but does not approve the conditions applicable to other
employees.
C.2 Committees of the Board of Directors
C.2.1 Detail all of the committees of the Board of Directors, their members and the proportion of executive,
proprietary, independent and other external directors sitting thereon:
EXECUTIVE COMMITTEE
Name
Carlos Torres Vila
Onur Genç
Jaime Félix Caruana Lacorte
Carlos Loring Martínez de Irujo
José Maldonado Ramos
Susana Rodríguez Vidarte
Position
Chair
Member
Member
Member
Member
Member
Category
Executive
Executive
Independent
Other external
Other external
Other external
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
33.33%
0%
16.67%
50%
Explain the duties that have been delegated or assigned to this committee, other than those that have already
been described in section C.1.10, and describe both the procedures and organisational and operational rules
of the committee. For each of these duties, indicate its most significant actions during the financial year and
how it has, in practice, exercised each of the duties attributed to it, whether in law, in the bylaws or in other
corporate resolutions.
Pursuant to Article 30 of BBVA's Regulations of the Board of Directors and Article 1.2 of its own Regulations,
the Executive Committee will be made aware of matters delegated by the Board of Directors, as required
by law, the Bylaws, the Regulations of the Board or its own Regulations.
In particular, in accordance with the powers conferred on it by Article 5 of the Regulations of the Executive
Committee, approved by the Board on 29 April 2019, the Committee performs the following functions:
Support functions to the Board of Directors in decision-making:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
187
(i) In relation to strategy: establishment of the bases and previous analysis of the proposals submitted
to the Board of Directors in relation to the Bank's Strategic Plan or other strategic decisions,
including the Risk Appetite Framework; prior analysis of the strategic and financial aspects of
proposals submitted to the Board regarding corporate transactions that fall within its decision-
making remit; and decision-making or execution of the mandates which are expressly delegated by
the Board in these fields, once the decisions reserved to it are adopted by the Board.
(ii) In relation to budgets: prior analysis of budget proposals submitted to the Board; corresponding
decision-making for the implementation of the budget approved by the Board; and analysis of
deviations from the approved budget.
(iii) In relation to finance: establishment of the bases and previous analysis of the proposals submitted
to the Board of Directors relating to the Bank's funding plan, its capital and liquidity structure, and
its dividends policy; and decision-making on the implementation of mandates conferred upon it by
the Board in these areas.
(iv) In relation to business risk: analysis of matters relating to business risk in the proposals and plans
submitted to the Board of Directors.
(v) In relation to reputational risk: analysis, evaluation and management of matters relating to
reputational risk.
Prior reporting of policies submitted to the Board and approval of Company and Group general policies:
analysis, prior to their consideration by the Board, of the general Group and Company policies that, in
accordance with the law or internal regulations, must be approved by the Board, except for policies
relating to issues handled by other Board committees, which will be approved or reported to the Board
beforehand by the appropriate committee.
Oversight and control of the following matters: (i) Group activity and results; (ii) budget monitoring; (iii)
progress of the Strategic Plan, through the key performance indicators established for this purpose;
(iv) monitoring of the Group's liquidity and funding plan and capital situation, as well as the activities of
the Assets and Liabilities Committee; (v) monitoring of the evolution of the risk profile and the core
metrics defined by the Board; (vi) share-price performance and changes in shareholder composition;
(vii) analysis of the markets in which the Group operates; and (viii) progress of projects and investments
agreed within its remit, as well as those agreed by the Board within the strategic level.
Decision-making powers on the following matters: (i) investments and divestments between
EUR 50 million and EUR 400 million, unless they are of a strategic nature, in which case they will be
the Board's responsibility; (ii) plans and projects that are considered to be of importance to the Group
and that arise from its activities, and that are not within the remit of the Board; (iii) decisions regarding
the assumption of risks that exceed the limits set by the Board, which must be reported to the Board
at its first meeting thereafter for ratification; (iv) granting and revoking of the Bank's powers; (v)
proposals for the appointment and replacement of directors in the Bank's subsidiaries or investees
companies with more than EUR 50 million in own funds; and (vi) whether executive directors may
hold management positions in companies controlled, directly or indirectly, by the Bank, or in the
Group's investee companies.
The Regulations of the Executive Committee set out the operational principles of the Committee and lay
down the basic rules of its organisation and operation.
The Regulations of the Executive Committee specifically provide that the Committee will meet whenever it
is called to do so by its Chair, who is empowered to call the Committee and to set the agenda. The
regulations also set out the procedure for calling ordinary and extraordinary meetings.
For the proper performance of its functions, the Committee will have available, where necessary, the
reports of the relevant Board committees on matters within their remits, and may request, as a matter of
relevance, the attendance of the chairs of those committees at its own meetings where such reports are
to be dealt with.
Other aspects relating to its organisation and operation are subject to the provisions of the Committee's
own Regulations. All other matters not provided for in the aforementioned Regulations will be subject to
the Regulations of the Board of Directors, insofar as they are applicable.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
188
The most significant activities carried out by the Executive Committee in 2019 are detailed in section H of
this Report.
AUDIT COMMITTEE
Name
Jaime Félix Caruana Lacorte
José Miguel Andrés Torrecillas
Belén Garijo López
Lourdes Máiz Carro
Ana Cristina Peralta Moreno
Position
Chair
Member
Member
Member
Member
Category
Independent
Independent
Independent
Independent
Independent
% of proprietary directors
% of independent directors
% of other external directors
0%
100%
0%
Explain the duties assigned to this committee, including, where appropriate, any that are in addition to those
provided for by law, and describe both the procedures and organisational and operational rules of the
committee. For each of these duties, indicate its most significant activities during the financial year and how it
has, in practice, exercised each of the duties attributed to it, whether in law, in the bylaws or in other corporate
resolutions.
The main task of the Audit Committee is to assist the Board of Directors in overseeing the preparation of
the financial statements and public information, and the relationship with the external auditor and the
Internal Audit area.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the Audit
Committee, approved by the Board on 29 April 2019, and notwithstanding any other functions assigned
to it by law, by the Bank's internal regulations or by resolution of the Board of Directors, the Audit
Committee is entrusted with the following functions , inter alia:
In relation to overseeing the financial statements and public information:
Oversee the process of preparing and reporting financial information and submit recommendations
or proposals to the Board of Directors aimed at safeguarding the integrity thereof; and analyse, prior
to their submission to the Board of Directors and in enough detail to guarantee their accuracy,
reliability, sufficiency and clarity, the financial statements of the Bank and of its consolidated Group
contained in the annual, six-monthly and quarterly reports, as well as in all other required financial
and related non-financial information.
Oversee the effectiveness of the Company's internal control and risk management systems, in terms
of the process of preparing and reporting financial information, including fiscal risks, and discuss with
the auditor any significant weaknesses in the internal control system detected during the audit,
without undermining its independence.
In relation to the Internal Audit function:
Propose to the Board the selection, appointment, re-election and removal of the head of the Internal
Audit function; monitor the independence, effectiveness and functioning of the Internal Audit
function; analyse and set objectives for the head of the Internal Audit function and assess his or her
performance; ensure that the Internal Audit function has the necessary material and human
resources; and analyse and, where appropriate, approve the annual work plan for the Internal Audit
function.
Receive monthly information from the head of the Internal Audit function regarding the activities
carried out by the Internal Audit function, and regarding any incidents and obstacles that may arise,
and verify that Senior Management takes into account the conclusions and recommendations of the
reports; and also follow up on these plans.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
189
Be apprised of the audited units' degree of compliance with corrective measures previously
recommended by Internal Audit and report to the Board on those cases that may involve a significant
risk for the Group.
In relation to the external audit process:
Submit to the Board of Directors proposals for the selection, appointment, re -election and
replacement of the external auditor, taking responsibility for the selection process in accordance with
applicable regulations, as well as the hiring conditions of the external auditor, and to periodically
obtain information from the external auditor on the external audit plan and its execution, in addition
to preserving its independence in the performance of its functions.
Ensure the independence of the auditor: (i) by avoiding that the auditor's warnings, opinions or
recommendations may be adversely influenced, ensuring that compensation for the auditor's work
does not compromise either its quality o r independence; and (ii) by establishing incompatibility
between the provision of audit and consulting services, unless they are tasks required by supervisors
or the provision of which by the auditor is permitted by applicable legislation, and there are no
alternatives on the market that are equal in terms of content, quality or efficiency to those provided
by the auditor, in which case, agreement by the Committee will be required.
Establish appropriate relations with the auditor in order to receive information on any matters that
may jeopardise its independence and any other matters in connection with the auditing process.
Where appropriate, authorise the provision of additional services other than prohibited services, by
the auditor or associated persons or entities, the performance of which is required by applicable
regulations in each case, under the terms provided for in auditing legislation.
Issue, on an annual basis and before the audit report is issued, a report expressing an opinion on
whether the auditor's independence has been compromised. This report must, in all cases, contain a
reasoned assessment of the provision of each and every additional service referred to in the preceding
paragraph, considered individually and collectively, other than the legal audit, and relating to the
framework of independence or the regulations on audit activity .
Ensure that the auditor holds an annual meeting with the full Board of Directors to inform it of the
work undertaken and progress of the Company's risks and accounting situations.
The most significant activities carried out by the Audit Committee in the 2019 financial year, as well as its
organisational and operational rules, are detailed in section H of this Report.
Identify the directors who are members of the Audit Committee and have been appointed on the basis of their
knowledge and experience of accounting or auditing, or both, and specify the date on which the Chair of this
Committee was appointed to the post.
Name of the directors with experience
Date of appointment of the chair to the post
Jaime Félix Caruana Lacorte
José Miguel Andrés Torrecillas
Belén Garijo López
Lourdes Máiz Carro
Ana Cristina Peralta Moreno
29 April 2019
APPOINTMENTS AND CORPORATE GOVERNANCE COMMITTEE
Name
José Miguel Andrés Torrecillas
Belén Garijo López
José Maldonado Ramos
Juan Pi Llorens
Susana Rodríguez Vidarte
Position
Chair
Member
Member
Member
Member
Category
Independent
Independent
Other external
Independent
Other external
% of proprietary directors
% of independent directors
% of other external directors
0%
60%
40%
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
190
Explain the duties assigned to this committee, including, where appropriate, any that are in addition to those
provided for by law, and describe both the procedures and organisational and operational rules of the
committee. For each of these duties, indicate its most significant activities during the financial year and how it
has, in practice, exercised each of the duties attributed to it, whether in law, in the bylaws or in other corporate
resolutions.
The main task of the Appointments and Corporate Governance Committee is to assist the B oard of
Directors in matters relating to the selection and appointment of members of the Board of Directors; the
assessment of their performance; the drafting of succession plans; the Bank's Corporate Governance
System; and the oversight of the conduct of directors and any conflicts of interest that may affect them.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Appointments and Corporate Governance Committee, approved by the Board on 29 April 2019, and
notwithstanding any other duties assigned to it by law, by the Bank's internal regulations or by resolution
of the Board of Directors, the Appointments and Corporate Governance Committee is entrusted with the
following functions:
1) Submit proposals to the Board of Directors for the appointment, re-election or removal of independent
directors and report on proposals for the appointment, re-election or removal of the remaining
directors.
To this end, the Committee will evaluate the balance of knowledge, skills and experience of the Board
of Directors, as well as the conditions that the candidates must meet to cover the vacancies that
arise, assessing the dedication of time considered necessary to adequately carry out their duties, in
view of the needs of the corporate bodies at any given time.
The Committee will ensure that selection procedures are not implicitly biased in such a way that may
entail any kind of discrimination and, in particular, that may hinder the selection of directors of the
underrepresented gender, endeavouring that directors of said gender who display the professional
profile sought are included amongst potential candidates .
The Committee, when drafting the corresponding proposals for the appointment of directors, will
take into consideration, in case they may be considered suitable, any requests that may be made by
any member of the Board of Directors regarding potential candidates to fill the vacancies that have
arisen.
2) Propose to the Board of Directors the selection and diversity policies for members of the Board.
3) Establish a target for representation of the underrepresented gender on the Board of Directors and
draw up guidelines on how to reach that target.
4) Analyse the structure, size and composition of the Board of Directors, at least once per year, when
assessing its operation.
5) Analyse the suitability of the members of the Board of Directors.
6) Review the status of each director each year, so that this may be reflected in the Annual Corporate
Governance Report.
7) Report on proposals for the appointment of Chairman and Secretary and, where appropriate, Deputy
Chair and Deputy Secretary, as well as the Chief Executive Officer (Consejero Delegado).
8) Submit to the Board of Directors proposals for the appointment, removal or re-appointment of the
Lead Director.
9) Determine the procedure for assessing the performance of the Chairman of the Board of Directors,
the Chief Executive Officer, the Board of Directors as a whole and the Board committees, and oversee
its implementation.
10) Report on the quality and efficiency of the performance of the Board of Directors.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
191
11) Report on the performance of the Chairman of the Board of Directors and of the Chief Executive
Officer, incorporating for the latter the assessment made in this regard by the Executive Committee,
for the purpose of periodic assessment of both by the Board.
12) Examine and organise the succession of the Chairman of the Board of Directors, the Chief Executive
Officer and, where applicable, the Deputy Chair, in coordination with the Lead Director in the case of
the Chairman of the Board, and, where appropriate, submit proposals to the Board of Directors to
ensure that the succession takes place in an orderly and planne d manner.
13) Review the Board of Directors' policy on the selection and appointment of members of the Senior
Management, and submit recommendations with the Board when applicable.
14) Report on proposals for the appointment and removal of senior managers.
15) Regularly review and assess the Company's Corporate Governance System and, where applicable,
submit proposals to the Board of Directors, for approval or subsequent submission to the General
Shareholders' Meeting, on any amendments and updates that would contribute to its implementation
and continuous improvement.
16) Ensure compliance with the provisions applicable to directors contained in the Regulations of the
Board of Directors or in the applicable legislation, as well as with the rules relating to conduct on the
securities markets, and inform the Board of these if it deems it necessary .
17) Report, prior to any decisions that may be made by the Board of Directors, on all matters within its
remit as provided for by law, the Bylaws, the Regulations of the Board and these Regulations, and in
particular on situations of conflict of interest of the directors.
The organisational and operational rules and most significant activities carried out by the Appointments
and Corporate Governance Committee in 2019 are detailed in section H of this Report.
REMUNERATIONS COMMITTEE
Name
Belén Garijo López
Tomás Alfaro Drake
Carlos Loring Martínez de Irujo
Lourdes Máiz Carro
Ana Cristina Peralta Moreno
Position
Chair
Member
Member
Member
Member
Category
Independent
Other external
Other external
Independent
Independent
% of proprietary directors
% of independent directors
% of other external directors
0%
60%
40%
Explain the duties assigned to this committee, including, where appropriate, any that are in addition to those
provided for by law, and describe both the procedures and organisational and operational rules of the
committee. For each of these duties, indicate its most significant activities during the financial year and how it
has, in practice, exercised each of the duties attributed to it, whether in law, in the bylaws or in other corporate
resolutions.
The main task of the Remunerations Committee is to assist the Board of Directors in remuneration matters
within its remit and, in particular, those relating to the remuneration of directors, senior managers and
those employees whose professional activities have a significant impact on the risk profile of the Group
(the "Identified Staff"), ensuring observance of approved remuneration policies.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Remunerations Committee, approved by the Board on 29 April 2019, and notwithstanding any other
duties assigned to it by law, by the Bank's internal regulations or by resolution of the Board of Directors,
the Remunerations Committee broadly performs the following functions:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
192
1) Propose to the Board of Directors, for submission to the General Shareholders' Meeting, the
remuneration policy for directors, and also submit its corresponding report, all in accordance with
the terms established by applicable regulations at any given time .
2) Determine the remuneration of non-executive directors, as provided for in the remuneration policy
for directors, submitting the corresponding proposals to the Board.
3) Determine the extent and amount of individual remunerations, rights and other economic rewards,
as well as the remaining contractual conditions for executive directors, so that these can be
contractually agreed, in accordance with the remuneration policy for directors, submitting the
corresponding proposals to the Board of Directors.
4) Determine the objectives and criteria for measuring the variable remuneration of the executive
directors and assess the degree of achievement thereof, submitting the corresponding proposals
to the Board of Directors.
5) Analyse, where appropriate, the need to make ex-ante or ex-post adjustments to variable
remuneration, including the application of malus or clawback arrangements for variable
remuneration, submitting the corresponding proposals to the Board of Directors, prior report of
the corresponding committees in each case.
6) Annually submit the proposal of the annual report on the remuneration of the Bank's directors to
the Board of Directors, which will be submitted to the Annual General Shareholders' Meeting, in
accordance with the provisions of the applicable law.
7) Propose to the Board of Directors the remuneration policy for senior managers and rest of
Identified Staff. Likewise, oversee its implementation, including oversight of the process for
identifying such employees.
8) Propose to the Board of Directors, and oversee the implementation of, the remuneration policy
for the Group, which may include the policy for senior managers and other emplo yees of the
Identified Staff, stated in the previous paragraph.
9) Propose to the Board of Directors the basic contractual conditions for senior managers, including
their remuneration and severance indemnity in the event of termination.
10) Directly oversee the remuneration of senior managers and determine, within the framework of the
remuneration model applicable to Senior Management at any given time, the objectives and
criteria for measuring variable remuneration of the heads of the Regulation and Internal Control
function and of the Internal Audit function, submitting the corresponding proposals to the Board
of Directors, on the basis of those submitted to it in this regard by the Risk and Compliance
Committee and the Audit Committee, respectively.
11) Ensure observance of the remuneration policies established by the Company and review them
periodically, proposing, where appropriate, any modifications deemed necessary to ensure,
amongst other things, that they are adequate for the purposes of attracting and retaini ng the best
professionals, that they contribute to the creation of long-term value and adequate control and
management of risks, and that they attend to the principle of pay equity. In particular, ensure that
the remuneration policies established by the Co mpany are subject to internal, central and
independent review at least once a year.
12) Verify the information on the remuneration of directors and senior managers contained in the
various corporate documents, including the annual report on the remuneration of directors.
13) Oversee the selection of external advisers, whose advice or support is required for the
performance of their functions in remuneration matters, ensuring that any potential conflicts of
interest do not impair the independence of the advice provi ded.
The organisational and operational rules and most significant activities carried out by the Remunerations
Committee in 2019 are detailed in section H of this Report.
RISK AND COMPLIANCE COMMITTEE
Juan Pi Llorens
Name
Position
Chair
Category
Independent
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
193
José Miguel Andrés Torrecillas
Jaime Félix Caruana Lacorte
Carlos Loring Martínez de Irujo
Susana Rodríguez Vidarte
Member
Member
Member
Member
Independent
Independent
Other external
Other external
% of proprietary directors
% of independent directors
% of other external directors
0%
60%
40%
Explain the duties assigned to this committee and describe both the procedures and organisational and
operational rules of the committee. For each of these duties, indicate its most significant activities during the
financial year and how it has, in practice, exercised each of the duties attributed to it, whether in law, in the
bylaws or in other corporate resolutions.
The main task of the Risk and Compliance Committee is to assist the Board of Directors in the determination
and monitoring of the Group's risk control and management policy, including risk internal control and non-
financial risks, with the exception of those related to internal financial control, which are within the Audit
Committee’s remit; those related to technological risk, which are within the Technology and Cybersecurity
Committee’s remit; and those related to business and reputational risk, which are within the Executive
Committee’s remit. It will also assist the Board of Directors in the oversight of the Compliance function and
the implementation of a risk and compliance culture in the Group.
In particular, in accordance with the powers conferred on it by Article 5 of the Regulations of the Risk and
Compliance Committee approved by the Board on 29 April 2019, and without prejudice to any other
functions assigned to it either by law, the Bank's internal regulations or attributed to it by decision of the
Board of Directors, the Risk and Compliance Committee will have the following functions explained below,
including also the actions carried out by the Committee to fulfil said functions:
1. Analyse, on the strategic bases established either by the Board of Directors or the Executive Committee
at any given time, and submit to the Board proposals regarding the strategy, control and management
of the risks of the Group. These proposals will identify, in particular: (i) the Group's risk appetite; and
(ii) the level of acceptable risk in terms of the risk profile and risk capital broken down into the Group's
businesses and areas of activity. The proposals shall be analysed and submitted to the Board of Directors
by the Committee on the basis of the strategic and financial approaches determined by both the Board
of Directors and the Executive Committee.
With regard to the BBVA Group's Risk Appetite Framework for financial year 2019, the Risk and
Compliance Committee has revised the proposal for risk statements, metrics and limits prior to its
consideration and approval by the competent corporate bodies.
Furthermore, in several of its meetings the Risk and Compliance Committee analysed and finally
submitted proposals for the BBVA Group's Risk Appetite Framework for 2020 financial year, as well as
an update to the BBVA Group's General Risk Management and Control Model. These were submitted
to the Board of Directors for its consideration and, where appropriate, its approval, on the basis of the
approach taken by the Executive Committee.
On the other hand, during financial year 2019, the Risk and Compliance Committee reviewed reports
on the internal capital adequacy assessment process (ICAAP) and the internal liquidity adequacy
assessment process (ILAAP), as well as proposals on statements of capital and liquidity adequacy, as
legally required, in order to monitor the development of stress scenarios and verify their alignment
with the approved Risk Appetite Framework. This review was carried out with assistance from the Risk
and Finance areas, amongst others. This made it possible to ensure that these reports and proposals
faithfully reflected the Group's situation in the areas analysed prior to them being submitted for
consideration by the Executive Committee and the Board of Directors.
2. Address, in a manner consistent with the Risk Appetite Framework established by the Board of
Directors, the control and management policies for the different Group’s risks, including financial risks,
and, to the extent that they do not correspond to another Board Committee, non-financial risks, as well
as internal control and reporting systems.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
194
The Risk and Compliance Committee has participated in the annual review and updating of the
corporate risk management and control policies for the different risks of the Group, ensuring they are
consistent with the Group's General Risk Management and Control Model.
The Risk and Compliance Committee also confirmed that the Model itself is adequate and that the
Group has risk-management areas structured both at corporate level and in each geographical and/or
business area, that function correctly and provide the Committee with the information required to
understand the Group's risk exposure at all times, thus enabling the Committee to fulfil its monitoring,
supervision and control functions.
3. Supervise the effectiveness of the Regulation & Internal Control area (under whose direction the areas
of Supervisors, Regulation and Compliance are included, as well as Internal Risk Control and Non-
Financial Risks), which will report to the Board of Directors via the Committee, and in particular will: (i)
propose to the Board of Directors the appointment and removal of the Head of Regulation & Internal
Control; (ii) analyse and establish the objectives for the Head of Regulation & Internal Control, and carry
out evaluation of their performance; (iii) ensure that Regulation & Internal Control has the material and
human resources necessary for the effective performance of its functions; (iv) analyse and, where
appropriate, approve the annual work plan for Regulation & Internal Control, as well as its modifications,
and monitor compliance with it.
The Risk and Compliance Committee has monitored the effectiveness of the Regulation & Internal
Control area, in matters related to the Head of the area (e.g. appointment, setting objectives) and
ensuring that the area has the resources necessary to carry out its functions.
Continued in section H of this Report.
TECHNOLOGY AND CYBERSECURITY COMMITTEE
Name
Carlos Torres Vila
Tomás Alfaro Drake
Sunir Kumar Kapoor
Juan Pi Llorens
Jan Paul Marie Francis Verplancke
Position
Chair
Member
Member
Member
Member
Category
Executive
Other external
Independent
Independent
Independent
% of executive directors
% of proprietary directors
% of independent directors
% of other external directors
20%
0%
60%
20%
Explain the duties assigned to this committee and describe both the procedures and organisational and
operational rules of the committee. For each of these duties, indicate its most significant activities during the
financial year and how it has, in practice, exercised each of the duties attributed to it, whether in law, in the
bylaws or in other corporate resolutions.
The main task of the Technology and Cybersecurity Committee is to assist the Board of D irectors in
oversight technological risk and cybersecurity management and in monitoring the Group's technological
strategy.
In particular, in accordance with the powers conferred on it by Article 5 of the Regulations of the
Technology and Cybersecurity Committee approved by the Board on 29 April 2019, the Technology
and Cybersecurity Committee will have the following functions, without prejudice to any other functions
assigned to it by law, the internal rules of the Bank or by decision of the Board. These fall into two
categories, as explained below, including the activities carried out by the Committee to fulfil the respective
functions:
Duties relating to oversight of technological risk and cybersecurity management, such as:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
195
– Review the Group's exposures to the main technological risks, including the risks related to
information security and cybersecurity, as well as the procedures adopted by the executive area
to monitor and control such exposures.
– Review the policies and systems for the assessment, control and management of the Group's
technological infrastructures and risks, including the response and recovery plans in the event
of cyberattacks.
– Be informed of business continuity plans in matters of technology and technological
infrastructure.
– Being informed, as appropriate, about: (i) compliance risks associated with information
technology; (ii) the procedures established for identifying, assessing, overseeing, managing and
mitigating these risks.
– Being informed about any relevant events that may have occurred with regard to cybersecurity,
i.e. events that, either individually or as a whole, may cause significant impact or harm to the
Group's equity, results or reputation.
– Being informed, as required, by the head of the Technological Security area regarding the
activities it carries out, as well as any incidents that may arise.
To ensure compliance with these duties, the Technology and Cybersecurity Committee has performed
the following activities:
– Review of the Group's exposure to technological risk: The Committee has reviewed the Bank's
and the Group's exposure to the main technological risks, including risks relating to information
security and cybersecurity, ensuring that the executive area is equipped with procedures for
monitoring and controlling said exposures.
– Evaluation, control and management of risks: The Committee has monitored the Group's
technological infrastructures and risks, and is informed of the cyberattack response and recovery
plans, as well as the business continuity plans that affect the Group's main technological
infrastructures.
Furthermore, the Committee has been informed of the compliance risks associated with
information technology, such as those derived from managing data with regard to the regulation
on personal data protection and the new regulation on payment services, as well as the
procedures established to identify, manage, control and, if necessary, mitigate these types of
risks.
– Cybersecurity: The Committee has been informed of the Group's cybersecurity strategy and of
the systems and tools that the Group possesses in this regard.
Likewise, the Committee has been informed of any significant events that have occurred in
relation to cybersecurity, including those that have directly affected the Bank or the Group's
companies, as well as those that have affected important (national or international) entities or
companies, so that the Committee is aware of the threats to which the Group is (or may be)
exposed and of the technological defences that BBVA possesses at any time to combat possible
attacks.
– Reports from the head of the Technological Security area: The Committee has been informed
of the relevant events, projects, transactions, tasks and activity indicators affecting the Group's
various cybersecurity programmes.
Continued in section H of this report.
C.2.2 Fill in the following table with information on the number of female directors sitting on the committees
of the board of directors at the close of the last four financial years:
Number of female directors
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
196
Financial year
2019
Financial year 2018
Financial year 2017
Financial year
2016
Number
%
Number
%
Number
%
Number
%
Executive
Committee
Audit Committee
Appointments
and Corporate
Governance
Committee
Remunerations
Committee
Risk and
Compliance
Committee
Technology and
Cybersecurity
Committee
1
3
2
3
1
-
16.66%
60%
40%
60%
20%
-
1
3
3
3
1
-
16.66%
60%
60%
60%
20%
-
1
2
2
2
1
-
16.66%
40%
40%
40%
20%
-
1
2
2
1
1
-
16.66%
40%
40%
20%
20%
-
C.2.3 Indicate, where applicable, if there are regulations for the board committees, where they can be
consulted and any amendments made to them during the financial year. Indicate whether an annual report on
the activities of each committee has been prepared voluntarily.
The Board of Directors, at its meeting on 29 April 2019, approved amendments to the Regulations of the
Board of Directors and to those of its committees. As a result, all Board committees have their own regulations
with the following characteristics in common: (i) harmonised structure and content; (ii) the specific functions
of the respective committee; and (iii) referral to the Regulations of the Board as regards the operation of the
Committee in all matters not provided for in each set of Regulations. These are all available on the Bank's
corporate website (www.bbva.com), under "Shareholders and Investors", "Corporate Governance and
Remuneration Policy".
In particular, with regard to the Executive Committee, the Audit Committee, the Risk and Compliance
Committee and the Technology and Cybersecurity Committee, the following changes were approved which
resulted in new consolidated texts:
The Executive Committee’s delegated functions were specified and limited, and provides support to
the Board in matters of strategy and finance and acts as a delegated body under the scope established
in its Regulations. Furthermore, the framework for decision-making in relation to its various
responsibilities was reflected in the Regulations, distinguishing between: (i) support functions to
supporting the Board of Directors in decision-making; (ii) functions relating to the prior report on
policies that are submitted for approval by the Board of Directors and approval of general policies; (iii)
monitoring and control functions and (iv) decision-making functions on certain matters.
The responsibilities of the Audit Committee have been modified to focus on those relating to oversight
of the Bank's and the Group's financial information, to the relationship with the external auditor and to
the Internal Audit function as the Group's third line of defence or "third layer of control". Responsibilities
assigned to date relating to the areas of regulatory compliance and conduct of the directors were
removed from the scope of this Committee.
With regard to the Risk and Compliance Committee, all functions relating to the "second layer of
control" are now included within its remit, with the exception of functions which fall within the remit of
other committees in matters of internal financial control, technological risk and reputational and
business risk. Matters relating to regulatory compliance and legal risk are also now included within this
committee's remit. In addition, the Regulations also include a requirement that the Committee be
composed exclusively of non-executive directors, with a majority of independent directors.
With regard to the Technology and Cybersecurity Committee, technical improvements were
incorporated into its Regulations.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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Moreover, new Regulations were implemented for the Appointments and Corporate Governance Committee
and the Remunerations Committee, as said Committees did not have their own regulations, with the following
main changes being introduced:
Functions relating to the corporate governance of the Company, such as the assessment of Board
members' performance, succession plans and the periodic review of the Bank's corporate governance
system, as well as those relating to the conduct of directors, are now included within the remit of the
Appointments and Corporate Governance Committee.
Some of the functions of the Remunerations Committee were reinforced as part of the development
of the Bank's Corporate Governance System.
All of the committees of the Board of Directors, within the framework of the annual assessment process of
their operation, have prepared and submitted a report to the Board of Directors detailing the activity carried
out by each of them in the performance of their functions during 2019, which are explained in more detail in
sections C.1.17 and C.2.1 above.
D RELATED-PARTY TRANSACTIONS AND INTRA-GROUP TRANSACTIONS
D.1 Explain the procedure and competent bodies, if any, for approving related-party and intra-group
transactions.
Procedure for approving related-party transactions
Article 17.1.e) (iii) of the Regulations of the Board of Directors provides that the Board is responsible for
approving, where applicable, transactions carried out by the Bank or its Group companies with directors
or shareholders who, individually or in co ncert with others, hold a significant interest, including
shareholders represented on the Board of Directors of the Company or of other Group companies, or with
persons linked to them, with the exceptions provided for by law.
Moreover, Article 8.6 of the Regulations of the Board of Directors establishes that approval of the
transactions conducted by the Company or by Group companies with directors, when these correspond
to the Board of Directors, will be granted, where appropriate, prior report from the Audit Committee. The
only exceptions to this approval will be transactions that simultaneously meet the three following
specifications: (i) they are carried out under contracts with standard terms and are applied en masse to a
large number of customers; (ii) they are executed at rates or prices set in general by the party acting as
supplier of the goods or services; and (iii) they are worth less than 1% of the Company's annual revenues.
D.2 Detail transactions deemed to be significant for their amount or content carried out between the company
or its group companies and the company's significant shareholders:
Name or corporate
name of the significant
shareholder
Name or
corporate name
of the company
or group
company
Nature of the
relationship
Type of
transaction
Amount
(thousands of euro)
D.3 Detail any transactions deemed to be significant for their amount or content carried out between the
company or its group companies and the directors or executives of the company:
Name or corporate
name of the directors
or executives
Name or
corporate name
of the related
party
Relationship
Nature of the
transaction
Amount
(thousands of euro)
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original will prevail.
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D.4 Detail the significant transactions in which the company has engaged with other companies belonging to
the same group, except those that are eliminated in the process of drawing up the consolidated financial
statements and that do not form part of the company's usual trade with respect to its objects and conditions.
In any event, provide information on any intra-group transactions with companies established in countries or
territories considered tax havens:
Corporate name of the Group Company
BBVA GLOBAL FINANCE LTD.
BBVA GLOBAL FINANCE LTD.
BBVA GLOBAL FINANCE LTD.
Brief description of the
transaction
Current account deposits
Term account deposits
Issue-linked subordinated liabilities
Amount
(thousands of
euro)
2,369
6,053
178,083
D.5 Detail any significant transactions between the company or its group companies and other related parties,
which have not been listed in the previous entries.
Corporate name of the related party
Brief description of the
transaction
Amount
(thousands of
euro)
D.6 Detail the mechanisms established to detect, determine and resolve possible conflicts of interest between
the company and/or its group, and its directors, executives or significant shareholders.
Articles 7 and 8 of the Regulations of the Board of Directors regulate issues relating to possible conflicts of
interest as follows:
Article 7
Directors must adopt necessary measures to avoid incurring in situations where their interests, whether on
their own account or for that of others, may enter into conflict with the corporate interest and with their duties
with respect to the Company, unless the Company has granted its consent under the terms established in
applicable legislation and in the Regulations of the Board of Directors.
Likewise, they must refrain from participating in deliberations and votes on resolutions or decisions in which
they or a related party may have a direct or indirect conflict of interest, unless these are decisions relating to
appointment or removal of positions on the management body .
Directors must notify the Board of Directors of any situation of direct or indirect conflict that they or parties
related to them may have with respect to the Company's interests .
Article 8
The duty of avoiding situations of conflicts of interest referred to in the Article 7 above obliges the directors to
refrain from, in particular:
-
Carrying out transactions with the Company, unless these relate to ordinary transactions, performed under
standard conditions for customers and of minor relevance. Such transactions are deemed to be those
whose information is not necessary to provide a true picture of the Company's equity, financial situation
and results.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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- Using the name of the Company or invoking their position as director to unduly influence the performance
of private transactions.
- Making use of corporate assets, including the Company's confidential information, for private ends.
-
Taking advantage of the Company's business opportunities.
- Obtaining advantages or remuneration from third parties other than the Company and its Group,
associated to the performance of their position, unless they are mere tokens of courtesy.
-
Engaging in activities on their own account or on behalf of third parties that involve effective actual or
potential competition with the Company or that, in any other way, bring them into permanent conflict with
the Company's interests.
The above provisions will also apply should the beneficiary of the prohibited acts or activities described in the
previous sections be a related party to the director. However, the Company may dispense with the
aforementioned prohibitions in specific cases, authorising a director or a related party to carry out a certain
transaction with the Company, to use certain corporate assets, to take advantage of a specific business
opportunity or to obtain an advantage or remuneration from a third party.
When the authorisation is intended to dispense with the prohibition against obtaining an advantage or
remuneration from third parties, or affects a transaction whose value is over 10% of the corporate assets, it
must necessarily be agreed by the General Shareholders' Meeting.
The obligation not to compete with the Company may only be dispensed with when no damage is expected
to the Company or when any damage that is expected is compensated by the benefits that are foreseen from
the dispensation. The dispensation will be conferred under an express and separate resolution of the General
Shareholders' Meeting.
In other cases, the authorisation may also be resolved by the Board of Directors, provided that the
independence of the members conferring it is guaranteed with respect to the director receiving the
dispensation. Moreover, it will be necessary to ensure that the authorised transaction will not do harm to the
corporate equity or, where applicable, that it is carried out under market conditions and that the process is
transparent.
Approval by the Board of Directors of the transactions of the Bank or companies within its Group with directors
will be granted, where appropriate, after receiving a report from the Audit Committee. The only exceptions to
this approval will be transactions that simultaneously meet the three following specifications: 1) they are carried
out under contracts with standardised terms and are applied en masse to a large number of customers; 2)
they are executed at rates or prices set in general by the party acting as supplier of the goods or services; and
3) they are worth less than 1% of the Company's annual revenues.
Since BBVA is a credit institution, it is subject to the provisions of Spanish Law 10/2014 of 26 June, on the
regulation, supervision and solvency of credit institutions, whereby the directors and general managers or
similar positions may not obtain credits, collateral or guarantees from the Bank on whose board or
management they work, above the limit and under the terms established in Article 35 of Royal
Decree 84/2015, implementing Law 10/2014, unless expressly authorised by the Bank of Spain.
Continued in Section H of this report.
D.7 Are more than one of the Group's companies listed in Spain?
NO
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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Identify the other companies listed in Spain and their relationship with the company:
Identity and relationship with other listed Group companies
Indicate whether the respective areas of business and any potential relations between them, as well as any
potential business relations between the other listed company and other group companies, have been publicly
defined:
NO
Define any potential business relations between the parent company and the listed
subsidiary company, and between the listed subsidiary company and other group
companies
Identify the mechanisms established to resolve any potential conflicts of interest between the listed company
and other group companies:
Mechanisms to resolve potential conflicts of interest
E RISK CONTROL AND MANAGEMENT SYSTEMS
E.1 Explain the scope of the company's Risk Control and Management System, including risks of a tax-related
nature.
The BBVA Group has a general risk management and control model (hereafter, the "Model") adapted to its
business model, its organisation, its footprint and its Corporate Governance System. This allows the BBVA
Group to operate within the framework of the control and risk management strategy and policy defined
by the Bank's corporate bodies and to adapt to an ever-changing economic and regulatory environment,
addressing risk management on a global level in a manner adapted to the circumstances at any moment.
This Model is applied comprehensively in the Group and is made up of the basic elements set out below:
I.
II.
III.
IV.
Governance and organisation
Risk Appetite Framework
Evaluation, monitoring and reporting
Infrastructure
Furthermore, the Group promotes the development of a risk culture that ensures consistent application of
the Model within the Group, and that guarantees that the risk function is understood and internalised at
all levels of the organisation.
The Model applies to the management and control of financial and non-financial risks of the Group,
including tax risks, without prejudice that, on the tax scope, in addition to the management of this type of
risk as a non-financial risk, BBVA has tax risk management policy based on an adequate control
environment, a risk identification system and a monitoring process including continuous improvement of
the effectiveness of the established controls. This management model is revised and assessed by an
independent expert.
For more information on the basic elements of the Model, see "General risk management and control
model" in the "Risk management" chapter of the individual and consolidated Management Reports for
financial year 2019.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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E.2 Identify the corporate bodies responsible for drawing up and enforcing the Risk Control and Management
System, including tax-related risks.
With regard to risks, the Board of Directors is responsible for determining the risk control and management
policy and the oversight and control of its implementation.
In addition, and for a proper discharge of its functions, the Board of Directors is assisted by the Risk and
Compliance Committee in the matters specified below. It is also assisted by the Executive Committee,
which focuses on strategy, finance and business-related matters in an integrated manner, in order to
monitor the Group's risks.
In particular, the Board of Directors establishes the Group's risk strategy and, in the discharge of this
function, determines the risk control and management policy, which is set out in: the BBVA Group's Risk
Appetite Framework—which includes the Group's risk appetite statement and a set of quantitative metrics
originating from said statement that reflect the BBVA Group's risk profile —; the management policy
framework for the different types of risk to which the Bank is or may be exposed; and the BBVA Group's
risk control and management model.
Furthermore, it monitors the evolution of the BBVA Group's risks as well as the risks of each of its main
geographical and/or business areas, ensuring their compliance with the BBVA Group's Risk Appetite
Framework; also overseeing internal information and control systems.
At the executive level, the Head of Global Risk Management is responsible for managing all of the Group's
financial risks and is responsible for ensuring, within the scope of functions, that the BBVA Group's risks
are managed according to the established model.
For decision-making, the Head of Global Risk Management has a governance structure for the role that
culminates in a support forum, the Global Risk Management Committee (GRMC), which is established as
the main executive-level committee on the risks within its remit.
In addition, the Chief Risk Officers of the geographical and business areas report functionally to the Head
of Global Risk Management and report operationally to the head of their geographical and/or business
area. This dual reporting system aims to ensure the independence of the local risk management function
from the operating functions, and enable its alignment with the Group's risk-related corporate policies and
goals.
With regard to non-financial risks and internal control, the Group has a Regulation & Internal Control area
that is independent from the other units, and is responsible for proposing and implementing policies related
to non-financial risks and the Group's internal control model. This area also includes, amongst others, the
Non-Financial Risk, Regulatory Compliance and Internal Risk Control units.
For more information on the bodies responsible for risk management and control at BBVA, see
"Governance and organization" in the "General risk management and control model" section under the "Risk
management" chapter of the individual and consolidated Management Reports for financial year 2019.
As far as tax risk is concerned, the Tax function of the BBVA Group is responsible for establishing the
control mechanisms and internal rules necessary to ensure compliance with current tax regulations, as
well as proposing the tax strategy to the Board of Directors for their consideration and approval, where
appropriate. In addition, the Audit Committee is responsible for overseeing the tax risks in the process of
preparation and presenting financial information, which is evidenced by the reports made by the Head of
the BBVA Group's Tax function to the Committee.
E.3 Indicate the primary risks, including tax-related risks and, where significant, risk derived from corruption
(the latter can be understood to be within the scope of Royal Decree Law 18/2017) that could prevent business
targets from being met.
BBVA has processes to identify risks and analyse scenarios, enabling dynamic and advance risk
management. These processes are forward-looking to ensure the identification of emerging risks, and take
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
202
into account the concerns of both the business and corporate areas, as well as those of Senior
Management.
Risks are identified and measured in a consistent manner and in line with methodologies that are
considered adequate. Their measurement includes scenario analyses and stress testing, and considers the
controls to which the risks are subject.
In this regard, there are a number of emerging risks that could impact the Group's business performance.
These risks are organised into the following large blocks:
Macroeconomic and geopolitical risks
Regulatory and reputational risks
Business, legal and operational risks
For more information on these risks, see "Risk factors" in the "Risk management" chapter of the individual
and consolidated Management Reports for financial year 2019, and “Other non-financial risks” chapter of
the Non-Financial Information Statement, included in said Management Reports.
Likewise, amongst the possible crimes included in the criminal prevention model are those related to
corruption and bribery, since there are a number of risks that could manifest in a company with
characteristics such as those of BBVA. For more information on these, see "Other standards of conduct" in
the "Compliance system" section, which is included in the "Ethical behaviour" chapter of the Non-Financial
Information Statement in the individual and consolidated Management Reports for the 2019 financial year.
On the other hand, and not having the consideration of significant risk referred to in this section, the
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones,
S.L. (Cenyt). Such investigation includes the provision of services by Cenyt to the Bank.
In relation to this, on 29th July 2019, the Bank was named as an official suspect (investigado) in a criminal
judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No.
6 of the National High Court) for alleged facts which could be constitutive of bribery, revelation of secrets
and corruption.
Certain current and former officer and employees of the Group, as well as former directors have also been
named as official suspects in connection with this investigation.
The Bank has been and continues to proactively collaborate with the Spanish judicial authorities, and has
shared with the courts the relevant information from its on-going forensic investigation regarding its
relationship with Cenyt.
The Bank has also testified before the judge and prosecutors at the request of Central Investigating Court
No. 6 of the National High Court.
On 3 February 2020 the Bank was notified by the Central Investigating Court No. 6 of the National High
Court of the order lifting secrecy of the proceedings.
This criminal judicial proceeding is at a preliminary stage. Therefore, it is not possible at this time to predict
the scope or duration of such proceeding or any related proceeding or its or their possible outcomes or
implications for the Group, including any fines, damages or harm to the Group's reputation caused thereby.
E.4 Identify whether the company has a risk tolerance level, including tax-related risks.
The Group's Risk Appetite Framework, approved by the corporate bodies, determines the risks (financial
and non-financial risks, including tax risks) and the associated risk levels that the Group is prepared to
assume to achieve its objectives, considering the organic development pattern of the business. These are
expressed in terms of solvency, liquidity and funding, profitability and recurrence of revenue, which are
reviewed not only periodically but also if there are any substantial changes in the Bank's business strategy
or relevant corporate transactions.
The Risk Appetite Framework is expressed through the following elements:
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original will prevail.
203
Risk Appetite Statement: This contains the general principles of the Group's risk strategy and the
target risk profile.
Statements and core metrics: Derived from the appetite statement, these statements set out the
general risk management principles in terms of solvency, liquidity and funding, profitability and
income recurrence.
Statement and metrics by type of risk: The general principles for managing each type of risk are
established based on the core metrics and their thresholds for the risk in question. A series of
metrics are also determined, and adherence to these ensures compliance with the core metrics
and the Group's Risk Appetite Statement.
In addition to this Framework, there is a level of management limits that is defined and managed by the
areas responsible for managing each type of financial and non-financial risk (including tax risks) in
developing the structure of the metrics by type of risk. This is to ensure that anticipatory risk management
respects this structure and, in general, the established Risk Appetite Framework.
Each significant geographical area has its own Risk Appetite Framework consisting of its local Risk Appetite
Statement, core metrics and statements, statements and metrics by type of risk, which should be
consistent with those set at the Group level, but adapted to their reality and approved by the corresponding
corporate bodies of each entity. This Appetite Framework has a limit structure in line and consistent with
the above.
The corporate risk area works together with the various geographical and/or business areas to define their
Risk Appetite Framework, so that it is coordinated with, and integrated into the Group's Risk Appetite,
making sure that its profile is in line with the one defined. Also, for local monitoring purposes, the Chief
Risk Officer for the geographical area and/or business area will periodically report on the evolution of the
local Risk Appetite Framework metrics to their corporate bodies, as well as, where appropriate, to the
appropriate local top-level committees, following a scheme similar to that of the Group, in accordance with
its own corporate governance systems.
For more information on the Risk Appetite Framework described above and on its monitoring and
management integration, see "Risk Appetite framework" in the "General Risk management and control
model" section within the "Risk management" chapter of the individual and consolidated Management
Reports for financial year 2019.
E.5 State what risks, including tax-related risks, have occurred during the financial year.
Risk is inherent to financial activity and, therefore, the occurrence of risks in minor or major measure is an
inseparable part of the Group's activities. BBVA therefore offers detailed information on the evolution of
risks which, by their nature, continuously affect the Group in carrying out its activity. This information is
provided in its annual financial statements (notes 7 and 19 on risk management and tax risks, respectively,
in the BBVA Group's Consolidated Annual Financial Statements; and notes 5 and 17 on the same subject
matters, in the BBVA Group's Individual Annual Financial Statements, both for financial year 2019) and in
the individual and consolidated management reports, both for financial year 2019 ("Risk management"
chapter and “Other non-financial risks” chapter of the Non-Financial Information Statement).
E.6 Explain the response and oversight plans for the primary risks faced by the company, including tax-related
risks, and the procedures followed by the company to ensure that the Board of Directors responds to any new
challenges.
The BBVA Group's internal control system for operational risks is based on the best practices developed
both in the COSO (Committee of Sponsoring Organizations of the Treadway Committee) "Enterprise Risk
Management — Integrated Framework" and in the "Framework for Internal Control Systems in Banking
Organisations" drawn up by the Basel Bank for International Settlements (BIS).
The control model has a system comprising three lines of defence:
The Group's business and support units constitute the first line of defence. They are responsible
for primary management of current and emerging risks, and implementing control procedures for
risk mitigation. They are also responsible for reporting to thei r business/support unit.
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original will prevail.
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The second line of defence is comprised of specialised control units in different areas of risk:
Compliance, Legal, Finance, People, Physical security, Technological security, Information and
Data Security, Suppliers, Internal Risk Control and Processes. This line defines the control policies
in its specialist field, across the entire Entity, and provides training to areas exposed to risk. It also
contrasts the identification of current and emerging risks carried out by the different business and
support units, and assesses the adequacy and effectiveness of the control environments
implemented by them.
With regard to operational risk, the control activity for the first and second lines of defence will
be coordinated by the Non-Financial Risks unit, which will also be responsible for providing these
units with a common internal control methodology and global tools. The Group's Head of Non-
Financial Risks is responsible for the function and, together with the Head of Compliance and the
Head of Internal Risk Control, reports its activity to the Head of Regulation & Internal Control and
to the Board's Risk and Compliance Committee, assisting the latter in any matters where
requested.
The third line of defence is made up of the Internal Audit unit, for which the Group assumes the
guidelines of the Basel Committee on Banking Supervision and of the Institute of Internal Auditors.
Its function is configured as an independent and objective activity of evaluation of the first and
second lines of defence. It evaluates the efficiency and effectiveness of the internal control and
risk management policies and systems and of the processes and policies established by the Group.
As part of the second line of defence, the Group has a specific Internal Risk Control Unit, within the area
of Regulation & Internal Control, which, independently, performs, among other tasks, the contrast and
control of financial risk regulation and governance structure and its application and operation in the area
of Global Risk Management, as well as the contrast of the development and implementation of financial
risk management and control processes. It is also responsible for the validation of risk models.
The Group's Head of Internal Risk Control is responsible for the function, proposes its work plan to the
Head of Regulation & Internal Control and to the Risk and Compliance Committee, providing them with
the necessary information to monitor the activity plans proposed. Moreover it assists the Risk and
Compliance Committee it in any matters where requested.
In addition, the internal risk control function is global and transversal, covering all types of financial risks
and having specific units in all geographical and/or business areas, with functional dependency on the
Group's Head of Internal Risk Control.
As far as tax risk is concerned, the Tax Department, located within the Finance area, is responsible for
establishing the policies and controls necessary to ensure compliance at all times with the current tax
regulations and the tax strategy approved by the Board of Directors. Internal Financial Control, as a second
line of defence against financial, accounting and tax risks, is the area responsible for assessing the quality
of the design and effectiveness of the control model operating in tax processes, as detailed in section F of
this document.
Finally, in order to meet the new challenges that arise, the BBVA Group has a governance system that
allows the Board of Directors to be informed of the real and potential risks that affect or may affect the
Group at any time. Thus, in addition to the work carried out by the Bank's different areas of control (Risk,
Regulation & Internal Control and Internal Audit), as well as other areas of the Bank, such as the legal and
tax areas; and the corresponding Board committees (such as the Risk and Compliance Committee or Audit
Committee), there is also the prospective monitoring and supervision carried out by the Technology and
Cybersecurity Committee. Its work allows the Board of Directors to be informed of the main technological
risks to which the Group is exposed – including those relating to information security risks, information
technology compliance risks, and cybersecurity risks – as well as current technology strategies and trends,
and relevant cybersecurity events affecting the Group or which might affect it in the future, among other
functions.
F INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS OVER FINANCIAL REPORTING (ICFR)
Describe the mechanisms comprising the risk management and control systems for financial reporting (ICFR)
in your entity.
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original will prevail.
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F.1 The entity's control environment
Give information on the key features of at least:
F.1.1. Which bodies and/or functions are responsible for: (i) the existence and maintenance of an adequate
and effective ICFR; (ii) its implementation and (iii) its supervision.
Pursuant to Article 17 of its Regulations, the Board of Directors approves the financial information that BBVA
is required to publish periodically as a listed company. The Board of Directors has an Audit Committee whose
main task, among others, is to assist the Board in overseeing the preparation of financial statements and public
information, as well as monitoring internal financial control.
In this regard, the Regulations of BBVA's Audit Committee establish that one of the Committee's functions is to
oversee the effectiveness of the Company's internal control and the risk management systems in the process
of drawing up and presenting financial information, including tax risks, as well as discussing with the external
auditor the significant weaknesses of the internal control syste m detected during the audit.
The BBVA Group complies with the requirements imposed by the Sarbanes Oxley Act ("SOX") for each financial
year's consolidated annual financial statements due to its status as a publicly traded company listed with the
United States Securities Exchange Commission ("SEC"). The main Group executives are involved in the design,
compliance and maintenance of an effective internal control model that guarantees the quality and veracity of
the financial information. The Finance area has been responsible during 2019 for producing the consolidated
annual financial statements and maintaining the control model for financial information generation. Specifically,
this function is performed by the Financial Internal Control area, which is integrated within the Group's general
internal control model, which is outlined below.
In 2019, the BBVA Group strengthened its internal control model, which comprise two key elements. The first
element is the control structure, organised into three lines of defence, as described in section E.6 above, and
the second is a governance scheme known as Corporate Assurance, which establishes a framework for
overseeing the internal control model and for escalating the main issues relating to internal control within the
Group to Senior Management.
The Corporate Assurance model (in which the business areas, support areas and the areas specialising in
internal control participate), is organised into a system of committees that analyse the most relevant issues
related to internal control in each geographical area, with the participation of the country's top managers.
These committees report to the Group's Global Committee, chaired by the Chief Executive Officer with the
assistance of the main global executives responsible for the business and control areas.
The effectiveness of this internal control system is assessed periodically for those risks that may affect the
correct preparation of the Group's financial statements. The assessment is coordinated by the Internal Financial
Control area and involves control specialists from business and support areas. The Group's Internal Audit area
also performs its own assessment of the internal control system with regard to the generation of financial
information. In addition, the external auditor of the BBVA Group issues an opinion every year on the
effectiveness of internal control over financial reporting based on criteria established by COSO (Committee of
Sponsoring Organizations of the Treadway Commission) and in accordance with PCAOB (the US Public
Company Accounting Oversight Board) standards. This opinion appears in Form 20-F, which is filed every year
with the SEC.
The result of the annual internal assessment of the System of Internal Control over Financial Reporting, carried
out by Internal Audit and Internal Financial Control, is reported to the Audit Committee by the heads of Internal
Financial Control.
F.1.2. Whether, especially in the process of drawing up financial information, the following elements exist:
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original will prevail.
206
• Departments and/or mechanisms responsible for: (i) the design and review of the organisational structure; (ii)
the clear definition of lines of responsibility and authority, with an adequate distribution of tasks and functions;
and (iii) ensuring that sufficient procedures exist for their correct dissemination within the entity.
Financial information is produced in the local Finance Departments of the BBVA Group banks in the different
countries where it operates. The consolidation work is carried out in the Corporate Centre, in the Finance
Department, which has overall responsibility for the preparation and disclosure of the Group's financial and
regulatory information.
BBVA's organisational structure clearly defines lines of action and responsibility for the areas involved in the
generation of financial information, both at the individual entity level and consolidated Group level, and also
provides the channels and circuits necessary for the proper disclosure thereof, as well as a procedure for the
disclosure of the annual accounts. The units responsible for drawing up these financial statements have a
suitable distribution of tasks and the necessary segregation of functions to draw up these statements in an
appropriate operational and control framework.
Additionally, there is an accountability model aimed at extending the culture of internal control, and
commitment with its compliance. Those in charge of the design and operation of the processes that have an
impact on financial reporting certify that all the controls associated with its operation under their responsibility
are sufficient and have worked correctly.
• Code of conduct, approval body, degree of dissemination and instruction, principles and values included
(indicating whether there are specific mentions of recording transactions and drawing up financial information),
body in charge of analysing non-compliance and proposing corrective measures and sanctions.
BBVA has a Code of Conduct that is approved by the Board of Directors and reflects BBVA's specific
commitments with regard to one of the principles of its Corporate Culture: Integrity in the consideration and
undertaking of its business. This Code likewise establishes the corresponding whistleblowing channel regarding
possible infringements of the Code. It is the subject of training and refresher programmes, including key
personnel in the financial function.
Following the update to the Code in 2015, communication campaigns to share its new content have been in
place since 2016, making use of new formats and digital channels. In addition, a training plan has been
developed at a global level, reaching the entire workforce of the Group.
The Code of Conduct can be accessed on the Bank's website (www.bbva.com) and on the employees' website
(Intranet). Additionally, Group members undertake personally and individually to observe its principles and
rules in an express declaration of awareness and adhesion.
One of the functions of the Risk and Compliance Committee is to examine draft codes of ethics and conduct
and their respective modifications prepared by the corresponding area of the Group, and give its opinion in
advance of the proposals to be submitted to the Corporate Bodies.
Additionally, BBVA has adopted a structure of Corporate Integrity Management Committees (with individual
powers at jurisdiction or Group entity levels, as applicable). Their joint scope of action covers all the Group
businesses and activities and their main duty is to ensure effective application of the Code of Conduct. There
is also a Corporate Integrity Management Committee, whose scope of responsibility extends throughout BBVA.
The main mission of this committee entails ensuring uniform application of the Code in BBVA.
The Compliance Unit in turn independently and objectively promotes and supervises that BBVA acts with
integrity, particularly in areas such as money-laundering prevention, conduct with clients, security market
conduct, corruption prevention, and other areas that could entail a reputational risk for BBVA. The unit's duties
include fostering the knowledge and application of the Code of Conduct, promoting the drafting and
distribution of its implementing standards, assisting in the resolution of any concern that may arise regarding
the interpretation of the Code, and managing the Whistleblowing Channel .
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• Whistleblowing channel, which allows financial and accounting irregularities to be communicated to the audit
committee, as well as possible breaches of the code of conduct and irregular activities in the organisation,
reporting where applicable if this is confidential in nature.
Preservation of the Corporate Integrity of BBVA transcends merely personal account ability for individual
actions, it calls for all employees to have zero tolerance for activities that do not comply with the Code of
Conduct or that could harm the reputation or good name of BBVA. This attitude is reflected in everyone's
commitment to whistle-blowing, by timely communication, of situations that, even when unrelated to their
activity or area of responsibility, could be infringe regulations or contradict the values and guidelines of the
Code.
The Code of Conduct itself establishes the communication guidelines to follow and contemplates a
Whistleblowing Channel, guaranteeing the duty of discretion of reporting parties, the confidentiality of the
investigations and the prohibition of retaliation or adverse consequences in light of communications made in
good faith.
Telephone lines and email inboxes have been set up in each jurisdiction for these communications, available
on the Group Intranet.
As described in the previous section, BBVA has adopted a structure of Corporate Integrity Management
Committees (with individual powers at jurisdiction or Group entity levels, as applicable), whose joint scope of
action covers all the Group businesses and activities and whose functions and responsibilities (explained in
greater detail in their corresponding regulations) include:
Driving and monitoring global initiatives to foster and promote a culture of ethics and integrity among
members of the Group.
Ensuring the uniform application of the Code.
Promoting and monitoring the functioning and effectiveness of the Whistleblowing Channel.
In cases where they are not already included among the members of the Committee, informing Senior
Management and/or the person responsible for preparing the financial statements of any events and
circumstances from which significant risks might arise for BBVA.
In addition, the Risk and Compliance Committee supervises and controls the proper functioning of the
Whistleblowing Channel, receiving periodic reports from the Compliance unit.
• Periodic training and refresher courses for employees involved in preparing and revising financial information,
and in ICFR assessment, covering at least accounting standards, audit, internal control and risk management.
The Finance area has a specific programme of courses and seminars, run in both its face-to-face and virtual
campus, which complement the general training of all employees of the BBVA Group, in accordance to their
functions and responsibilities. Specific training and periodic refresher courses are provided on accounting and
tax regulations, internal control and risk management, particularly for teams in the areas involved in preparing
and reviewing the financial and tax-related information and in evaluating the internal control system, to help
them perform their functions correctly. These courses are taught by professionals from the area and renowned
external providers.
Additionally, the BBVA Group has a personal development plan for all employees, which forms the basis of a
personalised training programme to deal with the areas of knowledge necessary to perform their functions.
F.2 Financial reporting risk assessment
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Give information on at least:
F.2.1. The key features of the risk identification process, including error and fraud risks, with respect to:
• Whether the process exists and is documented.
The ICFR was developed by the Group Management in accordance with international standards set forth by
the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), which establishes five
components on which the effectiveness and efficiency of internal control systems must be based:
Establishing an adequate control environment for monitoring all these activities.
Assessing the risks that may be incurred by an entity in drawing up its financial information.
Designing the necessary controls to mitigate the most critical risks.
Establishing the adequate information circuits to detect and communicate the system's weaknesses or
inefficiencies.
Monitoring such controls to ensure that they are operational and to guarantee their effectiveness over
time.
In order to identify the risks with a greater potential impact on the generation of financial information, the
processes through which such information is generated are analysed and documented, and an analysis of the
risks, errors or inaccuracies that may arise in each is later conducted.
Based on the corporate internal control methodology, the risks are categorised by type, including process
errors and fraud, and their probability of occurrence and pos sible impact are analysed.
The process of identifying risks in the preparation of Financial statements, including risks of error, falsehood
or omission, is carried out by the first line of defence: those responsible for each of the processes that
contribute to the preparation of financial information and those responsible for control. This risk identification
is performed taking into account the theoretical risk model and the mitigation and control framework previously
defined by the second line of defence, which, in the case of Finance, is the Internal Financial Control unit (tax
and financial reporting risk specialist), who, in turn, challenges the functioning and effectiveness of the controls
implemented.
The scope of the periodic assessment –annual, quarterly or monthly- of their controls is determined based on
the significance of the risks, thus ensuring coverage of the risks considered critical for the financial statements.
The assessment of the aforementioned risks and the design and effectiveness of their controls begins with the
understanding and knowledge of the analysed operating process, considering criteria of quantitative
materiality, likelihood of occurrence and economic impact, in addition to qualitative criteria associated with the
type, complexity and nature of the risks or of the business or process structure itself.
The system for identifying and assessing the risks of internal control over financial reporting is dynamic. It
evolves continuously, always reflecting the reality of the Group's business, changes in operating processes, the
regulations applicable at all times, the risks affecting them and the controls that mitigate them.
All this is documented in a corporate management tool developed and managed by the Non-Financial Risk
area (STORM). This tool documents all the risks and controls, by process, which are managed by the different
risk specialists, including the Financial Internal Control unit.
• Whether the process covers all of the objectives of financial re porting (existence and occurrence;
completeness; valuation; presentation, breakdown and comparability; and rights and obligations), whether the
information is updated and how frequently.
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Each of the processes identified in the BBVA Group for drawing up fi nancial information aim to record all
financial transactions, value the assets and liabilities in accordance with applicable accounting regulations and
provide a breakdown of the information in accordance with regulatory requirements and market needs.
The financial information control model analyses each of the phases of the processes mentioned above (from
procedural governance, documentation, criteria setting, decision making, information provision, application
operation, monitoring information generated, and reporting), in order to ensure that the identified risks are
adequately covered by controls that operate efficiently. The control model is updated when changes arise in
the relevant processes for producing financial information.
• The existence of a process for identifying the consolidation perimeter, taking into account aspects including
the possible existence of complex corporate structures, or instrumental or special purpose vehicles.
The Finance area includes a department responsible for the Group's financial consolidation, which carries out
a monthly process of identification, analysis and updating of the perimeter for the Group's consolidated
companies.
In addition, the information from the consolidation department on new companies set up by the Group's
different units, and the changes made to existing companies, is compared with the data analysed by a specific
committee at corporate level, whose function is to analyse and document the changes in the composition of
the corporate group (Corporate Structure Committee - CES).
In addition, the Finance area of the Bank, in controlling special purpose entities, makes a periodic report to the
Audit Committee on the structure of the Group of companies.
• Whether the process takes into account the effects of other types of risks (operational, technological, financial,
legal, tax-related, reputational, environmental etc.) insofar as they impact the financial statements.
The model of internal control over financial reporting applies not only to processes for directly drawing up such
financial information but also to all operational or technical processes that could have a relevant impact on the
financial, accounting, tax-related or management information.
As mentioned above, the Group has an internal control model coordinated by the Regulation & Internal Control
area, which uses a single methodology to assess of all the Group's Non-Financial Risks (mainly operational,
technological, financial, legal, tax-related, reputational, third party and compliance). All the specialist risk areas
and control assurers use a common tool (STORM) to document the identification of the risks, the controls that
mitigate those risks and the assessment of their effectiveness.
There are control assurers in all the operational or support areas, and therefore any type of risk that may affect
the Group's operations is analysed under that methodology and is included in the ICFR insofar as it may have
an impact on the financial information.
• Which of the entity's governing bodies supervises the process.
The process for identifying risks and assessing the design, effectiveness and suitability of the controls for
generating financial information is documented at least once a year, and is overseen by the Internal Audit area.
Moreover, the Group's head of Internal Financial Control reports annually to the Audit Committee on analysis
work that has been carried out, on the conclusions of the assessment of the control model relating to the
generation of financial information, and on the process for downstream certification of the effectiveness of the
control model. This process is undertaken by the financial officers of the main entities and holding control
specialists. This work follows the SOX methodology in compliance with the l egal requirements, under the
regulation, on systems of internal control over financial reporting, and is included in Form 20-F, submitted
annually to the SEC, as indicated in point F.1 above.
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F.3 Control activities
Give information on the main features, if at least the following exist:
F.3.1. Procedures for review and authorisation of financial information and the description of the ICFR, to be
published on the stock markets, indicating who is responsible for it, and the documentation describing the
activity flows and controls (including those concerning risk of fraud) for the different types of transactions that
may materially impact the financial statements, including the procedure for closing the accounts and the
specific review of the relevant judgements, estimates, valuations and projections.
All of the processes relating to the generation of financial information are documented, as is the corresponding
control model, including potential risks associated with each process and the controls put in place to mitigate
them. As explained in section F.2.1, the aforementioned risks and controls are recorded in the corporate tool
STORM, which also includes the result of the assessment of the operation of the controls and the degree of
risk mitigation.
In particular, the main processes relating to the generation of financial information are found in the Finance
area, and they are: accounting, consolidation, financial reporting, financial planning and monitoring, and
financial and tax management. The analysis of these processes, their risks and their controls is also
supplemented by that of all other critical risks that may have a financial impact from business areas or other
support areas.
In the aforementioned review procedures, special attention is paid, from a control point of view, to the financial
and tax-related information disseminated to the securities markets, including the specific review of controls on
relevant judgements, estimates and projections used in the preparation of the above-mentioned information.
As noted in the annual financial statements, it is occasionally necessary to make estimates to determine the
amount at which some assets, liabilities, income, expenses and commitments should be recorded. These
estimates are mainly related to:
The value corrections of certain financial assets.
The assumptions used to quantify certain provisions and in the actuarial calculation of liabilities and
commitments for post-employment and other obligations.
The useful life and impairment losses of tangible and intangible assets.
The appraisal of goodwill and assignments of the price paid in business combinations.
The fair value of certain unlisted assets and liabilities.
The recoverability of deferred tax assets.
These estimates are made based on the best information available on the closing date of the financial statement
and, together with other relevant issues for the closing of the annual and six-monthly financial statements, are
analysed and authorised by a Technical Committee.
F.3.2. Internal control procedures and policies for information systems (among others, access security, change
control, their operation, operational continuity and segregation of functions) that support the relevant
processes in the entity with respect to drawing up and publishing financial information.
The Group's current internal control model has expanded the catalogue of technological risks managed as non-
financial risks to three distinct categories:
Physical Security: covers risks from inadequate management of the physical security of assets
(including technology) and individuals due to the damage and deterioration of such assets.
Technological Security: covers risks from inadequate management of technology changes, IT system
failures, low availability and IT performance risk, IT system integrity risk, application tampering fraud,
and logical impersonation.
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Information and Data Security: covers risks from unauthorised access, modification or destruction of
data infrastructure, loss, theft or misuse of information and cyberattacks that affect the privacy,
confidentiality, availability, and integrity of information.
The internal control models therefore include procedures and controls regarding the operation of information
and access security systems, the segregation o f functions, and the development and modification of computer
applications used to generate financial information.
Both types of control are identified in the model of internal control over financial reporting and are analysed
and assessed periodically, in order to guarantee the integrity and reliability of the information drawn up.
With all these mechanisms, the BBVA Group can confirm that adequate management of access control is
maintained, the correct and necessary steps are taken to put applications into production as well as ensuring
their subsequent support, the creation of backup copies, and assurance of continuity in the processing and
recording of operations.
In summary, the entire process of preparing and reporting financial information has established and
documented the procedures and control models for technology and IT systems necessary to provide
reasonable assurance of the correctness of the BBVA Group's public financial information.
F.3.3. Internal control procedures and policies designed to supervise the management of activities
subcontracted to third parties and those aspects of evaluation, calculation and assessment outsourced to
independent experts which may materially impact the financial statements.
The internal control model sets o ut specific controls and procedures for the management of subcontracted
activities or those aspects of evaluation, calculation and assessment of assets or liabilities outsourced to
independent experts.
There is a specialist area of risk arising in operations with third parties ("third party"), a regulation and a
committee for non-financial operational risk admission, which includes outsourcing-related matters and
establishes and supervises the requirements to be fulfilled at the Group level for the activit ies to be
subcontracted.
There are procedural manuals for the outsourced financial processes that identify the procedures to be followed
and the controls to be applied by the service provider units and outsourcing units. The controls established in
the outsourced processes concerning the generation of financial information are also tested by the Internal
Financial Control area.
The valuations from independent experts used for matters relevant for generating financial information are
included within the standard circuit of review procedures executed by internal control, internal auditing and
external auditing.
F.4 Information and communication
Give information on the main features, if at least the following exist:
F.4.1. A specific function in charge of defining and maintaining accounting policies (accounting policy
department or area) and resolving queries or conflicts stemming from their interpretation, ensuring fluent
communication with those in charge of operations in the organisation, and an up-to-date manual of accounting
policies, communicated to the units through which the entity operates.
The organisation has two Technical Committees: one for Accounting and one for Capital. The purpose of these
committees is to analyse, study and issue standards that may affect the compilation of the Group's financial
and regulatory information, to determine the accounting and solvency criteria required to ensure that
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transactions are booked correctly, and to calculate capital requirements within the framework of the applicable
standards.
The Group also has an Manual for Accounting Policies, which is updated and made available to all Group units
by means of the Intranet. This Manual is the tool that guarantees that all the decisions related to accounting
policies or specific accounting criteria to be applied in the Group are supported and are standardised. It is
approved by the Technical Accounting Committee and is documented and updated for use and analysis by all
the Group's entities.
F.4.2. Mechanisms to capture and prepare financial reporting in standardised formats, for application and use
by all of the units of the entity or the group, that support the main financial statements and the notes, and the
detailed information on ICFR.
The BBVA Group's Finance area and the countries' financial management units are responsible for the processes
for preparing financial statements in accordance with the current accounting and consolidation manuals. There
is also a consolidation computer application that collects the accounting information of the various companies
within the Group and performs the consolidation processes, including the standardisation of accounting criteria,
aggregation of balances and consolidation adjustments.
Control measures have also been implemented in each of the aforementioned processes, both locally and at
consolidated level, to ensure that all the data supplying the financial information is collected in a
comprehensive, exact and timely manner. There is also a single and standardised financial reporting system
that is applicable to and used by all the Group units and supports the main financial statements and the
explanatory notes. There are also control measures and procedures to ensure that the information disclosed
to the markets includes a sufficient level of detail to enable investors and other users of the financial information
to understand and interpret it.
F.5 Supervision of the system's operation
Give information on the key features of at least:
F.5.1. The ICFR supervision activities carried out by the audit committee and whether the entity has an internal
audit function with powers that include providing support to the audit committee in its task of supervising the
internal control system, including the ICFR. Likewise, information will be given on the scope of the ICFR
assessment carried out during the financial year and of the procedure by which the person in charge of
performing the assessment communicates its results, whether the entity has an action plan listing the possible
corrective measures, and whether its impact on financial reporting has been considered.
The internal control units of the business areas and of the support areas conduct a preliminary assessment of
the internal control model, assess the risks identified in the processes, the effectiveness of controls, and the
degree of mitigation of the risks, as well as identifying weaknesses, and designing, implementing and
monitoring the mitigation measures and action plans.
The first assessment of the effectiveness of the controls should be carried out by the RCA (Risk Control Assurer).
Later it is the RCS (Risk Control Specialist –second line of defence-) who must challenge the design and
operation of the controls in order to issue a conclusion on the ope ration of the control model on the risks
covered by its field of expertise.
BBVA also has an Internal Audit unit that supports the Audit Committee with regard to the independent
supervision of the internal financial information control system. The Internal Audit function is entirely
independent of the units that draw up the financial information.
All the weaknesses in controls, mitigation measures and specific action plans are documented in the corporate
tool STORM and submitted to the internal control and operational risk committees of the areas, as well as to
the local or global Corporate Assurance Committees, based on the significance of the detected issues.
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In summary: both the weaknesses identified by the internal control units and those detected by the internal or
external auditor have an action plan in place to correct or mitigate the risks.
During the 2019 financial year, the areas responsible for Internal Control conducted a full assessment of the
system for internal control over financial reporting, and, to date, no material or significant weakness have been
revealed therein affecting the drawing up of financial information.
Additionally, in compliance with the SOX, the Group's Internal Control and Internal Auditing areas annually
assesses the effectiveness of the model of internal control over financial reporting on a group of risks (within
the perimeter of SOX companies) that could affect the drawing up of financial statements at local and
consolidated levels. This perimeter incorporates risks and controls in Finance and other specialisms that are
not directly financial (technology, risks, operational processes, human resources, procurement, legal, etc.).
The results of this assessment are reported annually to the Audit Committee.
F.5.2. Whether there is a discussion procedure via which the auditor (in line with the auditing technical
standards), the internal audit function and other experts can inform senior management and the audit
committee or the entity's directors of significant weaknesses in the internal control encountered during the
review processes for the annual financial statements or any others within their remit. Also provide information
on whether there is an action plan to try to correct or mitigate the weaknesses observed.
As described in section F.5.1 above, the Group has a procedure in place whereby the internal auditor and the
heads of Internal Financial Control report to the Audit Committee any significant internal control weaknesses
detected in the course of their work. Any significant or material weaknesses, if present, will likewise be reported.
Similarly, there is a procedure whereby the external auditor reports to the Audit Committee the result of their
work assessing the system for internal control over financial information.
Since BBVA is listed with the SEC, the BBVA Group's auditor annually issues its opinion on the effectiveness of
the internal control over financial reporting contained in the Group's consolidated annual financial statements
on 31 December each year, under PCAOB (Public Company Accounting Oversight Board) standards, with a
view to filing the financial information with the SEC on Form 20-F. The latest report issued on the financial
information for the 2018 financial year is available on www.sec.gov and www.bbva.com.
All control weaknesses identified by the Internal Control, Internal Audit and external audit areas have an action
plan for their resolution that is also presented to the Audit Committee.
The internal control oversight carried out by the Audit Committee, described in the Audit Committee
Regulations published on the Group website, www.bbva.com, includes the following activities:
Analyse, prior to their submission to the Board of Directors and in enough detail to guarantee their
accuracy, reliability, sufficiency and clarity, the financial statements of the Bank and of its consolidated
Group contained in the annual, six-monthly and quarterly reports, as well as in all other required financial
information and related non-financial information. For this purpose, the Committee will have the support
it needs from the Group's Senior Management especially that of the area responsible for accounting
functions, and from the Company and Group auditor, as well as all the necessary information made
available to it with the level of aggregation deemed appropriate.
Review the necessary consolidation perimeter, the correct application of accounting criteria, and all the
relevant changes relating to the accounting principles used and the presentation of the financial
statements.
Monitor the effectiveness of the Company's internal control as well as its risk management systems, in
terms of the process of preparing and reporting financial information, including tax-related risks, and
discuss with the auditor any significant weaknesses detected in the internal control system during the
audit, without undermining its independence. For such purposes, and where appropriate, the Committee
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may submit recommendations or proposals to the Board of Directors, along with the deadline for their
follow-up.
Analyse and, where appropriate, approve the annual work plan for the Internal Audit area, as well as any
other occasional or specific plans to be implemented as a result of regulatory changes or as required for
organisation of the Group's business.
Be apprised of the audited units' degree of compliance with corrective measures previously recommended
by the Internal Audit area and inform the Board of those cases that may involve a significant risk for the
Group.
The external auditor and the head of Internal Audit attend all regular meetings of the Audit Committee to report
on and, where appropriate, find out about the matters discussed within their respective remits.
F.6 Other relevant information
F.7 External auditor report
Report on:
F.7.1. Whether the ICFR information disclosed to the markets has been submitted by the external auditor for
review, in which case the entity must attach the corresponding report as an annex. Otherwise, explain the
reasons why it was not.
The information related to the BBVA Group's internal control over financial reporting described in this report is
reviewed by the external auditor, which issues its opinion on the control system and on its effectiveness in
relation to the accounts published at the close of each financial year.
On 28 March 2019, the BBVA Group, as a private foreign issuer in the United States, filed the Annual Report
(Form 20-F) for the financial year ending on 31 December 2018, which was published on the SEC website on
that same date.
In accordance with the requirements set out in Section 404 of the Sarbanes-Oxley Act of 2002 by the Securities
and Exchange Commission (SEC), the aforementioned Annual Report Form 20-F, included certification of the
top executives in the Group with regard to the establishment, maintenance and assessment of the Group's
system of internal control over financial reporting. The Form 20-F report also included the opinion of the
external auditor regarding the effectiveness of the Company's internal control system over financial reporting
at the close of the 2018 financial year.
G DEGREE OF COMPLIANCE WITH CORPORATE GOVERNANCE RECOMMENDATIONS
Indicate the extent of the company's compliance with the recommendations of the Good Governance Code of
Listed Companies.
If any recommendations are not being followed or are only being followed in part, a detailed explanation of
the reasons for this should be given so that shareholders, investors and the market in general have sufficient
information to assess the actions of the company. General explanations will not be acceptable.
1. The bylaws of listed companies should not place an upper limit on the votes that can be cast by a single
shareholder, or impose other obstacles to the takeover of the company by means of share purchases on the
market.
COMPLIANT
2. When a parent and subsidiary company are both listed, they should provide detailed disclosure on:
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a) The activity they engage in and any business dealings between them, as well as between the listed
subsidiary and other group companies.
b) The mechanisms in place to resolve possible conflicts of interest.
NOT APPLICABLE
3. During the annual general meeting the chairman of the Board of Directors should verbally inform
shareholders in sufficient detail of the most relevant aspects of the company's corporate governance,
supplementing the written information circulated in the annual corporate governance report. In particular:
a) Changes that have taken place since the previous annual general meeting.
b) The specific reasons for the company not following a given Corporate Governance Code
recommendation, and any alternative procedures followed in its stead.
COMPLIANT
4. The company should draw up and implement a policy of communication and contacts with shareholders,
institutional investors and proxy advisors that complies in full with market abuse regulations and accords
equitable treatment to shareholders in the same position.
This policy should be disclosed on the company's website, complete with details of how it has been put into
practice and the identities of the relevant interlocutors or those charged with its implementation.
COMPLIANT
5. The Board of Directors should not make a proposal to the general meeting for the delegation of powers to
issue shares or convertible securities without pre-emptive subscription rights for an amount exceeding 20% of
capital at the time of such delegation.
When a Board of Directors approves the issuance of shares or convertible securities without pre -emptive
subscription rights, the company should immediately post a report on its website explaining the exclusion as
envisaged in company legislation.
PARTIALLY COMPLIANT
The General Shareholders' Meeting held on 17 March 2017 delegated to the Board of Directors a power to
increase share capital and issue convertible securities, along with the power to wholly or partially exclude pre-
emptive subscription rights in respect of capital increases and issues of convertible securities carried out using
such delegated power. The power to exclude pre-emptive subscription rights is limited, overall, to 20% of
share capital as of the time of the delegation, except for the issuance of contingently convertible securities, the
conversion of which is intended to meet regulatory solvency requirements as to eligibility as capital instruments
in accordance with applicable regulations, since such instruments do not dilute the interests of shareholders.
6. Listed companies that draft the reports listed below, whether under a legal obligation or voluntarily, should
publish them on their website with sufficient time before the Ordinary General Meeting, even when their
publication is not mandatory:
a) Report on auditor independence.
b) Reports on the operation of the audit committee and the appointments and remuneration committee.
c) Audit committee report on related-party transactions.
d) Report on corporate social responsibility policy.
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7. The company should broadcast its general shareholders' meetings live on its website.
COMPLIANT
COMPLIANT
8. The audit committee should ensure that the Board of Directors can present the company's accounts to the
general shareholders' meeting without limitations or qualifications in the auditor's report. In the exceptional
case that qualifications exist, both the chair of the audit committee and the auditors should give a clear account
to shareholders of the scope and content of such limitations or qualifications.
COMPLIANT
9. The company should disclose its conditions and procedures for admitting share ownership, the right to
attend the general shareholders' meeting and the exercise or delegation of voting rights, and display them
permanently on its website.
Such conditions and procedures should encourage shareholders to attend and exercise their rights and be
applied in a non-discriminatory manner.
COMPLIANT
10. When an accredited shareholder exercises the right to supplement the agenda or submit new proposals
prior to the general shareholders' meeting, the company should:
a) Immediately circulate the supplementary items and new proposals.
b) Disclose the attendance card template and proxy appointment or remote voting form, duly modified so
that new agenda items and alternative proposals can be voted on in the same terms as those submitted
by the Board of Directors.
c) Put all these items or alternative proposals to the vote applying the same voting rules as for those
submitted by the Board of Directors, with particular regard to presumptions or deductions about the
direction of votes.
d) After the general shareholders' meeting, disclose the breakdown of votes on such supplementary items
or alternative proposals.
NOT APPLICABLE
11. In the event that a company plans to pay for attendance at the general shareholders' meeting, it should
first establish a general, long-term policy in this respect.
NOT APPLICABLE
12. The Board of Directors should perform its duties with unity of purpose and independent judgement,
according the same treatment to all shareholders in the same position. It should be guided by corporate
interest, understood as the creation of a profitable business that promotes its sustainable success over time,
while maximising its economic value.
In pursuing the corporate interest, it should not only abide by laws and regulations and conduct itself according
to principles of good faith, ethics and respect for commonly accepted customs and good practices, but also
strive to reconcile its own interests with the legitimate interests of its employees, suppliers, clients and other
stakeholders, as well as with the impact of its activities on the broader community and the natural environment.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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13. The Board of Directors should have an optimal size to promote its efficient functioning and maximise
participation. The recommended range is accordingly between five and fifteen members.
COMPLIANT
COMPLIANT
14. The Board of Directors should approve a director selection policy that:
a) Is concrete and verifiable;
b) Ensures that appointment or re-appointment proposals are based on a prior analysis of the needs of the
Board of Directors; and
c) Favours a diversity of knowledge, experience and gender.
The results of the prior analysis of the needs of the Board of Directors should be contained in the supporting
report from the Appointments Committee published upon the calling of the General Shareholders' Meeting at
which the appointment or re-appointment of each director is to be submitted for ratificati on.
The director selection policy should pursue the goal of having at least 30% of total board places occupied by
women directors by 2020.
The appointments committee should run an annual check on compliance with the director selection policy and
set out its findings in the annual corporate governance report.
COMPLIANT
15. Proprietary and independent directors should constitute an ample majority on the Board of Directors, while
the number of executive directors should be the minimum practical bearing in mind the complexity of the
corporate group and the ownership interests they control.
COMPLIANT
16. The percentage of proprietary directors out of all non-executive directors should be no greater than the
proportion between the ownership stake of the shareholders they represent and the remainder of the
company's capital.
This criterion can be relaxed:
a) In large cap companies where few or no equity stakes attain the legal threshold for significant
shareholdings.
b) In companies with a plurality of shareholders represented on the Board of Directors but not otherwise
related.
17. Independent directors should be at least half of all board members.
COMPLIANT
However, when the company does not have a large market capitalisation, or when a large cap company has
shareholders individually or concertedly controlling over 30% of capital, independent directors should occupy,
at least, a third of board places.
COMPLIANT
18. Companies should disclose the following director particulars on their websites and keep them up to date:
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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a) Background and professional experience.
b) Directorships held in other companies, listed or otherwise, and other paid activities they engage in, of
whatever nature.
c) Statement of the director class to which they belong, in the case of proprietary directors indicating the
shareholder they represent or have links with.
d) Date of their first appointment as a board member and subsequent re -appointments.
e) Shares held in the company, and any options on the same.
COMPLIANT
19. Following verification by the appointments committee, the annual corporate governance report should
disclose the reasons for the appointment of proprietary directors at the request of shareholders controlling less
than 3% of capital, and explain any rejection of a formal request for a board place from shareholders whose
equity stake is equal to or greater than that of others at whose request proprietary directors were appointed.
NOT APPLICABLE
20. Proprietary directors should resign when the shareholders they represent dispose of their ownership
interest in its entirety. If such shareholders reduce their stakes, thereby losing some of their entitlement to
proprietary directors, the latter's number should be reduced accordingly.
NOT APPLICABLE
21. The Board of Directors should not propose the removal of independent directors before the expiry of their
tenure as mandated by the bylaws, except where they find just cause, based on a report from the appointments
committee. In particular, just cause will be presumed when directors take up new posts or responsibilities that
prevent them allocating sufficient time to the work of a board member, or are in breach of their fiduciary duties
or come under one of the disqualifying grounds for classification as independent enumerated in the applicable
legislation.
The removal of independent directors may also be proposed when a takeover bid, merger or similar corporate
transaction alters the company's capital structure, provided the changes in board members hip ensue from the
proportionality criterion set out in recommendation 16.
COMPLIANT
22. Companies should establish rules obliging directors to disclose any circumstance that might harm the
company's name or reputation, tendering their resignation as the case may be, and, in particular, to inform
the Board of Directors of any criminal charges brought against them and any subsequent legal proceedings.
The moment a director is indicted or tried for any of the offences stated in company legislation, the Board of
Directors should open an investigation and, in light of the particular circumstances, decide whether or not he
or she should be called on to resign. The Board of Directors should give a reasoned account of all such
determinations in the annual corporate governance report.
COMPLIANT
23. Directors should express their clear opposition when they feel a proposal submitted to the Board of
Directors might damage the corporate interest. In particular, independents and other directors not subject to
potential conflicts of interest should strenuously challenge any decision that could harm the interests of
shareholders lacking board representation.
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original will prevail.
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When the Board of Directors makes material or repeated decisions about which a director has expressed
serious reservations, then he or she must draw the pertinent conclusions. Directors resigning for such causes
should set out their reasons in the letter referred to in the next recommendation.
The terms of this recommendation also apply to the secretary of the Board of Directors, even if he or she is
not a director.
COMPLIANT
24. Directors who give up their place before their tenure expires, through resignation or otherwise, should
state their reasons in a letter to be sent to all members of the Board of Directors. Whether or not such
resignation is disclosed as a material event, the motivating factors should be explained in the annual corporate
governance report.
COMPLIANT
25. The appointments committee should ensure that non-executive directors have sufficient time available to
fulfil their responsibilities effectively.
The regulations of the Board of Directors should lay down the maximum number of company boards on which
directors can serve.
COMPLIANT
26. The Board of Directors should meet with the necessary frequency to properly perform its functions, eight
times a year at least, in accordance with a calendar and agendas set at the start of the financial year, to which
each director may propose the addition of initially unscheduled items.
COMPLIANT
27. Director absences should be kept to a strict minimum and quantified in the annual corporate governance
report. In the event of absence, directors should delegate their powers of representation with the appropriate
instructions.
COMPLIANT
28. When directors or the secretary express concerns about some proposal or, in the case of directors, about
the company's performance, and such concerns are not resolved at the meeting, they should be recorded in
the minute book if the person expressing them so requests.
COMPLIANT
29. The company should provide suitable channels for directors to obtain the advice they need to carry out
their duties, extending if necessary to external assistance at the company's expense.
COMPLIANT
30. Regardless of the knowledge directors must possess to carry out their duties, they should also be offered
refresher programmes when circumstances so advise.
COMPLIANT
31. The agendas of board meetings should clearly indicate on which points the Board of Dire ctors must arrive
at a decision, so that directors can study or gather together the information they need beforehand.
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original will prevail.
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For reasons of urgency, the chairman may wish to present decisions or resolutions for board approval that
were not on the meeting agenda. In such exceptional circumstances, their inclusion will require the express
prior consent, duly minuted, of the majority of directors present.
COMPLIANT
32. Directors should be regularly informed of movements in share ownership and of the views of major
shareholders, investors and rating agencies on the company and its group.
COMPLIANT
33. The chairman, as the person charged with the efficient functioning of the Board of Directors, in addition
to the functions assigned by law and the company's bylaws, should prepare and submit to the board a schedule
of meeting dates and agendas; organise and co -ordinate regular evaluations of the board and, where
appropriate, the company's chief executive officer; exercise leadership of the board and be accountable for its
proper functioning; ensure that sufficient time is given to the discussion of strategic issues, and approve and
review refresher courses for each director, when circumstances so advise.
COMPLIANT
34. When a Lead Director has been appointed, the bylaws or regulations of the Board of Directors should
grant him or her the following powers over and above those conferred by law: chair the Board of Directors in
the absence of the chairman and vice chairmen; give voice to the concerns of non-executive directors; maintain
contacts with investors and shareholders to hear their views and develop a balanced understanding of their
concerns, especially those to do with the company's corporate governance; and co -ordinate the chairman's
succession plan.
35. The secretary of the Board of Directors should strive to ensure that the board's actions and decisions are
informed by the governance recommendations of the Good Governance Code of relevance to the company.
COMPLIANT
36. The full Board of Directors should conduct an annual evaluation, adopting, where necessary, an action
plan to correct weaknesses detected in:
COMPLIANT
a) The quality and efficiency of the board's operation.
b) The performance and membership of its committees.
c) The diversity of board membership and competences.
d) The performance of the Chairman of the Board of Directors and the company's chief executive.
e) The performance and contribution of individual directors, with particular attention to the chairs of board
committees.
The evaluation of board committees should start from the reports they send the Board of Directors, while that
of the board itself should start from the report of the appointments committee.
Every three years, the Board of Directors should engage an external facilitator to aid in the evaluation process.
This facilitator's independence should be verified by the appointments committee.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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Any business dealings that the facilitator or members of its corporate group maintain with the company or
members of its corporate group should be detailed in the annual corporate governance report.
The process followed and areas evaluated should be detailed in the annual corporate governance report.
COMPLIANT
37. When an executive committee exists, its membership mix by director class should resemble that of the
Board of Directors. The secretary of the board should also act as secretary to the executive committee.
PARTIALLY COMPLIANT
The current composition of BBVA’s Executive Committee was agreed by the Board of Directors at its meeting
on 29 April 2019, and it was considered that it had the most suitable composition for the performance of its
functions.
Thus, in accordance with Article 30 of the Regulations of the Board of Directors, which establishes that there
should be a majority of non-executive directors over executive directors, the Executive Committee, as of
31 December 2019, partially reflects the participation of the different classes of director on the Board of
Directors; the Chairman and Secretary of the Executive Committee hold the same positions on the Board of
Directors, and it is composed of two executive directors and four non-executive directors, of whom one is an
independent director and three are other external directors, resulting in a majority of non-executive directors
in accordance with the Regulations of the Board of Directors.
38. The Board of Directors should be kept fully informed of the matters discussed and decisions made by the
executive committee, and all board members should receive a copy of the committee's minutes.
COMPLIANT
39. All members of the audit committee, particularly its chair, should be appointed with regard to their
knowledge and experience in accounting, auditing and risk management matters. A majority of committee
places should be held by independent directors.
COMPLIANT
40. There should be a unit in charge of the internal audit function, under the supervision of the Audit
Committee, to monitor the effectiveness of reporting and internal control systems. This unit should report
functionally to the board's non-executive chair or the chair of the audit committee.
COMPLIANT
41. The head of the unit handling the internal audit function should present an annual work plan to the audit
committee, inform it directly of any incidents arising during its implementation and submit an activities report
at the end of each financial year.
COMPLIANT
42. The audit committee should have the following functions over and above those legally assigned:
1. With respect to internal control and reporting systems:
a) Monitor the preparation and the integrity of the financial information prepared on the company and,
where appropriate, the group, checking for compliance with legal provisions, the accurate demarcation of
the consolidation perimeter, and the correct application of accounting principles.
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original will prevail.
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b) Monitor the independence of the unit handling the internal audit function; propose the selection,
appointment, re-appointment and dismissal of the head of the internal audit service; propose the service's
budget; approve its priorities and work plans, ensuring that it focuses primarily on the main risks the
company is exposed to; receive regular report-backs on its activities; and verify that senior management is
acting on the findings and recommendations of its reports.
c) Establish and supervise a mechanism whereby staff can report, confidentially and, if appropriate and
feasible, anonymously, any potentially significant irregularities that they detect within the company, in
particular financial or accounting irregularities.
2. With respect to the external auditor:
a) Investigate the issues giving rise to the resignation of the external auditor, should this come about.
b) Ensure that the remuneration of the external auditor does not compromise its quality or independence.
c) Ensure that the company notifies any change of external auditor to the CNMV as a material event,
accompanied by a statement of any disagreements arising with the outgoing auditor and the reasons for
the same.
d) Ensure that the external auditor has a yearly meeting with the full Board of Directors to inform it of the
work undertaken and developments in the company's risk and accounting positions.
e) Ensure that the company and the external auditor adhere to current regulations on the provision of non-
audit services, limits on the concentration of the auditor's business and other requirements concerning
auditor independence.
PARTIALLY COMPLIANT
With respect to the function set out in section 1.c) of this recommendation, the Audit Committee established
and supervised the mechanism to which this recommendation refers until April 2019, from which time this
function was assigned to the Risk and Compliance Committee, which is set up to assist the Board of Directors
in overseeing the Compliance function and promoting a risk and compliance culture in the Group. This Risk
and Compliance Committee is composed exclusively of non-executive directors, the majority of whom are
independent directors, including the Chair.
This function is therefore included in Article 5.18 of the Regulations of the Risk and Compliance Committee,
whereby this Committee has the function of "reviewing and supervising the systems under which Group
professionals may confidentially report any irregularities in the field of financial information or other matters".
The foregoing is without prejudice to the fact that, should the communications referred to in this
recommendation occur, they are also transferred to the Audit Committee for analysis and supervision, in
accordance with the provisions of Article 31.10 of the Regulations of the Board of Directors, which sets out
the coordination system between the Board committees so that they can better carry out their functions.
43. The audit committee should be empowered to meet with any company employee or manager, even
ordering their appearance without the presence of another manager.
COMPLIANT
44. The audit committee should be informed of any structural or corporate changes the company is planning,
so the committee can analyse the operation and report to the Board of Directors beforehand on its economic
conditions and accounting impact and, in particular and when applicable, the exchange ratio proposed.
COMPLIANT
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
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45. Risk control and management policy should identify at least:
a) The different types of financial and non-financial risk the company is exposed to (including operational,
technological, legal, social, environmental, political and reputational risks), with the inclusion under financial
or economic risks of contingent liabilities and other off -balance-sheet risks.
b) The determination of the risk level the company sees as ac ceptable.
c) The measures in place to mitigate the impact of identified risk events should they occur.
d) The internal control and reporting systems to be used to control and manage the above risks, including
contingent liabilities and off-balance-sheet risks.
COMPLIANT
46. Companies should establish an internal risk control and management function in the charge of one of the
company's internal departments or units and under the direct supervision of the audit committee or some
other dedicated board committee. This function should be expressly charged with the following responsibilities:
a) Ensure that risk control and management systems are functioning correctly and, specifically, that major
risks the company is exposed to are correctly identified, managed and quantified.
b) Participate actively in the preparation of risk strategies and in key decisions about their management.
c) Ensure that risk control and management systems are mitigating risks effectively in the frame of the
policy drawn up by the Board of Directors.
COMPLIANT
47. Appointees to the appointments and remunerations committee – or to the appointments committee and
the remunerations committee, if separately constituted – should have the right balance of knowledge, skills
and experience for the functions they are called on to discharge. The majority of members should be
independent directors.
COMPLIANT
48. Large cap companies should operate separately constituted appointments and remunerations committees.
COMPLIANT
49. The appointments committee should consult with the Chairman of the Board of Directors and the
company's chief executive, especially on matters relating to executive directors.
When there are vacancies on the board, any of the directors may approach the appointments committee to
propose candidates that they might consider suitable.
COMPLIANT
50. The remunerations committee should operate independently and have the following functions in addition
to those assigned by law:
a) Propose to the Board of Directors the basic contractual conditions for senior managers.
b) Monitor compliance with the remuneration policy set by the company.
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original will prevail.
224
c) Periodically review the remuneration policy for directors and senior managers, including share -based
remuneration systems and their application, and ensure that their individual remuneration is proportionate
to the amounts paid to other directors and senior managers in the company.
d) Ensure that potential conflicts of interest do not undermine the independence of any external advice the
committee engages.
e) Verify the information on directors' and senior managers' remuneration contained in corporate
documents, including the annual report on the remuneration of directors.
COMPLIANT
51. The remunerations committee should consult with the company's chairman and chief executive, especially
on matters relating to executive directors and senior managers.
COMPLIANT
52. The terms of reference of supervision and control committees should be set out in the regulations of the
Board of Directors and aligned with those governing legally mandatory board committees as specified in the
preceding recommendations. They should include at least the following terms:
a) Committees should be formed exclusively by non-executive directors, with a majority of independents.
b) They should be chaired by independent directors.
c) The Board of Directors should appoint the members of such committees with regard to the knowledge,
skills and experience of its directors and each committee's tasks; discuss their proposals and reports; and
provide report-backs on their activities and work at the first board plenary following each committee
meeting.
d) They may engage external advice, when they feel it necessary for the discharge of their f unctions.
e) Meeting proceedings should be minuted and a copy made available to all board members.
COMPLIANT
53. The task of supervising compliance with corporate governance rules, internal codes of conduct and
corporate social responsibility policy should be assigned to one board committee or split between several,
which could be the audit committee, the appointments committee, the corporate social responsibility
committee, where one exists, or a dedicated committee established ad hoc by the Board of Directors under
its powers of self-organisation, with at the least the following functions:
a) Monitor compliance with the company's internal codes of conduct and corporate governance rules.
b) Oversee the strategy for communication and relations with shareholders and investors, including small
and medium-sized shareholders.
c) Periodically evaluate the effectiveness of the company's corporate governance system, to confirm that it
is fulfilling its mission to promote the corporate interest and catering, as appropriate, to the legitimate
interests of remaining stakeholders.
d) Review the company's corporate social responsibility policy, ensuring that it is geared to value creation.
e) Monitor corporate social responsibility strategy and practices and assess compliance in their respect.
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original will prevail.
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f) Monitor and evaluate the company's interaction with its stakeholder groups.
g) Evaluate all aspects of the non-financial risks the company is exposed to, including operational,
technological, legal, social, environmental, political and reputational risks.
h) Coordinate non-financial and diversity reporting processes in accordance with applicable legislation and
international benchmarks.
COMPLIANT
54. The corporate social responsibility policy should state the principles or commitments the company will
voluntarily adhere to in its dealings with stakeholder groups, specifying at least:
a) The goals of its corporate social responsibility policy and the support instruments to be deployed.
b) The corporate strategy with regard to sustainability, the environment and social issues.
c) Concrete practices in matters relative to: shareholders, employees, clients, suppliers, social issues, the
environment, diversity, fiscal responsibility, respect for human rights and the prevention of illegal conducts.
d) The methods or systems for monitoring the results of the practices referred to above, related risks and
their management.
e) The mechanisms for supervising non-financial risk, ethics and business conduct.
f) Channels for stakeholder communication, participation and dialogue.
g) Responsible communication practices that prevent the manipulation of information and protect the
company's honour and integrity.
COMPLIANT
55. The company should report on corporate social responsibility developments in its management report or
in a separate document, using an internationally accepted methodology.
COMPLIANT
56. Director remuneration should be sufficient to attract and retain individuals with the desired profile and
compensate the commitment, abilities and responsibility that the post demands, but not so high as to
compromise the independent judgement of non-executive directors.
COMPLIANT
57. Variable remuneration linked to the company's and the direc tor's performance, the award of shares, options
or any other right to acquire shares or to be remunerated on the basis of share price movements, and
membership of long-term savings schemes such as pension and retirement plans and other social pension
systems should be confined to executive directors.
The company may consider the share-based remuneration of non-executive directors provided they retain
such shares until the end of their mandate. The above condition will not apply to any shares that the director
must dispose of to defray costs related to their acquisition.
COMPLIANT
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original will prevail.
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58. In the case of variable remuneration, remuneration policies should include limits and technical safeguards
to ensure such remuneration reflects the professional performance of the beneficiaries and not simply the
general progress of the markets or the company's sector, or circumstances of that kind.
In particular, variable remuneration items should meet the following conditions:
a) Be subject to predetermined and measurable performance criteria that factor the risk assumed to obtain
a given outcome.
b) Promote the sustainability of the company and include non-financial criteria that are sufficient for long-
term value creation, such as compliance with the company's internal rules and procedures and its risk
control and management policies.
c) Be focused on achieving a balance between the delivery of short, medium and long-term objectives,
such that performance-related pay rewards ongoing achievement, maintained o ver sufficient time to
appreciate its contribution to long-term value creation. This will ensure that performance measurement is
not based solely on one-off, occasional or extraordinary events.
59. A major part of variable remuneration components should be deferred for a long enough period to ensure
that predetermined performance criteria have effectively been met.
COMPLIANT
COMPLIANT
60. Remuneration linked to company earnings should take into account any qualifications stated in the external
auditor's report that reduce the amount of such earnings.
61. A major part of executive directors' variable remuneration should be linked to the award of shares or
financial instruments whose value is linked to the share price.
COMPLIANT
COMPLIANT
62. Following the award of shares, share options or other rights on shares derived from the remuneration
system, directors should not be allowed to transfer a number of shares equivalent to twice their annual fixed
remuneration, or to exercise the share options or other rights on shares for at least three years after their
award.
The above condition will not apply to any shares that the director must dispose of to defray costs related to
their acquisition.
COMPLIANT
63. Contractual arrangements should include provisions that permit the company to reclaim variable
components of remuneration when payment was out of step with the director's actual performance or based
on data subsequently found to be misstated.
COMPLIANT
64. Termination payments should not exceed a fixed amount equivalent to two years of the director's total
annual remuneration and should not be paid until the company confirms that the director has met the
predetermined performance criteria.
COMPLIANT
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original will prevail.
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H OTHER INFORMATION OF INTEREST
1. If there is any other aspect relevant to the corporate governance in the company or in the group entities
that has not been addressed in the rest of the sections of this report, but is necessary to include to provide
more comprehensive and well-grounded information on the corporate governance structure and practices in
the entity or its group, give a brief description of them.
2. This section may also include any other information, clarification or detail related to previous sections of the
report if it is relevant and not reiterative.
In particular, indicate whether the company is subject to corporate governance legislation from a country other
than Spain and, if so, include the mandatory information to be provided, if different from that required by this
report.
3. The company may also indicate if it has voluntarily signed up to other international, industry -wide or any
other codes of ethical principles or best practices. Where applicable, identify the code in question and the date
of signing. In particular, indicate whether it has signed up to the Code of Good Tax Practices of 20 July 2010.
The data in this report refers to the financial year ending 31 December 2019, except in those cases when
another reference date is specifically stated.
Further to section A.2, Norges Bank informed the CNMV on 3 February 2020, that it had a holding of 3.066%
of BBVA's share capital.
Further to section A.3, the percentage of direct voting rights held by non-executive directors through financial
instruments corresponds to the number of "theoretical shares" accumulated as a result of the remuneration
system with deferred delivery of shares approved by resolution of the General Shareholders' Meeting. In
application of this resolution and in accordance with the BBVA Directors’ Remuneration Policy, the Board of
Directors annually allocates a number of "theoretical shares" to each non-executive director, corresponding to
20% of the annual cash remuneration received the previous financial year. These will be delivered, where
applicable, after they leave their positions as directors for reasons other than serious dereliction of their duties.
Details of the annual allocation carried out by the Board can be found in Notes 54 and 49 of the consolidated
and individual annual financial statements for the 2019 financial year, respectively, regarding remuneration
and other benefits received by the Board of Directors and members of the Bank's Senior Management.
For executive directors, the percentage of direct voting rights through financial instruments corresponds to
the number of shares received as part of Annual Variable Remuneration (AVR) for previous financial years,
which was deferred and is to be paid as of the date of this report, provided that the conditions for such are
met. Thus, this includes the percentage corresponding to the deferred 50% of the 2016 AVR, which will vest
in 2020 if conditions are met; the deferred 60% of the 2017 AVR, which will vest with the following payment
schedule: 60% in 2021, 20% in 2022 and the remaining 20% in 2023; and the deferred 60% of the 2018
AVR, which will vest with the following payment schedule: 60% in 2022, 20% in 2023, and the remaining
20% in 2024. The final amount of this remuneration is subject to the applicable multi-year performance
indicators, which may reduce the deferred amount, or even forfeit it, but never increase it. The final amount
is also subject to the malus and clawback clauses set out in the remuneration policy applicable in each financial
year.
Further to Section A.9, relating to income from treasury-share trading, Rule 21 of Circular 4/2017 and IAS 32,
Paragraph 33, expressly prohibit the recognition, in the income statement, of gains or losses made through
transactions carried out with its own capital instruments, including their issuance and redemption. Said profits
and losses are directly booked against the company's net equity. The table of significant variations includes the
date of entry of CNMV Model IV in the registries of that o rganism, model corresponding to the communications
with treasury shares, and the reason for such communication.
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original will prevail.
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Further to section A.12, there are no legal or statutory restrictions on the exercise of voting rights. Thus, in
accordance with Article 31 of the Bylaws, each voting share will confer the right to one vote on the holder,
whether present or represented at the General Shareholders' Meeting, regardless of its disbursement. There
are also no statutory restrictions on the acquisition or transfer of s hares in the Company's share capital.
However, as for the legal restrictions on the acquisition or transfer of shares in the company's share capital,
Spanish Act 10/2014, of 26 June, on the regulation, supervision and solvency of credit institutions (“Act
10/2014”) establishes that the direct or indirect acquisition of a significant holding (as defined in Article 16 of
Act 10/2014) in a credit institution is subject to assessment by the Bank of Spain as set out in Articles 16 et
seq. of Act 10/2014. Additionally, Article 25 of Royal Decree 84/2015, implementing Act 10/2014,
establishes that the Bank of Spain shall evaluate proposals for acquisitions of significant shares and submit a
proposal to the European Central Bank regarding whether to oppose this ac quisition or not. This same article
establishes the criteria that should be considered during said evaluation and the applicable timelines.
Further to Section C.1.5, within the framework of the continuous Board refreshment process, the
Appointments and Corporate Governance Committee, in performing its functions, has in recent years put in
place different selection processes for directors, aimed at identifying the most suitable candidates at all times,
based on the needs of the corporate bodies, which favour diversity in experience, knowledge, skills and gender,
as well as a level of independence of the Board.
The Board of Directors therefore has a diverse composition, combining people with extensive financial and
banking experience and knowledge with profiles that have experience and knowledge in various areas that are
of interest to the Bank and its Group, such as auditing, legal and academic fields, multinational business, digital
businesses and technology, both nationally and internationally. This enables the Board as a whole to have a
suitable balance in its composition and suitable knowledge of the Bank's and the Group's environment,
activities, strategies and risks, contributing to a better performance of its functions.
In the framework of the Board refreshment process, and taking into account the analysis of the structure, size
and composition of the Board, the Committee has carried out in 2019 a selection process for Board members,
based on the principles set in the Board Regulations and in the Selection Policy. As a result, the proposal of
three new members (two of them as independent directors and one of them as external director), as well as
the re-election of two directors (one as independent director and one as external director), will be submitted
to the 2020 General Meeting.
These new appointments, as well as the re-elections, if approved by the General Meeting, will contribute to
achieve the targets established in the Selection Policy, which provides that the Board should have at least 50%
of independent directors and that, in 2020, at least 30% of directors should be female directors. This would
in turn increase the diversity in the Board in terms of knowledge, international experience and nationality.
Likewise, this also considers the composition of the different Board committees that assist the Board in the
performance of its functions and which constitute a key element of BBVs Corporate Governance System. This
also assesses that the corporate bodies have a suitable and diverse composition, combining individuals who
have experience and knowledge of the Group, its businesses and the financial sector in general with others
who have training, skills, knowledge and experience in other areas and sectors that enable the right balance
to be attained in the composition of Corporate bodies to improve operation and performance of their functions.
This allows the Board of Directors and its committees to have suitable compositions that are always adapted
to their needs, so they can therefore perform their functions effectively.
Also, in accordance with the provisions of Article 540 of the Corporate Enterprises Act, which stipulates that a
brief description of the diversity policy, with regard to directors and to members of management, must be
provided, BBVA has a selection and appointment policy for members of Senior Management. Said policy is
designed to ensure that individuals in Senior Management positions at BBVA have the capacity to properly
exercise the responsibilities conferred upon them. Thus, members of BBVA Senior Management must have
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top-level academic and technical qualifications, professional skills—underpinned by their professional careers to
date—applicable to the responsibilities associated with the role to be fulfilled, a recognised honourable business
and professional reputation, and commitment to BBVA's values.
Thus, pursuant to the provisions of this policy on the assessment of internal talent, performance is assessed
in terms of the achievement of objectives, potential to assume greater responsibilities in the future, and
individuals' professional capabilities and skills. These assessments may be supported by means of review
sessions during which members of Senior Management analyse the profiles of certain employees and share
their opinions on the achievements and strengths of each individual. Moreover, for the selection of external
candidates for senior management positions, references and top-level executive search firms are used. The
Talent & Culture area ensures that external candidates possess top-level academic and technical qualifications,
that their professional careers to date adequately encompass the responsibilities associated with the roles to
be fulfilled, that they have recognised business and professional reputations, and that, during their careers at
other organisations, they have demonstrated a high level of alignment with BBVA's values. The candidates
identified through the company's external selection process are considered alongside internal candidates, in
order to select the individual that best fits the role to be fulfilled.
Moreover, in accordance with the Regulations of the Board, the BBVA Board of Directors is responsible for
appointing members of Senior Management based on a proposal from the Appointments and Corporate
Governance Committee. Prior to the proposal and appointment of members of Senior Management, the Bank
follows a selection process that is governed by the aforementioned principles and criteria, and that comprises
the following stages: (i) review and analysis of the duties to be performed in the position, and the profiles of
the candidates best suited to assume the position — this process ends with the preliminary selection of a
candidate to assume the position; (ii) assessment by the Suitability Committee of the suitability of the proposed
candidate, in accordance with the specific procedure established by the Bank in that regard; (iii) submission, if
the candidate is considered suitable, of the proposed appointment to the Appointments and Corporate
Governance Committee in order for the latter to prepare its report to the Board of Directors; and (iv) submission
of the proposal to the Board of Directors for approval, with said proposal accompanied by the favourable report
of the Appointments and Corporate Governance Committee.
The appointment of senior managers will be based on the proposal of the Group Executive Chairman for those
who report thereto, and of the Chief Executive Officer, prior information to the Group Executive Chairman. On
the other hand, the Board of Directors will be responsible for the appointment and dismissal of the head of the
Internal Audit function, based on a proposal from the Audit Committee, and the Head of Regulation & Internal
Control, on a proposal from the Risk and Compliance Committee, as well as the determination of their
objectives and assessment of their performance, on a proposal from the corresponding committee.
Further to Section C.1.6, regarding the selection process carried out in 2019, it has fol lowed the criteria
included in the Selection Policy, and it has thus favoured diversity of experience, knowledge, skills and gender;
does not suffer from implicit biases that may involve any kind of discrimination; and has included women who
could meet the professional profile.
Therefore, as described in Section C.1.5 above, and as a result of the 2019 selection process for directors
and of the related proposals for appointment and re-election of directors submitted to the 2020 General
Meeting, if approved, the 2020 target set in the Selection Policy would be achieved, regarding that the number
of female directors represent, at least, 30% of the total Board members.
Further to Section C.1.7, the aim of this selection process has been to identify the most adequate candidates
at any given time, depending on the needs of the corporate bodies, the circumstances and changes that may
take place in the Bank, its corporate bodies and its environment. The process favours diversity of experiences,
knowledge, skills and gender, and has not been affected by implicit bias that may have entailed any kind of
discrimination. Moreover, a firm specialised in the search of potential candidates has provided expert advice
on the process, ensuring, therefore, the highest professionalism and independence in the process.
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Likewise, the process has taken into consideration the number and profile of directors whose term of offices
(three years) ends on financial year 2020, so that the corresponding proposals of appointment or
reappointment may be submitted to the consideratio n of the next Annual General Shareholders’ Meeting.
Thus, the Committee has analysed the different profiles preselected, has decided which candidates would,
preliminarily, meet the Bank’s needs, and has been able to assess the training and professional career of each
candidate, as well as their main professional and personal skills, their vision on the Bank and the Group and
their disposition to join the Board of Directors.
In view of all the above, the Committee has proceeded to submit its corresponding proposals and reports on
the new directors’ appointments to the General Shareholders’ Meeting to be held in March 2020, as well as
the ones regarding the reappointment of directors.
Finally, as stated before in sections C.1.5 and C.1.6., should the General Shareholders’ Meeting to be held in
March 2020 approve the corresponding appointment proposals submitted to its consideration as a
consequence of the directors’ selection process carried out in 2019, the objective established in the selection
Policy that in 2020 the number of female directors represented should be, at least, 30% of the members of
the Board of Directors, will be met. Likewise, the majority of independent directors would be reinforced, also
taking into account the Selection Policy that states that the number of independent directors should be, at
least, 50% of the total.
Further to Section C.1.9, the different Board Committees with oversight and control functions also have certain
duties delegated by the Board of Directors, which are set forth in their corresponding regulations, available on
the Bank's website.
Further to the information included in section C.1.13:
The amount included in the item "Remuneration of the Board of Directors accrued during the financial year"
corresponds, in accordance with the instructions of this Report, with the amount declared as total remuneration
accrued according to Table C) "Summary of remunerations" of section 2.3 (Statistical Appendix) of BBVA's
Annual Report on the Remuneration of Directors, whic h includes: fixed and in-kind remuneration of executive
and non-executive directors received in the 2019 financial year; the upfront part (40%) of 2019 Annual
Variable Remuneration (AVR) for executive directors, in cash and monetised shares, to vest in 2020, if
conditions are met; as well as the deferred part (50%) of 2016 AVR, in cash and in monetised shares, together
with its corresponding update, to vest in 2020, if conditions are met.
An individual breakdown of these amounts for each director can be found in Notes 54 and 49 of BBVA’s
consolidated and individual annual financial statements for the 2019 financial year, respectively.
For the purpose of calculating the cash value of the shares corresponding to the upfront part of 2019 AVR for
the executive directors, the average closing price of the BBVA share for the trading sessions between 15
December 2019 and 15 January 2020 inclusive, has been taken as reference, which, in accordance with the
BBVA Directors’ Remuneration Policy, is the criterion used to determine the portion of the 2019 AVR payable
in shares. This price stood at EUR 5.03 per share. Similarly, the same average price has been taken for the
purpose of calculating the cash value of the shares corresponding to the deferred part of 2016 AVR (i.e.
EUR 5.03 per share). The price used to determine the initial number of shares of the deferred part of 2016
AVR was, pursuant to the applicable policy, the closing price of the BBVA share for the trading sessions between
15 December 2016 and 15 December 2017 inclusive (EUR 6.43 per share).
With regard to the "Amount of entitlements accrued by current directors in regard to pensions" indicated in
section C.1.13 of this Report, as at 31 December 2019, the Bank had undertaken pension commitments in
favour of the Group Executive Chairman and the executive director Head of Global Economic & Public Affairs
to cover contingencies of retirement, disability and death in accordance with the provisions of the Bylaws, the
BBVA Directors’ Remuneration Policy and the directors' respective contracts with the Bank. In the case of the
Chief Executive Officer, the Bank has not made retirement commitments, but has made commitments to cover
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disability and death contingencies, in accordance with the BBVA Directors’ Remuneration Policy and its contract
with the Bank.
The main characteristics of the pension system are detailed in the BBVA Directors’ Remuneration Policy, and
are, inter alia: they are defined contribution schemes; they do not provide for the possibility of receiving the
retirement pension in advance; and 15% of the agreed contributions will be considered "discretionary pension
benefits", in accordance with applicable regulations. These are included in Notes 54 and 49 of BBVA’s
consolidated and individual annual financial statements for the 2019 financial year, respectively, which also
include the amount of accrued entitlements by the Group Executive Chairman and the executive director Head
of Global Economic & Public Affairs.
The balance of the item "Provisions — Funds for pensions and similar obligations" on the Group's consolidated
balance sheet at 31 December 2019 includes EUR 72 million as post-employment provision commitments
maintained with former members of the Board of Directors.
Further to the information included in section C.1.14:
The item "Total remuneration of Senior Management" includes the remuneration of members of Senior
Management (15 member as at 31 December 2019, excluding executive directors) includes: the fixed and in-
kind remuneration received in the 2019 financial year; the initial part of 2019 AVR, both in cash and monetised
shares, to vest in 2020, if conditions are met; as well as the deferred part of 2016 AVR, in cash and in
monetised shares, together with their corresponding update, to vest in 2020, if conditions are met. The cash
value of the shares have been calculated at the same price as indicated for executive directors (i.e. EUR 5.03
per share; see section C.1.13).
The main characteristics of the pension systems for this group are: they are defined contribution schemes;
they do not provide for the possibility of receiving the retirement pension in advance; and 15% of the agreed
contributions will be considered "discretionary pension benefits", in accordance with applicable regulations.
The above concepts are included in Notes 54 and 49 of BBVA’s consolidated and individual annual financial
statements for the 2019 financial year, respectively.
The balance of the item "Provisions — Funds for pensions and similar obligations" on the Group's consolidated
balance sheet at 31 December 2019 includes EUR 278 million as post-employment provision commitments
maintained with former members of the Bank's Senior Management.
In addition, the positions as BBVA senior managers of Pello Xabier Belausteguigoitia Mateache and Joaquín
Manuel Gortari Díez are pending registration in the Register of Senior Officers of the Bank of Spain, as at the
date of this Report, pursuant to applicable regulations.
Further to Section C.1.17, the assessment carried out by the Board of Directors regarding the quality and
efficiency of the operation of the committees, based on reports submitted by their respective chairs, as well
as the assessment of the Executive Committee, are described below:
The different committees have regularly reported the Board of Directors on the activities carried out and
the resolutions adopted by each of the committees, in execution of their functions provided in their
regulations, approved by the Board of Directors on 29 April 2019. This has ensured that all directors
have a full understanding of the work being undertaken by the various Board committees.
In addition to the above, at its meeting held on 27 November 2019, the Board received the report by
the Chairman on the activity carried out by the Technology and Cybersecurity Committee in 2019
regarding the various areas within its remit, such as the technology and cybersecurity strategy, the plans,
policies and management of cybersecurity, or the monitoring and control of technological risks, among
other matters.
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At its meeting held on 19 December 2019, the Board received the report by the Chair of the Risk and
Compliance Committee on its activities throughout the 2019 financial year. The report detailed the tasks
performed by the Committee in its ongoing monitoring and oversight of the risks faced by the Group and
adequacy with approved strategies and policies, as well as the oversight of regulation, internal control
and compliance.
At its meeting held on 30 January 2020, the Board received the report by the Chair of the Audit
Committee on the activities of the Committee during 2019. This included its role of overseeing the
preparation of financial statements and the application of accounting criteria, the sufficient, adequate and
effective operation of internal control systems in the preparation of financial information, or the planning,
progress and depth of external auditor tasks, as well as Internal Audit.
At its meeting held on 30 January 2020, the Board received the report by the Chair of the Appointments
and Corporate Governance Committee on the activities undertaken by the Committee throughout 2019
in terms of its assigned duties, including its tasks relating to the appointment and re-election of directors,
assessment of the Board of Directors, the Chairman of the Board and Chief Executive Officer or the review
of BBVA Corporate Governance System, among others.
At its meeting held on 30 January 2020, the Board received the report by the Chair of the Remunerations
Committee on the activities undertaken by the Committee throughout 2019, reporting, among other
matters, on the tasks performed by the Committee relating to the preparation and implementation of the
proposed resolutions submitted to the Board regarding remuneration matters, particularly those relating
to the remuneration of executive directors and Senior Management, Identified Staff and BBVA Group.
Finally, at its meeting held on 30 January 2020, the Board of Directors received the report by the
Chairman on the activity carried out by the Executive Committee during 2019, detailing, among other
activities, the Committee's work in support of the Board of Directors in decision-making regarding strategy
and finance, development or implementation of decisions taken by the Board in the areas of strategy,
budgets or finance, oversight and monitoring of activity and results, strategic-prospective information, as
well as selected projects, transactions and Group policies.
All of which has been taken into consideration by the Board of Directors during the assessment process carried
out in respect of the 2019 financial year described in the preceding paragraphs .
Further to Section C.1.25, the Board of Directors resolved, at its meeting held on 29 April 2019, to appoint
José Miguel Andrés Torrecillas as Deputy Chair of the Board of Directors, ceasing as Lead Director, position
performed now by Juan Pi Llorens.
With regard to Section C.1.27, since BBVA shares are listed on the New York Stock Exchange, it is subject to
the supervision of the Securities & Exchange Commission (SEC) and, thus, to compliance with the Sarbanes
Oxley Act and its implementing regulations, and for this reason each year the Group Executive Chairman, the
Chief Executive Officer and the executive tasked with preparing the Accounts sign and submit the certifications
described in sections 302 and 906 of this Act, related to the content of the Annual Financial Statements. These
certificates are contained in the annual registration statement (Form 20-F) which the Company files with this
authority.
Further to Section C.2.1, the following is a brief indication of what the regulations establish regarding the
composition and functions of each of the Board committees:
Audit Committee: The Regulations of the Audit Committee establish that it shall consist of a minimum
of four independent directors. Committee members will be appointed by the Board of Directors,
seeking to ensure that they possess the necessary dedication, skills and experience to carry out their
roles. In any event, at least one member will be appointed taking into account their knowledge and
experience in accounting, auditing or both. As a whole, the Committee members will possess relevant
technical expertise in the financial sector. The Board will, from amongst its members, appoint the
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Chairman of this Committee, who must be replaced every four years and may be re-elected one year
after the end of their term of office. When the Chair cannot be present, meetings will be chaired by
the longest-serving independent director on the Committee, and, where multiple directors have equal
length of service, by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the
Deputy Secretary of the Board of Directors, will act as Secretary for the Committee.
Appointments and Corporate Governance Committee: The Regulations of the Appointments and
Corporate Governance Committee establish that it shall consist of a minimum of three directors, all of
them non-executive and most of them independent, as well as its Chair. Committee members will be
appointed by the Board of Directors, seeking to ensure that they possess the necessary dedication,
skills and experience to carry out their roles. The Board of Directors will appoint the Chair of the
Committee from amongst its independent members. When the Chair cannot be present, meetings will
be chaired by the longest-serving independent director on the Committee, and, where multiple
directors have equal length of service, by the eldest. The Secretary of the Board of Directors or, on
behalf thereof, the Deputy Secretary of the Board of Directors, will act as Secretary for the Committee.
Remunerations Committee: The Regulations of the Remunerations Committee establishes that it must
be comprised of a minimum of three non-executive directors and the majority, including the Chair,
must be independent directors. Committee members will be appointed by the Board of Directors,
seeking to ensure that they possess the necessary dedication, skills and experience to carry out their
roles. The Board of Directors will appoint the Chair of the Committee from amongst its independent
members. When the Chair cannot be present, meetings will be chaired by the longest-serving
independent director on the Committee, and, where multiple directors have equal length of service,
by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the Deputy Secretary of
the Board of Directors, will act as Secretary for the Committee.
Risk and Compliance Committee: The Regulations of the Risk and Compliance Committee establishes
that it will consist of a minimum of three directors, appointed by the Board of Directors, who possess
the appropriate knowledge, skills and experience to understand and control the Bank's risk strategy.
All the members of the Committee must be non-executive directors, with its Chair and a majority of
members being independent directors. The Board will appoint the Chair of the Committee from
amongst its independent members. When the Chair cannot be present, meetings will be chaired by
the longest-serving independent director on the Committee, and, where multiple directors have equal
length of service, by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the
Deputy Secretary of the Board of Directors, will act as Secretary for the Committee.
Technology and Cybersecurity Committee: The Regulations of the Technology and Cybersecurity
Committee establish that the Committee shall consist of a minimum of three directors, most of whom
shall be non-executive directors. Committee members will be appointed by the Board of Directors,
seeking to ensure that they possess the necessary dedication, skills and experience to carry out their
roles. The Board will appoint the Chair of the Committee from amongst its members. When the Chair
cannot be present, meetings will be chaired by the longest-serving director on the Committee, and,
where multiple directors have equal length of service, by the eldest. The Secretary of the Board of
Directors or, on behalf thereof, the Deputy Secretary of the Board of Directors, will act as Secretary
for the Committee.
Executive Committee: Article 30 of the Regulations of the Board and the Regulations of the Executive
Committee establishes that the Board of Directors may, in accordance with the Bylaws and with the
favourable vote of two-thirds of its members, appoint an Executive Committee, composed of a
minimum of four directors appointed by the Board of Directors, ensuring that there is a majority of
non-executive directors over executive directors. The Chairman of the Board of Directors will be an ex-
officio member of the Committee. The Secretary of the Board of Directors will hold the same position
on the Committee. If absent, the Secretary will be replaced by the Deputy Secretary or the person
appointed by the attendees of the relevant meeting.
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Also, as a follow-up to the most important activities of the Board Committees and their organisational and
operational rules as set out in paragraph C.2.1:
Audit Committee: In terms of the most significant activities carried out by the Committee during the
2019 financial year, it analysed and oversaw the process of preparing and presenting financial and
non-financial information related to the Bank as well as its consolidated Group from the annual, half-
yearly and quarterly reports, in order to determine its accuracy, reliability, adequacy and clarity, prior
to its submission to the Board. To this end, it focused particularly on the accounting policies and criteria
used, and on any changes that may have been made to them (for example, those resulting from the
entry into force of IFRS 16 and IAS 12).
In particular, prior to their approval by the Board, the Committee oversaw the preparation of the
individual and consolidated annual financial statements for the financial year, the half -yearly and
quarterly financial statements, as well as other relevant financial information, including the CNMV
Registration Document, US SEC Form 20-F, and the Prudential Relevance Report, among others.
In addition, within the financial information oversight process, the Committee supervised the
adequacy, appropriateness and effective operation of the internal co ntrol systems used in the
preparation of financial information, including the tax systems, along with both internal reports and
those of the external auditor on the effectiveness of the internal financial control.
With regards to activities related to the external auditor, the Committee has maintained appropriate
relationships with the heads of the external auditor, during each of the monthly meetings it has held,
in order to ascertain the planning, status and progress of the work in connection with the audit of the
Bank and Group’s annual financial statements, of the interim financial statements, and of other financial
information subject to review during the account auditing. It has also received and analysed the opinion
reports and communications from the auditor required by account auditing legislation, among which:
the work carried out on the Group's financial information, the external auditor's additional report for
the Audit Committee, and the confirmations of its independence with regards to the Bank and other
companies within its group.
Similarly, in relation to the independence of the external auditor, the Committee has ensured that
internal procedures are implemented to safeguard against situations that may give rise to
independence conflicts. It has also verified declarations made by the external auditor concerning
confirmation of its independence with regard to BBVA and its Group, and issued the corresponding
reports in accordance with applicable legislation.
Also, since the 3-year period for which KPMG had been appointed auditor for BBVA and its
Consolidated Group at the General Meeting ended in 2019, the Audit Committee analysed and
assessed the quality of the work performed by the auditor, submitting to the Board the proposal for
its re-election as auditors for the Bank and its Group for 2020, which has been in turn submitted to
the 2020 General Meeting.
Likewise, the Audit Committee initiated a tender process for, where appropriate, the possible
appointment of a new auditor from the 2021 financial year. Following the tender process, the
Committee concluded that KPMG was the firm that could offer a high-quality service that was best
suited to the current needs, and submitted to the Board its recommendation and preference for this
auditing firm.
With regards to Internal Audit tasks, the Committee approved the Annual Work Plan for Internal Audit
for the financial year, overseeing the organisational measures set out in the Area for the performance
of its functions; also approved the Strategic Plan that the Internal Audit area had drawn up for 2020-
2024; provided ongoing monitoring and supervised the Area's activities and reports, ascertained the
results of its most relevant work, identified any weaknesses and opportunities for improvement; and
considered the recommendations proposed by the Internal Audit as a result of its review work. In the
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framework of the external assessment of the Internal Audit by an independent expert, the Committee
oversaw the conclusions of the work carried out by the external expert in order to identify opportunities
for improvement and best practices in the field.
In relation to the Compliance Area in the period prior to the approval of the amendments to the
Committee Regulations, by which the functions regarding compliance were transferred to the Risk and
Compliance Committee, the Committee reviewed the Area's activity, including the monitoring the
results of its reviews and the degree of progress in the implementation of planned measures; the
Criminal Risk Prevention Model; the follow-up of issues related to MiFID regulations; it was made aware
of the main communications and inspections carried out by the Group's main supervisors, whether
national or foreign, in relation to matters within their remit, as well as all those issues that may have
arisen in this area of the Group's activity.
During the financial year, the Committee also reviewed the changes to the structure of the Group
companies, provided ongoing monitoring of the main issues relating to the Group's t ax risks, and
supervised the Group's tax management along with the results of the inspection processes carried out
on the matter.
Similarly, the Committee has been informed of major corporate transactions planned by the Group,
monitoring the economic conditions and their main accounting impacts and issuing, prior to the
decisions taken by the Board, the Committee's report on the transaction.
Lastly, during the Bank's General Shareholders' Meeting held in 2019, the Committee informed
shareholders of the main issues related to the matters within its remit, including overseeing the process
of preparing the Bank and Group’s financial information, which had been provided to shareholders for
their approval, the result of the account auditing and of the function that it had carried out in this
matter, as well as the main issues related to the matters described in this section and other matters
handled by the Committee.
Other functions entrusted to the Audit Committee are: (i) to inform the General Shareholders' Meeting
on the questions raised in relation to the matters that are within the remit of the Committee and, in
particular, on the result of the audit, explaining how the audit has contributed to the integrity of the
financial information and the function performed by the Committee in this process; (ii) to be apprised
of the reports, documents or communications from external supervisory bodies relating to the
Committee's functions; and make sure that the instructions, requirements and recommendations of
the supervisory bodies are fulfilled properly and on time; and (iii) to report on all matters within its
remit as provided for by law, the Bylaws and the Regulations of the Board of Directors prior to any
decisions that the Board of Directors may be required to adopt, and in particular on: financial
information that the Company is required to publish; economic conditions and the accounting impact
of relevant corporate transactions and structural modifications; the creation or acquisition of shares in
special purpose vehicles or in entities domiciled in tax havens or territories considered to be tax havens;
and related-party transactions.
Regarding organisational and operational rules, the operational principles of the Audit Committee are
indicated in its Regulations, which lay down the basic rules of its organisation and operation.
In particular, the Audit Committee's Regulations stipulate that, inter alia, the Committee shall meet
whenever it is called by its Chair, who is empowered to convene the Committee and to set the agenda
for its meeting. The Regulations contain the procedure for the calling of ordinary and extraordinary
meetings.
Executives responsible for the areas that manage matters within the Committee’s remit may be called
to meetings, in particular, Accounting and Internal Audit areas, and, at the request thereof, those
persons within the Group who have knowledge of or responsibility for the matters covered by the
agenda, when their presence at the meeting is deemed convenient. The Committee may also call any
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other Group employee or manager, and even arrange for them to attend without the presence of any
other manager. Notwithstanding the foregoing, it will seek to ensure that the presence of persons
outside the Committee during these meetings, such as Bank managers and employees, be limited to
those cases where it is necessary and to the items on the agenda for which they are called.
The Committee may, through its Secretary, engage external advisory services for relevant issues when
it considers that these cannot be provided by experts or technical staff within the Group on grounds
of specialisation or independence.
Other aspects relating to its organisation and operation will be subject to the provisions of the
Committee's Regulations. All matters not provided for in the aforementioned Regulations will adhere
to the Regulations of the Board of Directors, insofar as they are applicable.
Appointments and Corporate Governance Committee: The Regulations of the Appointments and
Corporate Governance Committee set out the operational principles of the Committee and lay down
the basic rules of its organisation and operation. In particular, the Regulations of the Appointments
and Corporate Governance Committee specifically provide that the Committee will meet whenever it
is called to do so by its Chair, who is empowered to call the Committee and to set the agenda for its
meetings. The Regulations also set out the procedure for calling ordinary and extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to
meetings, as well as, at the request thereof, those persons within the Group who have knowledge of
or responsibility for the matters covered by the agenda, when their presence at the meeting is deemed
appropriate. The Committee may also call on any other Group employee or manager, and even
arrange for them to appear without the presence of any other manager, however, it will seek to ensure
that that the presence of non-Committee members at its meetings is limited to those cases where it is
necessary and to the items of the agenda for which they are called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects relating to its organisation and operation will be subject to the provisions of the
Committee's Regulations. All other matters not provided in the Committee's Regulations will be in
accordance with the Regulations of the Board of Directors insofar as they are applicable
With respect to the Appointments and Corporate Governance Committee's most significant activities
during the 2019 financial year, in the performance of their functions, the following were particularly
noteworthy: the Committee's continuous analysis of the structure, size and composition of the Board
of Directors, ensuring that they are suitable for the corporate bodies to best perform their duties; the
analysis of the directors' compliance with the independence and suitability criteria and the absence of
any conflicts of interest for the performance of their duties; the review performed on the Board's
selection, appointment, rotation and diversity policy, which, together with the analysis of structure,
size and composition, led to corresponding proposals and reports for the re-election and appointment
of directors that in turn is to be submitted to the next General Shareholders' Meeting in March 2020.
The committee also carried out an analysis of the assessment of the operation of the Board, the
Executive Committee and the performance of the functions of the Chairman of the Board and the
Chief Executive Officer, submitting their corresponding reports for consideration by the Board.
In addition, within the framework of its duties relating to the Bank's Corporate Governance System,
the Committee has carried out the quarterly monitoring and supervision of the progress made in
implementing the changes made to the Bank's Corporate Governance System during the financial
year; as well as the result of the corporate governance roadshow, where meetings were held with the
Bank's main institutional investors and proxy advisors over the last months of 2019.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
237
Finally, the Committee analysed the appointments and removals of senior managers that were
proposed during the 2019 financial year, in compliance with the selection and appointment policy of
the members of the Senior Management; and the Committee reviewed and verified the suitability of
the proposed new senior managers, submitting their corresponding reports to the Board.
Remunerations Committee: The Regulations of the Remunerations Committee set out the operational
principles of the Committee and lay down the basic rules of its organisation and operation. In particular,
the Regulations of the Remunerations Committee provide, inter alia, that the Remunerations
Committee will meet whenever it is called to do so by its Chair, who is empowered to call the
Committee and to set the agenda for its meetings. The Regulations also and set out the procedure for
calling ordinary and extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to
meetings, as well as, at the request thereof, those persons within the Group who have knowledge of
or responsibility for the matters covered by the agenda, when their presence at the meeting is deemed
appropriate. The Committee may also call any other Group employee or manager, and even arrange
for them to appear without the presence of any other manager. It will, however, seek to ensure that
the presence of persons outside the Committee during its meetings be limited to those cases where it
is necessary and to the items on the agenda for which they had been called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects relating to its organisation and operation will be subject to the provisions of the
Committee's Regulations. All other matters not provided for in the aforementioned Regulations will be
subject to the Regulations of the Board of Directors, insofar as they are applicable.
In regards to the most important activities carried out by the Remunerations Committee during the
2019 financial year, the Committee has been focused on performing the functions assigned to it
pursuant to Article 5 of the Remunerations Committee's Regulations, as well as in execution of the
framework established in the BBVA Directors’ Remuneration Policy, approved by the General Meeting
held in March 2019, and in the BBVA Group's Remuneration Policy approved by the Board of Directors
in November 2017, which is generally applicable to all BBVA staff and which includes, in turn, the
Remuneration Policy for the Identified Staff.
Therefore, in the execution of its functions and of the remuneration policies mentioned, the Committee
has analysed the following matters and, where appropriate, submitted the corresponding proposals to
the Board for approval:
Firstly, the Remunerations Committee analysed the approach for updating the BBVA Directors’
Remuneration Policy approved by General Meeting held in 2017. This update included the new
contractual conditions for the Group Executive Chairman and the Chief Executive Officer as a result of
their appointment in December 2018, as well as certain additional technical improvements,
maintaining in general terms, the remuneration system established in the previous remuneration
policy.
Therefore, the Committee submitted to the Board of Directors the proposal to update the BBVA
Directors’ Remuneration Policy for the 2019, 2020 and 2021 financial years, along with the report
on the Policy drawn up by the Committee and the proposal for the maximum number of shares to be
issued to the executive directors in execution of such Policy, all of which was submitted to the General
Meeting held on 15 March 2019.
With regard to non-executive directors, the Committee analysed the remuneration of non-executive
directors in view of the changes incorporated in BBVA Corporate Governance System, submitting to
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
238
the Board proposals for establishing remuneration associated with the roles of Lead Director and
Deputy Chair of the Board, and the revision of remuneration for the directors and chairs of the different
Board committees, as a result of the redistribution of functions of certain committees as reflected in
their corresponding regulations.
With regard to executive directors, the Committee submitted to the Board the proposals necessary
for: determining the Annual Variable Remuneration (“AVR”) for the 2018 financial year; determining
the amount of the deferred part of the AVR for the 2015 financial year, as well as the amount of its
updating; the scales of achievement for assessing the multi-year performance indicators applicable to
the deferred 2018 AVR and the reference group of the Total Shareholder Return indicator that forms
part of these indicators; the conditions for payment of the initial part of the 2018 AVR and the deferred
part of the 2015 AVR; the novation of the Chairman's contract and the approval of the Chief Executive
Officer's contract to adapt them to their new functions and positions, determining their remuneration
conditions; determining the annual and multi-year performance indicators for the calculation of the
2019 AVR and their corresponding weightings; the objectives and achievement scales associated with
the annual performance indicators for the 2019 AVR; and the minimum thresholds of Attributable
Profit and Capital Ratio established for the accrual of 2019 AVR.
With regard to matters relating to Senior Management, the Committee has determined the basic
contractual conditions applicable to the members of Senior Management appointed on 20 December
2018 and throughout the 2019 financial year, as well as the salary review of certain members of
Senior Management. The Committee has also monitored the 2018 AVR of the membe rs of Senior
Management, as well as the deferred part of the 2015 AVR of the senior managers who are
beneficiaries of that remuneration, payment of which corresponded in 2019. Moreover, and as a result
of the fact that the heads of Internal Audit and Regulation & Internal Control now have to report to the
Board, the Committee has submitted to the Board the proposed objectives and annual performance
indicators to calculate 2019 AVR of the head of these functions, within the framework of the
remuneration model applicable to Senior Management.
In terms of matters relating to the Identified Staff, including Senior Management, the Committee has
determined that the multi-year performance indicators used to calculate the annual variable
remuneration for 2019 and the scales of achievement used to calculate the deferred annual variable
remuneration for 2018 should be the same as those established for executive directors.
As regards its function of ensuring compliance with the remuneration policies established by the
Company, the Committee has reviewed the implementation of the approved remuneration policies
(i.e. BBVA Directors’ Remuneration Policy and the BBVA Group's Remuneration Policy, including the
Remuneration Policy for the Identified Staff) and the procedure for identifying Staff, through the Internal
Audit’s annual report, and has also received information on the result of the process for identifying the
Identified Staff within the BBVA Group during the 2019 financial year.
The Committee has also verified the information of remuneration of directors and senior managers
contained in the financial statements and the Annual Report on the Remuneration of Directors for
2018.
Finally, the Committee has submitted the 2018 Annual Report on the Remuneration of Directors to
the Board for its approval and subsequent submission to the General Shareholders' Meeting, and it
has also proposed to the Board a resolution to increase the maximum variable remuneration level of
up to 200% of the fixed component applicable to a specific number of members of the Identified Staff.
Risk and Compliance Committee:
4. Receive monthly information from the Head of Regulation & Internal Control regarding the activities
carried out by said area, as well as regarding any incidents that may arise, and verify that the Group's
Senior Management takes into account the conclusions and recommendations of their reports.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
239
The Risk and Compliance Committee has received monthly information from the head of Regulation &
Internal Control regarding the activity carried out by each of the units that comprise that area, without
prejudice to the periodic report received directly by the Committee from the heads of Compliance,
Non-Financial Risks and Internal Risk Control, all of which fall under the Regulation & Internal Control
area.
5. Monitor the evolution of the Group’s risks and their degree of compatibility with established strategies
and policies, and with the Group's Risk Appetite Framework, and oversee procedures, tools and risk
measurement indicators established at Group level to obtain a global view of the Bank’s and the Group’s
risks. Likewise, monitor compliance with prudential regulation and supervisory requirements regarding
risks. Furthermore, analyse, where appropriate, the measures envisaged to mitigate the impact of
identified risks, should these materialise, to be adopted by the Executive Committee or the Board of
Directors, as appropriate.
Throughout financial year 2019, the Risk and Compliance Committee monitored the evolution of the
different risks to which the Group is exposed —both financial (credit risk, structural risks, market risk,
insurance risk, etc.) and non-financial (operational risks)—, all of it within the framework of the BBVA
Group's General Risk Management and Control Model and in accordance with the Risk Appetite
Framework approved by the corporate bodies.
To this effect, the Risk and Compliance Committee received and analysed information from the Risk
and Regulation & Internal Control areas suitably frequently, and had the support of the Group's head
of Global Risk Management, the head of Regulation & Internal Control, those in charge of each type
of risk in the corporate field and the risk directors of the Group's main geographical areas; to which it
should be added the direct interaction of the Committee with each of the speakers and the debates
that may have arisen during its meetings.
All of this afforded the Risk and Compliance Committee direct knowledge of the Group's risks, both
globally and locally, allowing it to perform its duty of monitoring the evolution of the Group's risks,
regardless of the type of risk, the geographical or business area in which it originates, and even the
sector or portfolio to which it belongs.
As part of this duty, the Risk and Compliance Committee also regularly monitored compliance with
the metrics and limits established for financial year 2019, with the necessary detail and frequency to
ensure adequate control of said indicators. To complete its control of the Risk Appetite Framework,
the Committee received information about the key internal and external variables that affect the
compliance of the Risk Appetite Framework, even if they are not directly part of it. All of this prior to
its follow-up by the other corporate bodies with risk functions.
In addition to the foregoing, the Risk and Compliance Committee has received monthly information
on the main credit risk operations approved by the committees of the Risk area in their respective
areas of competency, as well as the Group's most significant cases of credit exposure. Each month,
the Risk and Compliance Committee also had access to information about the qualitative risk
operations authorised by the Risk area.
6. Analyse, within its remit, risks associated with projects that are considered strategic for the Group or
with corporate operations to be submitted to consideration by the Board of Directors or, where
appropriate, to consideration by the Executive Committee and, where necessary, submit the
corresponding report.
The Risk and Compliance Committee has analysed, in advance, the financial and non-financial risks of
corporate operations submitted for c onsideration by the Executive Committee.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
240
7. Analyse, prior to their submission to the Board of Directors or to the Executive Committee those risk
operations to be submitted to their consideration.
During the 2019 financial year, no risk operations have been submitted for consideration by the Board
of Directors or the Executive Committee, and therefore, the Risk and Compliance Committee has not
had to perform this role in this financial year.
8. Examine whether the prices of the assets and liabilities offered to customers fully take into account the
Bank's business model and risk strategy and, if not, submit a plan to the Board of Directors aimed at
rectifying the situation.
In 2019, the Committee received recurring information on the evolution of metrics and analysis in
terms of profitability and capital, which evaluate the alignment of the resulting pricing in the financing
and credit activity against the risk strategy and risk transfer in the Group.
Additionally, the Committee monitored the profitability of portfolios and businesses and the
performance of the profitability indicators incorporated into the Risk Appetite Framework of the
Company. All of this enabled the Committee to confirm that the prices of the assets and liabilities
offered to customers were aligned with the Bank's business model and risk strategy.
9. Participate in the process of establishing the remuneration policy, ascertaining that it is compatible with
an adequate and effective risk management strategy and that it does not offer incentives to assume
risks that exceed the level tolerated by the Company.
The Committee has been involved in establishing the multi-year performance indicators of the variable
remuneration and the corresponding scales of achievement, analysing their alignment with sound,
effective and prudent risk management.
10. Verify that the Company and the Group have means, systems, structures and resources that are
consistent with best practices that enable them to implement their risk management strategy, ensuring
that the Bank's risk management mechanisms are adequate in relation thereto. All of this, in
coordination with the remaining Board Committees, within their respective remits.
The Committee was informed of the Risk area's structure, resources and incentive scheme as well as
its means, systems and tools (including those in development stage), having verified that the Group
has adequate resources in relation with its strategy.
11. Report, prior to any decisions that may have to be made by the Board of Directors, on all matters
within its remit as provided for in the law, the Bylaws, the Regulations of the Board of Directors and
the Risk and Compliance Committee Regulations.
The Risk and Compliance Committee participated in the review of the Group's Recovery Plan with a
view to assessing its alignment with the Risk Appetite Framework approved by the Group, with the
help of the Risk and Finance areas, inter alia, before its submission and, if appropriate, approval by
the appropriate corporate bodies.
The Committee also fulfilled this function to the extent and according to the specified herein for each
of its functions.
12. Ensure compliance with applicable national and international regulations on matters related to money
laundering, conduct on the securities markets, data protection and the scope of Group activities with
respect to competition, and ensure that any requests for action or information made by official
authorities on these matters are dealt with in due time and in an appropriate manner.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
241
13. Be informed on any breach of the applicable internal or external regulations, as well as the relevant
events that the areas reporting to the Committee may have identified within their oversight and control
functions. Likewise, the Committee shall be informed on those issues related to legal risks which may
arise in the course of Group’s activity.
14. Examine draft codes of ethics and conduct and their respective modifications prepared by the
corresponding area of the Group, and issue its opinion in advance of the proposals to be drawn up to
the corporate bodies.
Regarding the functions outlined in paragraphs 12, 13 and 14 above, the Committee has regularly
reviewed the Compliance area's activity over the course of the financial year, overseeing the results of
its examinations and the degree of progress in the implementation of planned measures in the different
areas of action (e.g. conduct, markets, anti-money laundering); the monitoring of issues relating to
MiFID regulations and bank transparency; the receipt of the corresponding independent expert reports
on compliance, as well as all those issues that may have arisen from the Group's activities in the area
of compliance. The Committee has also been kept informed of the Annual Plan of the Compliance
function approved, regularly assessing its degree of progress and achievement. Furthermore, the
Committee has received information on the main legal risks to which the Group is currently exposed
and has reviewed the Entity's activity regarding personal data protection.
15. Be apprised of reports, documents or communications from external supervisory bodies,
notwithstanding any communications made with the remaining committees with regard to their
respective remits, and verify that the instructions, requirements and recommendations received from
the supervisory bodies in order to correct the irregularities, shortfalls or inadequacies identified in the
inspections performed are fulfilled in due time and appropriate manner.
The Committee was made aware of the major communications and inspections carried out by the
Group's supervisory bodies, whether national or foreign, being informed, where appropriate, of the
recommendations, weaknesses or areas of improvement identified, as well as the action plans and
other measures established by the relevant executive areas in order to overcome them in time.
16. Ensure the promotion of risk culture across the Group.
During the 2019 financial year, the Risk and Compliance Committee verified the progress and
effectiveness of the various actions and initiatives drawn up by the Risk area to strengthen the risk
culture in the Group, so as to enable employees to perform their functions in a secure environment,
and to encourage the mitigation of risks to which their activities are exposed.
17. Supervise the Group's criminal risk prevention model.
The Committee has also been informed of the main points of the BBVA Group's Crime Prevention and
Criminal Risk Management Model, as well as its development and the main work lines in this regard.
18. Review and supervise the systems under which Group professionals may confidentially report any
irregularities in financial information or other matters.
The Committee has been informed by the head of the Compliance area —the unit responsible for
promoting and ensuring, in an independent and objective manner, that BBVA acts with integrity,
particularly in areas such as anti-money laundering, conduct with clients, security market conduct,
anti-corruption and other areas that might pose a risk to BBVA's reputation— of the functioning of the
whistleblowing channel, as well as of the noteworthy aspects of the area.
In terms of organisational and operation rules, the Regulations of the Risk and Compliance Committee set
out the operational principles, which lay down the basic rules of its organisation and functioning.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
242
In particular, the Risk and Compliance Committee's Regulations stipulate, inter alia, that the Committee shall
meet whenever it is convened by its Chair, who is empowered to call the Committee meetings and to set
their agenda. The Regulations contain the procedure for the calling of ordinary and extraordinary meetings.
Executives responsible for the areas that manage matters within the Committee’s remits may be called to
meetings, in particular the Regulation and Internal Control area and Risks area, and, at the request thereof,
those persons within the Group who have knowledge of or responsibility for the matters covered by the
agenda, when their presence at the meeting is deemed appropriate. The Committee may also call any
other Bank employee or manager, and even arrange for them to attend without the presence of any other
manager, while ensuring that the presence of persons outside the Committee during these meetings is
limited to those cases where it is necessary and to the items of the agenda for which they are called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues when
it considers that these cannot be provided by experts or technical staff within the Group on grounds of
specialisation or independence.
Other aspects relating to its organisation and operation will be subject to the provisions of the Committee's
own Regulations. All other matters not provided for in the aforementioned Regulations will be subject to
the Regulations of the Board of Directors, insofar as they are applicable .
The Technology and Cybersecurity Committee: Duties relating to the Technology Strategy are:
– Being informed, as appropriate, of the technology strategy and trends that may affect the Bank's
strategic plans, including through monitoring general industry trends.
– Being informed, as appropriate, of the metrics established by the Group for management and
control in the technological area, including the Group's developments and investments in this area.
– Being informed, as appropriate, of issues related to new technologies, applications, information
systems and best practices that may affect the Group's technological plans or strategy.
– Being informed, as appropriate, of the main policies, strategic projects and plans defined by the
Engineering Area.
– Reporting to the Board of Directors and, where appropriate, to the Executive Committee, on
matters related to information technologies falling within its remit.
To ensure compliance with these duties, the Technology and Cybersecurity Committee has performed
the following duties:
– Technology strategy: The Committee has been informed by the Engineering area o f the Group's
technology strategy, as well as of the status and evolution of the various projects, systems, tools
and developments integrated with the strategy, and receives a periodic report on the key
performance indicators (KPIs) in this regard. The Committee has also been informed of the number
of employees and level of investment required to effectively implement this strategy.
– Development of new products and services: The Committee has been informed of the main
projects that the Engineering area, to gether with the Group's business areas and the Client
Solutions area, has implemented or is planning to implement in developing new products and
digital services targeted at the Group's wholesale and retail customers.
– Trend information: The Committee has received information regarding the main technological
trends in the industry, and even in other important sectors, especially with regard to trends that
may affect the Bank's strategic plans.
Regarding the procedures and organisational and operational rules of the Technology and
Cybersecurity Committee, the Committee's operational principles are indicated in its own Regulations,
which lay down the basic rules of its organisation and operation.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
243
In particular, the Technology and Cybersecurity Committee's Regulations stipulate that, inter alia, the
Committee shall meet whenever it is called by its Chair, who is empowered to call the Committee and
to set the agenda for its meeting. The Regulations contain the procedure for the calling of ordinary
and extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to
meetings, as well as, at the request thereof, those persons within the Group who have knowledge of
or responsibility for the matters covered by the agenda, when their presence at the meeting is deemed
appropriate. The Committee may also call on any other Group employee or manager, and even
arrange for them to appear without the presence of any other manager, while ensuring that the
presence of non-Committee members at its meetings is limited to those cases where it is necessary
and to the items of the agenda for which they are called.
The Committee may, through its Secretary, engage external advisory services for relevant issues when
it considers that these cannot be properly provided by experts or technical staff within the Group on
grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee are included in the Regulations of
the Committee. All other matters not provided for in the aforementioned Regulations will be subject
to the Regulations of the Board of Directors, insofar as they are applicable.
Executive Committee: The main activities carried out by the Committee during the 2019 financial year
included the monitoring of the monthly evolution of the Group and its business areas' activity and
results, its crucial role in ensuring the integrity, coordination, consistency and coherence of the Group's
strategic and prospective processes, such as the Strategic Plan, the Group's Risk Appetite Framework
(RAF), the ICAAP, the ILAAP, the Budget and planning of liquidity and financing, taking into account
aspects common to all processes, such as macroeconomic perspectives, the regulatory and
supervisory framework and corporate operations, and driving the integration of the strategic bases
established by the Board into all processes.
Furthermore, the Committee has ensured the coherence and alignment of RAF with the strategy
established by the Board of Directors and has reviewed and proposed the bases for the proposals
upon which RAF has been drafted, which were submitted to the Board by the Risk and Compliance
Committee.
The role of the Committee has also been extended to supporting the Board in matters of finance by
analysing and monitoring the drafting of the Capital Plan and the Liquidity and Funding Plan prior to
its submission to the Board.
The Committee also oversaw, monitored and controlled the Group's risk management, it monitored
the evolution of the risk profile and metrics; the most significant aspects relating to changes in the
macroeconomic environment and other factors that impacted the Group's management and activities
over the course of the financial year; as well as any developments in BBVA share prices.
It also analysed the corporate transactions within its remit, as well as other matters or projects arising
from the day-to-day management of business and supervised and approved new corporate policies.
Finally, the Committee monitored the legislative and regulatory developments affecting financial
institutions, as well as the Group's authorisation to appoint administrators in subsidiaries or investee
companies, and the granting of the powers vested in the Group. It also oversaw matters relating to
corporate governance and the roadshow. However, the competences held by the Committee in this
regard were transferred to the Appointments and Corporate Governance Committee upon the
approval of the amendments to the Committee Regulations, as outlined in this report.
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
244
With respect to Section D (Related-party and Intragroup Transactions), see Notes 53 and 48 of the BBVA
consolidated and individual Annual Financial Statements for the 2019 financial year, respectively. Section D.4
details the transactions conducted by Banco Bilbao Vizcaya Argentaria, S.A., at the close of the financial year,
with the company issuing securities on international markets, carried out as part of ordinary trading related to
the management of outstanding issuances, guaranteed by BBVA. Moreover, with respect to Section D.4,
please refer to the section entitled "Offshore financial centres" in the BBVA Consolidated Management Report
for the 2019 financial year.
Likewise, in relation with Section D.6, all members of the Board of Directors and BBVA Senior Management
are subject to the provisions of the BBVA Code of Conduct and the Internal Standards of Conduct in the
Securities Markets, which establish procedures and measures to identify, prevent and manage potential
conflicts of interest. In particular, the Internal Standards of Conduct in the Securities Markets establishes that
all persons subject to them must notify the head of their area or the Compliance unit o f situations that could
potentially and under specific circumstances may entail conflicts of interest that might compromise their
impartiality, before they engage in any transaction or conclude any business in the securities market in which
such may arise.
Furthermore, regarding Section D.7, BBVA has significant shareholdings in three listed companies that are
neither subsidiaries nor part of the BBVA Group. As part of its ordinary trading, BBVA also has shareholdings
in other listed companies, without this stake being significant nor these companies considered as subsidiaries
that belong to the BBVA Group.
With respect to Section E.3, and as regards preliminary proceedings 96/2017 — investigation piece number 9
— for the services provided to the Bank by Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt), it
should be noted that, since January 2019, this issue has been periodically reported to the Bank's corporate
bodies. This relates to both the Board committees within their remit (Audit Committee and Risk and Compliance
Committee) as well as the Board of Directors as a whole. These bodies have driven and monitored internal
investigation procedures, ensuring that the Bank fully cooperates with the authorities and develops a policy of
transparency.
In addition to the above, throughout the 2019 financial year, the Bank's management bodies have adopted
several measures to reinforce the Bank's internal control systems, the key elements of which are described in
the “Compliance System” section of the Non-Financial Information report, included in the individual and
consolidated Management Reports in which this Corporate Governance Report is included. This relates to: (i)
the direct report of the heads of internal control and internal audit to the Board of Directors; (ii) approval of
new policies and improvement in processes related to outsourcing, procurement and others; and (iii)
reinforcement of the criminal prevention model.
It is also worth noting that the findings of the ongoing forensic investigation, which have been made available
to the judicial authorities and are the basis of the legal investigation, indicate that neither the Executive
Chairman of the Bank nor any of the current members of the Board of Directors are implicated, and it has not
been proven that the Bank has committed any criminal activity.
In this regard, in the testimony given before the judge and prosecutors at the request of Central Investigating
Court No. 6 of the Spanish National High Court, the Bank pleaded that it bears no criminal responsibility. It
must also be noted that the criminal responsibility of legal persons is only legally enforceable from 2010.
It must also be stressed that to date the case has not impacted the Bank's business, nor has it negatively
impacted the Bank's reputation indices, which are subject to recurrent monitoring by both the executive team
and by its management bodies.
BBVA has created a specific section on its corporate website with information on issues related to the Cenyt
case (https://www.bbva.com/en/specials/the-cenyt-case/).
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
245
Regarding adherence to codes of ethics or good practice, in 2011 BBVA’s Board of Directors approved the
Bank's adhesion to the CBPT (Código de Buenas Prácticas Tributarias — Code of Good Tax Practices) approved
by the Large Corporations Forum according to the wording proposed by the Spanish Tax Agency (AEAT). The
Group meets the obligations assumed as a result of this adherence and, during 2019, voluntarily prepared
and submitted to the Spanish Tax Agency the “Annual Fiscal Transparency Report” for companies adhering to
the CBPT. In this regard, the BBVA Group is also adhered since 2013 to the Code of Practice on Taxation for
Banks promoted by British tax authorities, and has also met its obligations. Furthermore, BBVA is committed
to implementing the provisions of the Universal Declaration of Human Rights and is a member of all major
international initiatives for sustainable development, such as the Principles of United Nations Global Compact,
the Equator Principles, the United Nations Principles for Responsible Investment, the United Nations
Environment Programme Financial Initiative, the Green Bond Principles, the Social Bond Principles, the Green
Loan Principles, the Thun Group of Banks on Human Rights CDP, the RE100 initiatives and the Science Based
Targets, Grupo Español para el Crecimiento Verde (Spanish Green Growth Group) initiatives, as well as those
of others conventions and treaties of international organisations such as the Organization for Economic Co-
operation and Development and the International Labour Organization. Also, in 2019 BBVA signed, as a
founding signatory, the Principles for Responsible Banking and joined the Collective Commitment to Climate
Action as part of this year's UN Secretary-General's Climate Action Summit. Moreover, BBVA is firmly committed
to the United Nations Sustainable Development Goals and the Paris Agreement on Climate Change, and, since
2017, the Bank has been part of the pilot group of banks committed to implementing the recommendations
regarding financing and climate change published in July by the Financial Stability Board of the G20 .
This annual corporate governance report was approved by the company's Board of Directors on 10 February
2020.
List whether any directors voted against or abstained from voting on the approval of this report.
NO
This English version is a translation of the original in Spanish for information purposes only. In case of a discrepancy, the Spanish
original will prevail.
246
P.1
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Contents
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets ........................................................................................................................................................................ 4
Consolidated income statements ................................................................................................................................................................. 7
Consolidated statements of recognized income and expense ................................................................................................................... 8
Consolidated statements of changes in equity ............................................................................................................................................ 9
Consolidated statements of cash flows ...................................................................................................................................................... 12
NOTES TO THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS
1.
2.
3.
4.
5.
6.
7
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Introduction, basis for the presentation of the Consolidated Financial Statements, Internal Control over Financial .......................
Reporting and other information ........................................................................................................................................................ 13
Principles of consolidation, accounting policies and measurement bases applied and recent IFRS pronouncements ................ 16
BBVA Group ........................................................................................................................................................................................ 39
Shareholder remuneration system .................................................................................................................................................... 41
Earnings per share .............................................................................................................................................................................. 43
Operating segment reporting ............................................................................................................................................................. 43
Risk management ............................................................................................................................................................................... 45
Fair value of financial instruments ..................................................................................................................................................... 85
Cash, cash balances at central banks and other demand deposits ................................................................................................. 95
Financial assets and liabilities held for trading ..................................................................................................................................96
Non-trading financial assets mandatorily at fair value through profit or loss .................................................................................. 97
Financial assets and liabilities designated at fair value through profit or loss ..................................................................................98
Financial assets at fair value through other comprehensive income ...............................................................................................98
Financial assets at amortized cost ................................................................................................................................................... 103
Hedging derivatives and fair value changes of the hedged items in portfolio hedges of interest rate risk ................................... 106
Investments in joint ventures and associates .................................................................................................................................. 108
Tangible assets ................................................................................................................................................................................. 109
Intangible assets ................................................................................................................................................................................ 113
Tax assets and liabilities .................................................................................................................................................................... 117
20.
Other assets and liabilities ................................................................................................................................................................. 121
21.
22.
23.
24.
25.
26.
27.
28.
29.
Non-current assets and disposal groups classified as held for sale ................................................................................................ 121
Financial liabilities at amortized cost ............................................................................................................................................... 124
Assets and liabilities under insurance and reinsurance contracts ................................................................................................. 130
Provisions ........................................................................................................................................................................................... 131
Post-employment and other employee benefit commitments ...................................................................................................... 132
Common stock ................................................................................................................................................................................... 141
Share premium ................................................................................................................................................................................. 142
Retained earnings, revaluation reserves and other reserves ......................................................................................................... 142
Treasury shares ................................................................................................................................................................................ 145
30.
Accumulated other comprehensive income (loss) ......................................................................................................................... 146
P.2
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
Non-controlling interest .................................................................................................................................................................... 146
Capital base and capital management ............................................................................................................................................. 147
Commitments and guarantees given ................................................................................................................................................ 151
Other contingent assets and liabilities .............................................................................................................................................. 151
Purchase and sale commitments and future payment obligations ................................................................................................ 152
Transactions on behalf of third parties ............................................................................................................................................ 152
Net interest income .......................................................................................................................................................................... 153
Dividend income................................................................................................................................................................................ 153
Share of profit or loss of entities accounted for using the equity method...................................................................................... 154
Fee and commission income and expense ...................................................................................................................................... 154
Gains (losses) on financial assets and liabilities, hedge accounting and exchange differences, net ............................................ 155
Other operating income and expense .............................................................................................................................................. 156
Income and expense from insurance and reinsurance contracts .................................................................................................. 157
Administration costs ......................................................................................................................................................................... 158
Depreciation and amortization .......................................................................................................................................................... 161
Provisions or (reversal) of provisions ............................................................................................................................................... 161
Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss or net ......................
gains by modification ........................................................................................................................................................................ 161
Impairment or (reversal) of impairment on non-financial assets .................................................................................................... 161
Gains (losses) on derecognition of non financial assets and subsidiaries, net .............................................................................. 162
Gain (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations .
........................................................................................................................................................................................................... 162
Consolidated statements of cash flows ........................................................................................................................................... 163
Accountant fees and services .......................................................................................................................................................... 164
Related-party transactions ............................................................................................................................................................... 165
Remuneration and other benefits to the Board of Directors and to the members of the Bank’s Senior Management ............... 167
Other information.............................................................................................................................................................................. 174
Subsequent events ........................................................................................................................................................................... 175
Explanation added for translation into English ................................................................................................................................ 175
P.3
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDICES
APPENDIX I. Additional information on subsidiaries and structured entities composing the BBVA Group ................................................ 177
APPENDIX II. Additional information on investments joint ventures and associates in the BBVA Group ................................................... 185
APPENDIX III. Changes and notification of participations in the BBVA Group in 2019 ................................................................................. 186
APPENDIX IV. Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2019 ......... 189
APPENDIX V. BBVA Group’s structured entities. Securitization funds ......................................................................................................... 190
APPENDIX VI. Details of the outstanding subordinated debt and preferred securities issued by the Bank or entities in the Group
consolidated as of December 31, 2019, 2018 and 2017 .................................................................................................................................. 191
APPENDIX VII Consolidated balance sheets held in foreign currency as of December 31, 2019, 2018 and 2017. ...................................... 195
APPENDIX VIII. Consolidated income statements for the first and second half of 2019 and 2018 .............................................................. 197
APPENDIX IX. Financial Statements of Banco Bilbao Vizcaya Argentaria, S.A. ............................................................................................ 198
APPENDIX X. Information on data derived from the special accounting registry and other information bonds........................................ 207
APPENDIX XI. Quantitative information on refinancing and restructuring operations and other requirement under Bank of Spain Circular
........................................................................................................................................................................................................... 214
6/2012
APPENDIX XII. Additional information on risk concentration ........................................................................................................................225
APPENDIX XIII. ....... Information in accordance with article 89 of Directive 2013/36/EU of the European Parliament and its application to
Spanish Law through Law 10/2014 ................................................................................................................................................................ 237
Glossary .......................................................................................................................................................................................................... 238
P.4
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated balance sheets for the years ended December 31, 2019, 2018 and 2017
ASSETS (Millions of Euros)
Notes
2019
2018 (*)
2017 (*)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS
FINANCIAL ASSETS HELD FOR TRADING
9
10
Derivatives
Equity instruments
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH
PROFIT OR LOSS
11
Equity instruments
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
12
Equity instruments
Debt securities
Loans and advances to customers
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
13
Equity instruments
Debt securities
Loans and advances to credit institutions
FINANCIAL ASSETS AT AMORTIZED COST
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
DERIVATIVES - HEDGE ACCOUNTING
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST
RATE RISK
JOINT VENTURES AND ASSOCIATES
Joint ventures
Associates
INSURANCE AND REINSURANCE ASSETS
TANGIBLE ASSETS
Properties, plant and equipment
For own use
Other assets leased out under an operating lease
Investment properties
INTANGIBLE ASSETS
Goodwill
Other intangible assets
TAX ASSETS
Current tax assets
Deferred tax assets
OTHER ASSETS
Insurance contracts linked to pensions
Inventories
Other
14
15
15
16
23
17
18
19
20
NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
21
44,303
102,688
33,185
8,892
26,309
535
21,286
12,482
5,557
4,327
110
-
-
1,120
1,214
1,214
-
61,183
2,420
58,731
33
439,162
38,877
4,275
13,649
58,196
90,117
30,536
5,254
25,577
2,163
14,566
12,021
5,135
3,095
237
-
-
1,803
1,313
1,313
-
56,337
2,595
53,709
33
419,660
32,530
3,941
9,163
382,360
374,027
1,729
28
1,488
154
1,334
341
10,068
9,816
9,554
263
252
6,966
4,955
2,010
17,083
1,765
15,318
3,800
-
581
3,220
3,079
2,892
(21)
1,578
173
1,405
366
7,229
7,066
6,756
310
163
8,314
6,180
2,134
18,100
2,784
15,316
5,472
-
635
4,837
2,001
42,680
64,695
35,265
6,801
22,573
-
-
56
2,709
1,888
174
648
69,476
3,224
66,251
-
445,275
24,093
7,300
26,261
387,621
2,485
(25)
1,588
256
1,332
421
7,191
6,996
6,581
415
195
8,464
6,062
2,402
16,888
2,163
14,725
4,359
-
229
4,130
23,853
TOTAL ASSETS
698,690
676,689
690,059
(*)
Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2019.
P.5
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated balance sheets for the years ended December 31, 2019, 2018 and 2017
LIABILITIES AND EQUITY (Millions of Euros)
FINANCIAL LIABILITIES HELD FOR TRADING
Derivatives
Short positions
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates
Other financial liabilities
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT
OR LOSS
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates
Other financial liabilities
Memorandum item: Subordinated liabilities
FINANCIAL LIABILITIES AT AMORTIZED COST
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates
Other financial liabilities
Memorandum item: Subordinated liabilities
DERIVATIVES - HEDGE ACCOUNTING
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF
INTEREST RATE RISK
LIABILITIES UNDER INSURANCE AND REINSURANCE CONTRACTS
PROVISIONS
Pensions and other post employment defined benefit obligations
Other long term employee benefits
Provisions for taxes and other legal contingencies
Commitments and guarantees given
Other provisions
TAX LIABILITIES
Current tax liabilities
Deferred tax liabilities
OTHER LIABILITIES
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR
SALE
TOTAL LIABILITIES
(*)
Presented for comparison purposes only (Note 1.3).
Notes
10
2019
2018 (*)
2017 (*)
89,633
35,019
12,249
7,635
24,969
9,761
-
-
80,774
31,815
11,025
10,511
15,687
11,736
-
-
46,182
36,169
10,013
-
-
-
-
-
12
10,010
6,993
2,222
-
-
944
4,656
4,410
-
516,641
25,950
28,751
384,219
63,963
13,758
18,018
2,233
-
10,606
6,538
4,631
61
677
711
457
2,808
880
1,928
3,742
1,554
-
-
976
2,858
3,159
-
509,185
27,281
31,978
375,970
61,112
12,844
18,047
2,680
-
9,834
6,772
4,787
62
686
636
601
3,276
1,230
2,046
4,301
-
-
-
-
-
2,222
-
543,713
37,054
54,516
376,379
63,915
11,850
17,316
2,880
(7)
9,223
7,477
5,407
67
756
578
669
3,298
1,114
2,184
4,550
17,197
643,765
623,814
636,736
22
15
15
23
24
19
20
The accompanying Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2019.
P.6
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated balance sheets for the years ended December 31, 2019, 2018 and 2017
LIABILITIES AND EQUITY (Continued) (Millions of Euros)
SHAREHOLDERS’ FUNDS
Capital
Paid up capital
Unpaid capital which has been called up
Share premium
Equity instruments issued other than capital
Other equity
Retained earnings
Revaluation reserves
Other reserves
Reserves or accumulated losses of investments in joint ventures and associates
Other
Less: treasury shares
Profit or loss attributable to owners of the parent
Less: interim dividends
ACCUMULATED OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to profit or loss
Actuarial gains (losses) on defined benefit pension plans
Non-current assets and disposal groups classified as held for sale
Share of other recognized income and expense of investments joint ventures and
associates
Fair value changes of equity instruments measured at fair value through other
comprehensive income
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value
through other comprehensive income
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedged item)
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedging instrument)
Fair value changes of financial liabilities at fair value through profit or loss attributable to
changes in their credit risk
Items that may be reclassified to profit or loss
Hedge of net investments in foreign operations (effective portion)
Foreign currency translation
Hedging derivatives. Cash flow hedges (effective portion)
Financial assets available for sale
Fair value changes of debt instruments measured at fair value through other
comprehensive income
Hedging instruments (non-designated items)
Non-current assets and disposal groups classified as held for sale
Share of other recognized income and expense of investments in joint ventures and
associates
MINORITY INTERESTS (NON-CONTROLLING INTERESTS)
Accumulated other comprehensive income
Other items
TOTAL EQUITY
TOTAL EQUITY AND TOTAL LIABILITIES
MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES) (Millions of Euros)
Loan commitments given
Financial guarantees given
Other commitments given
(*)
Presented for comparison purposes only (Note 1.3).
Notes
2019
2018 (*)
2017 (*)
26
27
28
28
28
29
30
31
Notes
33
33
33
55,958
3,267
3,267
-
23,992
-
56
26,402
-
(125)
(125)
-
(62)
3,512
(1,084)
(7,235)
(1,875)
(1,498)
2
-
(403)
-
-
-
24
(5,359)
(896)
(6,161)
(44)
1,760
-
(18)
1
6,201
(3,526)
9,727
54,925
698,690
2019
130,923
10,984
39,209
54,326
3,267
3,267
-
23,992
-
50
23,076
3
(58)
(58)
-
(296)
5,400
(1,109)
(7,215)
(1,284)
(1,245)
-
-
(155)
-
-
-
116
(5,932)
(218)
(6,643)
(6)
943
-
1
(9)
5,764
(3,236)
9,000
52,874
676,689
2018 (*)
118,959
16,454
35,098
53,283
3,267
3,267
-
23,992
-
54
23,746
12
(35)
(35)
-
(96)
3,514
(1,172)
(6,939)
(1,183)
(1,183)
-
-
(5,755)
1
(7,297)
(34)
1,641
(26)
(40)
6,979
(2,550)
9,530
53,323
690,059
2017 (*)
94,268
16,545
45,738
The accompanying Notes and Appendices are an integral part of the consolidated balance sheet as of December 31, 2019.
P.7
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated income statements for the years ended December 31, 2019, 2018 and 2017
CONSOLIDATED INCOME STATEMENTS (Millions of Euros)
Interest and other income
Interest expense
NET INTEREST INCOME
Dividend income
Share of profit or loss of entities accounted for using the equity method
Fee and commission income
Fee and commission expense
Gains (losses) on derecognition of financial assets and liabilities not measured at fair
value through profit or loss, net
Gains (losses) on financial assets and liabilities held for trading, net
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or
loss, net
Gains (losses) on financial assets and liabilities designated at fair value through profit or
loss, net
Gains (losses) from hedge accounting, net
Exchange differences, net
Other operating income
Other operating expense
Income from insurance and reinsurance contracts
Expense from insurance and reinsurance contracts
GROSS INCOME
Administration costs
Personnel expense
Other administrative expense
Depreciation and amortization
Provisions or reversal of provisions
Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss or net gains by modification
Financial assets measured at amortized cost
Financial assets at fair value through other comprehensive income
NET OPERATING INCOME
Impairment or reversal of impairment of investments in joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Tangible assets
Intangible assets
Other assets
Gains (losses) on derecognition of non - financial assets and subsidiaries, net
Negative goodwill recognized in profit or loss
Gains (losses) from non-current assets and disposal groups classified as held for sale
not qualifying as discontinued operations
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
Tax expense or income related to profit or loss from continuing operations
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS
Profit (loss) after tax from discontinued operations
PROFIT FOR THE YEAR
ATTRIBUTABLE TO MINORITY INTEREST (NON-CONTROLLING INTERESTS)
ATTRIBUTABLE TO OWNERS OF THE PARENT
EARNINGS PER SHARE (Euros)
Basic earnings per share from continued operations
Diluted earnings per share from continued operations
Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations
(*)
Presented for comparison purposes only (Note 1.3).
Notes
37.1
37.2
38
39
40
40
41
41
41
41
41
41
42
42
43
43
44.1
44.2
45
46
47
48
49
50
31
55.2
Notes
5
2019
2018 (*)
2017 (*)
31,061
(12,859)
18,202
162
(42)
7,522
(2,489)
239
451
143
(94)
59
586
671
(2,006)
2,890
(1,751)
24,542
(10,303)
(6,340)
(3,963)
(1,599)
(617)
(4,151)
(4,069)
(82)
7,872
(46)
(1,447)
(94)
(1,330)
(23)
(3)
-
21
6,398
(2,053)
4,345
-
4,345
833
3,512
29,831
(12,239)
17,591
157
(7)
7,132
(2,253)
216
707
96
143
72
(9)
949
(2,101)
2,949
(1,894)
23,747
(10,494)
(6,120)
(4,374)
(1,208)
(373)
(3,981)
(3,980)
(1)
7,691
-
(138)
(5)
(83)
(51)
78
-
815
8,446
(2,219)
6,227
-
6,227
827
5,400
29,296
(11,537)
17,758
334
4
7,150
(2,229)
985
218
(56)
(209)
1,030
1,439
(2,223)
3,342
(2,272)
25,270
(11,112)
(6,571)
(4,541)
(1,387)
(745)
(4,803)
(3,676)
(1,127)
7,222
-
(364)
(42)
(16)
(306)
47
-
26
6,931
(2,174)
4,757
-
4,757
1,243
3,514
2019
2018 (*)
2017 (*)
0.47
0.47
-
-
0.75
0.75
-
-
0.46
0.46
-
-
The accompanying Notes and Appendices are an integral part of the consolidated income statement as of December 31, 2019.
P.8
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated statements of recognized income and expense for the years ended December 31,
2019, 2018 and 2017
CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)
PROFIT RECOGNIZED IN INCOME STATEMENT
OTHER RECOGNIZED INCOME (EXPENSE)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
Actuarial gains (losses) from defined benefit pension plans
Non-current assets and disposal groups held for sale
Share of other recognized income and expense of entities accounted for using the equity method
Fair value changes of equity instruments measured at fair value through other comprehensive
income, net
Gains (losses) from hedge accounting of equity instruments at fair value through other
comprehensive income, net
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes
in their credit risk
Income tax related to items not subject to reclassification to income statement
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
Hedge of net investments in foreign operations (effective portion)
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Foreign currency translation
Translation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Cash flow hedges (effective portion)
Valuation gains (losses) taken to equity
Transferred to profit or loss
Transferred to initial carrying amount of hedged items
Other reclassifications
Available-for-sale financial assets
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Debt securities at fair value through other comprehensive income
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Non-current assets and disposal groups held for sale
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Entities accounted for using the equity method
Income tax relating to items subject to reclassification to income statements
TOTAL RECOGNIZED INCOME/EXPENSE
Attributable to minority interest (non-controlling interests)
Attributable to the parent company
(*)
Presented for comparison purposes only (Note 1.3).
2019
4,345
(310)
(584)
(364)
2
-
(229)
-
(133)
140
274
(687)
(687)
-
-
132
113
1
18
(109)
(99)
(10)
-
-
1,278
1,401
(122)
-
(19)
(8)
-
(11)
10
(332)
4,036
543
3,493
2018 (*)
2017 (*)
6,227
(2,523)
(141)
(79)
-
-
(172)
-
166
(56)
(2,382)
(244)
(244)
-
-
(1,537)
(1,542)
5
-
27
(32)
58
-
-
(901)
(766)
(135)
-
20
-
20
-
9
244
3,704
(420)
4,124
4,757
(4,439)
(91)
(96)
-
-
5
(4,348)
80
112
-
(32)
(5,080)
(5,089)
(22)
31
(67)
(122)
55
-
-
719
384
347
(12)
(20)
-
-
(20)
(14)
35
318
127
191
The accompanying Notes and Appendices are an integral part of the consolidated statement of recognized income and expense as of
December 31, 2019.
P.9
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Consolidated statements of changes in equity for the years ended December 31, 2019, 2018 and 2017
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
2019
Capital
(Note
26)
Share
Premium
(Note
27)
Equity
instruments
issued other
than capital
Other Equity
Retained
earnings
(Note 28)
Revaluation
reserves
(Note 28)
Other
reserves
(Note
28)
(-) Treasury
shares
(Note 29)
Non-controlling interest
(-)
Interim
dividends
(Note 4)
Accumulated
other
comprehensive
income
(Note 30)
Accumulated
other
comprehensive
income (Note
31)
Other
(Note 31)
Total
Balances as of January 1, 2019 (*)
Effect of changes in accounting policies ( Note 1.3)
Adjusted initial balance
Total income/expense recognized
Other changes in equity
Issuances of common shares
Issuances of preferred shares
Issuance of other equity instruments
Settlement or maturity of other equity instruments issued
Conversion of debt on equity
Common Stock reduction
Dividend distribution
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of other equity instruments to financial
liabilities
Reclassification of financial liabilities to other equity
instruments
Transfers within total equity
Increase/Reduction of equity due to business
combinations
Share based payments
3,267
-
3,267
-
-
-
-
23,992
-
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other increases or (-) decreases in equity
Balances as of December 31, 2019
-
3,267
-
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
-
50
-
6
-
-
-
-
-
-
-
-
-
-
-
-
-
(4)
11
56
23,017
58
23,076
-
3,327
-
-
-
-
-
-
(1,059)
-
13
-
-
3
-
3
-
(3)
-
-
-
-
-
-
-
-
-
-
-
(57)
-
(57)
-
(68)
-
-
-
-
-
-
(4)
-
-
-
-
4,360
(3)
(66)
-
-
14
26,402
-
-
-
-
-
-
1
(125)
(*)
Balances as of December 31, 2018 as originally reported in the consolidated Financial Statements for the year 2018.
The accompanying Notes and Appendices are an integral part of the consolidated statement of changes in equity as of December 31, 2019.
Profit or
loss
attributable
to owners
of the
parent
5,324
76
5,400
3,512
(5,400)
-
-
-
-
-
-
-
-
-
-
-
(296)
-
(296)
-
234
-
-
-
-
-
-
-
(1,088)
1,322
-
-
-
-
-
(975)
(134)
(1,109)
-
25
-
-
-
-
-
-
(1,084)
-
-
-
-
(5,400)
1,109
-
-
-
-
(7,215)
-
(7,215)
(19)
-
-
-
(3,236)
-
(3,236)
(291)
-
-
-
9,000
-
9,000
833
(106)
-
-
52,874
-
52,874
4,036
(1,985)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(142)
-
-
-
-
-
-
-
-
-
-
-
(2,289)
(1,088)
1,335
-
-
-
-
(4)
-
(62)
-
3,512
-
(1,084)
-
(7,235)
-
(3,526)
36
9,727
62
54,925
P.10
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Consolidated statements of changes in equity for the years ended December 31, 2019, 2018 and 2017
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
2018 (*)
Capital
(Note 26)
Share
Premium
(Note 27)
Equity
instruments
issued other than
capital
Other Equity
Retained
earnings
(Note 28)
Revaluation
reserves
(Note 28)
Other
reserves
(Note 28)
(-) Treasury
shares (Note
29)
Non-controlling interest
Profit or loss
attributable to
owners of the
parent
(-) Interim
dividends
(Note 4)
Accumulated
other
comprehensive
income
(Note 30)
Accumulated
other
comprehensive
income (Note
31)
Other
(Note 31)
Total
Balances as of January 1, 2018 (**)
Effect of changes in accounting policies
Adjusted initial balance
Total income/expense recognized
Other changes in equity
Issuances of common shares
Issuances of preferred shares
Issuance of other equity instruments
Settlement or maturity of other equity instruments
issued
Conversion of debt on equity
Common Stock reduction
Dividend distribution
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of other equity instruments to
financial liabilities
Reclassification of financial liabilities to other equity
instruments
Transfers within total equity (see Note 2.2.20)
Increase/Reduction of equity due to business
combinations
Share based payments
Other increases or (-) decreases in equity
3,267
-
3,267
-
23,992
-
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balances as of December 31, 2018
3,267
23,992
(*)
Presented for comparison purposes only (Note 1.3).
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
-
54
-
(4)
-
-
-
-
-
-
-
-
-
-
-
-
-
(19)
15
50
25,474
(2,579)
22,895
-
180
-
-
-
-
-
-
(992)
-
(24)
-
-
12
-
12
-
(10)
-
-
-
-
-
-
-
-
-
-
-
(44)
9
(34)
-
(23)
-
-
-
-
-
-
(4)
-
-
-
-
1,274
(10)
(19)
-
-
(77)
23,076
-
-
-
3
-
-
-
(96)
-
(96)
-
(199)
-
-
-
-
-
-
-
(1,684)
1,484
-
-
-
-
-
-
3,519
(5)
3,514
5,400
(3,514)
-
-
-
-
-
-
-
-
-
-
-
(1,043)
(129)
(1,172)
-
63
-
-
-
-
-
-
(1,109)
-
-
-
-
(8,792)
1,756
(7,036)
(1,276)
1,096
-
(3,378)
850
(2,528)
(1,247)
540
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,358
(822)
9,536
827
(1,364)
-
-
-
-
-
-
(378)
-
-
-
-
(3,514)
1,172
1,096
540
(540)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(446)
9,000
53,323
(919)
52,404
3,704
(3,234)
-
-
-
-
-
-
(2,483)
(1,684)
1,460
-
-
-
-
(19)
(508)
52,874
(58)
(296)
5,400
(1,109)
(7,215)
(3,236)
(**)
Balances as of December 31, 2017 as originally reported in the consolidated Financial Statements for the year 2017.
The accompanying Notes and Appendices are an integral part of the consolidated statement of changes in equity as of December 31, 2019.
P.11
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Consolidated statements of changes in equity for the years ended December 31, 2019, 2018 and 2017
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
2017 (*)
Capital
(Note 26)
Share
Premium
(Note 27)
Equity
instruments
issued other
than capital
Other Equity
Retained
earnings
(Note 28)
Revaluation
reserves
(Note 28)
Other
reserves
(Note 28)
(-) Treasury
shares (Note
29)
Non-controlling interest
Profit or loss
attributable to
owners of the
parent
(-) Interim
dividends
(Note 4)
Accumulated
other
comprehensive
income
(Note 30)
Accumulated
other
comprehensive
income (Note
31)
Total
Other
(Note 31)
Balances as of January 1, 2017 (**)
Effect of changes in accounting policies
Adjusted initial balance
Total income/expense recognized
Other changes in equity
Issuances of common shares
Issuances of preferred shares
Issuance of other equity instruments
Settlement or maturity of other equity instruments issued
Conversion of debt on equity
Common Stock reduction
Dividend distribution
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of other equity instruments to financial liabilities
Reclassification of financial liabilities to other equity instruments
Transfers within total equity
Increase/Reduction of equity due to business combinations
Share based payments
Other increases or (-) decreases in equity
Balances as of December 31, 2017
3,218
-
3,218
-
50
50
23,992
-
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,267
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
-
54
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22)
22
54
23,688
(1,813)
21,875
-
1,872
(50)
-
-
-
-
-
9
-
1
-
-
1,902
-
-
9
23,746
20
-
20
-
(8)
-
-
-
-
-
-
-
-
-
-
-
(8)
-
-
-
12
(67)
7
(60)
-
25
-
-
-
-
-
-
(9)
-
-
-
-
41
-
-
(6)
(34)
(48)
-
(48)
-
(48)
-
-
-
-
-
-
-
(1,674)
1,626
-
-
-
-
-
-
3,475
82
3,557
3,514
(3,557)
-
-
-
-
-
-
-
-
-
-
-
(3,557)
-
-
-
(96)
3,514
(1,510)
(111)
(1,621)
-
449
-
-
-
-
-
-
(1,029)
-
-
-
-
1,621
-
-
(144)
(1,172)
(5,458)
1,836
(3,622)
(3,317)
-
-
(2,246)
817
(1,429)
(1,122)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,939)
(2,551)
10,310
(817)
9,493
1,243
(1,207)
-
-
-
-
-
-
(290)
-
-
-
-
-
-
-
(917)
9,529
55,428
-
55,428
318
(2,423)
-
-
-
-
-
-
(1,318)
(1,674)
1,627
-
-
-
-
(22)
(1,035)
53,323
(*)
Presented for comparison purposes only (Note 1.3).
(**)
Balances as of December 31, 2016 as originally reported in the consolidated Financial Statements for the year 2016.
The accompanying Notes and Appendices are an integral part of the consolidated statement of changes in equity as of December 31, 2019.
P.12
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated statements of cash flows for the years ended December 31, 2019, 2018 and 2017
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS (Millions of Euros)
A) CASH FLOWS FROM OPERATING ACTIVITIES (1 + 2 + 3 + 4 + 5)
1. Profit for the year
2. Adjustments to obtain the cash flow from operating activities
Depreciation and amortization
Other adjustments
3. Net increase/decrease in operating assets
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Other financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other operating assets
4. Net increase/decrease in operating liabilities
Financial liabilities held for trading
Other financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Other operating liabilities
5. Collection/Payments for income tax
B) CASH FLOWS FROM INVESTING ACTIVITIES (1 + 2)
1. Investment
Tangible assets
Intangible assets
Investments in joint ventures and associates
Other business units
Non-current assets classified as held for sale and associated liabilities
Held-to-maturity investments
Other settlements related to investing activities
2. Divestments
Tangible assets
Intangible assets
Investments in joint ventures and associates
Subsidiaries and other business units
Non-current assets classified as held for sale and associated liabilities
Held-to-maturity investments
Other collections related to investing activities
C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2)
1. Payments
Dividends
Subordinated liabilities
Treasury stock amortization
Treasury stock acquisition
Other items relating to financing activities
2. Collections
Subordinated liabilities
Treasury shares increase
Treasury shares disposal
Other items relating to financing activities
D) EFFECT OF EXCHANGE RATE CHANGES
E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D)
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F)
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR (Millions of Euros)
Cash
Balance of cash equivalent in central banks
Other financial assets
Less: Bank overdraft refundable on demand
Notes
9
9, 14
2019
(8,214)
4,345
9,582
1,599
7,983
(36,747)
(11,664)
(318)
99
(3,755)
(24,119)
3,010
16,208
8,061
2,680
8,016
(2,549)
(1,602)
98
(1,494)
(852)
(528)
(114)
-
-
-
1,592
128
-
98
5
1,198
162
(2,702)
(7,418)
(2,147)
(3,571)
-
(1,088)
(612)
4,716
3,381
-
1,335
-
(258)
(11,077)
54,167
43,090
2019
7,060
36,031
-
-
2018 (*)
2017 (*)
9,249
6,227
7,619
1,208
6,411
(12,094)
1,379
(643)
349
(206)
(12,067)
(906)
10,286
(466)
1,338
10,481
(1,067)
(2,789)
7,516
(2,154)
(943)
(552)
(150)
(20)
(489)
-
9,670
731
-
558
4,268
3,917
196
(5,092)
(8,995)
(2,107)
(4,825)
-
(1,686)
(377)
3,903
2,451
-
1,452
-
(2,498)
9,175
44,992
54,167
2018 (*)
6,346
47,821
-
-
1,722
4,757
8,531
1,387
7,144
(5,227)
5,662
(783)
5,032
(14,836)
(302)
(3,916)
(6,057)
19
2,111
11
(2,423)
2,902
(2,339)
(777)
(564)
(101)
(897)
-
-
-
5,241
518
47
18
936
1,002
2,711
9
(98)
(5,763)
(1,698)
(2,098)
-
(1,674)
(293)
5,665
4,038
-
1,627
-
(4,266)
261
44,978
45,239
2017 (*)
6,220
39,018
-
-
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR
43,090
54,167
45,239
(*)
Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the consolidated statement of cash flows as of December 31, 2019.
P.13
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Notes to the accompanying Consolidated Financial Statements
Introduction, basis for the presentation of the Consolidated Financial Statements,
1.
Internal Control over Financial Reporting and other information
1.1
Introduction
Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter “the Bank” or “BBVA") is a private-law entity subject to the laws and regulations
governing banking entities operating in Spain. It carries out its activity through branches and agencies across the country and abroad.
The Bylaws and other public information are available for inspection at the Bank’s registered address (Plaza San Nicolás, 4 Bilbao) as
noted on its web site (www.bbva.com).
In addition to the activities it carries out directly, the Bank heads a group of subsidiaries, joint ventures and associates which perform a
wide range of activities and which together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (hereinafter, the “Group”
or the “BBVA Group”). In addition to its own separate financial statements, the Bank is required to prepare Consolidated Financial
Statements comprising all consolidated subsidiaries of the Group.
As of December 31, 2019, the BBVA Group had 288 consolidated entities and 54 entities accounted for using the equity method (see
Notes 3 and 16 and Appendix I to V).
The Consolidated Financial Statements of the BBVA Group for the year ended December 31, 2018 were approved by the shareholders at
the Annual General Meetings (“AGM”) held on March 15, 2019.
BBVA Group’s Consolidated Financial Statements and the Financial Statements for the Bank and the majority of the remaining entities
within the Group have been prepared as of December 31, 2019, and are pending approval by their respective AGMs. Notwithstanding, the
Board of Directors of the Bank understands that said financial statements will be approved without changes.
1.2
Basis for the presentation of the Consolidated Financial Statements
The BBVA Group’s Consolidated Financial Statements are presented in compliance with IFRS-IASB (International Financial Reporting
Standards as issued by the International Accounting Standards Board), as well as in accordance with the International Financial Reporting
Standards endorsed by the European Union (hereinafter, “EU-IFRS”) applicable as of December 31, 2019, considering the Bank of Spain
Circular 4/2017, and with any other legislation governing financial reporting applicable to the Group in Spain (see Note 1.3).
The BBVA Group’s accompanying Consolidated Financial Statements for the year ended December 31, 2019 were prepared by the
Group’s Directors (through the Board of Directors meeting held on February 10, 2020) by applying the principles of consolidation,
accounting policies and valuation criteria described in Note 2, so that they present fairly the Group’s total consolidated equity and financial
position as of December 31, 2019, together with the consolidated results of its operations and cash flows generated during the year ended
December 31, 2019.
These Consolidated Financial Statements were prepared on the basis of the accounting records kept by the Bank and each of the other
entities in the Group. Moreover, they include the adjustments and reclassifications required to harmonize the accounting policies and
valuation criteria used by the Group (see Note 2.2).
All effective accounting standards and valuation criteria with a significant effect in the Consolidated Financial Statements were applied in
their preparation.
The amounts reflected in the accompanying Consolidated Financial Statements are presented in millions of euros, unless it is more
appropriate to use smaller units. Some items that appear without a balance in these Consolidated Financial Statements are due to how
the units are expressed. Also, in presenting amounts in millions of euros, the accounting balances have been rounded up or down. It is
therefore possible that the totals appearing in some tables are not the exact arithmetical sum of their component figures.
The percentage changes in amounts have been calculated using figures expressed in thousands of euros.
1.3
Comparative information
The information included in the accompanying consolidated financial statements relating to the years ended December 31, 2018 and
December 31, 2017, in accordance to the applicable regulation, is presented for the purpose of comparison with the information for the
year ended December 31, 2019.
P.14
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Leases
As of January 1, 2019, IFRS 16 “Leases” replaced IAS 17 “Leases” and includes changes in the lessee accounting model (see Note 2.2.19).
This amendment was applied using the modified retrospective method and the previous years have not been restated for comparison
purposes as allowed by the standard (see Note 2.3).
Income taxes
As mentioned in Note 2.3 and derived from the Annual improvements cycle to IFRSs 2015-2017, the amendment to IAS 12 – “Income
Taxes” requires that the tax impacts of the distribution of dividends should be recorded under "Tax expense or income related to profit
or loss from continuing operations" in the consolidated income statement for the year. Previously they were recorded under total equity.
In order for the information to be comparable, the information for the years 2018 and 2017 has been restated, recognizing a €76 million
profit and a €5 million loss in the consolidated financial statements for such years, respectively, under “Retained earnings“ and “Less:
Interim dividends”. This has meant an increase of 1.4% and a decrease of 0.1% in the “Profit or loss attributable to owners of the parent”
for the years 2018 and 2017, respectively with respect to amounts previously presented in the consolidated Financial Statements for the
year ended December 31, 2018 and 2017. This reclassification has had no impact on the consolidated total equity.
Operating segments
During 2019, there have been changes to the BBVA Group business segments in comparison to the segment structure in 2018 (See Note
6). The information related to business segments as of and for the years ended December 31, 2018 and 2017 has been restated in order
to make them comparable, as required by IFRS 8 “Information by business segments”.
Hyperinflationary economies
In 2018, the information as of December 31, 2017 was restated for comparative purposes taking into account the change in accounting
policies for hyperinflationary economies in accordance with IAS 29 "Financial information in hyperinflationary economies" (see Note
2.2.20).
Application of IFRS 9
As of January 1, 2018, IFRS 9 “Financial instruments” replaced IAS 39 “Financial Instruments: Recognition and Measurement” and
included changes in the requirements for the classification and measurement of financial assets and financial liabilities, the impairment of
financial assets and hedge accounting (see Note 2.2.1). As permitted by the standard, IFRS 9 was not applied retrospectively for previous
years. As a consequence of the application of IFRS 9, the comparative information for the financial year 2017 included in these
Consolidated Financial Statements was subject to some non-significant modifications in order to improve the comparability.
1.4
Seasonal nature of income and expense
The nature of the most significant activities carried out by the BBVA Group’s entities is mainly related to typical activities carried out by
financial institutions, and are not significantly affected by seasonal factors within the same year.
1.5
Responsibility for the information and for the estimates made
The information contained in the BBVA Group’s Consolidated Financial Statements is the responsibility of the Group’s Directors.
Estimates were required to be made at times when preparing these Consolidated Financial Statements in order to calculate the recorded
or disclosed amount of some assets, liabilities, income, expense and commitments. These estimates relate mainly to the following:
Loss allowances on certain financial assets (see Notes 7, 12, 13, 14 and 16).
The assumptions used to quantify certain provisions (see Note 24) and for the actuarial calculation of post-employment benefit
liabilities and commitments (see Note 25).
The useful life and impairment losses of tangible and intangible assets (see Notes 17, 18, 20 and 21).
The valuation of goodwill and price allocation of business combinations (see Note 18).
The fair value of certain unlisted financial assets and liabilities (see Notes 7, 8, 10, 11, 12 and 13).
The recoverability of deferred tax assets (see Note 19).
Although these estimates were made on the basis of the best information available as of the end of the reporting period, future events
may make it necessary to modify them (either up or down) over the coming years. This would be done prospectively in accordance with
applicable standards, recognizing the effects of changes in the estimates in the corresponding consolidated income statement.
P.15
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
During 2019 there were no significant changes to the assumptions and estimations performed as of December 31, 2018, except as
indicated in these Consolidated Financial Statements.
1.6
BBVA Group’s Internal Control over Financial Reporting
BBVA Group’s Consolidated Financial Statements are prepared under an Internal Control over Financial Reporting Model (hereinafter
“ICFR"). It provides reasonable assurance with respect to the reliability and the integrity of the consolidated financial statements. It is also
aimed to ensure that the transactions are processed in accordance with the applicable laws and regulations.
The ICFR is in accordance with the control framework established in 2013 by the “Committee of Sponsoring Organizations of the Treadway
Commission” (hereinafter, "COSO"). The COSO 2013 framework sets five components that constitute the basis of the effectiveness and
efficiency of the internal control systems:
The establishment of an appropriate control framework.
The assessment of the risks that could arise during the preparation of the financial information.
The design of the necessary controls to mitigate the identified risks.
The establishment of an appropriate system of information to detect and report system weaknesses.
The monitoring activities over the controls to ensure they perform correctly and are effective over time.
The ICFR is a dynamic model that evolves continuously over time to reflect the reality of the BBVA Group’s businesses and processes, as
well as the risks and controls designed to mitigate them. It is subject to a continuous evaluation by the internal control units located in the
different entities of BBVA Group.
These internal control units are integrated within the BBVA internal control model which is based in two pillars:
A control system organized into three lines of defense that has been updated and strengthened in 2019 :
•
•
•
The first line of defense (1LoD) is located within the business and support units, which are responsible for identifying risks
associated with their processes, as well as for implementing and executing the necessary controls to mitigate them. In
2019, in order to reinforce the adequate risk management in each areas processes, the role of the Risk Control Assurer
was created.
The second line of defense (2LoD) comprises the specialized control units for each type of risk (Legal, IT, Third Party,
Finance, Compliance or Processes among others). This second line defines the mitigation and control frameworks for
their areas of responsibility across the entire organization and performs challenge to the control model (supervises the
implementation and design of the controls and assesses their effectiveness).
The third line of defense (3LoD) is the Internal Audit unit, which conducts an independent review of the model, verifying
the compliance and effectiveness of the model.
A committee structure, called Corporate Assurance, which enables the escalation of possible weaknesses and internal control
issues to the management at a Group level and also in each of the countries where the Group operates.
The internal control units within Finance comply with a common and standard methodology established at the Group level, as set out in
the following diagram:
BBVA’s INTERNAL CONTROL OVER FINANCIAL REPORTING
Companies
Processes
Risk
Controls
01
Selection of
evaluation
Scope
02
Documentation
of process
models
03
Risk identification
evaluation and
prioritization
04
Documentation
of control models
05
Identification
and
management of
residual risk
06
Evaluation of the
effectiveness of the
ICFR
Selection of
companies and
relevant
information to be
covered
Definition and
documentation of
the processes´
map that is
directly and
indirectly involved
in the preparation
of financial
information.
Identification of risks
linked to processes
that can trigger errors
in the financial
information.
Criticality
assesment of risks.
Identification of key
mitigating controls
Identification and
management of
the degree of risk
mitigation with the
controls identified.
Periodic review,
certification and
communication of ICRF
effectiveness
The ICFR Model is subject to annual evaluations by the Group’s Internal Audit Unit. It is also supervised by the Audit Committee of the
Bank’s Board of Directors.
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The BBVA Group is also required to comply with the Sarbanes-Oxley Act (hereafter “SOX”) for Consolidated Financial Statements as a
listed company with the U.S. Securities and Exchange Commission (“SEC”). The main senior executives of the Group are involved in the
design, compliance and implementation of the internal control model to make it effective and to ensure the quality and accuracy of the
financial information.
The description of the ICFR is included in the Corporate Governance Annual Report within the Management Report attached to the
consolidated financial statements for the year ended December 31, 2019.
Principles of consolidation, accounting policies and measurement bases applied and
2.
recent IFRS pronouncements
The Glossary includes the definition of some of the financial and economic terms used in Note 2 and subsequent Notes of the
accompanying consolidated Financial Statements.
2.1
Principles of consolidation
In terms of its consolidation, in accordance with the criteria established by IFRS, the BBVA Group is made up of four types of entities:
subsidiaries, joint ventures, associates and structured entities, defined as follows:
Subsidiaries
Subsidiaries are entities controlled by the Group (for definition of control, see Glossary). The financial statements of the subsidiaries
are fully consolidated with those of the Bank. The share of non-controlling interests from subsidiaries in the Group’s consolidated
total equity is presented under the heading “Minority interests (Non-controlling interests)” in the consolidated balance sheet. Their
share in the profit or loss for the period or year is presented under the heading “Attributable to minority interest (non-controlling
interests)” in the accompanying consolidated income statement (see Note 31).
Note 3 includes information related to the main subsidiaries in the Group as of December 31, 2019. Appendix I includes other
significant information on all entities.
Joint ventures
Joint ventures are those entities for which there is a joint arrangement to joint control with third parties other than the Group (for
definitions of joint arrangement, joint control and joint venture, refer to Glossary).
The investments in joint ventures are accounted for using the equity method (see Note 16). Appendix II shows the main figures for
joint ventures accounted for using the equity method as of December 31, 2019.
Associates
Associates are entities in which the Group is able to exercise significant influence (for definition of significant influence, see Glossary).
Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly,
unless it can be clearly demonstrated that this is not the case.
However, certain entities in which the Group owns 20% or more of the voting rights are not included as Group associates, since the
Group does not have the ability to exercise significant influence over these entities. Investments in these entities, which do not
represent material amounts for the Group, are classified as “Financial assets at fair value through other comprehensive income” or
“Non-trading financial assets mandatorily at fair value through profit or loss”
In contrast, some investments in entities in which the Group holds less than 20% of the voting rights are accounted for as Group
associates, as the Group is considered to have the ability to exercise significant influence over these entities. As of December 31,
2019, these entities are not significant to the Group.
Appendix II shows the most significant information related to the associates (see Note 16), which are accounted for using the equity
method.
Structured Entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who
controls the entity, such as when the voting rights relate to administrative matters only and the relevant activities are directed by
means of contractual arrangements (see Glossary).
In those cases where the Group sets up entities or has a holding in such entities, in order to allow its customers access to certain
investments, to transfer risks or for other purposes, in accordance with internal criteria and procedures and with applicable
regulations, the Group determines whether control over the entity in question actually exists and therefore whether it should be
subject to consolidation.
Such methods and procedures determine whether there is control by the Group, considering how the decisions are made about the
relevant activities, assessing whether the Group has control over the relevant elements, exposure to variable returns from
involvement with the investee and the ability to use control over the investee to affect the amount of the investor’s returns.
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Structured entities subject to consolidation
To determine if a structured entity is controlled by the Group, and therefore should be consolidated into the Group, the existing
contractual rights (different from the voting rights) are analyzed. For this reason, an analysis of the structure and purpose of each
investee is performed and, among others, the following factors will be considered:
-
-
-
-
Evidence of the current ability to manage the relevant activities of the investee according to the specific business needs
(including any decisions that may arise only in particular circumstances).
Potential existence of a special relationship with the investee.
Implicit or explicit Group commitments to support the investee.
The ability to use the Group´s power over the investee to affect the amount of the Group’s returns.
This type of entities include cases where the Group has a high exposure to variable returns and retains decision-making power over
the investee, either directly or through an agent.
The main structured entities of the Group are the asset securitization funds, to which the BBVA Group transfers loans and receivables
portfolios, and other vehicles, which allow the Group’s customers to gain access to certain investments or to allow for the transfer of
risks or for other purposes (see Appendices I and V). The BBVA Group maintains the decision-making power over the relevant
activities of these vehicles and financial support through securitized market standard contracts. The most common ones are:
investment positions in equity note tranches, funding through subordinated debt, credit enhancements through derivative
instruments or liquidity lines, management rights of defaulted securitized assets, “clean-up” call derivatives, and asset repurchase
clauses by the grantor.
For these reasons, the loans and receivable portfolios related to the vast majority of the securitizations carried out by the Bank or
Group subsidiaries are not derecognized in the books of said entity and the issuances of the related debt securities are recorded as
liabilities within the Group’s consolidated balance sheet.
For additional information on the accounting treatment for the transfer and derecognition of financial instruments, see Note 2.2.2.
“Transfers and derecognition of financial assets and liabilities”.
Non-consolidated structured entities
The Group owns other vehicles also for the purpose of allowing customers access to certain investments, to transfer risks, and for
other purposes, but without the Group having control of the vehicles, which are not consolidated in accordance with IFRS 10 –
“Consolidated Financial Statements”. The balance of assets and liabilities of these vehicles is not material in relation to the Group’s
Consolidated Financial Statements.
As of December 31, 2019, there was no material financial support from the Bank or its subsidiaries to unconsolidated structured
entities.
The Group does not consolidate any of the mutual funds it manages since the necessary control conditions are not met. Particularly,
the BBVA Group does not act as arranger but as agent since it operates the mutual funds on behalf and for the benefit of investors or
parties (arranger or arrangers) and, for this reason it does not control the mutual funds when exercising its authority for decision
making.
The mutual funds managed by the Group are not considered structured entities (generally, retail funds without corporate identity over
which investors have participations which gives them ownership of said managed equity). These funds are not dependent on a capital
structure that could prevent them from carrying out activities without additional financial support, being in any case insufficient as far
as the activities themselves are concerned. Additionally, the risk of the investment is absorbed by the fund participants, and the Group
is only exposed when it becomes a participant, and as such, there is no other risk for the Group.
In all cases, the operating results of equity method investees acquired by the BBVA Group in a particular period only include the period
from the date of acquisition to the financial statements date. Similarly, the results of entities disposed of during any year only include the
period from the start of the year to the date of disposal.
The consolidated financial statements of subsidiaries, associates and joint ventures used in the preparation of the Consolidated Financial
Statements of the Group have the same presentation date as the Consolidated Financial Statements. If financial statements at those same
dates are not available, the most recent will be used, as long as these are not older than three months, and adjusted to take into account
the most significant transactions. As of December 31, 2019, financial statements as of December 31 of all Group entities were utilized
except for the case of the consolidated financial statements of 6 associates deemed non-significant for which financial statements as of
November 30, 2019 were used for 5 of them and the financial statements as of October 31, 2019 were used for 1 of them.
Separate financial statements
The separate financial statements of the parent company of the Group are prepared under Spanish regulations (Circular 4/2017 of the
Bank of Spain, and following other regulatory requirements of financial information applicable to the Bank). The Bank uses the cost
method to account in its separate financial statements for its investments in subsidiaries, associates and joint venture entities, which are
consistent with the requirements of Bank of Spain Circular 4/2017 and IAS 27 “Consolidated and Separate Financial Statements”.
Appendix IX shows BBVA’s financial statements as of and for the years ended December 31, 2019 and 2018.
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2.2
Accounting policies and valuation criteria applied
The accounting standards and policies and the valuation criteria applied in preparing these Consolidated Financial Statements may differ
from those used by some of the entities within the BBVA Group. For this reason, necessary adjustments and reclassifications have been
made in the consolidation process to standardize these principles and criteria and comply with the EU-IFRS.
The accounting standards and policies and valuation criteria used in preparing the accompanying Consolidated Financial Statements are
as follows:
2.2.1
Financial instruments
IFRS 9 became effective as of January 1, 2018 and replaced IAS 39 regarding the classification and measurement of financial assets and
liabilities, the impairment of financial assets and hedge accounting. Actually, the Group has elected for continuing the application of IAS
39 for hedge accounting, as permitted by IFRS 9. The disclosures for the financial year 2017 related to the measurement of financial assets
and liabilities, the definition of impaired financial assets, and the method for calculating the impairment on financial assets, which are
presented for the purpose of comparability, are based on the accounting policies and valuation criteria applicable under IAS 39.
The main aspects regarding IAS 39, applicable until December 31, 2017, are as follows:
Measurement of financial instruments
IAS 39 established the following three categories for the recognition of financial assets, not applicable under IFRS 9, valued as follows:
“Available-for-sale financial assets”: Assets recognized under this heading were measured at their fair value. Subsequent
changes in fair value (gains or losses) were recognized temporarily net of tax effect, under the heading “Accumulated other
comprehensive income- Items that may be reclassified to profit or loss -Available-for-sale financial assets”.
“Loans and receivables” and “Held-to-maturity investments”: Assets and liabilities recognized under these headings were
subsequently measured at “amortized cost” using the “effective interest rate” method. This was because the consolidated
entities generally intend to hold such financial instruments to maturity.
Equity instruments whose fair value could not be determined in a sufficiently objective manner and financial derivatives that
have those instruments as their underlying asset and are settled by delivery of those instruments were recorded at acquisition
cost; adjusted, where appropriate, for any impairment loss.
Impairment losses on financial assets
The method for calculating the impairment of financial assets under IAS 39 was based on incurred losses; impairment losses were
recognized only if there was objective evidence of impairment. In other words, an event of a loss had to occur after initial recognition, so
that the impairment loss could have been recognized.
First, the Group would determine whether there was objective evidence of impairment individually for individually significant debt
instruments, and collectively for debt instruments that were not individually significant. If the Group determined that there was no
objective evidence of impairment, the assets were classified in groups of debt instruments based on similar risk characteristics and
impairment was assessed collectively.
The impairment on financial assets was determined by type of instrument and other circumstances that could have affected it, taking into
account the guarantees received to assure (in part or in full) the performance of the financial assets.
The information used under such model was past information, adjusted in order to reflect the effect of the conditions in such reporting
period, which did not affect the period matching past information, and avoid the effect of the conditions that did not exist. The model did
not allow the use of prospective information.
In the case of equity instruments classified as available for sale, valued at fair value, when there was objective evidence that the negative
differences that arose on measurement of these equity instruments were due to impairment, they were no longer registered as
“Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Available-for-sale financial assets” and were
recognized in the consolidated income statement. In general, the Group considered that there was objective evidence of impairment on
equity instruments classified as available-for-sale when significant unrealized losses had existed over a sustained period of time due to a
price reduction of at least 40% or over a period of more than 18 months. When applying this evidence of impairment, the Group took into
account the volatility in the price of each individual equity instrument to determine whether it was a percentage that could be recovered
through its sale in the market; other different thresholds could have existed for certain equity instruments or specific sectors. In addition,
for individually significant investments, the Group compared the valuation of the most significant equity instruments against valuations
performed by independent experts.
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Classification and measurement of financial assets
Classification of financial assets
IFRS 9 contains three main categories for financial assets classification: measured at amortized cost, measured at fair value with changes
through other comprehensive income, and measured at fair value through profit or loss.
The classification of financial assets measured at amortized cost or fair value must be carried out on the basis of two tests: the entity's
business model and the assessment of the contractual cash flow, commonly known as the "solely payments of principle and interest"
criterion (hereinafter, the SPPI).
A debt instrument will be classified in the amortized cost portfolio if the two following conditions are fulfilled:
The financial asset is managed within a business model whose purpose is to maintain the financial assets to maturity, to receive
contractual cash flows; and
In accordance with the contractual characteristics of the instrument its cash flows only represent the return of the principal and
interest, basically understood as consideration for the time value of money and the debtor's credit risk.
A debt instrument will be classified in the portfolio of financial assets at fair value with changes through other comprehensive income if
the two following conditions are fulfilled:
The financial asset is managed with a business model whose purpose combines collection of the contractual cash flows and
sale of the assets, and
The contractual characteristics of the instrument generate cash flows which only represent the return of the principal and
interest.
A debt instrument will be classified at fair value with changes in profit and loss provided that the entity's business model for their
management or the contractual characteristics of its cash flows do not require classification into one of the portfolios described above.
In general, equity instruments will be measured at fair value through profit or loss. However the Group may make an irrevocable election,
at initial recognition to present subsequent changes in the fair value through “other comprehensive income”.
Financial assets will only be reclassified when BBVA Group decides to change the business model. In this case, all of the financial assets
assigned to this business model will be reclassified. The change of the objective of the business model should occur before the date of the
reclassification.
Measurement of financial assets
All financial instruments are initially recognized at fair value, plus, those transaction costs which are directly attributable to the issue of
the particular instrument, for those cases in which financial assets are not classified at fair value through profit or loss.
Excluding all derivatives not considered as accounting or economic hedges, all the changes in the fair value of the financial instruments
arising from the accrual of interest and similar items are recognized under the headings “Interest and other income” or “Interest expense”,
as appropriate, in the accompanying consolidated income statement in the period in which the change occurred (see Note 37).
The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as
described below, according to the categories of financial assets.
“Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit and loss” and “Financial assets
designated at fair value through profit or loss”
Financial assets are recorded under the heading “Financial assets held for trading” if the objective of the business model is to generate
gains by buying and selling these financial instruments or generate short-term results. The financial assets recorded in the heading “Non-
trading financial assets mandatorily at fair value through profit and loss” are assigned to a business model which objective is to obtain the
contractual cash flows and / or to sell those instruments but its contractual cash flows do not comply with the requirements of the SPPI
test. Financial assets are classified in “Financial assets designated at fair value through profit or loss” only if it eliminates or significantly
reduces a measurement or recognition inconsistency (an ‘accounting mismatch’) that would otherwise arise from measuring financial
assets or financial liabilities, or recognizing gains or losses on them, on different bases.
The assets recognized under these headings of the consolidated balance sheet are measured upon acquisition at fair value and changes
in the fair value (gains or losses) are recognized as their net value under the headings “Gains (losses) on financial assets and liabilities held
for trading, net”, “Gains (losses) on non-trading financial assets mandatorily at fair value through profit and loss, net” and “Gains (losses)
on financial assets designated at fair value through profit or loss, net” in the accompanying consolidated income statement (see Note 41).
Changes in fair value resulting from variations in foreign exchange rates are recognized under the heading Gains (losses) on financial
assets and liabilities, net in the accompanying consolidated income statements (Note 41).
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”Financial assets at fair value through other comprehensive income”
Debt instruments
Assets recognized under this heading in the consolidated balance sheets are measured at their fair value. This category of valuation
implies the recognition of the information in the income statement as if it were an instrument valued at amortized cost, while the
instrument is valued at fair value in the balance sheet. Thus, both the interests of these instruments and the exchange differences and
impairment that arise in their case are recorded in the profit and loss account, while subsequent changes in its fair value (gains or losses)
are recognized temporarily (by the amount net of tax effect) under the heading “Accumulated other comprehensive income- Items that
may be reclassified to profit or loss - Fair value changes of debt instruments measured at fair value through other comprehensive income”
in the consolidated balance sheets (see Note 30).
The amounts recognized under the headings “Accumulated other comprehensive income- Items that may be reclassified to profit or loss
- Fair value changes of financial assets measured at fair value through other comprehensive income” continue to form part of the Group's
consolidated equity until the corresponding asset is derecognized from the consolidated balance sheet or until a loss allowance is
recognized on the corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the
headings “Gains (losses) on financial assets and liabilities, net” (see Note 41).
The net loss allowances in “Financial assets at fair value through other comprehensive income” over the year are recognized under the
heading “Loss allowances on financial assets, net – Financial assets at fair value through other comprehensive income” (see Note 47) in
the consolidated income statement for that period.
Interests of these instruments are recorded in the consolidated profit and loss account (see Note 37). Changes in foreign exchange rates
are recognized under the heading “Exchange differences, net" in the accompanying consolidated income statements (see Note 41).
Equity instruments
The BBVA Group, at the time of the initial recognition, may elect to present changes in the fair value in other comprehensive income of an
investment in an equity instrument that is not held for trading. The election is irrevocable and can be made on an instrument-by-
instrument basis. Subsequent changes in fair value (gains or losses) are recognized under the heading “Accumulated other
comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of equity instruments measured at
fair value through other comprehensive income”.
“Financial assets at amortized cost”
The assets under this category are subsequently measured at amortized cost, using the effective interest rate method.
Net loss allowances of assets recorded under these headings arising in each period are recognized under the heading “Impairment or
reversal of impairment on financial assets not measured at fair value through profit or loss – financial assets measured at cost” (see Note
47) in the consolidated income statement for that period.
Classification and measurement of financial liabilities
Classification of financial liabilities
Under IFRS 9, financial liabilities are classified in the following categories:
•
•
•
Financial liabilities at amortized cost;
Financial liabilities that are held for trading, including derivatives, are financial instruments which are recorded in this
category when the Group’s objective is to generate gains by buying and selling these financial instruments;
Financial liabilities that are designated at fair value through profit or loss on initial recognition under the Fair Value Option.
The Group has the option to designate irrevocably, on the initial moment of recognition, a financial liability as at fair value
through profit or loss provided that doing so results in the elimination or significant reduction of measurement or
recognition inconsistency, or if a group of financial liabilities, or a group of financial assets and financial liabilities, has to
be managed, and its performance evaluated, on a fair value basis in accordance with a documented risk management or
investment strategy.
Measurement of financial liabilities
All financial instruments are initially recognized at fair value except for those transaction costs which are directly attributable to the issue
of the particular financial liability, for those cases in which financial liabilities are not classified at fair value through profit or loss.
Excluding all trading derivatives not considered as accounting or economic hedges, all the changes in the fair value of the financial
instruments arising from the accrual of interest and similar items are recognized under the headings “Interest and other income” or
“Interest expense”, as appropriate, in the accompanying consolidated income statement in the period in which the change occurred (see
Note 37).
The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as
described below, according to the categories of financial liabilities.
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“Financial liabilities held for trading” and “Financial liabilities designated at fair value through profit or loss“
The subsequent changes in the fair value (gains or losses) of the liabilities recognized under these headings of the consolidated balance
sheets are recognized as their net value under the headings “Gains (losses) on financial assets and liabilities held for trading, net” and
“Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net” in the accompanying consolidated
income statements (see Note 41), except for the financial liabilities designated at fair value through profit and loss under the fair value
option for which the amount of change in the fair value that is attributable to changes in the own credit risk which is presented in under the
heading “Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of
financial liabilities at fair value through profit or loss attributable to changes in their credit risk”. However, changes in fair value resulting
from variations in foreign exchange rates are recognized under the heading Gains (losses) on financial assets and liabilities, net in the
accompanying consolidated income statements (Note 41).
“Financial liabilities at amortized cost”
The liabilities under this category are subsequently measured at amortized cost, using the “effective interest rate” method.
“Derivatives-Hedge Accounting” and “Fair value changes of the hedged items in portfolio hedges of interest-rate risk”
Assets and liabilities recognized under these headings in the accompanying consolidated balance sheets are measured at fair value.
Changes occurring subsequent to the designation of the hedging relationship in the measurement of financial instruments designated as
hedged items as well as financial instruments designated as hedge accounting instruments are recognized as follows:
In fair value hedges, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are
recognized under the heading “Gains (losses) from hedge accounting, net” in the consolidated income statement, with a
corresponding offset under the headings where hedging items ("Hedging derivatives") and the hedged items are recognized, as
applicable, except for interest-rate risks hedges (which are almost all of the hedges used by the Group), for which the valuation
changes are recognized under the headings “Interest and other income” or “Interest expense”, as appropriate, in the
accompanying consolidated income statement (see Note 37).
In fair value hedges of interest rate risk of a portfolio of financial instruments (portfolio-hedges), the gains or losses that arise in
the measurement of the hedging instrument are recognized in the consolidated income statement, with counterpart on the
headings “Derivatives-Hedge Accounting” and the gains or losses that arise from the change in the fair value of the hedged item
(attributable to the hedged risk) are also recognized in the consolidated income statement (in both cases under the heading
“Gains (losses) from hedge accounting, net”, using, as a balancing item, the headings "Fair value changes of the hedged items
in portfolio hedges of interest rate risk" in the consolidated balance sheets, as applicable).
In cash flow hedges, the gain or loss on the hedging instruments relating to the effective portion are recognized temporarily
under the heading ”Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Hedging
derivatives. Cash flow hedges” in the consolidated balance sheets, with a balancing entry under the heading “Hedging
derivatives” of the Assets or Liabilities of the consolidated balance sheets as applicable. These differences are recognized under
the headings “Interest and other income” or “Interest expense” at the time when the gain or loss in the hedged instrument
affects profit or loss, when the forecast transaction is executed or at the maturity date of the hedged item (see Note 37).
Differences in the measurement of the hedging items corresponding to the ineffective portions of cash flow hedges are
recognized directly in the heading “Gains (losses) from hedge accounting, net” in the consolidated income statement (see Note
41).
In the hedges of net investments in foreign operations, the differences attributable to the effective portions of hedging items are
recognized temporarily under the heading "Accumulated other comprehensive income - Items that may be reclassified to profit
or loss – Hedging of net investments in foreign transactions" in the consolidated balance sheets with a balancing entry under
the heading “Hedging derivatives” of the Assets or Liabilities of the consolidated balance sheets as applicable. These differences
in valuation are recognized under the heading “Exchange differences, net" in the consolidated income statement when the
investment in a foreign operation is disposed of or derecognized (see Note 41).
Loss allowances on financial assets
Definition of impaired financial assets
The impairment model is applied to financial assets valued at amortized cost and to financial assets valued at fair value with changes in
accumulated other comprehensive income, except for investments in equity instruments and contracts for financial guarantees and loan
commitments unilaterally revocable by BBVA. Likewise, all the financial instruments valued at fair value with change through profit and
loss are excluded from the impairment model.
The standard classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of
initial recognition. The first category includes the transactions when they are initially recognized (Stage 1); the second comprises the
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financial assets for which a significant increase in credit risk has been identified since its initial recognition (Stage 2) and the third one, the
impaired financial assets (Stage 3).
The calculation of the provisions for credit risk in each of these three categories must be done differently. In this way, expected loss up to
12 months for the financial assets classified in the first of the aforementioned categories must be recorded, while expected losses
estimated for the remaining life of the financial assets classified in the other two categories must be recorded. Thus, IFRS 9 differentiates
between the following concepts of expected loss:
Expected loss at 12 months: expected credit loss that arises from possible default events within 12 months following the
presentation date of the financial statements; and
Expected loss during the life of the transaction: this is the expected credit loss that arises from all possible default events over
the remaining life of the financial instrument.
All this requires considerable judgment, both in the modeling for the estimation of the expected losses and in the forecasts, on how the
economic factors affect such losses, which must be carried out on a weighted probability basis.
The BBVA Group has applied the following definitions:
Default
BBVA has applied a definition of default for financial instruments that is consistent with that used in internal credit risk management,
as well as the indicators under applicable regulation. Both qualitative and quantitative indicators have been considered.
The Group has considered there is a default when one of the following situations occurs:
•
•
Payment past-due for more than 90 days; or
There are reasonable doubts regarding the full reimbursement of the instrument.
In accordance with IFRS 9, the 90-day past-due stipulation may be waived in cases where the entity considers it appropriate, based
on reasonable and documented information that it is appropriate to use a longer term. As of December 31, 2019, the Group has not
considered periods higher than 90 days for any of the significant portfolios.
Credit impaired asset
An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a detrimental impact on the
estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the
following events:
•
•
•
•
•
•
Significant financial difficulty of the issuer or the borrower,
A breach of contract (e.g. a default or past due event),
A lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s
financial difficulty – that the lender would not otherwise consider,
It becoming probable that the borrower will enter bankruptcy or other financial reorganization,
The disappearance of an active market for that financial asset because of financial difficulties, or
The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event. Instead, the combined effect of several events may cause financial assets
to become credit-impaired.
The definition of impaired financial assets in the Group is aligned with the definition of default explained in the above paragraphs.
Significant increase in credit risk
The objective of the impairment requirements is to recognize lifetime expected credit losses for financial instruments for which
there have been significant increases in credit risk since initial recognition considering all reasonable and supportable information,
including that which is forward-looking.
The model developed by the Group for assessing the significant increase in credit risk has a two-prong approach that is applied
globally, although the specific characteristics of each geographic area are respected:
•
Quantitative criterion: the Group uses a quantitative analysis based on comparing the current expected probability of
default over the life of the transaction with the original adjusted expected probability of default, so that both values are
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comparable in terms of expected default probability for their residual life. The thresholds used for considering a significant
increase in risk take into account special cases according to geographic areas and portfolios. Depending on the age of
transactions at the time of implementation of the standard, some simplifications were made to compare the probabilities
of default between the current and the initial moment, based on the best information available at that moment.
•
Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through
rating/scoring systems or macroeconomic scenarios, so the quantitative analysis covers the majority of circumstances.
The Group will use additional qualitative criteria when it considers it necessary to include circumstances that are not
reflected in the rating/score systems or macroeconomic scenarios used.
Additionally, instruments under one of the following circumstances are considered Stage 2:
o More than 30 days past due. According to IFRS 9, default of more than 30 days is a presumption that can be rebutted
in those cases in which the entity considers, based on reasonable and documented information, that such non-
payment does not represent a significant increase in risk. As of December 31, 2019, the Group has not considered
periods higher than 30 days for any of the significant portfolios.
o Watch list: They are subject to special watch by the Risk units because they show negative signs in their credit quality,
even though there may be no objective evidence of impairment.
o
Refinance or restructuring that does not show evidence of impairment.
Although the standard introduces a series of operational simplifications or practical solutions for analyzing the increase in significant risk,
the Group does not use them as a general rule. However, for high-quality assets, mainly related to certain government institutions and
bodies, the standard allows for considering that their credit risk has not increased significantly because they have a low credit risk at the
presentation date.
Thus the classification of financial instruments subject to impairment under IFRS 9 is as follows:
Stage 1– without significant increase in credit risk
Financial assets which are not considered to have significantly increased in credit risk have loss allowances measured at an amount
equal to 12 months expected credit losses derived from defaults.
Stage 2– significant increases in credit risk
When the credit risk of a financial asset has increased significantly since the initial recognition, the loss allowances of that financial
instrument is calculated as the expected credit loss during the entire life of the asset.
Stage 3 – Impaired
When there is objective evidence that the instrument is credit impaired, the financial asset is transferred to this category in which the
provision for losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.
When the recovery of any recognized amount is considered remote, such amount is written-off on the consolidated balance sheet, without
prejudice to any actions that may be taken in order to collect the amount until the rights extinguish in full either because it is time-barred
debt, the debt is forgiven, or other reasons.
Method for calculating expected credit loss
Method for calculating expected loss
In accordance with IFRS 9, the measurement of expected losses must reflect:
A considered and unbiased amount, determined by evaluating a range of possible results;
the time value of money, and
reasonable and supportable information that is available without undue cost or effort and that reflects current conditions and
forecasts of future economic conditions.
The Group measures the expected losses both individually and collectively. The purpose of the Group's individual measurement is to
estimate expected losses for significant impaired instruments, or instruments classified in Stage 2. In these cases, the amount of credit
losses is calculated as the difference between expected discounted cash flows at the effective interest rate of the transaction and the
carrying amount of the instrument.
For the collective measurement of expected losses the instruments are grouped into groups of assets based on their risk characteristics.
Exposure within each group is segmented according to the common credit risk characteristics, similar characteristics of the credit risk,
indicative of the payment capacity of the borrower in accordance with their contractual conditions. These risk characteristics have to be
relevant in estimating the future flows of each group. The characteristics of credit risk may consider, among others, the following factors:
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Type of instrument.
Rating or scoring tools.
Credit risk scoring or rating.
Type of collateral.
Amount of time at default for stage 3.
Segment.
Qualitative criteria which can have a significant increase in risk.
Collateral value if it has an impact on the probability of a default event.
The estimated losses are derived from the following parameters:
PD: estimate of the probability of default in each period.
EAD: estimate of the exposure in case of default at each future period, taking into account the changes in exposure after the
presentation date of the financial statements.
LGD: estimate of the loss in case of default, calculated as the difference between the contractual cash flows and receivables,
including guarantees.
In the case of debt securities, the Group supervises the changes in credit risk through monitoring the external published credit ratings.
To determine whether there is a significant increase in credit risk that is not reflected in the published ratings, the Group also monitors the
changes in bond yields, and when they are available, the prices of CDS, together with the news and regulatory information available on the
issuers.
Use of present, past and future information
IFRS 9 requires incorporation of present, past and future information to detect any significant increase in risk and measure expected loss.
The standard does not require identification of all possible scenarios for measuring expected loss. However, the probability of a loss event
occurring and the probability it will not occur have to be considered, even though the possibility of a loss may be very low. Also, when there
is no linear relation between the different future economic scenarios and their associated expected losses, more than one future economic
scenario must be used for the measurement.
The approach used by the Group consists of using first the most probable scenario (baseline scenario) consistent with that used in the
Group's internal management processes, and then applying an additional adjustment, calculated by considering the weighted average of
expected losses in other economic scenarios (one more positive and the other more negative). The main macroeconomic variables that
are valued in each of the scenarios for each of the geographies in which the Group operates are Gross Domestic Product (GDP), interest
rates, unemployment rate and price of real estate properties.
2.2.2 Transfers and derecognition of financial assets and liabilities
The accounting treatment of transfers of financial assets is determined by the form in which risks and benefits associated with the financial
assets involved are transferred to third parties. Thus the financial assets are only derecognized from the consolidated balance sheet when
the cash flows that they generate are extinguished, when their implicit risks and benefits have been substantially transferred to third
parties or when the control of financial asset is transferred even in case of no physical transfer or substantial retention of such assets. In
the latter case, the financial asset transferred is derecognized from the consolidated balance sheet, and any right or obligation retained
or created as a result of the transfer is simultaneously recognized.
Similarly, financial liabilities are derecognized from the consolidated balance sheet only if their obligations are extinguished or acquired
(with a view to subsequent cancellation or renewed placement).
The Group is considered to have transferred substantially all the risks and benefits if such risks and benefits account for the majority of
the risks and benefits involved in ownership of the transferred financial assets. If substantially all the risks and benefits associated with the
transferred financial asset are retained:
The transferred financial asset is not derecognized from the consolidated balance sheet and continues to be measured using
the same criteria as those used before the transfer.
A financial liability is recognized at the amount equal to the amount received, which is subsequently measured at amortized cost
or fair value with changes in the income statement, whichever the case.
Both the income generated on the transferred (but not derecognized) financial asset and the expense of the new financial
liability continue to be recognized.
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Treatment of securitizations
The securitizations to which the Group entities transfer their credit portfolios are consolidated entities of the Group. For more information,
refer to Note 2.1 “Principles of consolidation”.
The Group considers that the risks and benefits of the securitizations are substantially retained if the subordinated bonds are held and/
or if subordination funding has been granted to those securitization funds, which means that the credit loss risk of the securitized assets
will be assumed. Consequently, the Group is not derecognizing those transferred loan portfolios.
On the other hand, the Group has carried out synthetic securitizations, which are transactions where risk is transferred through derivatives
or financial guarantees and in which the exposure of these securitizations remains in the balance sheet of the Group. The Group has
established the synthetic securitizations through received financial guarantees. As for the commissions paid, they are accrued during the
term of the financial guarantee.
2.2.3
Financial guarantees
Financial guarantees are considered to be those contracts that require their issuer to make specific payments to reimburse the holder of
the financial guarantee for a loss incurred when a specific borrower breaches its payment obligations on the terms – whether original or
subsequently modified – of a debt instrument, irrespective of the legal form it may take. Financial guarantees may take the form of a
deposit, bank guarantee, insurance contract or credit derivative, among others.
In their initial recognition, financial guarantees are recognized as liabilities in the consolidated balance sheet at fair value, which is generally
the present value of the fees, commissions and interest receivable from these contracts over the term thereof, and the Group
simultaneously recognizes a corresponding asset in the consolidated balance sheet for the amount of the fees and commissions received
at the inception of the transactions and the amounts receivable at the present value of the fees, commissions and interest outstanding.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine
the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required for them. The credit risk is
determined by application of criteria similar to those established for quantifying loss allowances on debt instruments measured at
amortized cost (see Note 2.2.1).
The provisions recognized for financial guarantees are recognized under the heading “Provisions - Provisions for contingent risks and
commitments” on the liability side in the consolidated balance sheets (see Note 24). These provisions are recognized and reversed with
a charge or credit, respectively to “Provisions or reversal of provision” in the consolidated income statements (see Note 46).
Income from financial guarantees is recorded under the heading “Fee and commission income” in the consolidated income statement
and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 40).
Synthetic securitizations made by the Group to date meet the requirements of the accounting regulations for accounting as guarantees.
Consideration as a financial guarantee means recognition of the commission paid for it over the period.
2.2.4 Non-current assets and disposal groups classified as held for sale and liabilities included in disposal groups
classified as held for sale
The headings “Non-current assets and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as
held for sale” in the consolidated balance sheet include the carrying amount of assets that are not part of the BBVA Group’s operating
activities. The recovery of this carrying amount is expected to take place through the price obtained on its disposal (see Note 21).
These headings include individual items and groups of items (“disposal groups”) and disposal groups that form part of a major operating
segment and are being held for sale as part of a disposal plan (“discontinued operations”). The heading “Non-current assets and disposal
groups classified as held for sale” include the assets received by the subsidiaries from their debtors, in full or partial settlement of the
debtors’ payment obligations (assets foreclosed or received in payment of debt and recovery of lease finance transactions), unless the
Group has decided to make continued use of these assets. The BBVA Group has units that specialize in real estate management and the
sale of this type of asset.
Symmetrically, the heading “Liabilities included in disposal groups classified as held for sale” in the consolidated balance sheet reflects
the balances payable arising from disposal groups and discontinued operations.
Non-current assets and disposal groups classified as held for sale are generally measured, at the acquisition date and at any later date
deemed necessary, at either their carrying amount or the fair value of the property (less costs to sell), whichever is lower.
In the case of real estate assets foreclosed or received in payment of debts, they are initially recognized at the lower of: the restated
carrying amount of the financial asset and the fair value at the time of the foreclosure or receipt of the asset less estimated sales costs.
The carrying amount of the financial asset is updated at the time of the foreclosure, treating the real property received as a secured
collateral and taking into account the credit risk coverage that would correspond to it according to its classification prior to the delivery.
For these purposes, the collateral will be valued at its current fair value (less sale costs) at the time of foreclosure. This carrying amount
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will be compared with the previous carrying amount and the difference will be recognized as a provision increase, if applicable. On the
other hand, the fair value of the foreclosed asset is obtained by appraisal, evaluating the need to apply a discount on the asset derived
from the specific conditions of the asset or the market situation for these assets, and in any case, deducting the company’s estimated
sale costs.
At the time of the initial recognition, these real estate assets foreclosed or received in payment of debts, classified as “Non-current assets
and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as held for sale” are valued at the
lower of: their restated fair value less estimated sale costs and their carrying amount; a deterioration or impairment reversal can be
recognized for the difference if applicable.
Non-current assets and disposal groups held for sale groups classified as held for sale are not depreciated while included under the
heading “Non-current assets and disposal groups classified as held for sale”.
Fair value of non-current assets held for sale from foreclosures or recoveries is based, mainly, in appraisals or valuations made by
independent experts on an annual basis or more frequently, should there be indicators of impairment.
Gains and losses generated on the disposal of assets and liabilities classified as non-current held for sale, and liabilities included in disposal
groups classified as held for sale as well as impairment losses and, where pertinent, the related recoveries, are recognized in “Gains
(losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations” in the
consolidated income statement (see Note 50). The remaining income and expense items associated with these assets and liabilities are
classified within the relevant consolidated income statement headings.
Income and expense for discontinued operations, whatever their nature, generated during the year, even if they have occurred before
their classification as discontinued operations, are presented net of the tax effect as a single amount under the heading “Profit (loss) after
tax from discontinued operations” in the consolidated income statement, whether the business remains on the consolidated balance
sheet or is derecognized from the consolidated balance sheet. As long as an asset remains in this category, it will not be amortized. This
heading includes the earnings from their sale or other disposal.
2.2.5 Tangible assets
Property, plant and equipment for own use
This heading includes the assets under ownership or acquired under lease terms (right to use), intended for future or current use by the
BBVA Group and that it expects to hold for more than one year. It also includes tangible assets received by the consolidated entities in full
or partial settlement of financial assets representing receivables from third parties which are expected to be held for continuing use.
For more information regarding the accounting treatment of right to use assets under lease terms, see Note 2.2.19 "Leases".
Property, plant and equipment for own use are presented in the consolidated balance sheets at acquisition cost, less any accumulated
depreciation and, where appropriate, any estimated impairment losses resulting from comparing this net carrying amount of each item
with its corresponding recoverable amount (see Note 17).
Depreciation is calculated using the straight-line method, during the useful life of the asset, on the basis of the acquisition cost of the
assets less their residual value; the land is considered to have an indefinite life and is therefore not depreciated.
The tangible asset depreciation charges are recognized in the accompanying consolidated income statements under the heading
"Depreciation and Amortization" (see Note 45) and are based on the application of the following depreciation rates (determined on the
basis of the average years of estimated useful life of the various assets):
Depreciation rates for tangible assets
0
Type of assets
Buildings for own use
Furniture
Fixtures
Office supplies and hardware
0
Annual Percentage
1% - 4%
8% - 10%
6% - 12%
8% - 25%
At each reporting date, the Group entities analyze whether there are internal or external indicators that a tangible asset may be impaired.
When there is evidence of impairment, the Group analyzes whether this impairment actually exists by comparing the asset’s net carrying
amount with its recoverable amount (defined as the higher between its recoverable amount less disposal costs and its value in use). When
the carrying amount exceeds the recoverable amount, the carrying amount is written down to the recoverable amount and depreciation
charges going forward are adjusted to reflect the asset’s remaining useful life.
Similarly, if there is any indication that the value of a previously impaired tangible asset is now recoverable, the consolidated entities will
estimate the recoverable amounts of the asset and recognize it in the consolidated income statement, recording the reversal of the
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impairment loss recognized in previous years and thus adjusting future depreciation charges. Under no circumstances may the reversal
of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognized
in prior years.
In the BBVA Group, most of the buildings held for own use are assigned to the different Cash-Generating-Units (CGU) to which they belong.
The corresponding impairment analyses are performed for these CGUs to check whether sufficient cash flows are generated to support
the value of the assets comprised within.
Operating and maintenance expense relating to tangible assets held for own use are recognized as an expense in the year they are incurred
and recognized in the consolidated income statements under the heading "Administration costs - Other administrative expense -
Property, fixtures and materials" (see Note 44.2).
Other assets leased out under an operating lease
The criteria used to recognize the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their
respective estimated useful lives and to recognize the impairment losses on them, are the same as those described in relation to tangible
assets for own use.
Investment properties
The heading “Tangible assets - Investment properties” in the consolidated balance sheets reflects the net values (purchase cost minus
the corresponding accumulated depreciation and, if appropriate, estimated impairment losses) of the land, buildings and other structures
that are held either to earn rentals or for capital appreciation through sale and that are neither expected to be sold off in the ordinary
course of business nor are destined for own use (see Note 17).
The criteria used to recognize the acquisition cost of investment properties, calculate their depreciation and their respective estimated
useful lives and recognize the impairment losses on them, are the same as those described in relation to tangible assets held for own use.
The BBVA Group determines periodically the fair value of its investment properties in such a way that, at the end of the financial year, the
fair value reflects the market conditions of investment property assets’ market at such date. This fair value will be determined taking as
references the valuations performed by independent experts.
2.2.6
Inventories
The balance under the heading “Other assets - Inventories” in the consolidated balance sheets mainly includes the land and other
properties that the BBVA Group’s real estate entities hold for development and sale as part of their real estate development activities (see
Note 20).
The cost of inventories includes those costs incurred in their acquisition and development, as well as other direct and indirect costs
incurred in getting them to their current condition and location.
In the case of the cost of real estate assets accounted for as inventories, the cost is comprised of: the acquisition cost of the land, the cost
of urban planning and construction, non-recoverable taxes and costs corresponding to construction supervision, coordination and
management. Financing cost incurred during the year form part of cost, provided that the inventories require more than a year to be in a
condition to be sold.
Properties purchased from customers in distress, which the Group manages for sale, are measured at the acquisition date and any
subsequent time, at either their related carrying amount or the net realizable value of the property, whichever is lower. The carrying
amount at acquisition date of these properties is defined as the balance pending collection on those assets that originated said purchases
(net of provisions).
Impairment
The amount of any subsequent adjustment due to inventory valuation for reasons such as damage, obsolescence, reduction in sale price
to its net realizable value, as well as losses for other reasons and, if appropriate, subsequent recoveries of value up to the limit of the initial
cost value, are recognized under the heading "Impairment or reversal of impairment on non-financial assets” in the accompanying
consolidated income statements for the year in which they are incurred (see Note 48).
In the case of the above mentioned real-estate assets, if the net realizable value is lower than the carrying amount of the loan recognized
in the consolidated balance sheet, a loss is recognized under the heading "Impairment or reversal of impairment on non-financial assets"
in the consolidated income statement for the year. In the case of real-estate assets accounted for as inventories, the BBVA Group’s
criterion for determining their net realizable value is mainly based on independent appraisals no more than one year old, or less if there
are indications of impairment.
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Inventory sales
In sale transactions, the carrying amount of inventories is derecognized from the consolidated balance sheet and recognized as an
expense under the income statement heading "Other operating expense – Change in inventories” in the year in which the income from its
sale is recognized. This income is recognized under the heading “Other operating income – Gains from sales of non-financial services” in
the consolidated income statements (see Note 42).
2.2.7 Business combinations
A business combination is a transaction, or any other deal, by which the Group obtains control of one or more businesses. It is accounted
for by applying the “acquisition method”.
According to this method, the acquirer has to recognize the assets acquired and the liabilities and contingent liabilities assumed, including
those that the acquired entity had not recognized in the accounts. The method involves the measurement of the consideration received
for the business combination and its allocation to the assets, liabilities and contingent liabilities measured according to their fair value, at
the purchase date, as well as the recognition of any non-controlling participation (minority interests) that may arise from the transaction.
In a business combination achieved in stages, the acquirer shall measure its previously held equity interest in the acquiree at its
acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss under the heading “Gains (losses) on
derecognition of non-financial assets and subsidiaries, net” of the consolidated income statements. In prior reporting periods, the acquirer
may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was
recognized in other comprehensive income shall be recognized on the same basis as would be required if the acquirer had disposed
directly of the previously held equity interest.
In addition, the acquirer shall recognize an asset in the consolidated balance sheet under the heading “Intangible asset - Goodwill” if on the
acquisition date there is a positive difference between:
the sum of the consideration transferred, the amount of all the non-controlling interests and the fair value of stock previously
held in the acquired business; and
the net fair value of the assets acquired and liabilities assumed.
If this difference is negative, it shall be recognized directly in the income statement under the heading “Negative goodwill recognized in
profit or loss”.
Non-controlling interests in the acquired entity may be measured in two ways: either at their fair value; or at the proportional percentage
of net assets identified in the acquired entity. The method of valuing non-controlling interest may be elected in each business combination.
BBVA Group has always elected for the second method.
2.2.8
Intangible assets
Goodwill
Goodwill represents a portion of consideration transferred in advance by the acquiring entity for the future economic benefits from assets
that cannot be individually identified and separately recognized. Goodwill is never amortized. It is subject periodically to an impairment
analysis, and is written off if there has been impairment (see Note 18).
Goodwill is assigned to one or more CGUs that expect to be the beneficiaries of the synergies derived from the business combinations.
The CGUs represent the Group’s smallest identifiable asset groups that generate cash flows for the Group and that are largely independent
of the flows generated from the Group’s other assets or groups of assets. Each unit or units to which goodwill is allocated:
Is the lowest level at which the entity manages goodwill internally.
Is not larger than an operating segment.
The cash generating units to which goodwill has been allocated are tested for impairment (including the allocated goodwill in their carrying
amount). This analysis is performed at least annually or more frequently if there is any indication of impairment.
For the purpose of determining the impairment of a cash-generating unit to which a part of goodwill has been allocated, the carrying
amount of that cash-generating unit, adjusted by the theoretical amount of the goodwill attributable to the non-controlling interests, in the
event they are not valued at fair value, is compared with its recoverable amount.
The recoverable amount of a cash-generating unit is equal to the fair value less sale costs or its value in use, whichever is greater. Value in
use is calculated as the discounted value of the cash flow projections that the unit’s management estimates and is based on the latest
budgets approved for the coming years. The main assumptions used in its calculation are: a sustainable growth rate to extrapolate the
cash flows indefinitely, and the discount rate used to discount the cash flows, which is equal to the cost of the capital assigned to each
cash-generating unit, and equivalent to the sum of the risk-free rate plus a risk premium inherent to the cash-generating unit being
evaluated for impairment.
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If the carrying amount of the cash-generating unit exceeds the related recoverable amount, the Group recognizes an impairment loss; the
resulting loss is apportioned by reducing, first, the carrying amount of the goodwill allocated to that unit and, second, if there are still
impairment losses remaining to be recognized, the carrying amount of the remainder of the assets. This is done by allocating the remaining
loss in proportion to the carrying amount of each of the assets in the unit. In the event the non-controlling interests are measured at fair
value, the deterioration of goodwill attributable to non-controlling interests will be recognized. In any case, an impairment loss recognized
for goodwill shall not be reversed in a subsequent period.
Goodwill impairment losses are recognized under the heading "Impairment or reversal of impairment on non-financial assets – Intangible
assets” in the consolidated income statements (see Note 48).
Other intangible assets
These assets may have an indefinite useful life if, based on an analysis of all relevant factors, it is concluded that there is no foreseeable
limit to the period over which the asset is expected to generate net cash flows for the consolidated entities. In all other cases they have a
finite useful life (see Note 18).
Intangible assets with a finite useful life are amortized according to the duration of this useful life, using methods similar to those used to
depreciate tangible assets. The defined useful life intangible asset is made up mainly of IT applications acquisition costs which have a
useful life of 3 to 5 years. The amortization charge of these assets is recognized in the accompanying consolidated income statements
under the heading "Depreciation and amortization" (see Note 45).
The consolidated entities recognize any impairment losses on the carrying amount of these assets with charge to the heading “Impairment
or reversal of impairment on non - financial assets- Intangible assets” in the accompanying consolidated income statements (see Note
48). The criteria used to recognize the impairment losses on these assets and, where applicable, the recovery of impairment losses
recognized in prior years, are similar to those used for tangible assets.
2.2.9
Insurance and reinsurance contracts
The assets and liabilities of the BBVA Group’s insurance subsidiaries are recognized according to their nature under the corresponding
headings of the consolidated balance sheets, and the initial recognition and valuation is carried out according to the criteria set out in IFRS
4.
The heading “Insurance and reinsurance assets” in the accompanying consolidated balance sheets includes the amounts that the
consolidated insurance subsidiaries are entitled to receive under the reinsurance contracts entered into by them with third parties and,
more specifically, the reinsurer´s share of the technical provisions recognized by the consolidated insurance subsidiaries.
The heading “Liabilities under insurance and reinsurance contracts” in the accompanying consolidated balance sheets includes the
technical provisions for direct insurance and inward reinsurance recognized by the consolidated insurance subsidiaries to cover claims
arising from insurance contracts open at period-end (see Note 23).
The income or expense reported by the BBVA Group’s consolidated insurance subsidiaries on their insurance activities is recognized, in
accordance with their nature, in the corresponding items of the consolidated income statements.
The consolidated insurance entities of the BBVA Group recognize the amounts of the premiums written and a charge for the estimated
cost of the claims that will be incurred at their final settlement to their consolidated income statements. At the close of each year the
amounts collected and unearned, as well as the costs incurred and unpaid, are accrued.
The most significant provisions recorded by consolidated insurance entities with respect to insurance policies issued by them are set out
by their nature in Note 23.
According to the type of product, the provisions may be as follows:
Life insurance provisions:
Represents the value of the net obligations undertaken with the life insurance policyholder. These provisions include:
•
Provisions for unearned premiums. These are intended for the accrual, at the date of calculation, of the premiums written.
Their balance reflects the portion of the premiums received until the closing date that has to be allocated to the period from
year-end to the end of the insurance policy period.
• Mathematical reserves: Represents the value of the life insurance obligations of the insurance entities at year-end, net of
the policyholder’s obligations, arising from life insurance contracted.
Non-life insurance provisions:
•
Provisions for unearned premiums. These provisions are intended for the accrual, at the date of calculation, of the
premiums written. Their balance reflects the portion of the premiums received until the closing date that has to be
allocated to the period between the year-end and the end of the policy period.
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•
Provisions for unexpired risks: The provision for unexpired risks supplements the provision for unearned premiums by
the amount by which that provision is not sufficient to reflect the assessed risks and expenses to be covered by the
consolidated insurance subsidiaries in the policy period not elapsed at year-end.
Provision for claims:
This reflects the total amount of the outstanding obligations arising from claims incurred prior to year-end. Insurance
subsidiaries calculate this provision as the difference between the total estimated or certain cost of the claims not yet reported,
settled or paid, and the total amounts already paid in relation to these claims.
Provision for bonuses and rebates:
This provision includes the amount of the bonuses accruing to policyholders, insurees or beneficiaries and the premiums to be
returned to policyholders or insurees, as the case may be, based on the behavior of the risk insured, to the extent that such
amounts have not been individually assigned to each of them.
Technical provisions for reinsurance ceded:
Calculated by applying the criteria indicated above for direct insurance, taking account of the assignment conditions established
in the open reinsurance contracts.
Other technical provisions:
Insurance entities have recognized provisions to cover the probable mismatches in the market reinvestment interest rates with
respect to those used in the valuation of the technical provisions.
The BBVA Group controls and monitors the exposure of the insurance subsidiaries to financial risk and, to this end, uses internal methods
and tools that enable it to measure credit risk and market risk and to establish the limits for these risks.
2.2.10 Tax assets and liabilities
Expenses on corporate income tax applicable to the BBVA Group’s Spanish entities and on similar income taxes applicable to consolidated
foreign entities are recognized in the consolidated income statement, except when they result from transactions on which the profits or
losses are recognized directly in equity, in which case the related tax effect is also recognized in equity.
The total corporate income tax expense is calculated by aggregating the current tax arising from the application of the corresponding tax
rate as per the tax base for the year (after deducting the tax credits or discounts allowable for tax purposes) and the change in deferred
tax assets and liabilities recognized in the consolidated income statement.
Deferred tax assets and liabilities include temporary differences, defined as the amounts to be payable or recoverable in future years
arising from the differences between the carrying amount of assets and liabilities and their tax bases (the “tax value”), and tax loss and
tax credit or discount carry forwards. These amounts are registered by applying to each temporary difference the tax rates that are
expected to apply when the asset is realized or the liability settled (see Note 19).
The "Tax Assets" line item in the accompanying consolidated balance sheets includes the amount of all the assets of a tax nature, broken
down into: "Current” (amounts of tax recoverable in the next twelve months) and "Deferred" (which includes the amount of tax to be
recovered in future years, including those arising from tax losses or credits for deductions or rebates that can be compensated). The "Tax
Liabilities" line item in the accompanying consolidated balance sheets includes the amount of all the liabilities of a tax nature, except for
provisions for taxes, broken down into: "Current” (income tax payable on taxable profit for the year and other taxes payable in the next
twelve months) and "Deferred" (the amount of corporate tax payable in subsequent years).
Deferred tax liabilities attributable to taxable temporary differences associated with investments in subsidiaries, associates or joint
venture entities are recognized as such, except where the Group can control the timing of the reversal of the temporary difference and it
is unlikely that it will reverse in the future. Deferred tax assets are recognized to the extent that it is probable that the consolidated entities
will generate enough taxable profits to make deferred tax assets effective and do not correspond to those from initial recognition (except
in the case of business combinations), which also does not affect the fiscal outcome.
The deferred tax assets and liabilities recognized are reassessed by the consolidated entities at each balance sheet date in order to
ascertain whether they still qualify as deferred tax assets and liabilities, and the appropriate adjustments are made on the basis of the
findings of the analyses performed. In those circumstances in which it is unclear how a specific requirement of the tax law applies to a
particular transaction or circumstance, and the acceptability of the definitive tax treatment depends on the decisions taken by the relevant
taxation authority in future, the entity recognizes current and deferred tax liabilities and assets considering whether it is probable or not
that a taxation authority will accept an uncertain tax treatment. Thus, if the entity concludes that it is not probable that the taxation
authority will accept an uncertain tax treatment, the entity uses the amount expected to be paid to (recovered from) the taxation
authorities.
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The income and expense directly recognized in consolidated equity that do not increase or decrease taxable income are accounted for as
temporary differences.
2.2.11 Provisions, contingent assets and contingent liabilities
The heading “Provisions” in the consolidated balance sheets includes amounts recognized to cover the BBVA Group’s current obligations
arising as a result of past events. These are certain in terms of nature but uncertain in terms of amount and/or settlement date. The
settlement of these obligations is deemed likely to entail an outflow of resources embodying economic benefits (see Note 24). The
obligations may arise in connection with legal or contractual provisions, valid expectations formed by Group entities relative to third parties
in relation to the assumption of certain responsibilities or through virtually certain developments of particular aspects of the regulations
applicable to the operation of the entities; and, specifically, future legislation to which the Group will certainly be subject. The provisions
are recognized in the consolidated balance sheets when each and every one of the following requirements is met:
They represent a current obligation that has arisen from a past event. At the date of the Consolidated Financial Statements,
there is more probability that the obligation will have to be met than that it will not.
It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
The amount of the obligation can be reasonably estimated.
Among other items, these provisions include the commitments made to employees by some of the Group entities mentioned in Note
2.2.12, as well as provisions for tax and legal litigation.
Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by,
the occurrence or non-occurrence of events beyond the control of the Group. Contingent assets are not recognized in the consolidated
balance sheet or in the consolidated income statement; however, they will be disclosed, should they exist, in the Notes to the Consolidated
Financial Statements, provided that it is probable will give rise to an increase in resources embodying economic benefits.
Contingent liabilities are possible obligations of the Group that arise from past events and whose existence is conditional on the
occurrence or non-occurrence of one or more future events beyond the control of the Group. They also include the existing obligations of
the Group when it is not probable that an outflow of resources embodying economic benefits will be required to settle them; or when, in
extremely rare cases, their amount cannot be measured with sufficient reliability.
Contingent liabilities are not recognized in the consolidated balance sheet or the income statement (excluding contingent liabilities from
business combination) but are disclosed in the Notes to the Consolidated Financial Statements, unless the possibility of an outflow of
resources embodying economic benefits is remote.
2.2.12 Pensions and other post-employment commitments
Below we provide a description of the most significant accounting policies relating to post-employment and other employee benefit
commitments assumed by BBVA Group entities (see Note 25).
Short-term employee benefits
Benefits for current active employees which are accrued and settled during the year and for which a provision is not required in the entity´s
accounts. These include wages and salaries, social security charges and other personnel expense.
Costs are charged and recognized under the heading “Administration costs – Personnel expense – Other personnel expense” of the
consolidated income statement (see Note 44.1).
Post-employment benefits – Defined-contribution plans
The Group sponsors defined-contribution plans for the majority of its active employees. The amount of these benefits is established as a
percentage of remuneration and/or as a fixed amount.
The contributions made to these plans in each year by BBVA Group entities are charged and recognized under the heading
“Administration costs – Personnel expense– Defined-contribution plan expense” of the consolidated income statement (see Note 44.1).
Post-employment benefits – Defined-benefit plans
Some Group entities maintain pension commitments with employees who have already retired or taken early retirement, certain closed
groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active
employees. These commitments are covered by insurance contracts, pension funds and internal provisions.
In addition, some of the Spanish entities have offered certain employees the option to retire before their normal retirement age,
recognizing the necessary provisions to cover the costs of the associated benefit commitments, which include both the liability for the
benefit payments due as well as the contributions payable to external pension funds during the early retirement period.
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Furthermore, certain Group entities provide welfare and medical benefits which extend beyond the date of retirement of the employees
entitled to the benefits.
All of these commitments are quantified based on actuarial valuations, with the amounts recorded under the heading “Provisions –
Provisions for pensions and similar obligations” in the consolidated balance sheet and determined as the difference between the value of
the defined-benefit commitments and the fair value of plan assets at the date of the Consolidated Financial Statements (see Note 25).
Current service cost is charged and recognized under the heading “Administration costs – Personnel expense – Defined-benefit plan
expense” of the consolidated income statement (see Note 44.1).
Interest credits/charges relating to these commitments are charged and recognized under the headings “Interest and other income” and
“Interest expense” of the consolidated income statement (see Note 37).
Past service costs arising from benefit plan changes as well as early retirements granted during the year are recognized under the heading
“Provisions or reversals of provisions” of the consolidated income statement (see Note 46).
Other long-term employee benefits
In addition to the above commitments, certain Group entities provide long-term service awards to their employees, consisting of monetary
amounts or periods of vacation granted upon completion of a number of years of qualifying service.
These commitments are quantified based on actuarial valuations and the amounts recorded under the heading “Provisions – Other long-
term employee benefits” of the consolidated balance sheet (see Note 24).
Valuation of commitments: actuarial assumptions and recognition of gains/losses
The present value of these commitments is determined based on individual member data. Active employee costs are determined using
the “projected unit credit” method, which treats each period of service as giving rise to an additional unit of benefit and values each unit
separately.
In establishing the actuarial assumptions we take into account that:
They should be unbiased, i.e. neither unduly optimistic nor excessively conservative.
Each assumption does not contradict the others and adequately reflect the existing relationship between economic variables
such as price inflation, expected wage increases, discount rates and the expected return on plan assets, etc. Future wage and
benefit levels should be based on market expectations, at the balance sheet date, for the period over which the obligations are
to be settled.
The interest rate used to discount benefit commitments is determined by reference to market yields, at the balance sheet date,
on high quality bonds.
The BBVA Group recognizes actuarial gains/losses relating to early retirement benefits, long service awards and other similar items under
the heading “Provisions or reversal of provisions” of the consolidated income statement for the period in which they arise (see Note 46).
Actuarial gains/losses relating to pension and medical benefits are directly charged and recognized under the heading "Accumulated
other comprehensive income – Items that will not be reclassified to profit or loss – Actuarial gains or losses on defined benefit pension
plans" of equity in the consolidated balance sheet (see Note 30).
2.2.13 Equity-settled share-based payment transactions
Equity –settled share-based payment transactions, provided they constitute the delivery of such equity instruments once completion of
a specific period of services has occurred, are recognized as an expense for services being provided by employees, by way of a balancing
entry under the heading “Shareholders’ funds – Other equity instruments” in the consolidated balance sheet. These services are
measured at fair value for the employees services received, unless such fair value cannot be calculated reliably. In such case, they are
measured by reference to the fair value of the equity instruments granted, taking into account the date on which the commitments were
granted and the terms and other conditions included in the commitments.
When the initial compensation agreement includes what may be considered market conditions among its terms, any changes in these
conditions will not be reflected in the consolidated income statement, as these have already been accounted for in calculating the initial
fair value of the equity instruments. Non-market vesting conditions are not taken into account when estimating the initial fair value of
equity instruments, but they are taken into account when determining the number of equity instruments to be issued. This will be
recognized on the consolidated income statement with the corresponding increase in total consolidated equity.
2.2.14 Termination benefits
Termination benefits are recognized in the financial statements when the BBVA Group agrees to terminate employment contracts with
its employees and has established a detailed plan.
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2.2.15 Treasury shares
The value of common stock issued by the BBVA Group’s entities and held by them - basically, shares and derivatives on the Bank’s shares
held by some consolidated entities that comply with the requirements to be recognized as equity instruments - are recognized as a
decrease to net equity, under the heading "Shareholders’ funds - Treasury stock" in the consolidated balance sheets (see Note 29).
These financial assets are recognized at acquisition cost, and the gains or losses arising on their disposal are credited or debited, as
appropriate, to the heading “Shareholders’ funds - Retained earnings” in the consolidated balance sheets (see Note 28).
2.2.16 Foreign-currency transactions and exchange differences
The BBVA Group’s functional currency, and thus the currency in which the Consolidated Financial Statements are presented, is the euro.
As such, all balances and transactions denominated in currencies other than the euro are deemed to be denominated in “foreign currency”.
Conversion to euros of the balances held in foreign currency is performed in two consecutive stages:
Conversion of the foreign currency to the entity’s functional currency (currency of the main economic environment in which the
entity operates); and
Conversion to euros of the balances held in the functional currencies of the entities whose functional currency is not the euro.
Conversion of the foreign currency to the entity’s functional currency
Transactions denominated in foreign currencies carried out by the consolidated entities (or entities accounted for using the equity
method) are initially accounted for in their respective currencies. Subsequently, the monetary balances in foreign currencies are
converted to their respective functional currencies using the exchange rate at the close of the financial year. In addition,
Non-monetary items valued at their historical cost are converted to the functional currency at the exchange rate applicable on
the purchase date.
Non-monetary items valued at their fair value are converted at the exchange rate in force on the date on which such fair value
was determined.
Monetary items are converted to the functional currency at the closing exchange rate.
Income and expense are converted at the period’s average exchange rates for all the operations carried out during the year.
When applying this criterion the BBVA Group considers whether significant variations have taken place in exchange rates during
the year which, owing to their impact on the statements as a whole, may require the application of exchange rates as of the date
of the transaction instead of such average exchange rates.
The exchange differences produced when converting the balances in foreign currency to the functional currency of the consolidated
entities are generally recognized under the heading "Exchange differences, net" in the consolidated income statements (see Note 41).
However, the exchange differences in non-monetary items measured at fair value are recorded to equity under the heading “Accumulated
other comprehensive income or loss - Items not subject to reclassification to income statement - Fair value changes of equity instruments
measured at fair value through other comprehensive income” in the consolidated balance sheets (see Note 30).
Conversion of functional currencies to euros
The balances in the financial statements of consolidated entities whose functional currency is not the euro are converted to euros as
follows:
Assets and liabilities: at the closing spot exchange rates as of the date of each of the consolidated balance sheets.
Income and expense and cash flows are converted by applying the exchange rate applicable on the date of the transaction, and
the average exchange rate for the financial year may be used, unless it has undergone significant variations during the year.
Equity items: at the historical exchange rates.
The exchange differences arising from the conversion to euros of balances in the functional currencies of the consolidated entities whose
functional currency is not the euro are recognized under the heading “Accumulated other comprehensive income – Items that may be
reclassified to profit or loss - Exchange differences” in the consolidated balance sheets (Notes 30 and 31 respectively). Meanwhile, the
differences arising from the conversion to euros of the financial statements of entities accounted for by the equity method are recognized
under the heading “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Entities accounted for
using the equity method" (Note 30) until the item to which they relate is derecognized, at which time they are recognized in the income
statement.
The financial statements of companies of hyperinflationary economies are restated for the effects of changes in prices before their
conversion to euros following the provisions of IAS 29 "Financial information in hyperinflationary economies" (see Note 2.2.20). Both
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these adjustments for inflation and the exchange differences that arise when converting the financial statements of companies into
hyperinflationary economies are accounted for in Reserves.
The breakdown of the main consolidated balances in foreign currencies, with reference to the most significant foreign currencies, is set
forth in Appendix VII.
Venezuela
Local financial statements of the Group subsidiaries in Venezuela are expressed in Venezuelan Bolivar, and converted into euros for the
consolidated financial statements. Venezuela is a country with strong exchange restrictions that has different rates officially published,
and, since December 31, 2015, the Board of Directors considers that the use of these exchanges rates for converting bolivars into euros
in preparing the Consolidated Financial Statements does not reflect the true picture of the financial statements of the Group and the
financial position of the Group subsidiaries in this country. Therefore, since the year ended December 31, 2015, the exchange rate for
converting bolivars into euros is an estimation taking into account the evolution of the estimated inflation in Venezuela.
As of December 31, 2019, 2018 and 2017, the impact on the financial statements that would have resulted by applying the last published
official exchange rate instead of the exchange rate estimated by BBVA Group was not significant (see Note 2.2.20).
2.2.17 Recognition of income and expense
The most significant policies used by the BBVA Group to recognize its income and expense are as follows.
Interest income and expense and similar items:
As a general rule, interest income and expense and similar items are recognized on the basis of their period of accrual using the
effective interest rate method.
They shall be recognized within the consolidated income statement according to the following criteria, independently from the
financial instruments’ portfolio which generates the income or expense:
•
•
The interest income past-due before the initial recognition and pending to be received will form part of the gross carrying
amount of the debt instrument.
The interest income accrued after the initial recognition will form part of the gross carrying amount of the debt instrument
until it will be received.
The financial fees and commissions that arise on the arrangement of loans and advances (basically origination and analysis
fees) are deferred and recognized in the income statement over the expected life of the loan. From that amount, the transaction
costs identified as directly attributable to the arrangement of the loans and advances will be deducted. These fees are part of
the effective interest rate for the loans and advances.
Once a debt instrument has been impaired, interest income is recognized applying the effective interest rate used to discount
the estimated recoverable cash flows on the carrying amount of the asset.
Income from dividends received:
Dividends shall be recognized within the consolidated income statement according to the following criteria, independently from
the financial instruments’ portfolio which generates this income:
• When the right to receive payment has been declared before the initial recognition and when the payment is pending to be
received, the dividends will not form part of the gross carrying amount of the equity instrument and will not be recognized
as income. Those dividends are accounted for as financial assets separately from the net equity instrument.
•
If the right to receive payment is received after the initial recognition, the dividends from the net equity instruments will be
recognized within the consolidated income statement. If the dividends correspond indubitable to the profits of the issuer
before the date of initial recognition, they will not be recognized as income but as reduction of the gross carrying amount
of the equity instrument because it represents a partly recuperation of the investment. Amongst other circumstances, the
generation date can be considered to be prior to the date of initial recognition if the amounts distributed by the issuer as
from the initial recognition are higher than its profits during the same period.
Commissions, fees and similar items:
Income and expense relating to commissions and similar fees are recognized in the consolidated income statement using
criteria that vary according to the nature of such items. The most significant items in this connection are:
•
•
•
Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized when
collected/paid.
Those arising from transactions or services that are provided over a period of time, which are recognized over the life of
these transactions or services.
Those relating to a singular transaction, which are recognized when this singular transaction is carried out.
Non-financial income and expense:
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These are recognized for accounting purposes on an accrual basis.
Deferred collections and payments:
These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market
rates.
2.2.18 Sales of assets and income from the provision of non-financial services
The heading “Other operating income” in the consolidated income statements includes the proceeds of the sales of assets and income
from the services provided by the Group entities that are not financial institutions. In the case of the Group, these entities are mainly real
estate and service entities (see Note 42).
2.2.19 Leases
Effective January 1, 2019, IFRS 16 replaced IAS 17 “Leases” (see Note 2.3). The single lessee accounting model requires the lessee to
record assets and liabilities for all lease contracts. The standard provides two exceptions to the recognition of lease assets and liabilities
that can be applied in the case of short-term contracts and those in which the underlying assets have low value. BBVA has elected to apply
both exceptions. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset, which is
recorded under the headings ‘‘ Tangible assets – Property plants and equipment’’ and‘‘ Tangible assets – Investment properties’’ of the
consolidated balance sheet (see Note 17) and a lease liability representing its obligation to make lease payments which is recorded under
the heading ‘‘ Financial liabilities at amortized cost – Other financial liabilities’’ in the consolidated balance sheet (see Note 22.5).
At the initial date of the lease, the lease liability represents the present value of all lease unpaid payments. The liabilities registered under
this heading of the consolidated balance sheets are measured after their initial recognition at amortized cost, this being determined in
accordance with the “effective interest rate” method.
The right to use assets are initially recorded at cost. This cost consists of the initial measurement of the lease liability, any payment made
before the initial date less any lease incentives received, all direct initial expenses incurred, as well as an estimate of the expenses to be
incurred by the lessee, such as expenses related to the removal and dismantling of the underlying asset. The right to use assets recorded
under this heading of the consolidated balance sheets are measured after their initial recognition at cost less:
The accumulated depreciation and accumulated impairment
Any remeasurement of the lease liability.
The interest expense on the lease liability is recorded in the consolidated income statements under the heading “Interest expense” (see
note 37). Variable payments not included in the initial measurement of the lease liability are recorded under the heading “Administration
costs – Other administrative expense” (see Note 44).
Amortization is calculated using the straight-line method over the lifetime of the lease contract, on the basis of the cost of the assets. The
tangible asset depreciation charges are recognized in the accompanying consolidated income statements under the heading
"Depreciation and Amortization" (see Note 45).
In case of electing one of the exceptions in order not to recognize the corresponding right to use and the liability in the consolidated balance
sheets, payments related to the corresponding lease are recognized in the consolidated income statements, over the contract period,
lineally, or in the way that best represents the structure of the lease operation, under the heading "Other administrative expense” (see
Note 44)
Operating lease and sublease incomes are recognized in the consolidated income statements under the headings “Other operating
income” (see Note 42).
As a lessor, lease contracts are classified as finance leases from the inception of the transaction if they substantially transfer all the risks
and rewards incidental to ownership of the asset forming the subject-matter of the contract. Leases other than finance leases are
classified as operating leases.
When the consolidated entities act as the lessor of an asset under finance leases, the aggregate present values of the lease payments
receivable from the lessee plus the guaranteed residual value (normally the exercise price of the lessee’s purchase option on expiration
of the lease agreement) are recognized as financing provided to third parties and, therefore, are included under the heading “Loans and
receivables” in the accompanying consolidated balance sheets (see Note 14).
When the consolidated entities act as lessors of an asset in operating leases, the acquisition cost of the leased assets is recognized
under "Tangible assets – Property, plant and equipment – Other assets leased out under an operating lease" in the consolidated
balance sheets (see Note 17). These assets are depreciated in line with the criteria adopted for items of tangible assets for own use, while
the income arising from the lease arrangements is recognized in the consolidated income statements on a straight-line basis within
“Other operating income” and "Other operating expense" (see Note 42).
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If a fair value sale and leaseback results in a lease, the profit or loss generated from the effectively transferred part of the sale is recognized
in the consolidated income statement at the time of sale (only for the effective transmitted part).
The assets leased out under operating lease contracts to other entities in the Group are treated in the Consolidated Financial Statements
as for own use, and thus rental expense and income is eliminated in consolidation and the corresponding depreciation is recognized.
2.2.20 Entities and branches located in countries with hyperinflationary economies
In accordance with the EU-IFRS criteria, to determine whether an economy has a high inflation rate the country's economic situation is
examined, analyzing whether certain circumstances are fulfilled, such as whether the population prefers to keep its wealth or savings in
non-monetary assets or in a relatively stable foreign currency, whether prices can be set in that currency, whether interest rates, wages
and prices are pegged to a price index or whether the accumulated inflation rate over three years reaches or exceeds 100%. The fact that
any of these circumstances is fulfilled will not be a decisive factor in considering an economy hyperinflationary, but it does provide some
reasons to consider it as such.
Argentina
Since 2018, the economy of Argentina has been considered hyperinflationary under the above criteria. As a result, the financial statements
of the BBVA Group’s entities located in Argentina have therefore been adjusted to correct for the effects of inflation in accordance with
IAS 29 “Financial reporting in hyperinflationary economies“.
During 2019 and 2018, the increase in the reserves of Group entities located in Argentina derived from the re-expression for hyperinflation
(IAS 29) amounts to €470 and €703 million, respectively, of which €313 and €463 million, respectively, have been recorded within
“Shareholders’ funds - Retained earnings” and €157 and €240 million, respectively, within “Minority interests – Other”. Furthermore,
during 2019 and 2018 the decrease in the reserves of Group entities located in Argentina derived from the conversion (IAS 21) amounted
to €460 and €773 million, respectively, of which €305 and €515 million, respectively, have been recorded within “Shareholders’ funds -
Retained earnings”, and €155 and €258 million, respectively, within “Minority interests – Other”. The net impact of both effects is
presented under the caption “Other increases or (-) decreases in equity” in the consolidated Statement of Changes in Equity for the years
ended December 31, 2019 and 2018. The net loss in the profit attributable to the parent company of the Group in 2019 and 2018 derived
from the application of IAS 29 amounted to €190 and €209 million, respectively. In addition, there is a net loss in the profit attributable to
the parent company of the Group in 2019 and 2018 derived from the application of IAS 21 which amounted to €34 and €57 million,
respectively.
The breakdown of the General Price Index (“GPI”) and the inflation index used as of December 31, 2019 for the inflation restatement of the
financial statements of the Group companies located in Argentina is as follows:
General Price Index
0
GPI
Average GPI
Inflation of the period
Venezuela
2019
285
233
55%
Since 2009, the economy of Venezuela has been considered hyperinflationary under the above criteria. As a result, the financial
statements of the BBVA Group’s entities located in Venezuela have therefore been adjusted to correct for the effects of inflation in
accordance with IAS 29 “Financial reporting in hyperinflationary economies“.
The losses recognized under the heading “Profit attributable to the parent company” in the accompanying consolidated income statement
as a result of the adjustment for inflation on net monetary position of the Group entities in Venezuela amounted to €8, €12 and €13 million
in 2019, 2018 and 2017, respectively (see Note 2.2.16).
2.3
Recent IFRS pronouncements
Standards and interpretations that became effective in 2019
The following amendments to the IFRS standards or their interpretations (hereinafter “IFRIC”) became effective in 2019.
IFRS 16 – “Leases”
Effective January 1, 2019, IFRS 16 replaced IAS 17 “Leases”. The new standard introduces a single lessee accounting model and requires
a lessee to recognize assets and liabilities for all leases. The standard provides two exceptions to the recognition of lease assets and
liabilities that can be applied in the case of short-term contracts and those in which the underlying assets have low value. BBVA has elected
to apply both exceptions. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset,
which is recorded under the headings “Tangible assets – Property plants and equipment” or “Tangible assets – Investment properties”
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of the consolidated balance sheet (see Note 17) and a lease liability representing its obligation to make lease payments which is recorded
under the heading “Financial liabilities at amortized cost – Other financial liabilities” in the consolidated balance sheet (see Note 22.5). In
the consolidated income statement, the amortization of the right to use assets is recorded in the heading “Depreciation and amortization
– tangible asset” (see Note 45) and the financial cost associated with the lease liability is recorded in the heading “Interest expense” (see
Note 37.2).
With regard to lessor accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor
will continue to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
At the transition date, the Group decided to apply the modified retrospective approach which requires recognition of a lease liability equal
to the present value of the future payments committed to as of January 1, 2019. Regarding the measurement of the right-of-use asset, the
Group elected to record an amount equal to the lease liability, adjusted for the amount of any advance or accrued lease payment related
to that lease recognized in the balance sheet before the date of initial application.
The Group´s lease liabilities, as a consequence of the first application of IFRS 16, correspond to the present value of the future lease
payments obligations during the lease term (see Note 22.5). This liability on January 1, 2019 does not match with the future minimum
payments for operating leases which had been disclosed in Note 35 of the consolidated financial statements for the year 2018 and which
were calculated under the previous standard IAS 17. The difference is mainly the result of the discount rate used to determine the
present value of the future lease payments as well as the lease term which includes the options to extend and/or early terminate,
provided that it is reasonably certain that this option will/will not be exercised. The discount rate used in Spain, the geography which
represents the biggest part of the IFRS 16 impact was 1.67% at the moment of the first application.
As of January 1, 2019, the Group recognized assets for the right-of-use and lease liabilities for an amount of €3,419 and €3,472 million,
respectively. The impact in terms of capital (CET1) of the Group amounted to -11 basis points.
IFRIC 23 – “Uncertainty over income tax treatments”
IFRIC 23 provides guidance on how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over
income tax treatments.
If the entity considers that it is probable that the taxation authority will accept an uncertain tax treatment, the Interpretation requires the
entity to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax
treatment used or planned to be used in its income tax filings.
If the entity considers that it is not probable that the taxation authority will accept an uncertain tax treatment, the Interpretation requires
the entity to use the most likely amount or the expected value (sum of the probability weighted amounts in a range of possible outcomes)
in determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The method used should be the
method that the entity expects to provide the better prediction of the resolution of the uncertainty.
The implementation of this standard as of January 1, 2019 has not had a significant impact on the Group’s consolidated financial
statements.
Amended IAS 28 – “Long-term Interests in associates and joint ventures”
The amendments to IAS 28 clarify that an entity is required to apply IFRS 9 to long term interests in an associate or joint venture that, in
substance, form part of the net investment in the associate or joint venture but to which the equity method is not applied.
The implementation of this standard as of January 1, 2019 has not had a significant impact on the Group’s consolidated financial
statements.
Annual improvements cycle to IFRSs 2015-2017
The annual improvements cycle to IFRSs 2015-2017 includes minor changes and clarifications to IFRS 3- “Business Combinations”, IFRS
11 – “Joint Arrangements”, IAS 12 – “Income Taxes” and IAS 23 – “Borrowing Costs”. The implementation of these standards as of January
1, 2019 has not had a significant impact on the Group’s consolidated financial statements.
Additionally, this project has introduced an amendment to IAS 12 that became effective on January 1, 2019 and meant that the tax impact
of the distribution of generated benefits must be recorded in the "Tax expense or income related to profit or loss from continuing
operations" line of the consolidated income statement for the year. The amount derived from this amendment to IAS 12 resulted in a credit
of €91 million in the consolidated income statement for the year 2019 (see Note 1.3).
Amended IAS 19 – “Plan Amendment, Curtailment or Settlement”
The minor amendments in IAS 19 concern the cases if an employee benefit plan is amended, curtailed or settled during the period. In these
cases, an entity should ensure that the current service cost and the net interest for the period after the remeasurement are determined
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using the assumptions used for the remeasurement. In addition, amendments have been included to clarify the effect of a plan
amendment, curtailment or settlement on the requirements regarding the asset ceiling.
The implementation of this standard as of January 1, 2019 has not had a significant impact on the Group´s consolidated financial
statements.
Standards and interpretations issued but not yet effective as of December 31, 2019
The following new International Financial Reporting Standards together with their Interpretations had been published at the date of
preparation of the accompanying consolidated financial statements, but are not mandatory as of December 31, 2019. Although in some
cases the International Accounting Standards Board (“IASB”) allows early adoption before their effective date, the BBVA Group has not
proceeded with this option for any such new standards.
IAS 1 and IAS 8 – Definition of Material
The amendments clarify the definition of material in the elaboration of the financial statements by aligning the definition of the conceptual
framework, IAS 1 and IAS 8 (which, before the amendments, included similar but not identical definitions). The new definition of material
is the following: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that
the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial
information about a specific reporting entity”.
This Standard will be applied to the accounting years starting on or after January 1, 2020. No significant impact on the consolidated
financial statements is expected.
IFRS 3 – Definition of a business
The amendments clarify the difference between the acquisition of a business or the acquisition of a set of assets. To determine whether a
transaction is an acquisition of a business, an entity should evaluate and conclude if the two following conditions are fulfilled:
the fair value of the acquired assets is not concentrated in one single asset or group of similar assets.
the entirety of acquired activities and assets includes, as a minimum, an input and a substantial process which, together,
contribute to the capacity to create products.
This Standard will be applied to the accounting years starting on or after January 1, 2020. No significant impact on the consolidated
financial statements is expected.
Amendments to IFRS 9, IAS 39 and IFRS 7- IBOR Reform
The IBOR Reform (Phase 1) refers to the amendments to IFRS 9, IAS 39 and IFRS 7 issued by the IASB to prevent some hedge accounting
from having to be discontinued in the period before the reform of the interest rate references takes place.
In some cases and / or jurisdictions, there may be uncertainty about the future of some interest rate references or their impact on the
contracts held by the entity, which directly causes uncertainty about the timing or amounts of the cash flows of the hedged instrument or
hedging instrument. Due to such uncertainties, some entities may be forced to discontinue their hedge accounting, or not be able to
designate new hedging relationships.
For this reason, the amendments include several reliefs that apply to all hedging relationships that are affected by the uncertainty arising
from the IBOR reform; A hedging relationship is affected by the reform if it generates uncertainty about the timing or amount of the cash
flows of the hedged instrument or that of a hedging instrument referenced to the particular interest rate benchmark.
Since the purpose of the modification is to provide some relief to the application of certain specific requirements of hedge accounting,
these exceptions must end once the uncertainty will be resolved or the hedging relationship ceases to exist.
The modifications will be applicable to the accounting years beginning on or after January 1, 2020 although early application is allowed.
The Group has not applied these modifications in advance as of December 31, 2019 because it considers that the existing uncertainty
does not affect its hedging relationships to the point that some had to be discontinued. Since 2020, they are not expected to have a
significant impact on the consolidated financial statements of the Group.
For additional information on the IBOR Reform see section “Risk factors” of the attached consolidated Management Report.
IFRS 17 – Insurance Contracts
IFRS 17 establishes the principles for the accounting for insurance contracts and supersedes IFRS 4. The new standard introduces a single
accounting model for all insurance contracts and requires the entities to use updated assumptions.
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An entity shall divide the contracts into groups and recognize and measure groups of insurance contracts at the total of:
the fulfilment cash flows, that comprises the estimate of future cash flows, an adjustment to reflect the time value of money and
the financial risk associated with the future cash flows and a risk adjustment for non-financial risk; and
the contractual service margin that represents the unearned profit.
The amounts recognized in the consolidated income statement shall be disaggregated into insurance revenue, insurance service
expenses and insurance finance income or expenses. Insurance revenue and insurance service expenses shall exclude any investment
components. Insurance revenue shall be recognized over the period the entity provides insurance coverage and in proportion to the value
of the provision of coverage that the insurer provides in the period.
This Standard will be applied to the accounting years starting on or after January 1, 2022. During 2019, the Group has established an IFRS
17 implementation project with the objective of harmonizing the criteria in the Group and with the participation of all the affected areas.
3.
BBVA Group
The BBVA Group is an international diversified financial group with a significant presence in retail banking, wholesale banking and asset
management. The Group also operates in the insurance sector.
The following information is detailed in the appendices of these consolidated financial statements of the Group for the year ended
December 31, 2019:
Appendix I shows relevant information related to the consolidated subsidiaries and structured entities.
Appendix II shows relevant information related to investments in joint ventures and associates accounted for using the equity
method.
Appendix III shows the main changes and notification of investments and divestments in the BBVA Group.
Appendix IV shows fully consolidated subsidiaries with more than 10% owned by non-Group shareholders.
The following table sets forth information related to the Group’s total assets as of December 31, 2019, 2018 and 2017, broken down by the
Group’s entities according to their activity:
Contribution to Consolidated Group total assets. Entities by main activities (Millions of euros)
Banking and other financial services
Insurance and pension fund managing companies
Other non-financial services
Total
2019
2018
2017
667,319
29,300
2,071
647,164
659,414
26,732
2,793
26,134
4,511
698,690
676,689
690,059
The total assets and results of operations broken down by operating segments are included in Note 6.
The BBVA Group’s activities are mainly located in Spain, Mexico, South America, the United States and Turkey, with active presence in
other countries, as shown below:
Spain
The Group’s activity in Spain is mainly carried out through Banco Bilbao Vizcaya Argentaria, S.A. The Group also has other
entities that mainly operate in Spain’s banking sector and insurance sector.
Mexico
The BBVA Group operates in Mexico, not only in the banking sector, but also in the insurance sector through BBVA Mexico.
South America
The BBVA Group’s activities in South America are mainly focused on the banking, financial and insurance sectors, in the
following countries: Argentina, Colombia, Peru, Uruguay and Venezuela. It has a representative office in Sao Paulo (Brazil).
The Group owns more than 50% of most of the entities based in these countries. Appendix I shows a list of the entities which,
although less than 50% owned by the BBVA Group as of December 31, 2019, are consolidated (see Note 2.1).
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The United States
The Group’s activity in the United States is mainly carried out through a group of entities with BBVA USA Bancshares, Inc. at
their head, as well as through the New York BBVA, S.A. branch and a representative office in Silicon Valley (California).
Turkey
The Group’s activity in Turkey is mainly carried out through the Garanti BBVA Group.
Rest of Europe
The Group’s activity in Europe is carried out through banks and financial institutions in Switzerland, Italy, Germany, Netherlands,
Finland and Romania, branches in Germany, Belgium, France, Italy, Portugal and the United Kingdom, and a representative
office in Moscow.
Asia-Pacific
The Group’s activity in this region is carried out through the Bank branches (in Taipei, Tokyo, Hong Kong, Singapore and
Shanghai) and representative offices (in Beijing, Seoul, Mumbai, Abu Dhabi and Jakarta).
Significant transactions in the Group in 2019
Divestitures
Sale of BBVA’s stake in BBVA Paraguay
On August 7, 2019, BBVA reached an agreement with Banco GNB Paraguay, S.A., an affiliate of Grupo Financiero Gilinski, for the sale of
its wholly-owned subsidiary Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (“BBVA Paraguay”).
The consideration for the acquisition of BBVA Paraguay’s shares amounts to approximately $270 million. The above mentioned
consideration is subject to regular adjustments for these kind of transactions between the signing and closing dates of the transaction. It
is expected that the transaction would result in a capital gain, net of taxes, calculated as of the date of this Annual Report, of approximately
€40 million and in a positive impact on the BBVA Group’s Common Equity Tier 1 (fully loaded) of approximately 6 basis points. The closing
of the transaction is expected during the first quarter of 2020 after obtaining regulatory authorizations from the competent authorities.
Significant transactions in the Group in 2018
Divestitures
Sale of BBVA’s stake in BBVA Chile
On November 28, 2017, BBVA received a binding offer (the “Offer”) from The Bank of Nova Scotia group (“Scotiabank”) for the acquisition
of BBVA’s stake in Banco Bilbao Vizcaya Argentaria Chile, S.A. (“BBVA Chile”) as well as in other companies of the Group in Chile with
operations that are complementary to the banking business (amongst them, BBVA Seguros Vida, S.A.). BBVA owned approximately,
directly and indirectly, 68.19% of BBVA Chile share capital. On December 5, 2017, BBVA accepted the Offer and entered into a sale and
purchase agreement and the sale was completed on July, 6, 2018.
The consideration received in cash by BBVA as consequence of the referred sale amounted to, approximately, USD 2,200 million. The
transaction resulted in a capital gain, net of taxes, of €633 million, which was recognized in 2018.
Agreement for the creation of a joint-venture and transfer of the real estate business in Spain
On November 29, 2017, BBVA reached an agreement with a subsidiary of Cerberus Capital Management, L.P. (“Cerberus”) for the
creation of a “joint venture” to which an important part of the real estate business of BBVA in Spain is transferred (the “Business”).
The Business comprises: (i) foreclosed real estate assets (the “REOs”), with a gross book value of approximately €13,000 million, taking
as starting point the position of the REOs as of June 26, 2017; and (ii) the necessary assets and employees to manage the Business in an
autonomous manner. For the purpose of the agreement with Cerberus, the whole Business was valued at approximately €5,000 million.
On October 10, 2018, after obtaining all required authorizations, BBVA completed the transfer of the real estate business in Spain. Closing
of the transaction has resulted in the sale of 80% of the share capital of the company Divarian Propiedad, S.A. to an entity managed by
Cerberus.
Divarian is the company to which the BBVA Group has contributed the Business provided that the effective transfer of several real estate
assets (REOs) remains subject to the fulfilment of certain conditions precedent. The final price payable by Cerberus will be adjusted
depending on the volume of REOs effectively contributed.
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The transaction did not have a significant impact on BBVA Group’s attributable profit of 2018 or the Common Equity Tier 1 (fully loaded)
as of December 31, 2018.
Significant transactions in the Group in 2017
Investments
On February 21, 2017, BBVA Group entered into an agreement for the acquisition from Dogus Holding A.S. and Dogus Arastirma
Gelistirme ve Musavirlik Hizmetleri A.S of 41,790,000,000 shares of Turkiye Garanti Bankasi, A.S. (“Garanti”), amounting to 9.95% of the
total issued share capital of Garanti Bank. On March 22, 2017, the sale and purchase agreement was completed, and therefore BBVA´s
total stake in Garanti as of December 31, 2017 amounts to 49.85% (See Note 31).
4.
Shareholder remuneration system
As announced on February 1, 2017, BBVA’s Board of Directors, at its meeting held on March, 29, 2017, executed a capital increase to be
charged to voluntary reserves for the instrumentation of the last “Dividend Option”, being the subsequent shareholders’ remunerations
fully in cash.
This fully in-cash shareholders’ remuneration policy would be composed of a distribution on account of the dividend of such year
(expected to be paid in October) and a final dividend (which would be paid once the year has ended and the profit allocation has been
approved, expected for April), subject to the applicable authorizations by the competent governing bodies.
Shareholder remuneration scheme “Dividend Option”
Until 2017, the Group implemented a shareholder remuneration system referred to as “Dividend Option”.
Under such remuneration scheme, BBVA offered its shareholders the possibility to receive all or part of their remuneration in the form of
newly-issued BBVA ordinary shares, whilst maintaining the possibility for BBVA shareholders to receive their entire remuneration in cash
by selling the rights of free allocation assigned either to BBVA (in execution of the commitment assumed by BBVA to acquire the rights of
free allocation at a guaranteed fixed price) or by selling the rights of free allocation on the market at the prevailing market price at that
time. However, the execution of the commitment assumed by BBVA was only available to whoever had been originally assigned such
rights of free allocation and only in connection with the rights of free allocation initially allocated at such time.
On March 29, 2017, BBVA’s Board of Directors resolved to execute the capital increase to be charged to voluntary reserves approved by
the Annual General Meeting (“AGM”) held on March 17, 2017, under agenda item three, to implement a “Dividend Option” in that year. As
a result of this increase, the Bank’s share capital increased by €49,622,955.62 through the issuance of 101,271,338 newly-issued BBVA
ordinary shares at 0.49 euros par value, given that 83.28% of owners of the rights of free allocation opted to receive newly issued BBVA
ordinary shares. The remaining 16.72% of the owners of the rights of free allocation exercised the commitment assumed by BBVA, and
as a result, BBVA acquired 1,097,962,903 rights (at a gross price of €0.131 each) for a total amount of €143,833,140.29. This amount is
recorded in “Total equity- Interim dividends” of the consolidated balance sheet as of December 31, 2017.
Cash Dividends
Throughout 2017, 2018 and 2019, BBVA’s Board of Directors approved the payment of the following dividends (interim or final dividends)
fully in cash, recorded in “Total Equity- Interim Dividends” and “Total Equity – Retained earnings” of the consolidated balance sheet of the
relevant year:
The Board of Directors, at its meeting held on September 27, 2017, approved the payment in cash of €0.09 (€0.0729 net of
withholding tax) per BBVA share as the first gross interim dividend against 2017 results. The total amount paid to shareholders
on October 10, 2017, after deducting treasury shares held by the Group's companies, amounted to €599 million and is
recognized under the headings “Total equity- Interim dividends” of the consolidated balance sheet as of December 31, 2017.
The Annual General Meeting of BBVA held on March 16, 2018 approved, under item 1 of the Agenda, the payment of a final
dividend for 2017, in addition to other dividends previously paid, in cash for an amount equal to €0.15 (€0.1215 net of withholding
tax) per BBVA share. The total amount paid to shareholders on April 10, 2018, after deducting treasury shares held by the
Group’s companies, amounted €996 million and is recognized under heading “Total equity- Retained earnings” of the
consolidated balance sheet as of December 31, 2018.
The Board of Directors, at its meeting held on September 26, 2018, approved the payment in cash of €0.10 (€0.081 net of
withholding tax) per BBVA share, as gross interim dividend against 2018 results. The total amount paid to shareholders on
October 10, 2018, after deducting treasury shares held by the Group's companies, amounted to €663 million and is recognized
under the heading “Total equity- Interim dividends” of the consolidated balance sheet as of December 31, 2018.
The Annual General Meeting of BBVA held on March 15, 2019, approved, under item 1 of the Agenda, the payment of a final
dividend for 2018, in addition to other dividends previously paid, in cash for an amount equal to €0.16 (€0.1296 withholding tax)
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per BBVA share. The total amount paid to shareholders on April 10, 2019, after deducting treasury shares held by the Group’s
Companies, amounted to €1,064 million and is recognized under the heading “Total equity- Retained earnings” of the
consolidated balance sheet as of December 31, 2019.
The Board of Directors, at its meeting held on October 2, 2019, approved the payment in cash of €0.10 (€0.081 net of
withholding tax rate of 19%) per BBVA share, as gross interim dividend based on 2019 results. The total amount paid to
shareholders on October 15, 2019, after deducting treasury shares held by the Group´s companies, amounted to €665 million
and is recognized under the heading “Total equity- Interim dividends” of the consolidated balance sheet as of December 31,
2019.
The provisional accounting statements prepared in accordance with legal requirements evidencing the existence of sufficient liquidity for
the distribution of the amounts agreed on October 2, 2019, mentioned above are as follows:
Available amount for Interim dividend payments (Millions of Euros)
0
August, 31, 2019
Profit of BBVA, S.A., after the provision for income tax
Additional Tier I capital instruments remuneration
Maximum amount distributable
Amount of proposed interim dividend
BBVA cash balance available to the date
Proposal on allocation of earnings for 2019
1,137
276
861
667
6,691
The allocation of earnings for 2019 subject to the approval of the Board of Directors at the Annual Shareholders Meeting is presented
below:
Allocation of earnings (Millions of Euros)
Profit for year (*)
Distribution
Interim dividends
Final dividend
Additional Tier 1 securities
Voluntary reserves
(*)
Net Income of BBVA, S.A. (see Appendix IX).
December 2019
2,241
667
1,067
419
88
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5.
Earnings per share
Basic and diluted earnings per share are calculated in accordance with the criteria established by IAS 33. For more information see
Glossary of terms.
The calculation of earnings per share is as follows:
Basic and Diluted Earnings per Share
Numerator for basic and diluted earnings per share (millions of euros)
Profit attributable to parent company
Adjustment: Additional Tier 1 securities (1)
Profit adjusted (millions of euros) (A)
Of which: profit from discontinued operations (net of non-controlling interest) (B)
Denominator for basic earnings per share (number of shares outstanding)
Weighted average number of shares outstanding (2)
Weighted average number of shares outstanding x corrective factor (3)
Adjusted number of shares - Basic earnings per share (C)
Adjusted number of shares - diluted earnings per share (D)
Earnings per share (*)
Basic earnings per share from continued operations (Euros per share)A-B/C
Diluted earnings per share from continued operations (Euros per share)A-B/D
Basic earnings per share from discontinued operations (Euros per share)B/C
Diluted earnings per share from discontinued operations (Euros per share)B/D
2019
2018 (4)
2017 (4)
3,512
(419)
3,093
-
6,668
6,668
6,648
6,648
0.47
0.47
0.47
-
-
5,400
(447)
4,953
-
6,668
6,668
6,636
6,636
0.75
0.75
0.75
-
-
3,514
(430)
3,084
-
6,642
6,642
6,642
6,642
0.46
0.46
0.46
-
-
(1)
(2)
(3)
Remuneration in the year related to contingent convertible securities, recognized in equity (see Note 22.4).
Weighted average number of shares outstanding (millions of euros), excluding weighted average of treasury shares during the year.
Corrective factor, due to the capital increase with pre-emptive subscription right, applied for the previous years.
(4) The figures corresponding to 2018 and 2017 have been restated (see Note 1.3)
(*) In 2019 the weighted average number of shares outstanding was 6,668 million (6,668 million and 6,642 million in 2018 and 2017, respectively) and the
adjustment of additional Tier 1 securities amounted to €419 million (€447 and €430 million in 2018 and 2017, respectively).
As of December 31, 2019, 2018 and 2017, there were no other financial instruments or share option commitments to employees that could
potentially affect the calculation of the diluted earnings per share for the years presented. For this reason, basic and diluted earnings per
share are the same.
6. Operating segment reporting
Operating segment reporting represents a basic tool in the oversight and management of the BBVA Group’s various activities. The BBVA
Group compiles reporting information on disaggregated business activities. These business activities are then aggregated in accordance
with the organizational structure determined by the BBVA Group and, ultimately, into the reportable operating segments themselves.
During 2019, the reporting structure of the BBVA Group’s business areas differs from the one presented at the end of the year 2018, as a
result of the integration of the Non-Core Real Estate business area into Banking Activity in Spain, which has been renamed “Spain”.
Additionally, balance sheet intra-group adjustments between Corporate Center and the operating segments have been reallocated to the
corresponding operating segments. In addition, certain expenses related to global projects and activities have been reallocated between
the Corporate Center and the corresponding operating segments. In order to make the 2019 information comparable as required by IFRS
8 “Information by business segments”, figures as of December 31, 2018 and 2017 have been restated in conformity with the new segment
reporting structure. The BBVA Group's operating segments are summarized below:
Spain
Includes mainly the banking and insurance business that the Group carries out in Spain.
The United States
Includes the financial business activity of BBVA USA in the country and the activity of the branch of BBVA, S.A., in New York.
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Mexico
Includes banking and insurance businesses in this country as well as the activity of its branch in Houston.
Turkey
Reports the activity of Garanti BBVA group that is mainly carried out in this country and, to a lesser extent, in Romania and the
Netherlands.
South America
Primarily includes the Group´s banking and insurance businesses in the region. In relation to the sale of BBVA Paraguay, the
closing is expected to take place during the first quarter of 2020 (see Note 3).
Rest of Eurasia
Includes the banking business activity carried out by the Group in Europe and Asia, excluding Spain.
Lastly, Corporate Center performs centralized Group functions, including: the costs of the head offices with a corporate function;
management of structural exchange rate positions; some equity instruments issuances to ensure an adequate management of the
Group's global solvency. It also includes portfolios whose management is not linked to customer relationships, such as industrial holdings,
certain tax assets and liabilities; funds due to commitments to employees; goodwill and other intangible assets.
The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2019, 2018 and 2017, is as follows:
Total assets by operating segments (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Subtotal assets by Operating Segments
Corporate Center and adjustments
Total assets BBVA Group
(1)
The figures corresponding to 2018 and 2017 have been restated (see Note 1.3).
2019
365,374
88,529
109,079
64,416
54,996
23,248
2018 (1)
354,901
82,057
97,432
66,250
54,373
18,834
2017 (1)
350,520
75,775
90,214
78,789
75,320
17,265
705,641
673,848
687,884
(6,951)
2,841
2,175
698,690
676,689
690,059
The following table sets forth certain summarized information relating to the income of each operating segment and Corporate Center
for the years ended December 31, 2019, 2018 and 2017 and reconciles the income statement of the various operating segments to the
consolidated income statement of the Group:
BBVA Group
Spain
The United
States
Mexico
Turkey
South
America
Rest of
Eurasia
Corporate
Center
Notes
55.2
55.2
2019
Net interest income
Gross income
Operating profit /(loss) before tax
Profit
2018 (1)
Net interest income
Gross income
Operating profit /(loss) before tax
Profit
2017 (1)
Net interest income
Gross income
Operating profit /(loss) before tax
Profit
18,202
24,542
6,398
3,512
17,591
23,747
8,446
5,400
17,758
25,270
6,931
3,514
3,645
5,734
1,878
1,386
3,698
5,968
1,840
1,400
3,810
6,162
1,189
877
2,395
3,223
705
590
2,276
2,989
920
736
2,119
2,876
749
486
6,209
8,029
3,691
2,699
5,568
7,193
3,269
2,367
5,476
7,122
2,960
2,170
2,814
3,590
1,341
506
3,135
3,901
1,444
567
3,331
4,115
2,143
823
3,196
3,850
1,396
721
3,009
3,701
1,288
578
3,200
4,451
1,671
847
175
454
163
127
175
414
148
96
180
468
181
128
(233)
(339)
(2,775)
(2,517)
(269)
(420)
(463)
(343)
(357)
74
(1,962)
(1,817)
(1) The figures corresponding to 2018 and 2017 have been restated (see Note 1.3).
The accompanying Consolidated Management Report presents the consolidated income statements and the balance sheets by operating
segments.
P.45
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
7 Risk management
7.1 Credit risk
Credit risk arises from the probability that one party to a financial instrument will fail to meet its contractual obligations for reasons of
insolvency or inability to pay and cause a financial loss for the other party.
The general principles governing credit risk management in the BBVA Group are:
Risks taken should comply with the general risk policy established by the Board of Directors of BBVA.
Risks taken should be in line with the level of equity and generation of recurring revenue of the BBVA Group prioritizing risk
diversification and avoiding relevant concentrations.
Risks taken should be identified, measured and assessed and there should be management and monitoring procedures, in
addition to sound mitigation and control mechanisms.
Risks should be managed in a prudent and integrated manner during their life cycle and their treatment should be based on the
type of risk. In addition, portfolios should be actively managed on the basis of a common metric (economic capital).
The main criterion when granting credit risks is the capability of the borrower or obligor to fulfill on a timely basis all financial
obligations with its business income or source of income without depending upon guarantors, bondsmen or pledged assets.
Credit risk management in the Group has an integrated structure for all its functions, allowing decisions to be taken objectively and
independently throughout the life cycle of the risk.
At Group level: frameworks for action and standard rules of conduct are defined for handling risk, specifically, the channels,
procedures, structure and supervision.
At the business area level: they are responsible for adapting the Group's criteria to the local realities of each geographical area
and for direct management of risk according to the decision-making channel:
o
o
Retail risks: in general, the decisions are formalized according to the scoring tools, within the general framework for
action of each business area, with regard to risks. The changes in weighting and variables of these tools must be
validated by the GRM area.
Wholesale risks: in general, the decisions are formalized by each business area within its general framework for action
with regard to risks, which incorporates the delegation rule and the Group's corporate policies.
The risk function has a decision-making process supported by a structure of committees with a solid governance scheme, which describes
their purposes and functioning for a proper performance of their tasks.
7.1.1 Measurement Expected Credit Loss (ECL)
IFRS 9 requires determining the expected credit loss of a financial instrument in a way that reflects an unbiased estimation removing any
conservatism or optimism, the time value of money and a forward looking perspective (including the economic forecast).
Therefore the recognition and measurement of expected credit losses (ECL) is highly complex and involves the use of significant analysis
and estimation including formulation and incorporation of forward-looking economic conditions into ECL.
Risk Parameters Adjusted by Macroeconomic Scenarios
Expected Credit Loss must include forward looking information, in accordance with IFRS 9, which states that the comprehensive credit
risk information must incorporate not only historical information but also all relevant credit information, including forward-looking
macroeconomic information. BBVA uses the classical credit risk parameters PD, LGD and EAD in order to calculate the ECL for the credit
portfolios.
BBVA´s methodological approach in order to incorporate the forward looking information aims to determine the relation between
macroeconomic variables and risk parameters following three main steps:
Step 1: Analysis and transformation of time series data.
Step 2: For each dependent variable find conditional forecasting models that are economically consistent.
Step 3: Select the best conditional forecasting model from the set of candidates defined in Step 2, based on their forecasting
capacity.
P.46
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
How economic scenarios are reflected in calculation of ECL
The forward looking component is added to the calculation of the ECL through the introduction of macroeconomic scenarios as an input.
Inputs highly depend on the particular combination of region and portfolio, so inputs are adapted to available data regarding each of them.
Based on economic theory and analysis, the main indicators most directly relevant for explaining and forecasting the selected risk
parameters (PD, LGD and EAD) are:
The net income of families, corporates or public administrations.
The outstanding payment amounts on the principal and interest on the financial instruments.
The value of the collateral assets pledge to the loan.
BBVA Group approximates these variables by using a proxy indicator from the set included in the macroeconomic scenarios provided by
the economic research department.
Only a single specific indicator for each of the three categories can be used and only one of the following core macroeconomic indicators
should be chosen as first option:
The real GDP growth for the purpose of conditional forecasting can be seen as the only “factor” required for capturing the
influence of all potentially relevant macro-financial scenarios on internal PDs and LGD.
The most representative short term interest rate (typically the policy rate or the most liquid sovereign yield or interbank rate)
or exchange rates expressed in real terms.
A comprehensive and representative index of the price of real estate properties expressed in real terms in the case of mortgage
loans and a representative and real term index of the price of the relevant commodity for corporate loan portfolios concentrated
in exporters or producer of such commodity.
Real GDP growth is given priority over any other indicator not only because it is the most comprehensive indicator of income and economic
activity but also because it is the central variable in the generation of macroeconomic scenarios.
Multiple scenario approach under IFRS 9
IFRS 9 requires calculating an unbiased probability weighted measurement of expected credit losses (“ECL”) by evaluating a range of
possible outcomes, including forecasts of future economic conditions.
The BBVA Research teams within the BBVA Group produce forecasts of the macroeconomic variables under the baseline scenario, which
are used in the rest of the related processes of the Bank, such as budgeting, ICAAP and risk appetite framework, stress testing, etc.
Additionally, the BBVA Research teams produced alternative scenarios to the baseline scenario so as to meet the requirements under the
IFRS 9 standard.
Alternative macroeconomic scenarios
For each of the macro-financial variables, BBVA Research produces three scenarios.
BBVA Research tracks, analyzes and forecasts the economic environment to provide a consistent forward looking assessment
about the most likely scenario and risks that impact BBVA’s footprint. To build economic scenarios, BBVA Research combines
official data, econometric techniques and expert knowledge.
Each of these scenarios corresponds to the expected value of a different area of the probabilistic distribution of the possible
projections of the economic variables.
The non-linearity overlay is defined as the ratio between the probability-weighted ECL under the alternative scenarios and the
baseline scenario, where the scenario’s probability depends on the distance of the alternative scenarios from the base one.
BBVA Group establishes equally weighted scenarios, being the probability 34% for the baseline scenario, 33% for the worst
alternative scenario and 33% for the best alternative scenario.
BBVA Group considers three prospective macroeconomic scenarios which are updated periodically (currently every three months).
BBVA Research projects a maximum of five years for the macroeconomic variables. The estimation for the next five years of the GDP used
in the estimation of the measurement of expected credit loss as of December 31, 2019 is as follows:
P.47
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
GDP for the main geographies:
GDP for the main geographies
Spain
Mexico
Turkey
The United States
Date
2019
2020
2021
2022
2023
GDP negative
scenario
GDP base
scenario
0.96%
1.35%
2.01%
1.85%
1.81%
1.54%
1.87%
2.10%
1.89%
1.85%
GDP
positive
scenario
2.15%
2.42%
2.19%
1.88%
1.85%
GDP negative
scenario
GDP base
scenario
-0.58%
0.93%
2.05%
2.07%
2.11%
0.23%
1.66%
2.14%
2.14%
2.15%
GDP
positive
scenario
1.06%
2.39%
2.23%
2.19%
2.17%
GDP negative
scenario
GDP base
scenario
-0.60%
-0.68%
4.60%
4.28%
4.31%
3.32%
2.48%
4.74%
4.38%
4.38%
GDP
positive
scenario
7.06%
5.27%
4.91%
4.47%
4.50%
GDP negative
scenario
GDP base
scenario
1.16%
1.00%
1.84%
1.83%
1.88%
2.12%
1.81%
1.92%
1.86%
1.91%
GDP
positive
scenario
3.13%
2.62%
2.03%
1.91%
1.94%
Peru
Argentina
Colombia
GDP negative
scenario
GDP base
scenario
GDP positive
scenario
GDP negative
scenario
GDP base
scenario
GDP positive
scenario
GDP negative
scenario
GDP base
scenario
GDP positive
scenario
0.34%
0.32%
3.07%
3.39%
3.86%
2.92%
2.46%
3.28%
3.39%
3.86%
5.43%
4.56%
3.49%
3.39%
3.86%
-7.41%
-6.62%
2.08%
1.64%
1.95%
-2.47%
-2.57%
2.30%
1.78%
2.10%
2.40%
0.85%
2.51%
1.88%
2.23%
1.93%
1.71%
3.61%
3.59%
3.59%
3.29%
2.73%
3.61%
3.59%
3.59%
4.58%
3.74%
3.61%
3.59%
3.59%
Date
2019
2020
2021
2022
2023
The approach in BBVA consists on using the scenario that is the most likely scenario, which is the baseline scenario, consistent with the
rest of internal processes (ICAAP, Budgeting…) and then applying an overlay adjustment that is calculated by taking into account the
weighted average of the ECL determined by each of the scenarios.
It is important to note that in general, it is expected that the effect of the overlay is to increase the ECL. It is possible to obtain an overlay
that does not have that effect, whenever the relationship between macro scenarios and losses is linear. However, the overlay is not
expected to reduce the ECL.
7.1.2 Credit risk exposure
In accordance with IFRS 7 “Financial instruments: Disclosures”, the BBVA Group’s credit risk exposure by headings in the balance sheets
as of December 31, 2019 and 2018 is provided below. It does not consider the loss allowances and the availability of collateral or other
credit enhancements to guarantee compliance with payment obligations. The details are broken down by financial instruments and
counterparties:
Maximum credit risk exposure (Millions of Euros)
Financial assets held for trading
Debt securities
Equity instruments
Loans and advances
Non-trading financial assets mandatorily at fair value through
profit or loss
Loans and advances
Debt securities
Equity instruments
Financial assets designated at fair value through profit or loss
Derivatives (trading and hedging)
Financial assets at fair value through other comprehensive income
Debt securities
Equity instruments
Loans and advances to credit institutions
Financial assets at amortized cost
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
Debt securities
Total financial assets risk
Total loan commitments and financial guarantees
33
Total maximum credit exposure
Notes
December
2019
Stage 1
Stage 2
Stage 3
10
10
10
11
11
11
12
13
13
13
69,503
26,309
8,892
34,303
5,557
1,120
110
4,327
1,214
39,462
61,293
58,841
2,420
33
58,590
33
250
-
-
-
451,640
402,024
33,624
15,993
4,285
13,664
394,763
38,930
628,670
181,116
809,786
4,285
13,500
345,449
38,790
-
158
33,360
106
-
6
15,954
33
169,663
10,452
1,001
P.48
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Maximum credit risk exposure (Millions of Euros)
Notes December 2018
Stage 1
Stage 2
Stage 3
Financial assets held for trading
Debt securities
Equity instruments
Loans and advances
Non-trading financial assets mandatorily at fair value through
profit or loss
Loans and advances
Debt securities
Equity instruments
10
10
10
11
11
11
Financial assets designated at fair value through profit or loss
12
Derivatives (trading and hedging)
Financial assets at fair value through other comprehensive income
Debt securities
Equity instruments
Loans and advances to credit institutions
Financial assets at amortized cost
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
Debt securities
Total financial assets risk
13
13
13
Total loan commitments and financial guarantees
33
Total maximum credit exposure
59,581
25,577
5,254
28,750
5,135
1,803
237
3,095
1,313
38,249
56,365
53,737
2,595
33
53,734
33
3
-
-
-
431,927
384,632
30,902
16,394
3,947
9,175
386,225
32,580
592,571
170,511
763,082
3,947
9,131
339,204
32,350
-
34
30,673
195
-
10
16,348
35
161,404
8,120
987
The maximum credit exposure presented in the table above is determined by type of financial asset as explained below:
In the case of financial instruments recognized in the consolidated balance sheets, exposure to credit risk is considered equal
to its carrying amount (not including loss allowances) with the only exception of trading and hedging derivatives.
The maximum credit risk exposure on financial commitments and guarantees granted is the maximum that the Group would be
liable for if these guarantees were called in, or the higher amount pending to be disposed from the customer in the case of
commitments.
The calculation of risk exposure for derivatives is based on the sum of two factors: the derivatives fair value and their potential
risk (or "add-on").
The breakdown by geographical location and Stage of the maximum credit risk exposure, the accumulated allowances recorded and
the carrying amount of the loans and advances to customers as of December 31, 2019 and 2018 is shown below:
December 2019
Gross exposure
Accumulated allowances
Carrying amount
Total
Stage 1
Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2
Stage 3
Spain (*)
197,058
173,843
14,599
8,616
(5,311)
(712)
(661)
(3,939)
191,747
173,131
13,939
4,677
The United States
57,387
49,744
7,011
632
(688)
(165)
(342)
(182)
56,699
49,580
6,670
Mexico
60,099
54,748
3,873
1,478
(2,013)
(697)
(404)
54,052
3,469
43,113
34,536
5,127
3,451
(2,613)
(189)
(450)
34,347
4,677
1,477
(912)
58,087
(1,974) 40,500
36,265
31,754
2,742
1,769
(1,769)
(366)
(323)
(1,079)
Others
839
824
7
9
(8)
(1)
(1)
(6)
34,497
31,388
2,419
832
823
6
394,763 345,449
33,360
15,954 (12,402)
(2,129)
(2,181)
(8,093) 382,360 343,320
31,179
450
566
690
2
7,861
Spain includes all countries where BBVA, S.A. operates.
Turkey includes all countries in which Garanti BBVA operates.
In South America, BBVA Group operates in Argentina, Colombia, Peru, Uruguay and Venezuela.
The amount of the accumulated impairment includes the provisions recorded for credit risk over the remaining expected lifetime of purchased financial instruments. Those
provisions were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc S.A. (as of December 31, 2019,
the remained balance was €433 million). These valuation adjustments are recognized in the income statement during the residual life of the operations or are applied to the
value corrections when the losses materialize.
Turkey (**)
South America
(***)
Total (****)
(*)
(**)
(***)
(****)
Turkey (**)
South America
(***)
P.49
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2018
Gross exposure
Accumulated allowances
Carrying amount
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Spain (*)
195,447
172,599
12,827
10,021
(5,874)
(713)
(877)
(4,284)
189,574
171,886
11,951
5,737
The United States
57,321
50,665
5,923
733
(658)
(206)
(299)
(153)
56,663
50,459
5,624
Mexico
52,858
48,354
3,366
1,138
(1,750)
(640)
(373)
(737)
51,107
47,714
2,992
580
401
43,718
34,883
6,113
2,722
(2,241)
(171)
(591)
(1,479)
41,479
34,712
5,523
1,244
36,098
31,947
2,436
1,715
(1,656)
(338)
(234)
(1,084)
Others
783
756
8
19
(19)
-
(1)
(18)
34,442
31,609
2,202
763
755
7
631
1
Total (****)
386,225 339,204
30,673
16,348
(12,199)
(2,070)
(2,374)
(7,755) 374,027 337,134
28,299
8,593
(*)
(**)
(***)
(****)
Spain includes all countries where BBVA, S.A. operates.
Turkey includes all countries in which Garanti BBVA operates.
In South America, BBVA Group operates in Argentina, Chile, Colombia, Peru, Uruguay and Venezuela.
The amount of the accumulated impairment includes the provisions recorded for credit risk over the remaining expected lifetime of purchased financial instruments. Those
provisions were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc S.A. (as of December 31, 2018
the remained balance was €540 million). These valuation adjustments are recognized in the income statement during the residual life of the operations or are applied to the
value corrections when the losses materialize.
The breakdown by counterparty of the maximum credit risk exposure, the accumulated allowances recorded, as well as the carrying
is shown below:
amount by stages of
to customers as of December 31, 2019 and 2018
loans and advances
December 2019 (Millions of Euros)
Gross exposure
Accumulated allowances
Net amount
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Public administrations
28,281
27,511
Other financial corporations
11,239
11,085
682
136
88
17
(59)
(31)
(15)
(19)
(22)
(2)
(21)
28,222
27,496
(10)
11,207
11,066
660
134
66
8
Non-financial corporations
173,254 148,768
16,018
8,468
(6,465)
(811)
(904)
(4,750) 166,789
147,957
15,114
3,718
Individuals
181,989 158,085
16,523
7,381
(5,847)
(1,283)
(1,252)
(3,312)
176,142
156,801
15,272
4,069
Loans and advances to
customers
394,763 345,449 33,360
15,954
(12,402)
(2,129)
(2,181)
(8,093) 382,360 343,320
31,179
7,861
December 2018 (Millions of Euros)
Gross exposure
Accumulated allowances
Net amount
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Total
Stage 1 Stage 2 Stage 3
Public administrations
28,632
27,740
Other financial corporations
9,490
9,189
764
291
128
11
(84)
(22)
(21)
(13)
(25)
(38)
28,549
27,719
(4)
(4)
9,468
9,176
739
286
91
6
Non-financial corporations
169,764
145,875
15,516
8,372
(6,260)
(730)
(1,190)
(4,341)
163,503
145,145
14,327
4,031
Individuals
178,339
156,400
14,102
7,838
(5,833)
(1,305)
(1,155)
(3,372)
172,506
155,094
12,946
4,466
Loans and advances to
customers
386,225 339,204 30,673
16,348
(12,199)
(2,070)
(2,374)
(7,755) 374,027 337,134 28,299
8,593
P.50
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The breakdown by counterparty and product of loans and advances, net of loss allowances, as well as the gross carrying amount by type
of product, classified in different headings of the assets, as of December 31, 2019, 2018 and 2017 is shown below:
December 2019 (Millions of Euros)
By product
On demand and short notice
Credit card debt
Commercial debtors
Finance leases
Reverse repurchase loans
Other term loans
Advances that are not loans
LOANS AND ADVANCES
By secured loans
Of which: mortgage loans
collateralized by immovable property
Of which: other collateralized loans
By purpose of the loan
Of which: credit for consumption
Of which: lending for house purchase
By subordination
Of which: project finance loans
December 2018 (Millions of Euros)
By product
On demand and short notice
Credit card debt
Commercial debtors
Finance leases
Reverse repurchase loans
Other term loans
Advances that are not loans
LOANS AND ADVANCES
By secured loans
Of which: mortgage loans
collateralized by immovable property
Of which: other collateralized loans
By purpose of the loan
Of which: credit for consumption
Of which: lending for house purchase
By subordination
Of which: project finance loans
Central
banks
General
governments
Credit
institutions
Other
financial
corporations
Non-
financial
corporations
Households
Total
Gross
carrying
amount
-
-
-
-
9
10
971
227
-
4,240
35
4,275
26,734
865
28,816
-
1
-
-
1,817
4,121
7,743
13,682
118
3
230
6
-
2,328
1,940
15,976
8,091
26
595
3,050
3,251
14,401
16,355
17,608
99
387
-
17,276
17,617
8,711
9,095
1,843
1,848
7,795
137,934
160,223
341,047 351,230
3,056
11,208
951
506
13,156
13,214
167,246
176,211
401,438 413,863
1,067
10,447
-
15
93
261
23,575
111,085
136,003
139,317
2,106
29,009
6,893
48,548 49,266
46,356
46,356 49,474
110,178
110,178
111,636
12,259
12,259
12,415
Central
banks
General
governments
Credit
institutions
Other
financial
corporations
Non-
financial
corporations
Households
Total
Gross
carrying
amount
-
-
-
-
3,911
29
3,941
10
8
948
226
293
26,839
1,592
29,917
-
1
-
-
477
2,947
5,771
9,196
151
2
195
3
-
7,030
2,088
9,468
2,833
2,328
16,190
8,014
-
133,573
984
163,922
648
13,108
103
406
-
157,760
498
172,522
3,641
3,834
15,446
16,495
17,436
17,716
8,650
9,077
770
772
332,060 342,264
10,962
11,025
388,966 401,183
1,056
7,179
-
15
285
219
1,389
26,784
31,393
111,809
139,883 144,005
6,835
47,081
47,855
40,124
40,124
42,736
111,007
111,007
112,952
13,973
13,973
14,286
P.51
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2017 (Millions of Euros)
On demand and short notice
Credit card debt
Trade receivables
Finance leases
Reverse repurchase loans
Other term loans
Advances that are not loans
LOANS AND ADVANCES
Of which: mortgage loans (Loans
collateralized by immovable property)
Of which: other collateralized loans
Of which: credit for consumption
Of which: lending for house purchase
Of which: project finance loans
Central
banks
General
governments
Credit
institutions
Other
financial
corporations
Non-financial
corporations
Households
Total
-
-
-
305
6,993
2
7,301
222
6
1,624
205
1,290
26,983
1,964
32,294
998
7,167
-
-
-
-
13,793
4,463
8,005
26,261
270
3
497
36
10,912
5,763
1,044
18,525
7,663
1,862
20,385
8,040
-
125,228
1,459
164,637
2,405
13,964
198
361
-
155,418
522
172,868
10,560
15,835
22,705
8,642
26,300
324,848
12,995
421,886
-
308
37,353
116,938
155,597
13,501
12,907
24,100
16,412
9,092
40,705
114,709
66,767
40,705
114,709
16,412
7.1.3 Mitigation of credit risk, collateralized credit risk and other credit enhancements
In most cases, maximum credit risk exposure is reduced by collateral, credit enhancements and other actions which mitigate the Group’s
exposure. The BBVA Group applies a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship
banking. The existence of guarantees could be a necessary but not sufficient instrument for accepting risks, as the assumption of risks by
the Group requires prior evaluation of the debtor’s capacity for repayment, or that the debtor can generate sufficient resources to allow
the amortization of the risk incurred under the agreed terms.
The policy of accepting risks is therefore organized into three different levels in the BBVA Group:
Analysis of the financial risk of the transaction, based on the debtor’s capacity for repayment or generation of funds.
The constitution of guarantees that are adequate, or at any rate generally accepted, for the risk assumed, in any of the generally
accepted forms: monetary, secured, personal or hedge guarantees; and finally
Assessment of the repayment risk (asset liquidity) of the guarantees received.
This is carried out through a prudent risk policy that consists of the analysis of the financial risk, based on the capacity for reimbursement
or generation of resources of the borrower, the analysis of the guarantee, assessing, among others, the efficiency, the robustness and the
risk, the adequacy of the guarantee with the operation and other aspects such as the location, currency, concentration or the existence
of limitations. Additionally, the necessary tasks for the constitution of guarantees must be carried out - in any of the generally accepted
forms (collaterals, personal guarantees and financial hedge instruments) - appropriate to the risk assumed.
The procedures for the management and valuation of collateral are set out in the corporate policies (retail and wholesale), which establish
the basic principles for credit risk management, including the management of collaterals assigned in transactions with customers. The
criteria for the systematic, standardized and effective treatment of collateral in credit transaction procedures in BBVA Group’s wholesale
and retail banking are included in the Specific Collateral Rules.
The methods used to value the collateral are in line with the best market practices and imply the use of appraisal of real-estate collateral,
the market price in market securities, the trading price of shares in mutual funds, etc. All the collaterals received must be correctly
assigned and entered in the corresponding register. They must also have the approval of the Group’s legal units.
The following is a description of the main types of collateral for each financial instrument class:
Debt instruments held for trading: The guarantees or credit enhancements obtained directly from the issuer or counterparty
are implicit in the clauses of the instrument (mainly guarantees of the issuer).
Derivatives and hedging derivatives: In derivatives, credit risk is minimized through contractual netting agreements, where
positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other
kinds of guarantees and collaterals, depending on counterparty solvency and the nature of the transaction (mainly collaterals).
The summary of the compensation effect (via netting and collateral) for derivatives and securities operations is presented in
Note 7.2.2.
Other financial assets designated at fair value through profit or loss and financial assets at fair value through other
comprehensive income: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent
to the structure of the instrument (mainly personal guarantees).
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
As of December 31, 2019 and 2018, BBVA Group had no credit risk exposure of impaired financial assets at fair value through
other comprehensive income (see Note 7.1.2).
Financial assets at amortized cost:
•
•
•
Loans and advances to credit institutions: These usually have the counterparty’s personal guarantee or pledged securities
in the case of repos.
Loans and advances to customers: Most of these loans and advances are backed by personal guarantees extended by
the customer. There may also be collateral to secure loans and advances to customers (such as mortgages, cash
collaterals, pledged securities and other collateral), or to obtain other credit enhancements (bonds or insurances).
Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to
the structure of the instrument.
Financial guarantees, other contingent risks and drawable by third parties: these have the counterparty’s personal guarantee
or other types of collaterals.
The disclosure of impaired loans and advances at amortized cost covered by collateral (see Note 7.1.2), by type of collateral, as of
December 31, 2019 and 2018, is the following:
December 2019 (Millions of Euros)
Impaired loans and advances at amortized cost
Total
15,959
15,959
3,396
3,396
939
939
35
35
221
221
542
542
Maximum
exposure to
credit risk
Of which secured by collateral
Residential
properties
Commercial
properties
Cash
Others
Financial
December 2018 (Millions of Euros)
Impaired loans and advances at amortized cost
Total
16,359
16,359
3,484
3,484
1,255
1,255
13
13
317
317
502
502
Maximum
exposure to
credit risk
Of which secured by collateral
Residential
properties
Commercial
properties
Cash
Others
Financial
The value of guarantees received as of December 31, 2019 and 2018, is the following:
Guarantees received (Millions of Euros)
Value of collateral
Of which: guarantees normal risks under special monitoring
Of which: guarantees non-performing risks
Value of other guarantees
Of which: guarantees normal risks under special monitoring
Of which: guarantees non-performing risks
Total value of guarantees received
2019
152,454
14,623
4,590
35,464
3,306
542
187,918
2018
158,268
14,087
5,068
16,897
1,519
502
175,165
The maximum credit risk exposure of impaired financial guarantees and other commitments at December 31, 2019 and 2018
amounts to €1,001 and €987 million, respectively (see Note 7.1.2).
7.1.4 Credit quality of financial assets that are neither past due nor impaired
The BBVA Group has tools that enable it to rank the credit quality of its transactions and customers based on an assessment and its
correspondence with the probability of default (“PD”) scales. To analyze the performance of PD, the Group has a series of tracking tools
and historical databases that collect the pertinent internally generated information. These tools can be grouped together into scoring and
rating models.
Scoring
Scoring is a decision-making model that contributes to both the arrangement and management of retail loans: consumer loans,
mortgages, credit cards for individuals, etc. Scoring is the tool used to decide to originate a loan, what amount should be originated and
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
what strategies can help establish the price, because it is an algorithm that sorts transactions by their credit quality. This algorithm enables
the BBVA Group to assign a score to each transaction requested by a customer, on the basis of a series of objective characteristics that
have statistically been shown to discriminate between the quality and risk of this type of transactions. The advantage of scoring lies in its
simplicity and homogeneity: all that is needed is a series of objective data for each customer, and this data is analyzed automatically using
an algorithm.
There are three types of scoring, based on the information used and on its purpose:
Reactive scoring: measures the risk of a transaction requested by an individual using variables relating to the requested
transaction and to the customer’s socio-economic data available at the time of the request. The new transaction is approved or
rejected depending on the score.
Behavioral scoring: scores transactions for a given product in an outstanding risk portfolio of the entity, enabling the credit rating
to be tracked and the customer’s needs to be anticipated. It uses transaction and customer variables available internally.
Specifically, variables that refer to the behavior of both the product and the customer.
Proactive scoring: gives a score at customer level using variables related to the individual’s general behavior with the entity, and
to his/her payment behavior in all the contracted products. The purpose is to track the customer’s credit quality and it is used
to pre-approve new transactions.
Rating
Rating tools, as opposed to scoring tools, do not assess transactions but focus on the rating of customers instead: companies,
corporations, SMEs, general governments, etc. A rating tool is an instrument that, based on a detailed financial study, helps determine a
customer’s ability to meet his/her financial obligations. The final rating is usually a combination of various factors: on one hand,
quantitative factors, and on the other hand, qualitative factors. It is a middle road between an individual analysis and a statistical analysis.
The main difference between ratings and scorings is that the latter are used to assess retail products, while ratings use a wholesale banking
customer approach. Moreover, scorings only include objective variables, while ratings add qualitative information. And although both are
based on statistical studies, adding a business view, rating tools give more weight to the business criterion compared to scoring tools.
For portfolios where the number of defaults is low (sovereign risk, corporates, financial entities, etc.) the internal information is
supplemented by “benchmarking” of the external rating agencies (Moody’s, Standard & Poor’s and Fitch). To this end, each year the PDs
compiled by the rating agencies at each level of risk rating are compared, and the measurements compiled by the various agencies are
mapped against those of the BBVA master rating scale.
Once the probability of default of a transaction or customer has been calculated, a "business cycle adjustment" is carried out. This is a
means of establishing a measure of risk that goes beyond the time of its calculation. The aim is to capture representative information of
the behavior of portfolios over a complete economic cycle. This probability is linked to the Master Rating Scale prepared by the BBVA
Group to enable uniform classification of the Group’s various asset risk portfolios.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The table below shows the abridged scale used to classify the BBVA Group’s outstanding risk as of December 31, 2019:
External rating
Internal rating
Standard&Poor's List
Reduced List (22 groups)
Average
Probability of default
(basic points)
Minimum from
>=
Maximum
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC+
CC
CC-
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
CC+
CC
CC-
1
2
3
4
5
8
10
14
20
31
51
88
150
255
441
785
1,191
1,500
1,890
2,381
3,000
3,780
0
2
3
4
5
6
9
11
17
24
39
67
116
194
335
581
1,061
1,336
1,684
2,121
2,673
3,367
2
3
4
5
6
9
11
17
24
39
67
116
194
335
581
1,061
1,336
1,684
2,121
2,673
3,367
4,243
These different levels and their probability of default were calculated by using as a reference the rating scales and default rates provided
by the external agencies Standard & Poor’s and Moody’s. These calculations establish the levels of probability of default for the BBVA
Group’s Master Rating Scale. Although this scale is common to the entire Group, the calibrations (mapping scores to PD sections/Master
Rating Scale levels) are carried out at tool level for each country in which the Group has tools available.
The table below outlines the distribution by probability of default within 12 months and stages of the gross carrying amount of loans and
advances to customers in percentage terms of the BBVA Group as of December 31, 2019 and 2018:
Probability of default (basis points)
December 2019
December 2018
Subject to 12 month ECL
(Stage 1)
Subject to lifetime ECL (Stage
2)
Subject to 12 month ECL
(Stage 1)
Subject to lifetime ECL
(Stage 2)
0 to 2
2 to 5
5 to 11
11 to 39
39 to 194
194 to 1,061
1,061 to 2,121
> 2,121
Total
%
5.5
6.3
14.6
24.5
24.5
14.0
1.4
0.4
91.0
%
-
-
0.2
0.8
1.6
3.6
1.2
1.5
9.0
%
9.6
10.8
6.3
20.9
30.1
12.2
1.6
0.2
91.7
%
-
0.1
-
0.4
1.8
3.6
1.2
1.2
8.3
7.1.5
Impaired secured loan risks
The breakdown of loans and advances, within financial assets at amortized cost, non-performing and accumulated impairment, as well
as the gross carrying amount, by counterparties as of December 31, 2019, 2018 and 2017 is as follows:
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December 2019 (Millions of Euros)
Gross carrying
amount
Non-performing
loans and advances
Accumulated
impairment
Non-performing
loans and
advances as a
% of the total
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air conditioning supply
Water supply
Construction
Wholesale and retail trade
Transport and storage
Accommodation and food service activities
Information and communications
Financial and insurance activities
Real estate activities
Professional, scientific and technical activities
Administrative and support service activities
Public administration and defense; compulsory social
security
Education
Human health services and social work activities
Arts, entertainment and recreation
Other services
Households
LOANS AND ADVANCES
4,285
28,281
13,664
11,239
173,254
3,758
4,669
39,517
12,305
900
10,945
27,467
9,638
8,703
6,316
6,864
19,435
4,375
3,415
282
903
4,696
1,396
7,671
-
88
6
17
(9)
(60)
(15)
(31)
8,467
(6,465)
154
100
1,711
684
14
1,377
1,799
507
279
95
191
782
167
118
5
41
66
47
331
(124)
(86)
(1,242)
(575)
(16)
(876)
(1,448)
(392)
(203)
(65)
(140)
(527)
(140)
(134)
(6)
(38)
(55)
(39)
(360)
(5,847)
(12,427)
-
0.3%
-
0.2%
4.9%
4.1%
2.1%
4.3%
5.6%
1.6%
12.6%
6.6%
5.3%
3.2%
1.5%
2.8%
4.0%
3.8%
3.4%
1.7%
4.5%
1.4%
3.4%
4.3%
4.1%
3.9%
181,989
412,711
7,381
15,959
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2018 (Millions of Euros)
Central Banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air conditioning supply
Water supply
Construction
Wholesale and retail trade
Transport and storage
Accommodation and food service activities
Information and communication
Financial and insurance activities
Real estate activities
Professional, scientific and technical activities
Administrative and support service activities
Public administration and defense, compulsory social
security
Education
Human health services and social work activities
Arts, entertainment and recreation
Other services
Households
LOANS AND ADVANCES
Gross carrying
amount
Non-performing
loans and
advances
Accumulated
impairment
Non-
performing
loans and
advances as a
% of the total
3,947
28,198
9,175
9,490
170,182
3,685
4,952
36,772
13,853
1,061
11,899
25,833
9,798
7,882
5,238
6,929
17,272
5,096
3,162
319
912
4,406
1,323
9,791
178,355
399,347
-
128
10
11
8,372
122
96
1,695
585
19
1,488
1,624
459
315
113
147
834
204
128
5
31
63
59
386
7,838
16,359
(6)
(84)
(12)
(22)
(6,260)
(107)
(70)
(1,134)
(446)
(15)
(1,007)
(1,259)
(374)
(204)
(72)
(128)
(624)
(171)
(125)
(7)
(31)
(63)
(41)
(382)
(5,833)
(12,217)
-
0.4%
0.1%
0.1%
4.9%
3.3%
1.9%
4.6%
4.2%
1.8%
12.5%
6.3%
4.7%
4.0%
2.1%
2.1%
4.8%
4.0%
4.0%
1.6%
3.4%
1.4%
4.5%
3.9%
4.4%
4.1%
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2017 (Millions of Euros)
Non-performing
Accumulated
impairment or
Accumulated changes in
fair value due to credit
risk
Non-performing
loans and
advances as a %
of the total
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air conditioning supply
Water supply
Construction
Wholesale and retail trade
Transport and storage
Accommodation and food service activities
Information and communication
Real estate activities
Professional, scientific and technical activities
Administrative and support service activities
Public administration and defense, compulsory social security
Education
Human health services and social work activities
Arts, entertainment and recreation
Other services
Households
LOANS AND ADVANCES
171
11
12
10,791
166
177
1,239
213
29
2,993
1,706
441
362
984
1,171
252
188
4
31
75
69
690
8,417
19,401
(111)
(36)
(26)
(7,538)
(123)
(123)
(955)
(289)
(11)
(1,708)
(1,230)
(353)
(222)
(256)
(1,100)
(183)
(130)
(6)
(25)
(68)
(38)
(716)
(5,073)
(12,784)
0.5%
0.3%
0.1%
6.3%
4.3%
3.7%
3.6%
1.8%
4.5%
20.1%
5.9%
4.2%
4.3%
17.0%
7.9%
3.8%
6.3%
1.9%
3.4%
1.7%
4.6%
4.3%
4.7%
4.5%
The changes during the years 2019, 2018 and 2017 of impaired financial assets and contingent risks are as follow:
Changes in impaired financial assets and contingent risks (Millions of Euros)
Balance at the beginning
Additions
Decreases (*)
Net additions
Amounts written-off
Exchange differences and other
Balance at the end
2019
2018
2017
17,134
9,857
(5,874)
3,983
(3,803)
(544)
16,770
20,590
9,792
(6,909)
2,883
(5,076)
(1,264)
17,134
23,877
10,856
(7,771)
3,085
(5,758)
(615)
20,590
(*) Reflects the total amount of impaired loans derecognized from the consolidated balance sheet throughout the year as a result of mortgage foreclosures
and real estate assets received in lieu of payment as well as monetary recoveries (see Note 21).
The changes during the years 2019, 2018 and 2017 in financial assets derecognized from the accompanying consolidated balance sheet
as their recovery is considered unlikely ("write-offs"), is shown below:
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Changes in impaired financial assets written-off from the balance sheet (Millions of Euros)
Balance at the beginning
Acquisition of subsidiaries in the year
Increase
Decrease:
Re-financing or restructuring
Cash recovery
Foreclosed assets
Sales (*)
Debt forgiveness
Time-barred debt and other causes
Net exchange differences
Balance at the end
(*) Includes principal and interest.
Notes
47
2019
32,343
-
4,712
(11,039)
(2)
(919)
(617)
(8,325)
(493)
(682)
230
26,245
2018
30,139
-
6,164
(4,210)
(10)
(589)
(625)
(1,805)
(889)
(292)
250
32,343
2017
29,347
-
5,986
(4,442)
(9)
(558)
(149)
(2,284)
(1,121)
(321)
(752)
30,139
As indicated in Note 2.2.1, although they have been derecognized from the consolidated balance sheet, the BBVA Group continues to
attempt to collect on these written-off financial assets, until the rights to receive them are fully extinguished, either because it is a time-
barred financial asset, the financial asset is condoned, or other reason.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
7.1.6 Loss allowances
Movements in gross accounting balances and accumulated allowances for loan losses during 2019 are recorded on the accompanying
consolidated balance sheet as of December 31, 2019, in order to cover the estimated loss allowances in loans and advances and debt
securities measured at amortized cost. As for the years ended December 31, 2018 and 2017, the changes in the accumulated allowances
are presented):
Changes in gross accounting balances of loans and advances at amortized cost. 2019 (Millions of Euros)
Opening balance
Transfers of financial assets:
Transfers from stage 1 to Stage 2
Transfers from stage 2 to Stage 1
Transfers to Stage 3
Transfers from Stage 3
Net annual origination of financial assets
Becoming write-offs
Changes in model / methodology
Foreign exchange
Modifications that do not result in derecognition
Other
Closing balance
Stage 1
352,282
(9,021)
(13,546)
5,656
(1,571)
440
20,296
(152)
-
1,611
(1)
(1,782)
363,234
Changes in allowances of loans and advances at amortized cost. 2019 (Millions of Euros)
Opening balance
Transfers of financial assets:
Transfers from stage 1 to Stage 2
Transfers from stage 2 to Stage 1
Transfers to Stage 3
Transfers from Stage 3
Net annual origination of allowances
Becoming write-offs
Changes in model / methodology
Foreign exchange
Modifications that do not result in derecognition
Other
Closing balance
Stage 1
(2,082)
176
126
(38)
89
(1)
(542)
130
-
(30)
(15)
215
(2,149)
Stage 2
30,707
6,279
13,546
(5,656)
(2,698)
1,087
(2,739)
(349)
-
35
(27)
(388)
33,518
Stage 2
(2,375)
(227)
(649)
273
234
(86)
(116)
337
-
(18)
(149)
366
(2,183)
Stage 3
16,359
2,741
-
-
4,269
(1,527)
246
(3,407)
-
16
15
(11)
15,959
Stage 3
(7,761)
(1,574)
-
-
(1,810)
236
(1,711)
2,789
-
69
(89)
183
(8,094)
Total
399,347
-
-
-
-
-
17,804
(3,908)
-
1,662
(13)
(2,180)
412,711
Total
(12,217)
(1,626)
(523)
235
(1,487)
149
(2,370)
3,256
-
20
(254)
764
(12,427)
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets at amortized cost. 2018 (Millions of Euros)
Not credit-impaired
Stage 1
Stage 2
Credit-
impaired
Credit-
impaired
(Stage 3)
Total
Loss
allowances
Loss allowances
(collectively
assessed)
Loss allowances
(individually
assessed)
Loss
allowances
Loss
allowances
Opening balance
Transfers of financial assets:
Transfers from Stage 1 to Stage 2 (not credit-impaired)
Transfers from Stage 2 (not credit - impaired) to Stage 1
Transfers to Stage 3
Transfers from Stage 3 to Stage 1 or 2
Changes without transfers between Stages
New financial assets originated
Purchased
Disposals
Repayments
Write-offs
Changes in model/ methodology
Foreign exchange
Modifications that result in derecognition
Modifications that do not result in derecognition
Other
Closing balance
Of which: Loans and advances
Of which: Debt certificates
(2,237)
-
208
(125)
55
(7)
358
(1,072)
-
2
641
13
-
(84)
5
3
135
(2,106)
(1,827)
-
(930)
619
282
(126)
(53)
(375)
-
3
432
14
-
72
10
(8)
133
(1,753)
(525)
-
(218)
50
564
(68)
(260)
(244)
-
-
118
2
-
(93)
25
1
20
(628)
(9,371)
-
-
-
(2,127)
333
(3,775)
-
-
110
1,432
4,433
-
343
98
(362)
1,111
(7,777)
(13,960)
-
(940)
544
(1,226)
132
(3,730)
(1,692)
-
115
2,623
4,461
-
239
138
(366)
1,399
(12,264)
(12,217)
(46)
Financial assets at amortized cost. 2017 (Millions of Euros) (*)
Opening
balance
Increases due
to amounts set
aside for
estimated loan
losses during
the year
Decreases due
to amounts
reversed for
estimated loan
losses during
the year
Decreases
due to
amounts
taken
against
allowances
Transfers
between
allowances
Other
adjustments
Closing
balance
Recoveries
recorded
directly to
the
statement
of profit or
loss
(10,937)
(7,484)
2,878
4,503
1,810
526
(8,703)
558
(144)
-
-
(15)
(26)
(103)
(26)
-
-
(5)
(4)
(17)
6
-
-
4
2
-
-
-
-
-
-
-
123
-
-
16
-
107
13
(28)
-
-
-
13
-
-
-
-
(16)
(12)
-
-
-
-
-
-
Specific allowances for financial
assets, individually and collectively
estimated
Debt securities
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Loans and advances
(10,793)
(7,458)
2,872
4,503
1,687
513
(8,675)
558
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
-
(39)
(7)
(25)
(7,402)
(3,319)
-
(70)
(2)
(287)
(3,627)
(3,472)
-
37
2
3
-
14
-
38
1,993
837
3,029
1,422
-
1
-
227
(228)
1,687
-
15
1
38
-
(42)
(6)
(7)
636
(5,599)
(177)
(3,022)
Collective allowances for incurred
but not reported losses on financial
assets
(5,270)
(1,783)
2,159
1,537
(1,328)
557
(4,130)
Debt securities
Loans and advances
Total
(46)
(5,224)
(16,206)
(8)
(1,776)
(9,267)
30
2,128
5,037
1
-
3
(21)
1,536
(1,328)
554
(4,109)
6,038
482
1,083
(12,833)
558
-
1
-
-
345
212
-
-
-
(*) Figures originally reported in the year 2017 in accordance to the applicable regulation.
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7.1.7 Refinancing and restructuring transactions
Group policies and principles with respect to refinancing and restructuring transactions
Refinancing and restructuring transactions (see definition in the Glossary) are carried out with customers who have requested such a
transaction in order to meet their current loan payments if they are expected, or may be expected, to experience financial difficulty in
making the payments in the future.
The basic aim of a refinancing and restructuring transaction is to provide the customer with a situation of financial viability over time by
adapting repayment of the loan incurred with the Group to the customer’s new situation of fund generation. The use of refinancing and
restructuring for other purposes, such as to delay loss recognition, is contrary to BBVA Group policies.
The BBVA Group’s refinancing and restructuring policies are based on the following general principles:
Refinancing and restructuring is authorized according to the capacity of customers to pay the new installments. This is done by
first identifying the origin of the payment difficulties and then carrying out an analysis of the customers’ viability, including an
updated analysis of their economic and financial situation and capacity to pay and generate funds. If the customer is a company,
the analysis also covers the situation of the industry in which it operates.
With the aim of increasing the solvency of the transaction, new guarantees and/or guarantors of demonstrable solvency are
obtained where possible. An essential part of this process is an analysis of the effectiveness of both the new and original
guarantees.
This analysis is carried out from the overall customer or group perspective.
Refinancing and restructuring transactions do not in general increase the amount of the customer’s loan, except for the expense
inherent to the transaction itself.
The capacity to refinance and restructure a loan is not delegated to the branches, but decided on by the risk units.
The decisions made are reviewed from time to time with the aim of evaluating full compliance with refinancing and restructuring
policies.
These general principles are adapted in each case according to the conditions and circumstances of each geographical area in which the
Group operates, and to the different types of customers involved.
In the case of retail customers (private individuals), the main aim of the BBVA Group’s policy on refinancing and restructuring a loan is to
avoid default arising from a customer’s temporary liquidity problems by implementing structural solutions that do not increase the
balance of the customer’s loan. The solution required is adapted to each case and the loan repayment is made easier, in accordance with
the following principles:
Analysis of the viability of transactions based on the customer’s willingness and ability to pay, which may be reduced, but should
nevertheless be present. The customer must therefore repay at least the interest on the transaction in all cases. No
arrangements may be concluded that involve a grace period for both principal and interest.
Refinancing and restructuring of transactions is only allowed on those loans in which the BBVA Group originally entered into.
Customers subject to refinancing and restructuring transactions are excluded from marketing campaigns of any kind.
In the case of non-retail customers (mainly companies, enterprises and corporates), refinancing/restructuring is authorized according to
an economic and financial viability plan based on:
Forecasted future income, margins and cash flows to allow entities to implement cost adjustment measures (industrial
restructuring) and a business development plan that can help reduce the level of leverage to sustainable levels (capacity to
access the financial markets).
Where appropriate, the existence of a divestment plan for assets and/or operating segments that can generate cash to assist
the deleveraging process.
The capacity of shareholders to contribute capital and/or guarantees that can support the viability of the plan.
In accordance with the Group’s policy, the conclusion of a loan refinancing and restructuring transaction does not mean the loan is
reclassified from "impaired" or "significant increase in credit risk" to normal risk. The reclassification to "significant increase in credit risk"
or normal risk categories must be based on the analysis mentioned earlier of the viability, upon completion of the probationary periods
described below.
The Group maintains the policy of including risks related to refinanced and restructured loans as either:
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
"Impaired assets", as although the customer is up to date with payments, they are classified as unlikely to pay when there are
significant doubts that the terms of their refinancing may not be met; or
"Significant increase in credit risk" until the conditions established for their consideration as normal risk are met.
The assets classified as "Impaired assets" should comply with the following conditions in order to be reclassified to "Significant increase
in credit risk":
The customer has to have paid a significant part of the pending exposure.
At least one year must have elapsed since its classification as "Impaired asset".
The customer does not have past due payments.
The conditions established for assets classified as “Significant increase in credit risk” to be reclassified out of this category are as follows:
The customer must have paid past-due amounts (principal and interest) since the date of the renegotiation or restructuring of
the loan or other objective criteria, demonstrating the borrower´s ability to pay, have been verified; none of its exposures is
more than 30 days past-due.
At least two years must have elapsed since completion of the renegotiation or restructuring of the loan and regular payments
must have been made during at least half of this probation period; and
It is unlikely that the customer will have financial difficulties and, therefore, it is expected that the customer will be able to meet
its loan payment obligations (principal and interest) in a timely manner.
The BBVA Group’s refinancing and restructuring policy provides for the possibility of two modifications in a 24 month period for loans that
are not in compliance with the payment schedule.
The internal models used to determine allowances for loan losses consider the restructuring and renegotiation of a loan, as well as re-
defaults on such a loan, by assigning a lower internal rating to restructured and renegotiated loans than the average internal rating
assigned to non-restructured/renegotiated loans. This downgrade results in an increase in the probability of default (PD) assigned to
restructured/renegotiated loans (with the resulting PD being higher than the average PD of the non- renegotiated loans in the same
portfolios).
For quantitative information on refinancing and restructuring transactions see Appendix XI.
7.1.8 Risk concentration
Policies for preventing excessive risk concentration
In order to prevent the build-up of excessive risk concentrations at the individual, sector and portfolio levels, BBVA Group maintains
updated maximum permitted risk concentration indices which are tied to the various observable variables related to concentration risk.
Together with the limits for individual concentration, the Group uses the Herfindahl index to measure the concentration of the Group's
portfolio and the banking group's subsidiaries. At the BBVA Group level, the index reached implies a "very low" degree of concentration.
The limit on the Group’s exposure or financial commitment to a specific customer therefore depends on the customer’s credit rating, the
nature of the risks involved, and the Group’s presence in a given market, based on the following guidelines:
The aim is, as much as possible, to reconcile the customer's credit needs (commercial/financial, short-term/long-term, etc.)
with the interests of the Group.
Any legal limits that may exist concerning risk concentration are taken into account (relationship between risks with a customer
and the capital of the shareholder´s entity that assumes them), the markets, the macroeconomic situation, etc.
Risk concentrations by geography
The breakdown of the main figures in the most significant foreign currencies in the accompanying consolidated balance sheets is set forth
in Appendix XII.
Sovereign risk concentration
Sovereign risk management
The risk associated with the transactions involving sovereign risk is identified, measured, controlled and tracked by a centralized unit
integrated in the BBVA Group’s Risk Area. Its basic functions involve the preparation of reports in the countries where sovereign risk exists
(called “financial programs”), tracking such risks, assigning ratings to these countries and, in general, supporting the Group in terms of
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reporting requirements for any transactions involving sovereign risk. The risk policies established in the financial programs are approved
by the relevant risk committees.
The country risk unit tracks the evolution of the risks associated with the various countries to which the Group are exposed (including
sovereign risk) on an ongoing basis in order to adapt its risk and mitigation policies to any macroeconomic and political changes that may
occur. Moreover, it regularly updates its internal ratings and forecasts for these countries. The methodology is based on the assessment
of quantitative and qualitative parameters which are in line with those used by certain multilateral organizations such as the International
Monetary Fund (IMF) and the World Bank, rating agencies and export credit organizations.
For additional information on sovereign risk in Europe see Appendix XII.
Valuation and impairment methods
The valuation methods used to assess the instruments that are subject to sovereign risks are the same ones used for other instruments
included in the relevant portfolios and are detailed in Note 8.
Specifically, the fair value of sovereign debt securities of European countries has been considered equivalent to their listed price in active
markets (Level 1 as defined in Note 8).
Risk related to the developer and Real-Estate sector in Spain
The relative weight of the investment in Real Estate developments has dramatically decreased during the last years, especially since 2014.
A corporate sales policy has been rolled out to eliminate those real estate assets from the balance sheet which have been most difficult to
be commercialized. The sales of 80% of the Group’s share in Divarian and of other performing and NPL wholesale portfolios to Funds and
specialized investors have been some of the most relevant transactions (see Note 3).
Policies and strategies established by the Group to deal with risks related to the developer and real-estate sector
BBVA has teams specializing in the management of the Real-Estate Sector risk, given its economic importance and specific technical
component. This specialization is not only in the Risk-Acceptance teams, but throughout the handling, commercial, problem risks and
legal, etc. It also includes the research department of the BBVA Group (BBVA Research), which helps determine the medium/long-term
vision needed to manage this portfolio.
The policies est ablished to address the risks related to the developer and real- estate sector, aim to accomplish, among others, the
following objectives: to avoid concentration in terms of customers, products and regions; to estimate the risk profile for the portfolio; and
to anticipate possible worsening of the portfolio within a sector is highly cyclic.
Specific policies for analysis and granting of new developer risk transactions
In the analysis of new operations, the assessment of the commercial operation in terms of the economic and financial viability of the
project has been one of the constant.
The monitoring of the work, the sales and the legal situation of the project are essential aspects for the admission and follow-up of new
real estate operations. With regard the participation of the Risk Acceptance teams, they have a direct link and participate in the
committees of areas such as Valuation, Legal, Research and Recoveries. This guarantees coordination and exchange of information in all
the processes.
The following strategies have been implemented with customers in the developer sector: avoidance of large corporate transactions, which
had already reduced their share in the years of greatest market growth. Additionally, very restrictive limits have been established for the
second-home market and for the of land operations. Feasibility studies, at project level, are performed by doing a contrast analysis in the
pre-commercialization phase, with an appropriate funding cycle and in locations with low commercialization risk.
Risk monitoring policies
The base information for analyzing the real estate portfolios is updated monthly. The tools used include the so-called “watch-list”, which
is updated monthly with the progress of each client under watch, and the different strategic plans for management of special groups.
There are plans that involve an intensification of the review of the portfolio for financing land, while, in the case of ongoing promotions,
they are classified based on the rate of progress of the projects. This implies a comparison of the progress of the work and the sales,
including a scoreboard which enables the persons in charge to detect timely any deviation from the project’s initial plan.
Since 2013, there are no threats of new defaults in the portfolio.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Proper management of the relationship with each customer requires knowledge of various aspects such as an analysis of the company’s
future viability, the updating of the information on the debtor and the guarantors (their current situation and business course, economic-
financial information, debt analysis and generation of funds), and the updating of the appraisal of the assets offered as collateral. BBVA
has a classification of debtors according to the provisions in each country, in general, categorizing the degree of problem of each risk.
The volume of restructurings during 2019 and 2018 has not been significant, being close to zero.
Policies applied in the management of real estate assets in Spain
Regarding the financing of real estate, a new regulation has been updated in 2018 in which recommendations for the
promotion of residential real estate are established.
The recommendations represent guidelines about how to manage the credit admission activity of BBVA Group entities based on best
practices of markets in which this activity is performed. It is expected that a high percentage of the current transactions will be in
compliance with the latter.
The guidelines apply to new transactions with clients which are not classified as impaired or Watchlist (WL1 or WL2).
The policies deriving from the guidelines foresee a prudential intervention in a market which has changed its cycle in almost all of the
geographies and which is showing a more sustainable behavior in terms of demography, employment and economic and investment
capacities.
For quantitative information about the risk related to the developer and Real-Estate sector in Spain see Appendix XII.
7.2
Market risk
7.2.1 Market risk in trading portfolios
Market risk originates in the possibility that there may be losses in the value of positions held due to movements in the market
variables that impact the valuation of traded financial products and assets. The main risks can be classified as follows:
Interest-rate risk: This arises as a result of exposure to movements in the different interest-rate curves involved in trading.
Although the typical products that generate sensitivity to the movements in interest rates are money-market products
(deposits, interest-rate futures, call money swaps, etc.) and traditional interest-rate derivatives (swaps and interest-rate
options such as caps, floors, swaptions, etc.), practically all the financial products are exposed to interest-rate movements due
to the effect that such movements have on the valuation of the financial discount.
Equity risk: This arises as a result of movements in share prices. This risk is generated in spot positions in shares or any
derivative products whose underlying asset is a share or an equity index. Dividend risk is a sub-risk of equity risk, arising as an
input for any equity option. Its variation may affect the valuation of positions and it is therefore a factor that generates risk on
the books.
Exchange-rate risk: This is caused by movements in the exchange rates of the different currencies in which a position is held.
As in the case of equity risk, this risk is generated in spot currency positions, and in any derivative product whose underlying
asset is an exchange rate. In addition, the quanto effect (operations where the underlying asset and the instrument itself are
denominated in different currencies) means that in certain transactions in which the underlying asset is not a currency, an
exchange-rate risk is generated that has to be measured and monitored.
Credit-spread risk: Credit spread is an indicator of an issuer's credit quality. Spread risk occurs due to variations in the levels of
spread of both corporate and government issues, and affects positions in bonds and credit derivatives.
Volatility risk: This occurs as a result of changes in the levels of implied price volatility of the different market instruments on
which derivatives are traded. This risk, unlike the others, is exclusively a component of trading in derivatives and is defined as a
first-order convexity risk that is generated in all possible underlying assets in which there are products with options that require
a volatility input for their valuation.
The metrics developed to control and monitor market risk in the BBVA Group are aligned with market practices and are implemented
consistently across all the local market risk units.
Measurement procedures are established in terms of the possible impact of negative market conditions on the trading portfolio of the
Group's Global Markets units, both under ordinary circumstances and in situations of heightened risk factors.
The standard metric used to measure market risk is Value at Risk (“VaR”), which indicates the maximum loss that may occur in the
portfolios at a given confidence level (99%) and time horizon (one day). This statistic value is widely used in the market and has the
advantage of summing up in a single metric the risks inherent to trading activity, taking into account how they are related and providing a
prediction of the loss that the trading book could sustain as a result of fluctuations in equity prices, interest rates, foreign exchange rates
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and credit spreads. The market risk analysis considers various risks, such as credit spread risk, basis risk, as well as volatility and
correlation risk.
With respect to the risk measurement models used by the BBVA Group, the Bank of Spain has authorized the use of the internal market
risk model to determine bank capital requirements deriving from risk positions on the BBVA, S.A. and BBVA Mexico trading book, which
jointly accounted for around 72%, 76% and 70% of the Group’s trading-book market risk as of December 31, 2019, 2018 and 2017. For
the rest of the geographical areas where the Group operates (applicable mainly to the Group´s South America subsidiaries, Garanti BBVA
and BBVA USA), bank capital for the risk positions in the trading book is calculated using the Standardized Approach defined by the Basel
Committee on Banking Supervision (which is referred to herein as the "standard model”).
The main headings in the consolidated balance sheet of the Group which are exposed to market risk, are positions whose main metric to
measure the market risk is the VaR. The table below shows, by accounting line of the consolidated balance sheet as of December 31, 2019,
2018 and 2017, the traded financial products and assets of trading for those geographical areas that use Internal Model (BBVA, S.A. and
BBVA Mexico):
Headings of the balance sheet under market risk (Millions of Euros)
Assets subject to market risk
Financial assets held for trading
December 2019
December 2018
December 2017
Main market risk
metrics - VaR
Main market risk
metrics -
Others (*)
Main market risk
metrics - VaR
Main market risk
metrics -
Others (*)
Main market risk
metrics - VaR
Main market risk
metrics -
Others (*)
96,461
1,671
114,156
124
59,008
441
Financial assets at fair value through other comprehensive
income
7,089
24,691
5,652
Of which: Equity instruments
Derivatives - Hedging accounting
Liabilities subject to market risk
Financial liabilities held for trading
Derivatives - Hedging accounting
(*)
Includes mainly assets and liabilities managed by ALCO.
-
628
-
74,967
671
1,783
840
-
12,677
1,183
-
688
-
67,859
550
19,125
2,046
1,061
-
11,011
910
5,661
24,083
-
829
-
42,468
1,157
2,404
1,397
-
2,526
638
Although the table above provides information on the financial positions in our trading portfolio subject to market risk and therefore VaR
measurement, such information is provided for information purposes only and does not reflect how market risk in trading activity is
managed.
The current management structure includes the monitoring of market-risk limits, consisting of a scheme of limits based on VaR, economic
capital (based on VaR measurements) and VaR sub-limits, as well as stop-loss limits for each of the Group’s business units.
The model used estimates VaR in accordance with the historical simulation methodology, which involves estimating losses and gains that
would have taken place in the current portfolio if the changes in market conditions that took place over a specific period of time in the past
were repeated. Based on this information, it predicts the maximum expected loss of the current portfolio within a given confidence level.
This model has the advantage of reflecting precisely the historical distribution of the market variables and not assuming any specific
distribution of probability. The historical period used in this model is two years.
VaR figures are estimated with the following methodologies:
VaR without smoothing, which awards equal weight to the daily information for the previous two years. This is currently the
official methodology for measuring market risks for the purpose of monitoring compliance with risk limits.
VaR with smoothing, which gives a greater weight to more recent market information. This metric supplements the previous
one.
At the same time, and following the guidelines established by the Spanish and European authorities, BBVA incorporates metrics in addition
to VaR with the aim of meeting the Bank of Spain's regulatory requirements with respect to the calculation of bank capital for the trading
book. Specifically, the measures incorporated in the Group since December 2011 (stipulated by Basel 2.5) are:
VaR: In regulatory terms, the VaR charge incorporates the stressed VaR charge, and the sum of the two (VaR and stressed VaR)
is calculated. This quantifies the losses associated with the movements of the risk factors inherent to market operations
(including interest-rate risk, exchange-rate risk, equity risk and credit risk, among others). Both VaR and stressed VaR are
rescaled by a regulatory multiplier set at three and by the square root of ten to calculate the capital charge.
Specific Risk - Incremental Risk Capital (“IRC”) Quantification of the risks of default and downgrading of the credit ratings of the
bond and credit derivative positions in the portfolio. The IRC charge is exclusively applied in entities in respect of which the
internal market risk model is used (i.e., BBVA, S.A. and BBVA Mexico). The IRC charge is determined based on the associated
losses (calculated at 99.9% confidence level over a one year horizon under the hypothesis of constant risk) due to a rating
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change and/or default of the issuer with respect to an asset. In addition, the price risk is included in sovereign positions for the
specified items.
Specific Risk - Securitization and correlation portfolios. Capital charges for securitizations and correlation portfolios are
assessed based on the potential losses associated with the rating level of a specific credit structure. They are calculated by the
standard model. The scope of the correlation portfolios refers to the First To Default (FTD)-type market operation and/or
tranches of market CDOs and only for positions with an active market and hedging capacity.
Validity tests are performed regularly on the risk measurement models used by the Group. They estimate the maximum loss that could
have been incurred in the assessed positions with a certain level of probability (backtesting), as well as measurements of the impact of
extreme market events on risk positions (stress testing). As an additional control measure, backtesting is conducted at a trading desk
level in order to enable more specific monitoring of the validity of the measurement models.
Market risk in 2019
The Group’s market risk related to its trading portfolio remained at low levels compared to other risks managed by BBVA, particularly
credit risk. This is due to the nature of the business. In 2019 the average VaR was €19 million, below the figure of 2018, with a high on
September 13, 2019 of €25 million. The evolution in the BBVA Group’s market risk during 2019, measured as VaR without smoothing (see
Glossary) with a 99% confidence level and a 1-day horizon (shown in millions of Euros) is as follows:
By type of market risk assumed by the Group's trading portfolio, the main risk factor for the Group continued to be that linked to interest
rates, with a weight of 58% of the total at December 31, 2019 (this figure includes the spread risk). The relative weight of this risk has
increased compared with the close of 2018 (55%). Exchange-rate risk accounted for 13% of the total risk, decreasing its weight with
respect to December 2018 (14%), while equity, volatility and correlation risk has decreased, with a weight of 29% at the close of 2019 (vs.
31% at the close of 2018).
As of December 31, 2019, 2018 and 2017 the VaR was €20 million, €17 million and €22 million, respectively. The total VaR figures for 2019,
2018 and 2017 can be broken down as follows:
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VaR by Risk Factor (Millions of Euros)
Interest/Spread
risk
Currency risk
Stock-market
risk
Vega/Correlation
risk
Diversification
effect(*)
Total
December 2019
VaR average in the year
VaR max in the year
VaR min in the year
End of period VaR
December 2018
VaR average in the year
VaR max in the year
VaR min in the year
End of period VaR
December 2017
VaR average in the year
VaR max in the year
VaR min in the year
End of period VaR
21
28
13
24
20
23
17
19
25
27
23
23
6
6
5
5
6
7
6
5
10
11
7
7
4
3
5
5
4
6
4
3
3
2
4
4
9
9
9
8
9
11
7
7
13
12
14
14
(20)
(21)
(18)
(22)
(20)
(21)
(18)
(17)
(23)
(19)
(26)
(26)
19
25
14
20
21
26
16
17
27
34
22
22
(*)
The diversification effect is the difference between the sum of the average individual risk factors and the total VaR figure that includes the implied correlation
between all the variables and scenarios used in the measurement.
Validation of the internal market risk model
The internal market risk model is validated on a regular basis by backtesting in both, BBVA, S.A. and Global Markets Mexico (BBVA
Mexico). The aim of backtesting is to validate the quality and precision of the internal market risk model used by BBVA Group to estimate
the maximum daily loss of a portfolio, at a 99% level of confidence and a 250-day time horizon, by comparing the Group's results and the
risk measurements generated by the internal market risk model. These tests showed that the internal market risk model of both, BBVA,
S.A. and BBVA Mexico is adequate and precise.
Two types of backtesting have been carried out in 2019, 2018 and 2017:
"Hypothetical" backtesting: the daily VaR is compared with the results obtained, not taking into account the intraday results or
the changes in the portfolio positions. This validates the appropriateness of the market risk metrics for the end-of-day position.
"Real" backtesting: the daily VaR is compared with the total results, including intraday transactions, but discounting the possible
minimum charges or fees involved. This type of backtesting includes the intraday risk in portfolios.
In addition, each of these two types of backtesting was carried out at a risk factor or business type level, thus making a deeper comparison
of the results with respect to risk measurements.
For the period between the year ended December 31, 2018 and the year ended December 31, 2019, the backtesting of the internal VaR
calculation model was carried out, comparing the daily results obtained to the risk level estimated by the internal VaR calculation model.
At the end of the year the comparison showed the internal VaR calculation model was working correctly, within the "green" zone (0-4
exceptions), thus validating the internal VaR calculation model, as has occurred each year since the internal market risk model was
approved for the Group.
Stress testing
A number of stress tests are carried out on the BBVA Group's trading portfolios. First, global and local historical scenarios are used that
replicate the behavior of an extreme past event, such as for example the collapse of Lehman Brothers or the "Tequilazo" crisis. These
stress tests are complemented with simulated scenarios, where the aim is to generate scenarios that have a significant impact on the
different portfolios, but without being anchored to any specific historical scenario. Finally, for some portfolios or positions, fixed stress
tests are also carried out that have a significant impact on the market variables affecting these positions.
Historical scenarios
The historical benchmark stress scenario for the BBVA Group is Lehman Brothers, whose sudden collapse in September 2008 led to a
significant impact on the behavior of financial markets at a global level. The following are the most relevant effects of this historical
scenario:
Credit shock: reflected mainly in the increase of credit spreads and downgrades in credit ratings.
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Increased volatility in most of the financial markets (giving rise to a great deal of variation in the prices of different assets
(currency, equity, debt).
Liquidity shock in the financial systems, reflected by a major movement in interbank curves, particularly in the shortest sections
of the euro and dollar curves.
Simulated scenarios
Unlike the historical scenarios, which are fixed and therefore not suited to the composition of the risk portfolio at all times, the scenario
used for the exercises of economic stress is based on resampling methodology. This methodology is based on the use of dynamic
scenarios that are recalculated periodically depending on the main risks affecting the trading portfolios. On a data window wide enough to
collect different periods of stress (data are taken from January 1, 2008 until the date of the assessment), a simulation is performed by
resampling of historic observations, generating a distribution of losses and gains that serve to analyze the most extreme of births in the
selected historical window. The advantage of this methodology is that the period of stress is not predetermined, but depends on the
portfolio maintained at each time, and making a large number of simulations (10,000 simulations) allows a greater richness of information
for the analysis of expected shortfall than what is available in the scenarios included in the calculation of VaR.
The main features of this approach are: a) the generated simulations respect the correlation structure of the data, b) there is flexibility in
the inclusion of new risk factors and c) it allows the introduction of a lot of variability in the simulations (desirable for considering extreme
events).
The impact of the stress test under multivariable simulation of the risk factors of the portfolio based on the expected shortfall (expected
shortfall calculated at a 95% confidence level, 20 days) as of December 31, 2019 is as follows:
Impact of the stress test (Millions of Euros)
Europe
Mexico
Peru Venezuela Argentina Colombia
Turkey
The United
States
0
Expected shortfall
(112)
(68)
(23)
-
(4)
(5)
(9)
(3)
7.2.2 Financial Instruments offset
Financial assets and liabilities may be netted in certain cases. In particular, they are presented for a net amount on the consolidated
balance sheet only when the Group's entities satisfy the provisions of IAS 32-Paragraph 42, so they have both the legal right to net
recognized amounts, and the intention of settling the net amount or of realizing the asset and simultaneously paying the liability.
In addition, the Group has presented as gross amounts assets and liabilities on the consolidated balance sheet for which there are master
netting arrangements in place, but for which there is no intention of settling the net amount. The most common types of events that trigger
the netting of reciprocal obligations are bankruptcy of the entity, surpassing certain level of indebtedness threshold, failure to pay,
restructuring and dissolution of the entity.
In the current market context, derivatives are contracted under different framework contracts being the most widespread the ones
developed by the International Swaps and Derivatives Association (“ISDA”) and, for the Spanish market, the Framework Agreement on
Financial Transactions (“CMOF”). Almost all portfolio derivative transactions have been concluded under these framework contracts,
including in them the netting clauses mentioned in the preceding paragraph as "Master Netting Agreement", greatly reducing the credit
exposure on these instruments. Additionally, in contracts signed with counterparties, the collateral agreement annexes called Credit
Support Annex (“CSA”) are included, thereby minimizing exposure to a potential default of the counterparty.
Moreover, many of the transactions involving assets purchased or sold under a repurchase agreement are transacted through clearing
houses that articulate mechanisms to reduce counterparty risk, as well as through the signing of various master agreements for bilateral
transactions, the most widely used being the Global Master Repurchase Agreement (GMRA), published by the International Capital
Market Association (“ICMA”), to which the clauses related to the collateral exchange are usually added within the text of the master
agreement itself.
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A summary of the effect of offsetting (via netting and collateral) for derivatives and securities operations is presented below as of
December 31, 2019, 2018 and 2017:
December 2019 (Millions of Euros)
Trading and hedging derivatives
Reverse repurchase, securities
borrowing and similar agreements
Total Assets
Trading and hedging derivatives
Repurchase, securities lending and
similar agreements
Notes
10, 15
10, 15
Gross
amounts
recognized
(A)
37,302
35,805
73,107
39,646
45,977
Gross amounts not offset in
the consolidated balance
sheets (D)
Gross
amounts
offset in the
consolidated
balance
sheets (B)
Net amount
presented in
the
consolidated
balance sheets
(C=A-B)
Financial
instruments
Cash
collateral
received/
pledged
Net amount
(E=C-D)
2,388
34,914
25,973
8,210
21
35,784
35,618
204
2,409
2,394
70,698
37,252
61,591
25,973
8,415
10,613
21
45,956
45,239
420
731
(39)
692
667
297
964
Total Liabilities
85,623
2,414
83,209
71,212
11,033
December 2018 (Millions of Euros)
Gross Amounts Not Offset
in the Consolidated
Balance Sheets (D)
Notes
Gross
amounts
recognized
(A)
Gross
amounts
offset in the
consolidated
balance
sheets (B)
Net amount
presented in
the
consolidated
balance
sheets (C=A-
B)
Financial
instruments
Cash
collateral
received/
pledged
Net amount
(E=C-D)
Trading and hedging derivatives
Reverse repurchase, securities borrowing
and similar agreements
Total Assets
Trading and hedging derivatives
Repurchase, securities lending and
similar agreements
Total liabilities
10, 15
49,908
16,480
33,428
25,024
7,790
10, 15
28,074
77,982
51,596
43,035
42
28,032
28,022
169
16,522
17,101
61,460
34,494
53,046
25,024
7,959
6,788
42
42,993
42,877
34
613
(159)
454
2,682
82
94,631
17,143
77,487
67,901
6,822
2,765
December 2017 (Millions of Euros)
Gross Amounts Not Offset
in the Consolidated
Balance Sheets (D)
Financial
instruments
Cash
collateral
received/
pledged
Net amount
(E=C-D)
Gross
amounts
offset in the
consolidated
balance
sheets (B)
11,584
Net amount
presented in
the
consolidated
balance
sheets (C=A-
B)
37,749
Notes
10, 15
10, 15
Gross
amounts
recognized
(A)
49,333
26,426
75,759
50,693
40,134
Trading and hedging derivatives
Reverse repurchase, securities borrowing
and similar agreements
Total Assets
Trading and hedging derivatives
Repurchase, securities lending and
similar agreements
Total Liabilities
27,106
7,442
56
26,369
26,612
141
11,641
11,644
64,118
39,049
53,717
27,106
7,583
8,328
56
40,078
40,158
21
3,202
(384)
2,818
3,615
(101)
3,514
90,827
11,701
79,126
67,264
8,349
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The amount of recognized financial instruments within derivatives includes the effect in case of compensation with counterparties with
which the Group holds netting agreements, while, for repos, it reflects the market value of the collateral associated with the transaction.
7.3 Structural risk
The structural risks are defined, in general terms, as the possibility of sustaining losses due to adverse movements in market risk factors
as a result of mismatches in the financial structure of an entity´s balance sheet.
In the Group, the following types of structural risks are defined, according to the nature and the following market factors: interest rate,
exchange rate and equity.
The scope of structural risks in the Group is limited to the banking book, excluding market risks in the trading book that are clearly
delimited and separated and make up the Market Risks.
The Assets and Liabilities Committee (ALCO) is the main responsible body for the management of structural risks regarding liquidity/
funding interest rate, currency, equity and solvency. Every month, with the participation of the CEO and representatives from the areas of
Finance, Risks and Business Areas, this committee monitors the structural risks and is presented with proposals for managing them for
its approval. These management proposals are made proactively by the Finance area, taking into account the risk appetite framework and
with the aim of guaranteeing recurrent earnings and financial stability and preserving the entity's solvency. All balance management units
have a local ALCO, which is permanently attended by members of the corporate center, and there is a corporate ALCO where
management strategies are monitored and presented in the Group's subsidiaries.
Global Risk Management (GRM) area acts as an independent unit, ensuring adequate separation between the management and risk
control functions, and is responsible for ensuring that the structural risks in the Group are managed according to the strategy approved
by the Board of Directors.
Consequently, GRM deals with the identification, measurement, monitoring and control of those risks and their reporting to the
corresponding corporate bodies. Through the Global Risk Management Committee (GRMC), it performs the function of control and risk
assessment and is responsible for developing the strategies, policies, procedures and infrastructure necessary to identify, evaluate,
measure and manage the significant risks that the BBVA Group faces. To this end, GRM, through the corporate unit of Structural Risks,
proposes a scheme of limits and alerts that defines the risk appetite set for each of the relevant structural risk types, both at Group level
and by management units, which will be reviewed annually, reporting the situation periodically to the Group's corporate bodies as well as
to the GRMC.
In addition, both, the management as well as the control and measurement system of the structural risks need to be adjusted necessarily
to the Group’s internal control model, in compliance therefore with the related evaluation and certification processes included. In this
regard, the required tasks and controls have been identified and documented, which allows the Bank to dispose of a regulatory framework
that includes precise processes and measures for structural risks with a global perspective from a geographical point of view.
BBVA’s internal control model, which is based on the high standards, is included within the three lines of defense. The Finance area is the
first line of defense, by being in charge of the structural risk management, whereas GRM is in charge of the identification of the risks and
establishes policies and control models, which are periodically evaluated with regard to their performance.
Within the second line of defense are located Internal Risk Control, which independently reviews the structural risk controls, and one entity
of Internal Financial Control, which reviews the design and the effectiveness of the operating management controls.
Internal Audit, which works with total independence, represents the third line of defense and reviews specific controls and processes.
7.3.1 Structural interest rate risk
The structural interest-rate risk (“IRRBB”) is related to the potential impact that variations in market interest rates have on an entity's net
interest income and equity. In order to properly measure IRRBB, BBVA takes into account the main sources that generate this risk:
repricing risk, yield curve risk, option risk and basis risk, which are analyzed with an integral vision, combining two complementary points
of view: net interest income (short term) and economic value (long term).
The exposure of a financial entity to adverse interest rates movements is a risk inherent to the development of the banking business, which
is also, in turn, an opportunity to create economic value. Therefore, interest rate risk must be effectively managed so that it is limited in
accordance with the entity’s equity and in line with the expected economic result.
This function falls to the Global ALM (Asset & Liability Management) unit, within the Finance area, who, through ALCO, aims to guarantee
the recurrence of results and preserve the solvency of the entity, always adhering to the risk profile defined by the management bodies of
the BBVA Group. The interest rate risk management of the balance sheet aims to promote the stability of the net interest income and
book value with respect to changes in market interest rates, types of markets in the different balance-sheets, while respecting solvency
and internal limits, as well as complying with current and future regulatory requirements. Likewise, a specific monitoring of the banking
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book instruments registered at market value (fair value) is developed, which due to their accounting treatment have an impact on results
and / or equity.
In this regard, the BBVA Group maintains an exposure to fluctuations on interest rates according to its objective strategy and risk profile,
being carried out in a decentralized and independent manner in each of the banking entities that compose its structural balance-sheet.
The management is carried out in accordance with the guidelines established by the European Banking Authority (EBA), with a monitoring
of interest rate risk metrics, with the aim of analyzing the potential impact that could be derived from the range of scenarios in the different
balance-sheets of the Group.
Nature of Interest Rate Risk
Repricing risk arises due to the difference between the repricing or maturity terms of the assets and liabilities, and represents the most
frequent interest rate risk faced by financial entities. However, other sources of risk as changes in the slope and shape of the yield curve,
the reference to different indexes and the optionality risk embedded in certain banking transactions, are also taken into account by the
risk control system.
BBVA's structural interest-rate risk management process is formed from a set of metrics and tools that enables the capture of additional
sources to properly monitor the risk profile of the Group, backed-up by an assumptions set that aims to characterize the behavior of the
balance sheet items with the maximum accuracy.
The IRRBB measurement is carried out on a monthly basis, and includes probabilistic measures based on methods of scenario simulation,
which enables to capture additional sources of risk to the parallel shifts, as the changes in slope and shape of the yield curve. Additionally,
sensitivity analysis to multiple parallel shocks of different magnitude are also assessed on a regular basis. The process is run separately
for each currency to which the Group is exposed, considering, at a later stage, the diversification effect among currencies and business
units.
The risk measurement model is complemented by the assessment of ad-hoc scenarios and stress tests. As stress testing has become
more relevant during the recent years, the evaluation of extreme scenarios of rupture of historical interest rates levels, correlations and
volatility has continued to be enhanced, while assessing, also, BBVA Research market scenarios.
During 2019 the Group has worked on the enhancement of the control and management model according to the guidelines established
by the EBA on the management of interest rate risk in the banking book. It is worth highlighting, among other aspects, the reinforcement
of stress analysis incorporating the assessment of the impacts on the main balance sheets of the Group that could derive from the range
of interest rate scenarios defined in accordance with the aforementioned EBA guidelines.
Key assumptions of the model
In order to measure structural interest rate risk, the setting of assumptions on the evolution and behavior of certain balance sheet items
is particularly relevant, especially those related to products without an explicit or contractual maturity.
The assumptions that characterize these balance sheet items must be understandable for the areas and bodies involved in risk
management and control and remain duly justified and documented. The modeling of these assumptions must be conceptually
reasonable and consistent with the evidence based on historical experience, reviewed at least once a year.
In view of the heterogeneity of the financial markets and the availability of historical data, each one of the entities of the Group is
responsible for determining the behavior assumptions to be applied to the balance sheet items, always under the guidelines and the
applicability of the corporate models existing in the Group.
Among the balance sheet assumptions stand out those established for the treatment of items without contractual maturity, mainly for
demand customer deposits, and those related to the expectations on the exercise of interest rate options, especially those relating to
loans and deposits subject to prepayment risk.
For the modeling of demand deposits, a segmentation of the accounts in several categories is previously carried out depending on the
characteristics of the customer (retail / wholesale) and the product (type of account / transactionality / remuneration), in order to outline
the specific behavior of each segment.
In order to establish the remuneration of each segment, the relationship between the evolution of market interest rates and the interest
rates of managed accounts is analyzed, with the aim of determining the translation dynamic (percentages and lags) of interest rates
variations to the remuneration of the accounts.
The behavior assigned to each category of accounts is determined by an analysis of the historical evolution of the balances and the
probability of cancellation of the accounts. For this, the volatile part of the balance assigned to a short-term maturity is isolated, thus
avoiding fluctuations in the level of risk caused by specific variations in the balances and promoting stability in the management of the
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balance. Once the stable part is identified, a medium / long term maturity model is applied through a decay distribution based on the
average term of the accounts and the conditional cancellation probabilities throughout the life of the product.
Additionally, the relationship of the evolution of the balance of deposits with the levels of market interest rates is taken into account, where
appropriate, including the potential migration between the different types of deposits (on demand / time deposits) in the different interest
rate scenarios.
Equally relevant is the treatment of early cancelation options embedded in credit loans, mortgage portfolios and customer deposits. The
evolution of market interest rates may condition, along with other variables, the incentive that customers have to prepay loans or deposits,
modifying the future behavior of the balance amounts with respect to the forecasted contractual maturity schedule.
The detailed analysis of the historical information related to prepayment data, both partial and total prepayment, combined with other
variables such as interest rates, allows estimating future amortizations and, where appropriate, their behavior linked to the evolution of
such variables.
The approval and updating of the risk behavior models of structural interest rate risk are subject to corporate governance under the scope
of GRM-Analytics. In this way, the models must be properly inventoried and cataloged and comply with the requirements established in
the internal procedures for their development, updating and management of the changes. The models are also subject to the
corresponding internal validations based on their relevance and the established monitoring requirements.
The table below shows the profile of average interest rate risk in terms of sensitivities of the main banks in the BBVA Group in 2019:
Sensitivity to interest-rate analysis - December 2019
Europe (***)
Mexico
The United States
Turkey
South America
BBVA Group
Impact on net interest income (*)
Impact on economic value (**)
100 basis-point
increase
100 basis-point
decrease
100 basis-point
increase
100 basis-point
decrease
+ (5% - 10%)
+ (0% - 5%)
+ (5% - 10%)
+ (0% - 5%)
+ (0% - 5%)
+ (0% - 5%)
- (0% - 5%)
- (0% - 5%)
- (5% - 10%)
- (0% - 5%)
- (0% - 5%)
- (0% - 5%)
+ (0% - 5%)
+ (0% - 5%)
- (5% - 10%)
- (0% - 5%)
- (0% - 5%)
- (0% - 5%)
- (0% - 5%)
- (0% - 5%)
+ (0% - 5%)
+ (0% - 5%)
+ (0% - 5%)
- (0% - 5%)
(*)
Percentage of "1 year" net interest income forecast for each unit.
(**)
Percentage of Core Capital for each unit.
(***)
In Europe falling interest rates at more negative level than current rates.
In 2019 in Europe monetary policy has remained expansionary, implementing in the last part of the year a new package of measures to
boost the economy and the financial system in response to a weaker global economic environment. This environment, coupled with
uncertainty about trade policy and low inflation led the Federal Reserve of the United States to begin a process of interest rate cuts. Both
monetary authorities, taking into account the recent signals regarding a stabilization of the economic growth, have not changed the
interest rates during the last months. In Mexico and Turkey, a bearish cycle was initiated in the second half of the year due to economic
weakness and inflation prospects. In South America, monetary policy has been expansive, with declines in the economies of Chile and
Peru, caused by the slowdown of the activity and the contained inflation, while in Colombia interest rates have remained flat. On the other
hand, in Argentina there is a restrictive monetary policy, with a strong increase in interest rates due to the strong volatility of the markets
after the election result.
BBVA maintains, at the aggregate level, a favorable position in net interest income in the event of an increase in interest rates, as well as
a moderate risk profile, in line with its target, through effective management of structural balance sheet risk. The higher net interest
income sensitivities are observed in, particularly the Euro and USD.
•
•
•
•
•
In Europe, the decrease in interest rates is limited by current levels, preventing extremely adverse scenarios.
In the United States, the net interest margin sensitivity has decreased during 2019 due to the downward trend of interest rates,
showing therefore a moderate risk profile.
Mexico shows a high level of stability between the balance sheets referenced to fixed and variable interest rates, keeping limited
net interest income sensitivity throughout 2019.
In Turkey, the evolution of the balance sheets in Turkish lira and USD has been positive, with very moderate interest rate risk,
which has allowed to reduce sensitivity during the year.
In South America, the balance sheet profiles in the countries which this business area comprises have remained stable, showing
a low interest rate risk with an almost stable sensitivity during the year.
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7.3.2 Structural exchange-rate risk
Structural exchange rate risk, inherent to the business of international banking groups that develop their activities in different geographies
and currencies, is defined as the possibility of impacts on solvency, equity value and results driven by fluctuations in the exchange rates
due to exposures in foreign currencies.
In the BBVA Group, structural exchange-rate risk arises from the consolidation of holdings in subsidiaries with functional currencies other
than the euro. Its management is centralized in order to optimize the joint management of permanent foreign currency exposures, taking
diversification into account.
The corporate Global ALM unit, through ALCO, designs and executes hedging strategies with the main purpose of preserving the stability
of consolidated capital ratios and income flows generated in a currency other than the euro in the BBVA Group, keeping a value generation
perspective to preserve the Group’s equity in the long term. To this end, a dynamic management strategy is carried out, considering hedge
transactions according to market expectations and their costs.
The risk monitoring metrics included in the framework of limits, in line with the Risk Appetite Framework, are integrated into management
and supplemented with additional assessment indicators. At the corporate level they are based on probabilistic metrics that measure the
maximum deviation in the Group’s Capital, CET1 (“Common Equity Tier 1”) ratio, and net attributable profit. The probabilistic metrics
make it possible to estimate the joint impact of exposure to different currencies taking into account the different variability in exchange
rates and their correlations.
The suitability of these risk assessment metrics is reviewed on a regular basis through back-testing exercises. The final element of
structural exchange-rate risk control is the stress and scenario analysis aimed to assess the vulnerabilities of foreign currency structural
exposure not contemplated by the risk metrics and to serve as an additional tool when making management decisions. The scenarios are
based both on historical situations simulated by the risk model and on the risk scenarios provided by BBVA Research.
As of December 31, 2019, it is worth mentioning the appreciation of the main currencies of the geographies where the Group operates
against the euro, especially the Mexican peso (6%) and the US Dollar (2%). The Turkish lira (-9%) and the Argentinian peso (-36%) have
depreciated, the latter being affected by idiosyncratic factors.
The Group's structural exchange-rate risk exposure level has slightly increased since the end of 2018 driven by the effect of currencies
appreciation. The hedging policy intends to keep low levels of sensitivity to movements in the exchange rates of emerging markets
currencies against the euro and focuses mainly on the Mexican peso and the Turkish lira. The risk mitigation level in the capital ratio due
to the book value of the BBVA Group's holdings in foreign emerging markets currencies stood at around 65% and, as of the end of 2019,
CET1 ratio sensitivity to the depreciation of 10% in the euro exchange rate for each currency was: USD +11 bp; Mexican peso -4 bps;
Turkish Lira -2 bps; other currencies -1 bp (excluding hyperinflation economies). On the other hand, hedging of emerging markets
currency denominated earnings in 2019 was 52%, concentrated in Mexican peso, Turkish lira and the main Latin American currencies.
7.3.3 Structural equity risk
Structural equity risk refers to the possibility of suffering losses in the value of positions in shares and other equity instruments held in the
banking book with long or medium term investment horizons due to fluctuations in the value of equity indexes or shares.
BBVA Group's exposure to structural equity risk arises largely from minority shareholdings held on industrial and financial companies.
This exposure is modulated in some portfolios with positions held on derivative instruments on the same underlying assets, in order to
adjust the portfolio sensitivity to potential changes in equity prices.
The management of structural equity portfolios is a responsibility of Global ALM and other Group's units specialized in this area. Their
activity is subject to the risk management corporate policy on structural equity risk management, complying with the defined
management principles and Risk Appetite Framework.
The structural equity risk metrics, designed by GRM according to the corporate model, contribute to the effective monitoring of the risk
by estimating the sensitivity and the capital necessary to cover the possible unexpected losses due to changes in the value of the
shareholdings in the Group's investment portfolio, with a level of confidence that corresponds to the objective rating of the entity, taking
into account the liquidity of the positions and the statistical behavior of the assets to be considered
In order to analyze the risk profile in depth, stress tests and scenario analysis of sensitivity to different simulated scenarios are carried
out. They are based on both past crisis situations and forecasts made by BBVA Research. These analyses are carried out regularly to
assess the vulnerabilities of structural equity exposure not contemplated by the risk metrics and to serve as an additional tool when
making management decisions.
Backtesting is carried out on a regular basis on the risk measurement model used.
With regard to the equity markets, the world indexes have closed the year 2019 with generalized gains and volatility moderation in a macro
environment of global growth slowdown.
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Structural equity risk, measured in terms of economic capital, has remained fairly stable in the period. The aggregate sensitivity of the
BBVA Group’s consolidated equity to a 1% fall in the price of shares of the companies making up the equity portfolio decreased to -€26
million as of December 31, 2019, compared to -€29 million as of December 31, 2018. This estimation takes into account the exposure in
shares valued at market prices, or if not applicable, at fair value (excluding the positions in the Treasury Area portfolios) and the net delta-
equivalent positions in derivatives on the same underlyings.
7.4 Liquidity and funding risk
Liquidity and funding risk is defined as the incapacity of a bank in meeting its payment commitments for missing resources or that, to face
those commitments, should have to make use of funding under burdensome terms.
7.4.1 Liquidity and Funding Strategy and Planning
The BBVA Group is a multinational financial institution whose business is focused mainly on retail and commercial banking activities. In
addition to the retail business model, which forms the core of its business, the Group engages in corporate and investment banking,
through the global CIB (Corporate & Investment Banking) division.
Liquidity and funding risk management aims to maintain a solid balance sheet structure which allows a sustainable business model. The
Group’s liquidity and funding strategy is based on the following pillars:
The principle of the funding self-sufficiency of its subsidiaries, meaning that each of the Liquidity Management Units (LMUs)
must cover its funding needs independently on the markets where it operates. This avoids possible contagion due to a crisis
affecting one or more of the Group’s LMUs.
Stable customer deposits as the main source of funding in all the LMUs, in accordance with the Group’s business model.
Diversification of the sources of wholesale funding, in terms of maturity, market, instruments, counterparties and currencies,
with recurring access to the markets.
Compliance with regulatory requirements, ensuring the availability of ample liquidity buffers, as well as sufficient instruments
as required by regulations with the capacity to absorb losses.
Compliance with the internal Liquidity Risk and Funding metrics, while adhering to the Risk Appetite level established for each
LMU at any time.
Liquidity and funding risk management aims to ensure that in the short term a bank does not have any difficulties in meeting its payment
commitments in due time and form, and that it does not have to make use of funding under burdensome terms, or conditions that
deteriorate its image or reputation.
In the medium term the aim is to ensure that the Group’s financing structure is ideal and that it is moving in the right direction with respect
to the economic situation, the markets and regulatory changes.
This management of structural and liquidity funding is based on the principle of financial self-sufficiency of the entities that make it up.
This approach helps prevent and limit liquidity risk by reducing the Group’s vulnerability during periods of high risk. This decentralized
management prevents possible contagion from a crisis affecting only one or a few Group entities, which must act independently to meet
their liquidity requirements in the markets where they operate.
As one aspect of this strategy, BBVA Group is organized into eleven LMUs composed of the parent and the banking subsidiaries in each
geographical area, plus the independent branches.
In addition, the policy for managing liquidity and funding risk is also based on the model’s robustness and on the planning and integration
of risk management into the budgeting process of each LMU, according to the appetite for funding risk it decides to assume in its business.
Liquidity and funding planning is drawn up as part of the strategic processes for the Group’s budgetary and business planning. It allows a
recurring growth of the banking business with suitable maturities and costs within the established risk tolerance levels by using a wide
range of instruments which allow the diversification of the funding sources and the maintenance of a high volume of available liquid assets.
7.4.2 Governance and monitoring
The responsibility for liquidity and funding management in normal business activity lies with the Finance area as a first line of defense in
managing the risks inherent to this activity, in accordance with the principles established by the European Banking Authority EBA and in
line with the standards, policies, procedures and controls in the framework established by the governing bodies. The Finance department,
through the Balance-Sheet Management area, plans and executes the funding of the structural long-term gap of each LMU and proposes
to the Assets and Liabilities Committee (ALCO) the actions to be taken on this matter, in accordance with the policies established by the
Risk and Compliance Committee in line with the metrics of the Risk Appetite Framework approved by the Board of Directors.
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The Finance area, in its regulatory liquidity reporting function, coordinates the processes necessary to meet any reporting requirements
that may be generated at corporate and regulatory level, with the areas responsible for this reporting in each LMU, thereby monitoring
the integrity of the information supplied.
GRM is responsible for ensuring that liquidity and funding risk in the Group is managed according to the strategy approved by the Board
of Directors. It is also responsible for identifying, measuring, monitoring and controlling those risks and reporting to the proper corporate
governing bodies. To carry out this work adequately, the risk function in the Group has been set up as a single, global function that is
independent of the management areas.
In addition, the Group has an Internal Risk Control unit that conducts an independent review of Liquidity and Funding Risk control and
management, independently of the functions performed in this area by Internal Audit. Additionally, the Group has in its second line of
defense an Internal Risk Control unit, which performs independent reviews of the Liquidity and Funding risk controls, and an Internal
Financial Control unit, which reviews the design and effectiveness of the operating management controls and the liquidity reporting.
As a third line of defense in the Group’s internal control model, Internal Audit is in charge of reviewing specific controls and processes in
accordance with an annual work plan.
The Group’s fundamental objectives regarding the liquidity and funding risk are determined through the Liquidity Coverage Ratio (LCR)
and through the Loan-to-Stable Customer Deposits (LtSCD) ratio.
The LCR ratio is a regulatory metric that aims to guarantee the resilience of entities in a scenario of liquidity tension within a time horizon
of 30 days. Within its risk appetite framework and system of limits and alerts, BBVA has established a required LCR compliance level for
the entire Group and for each individual LMU. The required internal levels aim to comply efficiently and sufficiently in advance with the
implementation of the regulatory requirement at a level above 100%.
The LtSCD ratio measures the relationship between net lending and stable cust omer funds. The aim is to preserve a stable funding
structure in the medium term for each LMU making up the BBVA Group, taking into account that maintaining an adequate volume of
stable customer funds is key to achieving a sound liquidity profile. In geographical areas with balance sheets with two currencies, the
indicator is also controlled by currency to manage the mismatches that might occur.
Stable customer funds can be considered as those obtained and managed from the LMUs among their target customers. Those funds
are characterized by their low sensitivity to market changes and by their less volatile behavior at aggregated level per operation due to the
loyalty of the customer to the entity. The stable resources are calculated by applying to each identified customer segment a haircut
determined by the analysis of the stability if the balances by which different aspects are evaluated (concentration, stability, level of loyalty).
The main source of stable resources arises from wholesale funding and retail customer funds.
In order to establish the target (maximum) levels of LtSCD in each LMU and provide an optimal funding structure reference in terms of
risk appetite, the corporate Structural Risks unit of GRM identifies and assesses the economic and financial variables that condition the
funding structures in the different geographical areas.
Additionally, liquidity and funding risk management aims to achieve a proper diversification of the funding structure, avoiding excessive
reliance on short-term funding by establishing a maximum level for the short-term funds raised, including both wholesale funding and
customer funds. The residual maturity profile of long -term wholesale funding has no significant concentrations, which matches the
schedule of planned issues to the best possible financial conditions of markets, as shown in the table below. Finally, concentration risk is
monitored at LMU level, with the aim of ensuring a correct diversification of both the counterparty and type of instrument.
One of the fundamental metrics within the general management framework of the liquidity and funding risk is the maintaining of a liquidity
buffer consisting of high quality assets free of charges which can be sold or offered as guarantees to obtain funding, either under normal
market conditions or in stress situations.
The Finance area is responsible for the collateral management and determining the liquidity buffer within the BBVA Group. According to
the principle of auto-sufficiency of the subsidiaries, every LMU is responsible for the holding of a buffer of liquid assets which comply with
the regulatory requirements applicable under each jurisdiction. In addition, the liquidity buffer of each LMU should be aligned with the
liquidity and funding risk tolerance as well as the management limits set and approved for each case.
In this context, the short-term resistance of the liquidity risk profile is promoted, guaranteeing that each LMU has sufficient collateral to
deal with the risk of the close of wholesale markets. Basic capacity is the short-term liquidity risk management and control metric that is
defined as the relationship between the available explicit assets and the maturities of wholesale liabilities and volatile funds, at different
terms up to one year, with special relevance being given to 30-day 90-day maturities, in order to maintain the survivability period above
the 3 months with the available buffer, not taking into consideration the inflows of the balance sheet.
Stress tests are carried out as a fundamental element of the liquidity and funding risk monitoring scheme. They enable anticipating
deviations from the liquidity targets and the limits set in the appetite, and establishing tolerance ranges in the different management areas.
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They also play a major role in the design of the Liquidity Contingency Plan and the definition of specific measures to be adopted to rectify
the risk profile if necessary.
For each scenario, it is checked whether BBVA has a sufficient stock of liquid assets to guarantee its capacity to meet the liquidity
commitments/outflows in the different periods analyzed. The analysis considers four scenarios: one central and three crisis-related
(systemic crisis; unexpected internal crisis with a considerable rating downgrade and/or affecting the ability to issue in wholesale markets
and the perception of business risk by the banking intermediaries and the entity’s customers; and a mixed scenario, as a combination of
the two aforementioned scenarios). Each scenario considers the following factors: existing market liquidity, customer behavior and
sources of funding, the impact of rating downgrades, market values of liquid assets and collateral, and the interaction between liquidity
requirements and the development of the LMU’s asset quality.
The stress tests conducted on a regular basis reveal that BBVA maintains a sufficient buffer of liquid assets to deal with the estimated
liquidity outflows in a scenario resulting from the combination of a systemic crisis and an unexpected internal crisis, during a period of
longer than 3 months in general for the different LMUs, including in the scenario of a significant downgrade of the Bank’s rating by up to
three notches.
Together with the results of the stress tests and the risk metrics, the early warning indicators play an important role within the corporate
model and the Liquidity Contingency Plan. They are mainly indicators of the funding structure, in relation to asset encumbrance,
counterparty concentration, flights of customer deposits, unexpected use of credit facilities, and of the market, which help anticipate
possible risks and capture market expectations.
Finance is the area responsible for the elaboration, monitoring, execution and update of the liquidity and funding plan and of the market
access strategy to guarantee and improve the stability and diversification of the wholesale funding sources.
In order to implement and establish management in an anticipated manner, limits are set on an annual basis for the main management
metrics that form part of the budgeting process for the liquidity and funding plan. This framework of limits contributes to the planning of
the joint future performance of:
The loan book, considering the types of assets and their degree of liquidity, as well as their validity as collateral in collateralized
funding.
Stable customer funds, based on the application of a methodology for establishing which segments and customer balances are
considered to be stable or volatile funds based on the principle of sustainability and recurrence of these funds.
Projection of the credit gap, in order to require a degree of self-funding that is defined in terms of the difference between the
loan-book and stable customer funds.
Incorporating the planning of securities portfolios into the banking book, which include both fixed-interest and equity securities,
and are classified as financial assets at fair value through other comprehensive income and at amortized cost, and additionally
on trading portfolios.
The structural gap projection, as a result of assessing the funding needs generated both from the credit gap and by the securities
portfolio in the banking book, together with the rest of on-balance-sheet wholesale funding needs, excluding trading portfolios.
This gap therefore needs to be funded with customer funds that are not considered stable or on wholesale markets.
As a result of these funding needs, BBVA Group plans the target wholesale funding structure according to the tolerance set in each LMU
target.
Thus, once the structural gap has been identified and after resorting to wholesale markets, the amount and composition of wholesale
structural funding is established in subsequent years, in order to maintain a diversified funding mix and guarantee that there is not a high
reliance on short-term funding (short-term wholesale funding plus volatile customer funds).
In practice, the execution of the principles of planning and self-funding at the different LMUs results in the Group’s main source of funding
being customer deposits, which consist mainly of demand deposits, savings deposits and time deposits.
As sources of funding, customer deposits are complemented by access to the interbank market and the domestic and international capital
markets in order to address additional liquidity requirements, implementing domestic and international programs for the issuance of
commercial paper and medium and long-term debt.
The process of analysis and assessment of the liquidity and funding situation and of the inherent risks is a process carried out on an
ongoing basis in the BBVA Group, with the participation of all the Group areas involved in liquidity and funding risk management. This
process is carried out at both local and corporate level. It is incorporated into the decision- making process for liquidity and funding
management, with integration between the risk appetite strategy and establishment and the planning process, the funding plan and the
limits scheme.
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7.4.3 Liquidity and funding performance
During 2019, the BBVA Group has maintained a robust and dynamic funding structure with a predominantly retail nature, where customer
resources represent the main source of funding.
Thus, the performance of the indicators show that the robustness of the funding structure remained steady during 2019, 2018 and 2017,
in the sense that all LMUs held self-funding levels with stable customer resources above the requirements.
LtSCD by LMU
Group (average)
Eurozone
BBVA Mexico
BBVA USA
Garanti BBVA
Other LMUs
December 2019
December 2018
December 2017
108%
108%
116%
111%
99%
103%
106%
101%
114%
119%
110%
99%
110%
108%
109%
109%
122%
108%
With respect to LCR, the Group has maintained a liquidity buffer at both consolidated and individual level in 2019. This has maintained the
ratio easily above 100%, with the consolidated ratio as of December 2019 standing at 129%.
Although this requirement is only established at Group level and banks in the Eurozone, the minimum level required is easily exceeded in
all the subsidiaries. It should be noted that the construction of the Consolidated LCR does not assume the transfer of liquidity between the
subsidiaries, so no excess of liquidity is transferred from these entities abroad to the consolidated ratio. If the impact of these highly liquid
assets is considered to be excluded, the LCR would be 158%, or +29 basis points above the required level.
LCR main LMU
Group
Eurozone
BBVA Mexico
BBVA USA (*)
Garanti BBVA
0
December 2019
December 2018
December 2017
129%
147%
147%
145%
206%
127%
145%
154%
143%
209%
128%
151%
148%
144%
134%
(*)BBVA USA LCR calculated according to local regulation (Fed Modified LCR).
Each entity maintains an individual liquidity buffer, both BBVA, S.A. and each of its subsidiaries, including BBVA USA, BBVA Mexico,
Garanti BBVA and the Latin American subsidiaries.
The table below shows the liquidity available by instrument as of December 31, 2019, 2018 and 2017 for the most significant entities based
on prudential supervisor’s information (Commission Implementing Regulations (EU) 2017/2114 of November 9, 2017):
December 2019 (Millions of Euros)
Cash and withdrawable central bank reserves
Level 1 tradable assets
Level 2A tradable assets
Level 2B tradable assets
Other tradable assets
Non tradable assets eligible for central banks
BBVA
Eurozone
BBVA
Mexico
BBVA USA
Garanti
BBVA
Other
14,516
41,961
403
5,196
22,213
-
6,246
7,295
316
219
1,269
-
4,949
11,337
344
-
952
2,935
6,450
7,953
-
-
669
-
6,368
3,593
-
12
586
-
Cumulated counterbalancing capacity
84,288
15,344
20,516
15,072
10,559
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December 2018 (Millions of Euros)
Cash and withdrawable central bank reserves
Level 1 tradable assets
Level 2A tradable assets
Level 2B tradable assets
Other tradable assets (*)
Non tradable assets eligible for central banks
Cumulated counterbalancing capacity
BBVA
Eurozone
BBVA Mexico BBVA USA
Garanti
BBVA
Other
26,506
29,938
449
4,040
8,772
-
69,705
7,666
4,995
409
33
1,372
-
14,475
1,667
10,490
510
-
1,043
2,314
16,024
7,633
6,502
-
-
499
-
6,677
3,652
-
-
617
-
14,634
10,946
(*) The balance of “BBVA Eurozone” has been reexpressed including the available funding in the European Central Bank (ECB)
December 2017 (Millions of Euros)
Cash and withdrawable central bank reserves
Level 1 tradable assets
Level 2A tradable assets
Level 2B tradable assets
Other tradable assets (*)
Non tradable assets eligible for central banks
Cumulated counterbalancing capacity
BBVA
Eurozone (1)
15,634
38,954
386
4,995
10,192
-
BBVA Mexico BBVA USA Garanti BBVA
Other
8,649
3,805
418
69
1,703
-
2,150
9,028
753
-
1,252
2,800
6,692
5,705
-
-
962
-
6,083
6,141
10
21
1,573
-
70,163
14,644
15,983
13,359
13,828
(1)
Includes Banco Bilbao Vizcaya Argentaria, S.A. and Banco Bilbao Vizcaya Argentaria (Portugal), S.A.
(*) The balance of “BBVA Eurozone” has been reexpressed including the available funding in the European Central Bank (ECB)
The Net Stable Funding Ratio (NSFR), defined as the ratio between the amount of stable funding available and the amount of stable funding
required, is one of the Basel Committee's essential reforms, and requires banks to maintain a stable funding profile in relation to the
composition of their assets and off-balance-sheet activities. This ratio should be at least 100% at all times.
The NSFR of BBVA Group and its main LMUs at December 31, 2019, calculated based on the Basel requirements, is the following:
NSFR main LMU
Group
BBVA Eurozone
BBVA Mexico
BBVA USA
Garanti BBVA
Below is a matrix of residual maturities by contractual periods based on supervisory prudential reporting as of December 31, 2019, 2018
and 2017:
December 2019
120%
113%
130%
116%
151%
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December 2019. Contractual maturities (Millions of Euros)
0
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
ASSETS
Cash, cash balances at central
banks and other demand
deposits
Deposits in credit entities
Deposits in other financial
institutions
Reverse repo, securities
borrowing and margin lending
-
-
-
20,954 20,654
-
-
-
-
3,591
283
488
585
503
-
189
-
24
-
120
- 41,608
432
6,216
1,336
1,120
796
589
991
1,420
1,072
672
2,089
10,084
21,612
3,858
2,287
561
808
4,121
1,838
411
803 36,299
Loans and advances
157 22,015 25,056 24,994
15,777
16,404
42,165
35,917
54,772 122,098 359,354
Securities' portfolio settlement
-
1,622
3,873
6,620
2,017
7,292
21,334
6,115
13,240 46,022 108,136
December 2019. Contractual maturities (Millions of Euros)
0
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
LIABILITIES
Wholesale funding
Deposits in financial institutions
Deposits in other financial
institutions and international
agencies
Customer deposits
Security pledge funding
Derivatives, net
1
1,393
1,714
4,208
1,645
4,386
8,328
10,608
10,803 27,840
70,927
7,377
7,608
493
1,122
172
1,514
386
614
206
510 20,004
10,177
3,859
867
381
367
257
982
503
271,638 43,577
18,550
10,013
7,266
6,605
3,717
2,062
- 45,135
3,202
15,801
1,456
653
3,393
7,206
499
854
759
952
18,843
1,039 365,321
1,308
78,914
-
(66)
(25)
29
(11)
1,097
(830)
(278)
(333)
(420)
(838)
December 2018. Contractual maturities (Millions of Euros)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
ASSETS
Cash, cash balances at central
banks and other demand deposits
9,550 40,599
-
-
-
-
-
-
-
-
50,149
Deposits in credit entities
801
3,211
216
141
83
152
133
178
27
1,269
6,211
Deposits in other financial
institutions
Reverse repo, securities
borrowing and margin lending
1
1,408
750
664
647
375
1,724
896
1,286
2,764
10,515
- 21,266
1,655
1,158
805
498
205
1,352
390
210
27,539
Loans and Advances
132 19,825 25,939 23,265
15,347
16,433 42,100 32,336 53,386 120,571 349,334
Securities' portfolio settlement
-
1,875
4,379
5,990
2,148
6,823
8,592
12,423
11,533 42,738 96,501
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December 2018. Contractual Maturities (Millions of Euros)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
LIABILITIES
Wholesale funding
Deposits in financial institutions
Deposits in other financial
institutions and international
agencies
Customer deposits
Security pledge funding
1
2,678
1,652
2,160
2,425
2,736
7,225
8,578
16,040 26,363 69,858
7,107
5,599
751
1,992
377
1,240
1,149
229
196
904
19,544
10,680
4,327
1,580
458
302
309
781
304
825
1,692
21,258
252,630 44,866
18,514
10,625
6,217
7,345
5,667
2,137
1,207
1,310 350,518
Derivatives, net
(523)
December 2017. Contractual Maturities (Millions of euros)
(75)
-
(68)
40 46,489
2,219
2,274
114
(5)
97
22,911
(117)
498
526
(91)
218
1,627
76,515
(67)
(392)
(840)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
ASSETS
Cash, cash balances at central
banks and other demand
deposits
Deposits in credit entities
Deposits in other financial
institutions
Reverse repo, securities
borrowing and margin lending
8,179
31,029
-
-
-
-
-
-
-
- 39,208
252
4,391
181
1
939
758
169
796
120
628
122
116
447
1,029
112
681
157
1,868
7,488
806
1,975
8,060
18,979
2,689
1,921
541
426
815
30
727
226
- 26,354
Loans and Advances
267
21,203 26,323 23,606
15,380
17,516 43,973 35,383 50,809 123,568 358,028
Securities' portfolio settlement
1
1,579
4,159
4,423
2,380
13,391
5,789
11,289
12,070 44,666 99,747
December 2017. Contractual maturities (Millions of Euros)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
LIABILITIES
Wholesale funding
Deposits in financial institutions
Deposits in other financial
institutions and international
agencies
Customer deposits
Security pledge funding
Derivatives, net
-
3,648
4,209
4,238
1,227
2,456
5,772
6,432
18,391 30,162
76,535
6,831
5,863
1,082
2,335
392
1,714
930
765
171
1,429
21,512
10,700
4,827
3,290
1,959
554
1,328
963
286
355
1,045 25,307
233,068
45,171
18,616
11,428
8,711
10,368
7,607
2,612
1,833
2,034 341,448
- 35,502
2,284
1,405
396
973
64 23,009
338
1,697 65,668
-
(18)
(110)
(116)
(135)
(117)
(336)
(91)
(106)
(419)
(1,448)
The matrix shows the retail nature of the funding structure, with a loan portfolio being mostly funded by customer deposits. On the
outflows side of the matrix, the “demand” maturity bucket mainly contains the retail customer sight accounts whose behavior historically
showed a high level of stability and little concentration. According to a behavior analysis which is done every year in every entity, this type
of account is considered to be stable and for liquidity risk purposes receive a better treatment.
In the Euro Liquidity Management Unit (LMU), the liquidity and funding position maintains solid and comfortable with a slightly increase
of the credit gap in 2019. During 2019, BBVA, S.A. made 7 issues in the public market for €5,750 million and USD 1,000 million; two issues
of Senior Non Preferred (“SNP”) securities at 5 years for €1,000 million each and another one at 7 years for €1,000 million; a T2 issue at
10 years with an early amortization option after the fifth year for €750 million; two AT1 issues for €1,000 million and USD 1,000 million
respectively with an early amortization option after five and a half years for the first and 5 years for the second ; and a Senior Preferred
securities issue at 7 years for €1,000 million.
In Mexico, there was a sound liquidity position despite the credit gap increase in 2019. This increase is mainly due to a lower increase in
deposits as a result of higher market competition. During the financial year 2019, BBVA Mexico made a Tier II issuance on international
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markets for USD 750 million as well as carried out a repurchase for the same amount as part of two subordinated issuances with a maturity
2020 and 2021 which were no longer computing in capital ratios. They also made an issuance on the local market for 10,000 million of
Mexican pesos in 2 tranches: 5,000 million at 3 years and 5,000 million at 8 years.
In the United States, a comfortable liquidity situation has been maintained with a decrease in the credit gap during the year mainly as a
result of an increase in the deposits which has allowed to reduce the dependency on brokered deposits. During the third quarter of 2019,
BBVA USA issued successfully a Senior debt note of USD 600 million at 5 years.
In Turkey we closed the year with an adequate liquidity situation, with Garanti BBVA showing an evolution of the credit gap in foreign
currency and therefore reducing the wholesale financing, allowing throughout an adequate buffer of liquid assets. The main operations
during the year were two syndicated loans for USD 1,600 million, a subordinated issuance for an amount of 252 million of Turkish lira (€39
million) and a securitization (Diversified Payment Rights) for USD 150 million. In addition, Garanti BBVA financed itself with a bilateral loan
for an amount of USD 322 million and issued a green bond for USD 50 million in December 2019. Furthermore, additional bilateral funds
for USD 110 million have been signed in December 2019.
Argentina was affected by the change in the political situation generating a reduction of deposits and credits in foreign currency in the
banking system. In this context, BBVA Argentina has maintained at any time a sound liquidity position supported by higher requirements
of regulatory reserve regulations. BBVA Argentina issued 1,619 million of Argentine pesos (€24 million) in the local market in the first
quarter of 2019 and later, in the fourth quarter, issued an additional 1,967 million of Argentine pesos (€29 million).
The liquidity position of the rest of subsidiaries has continued to be sound, maintaining a solid liquidity position in all the jurisdictions in
which the Group operates.
In this context, BBVA has maintained its objective of strengthening the funding structure of the different Group entities based on growing
their self-funding from stable customer funds, while guaranteeing a sufficient buffer of fully available liquid assets, diversifying the various
sources of funding available, and optimizing the generation of collateral available for dealing with stress situations in the markets.
7.4.4 Asset encumbrance
As of December 31, 2019, 2018 and 2017, the encumbered (those provided as collateral for certain liabilities) and unencumbered assets
are broken down as follows:
December 2019 (Millions of Euros)
Encumbered assets
Non-encumbered assets
Book value
Market value
Book value
Market value
Assets
Equity instruments
Debt securities
Loans and advances and other assets
101,792
3,526
29,630
68,636
3,526
29,567
596,898
12,113
95,611
489,174
12,113
95,611
December 2018 (Millions of Euros)
Encumbered assets
Non-encumbered assets
Book value
Market value
Book value
Market value
Assets
Equity instruments
Debt Securities
Loans and Advances and other assets
107,950
1,864
31,157
74,928
1,864
32,216
-
567,573
6,485
82,209
478,880
6,485
82,209
-
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2017 (Millions of euros)
Encumbered assets
Non-encumbered assets
Book value
Market value
Book value
Market value
Assets
Equity instruments
Debt Securities
Loans and Advances and other assets
110,600
2,297
28,700
79,604
2,297
29,798
579,459
9,616
84,391
485,451
9,616
84,391
The committed value of "Loans and Advances and other assets" corresponds mainly to loans linked to the issue of covered bonds,
territorial bonds or long-term securitized bonds (see Note 22.4) as well as those used as a guarantee to access certain funding
transactions with central banks. Debt securities and equity instruments correspond to underlying that are delivered in repos with different
types of counterparties, mainly clearing houses or credit institutions, and to a lesser extent central banks. Collateral provided to guarantee
derivative transactions is also included as committed assets.
As of December 31, 2019, 2018 and 2017, collateral pledges received mainly due to repurchase agreements and securities lending, and
those which could be committed in order to obtain funding are provided below:
December 2019. Collateral received (Millions of euros)
0
Fair value of
encumbered collateral
received or own debt
securities issued
Fair value of collateral
received or own debt
securities issued
available for
encumbrance
Nominal amount of
collateral received or
own debt securities
issued not available
for encumbrance
Collateral received
Equity instruments
Debt securities
Loans and advances and other assets
Own debt securities issued other than own covered
bonds or ABSs
December 2018. Collateral received (Millions of Euros)
38,496
65
38,431
-
-
9,208
70
9,130
8
82
48
-
38
10
-
0
Fair value of
encumbered collateral
received or own debt
securities issued
Fair value of collateral
received or own debt
securities issued
available for
encumbrance
Nominal amount of
collateral received or
own debt securities
issued not available
for encumbrance
Collateral received
Equity instruments
Debt securities
Loans and advances and other assets
Own debt securities issued other than own covered
bonds or ABSs
27,474
89
27,385
-
78
5,633
82
5,542
8
87
319
-
300
19
-
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2017. Collateral received (Millions of euros)
Fair value of
encumbered collateral
received or own debt
securities issued
Fair value of collateral
received or own debt
securities issued
available for
encumbrance
Nominal amount of
collateral received or
own debt securities
issued not available for
encumbrance
Collateral received
Equity instruments
Debt securities
Loans and Advances and other assets
Own debt securities issued other than own covered
bonds or ABSs
23,881
103
23,715
63
3
9,630
5
9,619
6
161
201
-
121
80
-
The guarantees received in the form of reverse repurchase agreements or security lending transactions are committed by their use in
repurchase agreements, as is the case with debt securities.
As of December 31, 2019, 2018 and 2017, financial liabilities issued related to encumbered assets in financial transactions as well as their
book value were as follows:
Sources of encumbrance (Millions of Euros)
December 2019
December 2018
December 2017
Matching
liabilities,
contingent
liabilities or
securities lent
Assets, collateral
received and own
debt securities issued
other than covered bonds
and ABSs encumbered
Matching
liabilities,
contingent
liabilities or
securities lent
Assets, collateral
received and own
debt securities
issued other than
covered bonds and
ABSs encumbered
Matching
liabilities,
contingent
liabilities or
securities lent
Assets, collateral
received and own
debt securities
issued other than
covered bonds and
ABSs encumbered
Book value of financial
liabilities
Derivatives
Loans and advances
Outstanding subordinated debt
Other sources
124,252
19,066
87,906
17,280
449
7.5 Legal risk factors
135,500
113,498
131,172
118,704
20,004
94,240
21,256
4,788
8,972
85,989
18,538
3,972
11,036
97,361
22,775
4,330
11,843
87,484
19,377
305
133,312
11,103
98,478
23,732
1,028
The financial sector is exposed to increasing litigation, so the financial institutions face a large number of proceedings of every kind, civil,
criminal, administrative, litigation, as well as investigations from the supervisor or other governmental authorities, along several
jurisdictions, which consequences are difficult to determine (including those procedures in which an undetermined number of applicants
is involved, in which damages claimed are not easy to estimate, in which an exorbitant amount is claimed, in which new jurisdictional issues
are introduced under creative non – contrasted legal arguments and those which are at a very initial stage).
In Spain, in many of the existing procedures, applicants claim, both at Spanish courts and through preliminary rulings towards the
European Union Court of Justice that various clauses usually included under a mortgage loan with credit institutions are stated abusive
(including mortgage fees clauses, early redemption right clause, referenced interest rate type and opening fee).
In particular, with regards to consumer mortgage loan agreements linked to the mortgage loan reference index (Índice de Referencia de
los Préstamos Hipotecarios — mortgage loan reference index) (IRPH), which is the average interest rate calculated by the Bank of Spain
and published in the Official Spanish Gazette (Boletín Oficial del Estado) for mortgage loans of more than three years for freehold housing
purchases granted by Spanish credit institutions and which is considered the “official interest rate” by mortgage transparency regulations,
on 14th December, 2017 the Spanish Supreme Court, in its Ruling No 669/2017 (the Ruling), held that it was not possible to determine
that a loan's interest rate was not transparent simply due to it making reference to one official rate or another, nor can its terms then be
confirmed as unfair under the provisions of Directive 93/13/EEC of 5th April, 1993. As of the date of this Annual Report, a preliminary
ruling is pending in which the Ruling is being challenged before the Court of Justice of the European Union. BBVA considers that the Ruling
is clear and well founded.
On 10th September, 2019, the Advocate General of the Court of Justice of the European Union issued a report on this matter.
In that report, the Advocate General of the Court of Justice of the European Union concluded that the bank to which the preliminary ruling
relates (Bankia, S.A.) complied with the requirement of transparency imposed by the applicable European regulation. The Advocate
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
General also indicated that it is for the national courts to carry out the checks they consider necessary in order to analyze compliance with
the applicable transparency obligations in each individual case.
The Advocate General's report does not bind the decision which the Court of Justice of the European Union may take finally on this matter
in the future.
It is therefore necessary to await the Court of Justice of the European Union’s ruling on the matter referred in the preliminary ruling in
order to determine whether it may have any effect on BBVA.
The impact of any potential unfavorable ruling by the Court of Justice of the European Union is difficult to predict at this time, but could be
material. The impact of such a resolution may vary depending on matters such as (i) the decision of the Court of Justice of the European
Union on what interest rate should be applied to the applicable loans; and (ii) whether the effects of the judgment are applied retroactively.
According to the latest available information, the amount of mortgage loans to individuals linked to IRPH and up to date with the payment
is approximately €2,800 million.
In addition, there are also claims before the Spanish courts challenging the application of certain interest rates and other mandatory rules
to certain revolving credit card agreements. The resolutions in this type of proceedings against the Group or other banking entities may
directly or indirectly affect the Group.
The Group is involved in several competition investigations and other legal actions related to competition initiated by third parties in
various countries which may give raise to penalties and claims by third parties.
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt). Such
investigation includes the provision of services by Cenyt to the Bank. On July 29, 2019, the Bank was named as an official suspect
(investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9, Central Investigating Court No. 6 of
the National High Court) for alleged facts which could be constitutive of bribery, revelation of secrets and corruption. Certain current and
former officers and employees of the Group, as well as former directors have also been named as official suspects in connection with this
investigation. The Bank has been and continues to proactively collaborate with the Spanish judicial authorities, including sharing with the
courts the relevant information from its on-going forensic investigation regarding its relationship with Cenyt. The Bank has also testified
before the judge and prosecutors at the request of the Central Investigating Court No. 6 of the National High Court.
On February 3, 2020, the Bank was notified by the Central Investigating Court No. 6 of the National High Court of the order lifting the
secrecy of the proceedings.
This criminal judicial proceeding is at a preliminary stage. Therefore, it is not possible at this time to predict the scope or duration of such
proceeding or any related proceeding or its or their possible outcomes or implications for the Group, including any fines, damages or harm
to the Group’s reputation caused thereby.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
8.
Fair value of financial instruments
Framework and processes control
As part of the process established in the Group for determining the fair value in order to ensure that financial assets and liabilities are
properly valued, BBVA has established, at a geographic level, a structure of Risk Operational Admission and Product Governance
Committees responsible for validating and approving new products or types of financial assets and liabilities before being contracted.
Local management responsible for valuation, which are independent from the business (see Management Report - Risk) are members of
these committees.
These areas are required to ensure, prior to the approval stage, the existence of not only technical and human resources, but also
adequate informational sources to measure the fair value of these financial assets and liabilities, in accordance with the rules established
by the valuation global area and using models that have been validated and approved by the responsible areas.
Fair value hierarchy
The fair value of financial instruments is commonly defined as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (market-based measurement).
All financial instruments, both assets and liabilities are initially recognized at fair value, which at that point is equivalent to the transaction
price, unless there is evidence to the contrary in the market. Subsequently, depending on the type of financial instrument, it may continue
to be recognized at amortized cost or fair value through adjustments in the consolidated income statement or equity.
When possible, the fair value is determined as the market price of a financial instrument. However, for many of the financial assets and
liabilities of the Group, especially in the case of derivatives, there is no market price available, so its fair value is estimated on the basis of
the price established in recent transactions involving similar instruments or, in the absence thereof, by using mathematical measurement
models that are sufficiently tried and trusted by the international financial community. The estimates of the fair value derived from the use
of such models take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of
risk associated with such asset or liability. However, the limitations inherent in the measurement models and possible inaccuracies in the
assumptions and parameters required by these models may mean that the estimated fair value of an asset or liability does not exactly
match the price for which the asset or liability could be exchanged or settled on the date of its measurement.
Additionally, for financial assets and liabilities that show significant uncertainty in inputs or model parameters used for valuation, criteria
is established to measure said uncertainty and activity limits are set based on these. Finally, these measurements are compared, as much
as possible, against other sources such as the measurements obtained by the business teams or those obtained by other market
participants.
The process for determining the fair value requires the classification of the financial assets and liabilities according to the measurement
processes used as set forth below:
Level 1: Valuation using directly the quotation of the instrument, observable and readily and regularly available from independent
price sources and referenced to active markets that the entity can access at the measurement date. The instruments classified
within this level are fixed-income securities, equity instruments and certain derivatives.
Level 2: Valuation of financial instruments with commonly accepted techniques that use inputs obtained from observable data
in markets.
Level 3: Valuation of financial instruments with valuation techniques that use significant unobservable inputs in the market. As
of December 31, 2019, the affected instruments at fair value accounted for approximately 0.57% of financial assets and 0.14%
of the Group’s financial liabilities. Model selection and validation is undertaken by control areas outside the business areas.
8.1
Fair value of financial instruments
The fair value of the Group’s financial instruments in the accompanying consolidated balance sheets and its corresponding carrying
amounts, as of December 31, 2019, 2018 and 2017 are presented below:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Fair Value and carrying amount (Millions of euros)
2019
2018
Notes
Carrying
amount
Fair value
Carrying
amount
Fair value
ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit
or loss
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Hedging derivatives
LIABILITIES
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Hedging derivatives
Fair value and carrying amount (Millions of Euros)
9
10
11
12
13
14
15
10
12
22
15
ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Available-for-sale financial assets
Loans and receivables
Held-to-maturity investments
Derivatives – Hedge accounting
LIABILITIES
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Derivatives – Hedge accounting
44,303
44,303
102,688
102,688
5,557
1,214
5,557
1,214
58,196
90,117
5,135
1,313
58,196
90,117
5,135
1,313
61,183
61,183
56,337
56,337
439,162
1,729
89,633
10,010
516,641
2,233
442,788
1,729
89,633
10,010
515,910
2,233
419,857
2,892
80,774
6,993
510,300
2,680
419,660
2,892
80,774
6,993
509,185
2,680
2017
Notes
Carrying amount
Fair value
9
10
12
-
-
-
15
10
12
22
15
42,680
64,695
2,709
69,476
431,521
13,754
2,485
46,182
2,222
543,713
2,880
42,680
64,695
2,709
69,476
438,991
13,865
2,485
46,182
2,222
544,604
2,880
The year 2017 is presented for comparison purposes separately due to the implementation of IFRS 9.
Not all financial assets and liabilities are recorded at fair value, so below we provide the information on financial instruments recorded at
fair value and subsequently the information of those recorded at amortized cost (including their fair value although this value is not used
when accounting for these instruments).
8.1.1
Fair value of financial instruments recognized at fair value, according to valuation criteria
Below are the different elements used in the valuation technique of financial instruments.
Active Market
BBVA considers active market as a market that allows the observation of bid and offer prices representative of the levels to which the
market participants are willing to negotiate an asset, with sufficient frequency and volume.
By default, BBVA would consider all internally approved “Organized Markets” as active markets, without considering this an unchangeable
list.
Furthermore, BBVA would consider as traded in an “Organized Market” quotations for assets or liabilities from Over The Counter (OTC)
markets when they are obtained from independent sources, observable on a daily basis and fulfil certain conditions.
The following table shows the financial instruments carried at fair value in the accompanying consolidated balance sheets, broken down
by level used to determine their fair value:
P.87
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Fair value of financial instruments by levels (Millions of Euros)
2019
2018
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
ASSETS-
Financial assets held for trading
Loans and advances
Debt securities
Equity instruments
Derivatives
31,135
697
18,076
8,832
3,530
70,045
32,321
8,178
-
29,546
1,508
1,285
55
59
109
26,730
47
17,884
5,194
3,605
62,983
28,642
7,494
-
26,846
Non-trading financial assets mandatorily at fair value through profit or loss
4,305
92
1,160
3,127
Loans and advances
Debt securities
Equity instruments
Financial assets designated at fair value through profit or loss
Loans and advances
Debt securities
Equity instruments
82
-
4,223
1,214
-
1,214
-
-
91
1
-
-
-
-
1,038
19
103
-
-
-
-
25
90
3,012
1,313
-
1,313
-
Financial assets at fair value through other comprehensive income
50,896
9,203
1,084
45,824
33
49,070
1,794
44
26,266
9,595
4,425
12,246
-
-
-
-
30
-
9,057
146
1,685
62,541
32,121
30,419
1
9,984
944
4,629
4,410
2,192
-
604
480
-
827
649
175
2
27
-
27
-
11
33
43,788
2,003
7
22,932
7,989
3,919
11,024
-
-
-
-
223
404
60
199
60
85
1,929
1,778
76
75
-
-
-
-
1,190
-
711
479
3
269
-
267
1
2,515
-
-
2,515
3
78
-
71
8
-
-
-
-
9,323
-
9,211
113
2,882
57,573
29,945
27,628
-
4,478
976
2,858
643
2,454
2017
Level 1
Level 2
Level 3
29,057
-
21,107
6,688
1,262
2,061
-
-
174
1,888
57,381
54,850
2,531
-
11,191
1,183
10,008
-
274
35,349
56
1,444
33
33,815
648
648
-
-
-
11,082
10,948
134
2,483
34,866
34,866
-
2,222
2,606
289
-
22
80
187
-
-
-
-
-
544
454
90
2
125
119
6
-
-
Loans and advances
Debt securities
Equity instruments
Hedging derivatives
LIABILITIES-
Financial liabilities held for trading
Deposits
Trading derivatives
Other financial liabilities
Financial liabilities designated at fair value through profit or loss
Customer deposits
Debt certificates
Other financial liabilities
Derivatives – Hedge accounting
Fair value of financial instruments by levels (Millions of euros)
ASSETS-
Financial assets held for trading
Loans and advances to customers
Debt securities
Equity instruments
Derivatives
Financial assets designated at fair value through profit or loss
Loans and advances to customers
Loans and advances to credit institutions
Debt securities
Equity instruments
Available-for-sale financial assets
Debt securities
Equity instruments
Hedging derivatives
LIABILITIES-
Financial liabilities held for trading
Derivatives
Short positions
Financial liabilities designated at fair value through profit or loss
Derivatives – Hedge accounting
The year 2017 is presented for comparison purpose separately due to the implementation of IFRS 9.
The following table sets forth the main valuation techniques, hypothesis and inputs used in the estimation of fair value of the financial
instruments classified under Levels 2 and 3, based on the type of financial asset and liability and the corresponding balances as of
December 31, 2019:
P.88
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Fair value of financial Instruments by levels. December 2019 (Millions of euros)
ASSETS
Financial assets held for trading
Loans and advances
Debt securities
Equity instruments
Derivatives
Interest rate
Equity
Foreign exchange and gold
Credit
Commodities
Level 2
Level 3
Valuation technique(s)
Observable inputs
Unobservable inputs
70,045
1,508
32,321
1,285
Present-value method
(Discounted future cash flows)
8,178
-
29,546
55
59
109
Present-value method
(Discounted future cash flows)
Observed prices in non active markets
Comparable pricing (Observable price in a similar market)
Present-value method
- Issuer´s credit risk
- Current market interest rates
- Funding interest rates observed in the market or in
consensus services
- Exchange rates
- Prepayment rates
- Issuer´s credit risk
- Recovery rates
- Funding interest rates not observed in the
market or in consensus services
- Issuer´s credit risk
- Current market interest rates
- Non active markets prices
- Brokers quotes
- Market operations
- NAVs published
- Prepayment rates
- Issuer´s credit risk
- Recovery rates
- NAV not published
Interest rate products (Interest rate Swaps, Call money Swaps y FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Swaptions: Black, Hull-White y LGM
Other Interest rate Options: Black, Hull-White y LGM
Constant Maturity Swaps: SABR
Future and Equity Forward: Discounted future cash flows
Equity Options: Local Volatility, Momentum adjustment
Future and Equity Forward: Discounted future cash flows
Foreign exchange Options: Local volatility, moments adjustment
Credit Derivatives: Default model and Gaussian copula
Commodities: Momentum adjustment and discounted cash flows
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices: shares, funds,
commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
Non-trading financial assets mandatorily at fair value through profit or loss
92
1,160
Loans and advances
Debt securities
Equity instruments
Financial assets at fair value through other comprehensive income
Debt securities
Equity instruments
Hedging derivatives
Interest rate
Equity
Foreign exchange and gold
Credit
Commodities
-
91
1
9,203
9,057
146
1,685
1,038
Specific liquidation criteria regarding losses of the EPA proceedings
PD and LGD of the internal models, valuations and specific criteria of the EPA proceedings
Discounted future cash flows
19
Present-value method
(Discounted future cash flows)
Comparable pricing (Observable price in a similar market)
Present-value method
Present-value method
(Discounted future cash flows)
Observed prices in non active markets
Comparable pricing (Observable price in a similar market)
Present-value method
103
1,084
604
480
-
- Issuer credit risk
- Current market interest rates
- Brokers quotes
- Market operations
- NAVs published
- Issuer´s credit risk
- Current market interest rates
- Non active market prices
- Brokers quotes
- Market operations
- NAVs published
Interest rate products (Interest rate Swaps, Call money Swaps y FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Swaptions: Black, Hull-White y LGM
Other Interest rate Options: Black, Hull-White y LGM
Constant maturity Swaps: SABR
Future and Equity Forward: Discounted future cash flows
Equity Options: Local volatility, Momentum adjustment
Future and Equity Forward: Discounted future cash flows
Foreign exchange Options: Local volatility, moments adjustment
Credit Derivatives: Default model and Gaussian copula
Commodities: Momentum adjustment and Discounted cash flows
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices: shares, funds,
commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Beta
- Implicit correlations between tenors
- interest rates volatility
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
- Implicit dividends and long term repos
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
- Prepayment rates
- Business plan of the underlying asset, WACC,
macro scenario
- Property valuation
- Prepayment rates
- Issuer credit risk
- Recovery rates
- NAV provided by the administrator of the fund
- Prepayment rates
- Issuer credit risk
- Recovery rates
- NAV provided by the administrator of the fund
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prevails.
Fair Value of financial Instruments by Levels. December 2019 (Millions of euros)
Level 2
62,541
32,121
30,419
1
9,984
2,192
LIABILITIES
Financial liabilities held for trading
Deposits
Derivatives
Interest rate
Equity
Foreign exchange and gold
Credit
Commodities
Short positions
Financial liabilities designated at fair value
through profit or loss
Derivatives – Hedge accounting
Interest rate
Equity
Foreign exchange and gold
Credit
Commodities
Level 3
Valuation technique(s)
Observable inputs
Unobservable inputs
827
649
175
2
27
11
Present-value method
(Discounted future cash flows)
- Interest rate yield
- Funding interest rates observed in the market
or in consensus services
- Exchange rates
- Funding interest rates not observed in
the market or in consensus services
Interest rate products (Interest rate Swaps, call money Swaps y FRA): Discounted
cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Swaptions: Black, Hull-White y LGM
Other Interest rate Options: Black, Hull-White y LGM
Constant Maturity Swaps: SABR
Future and Equity forward: Discounted future cash flows
Equity Options: Local volatility, momentum adjustment
Future and Equity Forward: Discounted future cash flows
Foreign exchange Options: Local volatility, moments adjustment
Credit Derivatives: Default model and Gaussian copula
Commodities: Momentum adjustment and discounted cash flows
Present-value method
(Discounted future cash flows)
Present-value method
(Discounted future cash flows)
Interest rate products (Interest rate Swaps, Call money Swaps y FRA): Discounted
cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Swaptions: Black, Hull-White y LGM
Other Interest rate Options: Black, Hull-White y LGM
Constant Maturity Swaps: SABR
Future and Equity Forward: Discounted future cash flows
Equity Options: Local volatility, momentum adjustment
Future and Equity Forward: Discounted future cash flows
Foreign exchange Options: Local Volatility, moments adjustment
Credit Derivatives: Default model and Gaussian copula
Commodities: Momentum adjustment and discounted cash flows
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices: shares, funds,
commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Beta
- Correlation between tenors
- Interest rates volatility
- Volatility of volatility
- Assets correlation
- Volatility of volatility
- Assets correlation
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
- Prepayment rates
- Issuer´s credit risk
- Current market interest rates
- Prepayment rates
- Issuer´s credit risk
- Current market interest rates
- Prepayment rates
- Issuer´s credit risk
- Current market interest rates
- Beta
- Implicit correlations between tenors
- interest rates volatility
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices: shares, funds,
commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
- Implicit dividends and long term repos
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
P.90
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Main valuation techniques
The main techniques used for the assessment of the majority of the financial instruments classified in Level 3, and its main unobservable
inputs, are described below:
The net present value (net present value method): This technique uses the future cash flows of each financial instrument, which are
established in the different contracts, and discounted to their present value. This technique often includes many observable inputs,
but may also include unobservable inputs, as described below:
•
•
Credit Spread: This input represents the difference in yield of a debt security and the reference rate, reflecting the additional
return that a market participant would require to take the credit risk of that debt security. Therefore, the credit spread of the
debt security is part of the discount rate used to calculate the present value of the future cash flows.
Recovery rate: This input represents the percentage of principal and interest recovered from a debt instrument that has
defaulted.
Comparable prices (similar asset prices): This input represents the prices of comparable financial instruments and benchmarks
used to calculate a reference yield based on relative movements from the entry price or current market levels. Further adjustments
to account for differences that may exist between financial instrument being valued and the comparable financial instrument may
be added. It can also be assumed that the price of the financial instrument is equivalent to the comparable instrument.
Net asset value: This input represents the total value of the financial assets and liabilities of a fund and is published by the fund
manager thereof.
Gaussian copula: This model is used to integrate default probabilities of credit instruments referenced to more than one underlying
CDS. The joint density function used to value the instrument is constructed by using a Gaussian copula that relates the marginal
densities by a normal distribution, usually extracted from the correlation matrix of events approaching default by CDS issuers.
Black 76: variant of Black Scholes model, whose main application is the valuation of bond options, cap floors and swaptions where
the behavior of the Forward and not the Spot itself, is directly modeled.
Black Scholes: The Black Scholes model postulates log-normal distribution for the prices of securities, so that the expected return
under the risk neutral measure is the risk free interest rate. Under this assumption, the price of vanilla options can be obtained
analytically, so that inverting the Black- Scholes formula, the implied volatility for process of the price can be calculated.
Heston: This model, typically applied to equity OTC options, assumes stochastic behavior of volatility. According to which, the
volatility follows a process that reverts to a long-term level and is correlated with the underlying equity instrument. As opposed to
local volatility models, in which the volatility evolves deterministically, the Heston model is more flexible, allowing it to be similar to
that observed in the short term today.
Libor market model: This model assumes that the dynamics of the interest rate curve can be modeled based on the set of forward
contracts that compose the underlying interest rate. The correlation matrix is parameterized on the assumption that the correlation
between any two forward contracts decreases at a constant rate, beta, to the extent of the difference in their respective due dates.
The input “Credit default volatility” is a volatility input of the credit factor dynamic. The multifactorial frame of this model makes it
ideal for the valuation of instruments sensitive to the slope or curve, including interest rate option.
Local Volatility: In the local volatility models of the volatility, instead of being static, evolves over time according to the level of
moneyness of the underlying, capturing the existence of smiles. These models are appropriate for pricing path dependent options
when use Monte Carlo simulation technique is used.
Adjustments to the valuation for risk of default
Under IFRS 13 the credit risk valuation adjustments must be considered in the classification of assets and liabilities within fair value hierarchy,
because of the absence of observable data of probabilities of default and recoveries used in the calculation.
These adjustments are calculated by estimating Exposure At Default, Probability of Default and Loss Given Default, which are based on the
recovery levels for all derivative products on any instrument, deposits and repos at the legal entity level (all counterparties under a same ISDA
/ CMOF), in which BBVA has exposure.
The credit valuation adjustments (“CVA”) and debit valuation adjustments (“DVA”) are a part of derivative instrument valuations, both financial
assets and liabilities, to reflect the impact in the fair value of the credit risk of the counterparty and BBVA, respectively.
P.91
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
As a general rule, the calculation of CVA is done through simulations of market and credit variables to calculate the expected positive exposure,
given the Exposure at Default and multiplying the result by the Loss Given Default of the counterparty. Consequently, the DVA is calculated as
the result of the expected negative exposure given the Exposure at Default and multiplying the result by the Loss Given Default of the
counterparty. Both calculations are performed throughout the entire period of potential exposure.
The information needed to calculate the exposure at default and the loss given default come from the credit markets (Credit Default Swaps or
iTraxx Indexes), where rating is available. For those cases where the rating is not available, BBVA implements a mapping process based on the
sector, rating and geography to assign probabilities of both probability of default and loss given default, calibrated directly to market or with an
adjustment market factor for the probability of default and the historical expected loss.
The amounts recognized in the consolidated balance sheet as of December 31, 2019 and 2018 related to the valuation adjustments to the credit
assessment of the derivative asset as “Credit Valuation Adjustments” (“CVA”) was €-106 million and €-163 million respectively, and the
valuation adjustments to the derivative liabilities as “Debit Valuation Adjustment” (DVA) was €117 million and €214 million respectively . The
impact recorded under “Gains or (-) losses on financial assets and liabilities held for trading, net” in the consolidated income statement as of
December, 2019 and 2018 corresponding to the mentioned adjustments was a net impact of €67 million and €-24 million respectively.
Additionally, as of December, 2019 and 2018, €-8 and €-12 million related to the “Funding Valuation Adjustments” (“FVA”) were recognized in
the consolidated balance sheet, being the impact on results €4 million and €-2 million, respectively.
Unobservable inputs
Quantitative information of unobservable inputs used to calculate Level 3 valuations is presented below as of December 31, 2019:
Financial instrument Valuation technique(s)
Significant
unobservable inputs
Min
Average
Max
Units
Loans and advances
Present value method
Repo funding curve
Credit spread
Recovery rate
(6)
18
16
83
100
504
0.00%
28.38%
40.00%
0.01%
98.31%
135.94%
p.b.
p.b
%
%
Debt securities
Equity instruments (*)
Credit option
Corporate Bond option
Equity OTC option
Net present value
Comparable pricing
Net asset Value
Comparable pricing
Gaussian Copula
Black 76
Heston
Local volatility
FX OTC options
Black Scholes/Local Vol Volatility
Beta
Correlation default
19.37%
44.33%
61.08%
%
Price volatility
-
-
-
Vegas
Forward volatility skew
35.12
35.12
35.12
Vegas
Dividends (**)
Volatility
2.49
3.70
0.25
23.21
60.90
Vegas
6.30
10.05
Vegas
2.00
18.00
%
%
Interest rate options
Libor Market Model
Correlation rate/Credit
(100)
100
(*) Due to the diversity of valuation models of equity valuations, we would not include all the unobservable inputs or the quantitative ranges of them.
(**) The range of non-observable dividends has too wide range to be relevant.
Credit default Volatility
-
-
-
Vegas
Financial assets and liabilities classified as Level 3
The changes in the balance of Level 3 financial assets and liabilities included in the accompanying consolidated balance sheets are as follows:
P.92
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets Level 3: Changes in the year (Millions of Euros)
2019
2018
2017
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Balance at the beginning
Group additions
Changes in fair value recognized in profit and loss (*)
Changes in fair value not recognized in profit and loss
Acquisitions, disposals and liquidations (**)
Net transfers to Level 3
Exchange differences and others
Balance at the end
3,527
2,787
835
-
125
-
822
-
116
-
-
-
112
2
5
77
31
3,753
44
(167)
(95)
(24)
(21)
-
595
(2,751)
189
865
(4)
-
2,102
2,710
761
-
47
-
3,527
2,787
(45)
32
106
(55)
835
-
320
(39)
(250)
125
(*)
(**)
Profit or loss that is attributable to gains or losses relating to those financial assets and liabilities held as of December 31, 2019, 2018 and 2017. Valuation adjustments are
recorded under the heading “Gains (losses) on financial assets and liabilities (net)”.
Of which, in 2019, the assets roll forward is comprised of €1,525 million of acquisitions, €1,102 million of disposals and €417 million of liquidations. The liabilities roll
forward is comprised of €858 million of acquisitions, €53 million of sales and €210 million of liquidations.
During 2019, certain interest rate yields have been adapted to those observable in the market, which mainly affects the valuation of certain
deposit classes recorded under “Financial liabilities at amortized cost” and certain insurance products recorded under “Financial liabilities
designated at fair value through profit or loss - Other financial liabilities”, and, a result thereof, their classification as instruments has changed
from Level 3 to Level 2. Additionally, in Level 3, €1,285 million in assets held for trading and €649 in liabilities held for trading have been
classified, mainly due to certain reverse repurchase and repurchase agreements, due to the non-observability and liquidity in the interest rate
yield for the financing of assets applied in the calculation of its fair value.
As of December 31, 2019, 2018 and 2017, the profit/loss on sales of financial instruments classified as Level 3 recognized in the accompanying
consolidated income statement was not material.
Transfers between levels
The Global Valuation Area, in collaboration with the Group, has established the rules for a proper financial instruments held for trading
classification according to the fair value hierarchy defined by IFRS.
On a monthly basis, any new assets added to the portfolio are classified, according to this criterion, by the subsidiaries. Then, there is a
quarterly review of the portfolio in order to analyze the need for a change in classification of any of these assets.
The financial instruments transferred between the different levels of measurement for the year ended December 31, 2019, are at the following
amounts in the accompanying consolidated balance sheets as of December 31, 2019:
Transfer between Levels. December 2019 (Millions of Euros)
ASSETS
Financial assets held for trading
Non-trading financial assets mandatorily at fair value
through profit or loss
Financial assets designated at fair value through profit or
loss
Financial assets at fair value through other comprehensive
income
Derivatives
Total
LIABILITIES
Derivatives
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or
loss
Total
From:
To:
Level 1
Level 2
Level 3
Level 2
Level 3
Level 1
Level 3
Level 1
Level2
74
-
-
6
-
79
-
1
-
1
-
-
-
6
-
6
-
-
-
-
1,119
23
-
4
-
1,145
-
-
-
-
502
2
-
209
26
739
27
-
27
54
1
-
1
-
-
2
-
-
-
-
160
44
-
454
10
667
125
-
2,679
2,804
P.93
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The amount of financial instruments that were transferred between levels of valuation during the year ended December 31, 2019, is not material
relative to the total portfolios, and corresponds to the above changes in the classification between levels these financial instruments modified
some of their features, specifically:
Transfers between Levels 1 and 2 represent mainly debt securities and equity instruments, which are either no longer listed on an
active market (transfer from Level 1 to 2) or have just started to be listed (transfer from Level 2 to 1).
Transfers from Level 2 to Level 3 are mainly due to transactions of financial assets held for trading, derivatives and financial liabilities
designated at fair value through profit or loss.
Transfers from Level 3 to Level 2 generally affect derivative and debt securities transactions, for which inputs observable in the
market have been obtained.
Sensitivity analysis
Sensitivity analysis is performed on financial instruments with significant unobservable inputs (financial instruments included in level 3), in
order to obtain a reasonable range of possible alternative valuations. This analysis is carried out on a monthly basis, based on the criteria
defined by the Global Valuation Area taking into account the nature of the methods used for the assessment and the reliability and availability
of inputs and proxies used. In order to establish, with a sufficient degree of certainty, the valuating risk that is incurred in such assets without
applying diversification criteria between them.
As of December 31, 2019, the effect on profit for the year and total equity of changing the main unobservable inputs used for the measurement
of Level 3 financial instruments for other reasonably possible unobservable inputs, taking the highest (most favorable input) or lowest (least
favorable input) value of the range deemed probable, would be as follows:
Financial instruments Level 3: Sensitivity analysis (Millions of Euros)
Potential impact on consolidated
income statement
Potential impact on
other comprehensive income
Most favorable
hypothesis
Least favorable
hypothesis
Most favorable
hypothesis
Least favorable
hypothesis
ASSETS
Financial assets held for trading
Loans and Advances
Debt securities
Equity instruments
Derivatives
Non-trading financial assets mandatorily at
fair value through profit or loss
Loans and advances
Debt securities
Equity instruments
Financial assets designated at fair value
through profit or loss
Financial assets at fair value through other
comprehensive income
Total
LIABILITIES
Financial liabilities held for trading
Total
5
-
3
1
2
367
354
7
5
-
-
372
3
3
(60)
(10)
-
(48)
(2)
(66)
(61)
-
(6)
-
-
(126)
(3)
(3)
-
-
-
-
-
-
-
-
-
-
10
10
-
-
-
-
-
-
-
-
-
-
-
-
(1)
(1)
-
-
8.2
Fair value of financial instruments carried at cost, by valuation criteria
The valuation technique used to calculate the fair value of financial assets and liabilities carried at cost as of December 31, 2019 are presented
below:
P.94
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets
Cash, balances at central banks and other demand deposits / loans to central banks / short-term loans to credit institutions/
Repurchase agreements: in general, their fair value is assimilated to their book value, due to the nature of the counterparty and
because they are mainly short-term balances in which the book value is the most reasonable estimation of the value of the asset.
Loans to credit institutions which are not short-term and loans to customers: In general, the fair value of these financial assets is
determined by the discount of expected future cash flows, using market interest rates at the time of valuation adjusted by the credit
spread and taking all kind of behavior hypothesis if it is considered to be relevant (prepayment fees, optionality, etc.).
Debt securities: Fair value estimated based on the available market price or by using internal valuation methodologies.
Financial liabilities
Deposits from central banks: for recurrent liquidity auctions and other monetary policy instruments of central banks / short-term
deposits, from credit institutions / repurchase agreements / short term customer deposits: their book value is considered to be the
best estimation of their fair value.
Deposits of credit institutions which are not short-term and term customer deposits: these deposits will be valued by discounting
future cash flows using the interest rate curve in effect at the time of the adjustment adjusted by the credit spread and incorporating
any behavioral assumptions if this proves relevant (early repayments , optionalities, etc.).
Debt certificate (Issuances): The fair value estimation of these liabilities depend on the availability of market prices or by using the
present value method: discount of future cash flows, using market interest rates at valuation time and taking into account the credit
spread.
The following table presents the fair value of key financial instruments carried at amortized cost in the accompanying consolidated balance
sheets as of December 31, 2019 and 2018, broken down according to the method of valuation used for the estimation:
Fair value of financial instruments at amortized cost by levels (Millions of euros)
ASSETS
Cash, cash balances at central banks and other demand deposits
Financial assets at amortized cost
LIABILITIES
Financial liabilities at amortized cost
2019
2018
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
44,111
29,391
-
192
58,024
-
172
217,279
196,119
21,419
204,619
193,819
67,229
289,599
159,082
58,225
269,128
182,948
The main valuation techniques and inputs used to estimate the fair value of financial instruments accounted for at cost and classified in levels
2 and 3 is shown below. These are broken down by type of financial instrument and the balances correspond to those as of December 31, 2019:
P.95
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Fair Value of financial Instruments at amortized cost by valuation technique. December 2019 (Millions of Euros)
Level 2
Level 3
Valuation technique(s)
Main inputs used
ASSETS
Financial assets at
amortized cost
217,279
196,119
Central banks
-
2
- Credit spread
- Prepayment rates
- Interest rate yield
Loans and advances to
credit institutions
Loans and advances to
customers
Debt securities
LIABILITIES
Financial liabilities at
amortized cost
Deposits from central
banks
Deposits from credit
institutions
Deposits from
customers
Debt certificates
Other financial liabilities
Equity instruments at cost
9,049
4,628
Present-value method
(Discounted future
cash flows)
- Credit spread
- Prepayment rates
- Interest rate yield
194,897
190,144
13,333
1,345
289,599
159,082
129
21,575
245,720
14,194
7,981
-
6,831
135,514
11,133
5,604
- Credit spread
- Prepayment rates
- Interest rate yield
- Credit spread
- Interest rate yield
Present-value method
(Discounted future
cash flows)
- Issuer´s credit risk
- Prepayment rates
- Interest rate yield
Until 2017, there were equity instruments and discretionary profit-sharing arrangements in some entities which were recognized at cost in the
Group’s consolidated balance sheets because their fair value could not be estimated in a sufficiently reliable manner for the amount of €469
million, as of December 31, 2017.
9.
Cash, cash balances at central banks and other demand deposits
The breakdown of the balance under the heading “Cash, cash balances at central banks and other demand deposits” in the accompanying
consolidated balance sheets is as follows:
Cash, cash balances at central banks and other demand deposits (Millions of Euros)
Cash on hand
Cash balances at central banks
Other demand deposits
Total
2019
7,060
31,755
5,488
44,303
2018
6,346
43,880
7,970
58,196
2017
6,220
31,718
4,742
42,680
The change in “Cash balances at central banks” is mainly due to the decrease in cash held at the Bank of Spain.
P.96
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
10. Financial assets and liabilities held for trading
10.1 Breakdown of the balance
The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:
Financial assets and liabilities held for trading (Millions of Euros)
Notes
2019
2018
2017
ASSETS
Derivatives
Equity instruments
Credit institutions
Other sectors
Debt securities
Issued by central banks
Issued by public administrations
Issued by financial institutions
Other debt securities
Loans and advances
Loans and advances to central banks
Reverse repurchase agreement
Loans and advances to credit institutions
Reverse repurchase agreement
Loans and advances to customers
Reverse repurchase agreement
Total assets
LIABILITIES
Derivatives
Short positions
Deposits
Deposits from central banks
Repurchase agreement
Deposits from credit institutions
Repurchase agreement
Customer deposits
Repurchase agreement
Total liabilities
7.1.2
7.1.2
7.1.2
35
35
35
35
35
35
-
33,185
8,892
1,037
7,855
26,309
840
23,918
679
872
34,303
535
535
21,286
21,219
12,482
12,187
102,688
35,019
12,249
42,365
7,635
7,635
24,969
24,578
9,761
9,689
89,633
-
30,536
5,254
880
4,374
25,577
1,001
22,950
790
836
28,750
2,163
2,163
14,566
13,305
12,021
11,794
90,117
31,815
11,025
37,934
10,511
10,511
15,687
14,839
11,736
11,466
80,774
-
35,265
6,801
962
5,839
22,573
1,371
19,344
816
1,041
56
-
-
-
-
56
-
64,695
36,169
10,013
-
-
-
-
-
-
-
46,182
As of December 31, 2019 “Short positions” include €11,649 million held with general governments.
10.2 Derivatives
The derivatives portfolio arises from the Group’s need to manage the risks it is exposed to in the normal course of business and also to market
products amongst the Group’s customers. As of December 31, 2019, 2018 and 2017, trading derivatives were mainly contracted in over-the-
counter (OTC) markets, with counterparties, consisting primarily of foreign credit institutions and other non financial corporations, and are
related to foreign-exchange, interest-rate and equity risk.
P.97
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Below is a breakdown of the net positions by transaction type of the fair value and notional amounts of derivatives recognized in the
accompanying consolidated balance sheets, divided into organized and OTC markets:
Derivatives by type of risk and by product or by type of market (Millions of Euros)
2019
2018
2017
Interest rate
OTC
Organized market
Equity instruments
OTC
Organized market
Foreign exchange and gold
OTC
Organized market
Credit
Credit default swap
Credit spread option
Total return swap
Other
Commodities
Other
DERIVATIVES
Of which: OTC - credit institutions
Of which: OTC - other financial corporations
Of which: OTC - other
21,479
21,479
-
2,263
353
1,910
9,086
9,049
37
353
338
-
14
-
4
-
33,185
20,706
6,153
4,378
Assets Liabilities
Assets Liabilities
Notional
amount -
Total
20,853 3,024,794
20,852 2,997,443
27,351
84,140
40,507
43,633
1
3,499
1,435
2,065
Assets Liabilities
Notional
amount -
Total
19,146
19,146
-
2,799
631
2,168
18,769 2,929,371 22,606
2,910,016 22,606
18,769
-
-
1,778
2,956
578
463
1,200
2,492
19,355
114,184
39,599
74,586
Notional
amount -
Total
22,546 2,152,490
2,129,474
22,546
23,016
-
95,573
2,336
42,298
1,207
53,275
1,129
10,266
10,260
6
397
283
2
113
-
4
-
472,194
463,662
8,532
29,077
26,702
150
2,225
-
64
-
8,355
8,344
11
232
228
2
2
-
3
-
35,019 3,610,269 30,536
16,979
23,717
1,000,243
7,372
6,214 2,370,988
4,005
159,521
3,016
9,693
9,638
55
393
248
-
145
-
3
-
432,283
426,952
5,331
25,452
22,791
500
2,161
-
67
-
10,371
10,337
34
489
480
-
9
-
3
18
31,815 3,501,358 35,265
21,016
897,384
18,729
8,695
2,355,784
7,758
4,316
148,917
2,780
10,729
10,688
40
517
507
-
9
-
3
38
380,404
373,303
7,101
30,181
27,942
200
2,039
-
36
561
36,169 2,659,246
898,209
22,804
1,548,919
9,207
128,722
2,986
11.
Non-trading financial assets mandatorily at fair value through profit or loss
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
Non-trading financial assets mandatorily at fair value through profit or loss (Millions of Euros)
Equity instruments
Debt securities
Loans and advances to customers
Total
Notes
7.1.2
7.1.2
7.1.2
2019
4,327
110
1,120
5,557
2018
2017
3,095
237
1,803
5,135
P.98
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
12. Financial assets and liabilities designated at fair value through profit or loss
The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:
Financial assets and liabilities designated at fair value through profit or loss (Millions of Euros)
ASSETS
Equity instruments
Debt securities
Loans and advances
Total assets
LIABILITIES
Deposits
Debt certificates
Other financial liabilities: Unit-linked products
Total liabilities
Notes
2019
2018
2017
7.1.2
1,214
-
1,214
944
4,656
4,410
10,010
1,313
-
1,313
976
2,858
3,159
6,993
1,888
174
648
2,709
-
-
2,222
2,222
As of December 31, 2019, 2018 and 2017, within “Financial liabilities designated at fair value through profit or loss”, liabilities linked to insurance
products where the policyholder bears the risk ("Unit-Link") are recorded. Since the liabilities linked to insurance products in which the
policyholder assumes the risk are valued the same way as the assets associated to these insurance products, there is no credit risk component
borne by the Group in relation to these liabilities.
In addition, the assets and liabilities are included in these headings to reduce inconsistencies (asymmetries) in the valuation of those
operations and those used to manage their risk.
13.
Financial assets at fair value through other comprehensive income
13.1
Breakdown of the balance
The breakdown of the balance by the main financial instruments in the accompanying consolidated balance sheets is as follows:
Financial assets designated at fair value through other comprehensive income (Millions of Euros)
Equity instruments
Loss allowances
Subtotal
Debt securities
Loss allowances
Subtotal
Loans and advances to credit institutions
Total
13.2
Equity instruments
Notes
7.1.2
7.1.2
7.1.2
2019
2018
2017
2,420
-
2,420
58,841
(110)
58,731
33
61,183
2,595
-
2,595
53,737
(28)
53,709
33
56,337
4,488
(1,264)
3,224
66,273
(21)
66,251
-
69,476
The breakdown of the balance under the heading "Equity instruments" of the accompanying consolidated financial statements as of December
31, 2019 and 2018 is as follows:
P.99
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets at fair value through other comprehensive income. Equity instruments. (Millions of Euros)
Equity instruments
Spanish companies shares
Foreign companies shares
The United States
Mexico
Turkey
Other countries
Subtotal equity instruments listed
Equity instruments
Spanish companies shares
Foreign companies shares
The United States
Mexico
Turkey
Other countries
2019
2018
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
2,181
136
30
1
3
102
2,317
5
450
387
-
5
57
-
87
47
33
2
5
87
1
79
32
-
4
43
(507)
(11)
-
-
-
(11)
1,674
213
78
34
5
96
2,172
90
20
1
3
66
(518)
1,886
2,262
-
(1)
-
-
-
(1)
5
528
419
-
9
99
6
453
388
-
6
59
-
43
17
25
-
1
43
1
54
23
-
4
27
(210)
(12)
-
-
(1)
(11)
1,962
121
37
26
2
56
(222)
2,083
-
(1)
-
-
-
(1)
7
506
411
-
10
85
Subtotal unlisted equity instruments
Total
2,595
The breakdown of the balance under the heading "Equity instruments" of the accompanying consolidated financial statements as of December
31, 2017 is as follows:
2,420
(223)
2,772
(519)
2,721
454
459
533
513
167
80
98
(1)
(1)
55
Available-for-sale financial assets. Equity instruments. December 2017 (Millions of Euros)
Amortized cost
Unrealized
gains
Unrealized
losses
Equity instruments listed
Spanish companies shares
Foreign companies shares
United States
Mexico
Turkey
Other countries
Subtotal equity instruments listed
Unlisted equity instruments
Spanish companies shares
Foreign companies shares
United States
Mexico
Turkey
Other countries
Subtotal unlisted equity instruments
Total
13.3 Debt securities
2,189
215
11
8
4
192
2,404
33
665
498
1
15
151
698
3,102
-
33
-
25
1
7
33
29
77
40
-
6
31
106
139
(1)
(7)
-
-
-
(7)
(8)
-
(8)
(6)
-
(2)
-
(8)
(16)
Fair
value
2,188
241
11
33
5
192
2,429
62
734
532
1
19
182
796
3,224
The breakdown of the balance under the heading “Debt securities” of the accompanying consolidated financial statements as of December 31,
2019 and 2018, broken down by issuers, is as follows:
P.100
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets at fair value through other comprehensive income. (Millions of Euros)
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
2019
2018
Domestic debt securities
Government and other government
agency debt securities
Central banks
Credit institutions
Other issuers
Subtotal
Foreign debt securities
Mexico
Government and other government
agency debt securities
Central banks
Credit institutions
Other issuers
The United States
Government securities
Treasury and other government
agencies
States and political subdivisions
Central banks
Credit institutions
Other issuers
Turkey
Government and other government
agency debt securities
Central banks
Credit institutions
Other issuers
Other countries
Other foreign governments and other
government agency debt securities
Central banks
Credit institutions
Other issuers
Subtotal
Total
20,740
-
959
907
22,607
7,790
6,869
-
77
843
11,376
8,570
5,595
2,975
-
122
2,684
3,752
3,752
-
-
-
11,870
6,963
1,005
1,795
2,106
34,788
57,395
830
-
65
40
935
22
18
-
2
2
68
42
32
10
-
2
24
38
38
-
-
-
554
383
9
109
53
681
1,617
(20)
21,550
17,205
-
-
-
-
1,024
947
-
793
804
(21)
23,521
18,802
(26)
(19)
-
-
(6)
(51)
(12)
(2)
(10)
-
-
(39)
(76)
(76)
-
-
-
7,786
6,868
-
78
840
11,393
8,599
5,624
2,975
-
124
2,670
3,713
3,713
-
-
-
(106)
12,318
(78)
7,269
(4)
(12)
(12)
(259)
(280)
1,010
1,892
2,147
35,210
58,731
6,299
5,286
-
35
978
14,507
11,227
7,285
3,942
-
49
3,231
4,164
4,007
-
157
-
9,551
4,510
987
1,856
2,197
34,521
53,323
661
-
63
37
761
6
4
-
-
2
47
37
29
8
-
1
9
20
20
-
-
-
319
173
2
111
33
392
1,153
(9)
17,857
-
-
(1)
(10)
-
855
841
19,553
(142)
6,163
(121)
5,169
-
(1)
(20)
(217)
(135)
(56)
(79)
-
-
(82)
(269)
-
34
961
14,338
11,130
7,258
3,872
-
50
3,158
3,916
(256)
3,771
-
(13)
-
-
145
-
(130)
9,740
(82)
(4)
(20)
(25)
(758)
(768)
4,601
986
1,947
2,206
34,157
53,709
P.101
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The breakdown of the balance under the heading “Debt securities” of the accompanying consolidated financial statements as of December 31,
2017, broken down by issuers, is as follows:
Available-for-sale financial assets. December 2017 (Millions of Euros)
Amortized
cost
Unrealized
gains
Unrealized
losses
Domestic debt securities
Government and other government agency debt securities
Central banks
Credit institutions
Other issuers
Subtotal Spanish debt securities
Foreign debt securities
Mexico
Government and other government agency debt securities
Central banks
Credit institutions
Other issuers
The United States
Government securities
Treasury and other government agencies
States and political subdivisions
Central banks
Credit institutions
Other issuers
Turkey
Government and other government agency debt securities
Central banks
Credit institutions
Other issuers
Other countries
Other foreign governments and other government agency
debt securities
Central banks
Credit institutions
Other issuers
Subtotal
Total
22,765
-
891
1,061
24,716
9,755
8,101
-
212
1,442
12,479
8,625
3,052
5,573
-
56
3,798
5,052
5,033
-
19
-
13,271
6,774
1,330
2,535
2,632
40,557
65,273
791
-
72
43
906
45
34
-
1
10
36
8
-
8
-
1
26
48
48
-
-
-
533
325
2
139
66
661
1,567
The credit ratings of the issuers of debt securities as of December 31, 2019, 2018, and 2017 are as follows:
Fair
value
23,539
-
962
1,103
25,605
9,658
8,015
-
209
1,434
12,317
8,500
3,018
5,482
-
57
3,759
4,985
4,967
-
19
-
(17)
-
-
-
(17)
(142)
(120)
-
(3)
(19)
(198)
(133)
(34)
(99)
-
-
(65)
(115)
(114)
-
(1)
-
(117)
13,687
(77)
(1)
(19)
(19)
(572)
(589)
7,022
1,331
2,654
2,679
40,647
66,251
P.102
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Debt securities by rating
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+ or below
Without rating
Total
13.4 Gains/losses
Changes in gains / losses
2019
2018
2017
Fair value
(Millions of Euros)
%
Fair value
(Millions of Euros)
%
Fair value
(Millions of Euros)
%
531
1.0%
687
1.0%
13,100
24.4%
10,738
16.2%
3,669
6.2%
7,279
12.4%
317
265
3,367
0.5%
0.5%
5.7%
12,895
22.0%
222
409
632
687
0.4%
0.8%
1.2%
1.3%
10,947
18.6%
18,426
34.3%
9,946
2,966
1,927
4,712
441
16.9%
5.1%
3.3%
8.0%
0.8%
9,195
4,607
1,003
4,453
445
17.1%
8.6%
1.9%
8.3%
0.8%
507
291
664
683
1,330
0.8%
0.4%
1.0%
1.0%
2.0%
35,175
53.1%
7,958
5,583
1,564
1,071
12.0%
8.4%
2.4%
1.6%
58,731
100.0%
53,709
100.0%
66,251
100.0%
The changes in the gains/losses (net of taxes) in December 31, 2019 and 2018 of debt securities recognized under the equity heading
“Accumulated other comprehensive income – Items that may be reclassified to profit or loss – Fair value changes of debt instruments
measured at fair value through other comprehensive income” and equity instruments recognized under the equity heading “Accumulated
other comprehensive income – Items that will not be reclassified to profit or loss – Changes in fair value of equity instruments designated at
fair value through other comprehensive income” in the accompanying consolidated balance sheets are as follows:
Other comprehensive income - Changes in gains / losses (Millions of euros)
Balance at the beginning
Effect of changes in accounting policies (IFRS 9)
Valuation gains and losses
Amounts transferred to income
Other reclassifications
Income tax
Balance at the end
Notes
30
Debt securities
Equity instruments
2019
943
-
1,267
(119)
-
(331)
1,760
2018
1,557
(58)
(640)
(137)
-
221
943
2019
(155)
-
(238)
-
(10)
(403)
2018
84
(40)
(174)
-
(25)
(155)
In 2019, the debt securities impaired recognized in the heading “Impairment or reversal of impairment on financial assets not measured at fair
value through profit or loss net gains by modification– Financial assets at fair value through other comprehensive income” in the accompanying
consolidated income statement amounted to €83 million (see Note 47) as a result of the decrease in the rating of debt securities in BBVA
Argentina during the last quarter of 2019.
In 2018, the debt securities impaired recognized in the heading “Impairment or reversal of impairment on financial assets not measured at fair
value through profit or loss net gains by modification– Financial assets at fair value through other comprehensive income” in the accompanying
consolidated income statement amounted to €1 million (see Note 47).
During 2019 and 2018 there has been no significant impairment registered in equity instruments under the heading “Impairment or reversal of
impairment on financial assets not measured at fair value through profit or loss net gains by modification- Financial assets at fair value through
other comprehensive income” (see Note 47).
P.103
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
14. Financial assets at amortized cost
14.1
Breakdown of the balance
The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the nature of the financial
instrument, is as follows:
Financial assets at amortized cost (Millions of Euros)
Debt securities
Government
Credit institutions
Other sectors
Loans and advances to central banks
Loans and advances to credit institutions
Reverse repurchase agreements
Other loans and advances
Loans and advances to customers
Government
Other financial corporations
Non-financial corporations
Other
Total
Of which: impaired assets of loans and advances to customers
Of which: loss allowances of loans and advances
Of which: loss allowances of debt securities
Notes
2019
2018
2017
35
38,877
31,526
719
6,632
4,275
13,649
1,817
11,832
32,530
25,014
644
6,872
3,941
9,163
478
8,685
382,360
374,027
28,222
11,207
166,789
176,142
439,162
15,954
(12,427)
(52)
28,114
9,468
163,922
172,522
419,660
16,349
(12,217)
(51)
24,093
17,030
1,152
5,911
7,300
26,261
13,861
12,400
387,621
31,645
18,173
164,510
173,293
445,275
19,390
(12,784)
(15)
During financial years 2019 and 2018, there have been no significant reclassifications neither from “Financial assets at amortized cost” to other
headings or from other headings to “Financial assets at amortized cost”.
14.2 Debt securities
The breakdown of the balance under the heading “Debt securities” in the accompanying consolidated balance sheets, according to the issuer
of the debt securities, is as follows:
P.104
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financial assets at amortized cost. (Millions of Euros)
2019
2018
Amortized
Unrealized
gains
Unrealized
losses
Fair
value
Amortized
Unrealized
gains
Unrealized
losses
Fair
value
cost
cost
Domestic debt
securities
Government and
other government
agencies
Central banks
Credit institutions
Other issuers
Subtotal
Foreign debt
securities
Mexico
Government and
other government
agencies debt
securities
Central banks
Credit institutions
Other issuers
The United States
Government
securities
Treasury and
other government
agencies
States and
political
subdivisions
Central banks
Credit institutions
Other issuers
Turkey
Government and
other government
agencies debt
securities
Central banks
Credit institutions
Other issuers
Other countries
Other foreign
governments and
other government
agency debt
securities
Central banks
Credit institutions
Other issuers
Subtotal
Total
12,755
630
(21)
13,363
10,953
458
(265)
11,146
-
26
4,903
17,684
-
-
38
668
-
-
(10)
(31)
-
26
-
53
4,931
5,014
18,320
16,019
-
-
41
499
-
-
-
53
(25)
5,030
(290)
16,228
6,374
168
(18)
6,525
5,148
10
-
5,157
5,742
4,571
-
529
254
-
350
227
9
-
1
-
-
-
-
-
4,579
-
351
227
6,217
2,559
15
(3)
2,570
-
-
-
(18)
(20)
(18)
5,576
166
-
526
272
6,125
5,690
1,161
4,530
-
25
410
-
2
-
111
111
50
61
-
-
-
5,783
2,070
(17)
1,193
118
(1)
-
(1)
(1)
4,590
1,952
-
25
409
-
23
466
4,113
48
(65)
4,097
4,062
4,105
47
(65)
4,088
4,054
-
7
1
-
1
-
-
-
-
-
8
1
-
7
1
-
-
-
-
9
6
-
-
-
-
-
-
-
-
-
(2)
(1)
2,070
118
1,952
-
30
470
(261)
3,801
(261)
3,793
-
-
-
-
7
1
4,581
82
(26)
4,637
4,741
32
(152)
4,622
3,400
82
(22)
3,459
3,366
27
(152)
3,242
-
135
1,047
21,194
38,877
-
-
-
409
1,077
-
-
-
135
(4)
1,043
(129)
(160)
21,476
39,796
64
147
1,164
16,510
32,530
-
-
5
57
556
-
-
-
(416)
(706)
64
147
1,169
16,150
32,378
P.105
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
As of December 31, 2019 and 2018, the credit ratings of the issuers of debt securities classified as follows:
AAA
AA+
AA
AA-
A+
A
A-
BBB+
BBB
BBB-
BB+ or below
Without rating
Total
2019
2018
Carrying amount
(Millions of Euros)
%
Carrying amount
(Millions of Euros)
39
6,481
14
713
-
16,806
607
3,715
551
3,745
5,123
1,083
0.1%
16.7%
-
1.8%
-
43.2%
1.6%
9.6%
1.4%
9.6%
13.2%
2.8%
49
1,969
62
-
607
21
6,117
13,894
1,623
2,694
4,371
1,123
%
0.2%
6.1%
0.2%
-
1.9%
0.1%
18.8%
42.7%
5.0%
8.3%
13.4%
3.5%
38,877
100.0%
32,530
100.0%
14.3
Loans and advances to customers
The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to their nature,
is as follows:
Loans and advances to customers (Millions of Euros)
On demand and short notice
Credit card debt
Trade receivables
Finance leases
Reverse repurchase agreements
Other term loans
Advances that are not loans
Total
Notes
35
2019
3,050
16,354
17,276
8,711
26
332,160
4,784
382,360
2018
3,641
15,445
17,436
8,650
294
324,767
3,794
374,027
2017
10,560
15,835
22,705
8,642
11,554
313,336
4,989
387,621
The following table sets forth a breakdown of the gross carrying amount "Loans and advances to customers" with maturity greater than one
year by fixed and variable rate as of December 31, 2019:
'Interest sensitivity of outstanding loans and advances maturing in more than one year (Millions of Euros)
Fixed rate
Variable rate
Total
Domestic
55,920
79,329
135,249
Foreign
68,915
97,765
166,680
Total
124,835
177,095
301,929
As of December 31, 2019, 2018 and 2017, 41%, 38% and 38%, respectively, of "Loans and advances to customers" with maturity greater than
one year have fixed-interest rates and 59%, 62% and 62%, respectively, have variable interest rates.
P.106
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The heading “Financial assets at amortized cost – Loans and advances to customers” in the accompanying consolidated balance sheets also
includes certain secured loans that, as mentioned in Appendix X and pursuant to the Mortgage Market Act, are linked to long-term mortgage-
covered bonds.
This heading also includes some loans that have been securitized. The balances recognized in the accompanying consolidated balance sheets
corresponding to these securitized loans are as follows:
Securitized loans (Millions of Euros)
Securitized mortgage assets
Other securitized assets
Total securitized assets
2019
26,169
4,249
30,418
2018
26,556
3,221
29,777
2017
28,950
4,143
33,093
15. Hedging derivatives and fair value changes of the hedged items in portfolio hedges of
interest rate risk
The balance of these headings in the accompanying consolidated balance sheets is as follows:
Derivatives – Hedge accounting and fair value changes of the hedged items in portfolio hedge of interest rate risk (Millions of Euros)
ASSETS
Derivatives – Hedge accounting
Fair value changes of the hedged items in portfolio hedges of interest rate risk
LIABILITIES
Hedging derivatives
Fair value changes of the hedged items in portfolio hedges of interest rate risk
2019
1,729
28
2,233
-
2018
2017
2,892
(21)
2,680
-
2,485
(25)
2,880
(7)
As of December 31, 2019, 2018 and 2017, the main positions hedged by the Group and the derivatives designated to hedge those positions
were:
Fair value hedging:
•
•
•
•
Fixed-interest debt securities at fair value through other comprehensive income and at amortized cost: The interest rate risk
of these securities is hedged using interest rate derivatives (fixed-variable swaps) and forward sales.
Long-term fixed-interest debt securities issued by the Bank: the interest rate risk of these securities is hedged using interest
rate derivatives (fixed-variable swaps).
Fixed-interest loans: The equity price risk of these instruments is hedged using interest rate derivatives (fixed-variable swaps).
Fixed-interest and/or embedded derivative deposit portfolio hedges: it covers the interest rate risk through fixed-variable
swaps. The valuation of the borrowed deposits corresponding to the interest rate risk is in the heading "Fair value changes of
the hedged items in portfolio hedges of interest rate risk”.
Cash-flow hedges: Most of the hedged items are floating interest-rate loans and asset hedges linked to the inflation of the financial
assets at fair value through other comprehensive income portfolio. This risk is hedged using foreign-exchange, interest-rate swaps,
inflation and FRA’s (“Forward Rate Agreement”).
Net foreign-currency investment hedges: These hedged risks are foreign-currency investments in the Group’s foreign subsidiaries.
This risk is hedged mainly with foreign-exchange options and forward currency sales and purchases.
Note 7 analyzes the Group’s main risks that are hedged using these derivatives.
P.107
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The details of the net positions by hedged risk of the fair value of the hedging derivatives recognized in the accompanying consolidated balance
sheets are as follows:
Derivatives - Hedge accounting breakdown by type of risk and type of hedge. (Millions of Euros)
2019
2018
2017
Assets
Liabilities
Assets
Liabilities
Assets
Liabilities
Interest rate
OTC
Organized market
Equity
OTC
Organized market
Foreign exchange and gold
OTC
Organized market
Credit
Commodities
Other
FAIR VALUE HEDGES
Interest rate
OTC
Organized market
Equity
OTC
Organized market
Foreign exchange and gold
OTC
Organized market
Credit
Commodities
Other
CASH FLOW HEDGES
HEDGE OF NET INVESTMENTS IN A
FOREIGN OPERATION
PORTFOLIO FAIR VALUE HEDGES OF
INTEREST RATE RISK
PORTFOLIO CASH FLOW HEDGES OF
INTEREST RATE RISK
DERIVATIVES-HEDGE ACCOUNTING
of which: OTC - credit institutions
of which: OTC - other financial corporations
of which: OTC - other
920
920
-
-
-
-
420
420
-
-
-
-
1,341
224
224
-
-
-
-
115
115
-
-
-
-
339
12
37
1
1,729
1,423
306
-
488
488
-
3
3
-
316
316
-
-
-
-
808
850
839
11
-
-
-
18
18
-
-
-
-
868
242
216
99
2,233
1,787
426
8
982
982
-
6
6
-
587
587
-
-
-
-
1,575
221
219
2
-
-
-
955
955
-
-
-
-
513
513
-
-
-
-
398
398
-
-
-
-
912
562
562
-
-
-
-
873
873
-
-
-
-
1,176
1,435
92
33
15
2,892
2,534
355
2
231
90
12
2,680
2,462
216
2
1,141
1,141
-
-
-
-
625
625
-
-
-
-
1,766
244
242
2
-
-
-
119
119
-
-
-
-
363
301
850
850
-
-
-
-
511
511
-
-
-
-
1,362
533
533
-
-
-
-
714
714
-
-
-
-
1,247
15
46
256
9
-
2,485
1,829
651
2
2,880
2,527
234
120
The cash flows forecasts for the coming years for cash flow hedging recognized on the accompanying consolidated balance sheet as of
December 31, 2019 are:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Cash flows of hedging instruments (Millions of Euros)
Receivable cash inflows
Payable cash outflows
3 months or less
From 3 months
to 1 year
From 1 to 5
years
More than 5
years
447
395
488
411
2,076
2,223
2,061
2,003
Total
5,071
5,032
The above cash flows will have an impact on the Group’s consolidated income statements until 2057.
In 2019, 2018 and 2017, there was no reclassification in the accompanying consolidated income statements of any amount corresponding to
cash flow hedges that was previously recognized in equity (see Note 41).
The amount for derivatives designated as accounting hedges that did not pass the effectiveness test in December 31, 2019, 2018 and 2017
were not material.
16.
Investments in joint ventures and associates
16.1
Joint ventures and associates
The breakdown of the balance of “Investments in joint ventures and associates” in the accompanying consolidated balance sheets is as follows:
Joint ventures and associates. Breakdown by entities (Millions of Euros)
2019
2018
2017
Joint ventures
Altura Markets S.V., S.A.
RCI Colombia
Desarrollo Metropolitanos del Sur, S.L.
Other
Subtotal
Associates
Divarian Propiedad, S.A.U.
Metrovacesa, S.A.
ATOM Bank PLC
Solarisbank AG
Cofides
Redsys servicios de procesamiento, S.L.
Servicios Electrónicos Globales S.A. de CV
Other
Subtotal
Total
73
37
14
30
154
630
443
136
36
23
14
11
41
69
32
13
59
173
591
508
138
37
22
12
9
88
1,334
1,488
1,405
1,578
64
19
12
160
256
-
697
66
-
21
10
6
533
1,332
1,588
Details of the joint ventures and associates as of December 31, 2019 are shown in Appendix II.
The following is a summary of the changes in the in December 31, 2019, 2018 and 2017 under this heading in the accompanying consolidated
balance sheets:
P.109
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Joint ventures and associates. Changes in the year (Millions of Euros)
Balance at the beginning
Acquisitions and capital increases
Disposals and capital reductions
Transfers and changes of consolidation method
Share of profit and loss
Exchange differences
Dividends, valuation adjustments and others
Balance at the end
Notes
39
2019
1,578
161
(149)
(27)
(42)
10
(43)
1,488
2018
1,588
309
(516)
211
(7)
2
(8)
1,578
2017
765
868
(8)
-
4
(29)
(12)
1,588
The variation during the year 2017 was mainly explained by the increase of BBVA Group stakes in Testa Residencial, S.A. and Metrovacesa
Suelo y Promoción, S.A. through its contribution to the capital increases carried out by both entities by contributing assets from the Bank’s
real estate assets (see Note 21).
The variation during the year 2018 was mainly explained by the decrease of BBVA Group stakes in Testa Residencial, S.A., Metrovacesa Suelo
y Promoción, S.A. and the contribution of assets and subsequent sale to Cerberus of 80% of the capital stake in Divarian Propiedad, S.A.U.,
(see Note 3 and Appendix III).
During the year 2019, there was no significant change in the heading “Investment in joint ventures and associates”
Appendix III provides notifications on acquisitions and disposals of holdings in subsidiaries, joint ventures and associates, in compliance with
article 155 of the Corporations Act and article 53 of the Securities Market Act 24/1988.
16.2
Other information about associates and joint ventures
If these entities had been consolidated rather than accounted for using the equity method, the change in each of the lines of balance sheet and
the consolidated income statement would not be significant.
As of December 31, 2019, 2018 and 2017 there was no financial support agreement or other contractual commitment to associates and joint
ventures entities from the holding or the subsidiaries that are not recognized in the financial statements (see Note 53.2).
As of December 31, 2019, 2018 and 2017 there was no contingent liability in connection with the investments in joint ventures and associates
(see Note 53.2).
16.3
Impairment
As described in IAS 36, when there is indicator of impairment, the book value of the associates and joint venture entities should be compared
with their recoverable amount, being the latter calculated as the higher between the value in use and the fair value minus the cost of sale. As of
December 31, 2019, 2018 and 2017, there were no significant impairments recognized.
17.
Tangible assets
The breakdown and movement of the balance and changes of this heading in the accompanying consolidated balance sheets, according to the
nature of the related items, is as follows:
P.110
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Tangible assets: Breakdown by type of assets and changes in the year 2019. (Millions of Euros)
Notes
Land and
buildings
Work in
progress
Furniture,
fixtures and
vehicles
Own use
Investment
properties
Right to use asset(*)
Investment
properties
Assets
leased out
under an
operating
lease
Total
Cost
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the
year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Accrued depreciation
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the
year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Impairment
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the
year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Net tangible assets
45
48
5,939
90
(44)
-
-
(41)
57
6,001
1,138
126
(38)
-
-
(16)
43
1,253
217
14
(3)
-
-
(16)
-
212
70
63
(20)
-
-
(51)
(6)
56
6,314
335
(302)
-
-
(8)
12
-
3,574
(57)
-
-
(1)
-
-
101
-
-
-
-
-
201
12
(10)
-
-
13
-
6,351
3,516
101
216
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,212
457
(255)
-
-
(13)
(57)
4,344
-
20
-
-
-
-
(20)
-
-
381
(3)
-
-
(1)
(7)
370
-
60
-
-
-
127
4
191
-
11
-
-
-
-
-
11
4
-
-
-
-
-
11
15
-
-
-
-
-
14
-
14
27
-
-
-
-
(4)
3
26
386
-
-
-
-
-
(49)
337
76
-
-
-
-
-
(2)
74
-
-
-
-
-
-
-
-
12,910
4,175
(433)
-
-
(88)
14
16,578
5,437
979
(296)
-
-
(30)
(23)
6,067
244
94
(3)
-
-
121
(13)
443
Balance at the beginning
Balance at the end
4,584
4,536
70
56
2,102
2,007
-
2,955
-
76
163
175
310
263
7,229
10,068
(*) The right to use is included at the date of implementation of IFRS 16 as of January 1, 2019.The right to use asset consists mainly of the rental of commercial
real estate premises for central services and the network branches located in the countries where the Group operates whose average term is between 5 and
20 years. The clauses included in rental contracts correspond to a large extent to rental contracts under normal market conditions in the country where the
property is rented (see Note 2.3). During 2019, there have been no significant changes in the right to use assets for leases.
P.111
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Tangible assets. Breakdown by type of assets and changes in the year 2018 (Millions of Euros)
Cost
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Accrued depreciation
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Impairment
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Net tangible assets
Balance at the beginning
Balance at the end
For own use
Notes
Land and
buildings
Work in
progress
Furniture,
fixtures and
vehicles
Total tangible
asset of own
use
Investment
properties
Assets leased
out under an
operating
lease
Total
5,490
445
(98)
-
-
64
38
5,939
234
78
(17)
-
-
(177)
(48)
70
6,628
12,352
404
(492)
-
-
(12)
(214)
927
(607)
-
-
(125)
(224)
6,314
12,323
1,076
-
4,380
5,456
45
48
120
(36)
-
(3)
(31)
12
1,138
315
30
-
-
-
(77)
(51)
217
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
469
(403)
-
-
(22)
(212)
4,212
-
-
-
-
-
-
-
-
-
589
(439)
-
(3)
(53)
(200)
5,350
315
30
-
-
-
(77)
(51)
217
-
228
11
(149)
-
-
(5)
116
201
13
5
(8)
-
-
(2)
3
11
20
(25)
(27)
-
-
(3)
62
27
-
492
13,072
-
(1)
-
-
-
(105)
938
(757)
-
-
(130)
(213)
386
12,910
77
-
-
-
-
-
(1)
76
-
-
-
-
-
-
-
-
-
5,546
594
(447)
-
(3)
(55)
(198)
5,437
335
5
(27)
-
-
(80)
11
244
-
4,099
4,584
234
70
2,248
2,102
6,581
6,756
195
163
415
310
7,191
7,229
P.112
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Tangible assets. Breakdown by type of assets and changes in the year 2017 (Millions of Euros)
Cost
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Accrued depreciation
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Impairment
Balance at the beginning
Additions
Retirements
Acquisition of subsidiaries in the year
Disposal of entities in the year
Transfers
Exchange difference and other
Balance at the end
Net tangible assets
Balance at the beginning
Balance at the end
For own use
Notes
Land and
buildings
Work in
progress
Furniture,
fixtures and
vehicles
Total
tangible
asset of own
use
Investment
properties
Assets leased
out under an
operating lease
Total
6,176
49
(42)
-
-
(273)
(420)
5,490
1,116
127
(26)
-
-
(53)
(88)
1,076
379
5
(2)
-
-
(58)
(9)
315
240
128
(29)
-
-
(57)
(48)
234
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,059
397
(264)
-
-
(186)
(378)
6,628
4,461
553
(235)
-
-
(146)
(253)
13,473
574
(335)
-
-
(516)
(844)
12,352
5,577
680
(261)
-
-
(199)
(341)
4,380
5,456
-
-
-
-
-
-
-
-
379
5
(2)
-
-
(58)
(9)
315
1,163
1
(90)
-
-
(698)
(148)
228
63
13
(7)
-
-
(31)
(25)
13
409
37
(10)
-
-
(276)
(140)
20
958
201
(93)
-
(552)
-
(22)
492
216
-
(21)
-
(134)
-
16
77
10
-
-
-
(10)
-
-
-
15,594
776
(518)
-
(552)
(1,214)
(1,014)
13,072
5,856
693
(289)
-
(134)
(230)
(350)
5,546
798
42
(12)
-
(10)
(334)
(149)
335
45
48
4,681
4,099
240
234
2,598
2,248
7,519
6,581
691
195
732
415
8,941
7,191
As of December 31, 2019, 2018 and 2017, the cost of fully amortized tangible assets that remained in use were €2,658 €2,624 and €2,660
million respectively while its recoverable residual value was not significant.
As of December 31, 2019, 2018 and 2017 the amount of tangible assets under financial lease schemes on which the purchase option is expected
to be exercised was not material. The main activity of the Group is carried out through a network of bank branches located geographically as
shown in the following table:
P.113
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Branches by geographical location (Number of branches)
Spain
Mexico
South America
The United States
Turkey
Rest of Eurasia
Total
2019
2,642
1,860
1,530
643
1,038
31
7,744
2018
2,840
1,836
1,543
646
1,066
32
7,963
2017
3,019
1,840
1,631
651
1,095
35
8,271
The following table shows the detail of the net carrying amount of the tangible assets corresponding to Spanish and foreign subsidiaries as of
December 31, 2019, 2018 and 2017:
Tangible assets by Spanish and foreign subsidiaries. Net assets values (Millions of euros)
BBVA and Spanish subsidiaries
Foreign subsidiaries
Total
18.
Intangible assets
18.1 Goodwill
2019
4,865
5,203
10,068
2018
2,705
4,524
7,229
2017
2,574
4,617
7,191
The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the cash-generating unit
(hereinafter “CGU”) to which goodwill has been allocated, is as follows:
P.114
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Goodwill. Breakdown by CGU and changes of the year (Millions of Euros)
The United
States
Turkey
Mexico
Colombia
Chile
Other
Total
Balance as of December 31, 2016
5,503
Additions
Exchange difference
Impairment
Other
-
(666)
-
-
Balance as of December 31, 2017
4,837
Additions
Exchange difference
Impairment
Other
-
229
-
-
Balance as of December 31, 2018
5,066
Additions
Exchange difference
Impairment
Other
-
98
(1,318)
-
624
-
(115)
-
-
509
-
(127)
-
-
382
-
(36)
-
-
523
24
(44)
-
(10)
493
-
26
-
-
191
-
(22)
-
-
168
-
(7)
-
-
519
161
-
31
-
-
-
3
-
-
Balance as of December 31, 2019
3,846
346
550
164
Goodwill in business combinations
There were no significant business combinations during 2019, 2018 and 2017.
Impairment Test
68
-
(3)
-
(33)
32
-
(3)
-
-
29
-
(2)
-
-
27
28
-
(1)
(4)
-
23
-
-
-
-
23
-
(1)
-
-
6,937
24
(851)
(4)
(43)
6,062
-
118
-
-
6,180
-
93
(1,318)
-
22
4,955
As mentioned in Note 2.2.8, the CGUs to which goodwill has been allocated, are periodically tested for impairment by including the allocated
goodwill in their carrying amount. This analysis is performed at least annually and whenever there is any indication of impairment.
The BBVA Group performs estimations on the recoverable amount of certain CGU´s by calculating the value in use through the discounted
value of future cash flows method.
The main hypotheses used for the value in use calculation are the following:
The forecast cash flows, including net interest margin, estimated by the Group's management, and based on the latest available
budgets for the next 3 to 5 years, considering the macroeconomic variables of each CGU, regarding the existing balance structure
as well as macroeconomic variables such as the evolution of interest rates and the CPI of the geography where the CGU is located,
among others.
The constant sustainable growth rate for extrapolating cash flows, starting in the third or fifth year, beyond the period covered by
the budgets or forecasts.
The discount rate on future cash flows, which coincides with the cost of capital assigned to each CGU, and which consists of a risk-
free rate plus a premium that reflects the inherent risk of each of the businesses evaluated.
The focus used by the Group's management to determine the values of the assumptions is based both on its projections and past experience.
These values are verified and use external sources of information, wherever possible. Additionally, the valuations of the goodwill of the CGUs
of The United States and Turkey have been reviewed by independent experts (not the Group's external auditors). However, certain changes to
the valuation assumptions used could cause differences in the impairment test result.
As a result of the goodwill impairment tests performed by the Group as of December 31, 2019, the Group estimated impairment losses in the
United States CGU, which have been recognized under “Impairment or reversal of impairment on non-financial assets - Intangible assets” in
the accompanying consolidated income statement as of December 31, 2019, assigned to the Group Corporate Center. This impairment had a
net negative impact on the “Profit for the year – attributable to owners of the parent” of €1,318 million, which is mainly as a result of the negative
P.115
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
evolution of interest rates, especially in the second half of the year, which accompanied by the slowdown of the economy causes the expected
evolution of results below the previous estimation. This recognition does not affect the Tangible Net Equity or the solvency ratio of the BBVA
Group.
As of December 31, 2018 and 2017, no impairment has been identified in any of the main CGUs.
Goodwill - The United States CGU
The Group’s most significant goodwill corresponds to the CGU in the United States, the main significant assumptions used in the impairment
test of this mentioned CGU are:
Impairment test assumptions CGU goodwill in the United States
Discount rate
Sustainable growth rate
2019
2018
2017
10.0%
3.5%
10.5%
4.0%
10.0%
4.0%
In accordance with paragraph 33.c of IAS 36, as of December 31, 2019, the Group used a steady growth rate of 3.5% based on the real GDP
growth rate of the United States, the expected inflation and the potential growth of the banking sector in the United States. This 3.5% rate is
lower than the historical average of the past 30 years of the nominal GDP rate of the United States and lower than the real GDP growth
forecasted by the IMF.
The assumptions with a greater relative weight and whose volatility could have a greater impact in determining the present value of the cash
flows starting on the fifth year are the discount rate and the sustainable growth rate. Below is shown the increased (or decreased) amount of
the CGU recoverable amount as a result of a reasonable variation (in basis points) of each of the key assumptions as of December 31, 2019:
Sensitivity analysis for main assumptions - The United States (Millions of Euros)
Discount rate
Sustainable growth rate
(871)
340
1,017
(292)
Increase of 50 basis points (*)
Decrease of 50 basis points (*)
(*)
Based on historical changes, the use of 50 basis points to calculate the sensitivity analysis would be a reasonable variation with respect to the observed variations over
the last five years.
Goodwill - Turkey CGU
The main significant assumptions used in the impairment test of the CGU of Turkey are:
Impairment test assumptions CGU goodwill in Turkey
Discount rate
Sustainable growth rate
2019
2018
2017
17.4%
7.0%
24.3%
7.0%
18.0%
7.0%
Given the potential growth of the sector in Turkey, in accordance with paragraph 33.c of IAS 36, as of December 31, 2019, 2018 and 2017 the
Group used a steady growth rate of 7.0% based on the real GDP growth rate of Turkey and expected inflation.
P.116
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The assumptions with a greater relative weight and whose volatility could affect more in determining the present value of the cash flows starting
on the fifth year are the discount rate and the sustainable growth rate. Below is shown the increased (or decreased) amount of the recoverable
amount as a result of a reasonable variation (in basis points) of each of the key assumptions as of December 31, 2019:
Sensitivity analysis for main assumptions - Turkey (Millions of euros)
Discount rate
Sustainable growth rate
Goodwill - Other CGUs
Impact of an increase of 50 basis
points
Impact of a decrease of 50 basis
points
(192)
31
212
(28)
The sensitivity analysis on the main hypotheses carried out for the rest of the CGUs of the Group indicate that their value in use would continue
to exceed their book value.
18.2 Other intangible assets
The breakdown of the balance and changes of this heading in the accompanying consolidated balance sheets, according to the nature of the
related items, is as follows:
Other intangible assets (Millions of Euros)
Computer software acquisition expense
Other intangible assets with an infinite useful life
Other intangible assets with a definite useful life
Total
The changes of this heading in December 31, 2019, 2018 and 2017, are as follows:
2019
1,598
11
401
2,010
2018
1,605
11
518
2,134
2017
1,682
12
708
2,402
Other intangible assets (Millions of Euros)
Balance at the beginning
Additions
Amortization in the year
Exchange differences and other
Impairment
Balance at the end
Notes
2019
2018
2017
45
48
2,134
533
(620)
(25)
(12)
2,010
2,402
552
(614)
(123)
(83)
2,134
2,849
564
(694)
(305)
(12)
2,402
As of December 31, 2019, 2018 and 2017, the cost of fully amortized intangible assets that remained in use were €2,702 million, €2,412 million,
and €1,969 million respectively, while their recoverable value was not significant.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
19.
Tax assets and liabilities
19.1
Consolidated tax group
Pursuant to current legislation, BBVA consolidated tax group in Spain includes the Bank (as the parent company) and its Spanish subsidiaries
that meet the requirements provided for under Spanish legislation regulating the taxation regime for the consolidated profit of corporate
groups.
The Group’s non-Spanish banks and subsidiaries file tax returns in accordance with the tax legislation in force in each country.
19.2 Years open for review by the tax authorities
The years open to review in the BBVA consolidated tax group in Spain as of December 31, 2019 are 2014 and subsequent years for the main
taxes applicable.
The remainder of the Spanish consolidated entities in general have the last four years open for inspection by the tax authorities for the main
taxes applicable, except for those in which there has been an interruption of the limitation period due to the start of an inspection.
In the year 2017 as a consequence of the tax authorities examination reviews, inspections were initiated through the year 2013 inclusive, and
all such years closed with acceptance during the year 2017. These inspections did not result in any material amount to record in the
Consolidated Annual accounts as their impact was previously provisioned for.
In view of the varying interpretations that can be made of some applicable tax legislation, the outcome of the tax inspections of the open years
that may be conducted by the tax authorities in the future may give rise to contingent tax liabilities which cannot be reasonably estimated at
the present time. However, the Group considers that the possibility of these contingent liabilities becoming actual liabilities is remote and, in
any case, the tax charge which might arise therefore would not materially affect the Group’s accompanying consolidated financial statements.
19.3 Reconciliation
The reconciliation of the Group’s corporate income tax expense resulting from the application of the Spanish corporation income tax rate and
the income tax expense recognized in the accompanying consolidated income statements is as follows:
Reconciliation of taxation at the Spanish corporation tax rate to the tax expense recorded for the year (Millions of Euros)
Profit or (-) loss before tax
From continuing operations
From discontinued operations
Taxation at Spanish corporation tax rate 30%
Lower effective tax rate from foreign entities (*)
Mexico
Chile
Colombia
Peru
Turkey
Others
Revenues with lower tax rate (dividends/capital gains)
Equity accounted earnings
Other effects (**)
Income tax
Of which: Continuing operations
Of which: Discontinued operations
2019
2018
2017
Amount
Effective
tax
%
Amount
Effective
tax
%
Amount
Effective
tax
%
6,398
6,398
-
1,920
(381)
(112)
(2)
6
(12)
(86)
(175)
(49)
18
545
2,053
2,053
-
27%
27%
32%
28%
23%
8,446
8,446
-
2,534
(234)
(78)
(18)
10
(12)
(132)
(4)
(57)
3
(27)
2,219
2,219
-
28%
21%
33%
28%
20%
6,931
6,931
-
2,079
(307)
(100)
(29)
(3)
(16)
(182)
23
(53)
(2)
457
2,174
2,174
-
27%
21%
29%
27%
21%
(*)
Calculated by applying the difference between the tax rate in force in Spain and the one applied to the Group’s earnings in each jurisdiction.
(**) The amount of 2019 is generated as a result of the impact of the impairment of goodwill in The United States' CGU (see Note 18.1).
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The effective income tax rate for the Group in the years ended December 31, 2019, 2018 and 2017 is as follows:
Effective tax rate (Millions of Euros)
Income from:
Consolidated tax group in Spain
Other Spanish entities
Foreign entities
Gains (losses) before taxes from continuing operations
Tax expense or income related to profit or loss from continuing operations
Effective tax rate
2019
2018
2017
(718)
7
7,109
6,398
2,053
32.1%
1,482
33
6,931
8,446
2,219
26.3%
(678)
29
7,580
6,931
2,174
31.4%
In the year 2019, in the main countries in which the Group has presence, there has been no changes in the nominal tax rate on corporate income
tax except for Colombia, where the applicable tax rate is 33% compared to the initially forecasted 37%. In the year 2018, the changes in the
nominal tax rate on corporate income tax, in comparison with those existing in the previous years, in the main countries in which the Group
has a presence, have been in the United States (federal tax from 35% to 21%), Turkey (from 20% to 22%), Argentina (from 35% to 30%),
Chile (from 25.5% to 27%) and Colombia (from 40% to 37%).
19.4
Income tax recognized in equity
In addition to the income tax expense recognized in the accompanying consolidated income statements, the Group has recognized the
following income tax charges for these items in the consolidated total equity:
Tax recognized in total equity (Millions of Euros)
Charges to total equity
Debt securities and others
Equity instruments
Subtotal
Total
19.5 Current and deferred taxes
2019
2018
2017
(130)
(40)
(170)
(170)
(87)
(56)
(143)
(143)
(355)
(74)
(429)
(429)
The balance under the heading "Tax assets" in the accompanying consolidated balance sheets includes current and deferred tax assets. The
balance under the “Tax liabilities” heading includes the Group’s various current and deferred tax liabilities. The details of the mentioned tax
assets and liabilities are as follows:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Tax assets and liabilities (Millions of Euros)
Tax assets
Current tax assets
Deferred tax assets
Pensions
Financial Instruments
Other assets (investments in subsidiaries)
Loss allowances
Other
Secured tax assets (*)
Tax losses
Total
Tax liabilities
Current tax liabilities
Deferred tax liabilities
Financial Instruments
Other
Total
2019
2018
2017
1,765
15,318
456
1,386
204
1,636
841
9,363
1,432
2,784
15,316
405
1,401
302
1,375
990
9,363
1,480
2,163
14,725
395
1,453
357
1,005
870
9,433
1,212
17,083
18,100
16,888
880
1,928
1,014
914
2,808
1,230
2,046
1,136
910
3,276
1,114
2,184
1,427
757
3,298
(*) Law guaranteeing the deferred tax assets has been approved in Spain in 2013. In 2017 guaranteed deferred tax assets also existed in Portugal but in year 2018 they lost the
guarantee due to the merge between BBVA Portugal S.A. and BBVA, S.A.
The most significant variations of the deferred assets and liabilities in the years 2019, 2018 and 2017 derived from the followings causes:
Deferred tax assets and liabilities. Annual variations (Millions of Euros)
Balance at the beginning
Pensions
Financials instruments
Other assets
Loss allowances
Others
Guaranteed tax assets
Tax losses
Balance at the end
2019
2018
2017
Deferred
assets
Deferred
liabilities
Deferred
assets
Deferred
liabilities
Deferred
assets
Deferred
liabilities
15,316
51
(15)
(98)
261
(149)
-
(48)
15,318
2,046
-
(122)
-
-
4
-
-
1,928
14,725
10
(52)
(55)
370
120
(70)
268
15,316
2,184
-
(291)
-
-
153
-
-
2,046
16,391
(795)
82
(305)
(385)
(366)
2
101
14,725
3,392
-
(367)
-
-
(841)
-
-
2,184
With respect to the changes in assets and liabilities due to deferred tax in 2019 contained in the above table, the following should be pointed
out:
Secured tax assets maintain the same balance as in the previous year.
The decrease in tax losses occurs as a result of the review of the balance of booked deferred taxes carried out on every
accounting closing.
The evolution of the deferred tax assets and liabilities (without taking into consideration the secured deferred tax asset and the
tax losses) in net terms is a decrease of €168 million mainly due to the variations in the valuation of portfolio securities and to
the operation of the corporate income tax in which differences between accounting and taxation produce movements in the
deferred taxes.
On the deferred tax assets and liabilities contained in the table above, those included in section 19.4 above have been recognized against the
entity's equity, and the rest against earnings for the year or reserves.
As of December 31, 2019, 2018 and 2017, the estimated amount of temporary differences associated with investments in subsidiaries, joint
ventures and associates, which were not recognized deferred tax liabilities in the accompanying consolidated balance sheets, amounted to
473 million euros, 443 million euros and 376 million euros, respectively.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Of the deferred tax assets contained in the above table, the detail of the items and amounts guaranteed by the Spanish government, broken
down by the items that originated those assets is as follows:
Secured tax assets (Millions of Euros)
Pensions
Loss allowances
Total
(*)
In 2017 guaranteed deferred tax assets also existed in Portugal but in 2018 they lost the guarantee.
2019
1,924
7,439
9,363
2018
1,924
7,439
9,363
2017 (*)
1,947
7,486
9,433
As of December 31, 2019, non-guaranteed net deferred tax assets of the above table amounted to €4,027 million (€3,907 and €3,108 million
as of December 31, 2018 and 2017 respectively), which broken down by major geographies is as follows:
Spain: Net deferred tax assets recognized in Spain totaled €2,447 million as of December 31, 2019 (€2,653 and €2,052 million
as of December 31, 2018 and 2017, respectively). €1,420 million of the figure recorded in the year ended December 31, 2019 for
net deferred tax assets related to tax credits and tax loss carry forwards and €1,027 million relate to temporary differences.
Mexico: Net deferred tax assets recognized in Mexico amounted to €1,083 million as of December 31, 2019 (€826 and €615
million as of December 31, 2018 and 2017, respectively). Practically all of deferred tax assets as of December 31, 2019 relate to
temporary differences. The remainders are tax credits carry forwards.
South America: Net deferred tax assets recognized in South America amounted to €84 million as of December 31, 2019 (€0.4
and €26 million as of December 31, 2018 and 2017, respectively). Practically all the deferred tax assets are related to temporary
differences.
The United States: Net deferred tax assets recognized in the United States amounted to 122 million as of December 31, 2019
(€164 and €180 as of December 31, 2018 and 2017, respectively). All the deferred tax assets relate to temporary differences.
Turkey: Net deferred tax assets recognized in Turkey amounted to €278 million as of December 31, 2019 (€250 and €224
million as of December 31, 2018 and 2017 respectively). As of December 31, 2019, all the deferred tax assets correspond to €10
million of tax credits related to tax losses carry forwards and deductions and €268 million relate to temporary differences.
Based on the information available as of December 31, 2019, including historical levels of benefits and projected results available to the Group
for the coming 15 years, it is considered that sufficient taxable income will be generated for the recovery of above mentioned unsecured
deferred tax assets when they become deductible according to the tax laws.
On the other hand, the Group has not recognized certain deductible temporary differences, negative tax bases and deductions for which, in
general, there is no legal period for offsetting, amounting to approximately € 2,207 million euros, which are mainly originated by Catalunya
Banc.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
20.
Other assets and liabilities
The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:
Other assets and liabilities: (Millions of Euros)
Assets
Inventories
Of which: Real estate
Transactions in progress
Accruals
Prepaid expense
Other prepayments and accrued income
Other items
Total other assets
Liabilities
Transactions in progress
Accruals
Accrued expense
Other accrued expense and deferred income
Other items
Total other liabilities
2019
2018
2017
581
579
138
804
573
231
2,277
3,800
39
2,456
2,064
392
1,247
3,742
635
633
249
702
465
237
3,886
5,472
39
2,558
2,119
439
1,704
4,301
229
226
156
768
509
259
3,207
4,359
165
2,490
1,997
493
1,894
4,550
21.
Non-current assets and disposal groups classified as held for sale
The composition of the balance under the heading “Non-current assets and disposal groups classified as held for sale” in the accompanying
consolidated balance sheets, broken down by the origin of the assets, is as follows:
Non-current assets and disposal groups classified as held for sale. Breakdown by items (Millions of Euros)
Foreclosures and recoveries (*)
Foreclosures
Recoveries from financial leases
Assets from tangible assets
Business sale - Assets (**)
Accrued amortization (***)
Impairment losses
Total non-current assets and disposal groups classified as held for
sale
2019
1,647
1,553
94
310
1,716
(51)
(543)
2018
2,211
2,135
76
433
29
(44)
(628)
2017
6,207
6,047
160
447
18,623
(77)
(1,348)
3,079
2,001
23,853
(*)
(**)
Corresponds mainly to the agreement with Cerberus to transfer the "Real Estate" business in Spain in 2018 (see Note 3).
The 2019 balance corresponds mainly to the BBVA´s stake in BBVA Paraguay and 2017 balance corresponds mainly to the BBVA´s stake in BBVA Chile sold in 2018 (see
Note 3).
(***) Amortization accumulated until related asset reclassified as “non-current assets and disposal groups classified as held for sale”.
The changes in the balances of “Non-current assets and disposal groups classified as held for sale” in 2019, 2018 and 2017 are as follows:
P.122
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Non-current assets and disposal groups classified as held for sale. Changes in the year 2019 (Millions of Euros)
Foreclosed assets
Notes
Foreclosed assets
through auction
proceeding
Recovered assets
from financial leases
From own use
assets
(*)
Other assets
(**)
Total
Cost (1)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Transfers, other movements and exchange differences
Balance at the end
Impairment (2)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Other movements and exchange differences
Balance at the end
Balance at the end of net carrying value (1)-(2)
50
2,135
597
2
(967)
(214)
1,553
482
66
-
(160)
(5)
383
1,170
76
68
-
(56)
7
95
22
6
-
(4)
4
28
67
389
10
-
(206)
65
258
124
5
-
(22)
25
132
126
29
1,676
-
-
11
1,716
-
-
-
-
-
-
2,629
2,351
2
(1,229)
(131)
3,622
628
77
-
(186)
24
543
1,716
3,079
(*)
Net of amortization accumulated until assets were reclassified as non-current assets classified as held for sale.
(** )
The variation corresponds mainly to the agreement of the sale of BBVA Paraguay (see Note 3).
Non-current assets and disposal groups classified as held for sale. Changes in the year 2018 (Millions of Euros)
Cost (1)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Transfers, other movements and exchange differences
Balance at the end
Impairment (2)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Other movements and exchange differences
Balance at the end
Balance at the end of net carrying value (1)-(2)
Foreclosed assets
Notes
Foreclosed
assets through
auction
proceeding
Recovered
assets from
financial leases
From own use
assets
(*)
Other assets (**)
Total
6,047
637
-
(4,354)
(195)
2,135
1,102
195
-
(793)
(22)
482
1,653
160
55
-
(135)
(4)
76
52
11
-
(37)
(4)
22
54
371
4
-
(227)
241
389
194
2
-
(101)
29
124
265
18,623
-
-
(18,594)
-
29
-
-
-
-
-
-
29
25,201
696
-
(23,310)
42
2,629
1,348
208
-
(931)
3
628
2,001
50
(*)
Net of amortization accumulated until assets were reclassified as non-current assets classified as held for sale.
(** )
The variation corresponds mainly to the BBVA’s stake in BBVA Chile and the agreement with Cerberus to transfer the "Real Estate" business in Spain (see Note 3).
P.123
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Non-current assets and disposal groups classified as held for sale. Changes in the year 2017 (Millions of Euros)
Cost (1)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Transfers, other movements and exchange differences
Balance at the end
Impairment (2)
Balance at the beginning
Additions
Contributions from merger transactions
Retirements (sales and other decreases)
Other movements and exchange differences
Balance at the end
Balance at the end of net carrying value (1)-(2)
Foreclosed assets
Notes
Foreclosed assets
through auction
proceeding
Recovered assets
from financial
leases
From own use
assets
(*)
Other assets
(**)
Total
4,057
791
-
(1,037)
2,236
6,047
1,237
143
-
(272)
(6)
1,102
4,945
168
45
-
(49)
(4)
160
47
14
-
(7)
(2)
52
108
1,065
1
-
(131)
(564)
371
443
1
-
(42)
(208)
194 -
177
40
-
-
-
18,583
18,623
-
-
-
-
-
18,623
5,330
837
-
(1,217)
20,251
25,201
1,727
158
-
(321)
(216)
1,348
23,853
50
(*)
Net of amortization accumulated until assets were reclassified as non-current assets classified as held for sale.
(** )
The variation corresponds mainly to the BBVA’s stake in BBVA Chile and the agreement with Cerberus to transfer the "Real Estate" business in Spain (see Note 3).
As indicated in Note 2.2.4, “Non-current assets and disposal groups held for sale” and “Liabilities included in disposal groups classified as held
for sale” are valued at the lower amount between its fair value less costs to sell and its book value. As of December 31, 2019, practically all of
the carrying amount of the assets recorded at fair value on a non-recurring basis coincides with their fair value.
Assets from foreclosures or recoveries
As of December 31, 2019, 2018 and 2017, assets from foreclosures and recoveries, net of impairment losses, by nature of the asset, amounted
to €871, €1,072 and €1,924 million in assets for residential use; €259, €182 and €491 million in assets for tertiary use (industrial, commercial
or office) and €28 €19 and €29 million in assets for agricultural use, respectively.
In December 31, 2019, 2018 and 2017, the average sale time of assets from foreclosures or recoveries was between 2 and 3 years.
During the years 2019, 2018 and 2017, some of the sale transactions for these assets were financed by Group companies. The amount of loans
to buyers of these assets in those years amounted to €79, €82 and €207 million, respectively; with an average financing of 27.5% of the sales
price during 2019.
As of December 31, 2019, 2018 and 2017, the amount of the profits arising from the sale of Group companies financed assets - and therefore
not recognized in the consolidated income statement - amounted to €1 million in each financial year.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
22.
Financial liabilities at amortized cost
22.1 Breakdown of the balance
The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:
Financial liabilities measured at amortized cost (Millions of Euros)
Deposits
Deposits from central banks
Demand deposits
Time deposits
Repurchase agreements
Deposits from credit institutions
Demand deposits
Time deposits
Repurchase agreements
Customer deposits
Demand deposits
Time deposits
Repurchase agreements
Debt certificates
Other financial liabilities
Total
2019
438,919
25,950
23
25,101
826
28,751
7,161
18,896
2,693
384,219
280,391
103,293
535
63,963
13,758
516,641
2018
435,229
27,281
20
26,885
375
31,978
8,370
19,015
4,593
375,970
260,573
114,188
1,209
61,112
12,844
509,185
2017
467,949
37,054
2,588
28,311
6,155
54,516
3,731
25,941
24,843
376,379
240,583
126,716
9,079
63,915
11,850
543,713
22.2 Deposits from credit institutions
The breakdown by geographical area and the nature of the related instruments of this heading in the accompanying
consolidated balance sheets is as follows:
Deposits from credit institutions. December 2019 (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
Demand deposits
Time deposits &
other (*)
Repurchase
agreements
2,104
2,082
432
302
394
1,652
194
7,161
1,113
4,295
1,033
617
2,285
5,180
4,374
18,896
1
-
168
4
161
2,358
-
2,693
Total
3,218
6,377
1,634
924
2,840
9,190
4,568
28,751
(*) Subordinated deposits are included amounting €195 million.
P.125
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Deposits from credit institutions. December 2018 (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
Demand deposits
Time deposits &
other (*)
Repurchase
agreements
1,981
1,701
280
651
442
3,108
207
8,370
2,527
2,677
286
669
1,892
6,903
4,061
19,015
55
-
-
4
-
4,534
-
4,593
(*) Subordinated deposits are included amounting €191 million.
Deposits from credit institutions. December 2017 (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
Demand deposits
Time deposits &
other (*)
Repurchase
agreements
762
1,563
282
73
448
526
77
3,731
3,879
2,398
330
836
2,538
12,592
3,369
25,941
878
-
1,817
44
13
21,732
360
24,843
(*) Subordinated deposits are included amounting €233 million.
22.3 Customer deposits
Total
4,563
4,379
566
1,323
2,335
14,545
4,268
31,978
Total
5,518
3,961
2,429
953
2,999
34,849
3,806
54,516
The breakdown by geographical area of this heading in the accompanying consolidated balance sheets, by type of instrument
is as follows:
Customer deposits. December 2019 (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
Demand deposits
Time deposits &
other (*)
Repurchase
agreements
146,651
46,372
43,326
13,775
22,748
6,610
909
24,958
19,810
12,714
22,257
13,913
8,749
892
2
-
523
10
-
-
-
Total
171,611
66,181
56,564
36,042
36,661
15,360
1,801
280,391
103,293
535
384,219
(*) Subordinated deposits are included amounting to €189 million.
P.126
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Customer deposits. December 2018 (Millions of Euros)
Demand deposits
Time deposits and
other (*)
Repurchase
agreements
Total
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
138,236
41,222
38,383
10,856
23,811
7,233
831
260,573
28,165
21,317
11,837
22,564
14,159
14,415
1,731
114,188
3
-
770
7
-
429
-
1,209
(*) Subordinated deposits are included amounting to €220 million.
Customer deposits. December 2017 (Millions of Euros)
Spain
The United States
Mexico
Turkey
South America
Rest of Europe
Rest of the world
Total
Demand
deposits
Time deposits &
other (*)
Repurchase
agreements
123,382
36,728
36,492
12,427
23,710
6,816
1,028
39,513
21,436
11,622
24,237
15,053
13,372
1,484
240,583
126,716
2,664
-
4,272
152
2
1,989
-
9,079
(*) Subordinated deposits are included amounting to €194 million.
22.4 Debt certificates
The breakdown of the balance under this heading, by financial instruments and by currency, is as follows:
166,403
62,539
50,991
33,427
37,970
22,077
2,563
375,970
Total
165,559
58,164
52,387
36,815
38,764
22,177
2,511
376,379
P.127
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Debt certificates (Millions of Euros)
In Euros
Promissory bills and notes
Non-convertible bonds and debentures
Covered bonds (*)
Hybrid financial instruments
Securitization bonds
Wholesale funding
Subordinated liabilities
Convertible perpetual certificates
Convertible subordinated debt
Non-convertible preferred stock
Other non-convertible subordinated liabilities
In foreign currencies
Promissory bills and notes
Non-convertible bonds and debentures
Covered bonds (*)
Hybrid financial instruments
Securitization bonds
Wholesale funding
Subordinated liabilities
Convertible perpetual certificates
Convertible subordinated debt
Non-convertible preferred stock
Other non-convertible subordinated liabilities
Total
(*) Including mortgage-covered bonds (see Appendix X).
2019
40,185
737
12,248
15,542
518
1,354
1,817
7,968
5,000
-
83
2,885
23,778
1,210
10,587
362
1,156
17
780
9,666
1,782
-
76
7,808
63,963
2018
37,436
267
9,638
15,809
814
1,630
142
9,136
5,490
-
107
3,540
23,676
3,237
9,335
569
1,455
38
544
8,499
873
-
74
7,552
61,112
2017
38,735
1,309
9,418
16,425
807
2,295
-
8,481
4,500
-
107
3,875
25,180
3,157
11,109
650
1,809
47
-
8,407
2,085
-
55
6,268
63,915
As of December 31, 2019, 71% of “Debt certificates” have fixed-interest rates and 29% have variable interest rates.
Most of the foreign currency issues are denominated in U.S. dollars.
22.4.1. Subordinated liabilities
The breakdown of this heading, is as follows:
Memorandum item: Subordinated liabilities at amortized cost
Subordinated deposits
Subordinated certificates
Preferred stock
Compound convertible financial instruments
Other non-convertible subordinated liabilities (*)
2019
384
17,635
159
6,782
10,693
2018
411
17,635
181
6,363
11,092
Total
(*) The €40 million subordinated issuances of BBVA Paraguay as of December 2019 are recorded in the heading "Liabilities included in disposal groups classified as held for sale".
18,018
18,047
P.128
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The issuances of BBVA International Preferred, S.A.U., BBVA Global Finance, Ltd., Caixa Terrassa Societat de Participacions Preferents, S.A.U.
and CaixaSabadell Preferents, S.A.U., are jointly, severally and irrevocably guaranteed by the Bank. The balance variances are mainly due to
the following transactions:
Convertible perpetual liabilities
The AGM held on March 17, 2017, resolved, under agenda item five, to confer authority to the Board of Directors to issue securities convertible
into newly issued BBVA shares, on one or several occasions, within the maximum term of five years to be counted from the approval date of
the authorization, up to a maximum overall amount of €8 billion or its equivalent in any other currency. Likewise, the AGM resolved to confer
to the Board of Directors the authority to totally or partially exclude shareholders’ pre-emptive subscription rights within the framework of a
specific issue of convertible securities, although this power was limited to ensure the nominal amount of the capital increases resolved or
effectively carried out to cover the conversion of mandatory convertible issuances made under this authority (without prejudice to anti-dilution
adjustments), with exclusion of pre-emptive subscription rights and of those likewise resolved or carried out with exclusion of pre-emptive
subscription rights in use of the authority to increase the share capital conferred by the AGM held on March 17, 2017, under agenda item four,
do not exceed the maximum nominal amount, overall, of 20% of the share capital of BBVA at the time of the authorization, this limit not being
applicable to contingent convertible issues.
Under that delegation, BBVA made the following issuances that qualify as additional tier 1 capital of the Bank and the Group in accordance with
Regulation (EU) 575/2013:
In May and November 2017, BBVA carried out both issuances of perpetual contingent convertible securities (additional tier 1
instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of €500 million and
$1,000 million, respectively. These issuances are listed in the Global Exchange Market of Euronext Dublin and were targeted only at
qualified investors and foreign private banking clients, not being offered to, and not being subscribed for, in Spain or by Spanish
residents.
In September 2018 and March 2019, BBVA carried out both issuances of perpetual contingent convertible securities (additional tier
1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of €1,000 million each.
These issuances are listed in the AIAF Fixed Income Securities Market and were targeted only at professional clients and eligible
counterparties, and not being offered or sold to any retail clients.
On September 5, 2019, BBVA carried out an issuance of perpetual contingent convertible securities (additional tier 1 instrument),
with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of $1,000 million. This issuance is listed
in the Global Exchange Market of Euronext Dublin and was targeted only at qualified investors, not being offered to, and not being
subscribed for, in Spain or by Spanish residents.
Additionally, other issuances:
The additional issuances of perpetual contingent convertible securities (additional tier 1 instruments) with exclusion of pre-emptive
subscription rights of shareholders were carried out, by virtue of other delegations conferred by the AGM, in February 2015 for an
amount of €1.5 billion and in April 2016 for an amount of €1 billion. These issuances were targeted only at qualified investors and
foreign private banking clients not being offered to, and not being subscribed for, in Spain or by Spanish residents. These issuances
are listed in the Global Exchange Market of Euronext Dublin and qualify as additional tier 1 capital of the Bank and the Group in
accordance with Regulation (EU) 575/2013.
These perpetual securities will be converted into newly issued ordinary shares of BBVA if the CET 1 ratio of the Bank or the Group is less than
5.125%, in accordance with their respective terms and conditions.
These issues may be fully redeemed at BBVA´s option only in the cases contemplated in their respective terms and conditions, and in any
case, in accordance with the provisions of the applicable legislation. In particular:
On May 9, 2018, the Bank early redeemed the issuance of preferred securities contingently convertible (additional tier 1 instrument)
carried out by the Bank on May 9, 2013, for an amount of USD1.5 billion on the First Reset Date of the issuance and once the prior
consent from the Regulator was obtained.
On February 19, 2019 the Bank early redeemed the issuance of preferred securities contingently convertible (additional tier 1
instrument), carried out by the Bank on February 19, 2014, for a total amount of €1,5 billion and once the prior consent from the
Regulator has been obtained.
Additionally, on December 23, 2019, the Bank has notified its irrevocable decision to early redeem next February 18, 2020 the
issuance of preferred securities contingently convertible (additional tier 1 instrument), carried out by the Bank on February 18, 2015,
for a total amount of €1,5 billion and once the prior consent from the Regulator has been obtained.
P.129
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Preferred securities
The breakdown by issuer of the balance under this heading in the accompanying consolidated balance sheets is as follows:
Preferred securities by issuer (Millions of Euros)
BBVA International Preferred, S.A.U. (1)
Unnim Group (2)
BBVA USA
BBVA Colombia
Other
Total
(1) Listed on the London stock exchange.
(2) Unnim Group: Issuances prior to the acquisition by BBVA.
2019
2018
37
83
19
20
-
159
35
98
19
19
9
181
2017
36
98
19
1
9
163
These issuances were fully subscribed at the moment of the issue by qualified/institutional investors outside the Group and are redeemable,
totally or partially, at the issuer’s option after five years from the issue date, depending on the terms of each issuance and with the prior consent
from the Bank of Spain or the relevant authority.
Redemption of preferred securities
BBVA International Preferred, S.A.U. carried out the early redemption in full of its Series B preferred securities on March 20, 2017, for an
outstanding amount of €164,350,000; on March 22, 2017, the early redemption in full of its Series A preferred securities for an outstanding
amount of €85,550,000; and on April 18, 2017 the early redemption in full of its Series C preferred securities for an outstanding amount of
USD 600,000,000, once the prior consent was obtained.
22.5 Other financial liabilities
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
Other financial liabilities (Millions of Euros)
Lease liabilities (*)
Creditors for other financial liabilities
Collection accounts
Creditors for other payment obligations
Total
(*) Lease liabilities are recognized after the implementation of IFRS 16 (see Note 2.1).
2019
3,335
2,623
3,306
4,494
13,758
2018
2017
2,891
4,305
5,648
12,844
2,835
3,452
5,563
11,850
A breakdown of the maturity of the lease liabilities, due after December 31, 2019 is provided below:
Maturity of future payment obligations (Millions of Euros)
Leases
Up to 1
year
1 to 3 years
3 to 5
years
Over 5
years
Total
269
500
535
2,031
3,335
P.130
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
23.
Assets and liabilities under insurance and reinsurance contracts
The Group has insurance subsidiaries mainly in Spain and Latin America (mostly in Mexico). The main product offered by the insurance
subsidiaries is life insurance to cover the risk of death (risk insurance) and life-savings insurance. Within life and accident insurance, a
distinction is made between freely sold products and those offered to customers who have taken mortgage or consumer loans, which cover
the principal of those loans in the event of the customer’s death.
There are two types of savings products: individual insurance, which seeks to provide the customer with savings for retirement or other events,
and group insurance, which is taken out by employers to cover their commitments to their employees.
The insurance business is affected by different risks, including those that are related to the BBVA Group such as credit risk, market risk, liquidity
risk and operational risk and the methodology for risk measurement applied in the insurance activity is similar (see Note 7 and Management
Report - Risk), although it has a differentiated management due to the particular characteristics of the insurance business, such as the
coverage of contracted obligations and the long term of the commitments. Additionally, the insurance business generates certain specific
risks, of a probabilistic nature:
Technical risk: arises from deviations in the estimation of the casualty rate of insurances, either in terms of numbers, the amount of
such claims and the timing of its occurrence.
Biometric risk: depending on the deviations in the expected mortality behavior or the survival of the insured persons.
The insurance industry is highly regulated in each country. In this regard, it should be noted that the insurance industry is undergoing a gradual
regulatory transformation through new risk-based capital regulations, which have already been published in several countries.
The heading “Assets under reinsurance and insurance contracts” in the accompanying consolidated balance sheets includes the amounts that
the consolidated insurance entities are entitled to receive under the reinsurance contracts entered into by them with third parties and, more
specifically, the share of the reinsurer in the technical provisions recognized by the consolidated insurance subsidiaries. As of December 31,
2019, 2018 and 2017, the balance under this heading amounted to €341, €366 million and €421 million respectively.
The most significant provisions recognized by consolidated insurance subsidiaries with respect to insurance policies issued by them are under
the heading “Liabilities under insurance and reinsurance contracts” in the accompanying consolidated balance sheets.
The breakdown of the balance under this heading is as follows:
Technical reserves (Millions of Euros)
Mathematical reserves
Individual life insurance (1)
Savings
Risk
Group insurance (2)
Savings
Risk
Provision for unpaid claims reported
Provisions for unexpired risks and other provisions
Total
2019
2018
2017
9,247
6,731
5,906
825
2,517
2,334
182
641
718
10,606
8,504
6,201
5,180
1,021
2,303
2,210
93
662
668
9,834
7,961
5,359
4,392
967
2,601
2,455
147
631
631
9,223
(1)
(2)
Provides coverage in the event of death or disability.
The insurance policies purchased by employers (other than BBVA Group) on behalf of its employees
The cash flows of those “Liabilities under insurance and reinsurance contracts” are shown below:
P.131
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Maturity (Millions of euros). Liabilities under insurance and reinsurance contracts
2019
2018
2017
Up to 1 year
1 to 3 years
3 to 5 years
Over 5 years
1,571
1,686
1,560
1,197
1,041
1,119
1,806
1,822
1,502
6,032
5,285
5,042
Total
10,606
9,834
9,223
The modeling methods and techniques used to calculate the mathematical reserves for the insurance products are actuarial and financial
methods and modeling techniques approved by the respective country’s insurance regulator or supervisor. The most important insurance
entities are located in Spain and Mexico (which together account for approximately 85% of the insurance revenues), where the modeling
methods and techniques are reviewed by the insurance regulator in Spain (General Directorate of Insurance) and Mexico (National Insurance
and Bonding Commission), respectively. The modeling methods and techniques used to calculate the mathematical reserves for the insurance
products are compliant with IFRS and primarily involve the valuation of the estimated future cash flows, discounted at the technical interest
rate for each policy. To ensure this technical interest rate, asset-liability management is carried out, acquiring a portfolio of securities that
generate the cash flows needed to cover the payment commitments assumed with the customers.
The table below shows the key assumptions as of December 31, 2019, used in the calculation of the mathematical reserves for insurance
products in Spain and Mexico, respectively:
Mathematical reserves
Mortality table
Average technical interest type
Spain
Mexico
Spain
Mexico
Individual life insurance (1)
GRMF 80-2, GKMF
80/95. PASEM, PERMF
2000
Tables of the Comisión
Nacional de Seguros y
Fianzas 2000-individual
0.25% -2.91%
2.50%
Group insurance(2)
PERMF 2000
Tables of the Comisión
Nacional de Seguros y
Fianzas 2000-grupo
Depending on the related
portfolio
5.50%
(1)
(2)
Provides coverage in the case of one or more of the following events: death and disability.
Insurance policies purchased by companies (other than Group BBVA entities) on behalf of their employees.
24.
Provisions
The breakdown of the balance under this heading in the accompanying consolidated balance sheets, based on type of provisions, is as follows:
Provisions. Breakdown by concepts (Millions of Euros)
Provisions for pensions and similar obligations
Other long term employee benefits
Provisions for taxes and other legal contingencies
Provisions for contingent risks and commitments
Other provisions (*)
Total
Notes
25
25
2019
4,631
61
677
711
457
6,538
2018
4,787
62
686
636
601
6,772
2017
5,407
67
756
578
669
7,477
(*) Individually insignificant provisions or contingencies, for various concepts in different geographies.
The change in provisions for pensions and similar obligations for the years ended December 31, 2019, 2018, and 2017 is as follows:
P.132
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Provisions for pensions and similar obligations. Changes over the year (Millions of Euros)
Balance at the beginning
Add
Charges to income for the year
Interest expense and similar charges
Personnel expense
Provision expense
Charges to equity (1)
Transfers and other changes
Less
Benefit payments
Employer contributions
Balance at the end
Notes
44.1
25
25
25
2019
4,787
330
65
50
215
329
(32)
(718)
(65)
4,631
2018
2017
5,407
6,025
126
78
58
(10)
41
95
(779)
(103)
4,787
391
71
62
258
140
(264)
(861)
(25)
5,407
(1)
Correspond to actuarial losses (gains) arising from certain defined-benefit post-employment pension commitments and other similar benefits recognized in “Equity” (see Note
2.2.12).
Provisions for taxes, legal contingencies and other provisions. Changes over the year (Millions of Euros)
Balance at beginning
Additions
Acquisition of subsidiaries
Unused amounts reversed during the year
Amount used and other variations
Balance at the end
Ongoing legal proceedings and litigation
2019
1,286
396
-
(96)
(453)
1,134
2018
1,425
455
-
(184)
(410)
1,286
2017
2,028
868
-
(164)
(1,306)
1,425
The financial sector faces an environment of increasing regulatory and litigious pressure. In this environment, the different Group’s entities are
often parties to individual or collective legal proceedings arising from the ordinary activity of their businesses. In accordance with the
procedural status of these proceedings and according to the criteria of the attorneys who manage them, BBVA considers that none of them is
material, individually or in aggregate, and that no significant impact derives from them neither in the results of operations nor on liquidity, nor
in the financial position at a consolidated level of the Group, as at the level of the standalone Bank. The Group Management considers that the
provisions made in connection with these legal proceedings are adequate.
As mentioned in Note 7.5 Legal risk factors, the Group is subject or may be subject in the future to a series of legal and regulatory investigations,
procedures and actions which, in case of a negative result, could have an adverse impact on the business, the financial situation and the results
of the Group.
25.
Post-employment and other employee benefit commitments
As stated in Note 2.2.12, the Group has assumed commitments with employees including short-term employee benefits (see Note 44.1),
defined contribution and defined benefit plans (see Glossary), healthcare and other long-term employee benefits.
The Group sponsors defined-contribution plans for the majority of its active employees with the plans in Spain and Mexico being the most
significant. Most defined benefit plans are closed to new employees with liabilities relating largely to retired employees, the most significant
being those in Spain, Mexico, the United States and Turkey. In Mexico, the Group provides medical benefits to a closed group of employees
and their family members, both active service and in retirees.
P.133
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The breakdown of the net defined benefit liability recorded on the balance sheet as of December 31, 2019, 2018 and 2017 is provided below:
Net defined benefit liability (asset) on the consolidated balance sheet (Millions of Euros)
Pension commitments
Early retirement commitments
Medical benefits commitments
Other long term employee benefits
Total commitments
Pension plan assets
Medical benefit plan assets
Total plan assets (1)
Total net liability / asset
Of which: Net asset on the consolidated balance sheet (2)
Of which: +Net liability on the consolidated balance sheet for provisions for pensions and
similar obligations (3)
Of which: Net liability on the consolidated balance sheet for other long term employee benefits
(4)
2019
2018
2017
5,050
1,486
1,580
61
8,177
1,961
1,532
4,678
1,793
1,114
62
7,647
1,694
1,146
4,969
2,210
1,204
67
8,451
1,892
1,114
3,493
2,840
3,006
4,684
4,807
(8)
(41)
5,445
(27)
4,631
4,787
5,407
61
62
67
(1)
(2)
(3)
(4)
In Turkey, the foundation responsible for managing the benefit commitments holds an additional asset of €252 million as of December 31, 2019 which, in
accordance with IFRS regarding the asset ceiling, has not been recognized in the Consolidated Financial Statements, because although it could be used to
reduce future pension contributions it could not be immediately refunded to the employer.
Recorded under the heading “Other Assets - Other” of the consolidated balance sheet (see Note 20).
Recorded under the heading “Provisions - Provisions for pensions and similar obligations” of the consolidated balance sheet (see Note 24).
Recorded under the heading “Provisions – Other long-term employee benefits” of the consolidated balance sheet (see Note 24).
The amounts relating to benefit commitments charged to consolidated income statement for the years 2019, 2018 and 2017 are as follows:
Consolidated income statement impact (Millions of Euros)
Interest and similar expense
Interest expense
Interest income
Personnel expense
Defined contribution plan expense
Defined benefit plan expense
Provisions (net)
Early retirement expense
Past service cost expense
Remeasurements (*)
Other provision expense
Total impact on consolidated income statement: debit (credit)
Notes
2019
2018
2017
44.1
44.1
46
65
307
(242)
163
113
50
214
190
18
7
(2)
441
78
295
(217)
147
89
58
125
141
(33)
(10)
28
350
71
294
(223)
149
87
62
343
227
3
31
82
563
(*)
Actuarial losses (gains) on remeasurement of the net defined benefit liability relating to early retirements in Spain and other long-term employee benefits
that are charged to the income statements (see Note 2.2.12).
The amounts relating to post-employment benefits charged to the consolidated balance sheet correspond to the actuarial gains (losses) on
remeasurement of the net defined benefit liability relating to pension and medical commitments before income taxes. As of December 31,
2019, 2018 and 2017 are as follows:
P.134
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Equity impact (Millions of Euros)
Defined benefit plans
Post-employment medical benefits
Total impact on equity: debit (credit)
25.1 Defined benefit plans
2019
2018
2017
254
74
329
81
(47)
34
(40)
179
140
Defined benefit commitments relate mainly to employees who have already retired or taken early retirement, certain closed groups of active
employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. For the
latter, the Group pays the required premiums to fully insure the related liability. The change in these pension commitments during the years
ended December 31, 2019, 2018 and 2017 is presented below:
Defined benefits (Millions of Euros)
Balance at the beginning
Current service cost
Interest income/expense
Contributions by plan
participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic
assumptions
From changes in financial
assumptions
Other actuarial gain and losses
Benefit payments
Settlement payments
Business combinations and
disposals
Effect on changes in foreign
exchange rates
Conversions to defined
contributions
Other effects
Balance at the end
Of which: Spain
Of which: Mexico
Of which: The United States
Of which: Turkey
2019
2018
2017
Defined
benefit
obligation
7,585
53
304
4
-
210
783
-
(15)
688
110
(905)
-
-
63
-
19
8,116
4,592
2,231
375
444
Plan
assets
2,839
-
242
4
65
-
454
454
-
-
-
(187)
-
-
69
-
6
3,493
266
2,124
323
359
Net
liability
(asset)
Defined
benefit
obligation
Plan
assets
Net liability
(asset)
Defined
benefit
obligation
Plan
assets
Net liability
(asset)
4,746
53
62
-
(65)
210
329
(454)
(15)
688
110
(718)
-
-
(6)
-
13
4,623
4,326
107
52
86
8,384
61
292
4
-
109
(263)
-
14
(274)
(3)
(979)
-
-
(31)
-
10
7,585
4,807
1,615
326
422
3,006
-
217
3
103
-
(286)
(286)
-
-
-
(200)
-
-
(9)
-
6
2,840
260
1,587
287
339
5,378
61
76
1
(103)
109
21
286
14
(274)
(3)
(779)
-
-
8,851
64
290
3,022
-
223
4
-
231
331
-
100
220
12
(1,029)
-
-
4
25
-
161
161
-
-
-
(169)
-
-
(22)
(278)
(258)
-
4
4,745
4,547
28
39
83
(82)
(1)
8,384
5,442
1,661
360
520
-
(1)
3,006
320
1,602
309
424
5,829
64
68
-
(25)
231
171
(161)
100
220
12
(861)
-
-
(19)
(82)
-
5,378
5,122
60
51
96
(1)
(2)
Including gains and losses arising from settlements.
Excluding interest, which is recorded under "Interest income or expense".
The balance under the heading “Provisions - Pensions and other post-employment defined benefit obligations” of the accompanying
consolidated balance sheet as of December 31, 2019 includes €351 million relating to post-employment benefit commitments to former
members of the Board of Directors and the Bank’s Management (see Note 54).
The most significant commitments are those in Spain and Mexico and, to a lesser extent, in the United States and Turkey. The remaining
commitments are located mostly in Portugal and South America. Unless otherwise required by local regulation, all defined benefit plans have
been closed to new entrants, who instead are able to participate in the Group´s defined contribution plans.
P.135
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Both the costs and the present value of the commitments are determined by independent qualified actuaries using the “projected unit credit”
method. In order to guarantee the good governance of these plans, the Group has established specific benefits committees. These benefit
committees include members from the different areas of the business to ensure that all decisions are made taking into consideration all of the
associated impacts.
The following table sets out the key actuarial assumptions used in the valuation of these commitments as of December 31, 2019, 2018 and
2017:
Actuarial assumptions (Millions of Euros)
2019
2018
2017
Spain
Mexico
The
United
States
Turkey
Spain
Mexico
9.04%
4.75%
2.47%
7.00%
3.24%
-
-
-
12.50%
9.70%
8.20%
12.40%
1.28%
-
-
-
10.45%
4.75%
2.51%
7.00%
The
United
States
4.23%
-
-
-
Turkey
Spain
Mexico
16.30%
14.00%
12.50%
16.70%
1.24%
-
-
-
9.48%
4.75%
2.13%
7.00%
The
United
States
3.57%
-
-
-
Turkey
11.60%
9.90%
8.40%
12.60%
Discount rate
Rate of salary increase
Rate of pension increase
Medical cost trend rate
Mortality tables
0.68%
-
-
-
PERM/F
PERM/F
PERM/F
2000P EMSSA09 RP 2014 CSO2001
2000P EMSSA09 RP 2014 CSO2001
2000P EMSSA09 RP 2014 CSO2001
In Spain, the discount rate shown as of December, 31, 2019, corresponds to the weighted average rate, the actual discount rates used are 0%
and 1% depending on the type of commitment.
Discount rates used to value future benefit cash flows have been determined by reference to high quality corporate bonds (Note 2.2.12)
denominated in Euro in the case of Spain, Mexican peso for Mexico and USD for the United States, and government bonds denominated in
Turkish Lira for Turkey.
The expected return on plan assets has been set in line with the adopted discount rate.
Assumed retirement ages have been set by reference to the earliest age at which employees are entitled to retire, the contractually agreed age
in the case of early retirements in Spain or by using retirement rates.
Changes in the main actuarial assumptions may affect the valuation of the commitments. The table below shows the sensitivity of the benefit
obligations to changes in the key assumptions:
Sensitivity analysis (Millions of Euros)
Discount rate
Rate of salary increase
Rate of pension increase
Medical cost trend rate
Change in obligation from each additional year of
longevity
Basis points change
2019
2018
Increase
Decrease
Increase
Decrease
50
50
50
100
-
(367)
3
27
338
137
405
(3)
(26)
(266)
-
(298)
3
19
229
108
332
(3)
(18)
(181)
-
The sensitivities provided above have been determined at the date of these consolidated financial statements, and reflect solely the impact of
changing one individual assumption at a time, keeping the rest of the assumptions unchanged, thereby excluding the effects which may result
from combined assumption changes.
In addition to the commitments to employees shown above, the Group has other less material long-term employee benefits. These include
long-service awards, which consist of either an established monetary award or some vacation days granted to certain groups of employees
when they complete a given number of years of service. As of December 31, 2019, 2018 and 2017, the actuarial liabilities for the outstanding
awards amounted to €61, €62 million and €67 million, respectively. These commitments are recorded under the heading "Provisions - Other
long-term employee benefits" of the accompanying consolidated balance sheet (see Note 24).
P.136
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
25.1.1 Post-employment commitments and similar obligations
These commitments relate mostly to pension payments, and which have been determined based on salary and years of service. For most
plans, pension payments are due on retirement, death and long term disability.
In addition, during the year 2019, Group entities in Spain offered certain employees the option to take retirement or early retirement (that is,
earlier than the age stipulated in the collective labor agreement in force). This offer was accepted by 616 employees (489 and 731 during years
2018 and 2017, respectively). These commitments include the compensation and indemnities due as well as the contributions payable to
external pension funds during the early retirement period. As of December 31, 2019, 2018 and 2017, the value of these commitments amounted
to €1,486, €1,793 million and €2,210 million, respectively.
The change in the benefit plan obligations and plan assets during the year ended December 31, 2019 was as follows:
Post-employment commitments 2019 (Millions of Euros)
Balance at the beginning
Current service cost
Interest income or expense
Contributions by plan participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic assumptions
From changes in financial assumptions
Other actuarial gain and losses
Benefit payments
Settlement payments
Business combinations and disposals
Effect on changes in foreign exchange rates
Conversions to defined contributions
Other effects
Balance at the end
Of which: Vested benefit obligation relating to current
employees
Of which: Vested benefit obligation relating to retired
employees
(1)
(2)
Including gains and losses arising from settlements.
Excluding interest, which is recorded under "Interest income or expense".
Defined benefit obligation
Spain
Mexico
The
United
States
Turkey
Rest of
the world
4,807
4
45
-
-
190
298
-
-
239
59
(766)
-
-
-
-
14
4,592
86
4,506
512
4
53
-
-
15
99
-
-
87
12
(50)
-
-
32
-
-
664
-
-
326
1
14
-
-
-
44
-
-
42
2
(15)
-
-
6
-
(1)
375
-
-
422
20
64
3
-
3
(3)
-
(13)
(41)
51
(21)
-
-
(44)
-
-
444
-
-
402
3
11
1
-
2
49
-
(2)
52
(1)
(14)
-
-
1
-
6
460
-
-
P.137
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Post-employment commitments 2019 (Millions of Euros)
Balance at the beginning
Current service cost
Interest income or expense
Contributions by plan participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic assumptions
From changes in financial assumptions
Other actuarial gains and losses
Benefit payments
Settlement payments
Business combinations and disposals
Effect on changes in foreign exchange rates
Conversions to defined contributions
Other effects
Balance at the end
(1)
(2)
Including gains and losses arising from settlements.
Excluding interest, which is recorded under "Interest income or expense".
Post-employment commitments 2019 (Millions of euros)
Balance at the beginning
Current service cost
Interest income or expense
Contributions by plan participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic assumptions
From changes in financial assumptions
Other actuarial gain and losses
Benefit payments
Settlement payments
Business combinations and disposals
Effect on changes in foreign exchange rates
Conversions to defined contributions
Other effects
Balance at the end
(1)
(2)
Including gains and losses arising from settlements.
Excluding interest, which is recorded under "Interest income or expense".
Spain
Mexico
Plan assets
The
United
States
Turkey
Rest of
the world
260
-
3
-
-
-
67
67
-
-
-
(64)
-
-
-
-
-
266
441
-
44
-
47
-
90
90
-
-
-
(50)
-
(7)
27
-
-
592
287
-
12
-
3
-
28
28
-
-
-
(13)
-
-
6
-
-
323
339
-
53
3
14
-
(5)
(5)
-
-
-
(10)
-
-
(34)
-
-
359
366
-
8
1
1
-
50
50
-
-
-
(11)
-
-
-
-
6
422
Net liability (asset)
The United
States
Mexico
Turkey
71
4
9
-
(47)
15
9
(90)
-
87
12
(1)
-
7
5
-
-
72
39
1
2
-
(3)
-
16
(28)
-
42
2
(2)
-
-
-
-
(1)
52
83
20
11
-
(14)
3
2
5
(13)
(41)
51
(11)
-
-
(9)
-
-
86
Rest of
the world
36
3
3
-
(1)
2
(1)
(50)
(2)
52
(1)
(3)
-
-
1
-
-
38
Spain
4,547
4
42
-
-
190
231
(67)
-
239
59
(702)
-
-
-
-
14
4,326
P.138
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The change in net liabilities (assets) during the years ended 2018 and 2017 was as follows:
Post-employment commitments (Millions of Euros)
Balance at the beginning
Current service cost
Interest income or expense
Contributions by plan participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic assumptions
From changes in financial assumptions
Other actuarial gain and losses
Benefit payments
Settlement payments
Business combinations and disposals
Effect on changes in foreign exchange rates
Conversions to defined contributions
Other effects
Balance at the end
2018: Net liability (asset)
2017: Net liability (asset)
Spain
Mexico
The
United
States
Turkey
Rest of
the
world
Spain
Mexico
The United
States
Turkey
Rest of
the
world
5,122
4
59
-
-
148
(28)
4
-
-
(32)
(763)
-
-
-
-
5
4,547
(18)
5
(2)
-
-
(1)
88
70
-
(9)
27
-
-
-
(1)
-
-
71
51
-
2
-
(2)
-
(11)
17
(1)
(28)
1
(2)
-
-
2
-
(1)
39
96
21
8
-
(13)
2
3
21
-
(45)
29
(11)
-
-
(26)
-
-
83
36
4
2
1
(18)
2
14
11
15
(12)
-
(3)
-
-
(1)
-
-
36
5,799
4
73
-
-
235
(67)
(21)
-
(33)
(13)
(842)
-
-
-
(82)
2
5,122
(59)
5
(6)
-
(1)
1
38
(10)
22
18
7
(1)
-
-
5
-
-
(18)
46
3
1
-
-
-
9
99
21
9
-
(16)
4
12
(11)
(101)
(2)
22
-
(2)
-
-
(5)
-
(1)
51
-
81
32
(11)
-
-
(21)
-
-
96
43
5
2
-
(8)
3
(1)
2
(3)
4
(4)
(3)
-
-
(5)
-
(1)
36
(1)
(2)
Includes gains and losses from settlements.
Excludes interest which is reflected in the line item “Interest income and expense”.
In Spain, local regulation requires that pension and death benefit commitments must be funded, either through a qualified pension plan or an
insurance contract.
In the Spanish entities these commitments are covered by insurance contracts which meet the requirements of the accounting standard
regarding the non-recoverability of contributions. However, a significant number of the insurance contracts are with BBVA Seguros, S.A. – a
consolidated subsidiary and related party – and consequently these policies cannot be considered plan assets under IAS 19. For this reason,
the liabilities insured under these policies are fully recognized under the heading "Provisions – Pensions and other postemployment defined
benefit obligations" of the accompanying consolidated balance sheet (see Note 24), while the related assets held by the insurance company
are included within the Group´s consolidated assets (recorded according to the classification of the corresponding financial instruments). As
of December 31, 2019 the value of these separate assets was €2,620 million, (€2,543 and €2,689 million as of December 31, 2018 and 2017,
respectively) representing direct rights of the insured employees held in the consolidated balance sheet, hence these benefits are effectively
fully funded.
On the other hand, some pension commitments have been funded through insurance contracts with insurance companies not related to the
Group. In this case the accompanying consolidated balance sheet reflects the value of the obligations net of the fair value of the qualifying
insurance policies. As of December 31, 2019, 2018 and 2017, the value of the aforementioned insurance policies (€266, €260 and €320 million,
respectively) exactly match the value of the corresponding obligations and therefore no amount for this item has been recorded in the
accompanying consolidated balance sheet.
Pensions benefits are paid by the insurance companies with whom BBVA has insurance contracts and to whom all insurance premiums have
been paid. The premiums are determined by the insurance companies using “cash flow matching” techniques to ensure that benefits can be
met when due, guaranteeing both the actuarial and interest rate risk.
In Mexico, there is a defined benefit plan for employees hired prior to 2001. Other employees participate in a defined contribution plan. External
funds/trusts have been constituted locally to meet benefit payments as required by local regulation.
In the United States there are two defined benefit plans, closed to new employees, who instead are able to join a defined contribution plan.
External funds/trusts have been constituted locally to fund the plans, as required by local regulation.
In 2008, the Turkish government passed a law to unify the different existing pension systems under a single umbrella Social Security system.
Such system provides for the transfer of the various previously established funds.
P.139
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The financial sector is in this stage at present, maintaining these pension commitments managed by external pension funds (foundations)
established for that purpose.
The foundation that maintains the assets and liabilities relating to employees of Garanti in Turkey, as per the local regulatory requirements,
has registered an obligation amounting to €286 million as of December 31, 2019 pending future transfer to the Social Security system.
Furthermore, Garanti has set up a defined benefit pension plan for employees, additional to the social security benefits, reflected in the
consolidated balance sheet.
25.1.2 Medical benefit commitments
The change in defined benefit obligations and plan assets during the years 2019, 2018 and 2017 was as follows:
Medical benefits commitments
2019
2018
2017
Defined
benefit
obligation
Plan
assets
Net liability
(asset)
Defined
benefit
obligation
Plan
assets
Net
liability
(asset)
Defined
benefit
obligation
Plan
assets
Net
liability
(asset)
Balance at the beginning
Current service cost
Interest income or expense
Contributions by plan participants
Employer contributions
Past service costs (1)
Remeasurements:
Return on plan assets (2)
From changes in demographic assumptions
From changes in financial assumptions
Other actuarial gain and losses
Benefit payments
Settlement payments
Business combinations and disposals
Effect on changes in foreign exchange rates
Other effects
Balance at the end
1,114
21
119
-
-
-
298
-
-
311
(13)
(39)
-
-
68
(1)
1,580
1,146
-
123
-
-
-
224
224
-
-
-
(39)
-
7
71
-
1,532
(32)
21
(4)
-
-
-
74
(224)
-
311
(13)
(1)
-
(7)
(2)
(1)
48
1,204
27
116
-
-
(42)
(210)
-
-
(182)
(28)
(34)
-
-
62
(9)
1,114
1,114
-
109
-
71
-
(164)
(164)
-
-
-
(33)
-
-
59
(9)
1,146
91
27
8
-
(71)
(42)
(47)
164
-
(182)
(28)
(1)
-
-
3
(0)
(32)
1,015
26
101
-
-
(11)
200
-
83
128
(10)
(35)
-
-
(92)
-
1,204
1,113
-
112
-
-
-
21
21
-
-
-
(33)
-
-
(100)
-
1,114
(98)
26
(11)
-
-
(11)
179
(21)
83
128
(10)
(2)
-
-
8
-
91
(1)
(2)
Including gains and losses arising from settlements.
Excluding interest, which is recorded under "Interest income or expense".
In Mexico, there is a medical benefit plan for employees hired prior to 2007. New employees from 2007 are covered by a medical insurance
policy. An external trust has been constituted locally to fund the plan, in accordance with local legislation and Group policy.
In Turkey, employees are currently provided with medical benefits through a foundation in collaboration with the Social Security system,
although local legislation prescribes the future unification of this and similar systems into the general Social Security system itself.
The valuation of these benefits and their accounting treatment follow the same methodology as that employed in the valuation of pension
commitments.
25.1.3 Estimated benefit payments
As of December 31, 2019, the estimated benefit payments over the next ten years for all the entities in Spain, Mexico, the United States and
Turkey are as follows:
P.140
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Estimated benefit payments (Millions of Euros)
Commitments in Spain
Commitments in Mexico
Commitments in the United States
Commitments in Turkey
Total
25.1.4 Plan assets
2020
2021
2022
2023
2024 2025-2029
621
106
17
20
764
544
110
18
22
694
449
117
19
18
603
360
125
19
22
526
288
132
20
25
465
903
808
107
200
2,018
The majority of the Group´s defined benefit plans are funded by plan assets held in external funds/trusts legally separate from the Group
sponsoring entity. However, in accordance with local regulation, some commitments are not externally funded and covered through internally
held provisions, principally those relating to early retirements.
Plan assets are those assets which will be used to directly settle the assumed commitments and which meet the following conditions: they are
not part of the Group sponsoring entities assets, they are available only to pay post-employment benefits and they cannot be returned to the
Group sponsoring entity.
To manage the assets associated with defined benefit plans, BBVA Group has established investment policies designed according to criteria
of prudence and minimizing the financial risks associated with plan assets.
The investment policy consists of investing in a low risk and diversified portfolio of assets with maturities consistent with the term of the benefit
obligation and which, together with contributions made to the plan, will be sufficient to meet benefit payments when due, thus mitigating the
plans‘ risks.
In those countries where plan assets are held in pension funds or trusts, the investment policy is developed consistently with local regulation.
When selecting specific assets, current market conditions, the risk profile of the assets and their future market outlook are all taken into
consideration. In all the cases, the selection of assets takes into consideration the term of the benefit obligations as well as short-term liquidity
requirements.
The risks associated with these commitments are those which give rise to a deficit in the plan assets. A deficit could arise from factors such as
a fall in the market value of plan assets, an increase in long-term interest rates leading to a decrease in the fair value of fixed income securities,
or a deterioration of the economy resulting in more write-downs and credit rating downgrades.
The table below shows the allocation of plan assets of the main companies of the BBVA Group as of December 31, 2019, 2018 and 2017:
Plan assets breakdown (Millions of Euros)
Cash or cash equivalents
Debt securities (government bonds)
Property
Mutual funds
Insurance contracts
Other investments
Total
Of which: Bank account in BBVA
Of which: Debt securities issued by BBVA
2019
2018
2017
56
2,668
-
2
142
-
2,869
4
-
26
2,080
-
2
132
-
2,241
3
-
68
2,178
1
1
4
10
2,261
5
3
Of which: Property occupied by BBVA
-
In addition to the above there are plan assets relating to the previously mentioned insurance contracts in Spain and the foundation in Turkey.
-
-
The following table provides details of investments in listed securities (Level 1) as of December 31, 2019, 2018 and 2017:
P.141
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Investments in listed markets
Cash or cash equivalents
Debt securities (Government bonds)
Mutual funds
Total
Of which: Bank account in BBVA
Of which: Debt securities issued by BBVA
2019
2018
2017
56
2,668
2
2,727
4
-
26
2,080
2
2,109
3
-
68
2,178
1
2,247
5
3
Of which: Property occupied by BBVA
-
The remainders of the assets are mainly invested in Level 2 assets in in accordance with the classification established under IFRS 13 (mainly
insurance contracts). As of December 31, 2019, almost all of the assets related to employee commitments corresponded to fixed income
securities.
-
-
25.2 Defined contribution plans
Certain Group entities sponsor defined contribution plans. Some of these plans allow employees to make contributions which are then
matched by the employer.
Contributions are recognized as and when they are accrued, with a charge to the consolidated income statement in the corresponding year.
No liability is therefore recognized in the accompanying consolidated balance sheet (see Note 44.1).
26. Common stock
As of December 31, 2019, 2018 and 2017, BBVA’s common stock amounted to €3,267,264,424.20 divided into 6,667,886,580 fully subscribed
and paid-up registered shares, all of the same class and series, at €0.49 par value each, represented through book-entries. All of the Bank
shares carry the same voting and dividend rights, and no single stockholder enjoys special voting rights. Each and every share is part of the
Bank’s common stock.
The Bank’s shares are traded on the stock markets of Madrid, Barcelona, Bilbao and Valencia through the Sistema de Interconexión Bursátil
Español (Mercado Continuo), as well as on the London and Mexico stock markets. BBVA American Depositary Shares (ADSs) traded on the
New York Stock Exchange.
Additionally, as of December 31, 2019, the shares of Banco BBVA Peru, S.A.; Banco Provincial, S.A.; Banco BBVA Colombia, S.A.; Banco BBVA
Argentina, S.A. and Garanti BBVA A.S., were listed on their respective local stock markets. Banco BBVA Argentina, S.A. was also quoted in the
Latin American market (Latibex) of the Madrid Stock Exchange and the New York Stock Exchange. Also, the Depositary Receipts (“DR”) of
Garanti BBVA, A.S. are listed in the London Stock Exchange
As of December 31, 2019, State Street Bank and Trust Co., The Bank of New York Mellon SA NV and Chase Nominees Ltd in their capacity as
international custodian/depositary banks, held 11.68%, 2.03%, and 6.64% of BBVA common stock, respectively. Of said positions held by the
custodian banks, BBVA is not aware of any individual shareholders with direct or indirect holdings greater than or equal to 3% of BBVA common
stock outstanding.
On April 18, 2019, Blackrock, Inc. reported to the Spanish Securities and Exchange Commission (CNMV) that, it had an indirect holding of
BBVA common stock totaling 5.917%, of which 5.480% are voting rights attributed to shares and 0.437% are voting rights through financial
instruments.
On February 3, 2020, Norges Bank reported to the Spanish Securities and Exchange Commission (CNMV) that it had an indirect holding of
BBVA S.A. common stock totaling 3.066%, of which 3.051% are voting rights attributed to shares, and 0.015% are voting rights through
financial instruments.
BBVA is not aware of any direct or indirect interests through which control of the Bank may be exercised. BBVA has not received any
information on stockholder agreements including the regulation of the exercise of voting rights at its annual general meetings or restricting or
placing conditions on the free transferability of BBVA shares. No agreement is known that could give rise to changes in the control of the Bank.
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
BBVA banking subsidiaries, associates and joint ventures worldwide, are subject to supervision and regulation from a variety of regulatory
bodies in relation to, among other aspects, the satisfaction of minimum capital requirements. The obligation to satisfy such capital
requirements may affect the ability of such entities to transfer funds in the form of cash dividends, loans or advances. In addition, under the
laws of the various jurisdictions where such entities are incorporated, dividends may only be paid out through funds legally available for such
purpose. Even when the minimum capital requirements are met and funds are legally available, the relevant regulators or other public
administrations could discourage or delay the transfer of funds to the Group in the form of cash, dividends, loans or advances for prudential
reasons.
Resolutions adopted by the Annual General Meeting
Capital increase
BBVA’s AGM held on March 17, 2017 resolved, under agenda item four, to confer authority on the Board of Directors to increase Bank’s share
capital, on one or several occasions, within the legal term of five years of the approval date of the authorization, up to the maximum amount
corresponding to 50% of Bank’s share capital at the time on which the resolution was adopted, likewise conferring authority to the Board of
Directors to totally or partially exclude shareholders’ pre-emptive subscription rights over any specific issue that may be made under such
authority; although the power to exclude pre-emptive subscription rights was limited, such that the nominal amount of the capital increases
resolved or effectively carried out with the exclusion of pre-emptive subscription rights in use of the referred authority and those that may be
resolved or carried out to cover the conversion of mandatory convertible issues that may also be made with the exclusion of pre-emptive
subscription rights in use of the authority to issue convertible securities conferred by the AGM held on March 17, 2017, under agenda item five
(without prejudice to the anti-dilution adjustments and this limit not being applicable to contingent convertible issues) shall not exceed the
nominal maximum overall amount of 20% of the share capital of BBVA at the time of the authorization.
As of the date of this document, the Bank’s Board of Directors has not exercised the authority conferred by the AGM.
“Dividend Option” Program 2017:
Note 4 introduces the details of the remuneration system ‘‘Dividend Option’’.
Convertible and/or exchangeable securities:
Note 22.4 introduces the details of the convertible and/or exchangeable securities.
27.
Share premium
As of December 31, 2019, 2018 and 2017, the balance under this heading in the accompanying consolidated balance sheets was €23,992
million.
The amended Spanish Corporation Act expressly permits the use of the share premium balance to increase capital and establishes no specific
restrictions as to its use (see Note 26).
28.
Retained earnings, revaluation reserves and other reserves
28.1 Breakdown of the balance
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Retained earnings, revaluation reserves and other reserves. Breakdown by concepts (Millions of Euros)
Legal reserve
Restricted reserve
Reserves for regularizations and balance revaluations
Voluntary reserves
Total reserves holding company (*)
Consolidation reserves attributed to the Bank and dependent consolidated
companies
Total
(*) Total reserves of BBVA, S.A. (See Appendix IX).
2019
2018
2017
653
124
-
8,331
9,108
17,169
26,277
653
133
3
8,010
8,799
14,222
23,021
644
159
12
8,643
9,458
14,266
23,724
28.2
Legal reserve
Under the amended Spanish Corporations Act, 10% of any profit made each year must be transferred to the legal reserve. The transfer must
be made until the legal reserve reaches 20% of the common stock.
The legal reserve can be used to increase the common stock provided that the remaining reserve balance does not fall below 10% of the
increased capital. While it does not exceed 20% of the common stock, it can only be allocated to offset losses exclusively in the case that there
are not sufficient reserves available.
28.3 Restricted reserves
As of December 31, 2019, 2018 and 2017, the Bank’s restricted reserves are as follows:
Restricted reserves. Breakdown by concepts (Millions of Euros)
Restricted reserve for retired capital
Restricted reserve for parent company shares and loans for those shares
Restricted reserve for redenomination of capital in euros
Total
2019
2018
2017
88
34
2
124
88
44
2
133
88
69
2
159
The restricted reserve for retired capital resulted from the reduction of the nominal par value of the BBVA shares made in April 2000.
The second heading corresponds to restricted reserves related to the amount of shares issued by the Bank in its possession at each date, as
well as the amount of customer loans outstanding at those dates that were granted for the purchase of, or are secured by, the parent company
shares.
Finally, pursuant to Law 46/1998 on the Introduction of the Euro, a restricted reserve is recognized as a result of the rounding effect of the
redenomination of the parent company common stock in euros.
28.4 Retained earnings, Revaluation reserves and Other reserves by entity
The breakdown, by company or corporate group, under the headings “Retained earnings”, “Revaluation reserves” and “other reserves” in the
accompanying consolidated balance sheets is as follows:
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Retained earnings, revaluation reserves and other reserves. Breakdown by concepts (Millions of Euros)
2019
2018
2017
Retained earnings (losses) and revaluation reserves
Holding Company
BBVA Mexico Group
Garanti BBVA Group
BBVA Colombia Group
Corporación General Financiera S.A.
BBVA Perú Group
BBV América, S.L.
Catalunyacaixa Inmobiliaria, S.A.
BBVA Chile Group
BBVA Paraguay
Bilbao Vizcaya Holding, S.A.
Compañía de Cartera e Inversiones, S.A.
Gran Jorge Juan, S.A.
Banco Industrial de Bilbao, S.A.
BBVA Luxinvest, S.A.
Pecri Inversión S.L.
BBVA Suiza, S.A.
BBVA Portugal Group
BBVA Seguros, S.A.
BBVA Venezuela Group
Grupo BBVA USA Bancshares
BBVA Argentina Group
Anida Grupo Inmobiliario, S.L.
Unnim Real Estate
Anida Operaciones Singulares, S.L.
Other
Subtotal
Other reserves or accumulated losses of investments in joint ventures and
associates
Metrovacesa, S.A.
ATOM Bank PLC
Other
Subtotal
Total
16,623
10,645
1,985
1,130
932
848
247
225
597
130
62
47
27
(13)
(48)
(50)
(52)
(59)
(99)
(125)
(317)
35
(587)
(594)
(5,375)
188
26,402
(75)
(56)
6
(125)
14,701
10,014
1,415
998
1,084
756
217
233
552
119
49
108
(33)
-
(48)
(74)
(53)
(66)
(127)
(124)
(586)
103
363
(587)
(5,317)
(618)
23,079
(61)
(28)
31
(58)
15,759
9,442
751
926
1,202
681
195
11
951
108
(73)
(20)
(47)
25
25
(76)
(57)
(436)
(215)
(113)
(794)
999
515
(576)
(4,881)
(544)
23,758
(53)
(12)
30
(35)
26,277
23,021
23,724
For the purpose of allocating the reserves and accumulated losses to the consolidated entities and to the parent company, the transfers of
reserves arising from the dividends paid and transactions between these entities are taken into account in the period in which they took place.
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
29.
Treasury shares
In the years ended December 31, 2019, 2018 and 2017 the Group entities performed the following transactions with shares issued by the Bank:
Treasury shares (Millions of euros)
Balance at beginning
+ Purchases
- Sales and other changes
+/- Derivatives on BBVA shares
+/- Other changes
Balance at the end
Of which:
Held by BBVA, S.A.
Held by Corporación General Financiera, S.A.
Held by other subsidiaries
Average purchase price in Euros
Average selling price in Euros
Net gain or losses on transactions
(Shareholders' funds-Reserves)
2019
2018
2017
Number of
Shares
Millions of
Euros
Number of
Shares
Millions of
Euros
Number of
Shares
Millions of
Euros
47,257,691
214,925,699
296
1,088
13,339,582
279,903,844
96
1,683
7,230,787
238,065,297
(249,566,201)
(1,298)
(245,985,735)
(1,505)
(231,956,502)
48
1,674
(1,622)
-
(23)
-
-
12,617,189
-
-
12,617,189
-
5.06
5.20
-
47,257,691
-
-
47,257,691
-
6.11
6.25
-
62
-
-
62
-
-
-
13
-
-
13,339,582
-
-
13,339,582
-
7.03
6.99
23
-
296
-
-
296
-
-
-
(24)
(4)
-
96
-
-
96
-
-
-
1
The percentages of treasury shares held by the Group in the years ended December 31, 2019, 2018 and 2017 are as follows:
Treasury Stock
2019
2018
2017
Min
Max
Closing
Min
Max
Closing
Min
Max
Closing
% treasury stock
0.138%
0.746%
0.213%
0.200%
0.850%
0.709%
0.004%
0.278%
0.200%
The number of BBVA shares accepted by the Group in pledge of loans as of December 31, 2019, 2018 and 2017 is as follows:
Shares of BBVA accepted in pledge
Number of shares in pledge
Nominal value
% of share capital
2019
2018
2017
43,018,382
61,632,832
64,633,003
0.49
0.65%
0.49
0.92%
0.49
0.97%
The number of BBVA shares owned by third parties but under management of a company within the Group as of December 31, 2019, 2018 and
2017 is as follows:
Shares of BBVA owned by third parties but managed by the Group
2019
2018
2017
Number of shares owned by third parties
23,807,398
25,306,229
34,597,310
Nominal value
% of share capital
0.49
0.36%
0.49
0.38%
0.49
0.52%
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
30. Accumulated other comprehensive income (loss)
The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:
Accumulated other comprehensive income (Millions of Euros)
Items that will not be reclassified to profit or loss
Actuarial gains (losses) on defined benefit pension plans
Non-current assets and disposal groups classified as held for sale
Share of other recognized income and expense of investments in subsidiaries, joint ventures and
associates
Notes
2019
2018 2017(*)
(1,875)
(1,498)
(1,284)
(1,245)
(1,183)
(1,183)
2
-
-
-
-
-
Fair value changes of equity instruments measured at fair value through other comprehensive income
13.4
(403)
(155)
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through other
comprehensive income
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their
credit risk
-
24
-
116
Items that may be reclassified to profit or loss
Hedge of net investments in foreign operations (effective portion)
Foreign currency translation
Hedging derivatives. Cash flow hedges (effective portion)
Financial assets available for sale
(5,359)
(896)
(5,932)
(218)
(5,755)
1
(6,161)
(6,643)
(7,297)
(44)
(6)
(34)
1,641
-
(26)
(40)
Fair value changes of debt instruments measured at fair value through other comprehensive income
13.4
1,760
943
Hedging instruments (non-designated items)
Non-current assets and disposal groups classified as held for sale
Share of other recognized income and expense of investments in subsidiaries, joint ventures and associates
-
(18)
1
-
1
(9)
Total
(*) See Note 1.3
The balances recognized under these headings are presented net of tax.
31.
Non-controlling interest
(7,235)
(7,215)
(6,939)
The table below is a breakdown by groups of consolidated entities of the balance under the heading “Minority interests (non-controlling
interest)” of total equity in the accompanying consolidated balance sheets is as follows:
Non-controlling interests: breakdown by subgroups (Millions of Euros)
Garanti BBVA
BBVA Peru
BBVA Argentina
BBVA Colombia
BBVA Venezuela
Other entities
Total
2019
4,240
1,334
422
76
71
57
6,201
2018
4,058
1,167
352
67
67
53
5,764
2017
4,903
1,059
420
65
78
454
6,979
These amounts are broken down by groups of consolidated entities under the heading “Attributable to minority interests (non-controlling
interest)” in the accompanying consolidated income statements:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Profit attributable to non-controlling interests (Millions of Euros)
Garanti BBVA
BBVA Peru
BBVA Argentina
BBVA Colombia
BBVA Venezuela
Other entities
2019
2018
2017
524
236
60
11
(1)
4
585
227
(18)
9
(5)
30
883
208
93
7
(2)
55
Total
1,243
Dividends distributed to non-controlling interest of the Group during the year 2019 are: BBVA Peru Group €115 million, BBVA Argentina Group
€16 million, BBVA Colombia Group €3 million, and other Group entities accounted for €8 million.
833
827
32.
Capital base and capital management
32.1 Capital base
As of December 31, 2019, 2018 and 2017, equity is calculated in accordance to the applicable regulation of each year on minimum capital base
requirements for Spanish credit institutions –both as individual entities and as consolidated group– and how to calculate them, as well as the
various internal capital adequacy assessment processes they should have in place and the information they should disclose to the market.
The minimum capital base requirements established by the current regulation are calculated according to the Group’s exposure to credit and
dilution risk, counterparty and liquidity risk relating to the trading portfolio, exchange-rate risk and operational risk. In addition, the Group must
fulfill the risk concentration limits established in said regulation and the internal corporate governance obligations.
With regard to BBVA, after the supervisory review and evaluation process (“SREP”) carried out by the ECB, the Group has received the
communication to maintain, from January, 1, 2020 on a consolidated basis, a CET1 capital ratio of 9.27% and a total capital ratio of 12.77%.
This total capital requirement at consolidated level includes: i) a Pillar 1 requirement of 8% that should be fulfilled by a minimum of 4.5% of
CET1; ii) a Pillar 2 requirement of 1.5% of CET1 that remains at the same level as the one included in the previous SREP decision; iii) a Capital
Conservation buffer of 2.5% of CET1; iv) the Other Systemic Important Institution buffer (OSII) of 0.75% of CET1; and v) the Countercyclical
Capital buffer 0.02% of CET1.
The ECB Pillar 2 requirement remains at the same level as the one established in the last SREP decision, being the sole difference the evolution
of the Countercyclical Capital buffer of 0.01% approximately.
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
A reconciliation of the main figures between the accounting and regulatory own funds as of December 31, 2019, 2018 and 2017 is shown below:
Eligible capital resources (Millions of Euros)
Capital
Share premium
Retained earnings, revaluation reserves and other reserves
Other equity instruments, net
Treasury shares
Attributable to the parent company
Attributable dividend
Total equity
Accumulated other comprehensive income
Non-controlling interest
Shareholders' equity
Goodwill and other intangible assets
Direct and synthetic treasury shares
Deductions
Temporary CET 1 adjustments
Capital gains from the Available-for-sale debt instruments portfolio
Capital gains from the Available-for-sale equity portfolio
Differences from solvency and accounting level
Equity not eligible at solvency level
Other adjustments and deductions (1)
Common Equity Tier 1 (CET 1)
Additional Tier 1 before Regulatory Adjustments
Total Regulatory Adjustments of Additional Tier 1
Tier 1
Tier 2
Total Capital (Total Capital=Tier 1 + Tier 2)
Total Minimum equity required
(*) Provisional data.
Notes
2019 (*)
26
27
28
29
6
30
31
3,267
23,992
26,277
56
(62)
3,512
(1,084)
55,958
(7,235)
6,201
54,925
(6,803)
(422)
(7,225)
-
-
-
(215)
(215)
(3,832)
43,653
6,048
-
49,701
8,324
58,025
-
46,540
2018
3,267
23,992
23,021
50
(296)
5,400
(1,109)
54,326
(7,215)
5,764
52,874
(8,199)
(135)
(8,334)
-
-
-
(176)
(176)
(4,049)
40,313
5,634
-
45,947
8,756
54,703
-
41,576
2017
3,267
23,992
23,724
54
(96)
3,514
(1,172)
53,283
(6,939)
6,979
53,323
(6,627)
(182)
(6,809)
(273)
(256)
(17)
(189)
(462)
(3,711)
42,341
6,296
(1,657)
46,980
8,798
55,778
-
40,370
(1) Other adjustments and deductions includes the amount of minority interest not eligible as capital, amount of dividends not distributed and other deductions and filters set by the CRR.
The Group’s bank capital in accordance with the aforementioned applicable regulation as of December 31, 2019, 2018 and 2017 is shown below:
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Amount of capital CC1 (Millions of Euros)
Capital and share premium
Retained earnings and equity instruments
Other accumulated income and other reserves
Minority interests
Net interim attributable profit
Ordinary Tier 1 (CET 1) before other reglamentary adjustments
Goodwill and intangible assets
Direct and indirect holdings in equity
Deferred tax assets
Other deductions and filters
Total common equity Tier 1 reglamentary adjustments
Common equity TIER 1 (CET1)
Equity instruments and share premium classified as liabilities
Qualifying Tier 1 capital included in consolidated AT1 capital issued by subsidiaries and held by third parties
Additional Tier 1 (CET 1) before regulatory adjustments
Temporary CET 1 adjustments
Total regulatory adjustments of additional equity l Tier 1
Additional equity Tier 1 (AT1)
Tier 1 (Common equity TIER 1+ additional TIER 1)
Equity instruments and share premium accounted as Tier 2
Eligible equity instruments
Credit risk adjustments
Tier 2 before regulatory adjustments
Tier 2 reglamentary adjustments
Tier 2
Total capital (Total capital=Tier 1 + Tier 2)
Total RWA's
CET 1 (phased-in)
Tier 1 (phased-in)
Total capital (phased-in)
(*) Provisional data.
2019 (*)
2018
2017
27,259
27,259
27,259
26,960
23,773
23,791
(7,157)
(7,143)
(6,863)
4,404
3,809
1,316
3,188
5,446
1,302
52,783
50,887
50,935
(6,803)
(8,199)
(6,627)
(484)
(432)
(1,420)
(1,260)
(423)
(682)
(278)
(755)
(933)
(9,130) (10,573)
(8,594)
43,653
5,400
648
40,313
5,005
629
6,048
5,634
-
-
-
-
6,048
5,634
42,341
5,893
403
6,296
(1,657)
(1,657)
4,639
49,701
45,947
46,980
3,064
4,711
550
3,768
4,409
579
8,324
8,756
-
-
1,759
6,438
601
8,798
-
8,324
8,756
8,798
58,025
54,703
364,448 348,264
11.6%
13.2%
15.7%
12.0%
13.6%
15.9%
55,778
362,875
11.7%
12.9%
15.4%
As of December 2019 Common Equity Tier 1 (CET1) phased-in ratio1 stood at 11.98% (fully-loaded ratio of 11.74%), including the impact of
IFRS 16 standard’s implementation that entered into force on January 1 st, 2019 (-11 basis points). Compared to December 2018, the ratio
increased by +40 basis points supported by the profit generation, net of dividend payments and remuneration of contingent convertible capital
instruments (CoCos), notwithstanding the moderate growth of risk-weighted assets.
In addition, the impairment of the goodwill in the United States CGU recognized by the Group amounting to €1,318 million has no impact on
the regulatory own funds (see Note 18.1).
Risk-weighted assets (RWAs) increased by approximately € 16,100 million in 2019 as a result of activity growth, mainly in emerging markets
and the inc orporation of regulatory impacts (the application of IFRS 16 standard and TRIM - Targeted Review of Internal Models) for
approximately € 7,600 million (impact on the CET1 ratio of -25 basis points). It should be noted that during the second quarter of the year the
recognition by the European Commission1 of Argentina as a country whose supervisory and regulatory requirements2 are considered
equivalent had a positive effect on the evolution of the RWAs.
The Additional tier 1 capital (AT1) phased-in ratio stood at 1.66% as of December 31st, 2019. In this regard, BBVA S.A. carried out an issue of
€1,000 million CoCos, registered at the Spanish Securities Market Commission (CNMV) and another issue of the same type of instruments,
registered in the Securities and Exchange Commission (“SEC”) for USD 1,000 million.
1 This CET1 phased-in ratio includes the impact of the initial implementation of IFRS9. In this context, the European Commission and Parliament
have established temporary arrangements that are voluntary for the institutions, adapting the impact of IFRS9 on capital ratios. BBVA has
informed the supervisory board its adherence to these arrangements.
2 On April 1, 2019, the Official Journal of the European Union published Commission Implementing Decision (EU) 2019/536, which includes
Argentina within the list of third countries and territories whose supervisory and regulatory requirements are considered equivalent for the
purposes of the treatment of exposures in accordance with Regulation (EU) No. 575/2013.
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
On the other hand, in February 2020 the CoCos issuance of € 1,500 million issued in February 2015 will be amortized. As of December 31st,
2019, it is no longer included in the capital ratios.
Finally, in terms of issues eligible as Tier 2 capital, BBVA S.A. issued a € 750 million subordinated debt and carried out the early redemption of
two subordinated-debt issues; one for €1,500 million redeemed in April 2019, and another issued in June 2009 by Caixa d'Estalvis de Sabadell
with an outstanding nominal amount of €4.9 million and redeemed in June 2019.
With regard to the subsidiaries of the Group, BBVA Mexico carried out a Tier 2 issuance of USD 750 million and partially repurchased two
subordinated debt issuances ($250 million due in 2020 and $500 million due in 2021). Meanwhile, Garanti BBVA issued another Tier 2
issuance of TRY 253 million.
All of this, together with the evolution of the remaining elements eligible as Tier 2 capital, set the Tier 2 phased in ratio at 2.28% as of December
31st, 2019. In addition, in January 2020, BBVA, S.A. issued €1,000 million of Tier 2 eligible subordinated debt. This issue will be included in the
capital ratios for the first quarter of 2020 with an estimated impact of approximately +27 basis points on the T2 capital ratio.
These levels are above the requirements established by the supervisor in its SREP letter applicable in 2019, also above the applicable
requirements from January, 1st. 2020.
In November 2019, BBVA received a new communication from the Bank of Spain regarding its minimum requirement for own funds and
eligible liabilities (MREL), as determined by the Single Resolution Board, that was calculated taking into account the financial and supervisory
information as of December 31, 2017.
In accordance with such communication, BBVA has to reach, by January 1, 2021, an amount of own funds and eligible liabilities equal to
15.16% of the total liabilities and own funds of its resolution group, on sub-consolidated basis (the MREL requirement). Within this MREL, an
amount equal to 8.01% of the total liabilities and own funds shall be met with subordinated instruments (the subordination requirement),
once the relevant allowance is applied.
This MREL requirement is equal to 28.50% in terms of risk-weighted assets (RWAs), while the subordination requirement included in the MREL
requirement is equal to 15.05% in terms of RWAs, once the relevant allowance has been applied.
In order to comply with this requirement, BBVA has continued its issuance program during 2019 by closing three public senior non-preferred
debt, for a total of € 3,000 million, of which one in green bonds by € 1,000 million. In addition, BBVA issued a senior preferred debt of € 1,000
million.
The Group estimates that the current own funds and eligible liabilities structure of the resolution group meets the MREL requirement, as well
as with new subordination requirement.
32.2 Leverage ratio
The leverage ratio (LR) is a regulatory measure complementing capital designed to guarantee the soundness and financial st rength of
institutions in terms of indebtedness. This measurement can be used to est imate the percentage of the assets and off -balance sheet
arrangements financed with Tier 1 capital, the carrying amount of the assets used in this ratio is adjusted to reflect the bank’s current or
potential leverage with a given balance-sheet position (Leverage ratio exposure).
Breakdown of capital base as of December 31, 2019, 2018 and 2017, calculated according to CCR, is as follows:
Capital Base
Tier 1 (millions of euros) (a)
Exposure (millions of euros) (b)
Leverage ratio (a)/(b) (percentage)
(*) Provisional data.
32.3 Capital management
Capital management in the BBVA Group has a twofold aim:
2019 (*)
49,701
724,803
6.86%
2018
45,947
705,299
6.51%
2017
46,980
709,758
6.62%
Maintain a level of capitalization according to the business objectives in all countries in which it operates and, simultaneously,
Maximize the return on shareholders’ funds through the efficient allocation of capital to the different units, a good management of
the balance sheet and appropriate use of the various instruments forming the basis of the Group’s equity: shares, preferred
securities and subordinated debt.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
This capital management is carried out determining the capital base and the solvency ratios established by the prudential and minimum capital
requirements also have to be met for the entities subject to prudential supervision in each country.
The current regulation allows each entity to apply its own internal ratings-based (IRB) approach to risk assessment and capital management,
subject to Bank of Spain approval. The BBVA Group carries out an integrated management of these risks in accordance with its internal policies
and its internal capital estimation model has received the Bank of Spain’s approval for certain portfolios (see Note 7).
33.
Commitments and guarantees given
The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:
Commitments and guarantees given (Millions of Euros)
Notes
2019
2018
2017
Loan commitments given
Of which: defaulted
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Financial guarantees given (*)
Of which: defaulted
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Other commitments given
Of which: defaulted
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
7.1.2
7.1.2
7.1.2
Total commitments and guarantees given
7.1.2
130,923
270
-
3,117
11,742
4,578
65,475
46,011
10,984
224
0
125
995
583
8,986
295
39,209
506
1
521
5,952
2,902
29,682
151
181,116
118,959
247
-
2,318
9,635
5,664
58,405
42,936
16,454
332
2
159
1,274
730
13,970
319
35,098
408
1
248
5,875
2,990
25,723
261
170,511
94,268
537
1
2,198
946
3,795
58,133
29,195
16,545
278
-
248
1,158
3,105
11,518
516
45,738
461
7
227
15,330
3,820
25,992
362
156,551
(*) Non-performing financial guarantees given amounted to €730, €740 and €739 million, respectively, as of December 31, 2019, 2018 and 2017.
As of December 31, 2019, the provisions for loan commitments given, financial guarantees given and other commitments given, recorded in
the consolidated balance sheet amounted €341 million, €219 million and €151 million, respectively.
Since a significant portion of the amounts above will expire without any payment being made by the consolidated entities, the aggregate
balance of these commitments cannot be considered to be the actual future requirement for financing or liquidity to be provided by the BBVA
Group to third parties.
In the years 2019, 2018 and 2017, no issuance of debt securities carried out by associates of the BBVA Group, joint venture entities or non-
Group entities have been guaranteed,
34. Other contingent assets and liabilities
As of December, 2019, 2018 and 2017 there were no material contingent assets or liabilities other than those disclosed in the accompanying
Notes to the consolidated financial statements.
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35.
Purchase and sale commitments and future payment obligations
The breakdown of purchase and sale commitments of the BBVA Group as of December 31, 2019, 2018 and 2017 is as follows:
Purchase and sale commitments (Millions of Euros)
Financial instruments sold with repurchase commitments
45,956
42,993
40,077
Notes
2019
2018
2017
Financial liabilities held for trading
Central banks
Credit institutions
Customer deposits
Financial liabilities at amortized cost
Central banks
Credit institutions
Customer deposits
Financial instruments purchased with resale commitments
Financial assets held for trading
Central banks
Credit institutions
Loans and advances to customers
Financial assets at amortized cost
Central banks
Credit institutions
Loans and advances to customers
10
10
10
22
22
22
10
10
10
14
41,902
7,635
24,578
9,689
4,054
826
2,693
535
36,815
10,511
14,839
11,466
6,178
375
4,593
1,209
35,784
28,034
33,941
535
21,219
12,187
1,843
-
1,817
26
27,262
2,163
13,305
11,794
772
-
478
294
-
-
-
-
40,077
6,155
24,843
9,079
26,368
-
-
-
-
26,368
305
13,861
12,202
A breakdown of the maturity of other payment obligations, not included in previous notes, due after December 31, 2019 is provided below:
Maturity of future payment obligations (Millions of Euros)
Up to 1 year
1 to 3 years
3 to 5 years
Over 5 years
Total
Purchase commitments
Technology and systems projects
Other projects
Total
23
4
19
23
-
-
-
-
-
-
-
-
-
-
-
-
23
4
19
23
36.
Transactions on behalf of third parties
As of December 31, 2019, 2018 and 2017 the details of the relevant transactions on behalf of third parties are as follows:
Transactions on behalf of third parties. Breakdown by concepts (Millions of Euros)
Financial instruments entrusted to BBVA by third parties
Conditional bills and other securities received for collection
Securities lending
Total
2019
2018
2017
693,377
628,417
624,822
13,133
7,129
13,484
4,866
14,775
5,485
713,639
646,768
645,081
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see
Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
37.
Net interest income
37.1
Interest and similar income
The breakdown of the interest and similar income recognized in the accompanying consolidated income statement is as follows:
Interest and similar income. Breakdown by origin (Millions of Euros)
Financial assets held for trading
Financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Insurance activity
Adjustments of income as a result of hedging transactions
Other income
Total
2019
2,041
159
1,815
25,698
1,079
(74)
343
31,061
2018
2,057
148
1,846
24,572
1,141
(201)
268
2017
1,306
73
1,485
24,485
1,058
415
474
29,831
29,296
The amounts recognized in consolidated equity in connection with hedging derivatives for the years ended December 31, 2019, 2018 and 2017
and the amounts derecognized from the consolidated equity and taken to the consolidated income statements during those years are included
in the accompanying “Consolidated statements of recognized income and expenses”.
37.2
Interest expense
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Interest expense. Breakdown by origin (Millions of Euros)
Financial liabilities held for trading
Financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost (*)
Adjustments of expense as a result of hedging transactions
Insurance activity
Cost attributable to pension funds
Other expense
Total
(*) Includes €114 million as of December 31, 2019 corresponding to interest expense on leases (see Note 22.5).
38. Dividend income
2019
2018
1,230
6
10,805
(246)
753
86
224
12,859
1,211
41
10,321
(352)
832
73
113
12,239
2017
87
-
9,729
665
732
79
245
11,537
The balances for this heading in the accompanying consolidated income statements correspond to dividends on shares and equity instruments
other than those from shares in entities accounted for using the equity method (see Note 39), as can be seen in the breakdown below:
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Dividend income (Millions of Euros)
Dividends from:
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Total
2019
2018
2017
26
136
162
19
138
157
145
188
334
39.
Share of profit or loss of entities accounted for using the equity method
Results from “Share of profit or loss of entities accounted for using the equity method” resulted in a negative impact of €42 million as of
December 31, 2019, compared with the negative impact of €7 and the positive impact of €4 million recorded as of December 31, 2018 and
2017, respectively.
40.
Fee and commission income and expense
The breakdown of the balance under these headings in the accompanying consolidated income statements is as follows:
Fee and commission income (Millions of Euros)
Bills receivables
Demand accounts
Credit and debit cards and TPVs
Checks
Transfers and other payment orders
Insurance product commissions
Loan commitments given
Other commitments and financial guarantees given
Asset management
Securities fees
Custody securities
Other fees and commissions
Total
2019
2018
39
526
39
451
3,083
2,900
203
735
172
222
392
194
689
178
223
390
1,066
1,023
319
123
642
325
122
598
2017
46
507
2,834
212
648
200
231
396
923
385
122
645
7,522
7,132
7,150
The breakdown of fee and commission expense under these heading in the accompanying consolidated income statements is as follows:
Fee and commission expense (Millions of Euros)
Demand accounts
Credit and debit cards
Transfers and other payment orders
Commissions for selling insurance
Custody securities
Other fees and commissions
Total
2019
36
1,662
150
54
30
557
2,489
2018
39
1,502
96
48
29
539
2,253
2017
45
1,458
123
60
38
506
2,229
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Gains (losses) on financial assets and liabilities, hedge accounting and exchange
41.
differences, net
The breakdown of the balance under this heading, by source of the related items, in the accompanying consolidated income statement is as
follows:
Gains (losses) on financial assets and liabilities, hedge accounting and exchange differences, net. Breakdown by heading (Millions of Euros)
Gains (losses) on derecognition of financial assets and liabilities not measured at fair
value through profit or loss, net
Financial assets at amortized cost
Other financial assets and liabilities
Gains (losses) on financial assets and liabilities held for trading, net
Reclassification of financial assets from fair value through other comprehensive
income
Reclassification of financial assets from amortized cost
Other gains (losses)
Gains (losses) on non-trading financial assets mandatorily at fair value through profit
or loss, net
Reclassification of financial assets from fair value through other comprehensive
income
Reclassification of financial assets from amortized cost
Other gains (losses)
Gains (losses) on financial assets and liabilities designated at fair value through profit
or loss, net
Gains (losses) from hedge accounting, net
Subtotal gains (losses) on financial assets and liabilities
Exchange differences
Total
2019
2018
2017
239
65
173
451
-
-
451
143
-
-
143
(94)
59
798
586
1,383
216
51
164
707
-
-
707
96
-
-
96
143
72
1,234
(9)
1,223
985
133
852
218
(56)
(209)
938
1,030
1,968
The breakdown of the balance (excluding exchange rate differences) under this heading in the accompanying income statements by the nature
of financial instruments is as follows:
Gains (losses) on financial assets and liabilities. Breakdown by nature of the financial instrument (Millions of Euros)
Debt instruments
Equity instruments
Trading derivatives and hedge accounting
Loans and advances to customers
Customer deposits
Other
Total
2019
972
1,337
(1,098)
103
(26)
(490)
798
2018
354
(253)
927
(172)
240
138
1,234
2017
545
845
(470)
97
(96)
18
938
The breakdown of the balance of the impact of the derivatives (trading and hedging) under this heading in the accompanying consolidated
income statements is as follows:
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Derivatives - Hedge accounting (Millions of Euros)
Derivatives
Interest rate agreements
Securities agreements
Commodity agreements
Credit derivative agreements
Foreign-exchange agreements
Other agreements
Subtotal
Hedging derivatives ineffectiveness
Fair value hedges
Hedging derivative
Hedged item
Cash flow hedges
Subtotal
Total
2019
2018
2017
-
-
(64)
(1,079)
6
74
(60)
(35)
(1,158)
-
-
59
14
45
-
59
(1,098)
-
-
90
294
(2)
(109)
606
(24)
856
87
(150)
237
(15)
72
927
165
(139)
99
(564)
315
(137)
(261)
(177)
(236)
59
(32)
(209)
(470)
In addition, in the years ended December 31, 2019, 2018 and 2017, under the heading “Exchange differences, net" in the accompanying
consolidated income statements amounts of negative €225 million, positive €113 million and positive €235 million, respectively, were
recognized for transactions with foreign exchange trading derivatives.
42. Other operating income and expense
The breakdown of the balance under the heading “Other operating income” in the accompanying consolidated income statements is as follows:
Other operating income (Millions of Euros)
Gains from sales of non-financial services
Of which: Real estate
Other operating income
Of which: Hyperinflation adjustment (*)
Total
(*) See Note 2.2.20
2019
2018
258
91
413
146
671
458
283
491
120
949
2017
1,109
884
330
-
1,439
The breakdown of the balance under the heading “Other operating expense” in the accompanying consolidated income statements is as
follows:
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Other operating expense (Millions of Euros)
Change in inventories
Of which: Real estate
Other operating expense
Of which: Contributions to guaranteed banks deposits funds
Of which: Hyperinflation adjustment (*)
Total
(*) See Note 2.2.20
2019
2018
107
68
1,899
770
538
2,006
292
248
1,808
727
494
2,101
2017
886
816
1,337
703
31
2,223
43.
Income and expense from insurance and reinsurance contracts
The detail of the headings “Income and expense from insurance and reinsurance contracts” in the accompanying consolidated income
statements is as follows:
Other operating income and expense on insurance and reinsurance contracts (Millions of Euros)
Income on insurance and reinsurance contracts
Expense on insurance and reinsurance contracts
Total
2019
2,890
(1,751)
1,138
2018
2,949
(1,894)
1,055
2017
3,342
(2,272)
1,069
The table below shows the contribution of each insurance product to the Group´s income for the years ended December 31, 2019, 2018 and
2017:
Income by type of insurance product (Millions of Euros)
Life insurance
Individual
Savings
Risk
Group insurance
Savings
Risk
Non-Life insurance
Home insurance
Other non-life insurance products
Total
2019
2018
2017
631
477
116
361
154
26
127
508
90
418
682
486
56
430
196
39
157
373
110
263
604
346
38
308
258
(4)
263
464
118
346
1,138
1,055
1,069
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
44. Administration costs
44.1 Personnel expense
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Personnel expense (Millions of Euros)
Wages and salaries
Social security costs
Defined contribution plan expense
Defined benefit plan expense
Other personnel expense
Total
Notes
25
25
2019
4,920
780
113
50
478
2018
4,786
722
89
58
465
2017
5,163
761
87
62
497
6,340
6,120
6,571
The breakdown of the average number of employees in the BBVA Group as of December 31, 2019, 2018 and 2017 is as follows:
Average number of employees
Spanish banks
Management Team
Other line personnel
Clerical staff
Branches abroad
Subtotal
Companies abroad
Mexico
The United States
Turkey
Venezuela
Argentina
Colombia
Peru
Other
Subtotal
Pension fund managers
Other non-banking companies
2019
2018
2017
1,049
21,438
2,626
1,000
26,114
33,377
9,712
22,026
2,806
6,193
5,301
5,976
1,605
86,995
396
12,638
1,047
21,840
2,818
589
26,294
31,655
9,786
22,322
3,631
6,074
5,185
5,879
3,767
88,299
395
14,349
1,026
22,180
3,060
603
26,869
30,664
9,532
23,154
4,379
6,173
5,374
5,571
5,501
90,348
362
14,925
The breakdown of the number of employees in the BBVA Group as of December 31, 2019, 2018 and 2017 by category and gender is as follows:
Number of employees at the year end. Professional category and gender
Management team
Other line personnel
Clerical staff
Total
2019
2018
2017
Male
Female
Male
Female
Male
Female
1,164
38,153
19,414
58,731
344
39,644
28,254
68,242
1,197
37,461
19,315
57,973
339
38,918
28,397
67,654
1,244
38,670
20,639
60,553
342
39,191
31,770
71,303
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
44.1.1
Share-based employee remuneration
The amounts recognized under the heading “Administration costs - Personnel expense - Other personnel expense” in the consolidated income
statements for the year ended December 31, 2019, 2018 and 2017, corresponding to the remuneration plans based on equity instruments in
each year, amounted to €31 million, €29 million and €38 million, respectively. These amounts have been recognized with a corresponding
entry under the heading “Shareholders’ funds - Other equity instruments” in the accompanying consolidated balance sheets, net of tax effect.
The characteristics of the Group's remuneration plans based on equity instruments are described below.
System of Variable Remuneration in Shares
BBVA has a specific remuneration system applicable to those employees whose professional activities may have a material impact on the risk
profile of the Group (hereinafter “Identified Staff”), designed within the framework of applicable regulations to credit institutions and
considering best practices and recommendations at the local and international levels in this matter.
In 2019, this remuneration scheme is reflected in the following remuneration policies:
BBVA Group Remuneration Policy, approved by the Board of Directors on 29 of November 2017, that applies in general to all
employees of BBVA and of its subsidiaries that form part of the consolidated group. This policy includes in a specific chapter the
remuneration system applicable to the members of BBVA Group Identified Staff, including Senior Management.
BBVA Directors’ Remuneration Policy, approved by the Board of Directors and by the General Shareholders’ Meeting held on
March 15, 2019, that it’s applicable to BBVA Directors. The remuneration system for executive directors corresponds, generally,
with the applicable system to the Identified Staff, to which they belong, incorporating some particularities of their own, derived
from their condition of directors.
The Annual Variable Remuneration for the Identified Staff members is subject to specific rules for settlement and payment established in their
corresponding remuneration policies, specifically:
Variable remuneration for Identified Staff members for each financial year will be subject to ex ante adjustments, so that it shall be
reduced at the time of the performance assessment in the event of negative performance of the Group’s results or other
parameters such as the level of achievement of budgeted targets, and it shall not accrue or it will accrue in a reduced amount,
should certain level of profits and capital ratios not be achieved.
60% of the Annual Variable Remuneration will be paid, if conditions are met, in the year following that to which it corresponds (the
“Upfront Portion”). For executive directors, members of the Senior Management and Identified Staff members with particularly
high variable remuneration, the Upfront Portion will be 40% of the Annual Variable Remuneration. The remaining portion will be
deferred in time (hereinafter, the “Deferred Component”) for a 5 year-period for executive directors and members of the Senior
Management, and 3 years for the remaining Identified Staff.
50% of the Annual Variable Remuneration, both the Upfront Portion and the Deferred Component, shall be established in BBVA
shares. As regards executive directors and Senior Management, 60% of the Deferred Component shall be established in shares.
Shares received as Annual Variable Remuneration shall be withheld for a one-year period after delivery, except for the transfer of
those shares required to honor the payment taxes.
The Deferred Component of the Annual Variable Remuneration may be reduced in its entirety, but never increased, based on the
result of multi-year performance indicators aligned with the Group’s core risk management and control metrics related to the
solvency, capital, liquidity, profitability or to the share performance and the recurring results of the Group.
Resulting cash portions of the Deferred Component of Annual Variable Remuneration and subject to the multi-year performance
indicators, finally delivered, shall be updated following the Consumer Price Index (CPI), measured as the year-on-year change
prices, as agreed by the Board of Directors.
The entire Annual Variable Remuneration shall be subject to malus and clawback arrangements during the whole deferral and
withholding period, both linked to a downturn in the financial performance of the Bank as a whole, of a specific unit or area, or of
exposure generated by an Identified Staff member, when such a downturn in financial performance arises from any of the
circumstances expressly named in the remuneration policies.
No personal hedging strategies or insurances shall be used in connection with remuneration or liability that may undermine the
effects of alignment with sound risk management.
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The variable component of the remuneration for a financial year shall be limited to a maximum amount of 100% of the fixed
component of the total remuneration, unless the General Meeting resolves to increase this percentage up to a maximum of 200%.
In this regard, the General Meeting held on March, 15, 2019 resolved to increase this limit to a maximum level of 200% of the fixed component
of the total remuneration for a given number of the Identified Staff members, in the terms indicated in the report issued for this purpose by the
Board of Directors dated February 11, 2019.
According to the settlement and payment scheme indicated, during 2019, a total amount of 5,236,123 BBVA shares corresponding to the
Upfront Portion of 2018 Annual Variable Remuneration has been delivered to the Identified Staff.
Additionally, according to the Remuneration Policy applicable in 2015, during 2019 a total amount of 3,575,777 BBVA shares corresponding to
the Deferred Component of 2015 Variable Remuneration has been delivered to the Identifies Staff. This amount has been subject to a
downward adjustment due to the multi-year performance evaluation of one of the long-time indicators, relative TSR, which scale has
determined a downward adjustment of the Deferred Component linked to this indicator in a 10%.
Likewise, the aforesaid policy established that the deferred amounts in shares of the Annual Variable Remuneration finally vested, subject to
multi-year performance indicators, will be updated in cash, based on the terms established by the Board of Directors. In this regard, during
2019 a total amount of 3,003,646 euros has been delivered to the Identified Staff as updates of the corresponding shares of the Deferred
Component of 2015 Annual Variable Remuneration.
Detailed information on the delivery of shares to executive directors and Senior Management is included in Note 54.
Lastly, in line with specific regulation applicable in Portugal and Brazil, BBVA has identified the staff in these countries whose Annual Variable
Remuneration should be subject to a specific settlement and payment scheme, more specifically:
A percentage of the Annual Variable Remuneration is subject to a three years deferral that shall be paid yearly over the mentioned
period.
50% of the Annual Variable Remuneration, both the Upfront Portion and Deferred Component, shall be established in BBVA
Shares.
Both the Upfront Portion and the Deferred Component of the Annual Variable Remuneration may be subject to update
adjustments in cash.
According to this remuneration scheme, during financial year 2019 a total of 21,916 BBVA shares corresponding to the Upfront Portion of 2018
Annual Variable Remuneration have been delivered to this staff in Portugal and Brazil.
Additionally, during 2019 there have been delivered to this staff in Portugal and Brazil a total of 9,717 BBVA shares corresponding to the first
third of the Deferred Component of 2017 Annual Variable Remuneration, as well as 2,435 euros as adjustments for updates. A total of 12,365
BBVA shares corresponding to the second third of the Deferred Component of 2016 Annual Variable Remuneration and 5,810 euros as
adjustments for updates; and a total of 10,460 BBVA shares corresponding to the last third of the Deferred Component of 2015 Annual Variable
Remuneration and 8,786 euros as adjustments for updates.
44.2 Other administrative expense
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Other administrative expense (Millions of Euros)
Technology and systems
Communications
Advertising
Property, fixtures and materials
Of which: Rent expense (*)
Taxes other than income tax
Other expense
Total
(*) The change is mainly due to the implementation of IFRS 16 on January 1, 2019 (see Note 2.1).
2019
1,216
218
317
552
106
401
1,258
3,963
2018
1,133
235
336
982
552
417
1,271
4,374
2017
1,018
269
352
1,033
581
456
1,412
4,541
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Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
45. Depreciation and amortization
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Depreciation and amortization (Millions of Euros)
Tangible assets
For own use
Investment properties
Right-of-use assets (*)
Other Intangible assets
Total
Notes
17
18.2
2019
2018
2017
979
584
3
392
620
1,599
594
589
5
613
1,208
694
680
13
694
1,387
(*) The change is mainly due to the implementation of IFRS 16 on January 1, 2019 (see Note 2.1).
46. Provisions or (reversal) of provisions
For the years ended December 31, 2019, 2018 and 2017, the net provisions recognized in this income statement line item were as follows:
Provisions or (reversal) of provisions (Millions of Euros)
Pensions and other post employment defined benefit obligations
Commitments and guarantees given
Pending legal issues and tax litigation
Other provisions
Total
Notes
2019
2018
25
214
93
170
140
617
125
(48)
133
163
373
2017
343
(313)
318
397
745
47.
Impairment or (reversal) of impairment on financial assets not measured at fair value
through profit or loss or net gains by modification
The breakdown of impairment or reversal of impairment on financial assets not measured at fair value through profit or loss by the nature of
those assets in the accompanying consolidated income statements is as follows:
Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss or net gains by modification
(Millions of Euros)
Financial assets at fair value through other comprehensive income
Debt securities
Equity instruments
Financial assets at amortized cost
Of which: recovery of written-off assets
Held to maturity investments
Total
Notes
2019
2018
2017
82
82
1
1
7.1.5
4,069
919
3,980
589
4,151
3,981
1,127
(4)
1,131
3,677
558
(1)
4,803
48.
Impairment or (reversal) of impairment on non-financial assets
The impairment losses on non-financial assets broken down by the nature of those assets in the accompanying consolidated income
statements are as follows:
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Impairment or (reversal) of impairment on non-financial assets (Millions of Euros)
Tangible assets
Intangible assets (*)
Others
Total
Notes
2019
2018
2017
17
20
94
1,330
23
1,447
5
83
51
138
42
16
306
364
(*) The balance of 2019 mainly corresponds to the impairment of the CGU in The United States (see Note 18).
49. Gains (losses) on derecognition of non financial assets and subsidiaries, net
The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:
Gains (losses) on derecognition of non-financial assets and subsidiaries, net (Millions of Euros)
Gains
Disposal of investments in non-consolidated subsidiaries
Disposal of tangible assets and other
Losses
Disposal of investments in non-consolidated subsidiaries
Disposal of tangible assets and other
Total
2019
2018
2017
-
9
27
-
(2)
(37)
(3)
-
55
81
-
(13)
(45)
78
-
38
69
-
(27)
(33)
47
50. Gain (losses) from non-current assets and disposal groups classified as held for sale not
qualifying as discontinued operations
The main items included in the balance under this heading in the accompanying consolidated income statements are as follows:
Gain (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (Millions of
Euros)
Gains on sale of real estate
Impairment of non-current assets held for sale
Gains (losses) on sale of investments classified as non-current assets held for
sale (*)
Gains on sale of equity instruments classified as non-current assets held for
sale
Total
Notes
21
2019
89
(77)
10
-
21
2018
129
(208)
894
-
815
2017
102
(158)
82
-
26
(*)
The variation in year 2018 is mainly due to the sale of the BBVA stake in BBVA Chile (see Note 3).
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51. Consolidated statements of cash flows
In the consolidated statements of cash flows, balance of “Cash equivalent in central banks” includes short-term deposits at central banks
recorded under the heading "Financial assets at amortized cost" in the accompanying consolidated balance sheets and does not include
demand deposits with credit institutions recorded in the heading "Cash, balances in cash at Central Bank and other demand deposits".
The variation between 2019 and 2018 of the financial liabilities from financing activities is the following:
Liabilities from financing activities (Millions of Euros)
Non-cash changes
Liabilities at amortized cost: Debt certificates
61,112
2,643
-
-
December
31, 2018
Cash
flows
Acquisition Disposal
Foreign
exchange
movement
209
December
31, 2019
Fair value
changes
-
63,963
Of which: Issuances of subordinated liabilities (*)
(*) Additionally, there are €384 million of issuances of subordinated liabilities as of December 2019 (see Note 22 and Appendix VI). The €40 million subordinated issuances of BBVA
Paraguay as of December 2019 are recorded in the heading "Liabilities included in disposal groups classified as held for sale".
17,635
(190)
229
-
-
-
17,675
Liabilities from financing activities (Millions of Euros)
Liabilities at amortized cost: Debt
certificates
Of which: Issuances of subordinated
liabilities (*)
December
31, 2017
Cash
flows
Acquisition Disposal
Foreign
exchange
movement
Fair value
changes
December 31,
2018
Non-cash changes
61,649
2,152
17,443
857
-
-
(1,828)
(862)
(694)
29
-
-
61,112
17,635
(*) Additionally, there were €411 million of issuances of subordinated liabilities as of December 2019 (see Note 22 and Appendix VI). The €574 million subordinated issuances of BBVA Chile
as of December 2019 were recorded in the heading "Liabilities included in disposal groups classified as held for sale".
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52. Accountant fees and services
The details of the fees for the services contracted by entities of the BBVA Group for the years ended December 31, 2019, 2018 and 2017
with their respective auditors and other audit entities are as follows:
Fees for Audits conducted and other related services (Millions of euros) (**)
Audits of the companies audited by firms belonging to the KPMG worldwide
organization and other reports related with the audit (*)
Other reports required pursuant to applicable legislation and tax regulations
issued by the national supervisory bodies of the countries in which the Group
operates, reviewed by firms belonging to the KPMG worldwide organization
Fees for audits conducted by other firms
2019
28.1
1.5
-
2018
26.1
1.5
0.1
2017
27.2
1.9
0.1
(*)
Including fees pertaining to annual legal audits (€24.1, €22.4 and €22.6 million as of December 31, 2019, 2018 and 2017, respectively).
(**)
Regardless of the billed year.
In the years ended December 31, 2019, 2018 and 2017, certain entities in the BBVA Group contracted other services (other than audits)
as follows:
Other services rendered (Millions of Euros)
Firms belonging to the KPMG worldwide organization
2019
0.3
2018
2017
0.3
0.5
This total of contracted services includes the detail of the services provided by KPMG Auditores, S.L. to BBVA, S.A. or its controlled
companies at the date of preparation of these consolidated financial statements as follows:
Fees for audits conducted (*) (Millions of Euros)
Legal audit of BBVA,S.A. or its companies under control
Other audit services of BBVA, S.A. or its companies under control
Limited Review of BBVA, S.A. or its companies under control
Reports related to issuances
Assurance services and other required by the regulator
Other
2019
2018
2017
6.5
5.5
0.9
0.3
0.8
-
6.7
5.9
1.1
0.3
0.9
-
6.8
5.0
0.9
0.4
0.6
-
(*) Services provided by KPMG Auditores, S.L. to companies located in Spain, to the branch of BBVA in New York and to the branch of BBVA in London.
The services provided by the auditors meet the independence requirements of the external auditor established under Audit of Accounts
Law (Law 22/2015) and under the Sarbanes-Oxley Act of 2002 adopted by the Securities and Exchange Commission (SEC).
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53.
Related-party transactions
As financial institutions, BBVA and other entities in the Group engage in transactions with related parties in the normal course of their
business. These transactions are not relevant and are carried out under normal market conditions. As of December 31, 2019, 2018, and
2017 the following are the transactions with related parties:
53.1 Transactions with significant shareholders
As of December 31, 2019, 2018 and 2017, there were no shareholders considered significant (see Note 26).
53.2 Transactions with BBVA Group entities
The balances of the main captions in the accompanying consolidated balance sheets arising from the transactions carried out by the
BBVA Group with associates and joint venture entities accounted for using the equity method are as follows:
Balances arising from transactions with entities of the Group (Millions of Euros)
Assets
Loans and advances to credit institutions
Loans and advances to customers
Liabilities
Deposits from credit institutions
Customer deposits
Debt certificates
Memorandum accounts
Contingent commitments
Other contingent commitments given
Financial guarantees given
2019
2018
2017
26
1,682
3
453
-
166
1,042
106
132
1,866
2
521
-
152
1,358
78
91
510
5
428
-
114
1,175
78
The balances of the main aggregates in the accompanying consolidated income statements resulting from transactions with associates
and joint venture entities that are accounted for under the equity method are as follows:
Balances of consolidated income statement arising from transactions with entities of the Group (Millions of Euros)
Income statement
Interest and other income
Interest expense
Fee and commission income
Fee and commission expense
2019
2018
2017
19
1
4
53
55
2
5
48
26
1
5
49
There were no other material effects in the consolidated financial statements arising from dealings with these entities, other than the
effects from using the equity method (see Note 2.1) and from the insurance policies to cover pension or similar commitments (see Note
25) and the derivatives transactions arranged by BBVA Group with these entities, associates and joint ventures.
In addition, as part of its normal activity, the BBVA Group has entered into agreements and commitments of various types with
shareholders of subsidiaries and associates, which have no material effects on the accompanying consolidated financial statements.
53.3 Transactions with members of the Board of Directors and Senior Management
The amount and nature of the transactions carried out with members of the Board of Directors and Senior Management of BBVA is given
below. These transactions belong to the Bank's ordinary business or traffic, are of little relevance and have being carried out under
normal market conditions.
As of December 31, 2019 and 2018, the amount availed against the loans granted by the Group’s entities to the members of the Board of
Directors amounted to €607 and €611 thousand, respectively. As of December 31, 2017, there were no loans granted by the Group’s
entities to the members of the Board of Directors.
As of December 31, 2019, 2018 and 2017, there were no loans granted to parties related to the members of the Board of Directors.
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As of December 31, 2019, 2018 and 2017, the amount availed against the loans granted by the Group’s entities to the members of Senior
Management (excluding the executive directors) amounted to €4,414, €3,783 and €4,049 thousand, respectively. The amount availed
against the loans granted to parties related to members of the Senior Management on those same dates amounted to €57, €69 and €85
thousand, respectively.
As of December 31, 2019, 2018 and 2017 no guarantees had been granted to any member of the Board of Directors.
As of December 31, 2019, 2018 and 2017, the amount availed against guarantees arranged with members of the Senior Management
amounted to €10, €38 and €28 thousand, respectively.
As of December 31, 2019 the amount availed against commercial loans and guarantees arranged with parties related to the members of
the Bank’s Board of Directors and the Senior Management totaled to €25 thousand. As of December 31, 2018, no commercial loans and
guarantees has been granted to parties related to the members of the Bank’s Board of Directors and the Senior Management. As of
December 31, 2017 the amount availed against commercial loans and guarantees arranged with parties related to the members of the
Bank’s Board of Directors and the Senior Management totaled €8 thousand.
The information on the remuneration of the members of the BBVA Board of Directors and Senior Management is included in Note 54.
53.4 Transactions with other related parties
As of December 31, 2019, 2018 and 2017, the Group did not conduct any transactions with other related parties that are not in the ordinary
course of its business, which were not carried out at arm's-length market conditions and of marginal relevance; whose information is not
necessary to give a true picture of the BBVA Group’s consolidated net equity, net earnings and financial situation.
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54 Remuneration and other benefits for the Board of Directors and members of the Bank's
Senior Management
Remuneration received by non-executive directors in 2019
The remunerations paid to non-executive members of the Board of Directors during the 2019 financial year are indicated below,
individualized and itemized:
Remuneration for non-executive directors (Thousands of Euros)
Board of
Directors
Executive
Committee
Audit
Committee
Risk and
Compliance
Committee
Remunerations
Committee
Appointments
and Corporate
Governance
Committee
Technology and
Cybersecurity
Committee
Other
functions
(1)
Total
Tomás Alfaro Drake
José Miguel Andrés
Torrecillas
Jaime Caruana
Lacorte
Belén Garijo López
Sunir Kumar Kapoor
Carlos Loring
Martínez de Irujo
Lourdes Máiz Carro
José Maldonado
Ramos
Ana Peralta Moreno
Juan Pi Llorens
Susana Rodríguez
Vidarte
Jan Verplancke
Total (2)
129
129
129
129
129
129
129
129
129
129
129
129
1,545
104
110
68
68
68
24
107
107
107
214
107
167
167
167
167
43
107
43
43
43
111
45
14
45
31
45
33
43
14
43
43
53
214
483
527
348
172
445
253
340
240
493
447
667
442
642
278
289
43
186
172
4,134
87
(1)
(2)
Amounts received during the 2019 financial year by José Miguel Andrés Torrecillas, in his capacity as Deputy Chair of the Board of Directors, and by
Juan Pi Llorens, in his capacity as Lead Director, positions for which they were appointed by resolution of the Board of Directors on 29 April 2019.
This includes the amounts corresponding to the position of member of the Board and of the various committees during the 2019 financial year. By
resolution of the Board of Directors on 29 April 2019, the functions of some Board committees were redistributed, and their associated remunerations
adapted to these changes in some cases.
Also, during the 2019 financial year, €104 thousand have been paid out in casualty and healthcare insurance premiums for non-executive
members of the Board of Directors.
Remuneration received by executive directors in 2019
Over the course of financial year 2019, the executive directors have received the amount of the Annual Fixed Remuneration corresponding
to said financial year, established for each director in the Remuneration Policy for BBVA Directors, which was approved by the General
Meeting held on 15 March 2019.
In addition, the executive directors have received their Annual Variable Remuneration (AVR) for the 2018 financial year, which, in
accordance with the settlement and payment system set out in the remuneration policy applicable to said year, was due to be paid to
them during the 2019 financial year.
In application of this settlement and payment system:
•
•
40% of the 2018 Annual Variable Remuneration corresponding to executive directors has been paid in the 2019 financial year
(the "Upfront Portion"); in equal parts in cash and BBVA shares.
The remaining 60% of the Annual Variable Remuneration has been deferred (40% in cash and 60% in shares) for a period of
five years, and its accrual and payment will be subject to compliance with a series of multi-year indicators (the "Deferred
Portion"). The application of these indicators, calculated over the first three years of deferral, may lead to a reduction of the
Deferred Portion, even in its entirety, but in no event may such amount be increased. Provided that the relevant conditions have
been met, the resulting amount will then be paid, in cash and in BBVA shares, according to the following payment schedule:
60% in 2022, 20% in 2023 and the remaining 20% in 2024.
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•
•
•
•
•
All the shares delivered to the executive directors as Annual Variable Remuneration, both as part of the Upfront Portion and the
Deferred Portion, will be withheld for a period of one year after their delivery; this will not apply to those shares transferred to
honor the payment of taxes arising therefrom.
The Deferred Portion of the Annual Variable Remuneration payable in cash will be subject to updating under the terms
established by the Board of Directors.
Executive directors may not use personal hedging strategies or insurance in connection with the remuneration and
responsibility that may undermine the effects of alignment with prudent risk management.
The variable component of the remuneration for executive directors corresponding to the 2018 financial year is limited to a
maximum amount of 200% of the fixed component of the total remuneration, as agreed by the General Shareholders' Meeting
held during that financial year.
Over the entire deferral and withholding period, the Annual Variable Remuneration for the executive directors will be subject to
variable remuneration reduction and recovery arrangements (malus and clawback).
Additionally, upon receipt of the shares, executive directors will not be allowed to transfer a number equivalent to twice their Annual Fixed
Remuneration for at least three years after their delivery.
Similarly, in accordance with the Remuneration Policy for BBVA Directors applicable in 2015 and in application of the settlement and
payment system of the Annual Variable Remuneration for said financial year, the Group Executive Chairman and the executive director
Head of Global Economics & Public Affairs ("Head of GE&PA") have received in 2019 the deferred Annual Variable Remuneration for the
2015 financial year, delivery of which was due that year (50% of the Annual Variable Remuneration), after being adjusted downwards
following the result of the TSR indicator. This remuneration has been paid in equal parts in cash and in shares, together with the
corresponding update in cash, thus concluding payment of the Annual Variable Remuneration to the executive directors for the 2015
financial year.
In accordance with the above, the remunerations paid to executive directors during the 2019 financial year are indicated below,
individualized and itemized:
Annual Fixed Remuneration for 2019 (Thousands of Euros)
Group Executive Chairman
Chief Executive Officer
Director de GE&PA
Total
2,453
2,179
834
5,466
In addition, in accordance with the current Remuneration Policy for BBVA Directors, during the 2019 financial year, the Chief Executive
Officer (Consejero Delegado) has received the corresponding amounts of fixed remuneration for the concepts of cash in lieu of pension,
given that he does not have a retirement pension (see the Pension Commitments section of this Note), and mobility allowance. The Bank
therefore paid the Chief Executive Officer the amount of €654 thousand and €506 thousand, respectively, for these concepts during the
2019 financial year.
Annual Variable Remuneration for 2018
Group Executive Chairman
Chief Executive Officer (2)
Head of GE&PA
Total
In cash (1)
(thousands of Euros)
In shares (1)
479
200
79
758
100,436
41,267
16,641
158,344
(1) Remunerations corresponding to the upfront portion (40%) of the AVR for the 2018 financial year (50% paid in cash and 50% in BBVA shares).
For the Group Executive Chairman and Chief Executive Officer, these variable remunerations are linked to their previous positions as Chief
Executive Officer and President & CEO of BBVA USA, respectively.
(2) Remuneration received in US dollars. Data in thousands of Euros is for information purposes.
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Deferred Annual Variable Remuneration for 2015
Group Executive Chairman
Head of GE&PA
Total
In cash (1)
(thousands of Euros)
In shares (1)
612
113
725
79,157
14,667
93,824
(1) Remunerations corresponding to deferred AVR for financial year 2015 (50% of the AVR for 2015, in equal parts in cash and shares), payment of
which was due in 2019, together with its corresponding update in cash, and after its downward adjustment following the result of the TSR indicator.
For the Group Executive Chairman, these variable remunerations relate to his previous position as Chief Executive Officer.
In addition, the executive directors received remuneration in kind throughout financial year 2019, including insurance premiums and
others, amounting to a total of €411 thousand, of which €184 thousand correspond to the Group Executive Chairman, €144 thousand to
the Chief Executive Officer and €83 thousand to the executive director Head of GE&PA.
Remuneration received by Senior Management in 2019
During the 2019 financial year, the members of Senior Management, excluding executive directors, have received the amount of the
Annual Fixed Remuneration corresponding to that financial year.
In addition, they have received the Annual Variable Remuneration for financial year 2018, which, in accordance with the settlement and
payment system set out in the remuneration policy applicable for said financial year, was due to be paid to them during financial year
2019.
Under this settlement and payment system, the same rules as set out above for executive directors are applicable. These include, among
others: 40% of the Annual Variable Remuneration, in equal parts in cash and in BBVA shares, will be paid in the financial year following the
year to which it corresponds (the "Upfront Portion"), and the remaining 60% will be deferred (40% in cash and 60% in shares) for a five-
year period, with its accrual and payment being subject to compliance with a series of multi-year indicators (the "Deferred Portion"),
applying the same payment schedule established for executive directors. The shares received will be withheld for a period of one year
(this will not apply to those shares transferred to honour the payment of taxes arising therefrom). Likewise, senior management may not
use personal hedging strategies or insurance in connection with the remuneration; the variable component of the remuneration for Senior
Management corresponding to financial year 2018 will be limited to a maximum amount of 200% of the fixed component of the total
remuneration; and over the entire deferral and withholding period, the Annual Variable Remuneration will be subject to reduction and
recovery (malus and clawback) arrangements.
Similarly, in accordance with the remuneration policy applicable to the executive directors in 2015 and in application of the settlement and
payment system of the Annual Variable Remuneration for said financial year, the members of the Senior Management who were
beneficiaries of such remuneration, have received in 2019 the deferred portion of the Annual Variable Remuneration for financial year
2015, after being adjusted downwards following the result of the TSR indicator, in equal parts in cash and in shares, along with its update
in cash, concluding the payment of this remuneration to the members of the Senior Management.
In accordance with the above, the remuneration paid during the 2019 financial year to all members of the Senior Management as a whole,
who held that position as of 31 December 2019 (15 members), excluding executive directors, is indicated below (itemized):
Annual Fixed Remuneration for 2019 (thousands of Euros)
Senior Management total
13,883
Annual Variable Remuneration for 2018
Senior Management total
In cash
(thousands of Euros)
In shares
887
185,888
(1) Remunerations corresponding to the upfront portion (40%) of the AVR for financial year 2018 (paid 50% in cash and 50% in BBVA shares). For those
members of the Senior Management who were appointed by the Board of Directors on 20 December 2018 and 29 April, 30 July and 19 December
2019, this remuneration relates to their previous positions.
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Annual Variable Remuneration for 2015
Senior Management total
In cash
(thousands of Euros)
In shares
1,263
163,215
(1) Remunerations corresponding to deferred AVR for financial year 2015 (50% of the AVR for 2015, in equal parts in cash and in
shares), payment of which was due in 2019, together with its corresponding update in cash, and after its downward adjustment
following the result of the TSR indicator.
In addition, all members of Senior Management, excluding executive directors, have received remuneration in kind throughout the 2019
financial year, including insurance premiums and others, amounting to a total of €769 thousand.
Remunerations of executive directors due in 2020 and subsequent financial years
• Annual Variable Remuneration for executive directors for the 2019 financial year
Following year-end 2019, the Annual Variable Remuneration for executive directors corresponding to said period has been determined,
applying the conditions set out in the Remuneration Policy for BBVA Directors approved by the General Meeting on 15 March 2019. As in
the previous financial year, the following settlement and payment system applies to this remuneration:
• The Upfront Portion (40% of the 2019 Annual Variable Remuneration) will be paid, provided that the conditions are met, during the
first quarter of 2020, in equal parts in cash and in shares, which amounts to €636 thousand and 126,470 BBVA shares in the case of
the Group Executive Chairman; €571 thousand and 113,492 BBVA shares in the case of the Chief Executive Officer and €75 thousand
and 14,998 BBVA shares in the case of the Head of GE&PA.
• The remaining 60% of the 2019 Annual Variable Remuneration will be deferred (40% in cash and 60% in shares) over a five-year
period (Deferred Portion), subject to compliance with the multi-year performance indicators determined by the Board of Directors at
the start of financial year 2019, which may lead to a reduction in the Deferred Portion, even in its entirety, but in no event may such
amount be increased. These multi-year performance indicators will be calculated over the first three years of deferral and, provided
that the relevant conditions have been met, the resulting amount will then be paid, in cash and in BBVA shares, according to the
following payment schedule: 60% after the third year of deferral; 20% after the fourth year of deferral; and the remaining 20% after
the fifth year of deferral. All the above is subject to the settlement and payment system set out in the Remuneration Policy for BBVA
Directors, which includes, among others, malus and clawback arrangements and retention periods for the shares.
The amounts corresponding to the deferred shares are detailed in the section "Other capital instruments – Remunerations based on
Capital Instruments" and the cash part in "Other Liabilities/Other Accruals" in the consolidated balance sheet as of 31 December 2019.
• Deferred Annual Variable Remuneration of executive directors for financial year 2016
Following year-end 2019, the deferred Annual Variable Remuneration of executive directors for financial year 2016 (50%) has been
determined, with delivery, if conditions are met, during financial year 2020, subject to the conditions established for this purpose in the
remuneration policy applicable in that financial year.
Thus, based on the result of each of the multi-year performance indicators set by the Board in 2016 to calculate the deferred portion of
this remuneration, and in application of the relevant scales of achievement and their corresponding targets and weightings, the final
amount of the deferred Annual Variable Remuneration for financial year 2016 has been determined, following the corresponding
downward adjustment as a consequence of the result of the TSR indicator. As a result, such remuneration, including the corresponding
updates, has been determined in an amount of €656 thousand and 89,158 BBVA shares in the case of the Group Executive Chairman;
€204 thousand and 31,086 BBVA shares in the case of the Chief Executive Officer; and €98 thousand and 13,355 BBVA shares in the case
of the Head of GE&PA. With these amounts paid, there will be no more outstanding payments due to the executive directors in respect of
Annual Variable Remuneration for the 2016 financial year.
Lastly, as at year-end 2019, in addition to the abovementioned Deferred Portion of the Annual Variable Remuneration of the executive
directors for financial year 2019 and in accordance with the conditions established in the remuneration policies applicable in previous
years, 60% of the Annual Variable Remuneration corresponding to financial years 2017 and 2018 has been deferred and is pending
payment to the executive directors and will be received in future years, if the applicable conditions are met.
Remunerations of Senior Management due in 2020 and subsequent financial years
• Annual Variable Remuneration of Senior Management for financial year 2019
Following year-end 2019, the Annual Variable Remuneration of Senior Management corresponding to said financial year has been
determined (15 members as of 31 December 2019, excluding executive directors). The Annual Variable Remuneration for all members of
the Senior Management, excluding executive directors, has been determined to be a combined total amount of €6,363 thousand.
The 2019 Annual Variable Remuneration for each member of Senior Management will be paid, in the first quarter of 2020, in accordance
with the settlement and payment system applicable in each case and in accordance with the provisions of the BBVA Group's
Remuneration Policy, if the applicable conditions are met, in an amount equal to €1,291 thousand and 257,907 BBVA shares (Upfront
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Portion). The remaining amount will be deferred and subject to the remaining conditions of the settlement and payment system of the
applicable Annual Variable Remuneration.
• Determination of the Deferred Annual Variable Remuneration of Senior Management for financial year 2016
Following year-end 2019, the deferred Annual Variable Remuneration of Senior Management (15 members as of 31 December 2019,
excluding executive directors) for financial year 2016 has been determined, with delivery, if conditions are met, taking place during
financial year 2020, subject to the conditions established for this purpose in the applicable remuneration policy.
Thus, based on the result of each of the multi-year performance indicators set by the Board in 2016 to calculate the deferred portion of
this remuneration, and in application of the relevant scales of achievement and their corresponding targets and weightings, the final
amount of the deferred portion of the Annual Variable Remuneration for members of the Senior Management for financial year 2016 has
been determined, following the corresponding downward adjustment as a consequence of the result of the TSR indicator. The combined
total amount, excluding executive directors, has been determined to be €1,277 thousand and 196,899 BBVA shares, including the
corresponding updates. With these amounts paid, there will be no more outstanding payments due to the Senior Management in respect
of the Annual Variable Remuneration for the 2016 financial year.
Lastly, in addition to the abovementioned Deferred Portion of the Annual Variable Remuneration for financial year 2019, as at year-end
2019 and in accordance with the conditions established in the remuneration policies applicable in previous years, 60% of the Annual
Variable Remuneration corresponding to financial years 2017 and 2018 has been deferred and is pending payment to the members of the
Senior Management and will be received in future years if the applicable conditions are met.
Remuneration system with deferred delivery of shares for non-executive directors
BBVA has a remuneration system in shares with deferred delivery for its non-executive directors, which was approved by the General
Shareholders' Meeting held on 18 March 2006 and extended by resolutions of the General Meetings held on 11 March 2011 and 11 March
2016 for an additional period of five years in each case.
This system involves the annual allocation to non-executive directors of a number of "theoretical shares" of BBVA equivalent to 20% of
the total remuneration received in cash by each of them in the previous financial year. This is calculated according to the average closing
prices of BBVA shares during the 60 trading sessions prior to the dates of the Annual General Shareholders' Meetings that approve the
corresponding annual financial statements for each financial year.
These shares will be delivered to each beneficiary, where applicable, after they leave their positions as directors for reasons other than
serious breach of their duties.
The "theoretical shares" allocated to non-executive directors who are beneficiaries of the remuneration system in shares with deferred
delivery in financial year 2019, corresponding to 20% of the total remuneration in cash received by each of them in financial year 2018,
are as follows:
Tomás Alfaro Drake
José Miguel Andrés Torrecillas
Jaime Caruana Lacorte
Belén Garijo López
Sunir Kumar Kapoor
Carlos Loring Martínez de Irujo
Lourdes Máiz Carro
José Maldonado Ramos
Ana Peralta Moreno
Juan Pi Llorens
Susana Rodríguez Vidarte
Jan Verplancke
Total
Theoretical shares
allocated in 2019
Theoretical shares
accumulated as at 31
December 2019
10,138
19,095
9,320
12,887
6,750
17,515
11,160
15,328
5,624
17,970
17,431
5,203
148,421
93,587
55,660
9,320
47,528
15,726
116,391
34,320
94,323
5,624
72,141
122,414
5,203
672,237
Pension commitments with directors and Senior Management
The Bank has not made pension commitments with non-executive directors.
With regard to the Group Executive Chairman, the Remuneration Policy for BBVA Directors establishes a pension framework whereby he
is eligible, provided that he does not leave his position as a result of a serious breach of duties, to receive a retirement pension, paid in
either income or capital, when he reaches the legally established retirement age. The amount of this pension will be determined by the
annual contributions made by the Bank, together with their corresponding accumulated yields as of that date.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The annual contribution to cover the retirement contingency in the Group Executive Chairman's defined-contribution system, as
established in the Remuneration Policy for BBVA Directors, was determined as a result of the conversion of his previous defined-benefit
rights into a defined-contribution system, in the annual amount of €1,642 thousand. The Board of Directors may update this amount
during the term of the Policy, in the same way and under the same terms as it may update the Annual Fixed Remuneration.
15% of the aforementioned agreed annual contribution will be based on variable components and considered "discretionary pension
benefits", therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable
regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with the
Remuneration Policy for BBVA Directors.
In the event the contractual relationship terminates before reaching retirement age for reasons other than serious breach of duties, the
retirement pension due to the Group Executive Chairman upon reaching the legally established retirement age will be calculated based on
the funds accumulated through the contributions made by the Bank under the terms set out, up to that date, plus the corresponding
accumulated yield, with no additional contributions to be made by the Bank in any event from the time of termination.
With respect to the commitments to cover the contingencies for death and disability benefits for the Group Executive Chairman, the Bank
will undertake the payment of the corresponding annual insurance premiums in order to top up the coverage of these contingencies.
In line with the above, during the 2019 financial year, €1,919 thousand were recorded to meet the pension commitments for the Chairman.
This amount includes the contribution to the retirement contingency (€1,642 thousand) and the payment of premiums for the death and
disability contingencies (€278 thousand), as well as the negative adjustment of €1 thousand for “discretionary pension benefits” for the
2018 financial year, which were declared at 2018 year-end and had to be registered in the accumulated fund in 2019.
As of 31 December 2019, the total accumulated amount of the fund to meet the retirement commitments for the Group Executive
Chairman was €21,582 thousand.
With regard to the agreed annual contribution to the retirement contingency corresponding to the 2019 financial year, 15% (€246
thousand) has been registered in that financial year as "discretionary pension benefits". Following year-end 2019, this amount has been
adjusted according to the criteria established to determine the Group Executive Chairman's Annual Variable Remuneration for 2019.
Accordingly, the "discretionary pension benefits" for the 2019 financial year have been determined in an amount of €261 thousand, which
will be included in the accumulated fund for financial year 2020, subject to the same conditions as the Deferred Portion of the Annual
Variable Remuneration for financial year 2019, as well as to the remaining conditions established for these benefits in the Remuneration
Policy for BBVA Directors.
With regard to the Chief Executive Officer, in accordance with the provisions of the current Remuneration Policy for BBVA Directors and
his contract, the Bank has not made any retirement commitments, although he is entitled to an annual cash sum instead of a retirement
pension (cash in lieu of pension), equivalent to 30% of his Annual Fixed Remuneration. The Bank has also made pension commitments to
cover the death and disability contingencies, for which purpose the corresponding annual insurance premiums will be paid.
In accordance with the above, in the 2019 financial year the Bank has paid the Chief Executive Officer the amount of fixed remuneration
as cash in lieu of pension set out in the “Remuneration received by executive directors in 2019” section of this Note. Furthermore, €141
thousand were recorded for the payment of the annual insurance premiums to cover the death and disability contingencies.
For the executive director Head of GE&PA, the pension system provided for in the Remuneration Policy for BBVA Directors establishes an
annual contribution of 30% of the Head of GE&PA's Annual Fixed Remuneration to cover the retirement contingency. 15% of the
aforementioned agreed annual contribution will be based on variable components and considered "discretionary pension benefits",
therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable regulations, as well
as any other conditions concerning variable remuneration that may be applicable in accordance with the Policy.
The executive director Head of GE&PA, upon reaching retirement age, will be entitled to receive, in the form of capital or income, the
benefits arising from contributions made by the Bank to cover pension commitments, plus the corresponding yield accumulated up to
that date, provided the executive director Head of GE&PA does not leave said position due to serious breach of duties. In the event of
voluntary termination of the contractual relationship by the director before retirement, the benefits will be limited to 50% of the
contributions made by the Bank up to that date, together with the corresponding accumulated yield, with no additional contributions to
be made by the Bank in any event upon termination of the contractual relationship.
With respect to the commitments to cover the contingencies for death and disability benefits for the executive director Head of GE&PA,
the Bank will undertake the payment of the corresponding annual insurance premiums in order to top up the coverage under their pension
system.
In line with the above, during the 2019 financial year, €404 thousand have been recorded to meet the pension commitments for the
executive director Head of GE&PA. This amount includes the contribution to the retirement contingency (€250 thousand) and the
payment of premiums to cover the death and disability contingencies (€150 thousand), as well as €4 thousand corresponding to the
adjustment made to the amount of "discretionary pension benefits" for financial year 2018, as declared at 2018 year-end and which had
to be registered in the accumulated fund in 2019.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
As of 31 December 2019, the total accumulated amount of the fund to meet the retirement commitments for the executive director Head
of GE&PA amounts to €1,404 thousand.
With regard to the annual contribution agreed for the retirement contingency, 15% (€38 thousand) has been registered in 2019 as
"discretionary pension benefits" and, following year-end 2019, this amount has been adjusted according to the criteria established to
determine the executive director Head of GE&PA's Annual Variable Remuneration for 2019. Accordingly, the "discretionary pension
benefits" for the financial year have been determined in an amount of €40 thousand, which will be included in the accumulated fund for
financial year 2020, subject to the same conditions as the Deferred Portion of the Annual Variable Remuneration for financial year 2019,
as well as the remaining conditions established for these benefits in the Remuneration Policy for BBVA Directors.
In addition, during the 2019 financial year, €3,281 thousand have been recorded to meet the pension commitments for members of the
Senior Management (15 members holding that position as of 31 December 2019, excluding executive directors). This amount includes
both the contribution to the retirement contingency (€2,656 thousand) and the payment of premiums to cover the death and disability
contingencies (€627 thousand), as well as the negative adjustment of €2 thousand for “discretionary pension benefits” for the 2018
financial year, as declared at 2018 year-end, and which had to be registered in the accumulated fund in 2019.
At 31 December 2019, the total accumulated amount of the fund to meet the retirement commitments for members of the Senior
Management amounts to €20,287 thousand.
15% of the agreed annual contributions for members of the Senior Management to cover retirement contingencies will be based on
variable components and considered "discretionary pension benefits", therefore subject to the conditions regarding delivery in shares,
retention and clawback established in the applicable regulations, as well as any other conditions concerning variable remuneration that
may be applicable in accordance with the remuneration policy applicable to members of the Senior Management.
Accordingly, with regard to the agreed annual contribution for the retirement contingency registered in the 2019 financial year, an amount
of €389 thousand has been registered as "discretionary pension benefits" during the 2019 financial year and, following year-end 2019,
this amount has been adjusted according to the same criteria established to determine the Senior Management's Annual Variable
Remuneration for 2019. Accordingly, the "discretionary pension benefits" for members of the Senior Management for the financial year
have been determined in an amount of €402 thousand, which will be included in the accumulated fund for financial year 2020, subject to
the same conditions as the Deferred Portion of Annual Variable Remuneration for financial year 2019, as well as the remaining conditions
established for these benefits in the remuneration policy applicable to members of the Senior Management.
Payments for the termination of the contractual relationship
In accordance with the Remuneration Policy for BBVA Directors, the Bank has no commitments regarding severance payments to
executive directors.
With regard to Senior Management, excluding executive directors, the Bank has paid out a total of €8,368 thousand during financial year
2019, resulting from the termination of the contractual relationship with four senior managers with an average length of service in the
Group of 25 years, in execution of their contracts. These contracts include the right to receive the relevant legal indemnity, provided that
termination of their contract is not due to voluntary leave, retirement, disability or serious breach of their duties. The amount of this pay
will be calculated in accordance with the provisions of applicable labor regulations. In some cases, the contracts also include the right to
an amount additional to the legal indemnity, which will be considered variable remuneration in accordance with the solvency regulations
that apply to this group, as well as notice clauses.
In line with the above, as of 31 December 2019, €1,199 thousand is pending payment and will be paid, if conditions are met, in accordance
with the same schedule and regulations of the settlement and payment system applicable to the Annual Variable Remuneration for
financial year 2019, as established in the remuneration policy applicable to the members of Senior Management.
All these payments comply with the conditions set out in the regulations applicable to the group of employees with a material impact on
the Group's risk profile, to which senior managers belong.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
55. Other information
55.1
Environmental impact
Given the activities BBVA Group entities engage in, the Group has no environmental liabilities, expenses, assets, provisions or
contingencies that could have a significant effect on its consolidated equity, financial situation and profits. Consequently, as of December
31, 2019, there is no item included that requires disclosure in an environmental information report pursuant to Ministry JUS/318/2018, of
March 21, by which the new model for the presentation in the Commercial Register of the consolidated annual accounts of the subjects
obliged to its publication is approved.
55.2 Reporting requirements of the Spanish National Securities Market Commission (CNMV)
Dividends paid
The table below presents the dividends per share paid in cash during 2019, 2018 and 2017 (cash basis dividend, regardless of the year in
which they were accrued), but without including other shareholder remuneration, such as the “Dividend Option”. See Note 4 for a
complete analysis of all remuneration awarded to the shareholders in 2019, 2018 and 2017.
Dividends paid ("Dividend Option" not included)
2019
2018
2017
% Over
nominal
Euros
per share
Amount
(Millions
of Euros)
% Over
nominal
Euros per
share
Amount
(Millions
of Euros)
% Over
nominal
Euros per
share
Amount
(Millions of
Euros)
Ordinary shares
Rest of shares
53.06%
0.26
1,734
51.02%
0.25
1,667
34.69%
Total dividends paid in cash
53.06%
Dividends with charge to income
53.06%
-
-
0.26
0.26
-
-
1,734
51.02%
1,734
51.02%
-
0.25
0.25
-
1,667
1,667
-
34.69%
34.69%
Dividends with charge to reserve
or share premium
Dividends in kind
Flexible payment
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ordinary income and attributable profit by operating segment
0.17
-
0.17
0.17
-
-
-
1,125
-
1,125
1,125
-
-
-
The detail of the consolidated ordinary income and profit for each operating segment is as follows as of December 2019 and 2018:
Ordinary income and attributable profit by operating segment
Spain
The United States
Mexico
Turkey
South America
Rest of Eurasia
Subtotal operating segments
Corporate Center
Income from ordinary activities (1)
Profit/ (loss)
2019
9,814
4,516
13,131
8,868
6,786
684
43,800
(696)
2018
10,724
3,910
11,610
9,830
6,555
617
43,246
(994)
2019
1,386
590
2,699
506
721
127
6,029
(2,517)
2018
1,400
736
2,367
567
578
96
5,743
(343)
5,400
Total
(1) The line comprises interest income; dividend income; fee and commission income; gains (losses) on derecognition of financial assets and liabilities not measured at fair value
through profit or loss, net; gains (losses) on financial assets and liabilities held for trading, net; gains (losses) on non-trading financial assets mandatorily at fair value through profit
or loss, net; gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net; gains (losses) from hedge accounting, net; other operating income;
and income from insurance and reinsurance contracts.
42,252
43,104
3,512
Interest income by geographical area
The breakdown of the balance of “Interest income and similar income” in the accompanying consolidated income statements by
geographical area is as follows:
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Interest income. Breakdown by geographical area (Millions of Euros)
Domestic
Foreign
European Union
Eurozone
No Eurozone
Other countries
Total
Notes
37.1
2019
4,962
26,099
470
304
166
25,629
31,061
2018
2017
4,952
24,879
5,093
24,203
509
391
117
422
239
183
24,370
29,831
23,781
29,296
Average number of employees
The detail of the average number of employees is as follows as of December 2019, 2018 and 2017:
Average number of employees
Men
Women
Total
2019
58,365
67,778
2018
59,547
69,790
2017
60,730
71,774
126,143
129,336
132,504
55.3 Mortgage market policies and procedures
The information on “Mortgage market policies and procedures” (for the granting of mortgage loans and for debt issues secured by such
mortgage loans) required by Bank of Spain Circular 5/2011, applying Royal Decree 716/2009, dated April 24 (which developed certain
aspects of Act 2/1981, dated March 25, on the regulation of the mortgage market and other mortgage and financial market regulations),
can be found in Appendix X.
56.
Subsequent events
On January 31, 2020 it was announced that it was foreseen to submit to the consideration of the corresponding government bodies the
proposal of cash payment in a gross amount of euro 0.16 per share to be paid in April 2020 as final dividend for 2019 (see Note 4).
From January 1, 2020 to the date of preparation of these consolidated financial statements, no other subsequent events not mentioned
above in these financial statements have taken place that could significantly affect the Group’s earnings or its equity position.
57.
Explanation added for translation into English
These accompanying consolidated financial statements are presented on the basis of IFRS, as adopted by the European Union. Certain
accounting practices applied by the Group that conform to EU-IFRS may not conform to other generally accepted accounting principles.
P.176
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Appendices
P.177
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
APPENDIX I. Additional information on subsidiaries and structured entities composing the BBVA Group
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
ACTIVOS MACORP SL
ALCALA 120 PROMOC. Y GEST.IMMOB. S.L.
ANIDA GRUPO INMOBILIARIO SL
ANIDA INMOBILIARIA, S.A. DE C.V.
ANIDA OPERACIONES SINGULARES, S.A.
ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V.
ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA
ANTHEMIS BBVA VENTURE PARTNERSHIP LLP
APLICA NEXTGEN OPERADORA S.A. DE C.V.
APLICA NEXTGEN SERVICIOS S.A. DE C.V
APLICA TECNOLOGIA AVANZADA SA DE CV
ARIZONA FINANCIAL PRODUCTS, INC
ARRAHONA AMBIT, S.L.
ARRAHONA IMMO, S.L.
ARRAHONA NEXUS, S.L.
ARRAHONA RENT, S.L.U.
ARRELS CT FINSOL, S.A.
ARRELS CT LLOGUER, S.A.
ARRELS CT PATRIMONI I PROJECTES, S.A.
ARRELS CT PROMOU SA
AZLO BUSINESS, INC
BAHIA SUR RESORT S.C.
BANCO BBVA ARGENTINA S.A.
SPAIN
SPAIN
SPAIN
MEXICO
SPAIN
MEXICO
PORTUGAL
UNITED KINGDOM
MEXICO
MEXICO
MEXICO
UNITED STATES
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
UNITED STATES
SPAIN
ARGENTINA
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY SA
URUGUAY
BANCO INDUSTRIAL DE BILBAO SA
BANCO OCCIDENTAL SA
BANCO PROVINCIAL OVERSEAS NV
BANCO PROVINCIAL SA - BANCO UNIVERSAL
BBV AMERICA SL
BBVA (SUIZA) SA
BBVA AGENCIA DE SEGUROS COLOMBIA LTDA
BBVA ASSET MANAGEMENT SA SAF
BBVA ASSET MANAGEMENT SA SGIIC
SPAIN
SPAIN
CURAÇAO
VENEZUELA
SPAIN
SWITZERLAND
REAL ESTATE
REAL ESTATE
INVESTMENT COMPANY
INVESTMENT COMPANY
REAL ESTATE
REAL ESTATE
REAL ESTATE
INVESTMENT COMPANY
SERVICES
SERVICES
SERVICES
FINANCIAL SERVICES
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
SERVICES
INACTIVE
BANKING
BANKING
BANKING
BANKING
BANKING
BANKING
INVESTMENT COMPANY
BANKING
50.63
-
100.00
-
-
-
-
-
-
-
100.00
-
-
-
-
-
-
-
-
-
-
99.95
39.97
100.00
-
49.43
-
1.46
100.00
100.00
-
-
49.37
100.00
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
26.58
-
99.93
50.57
100.00
53.75
-
-
100.00
100.00
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.95
66.55
100.00
99.93
100.00
100.00
55.21
100.00
100.00
100.00
100.00
100.00
100.00
100.00
46.12
100.00
21
19
1,538
99
1,444
43
27
4
-
-
203
872
12
53
58
9
64
5
22
28
5
-
157
110
47
17
51
36
79
98
-
10
43
31
6
1,139
19
21
17
1,625
71
1,504
42
8
4
(3)
-
219
872
24
114
64
11
79
6
24
37
19
1
963
164
45
18
45
132
611
114
0
6
(58)
21
4
2,041
11
1
1
(73)
9
(57)
1
(1)
(2)
4
-
8
-
(2)
-
1
-
-
-
-
(4)
(14)
-
214
41
2
-
6
(7)
16
7
-
4
114
10
1
439
8
BBVA ASSET MANAGEMENT SA SOCIEDAD FIDUCIARIA (BBVA FIDUCIARIA)
COLOMBIA
BBVA AUTOMERCANTIL COMERCIO E ALUGER DE VEICULOS AUTOMOVEIS LDA.
PORTUGAL
BBVA BANCO CONTINENTAL SA (1)
BBVA BANCOMER GESTION, S.A. DE C.V.
PERU
MEXICO
FINANCIAL SERVICES
FINANCIAL SERVICES
BANKING
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
46.12
100.00
COLOMBIA
INSURANCES SERVICES
PERU
FINANCIAL SERVICES
SPAIN
OTHER INVESTMENT COMPANIES
100.00
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(1) Full consolidation method is used according to accounting rules (see Glossary)
P.178
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
BBVA BANCOMER OPERADORA SA DE CV
BBVA BANCOMER SA INSTITUCION DE BANCA MULTIPLE GRUPO FINANCIERO BBVA
BANCOMER
BBVA BANCOMER SEGUROS SALUD SA DE CV
BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V.
BBVA BOLSA SOCIEDAD AGENTE DE BOLSA S.A.
BBVA BRASIL BANCO DE INVESTIMENTO SA
BBVA BROKER CORREDURIA DE SEGUROS Y REASEGUROS SA
BBVA BROKER SA
BBVA COLOMBIA SA
BBVA CONSOLIDAR SEGUROS SA
BBVA CONSULTING ( BEIJING) LIMITED
BBVA CONSUMER FINANCE ENTIDAD DE DESARROLLO A LA PEQUEÑA Y MICRO
EMPRESA EDPYME SA (BBVA CONSUMER FINANCE - EDPYME)
BBVA DATA & ANALYTICS SL
BBVA DISTRIBUIDORA DE SEGUROS S.R.L.
BBVA FINANCIAL CORPORATION
BBVA FINANZIA SPA
BBVA FOREIGN EXCHANGE INC.
BBVA FRANCES ASSET MANAGMENT S.A. SOCIEDAD GERENTE DE FONDOS COMUNES
DE INVERSIÓN.
BBVA FUNDOS S.GESTORA FUNDOS PENSOES SA
MEXICO
MEXICO
MEXICO
MEXICO
PERU
BRAZIL
SPAIN
ARGENTINA
Activity
SERVICES
BANKING
INSURANCES SERVICES
SERVICES
SECURITIES DEALER
BANKING
FINANCIAL SERVICES
INSURANCES SERVICES
COLOMBIA
BANKING
ARGENTINA
CHINA
INSURANCES SERVICES
FINANCIAL SERVICES
PERU
FINANCIAL SERVICES
SPAIN
URUGUAY
UNITED STATES
ITALY
UNITED STATES
ARGENTINA
SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
IN LIQUIDATION
FINANCIAL SERVICES
FINANCIAL SERVICES
PORTUGAL
PENSION FUNDS MANAGEMENT
BBVA GLOBAL FINANCE LTD
BBVA GLOBAL MARKETS BV
BBVA HOLDING CHILE SA
BBVA INFORMATION TECHNOLOGY ESPAÑA SL
BBVA INSTITUIÇAO FINANCEIRA DE CREDITO SA
BBVA INSURANCE AGENCY, INC.
BBVA INTERNATIONAL PREFERRED SOCIEDAD ANONIMA
BBVA IRELAND PLC
BBVA LEASING MEXICO SA DE CV
CAYMAN ISLANDS
NETHERLANDS
CHILE
SPAIN
PORTUGAL
UNITED STATES
SPAIN
IRELAND
MEXICO
BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A.
SPAIN
BBVA MORTGAGE CORPORATION
BBVA NEXT TECHNOLOGIES OPERADORA, S.A. DE C.V.
BBVA NEXT TECHNOLOGIES SLU
BBVA NEXT TECHNOLOGIES, S.A. DE C.V.
BBVA OP3N S.L.
BBVA OPEN PLATFORM INC
BBVA PARAGUAY SA
UNITED STATES
MEXICO
SPAIN
MEXICO
SPAIN
UNITED STATES
PARAGUAY
FINANCIAL SERVICES
FINANCIAL SERVICES
INVESTMENT COMPANY
SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
SERVICES
INVESTMENT COMPANY
100.00
SERVICES
SERVICES
SERVICES
BANKING
-
-
-
100.00
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Direct
Indirect
Total
Net carrying
amount
Equity
excluding
profit(loss)
31.12.19
Profit (loss)
31.12.19
-
-
-
-
-
100.00
99.94
-
77.41
87.78
-
-
-
-
-
100.00
-
-
100.00
100.00
100.00
61.22
76.00
49.90
-
100.00
100.00
-
-
-
-
100.00
100.00
100.00
100.00
100.00
-
0.06
99.96
18.06
12.22
100.00
100.00
100.00
100.00
100.00
-
100.00
100.00
-
-
-
38.78
-
50.10
100.00
-
-
100.00
100.00
100.00
100.00
-
100.00
100.00
100.00
-
100.00
21
4
100.00
10,124
7,549
100.00
100.00
100.00
100.00
100.00
99.96
95.47
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
76.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
13
50
5
16
-
-
355
8
2
26
6
5
231
3
22
14
8
-
-
139
1
39
47
-
2
51
10
14
53
4
25
10
3
1,186
21
2
20
3
3
227
4
17
11
6
5
-
299
1
52
38
-
3
133
18
2,989
2,907
-
31
1
2
3
23
-
22
2
2
8
139
23
2,244
(1)
18
1
-
5
4
229
12
-
5
-
2
2
-
5
2
2
-
-
54
1
3
9
-
-
15
18
77
-
4
-
(1)
(6)
31
BBVA PENSIONES SA ENTIDAD GESTORA DE FONDOS DE PENSIONES
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
PENSION FUNDS MANAGEMENT
SPAIN
100.00
-
100.00
13
19
8
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
P.179
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
Activity
Direct
Indirect
Total
Net carrying amount
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
Equity excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
BBVA PERU HOLDING SAC
BBVA PLANIFICACION PATRIMONIAL SL
BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES
BBVA PROCESSING SERVICES INC.
BBVA PROCUREMENT SERVICES AMERICA DEL SUR SpA
BBVA RE INHOUSE COMPAÑIA DE REASEGUROS, S.E.
BBVA REAL ESTATE MEXICO, S.A. DE C.V.
BBVA SECURITIES INC
BBVA SEGUROS COLOMBIA SA
BBVA SEGUROS DE VIDA COLOMBIA SA
BBVA SEGUROS SA DE SEGUROS Y REASEGUROS
BBVA SERVICIOS, S.A.
BBVA SOCIEDAD TITULIZADORA S.A.
BBVA TRADE, S.A.
BBVA TRANSFER HOLDING INC
BBVA TRANSFER SERVICES INC
BBVA USA
BBVA USA BANCSHARES, INC.
BBVA VALORES COLOMBIA SA COMISIONISTA DE BOLSA
BBVA WEALTH SOLUTIONS, INC.
BILBAO VIZCAYA HOLDING SA
CAIXA MANRESA IMMOBILIARIA ON CASA SL
CAIXA MANRESA IMMOBILIARIA SOCIAL SL
CAIXA TERRASSA SOCIETAT DE PARTICIPACIONS PREFERENTS SAU
CAIXASABADELL PREFERENTS SA
CARTERA E INVERSIONES SA CIA DE
CASA DE BOLSA BBVA BANCOMER SA DE CV
CATALONIA GEBIRA, S.L. (IN LIQUIDATION)
CATALONIA PROMODIS 4, S.A.
CATALUNYACAIXA CAPITAL SA
CATALUNYACAIXA IMMOBILIARIA SA
CATALUNYACAIXA SERVEIS SA
CDD GESTIONI S.R.L.
CETACTIUS SL
CIDESSA DOS, S.L.
CIDESSA UNO SL
PERU
SPAIN
BOLIVIA
INVESTMENT COMPANY
FINANCIAL SERVICES
PENSION FUNDS MANAGEMENT
100.00
80.00
75.00
UNITED STATES
FINANCIAL SERVICES
CHILE
SPAIN
SERVICES
INSURANCES SERVICES
MEXICO
FINANCIAL SERVICES
UNITED STATES
FINANCIAL SERVICES
COLOMBIA
COLOMBIA
SPAIN
SPAIN
PERU
SPAIN
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
INSURANCES SERVICES
INSURANCES SERVICES
INSURANCES SERVICES
COMMERCIAL
FINANCIAL SERVICES
INVESTMENT COMPANY
INVESTMENT COMPANY
FINANCIAL SERVICES
BANKING
-
-
-
-
-
94.00
94.00
99.96
-
-
-
-
-
-
INVESTMENT COMPANY
100.00
COLOMBIA
SECURITIES DEALER
UNITED STATES
FINANCIAL SERVICES
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
INVESTMENT COMPANY
REAL ESTATE
REAL ESTATE
FINANCIAL SERVICES
FINANCIAL SERVICES
INVESTMENT COMPANY
MEXICO
SECURITIES DEALER
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
ITALY
SPAIN
SPAIN
SPAIN
REAL ESTATE
REAL ESTATE
INVESTMENT COMPANY
REAL ESTATE
SERVICES
REAL ESTATE
REAL ESTATE
INVESTMENT COMPANY
INVESTMENT COMPANY
-
-
89.00
100.00
100.00
100.00
100.00
100.00
-
-
-
100.00
100.00
100.00
100.00
100.00
-
-
-
20.00
5.00
100.00
100.00
100.00
100.00
100.00
6.00
6.00
-
100.00
100.00
100.00
100.00
100.00
100.00
-
100.00
100.00
11.00
-
-
-
-
-
100.00
100.00
100.00
-
-
-
-
-
100.00
100.00
100.00
100.00
80.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.96
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
124
-
1
1
6
39
-
206
10
14
713
-
1
10
96
73
947
1
5
1
6
43
-
193
15
104
532
-
1
5
81
63
11,063
11,424
10,997
11,755
5
12
41
2
4
1
-
92
46
-
1
82
321
2
5
1
15
5
5
8
87
2
3
1
1
27
26
-
1
81
317
2
10
1
15
(38)
199
-
8
-
-
-
-
13
9
34
298
-
-
6
16
10
107
135
-
4
15
-
-
-
-
77
21
-
-
1
-
-
-
-
-
65
CIERVANA SL
INVESTMENT COMPANY
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
SPAIN
100.00
-
100.00
54
53
-
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
P.180
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity
excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
CLUB GOLF HACIENDA EL ALAMO, S.L.( IN LIQUIDATION)
COMERCIALIZADORA CORPORATIVA SAC
COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A.
SPAIN
IN LIQUIDATION
PERU
FINANCIAL SERVICES
COLOMBIA
SERVICES
COMPAÑIA CHILENA DE INVERSIONES SL
COMPASS CAPITAL MARKETS, INC.
COMPASS GP, INC.
COMPASS INSURANCE TRUST
COMPASS LIMITED PARTNER, INC.
COMPASS LOAN HOLDINGS TRS, INC.
COMPASS MORTGAGE FINANCING, INC.
COMPASS SOUTHWEST, LP
COMPASS TEXAS MORTGAGE FINANCING, INC
CONSOLIDAR A.F.J.P SA
CONTENTS AREA, S.L.
CONTINENTAL DPR FINANCE COMPANY
CONTRATACION DE PERSONAL, S.A. DE C.V.
CORPORACION GENERAL FINANCIERA SA
COVAULT, INC
DALLAS CREATION CENTER, INC
DATA ARCHITECTURE AND TECHNOLOGY MEXICO SA DE CV
DATA ARCHITECTURE AND TECHNOLOGY S.L.
DATA ARCHITECTURE AND TECHNOLOGY OPERADORA SA DE CV
DENIZEN FINANCIAL, INC
DENIZEN GLOBAL FINANCIAL SAU
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1859
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1860
DISTRITO CASTELLANA NORTE, S.A.
ECASA, S.A.
EL ENCINAR METROPOLITANO, S.A.
EL MILANILLO, S.A.
EMPRENDIMIENTOS DE VALOR S.A.
ENTRE2 SERVICIOS FINANCIEROS E.F.C SA
ESPAIS SABADELL PROMOCIONS INMOBILIARIES, S.A.
EUROPEA DE TITULIZACION SA SGFT .
EXPANSION INTERCOMARCAL SL
INVESTMENT COMPANY
100.00
-
SPAIN
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
UNITED STATES
ARGENTINA
SPAIN
INVESTMENT COMPANY
INVESTMENT COMPANY
INVESTMENT COMPANY
FINANCIAL SERVICES
INVESTMENT COMPANY
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
IN LIQUIDATION
SERVICES
CAYMAN ISLANDS
FINANCIAL SERVICES
MEXICO
SERVICES
SPAIN
UNITED STATES
UNITED STATES
SERVICES
SERVICES
MEXICO
SERVICES
SPAIN
SERVICES
MEXICO
SERVICES
UNITED STATES
SERVICES
SPAIN
PAYMENT ENTITIES
MEXICO
FINANCIAL SERVICES
MEXICO
FINANCIAL SERVICES
SPAIN
CHILE
SPAIN
SPAIN
REAL ESTATE
FINANCIAL SERVICES
REAL ESTATE
REAL ESTATE
URUGUAY
FINANCIAL SERVICES
SPAIN
SPAIN
SPAIN
SPAIN
FINANCIAL SERVICES
REAL ESTATE
FINANCIAL SERVICES
INVESTMENT COMPANY
-
-
-
97.87
50.00
100.00
99.97
0.03
-
-
-
-
-
-
-
-
46.11
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
53.89
100.00
100.00
100.00
-
-
-
-
-
-
100.00
-
-
-
-
-
-
-
100.00
100.00
100.00
51.00
100.00
100.00
-
100.00
100.00
75.54
99.05
100.00
100.00
97.87
50.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
51.00
100.00
100.00
100.00
100.00
100.00
75.54
99.05
100.00
100.00
100.00
100.00
100.00
100.00
-
-
100.00
100.00
88.24
100.00
-
-
88.24
100.00
-
42.40
42.40
1
-
5
221
7,429
44
-
1
-
4
239
7,344
44
-
6,512
6,429
74
-
73
-
5,380
5,323
-
1
6
-
8
-
1
7
-
7
510
1,433
1
2
1
-
-
1
-
-
-
113
30
-
7
2
9
6
2
16
-
3
4
1
2
-
3
5
-
-
150
18
-
7
3
9
8
20
17
1
-
-
1
11
85
-
-
84
1
-
66
-
-
-
-
1
20
(3)
(1)
-
-
-
(2)
(3)
-
-
(5)
12
-
-
(1)
-
(1)
3
-
-
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION (1)
MEXICO
REAL ESTATE
F/253863 EL DESEO RESIDENCIAL
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
MEXICO
REAL ESTATE
-
65.00
65.00
-
1
-
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(1) Full consolidation method is used according to accounting rules (see Glossary)
P.181
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect Total
Net carrying
amount
F/403035-9 BBVA HORIZONTES RESIDENCIAL
FIDEICOMISO 28991-8 TRADING EN LOS MCADOS FINANCIEROS
FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS
FIDEICOMISO F/403112-6 DE ADMINISTRACION DOS LAGOS
FIDEICOMISO HARES BBVA BANCOMER F/ 47997-2
FIDEICOMISO INMUEBLES CONJUNTO RESIDENCIAL HORIZONTES DE VILLA CAMPESTRE
FIDEICOMISO LOTE 6.1 ZARAGOZA
MEXICO
REAL ESTATE
MEXICO
FINANCIAL SERVICES
MEXICO
FINANCIAL SERVICES
MEXICO
REAL ESTATE
MEXICO
REAL ESTATE
COLOMBIA
REAL ESTATE
COLOMBIA
REAL ESTATE
FIDEICOMISO N.989 EN THE BANK OF NEW YORK MELLON SA INSTITUCION DE BANCA MULTIPLE FIDUCIARIO (FIDEIC.00989 6 EMISION)
MEXICO
FINANCIAL SERVICES
FIDEICOMISO Nº 847 EN BANCO INVEX SA INSTITUCION DE BANCA MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 4ª EMISION)
MEXICO
FINANCIAL SERVICES
FIDEICOMISO SCOTIABANK INVERLAT S A F100322908
FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. (IN LIQUIDATION)
FORUM COMERCIALIZADORA DEL PERU SA
FORUM DISTRIBUIDORA DEL PERU SA
FORUM DISTRIBUIDORA, S.A.
FORUM SERVICIOS FINANCIEROS, S.A.
FUTURO FAMILIAR, S.A. DE C.V.
G NETHERLANDS BV
GARANTI BANK SA
GARANTI BBVA AS (1)
GARANTI BBVA EMEKLILIK AS
GARANTI BBVA FACTORING AS
GARANTI BBVA FILO AS
GARANTI BBVA LEASING AS
GARANTI BBVA PORTFOY AS
GARANTI BBVA YATIRIM AS
GARANTI BILISIM TEKNOLOJISI VE TIC TAS
GARANTI DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY
GARANTI FILO SIGORTA ARACILIK HIZMETLERI A.S.
GARANTI HOLDING BV
GARANTI KONUT FINANSMANI DANISMANLIK HIZMETLERI AS (GARANTI MORTGAGE)
GARANTI KULTUR AS
GARANTI ODEME SISTEMLERI AS (GOSAS)
GARANTI YATIRIM ORTAKLIGI AS
GARANTIBANK BBVA INTERNATIONAL N.V.
GARRAF MEDITERRANIA, S.A.
MEXICO
REAL ESTATE
MEXICO
FINANCIAL SERVICES
SPAIN
IN LIQUIDATION
PERU
SERVICES
PERU
FINANCIAL SERVICES
CHILE
CHILE
FINANCIAL SERVICES
FINANCIAL SERVICES
SERVICES
MEXICO
NETHERLANDS
INVESTMENT COMPANY
ROMANIA
TURKEY
TURKEY
TURKEY
TURKEY
TURKEY
TURKEY
TURKEY
TURKEY
BANKING
BANKING
INSURANCES SERVICES
FINANCIAL SERVICES
SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
SERVICES
CAYMAN ISLANDS FINANCIAL SERVICES
TURKEY
FINANCIAL SERVICES
NETHERLANDS
INVESTMENT COMPANY
TURKEY
TURKEY
TURKEY
TURKEY
SERVICES
SERVICES
FINANCIAL SERVICES
INVESTMENT COMPANY
NETHERLANDS
BANKING
SPAIN
REAL ESTATE
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65.00 65.00
100.00 100.00
-
3
100.00 100.00
50
100.00 100.00
100.00 100.00
100.00 100.00
59.99 59.99
100.00 100.00
100.00 100.00
100.00 100.00
100.00 100.00
60.00 60.00
100.00 100.00
100.00 100.00
-
5
1
-
-
-
3
5
-
1
6
100.00 100.00
43
100.00 100.00
246
100.00 100.00
100.00 100.00
100.00 100.00
1
340
262
49.85
-
49.85 4,967
84.91 84.91
173
81.84 81.84
100.00 100.00
20
1
100.00 100.00
152
100.00 100.00
100.00 100.00
100.00 100.00
100.00 100.00
100.00 100.00
20
48
15
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00 100.00
263
340
100.00 100.00
100.00 100.00
100.00 100.00
91.40 91.40
-
-
-
-
100.00 100.00
587
100.00 100.00
2
1
-
3
6
577
2
Equity
excluding
profit (loss)
31.12.19
-
2
45
-
3
1
2
(3)
1
2
6
-
1
5
35
187
1
291
293
7,219
129
21
5
137
14
26
12
(5)
-
Profit (loss)
31.12.19
-
-
5
-
2
-
-
3
1
1
(1)
-
-
1
6
49
-
(3)
25
968
71
4
5
16
6
23
4
(14)
-
-
-
-
-
1
7
-
GESCAT GESTIO DE SOL SL
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
REAL ESTATE
SPAIN
100.00
-
100.00
11
12
(1)
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(1) Full consolidation method is used according to accounting rules (see Glossary)
P.182
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
GESCAT LLEVANT, S.L.
GESCAT LLOGUERS SL
GESCAT POLSKA SP ZOO
GESCAT SINEVA, S.L.
GESCAT VIVENDES EN COMERCIALITZACIO SL
GESTION DE PREVISION Y PENSIONES SA
GESTION Y ADMINISTRACION DE RECIBOS, S.A. - GARSA
GRAN JORGE JUAN SA
GRUPO FINANCIERO BBVA BANCOMER SA DE CV
GUARANTY BUSINESS CREDIT CORPORATION
GUARANTY PLUS HOLDING COMPANY
HABITATGES FINVER, S.L.
HABITATGES JUVIPRO, S.L.
HOLAMUNO AGENTE DE SEGUROS VINCULADO, S.L.U. (IN LIQUIDATION)
HOLVI DEUTSCHLAND SERVICE GMBH ( IN LIQUIDATION)
HOLVI PAYMENT SERVICE OY
HUMAN RESOURCES PROVIDER, INC
HUMAN RESOURCES SUPPORT, INC
INMESP DESARROLLADORA, S.A. DE C.V.
INMUEBLES Y RECUPERACIONES CONTINENTAL SA
INPAU, S.A.
INVERAHORRO SL
INVERPRO DESENVOLUPAMENT, S.L.
INVERSIONES ALDAMA, C.A.
INVERSIONES BANPRO INTERNATIONAL INC NV (1)
INVERSIONES BAPROBA CA
INVERSIONES P.H.R.4, C.A.
IRIDION SOLUCIONS IMMOBILIARIES SL
JALE PROCAM, S.L. (IN LIQUIDATION)
L'EIX IMMOBLES, S.L.
LIQUIDITY ADVISORS LP
MADIVA SOLUCIONES, S.L.
MICRO SPINAL LLC
MISAPRE, S.A. DE C.V.
MOMENTUM SOCIAL INVESTMENT HOLDING, S.L.
MOTORACTIVE IFN SA
SPAIN
SPAIN
POLAND
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
PENSION FUNDS MANAGEMENT
SERVICES
REAL ESTATE
MEXICO
FINANCIAL SERVICES
UNITED STATES
UNITED STATES
SPAIN
SPAIN
SPAIN
GERMANY
FINLAND
UNITED STATES
UNITED STATES
FINANCIAL SERVICES
INVESTMENT COMPANY
REAL ESTATE
REAL ESTATE
IN LIQUIDATION
IN LIQUIDATION
FINANCIAL SERVICES
SERVICES
SERVICES
MEXICO
REAL ESTATE
PERU
REAL ESTATE
SPAIN
SPAIN
SPAIN
VENEZUELA
CURAÇAO
VENEZUELA
VENEZUELA
SPAIN
SPAIN
SPAIN
REAL ESTATE
INVESTMENT COMPANY
INVESTMENT COMPANY
IN LIQUIDATION
INVESTMENT COMPANY
FINANCIAL SERVICES
INACTIVE
REAL ESTATE
IN LIQUIDATION
REAL ESTATE
UNITED STATES
FINANCIAL SERVICES
SPAIN
SERVICES
UNITED STATES
FINANCIAL SERVICES
MEXICO
FINANCIAL SERVICES
SPAIN
ROMANIA
INVESTMENT COMPANY
FINANCIAL SERVICES
-
100.00
100.00
100.00
-
-
-
100.00
100.00
60.00
-
-
-
100.00
100.00
99.98
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
-
-
48.00
100.00
-
100.00
-
-
-
-
-
-
-
-
100.00
100.00
-
-
60.46
-
50.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
60.00
100.00
100.00
99.98
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
48.01
100.00
60.46
100.00
50.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
3
3
-
6
91
9
1
423
6,678
33
-
1
1
-
-
55
349
343
35
44
25
98
4
-
16
-
-
2
-
2
1,154
9
-
-
7
36
3
4
-
6
92
21
2
409
8,586
33
-
1
1
1
-
22
342
337
21
42
25
102
8
-
46
1
-
2
(53)
2
1,144
2
-
-
7
25
-
-
-
-
(2)
5
-
14
2,645
-
-
-
-
-
-
(17)
6
6
14
2
-
-
2
-
6
(1)
-
-
(2)
-
17
-
-
(1)
-
3
MOTORACTIVE MULTISERVICES SRL
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
ROMANIA
SERVICES
-
100.00
100.00
-
1
1
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
(1) Full consolidation method is used according to accounting rules (see Glossary)
P.183
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
MULTIASISTENCIA OPERADORA S.A. DE C.V.
MULTIASISTENCIA SERVICIOS S.A. DE C.V.
MULTIASISTENCIA, S.A. DE C.V.
NOIDIRI SL
NOVA TERRASSA 3, S.L.
OPCION VOLCAN, S.A.
OPENPAY COLOMBIA SAS
OPENPAY S.A.P.I DE C.V.
OPENPAY SERVICIOS S.A. DE C.V.
OPERADORA DOS LAGOS S.A. DE C.V.
OPPLUS OPERACIONES Y SERVICIOS SA
OPPLUS SAC (IN LIQUIDATION)
P.I. HOLDINGS NO. 3, INC.
PARCSUD PLANNER, S.L.
PECRI INVERSION SA
MEXICO
INSURANCES SERVICES
MEXICO
INSURANCES SERVICES
MEXICO
INSURANCES SERVICES
SPAIN
SPAIN
REAL ESTATE
REAL ESTATE
MEXICO
REAL ESTATE
COLOMBIA
PAYMENT ENTITIES
MEXICO
PAYMENT ENTITIES
MEXICO
MEXICO
SPAIN
SERVICES
SERVICES
SERVICES
PERU
IN LIQUIDATION
UNITED STATES
SPAIN
SPAIN
FINANCIAL SERVICES
REAL ESTATE
-
-
-
100.00
100.00
100.00
100.00
-
-
-
-
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
-
-
-
100.00
100.00
100.00
OTHER INVESTMENT COMPANIES
100.00
-
PENSIONES BBVA BANCOMER, S.A. DE C.V., GRUPO FINANCIERO BBVA BANCOMER
MEXICO
INSURANCES SERVICES
PHOENIX LOAN HOLDINGS, INC.
PI HOLDINGS NO. 1, INC.
PORTICO PROCAM, S.L.
PROMOCIONES Y CONSTRUCCIONES CERBAT, S.L.U.
PROMOTORA DEL VALLES, S.L.
PROMOU CT 3AG DELTA, S.L.
PROMOU CT EIX MACIA, S.L.
PROMOU CT GEBIRA, S.L.
PROMOU CT OPENSEGRE, S.L.
PROMOU CT VALLES, S.L.
PROMOU GLOBAL, S.L.
PRONORTE UNO PROCAM, S.A.
PROPEL VENTURE PARTNERS GLOBAL, S.L
PROPEL VENTURE PARTNERS US FUND I, L.P.
PRO-SALUD, C.A.
PROVINCIAL DE VALORES CASA DE BOLSA CA
PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA
PROV-INFI-ARRAHONA, S.L.
PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A.
UNITED STATES
UNITED STATES
FINANCIAL SERVICES
FINANCIAL SERVICES
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
SPAIN
UNITED STATES
VENEZUELA
VENEZUELA
VENEZUELA
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
FINANCIAL SERVICES
VENTURE CAPITAL
INACTIVE
SECURITIES DEALER
FINANCIAL SERVICES
SPAIN
BOLIVIA
REAL ESTATE
PENSION FUNDS MANAGEMENT
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA
ARGENTINA
BANKING
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.50
100.00
58.86
90.00
100.00
100.00
100.00
50.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.50
100.00
58.86
90.00
100.00
100.00
100.00
50.00
-
-
27
-
6
2
-
18
-
1
1
1
1
1
169
245
288
84
26
8
36
1
4
2
5
2
18
-
52
107
-
1
1
6
2
8
-
-
18
-
6
1
-
4
-
1
30
1
1
1
166
211
285
84
26
8
37
1
5
2
7
2
18
-
64
90
-
1
1
6
2
21
-
-
9
-
-
1
-
(1)
-
-
6
-
-
-
3
90
5
-
-
-
(1)
-
(1)
-
(2)
-
-
-
15
17
-
-
-
-
-
(4)
PUERTO CIUDAD LAS PALMAS, S.A.
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019..
REAL ESTATE
SPAIN
-
(24)
(1)
-
96.64
96.64
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
P.184
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Additional information on subsidiaries and structured entities composing the BBVA Group (Continued)
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% Legal share of participation (**)
Millions of Euros (*)
Affiliate entity data
QIPRO SOLUCIONES S.L.
RALFI IFN SA
RPV COMPANY
RWHC, INC
SAGE OG I, INC
SATICEM GESTIO SL
SATICEM HOLDING SL
SATICEM IMMOBILIARIA SL
SATICEM IMMOBLES EN ARRENDAMENT SL
SEGUROS BBVA BANCOMER SA DE CV GRUPO FINANCIERO BBVA BANCOMER
SEGUROS PROVINCIAL CA
SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V.
SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V.
SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V.
SIMPLE FINANCE TECHNOLOGY CORP.
SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA
SOCIEDAD GESTORA DEL FONDO PUBLICO DE REGULACION DEL MERCADO HIPOTECARIO SA
SPORT CLUB 18 SA
TEXAS LOAN SERVICES LP
TMF HOLDING INC.
TRIFOI REAL ESTATE SRL
TUCSON LOAN HOLDINGS, INC.
UNIVERSALIDAD TIPS PESOS E-9
UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA
UPTURN FINANCIAL INC
URBANIZADORA SANT LLORENC SA
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L.
VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA
SPAIN
ROMANIA
CAYMAN ISLANDS
UNITED STATES
UNITED STATES
SPAIN
SPAIN
SPAIN
SPAIN
MEXICO
VENEZUELA
MEXICO
MEXICO
MEXICO
SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
FINANCIAL SERVICES
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
INSURANCES SERVICES
INSURANCES SERVICES
SERVICES
SERVICES
SERVICES
UNITED STATES
FINANCIAL SERVICES
SPAIN
SPAIN
SPAIN
UNITED STATES
UNITED STATES
ROMANIA
SERVICES
INACTIVE
INVESTMENT COMPANY
FINANCIAL SERVICES
INVESTMENT COMPANY
REAL ESTATE
UNITED STATES
FINANCIAL SERVICES
FINANCIAL SERVICES
COLOMBIA
SPAIN
-
-
-
-
-
100.00
100.00
100.00
100.00
-
-
-
-
-
-
100.00
77.20
100.00
-
-
-
-
-
100.00
100.00
100.00
100.00
100.00
-
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
-
-
-
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
77.20
100.00
5
38
-
772
-
4
5
16
2
413
8
5
2
16
56
71
-
8
100.00
100.00
1,170
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
16
1
30
-
REAL ESTATE
100.00
-
100.00
336
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
SPAIN
SPAIN
ARGENTINA
INACTIVE
SERVICES
BANKING
60.60
-
-
-
51.00
51.00
60.60
51.00
51.00
2
-
-
15
12
16
0
753
-
4
5
15
2
336
8
6
6
12
78
76
-
12
1,151
15
1
30
29
543
4
-
-
29
2
2
(1)
14
-
-
-
1
-
282
-
-
1
4
(23)
(5)
-
(3)
20
1
-
1
1
(18)
(3)
-
1
1
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying amount (net of provision), the Group´s ownership percentage has been applied, without
considering the impairment of goodwill. Information on foreign companies at exchange rate as of December 31, 2019.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power directly held by the parent. Therefore, the number of votes corresponding to the parent
company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct ownership interest.
This Appendix is an integral part of Note 3 of the condensed consolidated financial statements for the year ended December 31, 2019.
P.185
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
APPENDIX II. Additional information on investments joint ventures and associates in the BBVA Group
Acquisitions or increases of interest ownership in consolidated subsidiaries
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Assets
31.12.19
Liabilities
31.12.19
Equity
excluding
profit (loss)
31.12.19
Profit (loss)
31.12.19
% Legal share of participation
Millions of Euros (*)
Affiliate entity data
ASSOCIATES
ADQUIRA ESPAÑA, S.A.
ATOM BANK PLC
AUREA, S.A. (CUBA)
COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA
COMPAÑIA PERUANA DE MEDIOS DE PAGO SAC (VISANET PERU)
DIVARIAN PROPIEDAD, S.A.U.
FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS
BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO
ELECTRONICOS
SPAIN
COMMERCIAL
UNITED KINGDOM BANKING
CUBA
SPAIN
PERU
SPAIN
REAL ESTATE
PUBLIC ENTITIES AND
INSTITUTIONS
ELECTRONIC MONEY
ENTITIES
REAL ESTATE
-
40.00
39.02
-
40.00
39.02
-
49.00
49.00
16.67
-
16.67
-
21.03
21.03
3
136
5
23
3
19
3,285
10
146
103
20.00
-
20.00
630
3,252
MEXICO
FINANCIAL SERVICES
-
28.50
28.50
2
8
11
3,024
0
6
89
101
-
7
350
9
131
5
3,199
13
METROVACESA SA
REDSYS SERVICIOS DE PROCESAMIENTO SL
SPAIN
SPAIN
FINANCIAL SERVICES
20.00
-
20.00
REAL ESTATE
9.44
11.41
20.85
443
2,622
280
2,343
-
-
40.00
40.00
46.14
46.14
ROMBO COMPAÑIA FINANCIERA SA
ARGENTINA
BANKING
SERVICIOS ELECTRONICOS GLOBALES SA DE CV
SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA
MEXICO
ESPAÑA
SERVICES
FINANCIAL SERVICES
28.72
-
28.72
SOLARISBANK AG
TELEFONICA FACTORING ESPAÑA SA
TF PERU SAC
JOINT VENTURES
ADQUIRA MEXICO SA DE CV
ALTURA MARKETS SOCIEDAD DE VALORES SA
COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV
CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. (1)
DESARROLLOS METROPOLITANOS DEL SUR, S.L.
FIDEICOMISO DE ADMINISTRACION REDETRANS
FIDEICOMISO F/402770-2 ALAMAR
FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA (1)
PROMOCIONS TERRES CAVADES, S.A.
RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO
VITAMEDICA ADMINISTRADORA, S.A. DE C.V
(*) In foreign companies the exchange rate of December 31, 2019 is applied.
(1) Classified as Non-current asset in seld.
GERMANY
BANKING
-
22.22
22.22
SPAIN
PERU
MEXICO
SPAIN
MEXICO
SPAIN
SPAIN
COLOMBIA
MEXICO
MEXICO
SPAIN
COLOMBIA
MEXICO
FINANCIAL SERVICES
30.00
-
30.00
FINANCIAL SERVICES
-
24.30
24.30
COMMERCIAL
-
50.00
SECURITY DEALER
50.00
-
SERVICES
INVESTMENT COMPANY
REAL ESTATE
FINANCIAL SERVICES
REAL ESTATE
REAL ESTATE
REAL ESTATE
FINANCIAL SERVICES
SERVICES
-
-
-
-
-
-
-
-
-
50.00
50.00
50.00
25.07
42.40
32.25
39.11
49.00
51.00
50.00
50.00
50.00
50.00
50.00
25.07
42.40
32.25
39.11
49.00
51.00
This Appendix is an integral part of Notes 3 and 16 of the condensed consolidated financial statements for the year ended December 31, 2019.
14
10
11
8
36
4
1
2
73
9
29
14
1
8
12
4
37
5
128
118
23
31
416
60
6
6
56
93
-
3
369
46
1
2
60
28
20
27
65
7
3
4
2,448
2,301
138
17
63
81
4
18
182
15
514
19
-
5
53
-
-
-
-
439
10
16
58
27
4
18
182
15
67
9
1
(90)
1
9
9
(48)
(4)
(1)
11
(4)
3
1
(18)
7
2
-
9
1
-
2
-
-
-
-
8
-
P.186
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
APPENDIX III. Changes and notification of participations in the BBVA Group in 2019
Acquisitions or increases of interest ownership in consolidated subsidiaries
Millions of Euros
% of Voting rights
Company
Type of
transaction
Activity
Price paid in the
transactions +
expenses directly
attributable to the
transactions
Fair value of equity
instruments
issued for the
transactions
% participation
(net)
acquired
in the year
Total voting rights
controlled after the
transactions
Effective date for the
transaction (or
notification date)
Category
DATA ARCHITECTURE AND TECHNOLOGY MEXICO SA DE CV
FOUNDING
SERVICES
DATA ARCHITECTURE AND TECHNOLOGY OPERADORA SA DE CV
FOUNDING
SERVICES
ANTHEMIS BBVA VENTURE PARTNERSHIP LLP
CAPITAL INCREASE
INVESTMENT COMPANY
BBVA PROCUREMENT AMERICA SA DE CV (1)
FOUNDING
SERVICES
FIDEICOMISO INMUEBLES CONJUNTO RESIDENCIAL HORIZONTES DE
VILLA CAMPESTRE
FOUNDING
REAL ESTATE
OPENPAY COLOMBIA SAS
FOUNDING
PAYMENT INSTITUTIONS
1
-
4
-
1
-
-
-
-
-
-
-
100.00%
100.00%
100.00%
25.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
22-Jul-19
22-Jul-19
25-Nov-19
4-Mar-19
1-Sep-19
9-Oct-19
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
(1) Company incorporated and liquidated in the same year.
P.187
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Disposals or reduction of interest ownership in consolidated subsidiaries
Millions of Euros
% of Voting rights
Company
Type of transaction
Activity
Profit (loss)
in the transaction
Changes in the
equity due to the
transaction
% Participation
sold
in the year
Total voting rights
controlled after the
disposal
Effective date for the
transaction (or
notification date)
Category
BBVA FRANCES VALORES, S.A.
ENTIDAD DE PROMOCION DE NEGOCIOS SA
BBVA NOMINEES LIMITED ( IN LIQUIDATION)
BBVA LUXINVEST SA
BBVA CONSULTORIA, S.A.
RENTRUCKS ALQUILER Y SERVICIOS DE TRANSPORTE SA
FIDEICOMISO Nº 711 EN BANCO INVEX SA INSTITUCION DE BANCA
MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 1ª
EMISION)
FIDEICOMISO Nº 752 EN BANCO INVEX SA INSTITUCION DE BANCA
MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 2ª
EMISION)
RESIDENCIAL CUMBRES DE SANTA FE, S.A. DE C.V.
FINANCEIRA DO COMERCIO EXTERIOR SAR.
ANIDA GERMANIA IMMOBILIEN ONE, GMBH
SERVICIOS TECNOLOGICOS SINGULARES, S.A.
COPROMED SA DE CV
INVERSIONES DE INNOVACION EN SERVICIOS FINANCIEROS, S.L.
PERSONAL DATA BANK SLU
BBVA PROCUREMENT AMERICA SA DE CV (1)
GARANTI HIZMET YONETIMI AS
MERGER
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
SECURITIES DEALER
OTHER HOLDING
SERVICES
INVESTMENT COMPANY
SERVICES
FINANCIAL SERVICES
MERGER
FINANCIAL SERVICES
MERGER
FINANCIAL SERVICES
MERGER
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
MERGER
LIQUIDATION
LIQUIDATION
LIQUIDATION
REAL ESTATE
COMMERCIAL
REAL ESTATE
SERVICES
SERVICES
INVESTMENT COMPANY
SERVICES
SERVICES
FINANCIAL SERVICES
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00%
99.88%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31-Oct-19
14-Jun-19
2-Apr-19
2-Sep-19
18-Feb-19
30-Apr-19
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
30-May-19
SUBSIDIARY
30-Nov-19
SUBSIDIARY
29-Nov-19
21-Jan-19
9-May-19
25-Feb-19
18-Oct-19
16-Sep-19
31-Dec-19
11-Dec-19
23-Dec-19
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
SUBSIDIARY
(1) Company incorporated and liquidated in the same year.
P.188
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Changes and notification of participations in the BBVA Group in 2019 (continued)
Business combinations and other acquisitions or increases of interest ownership in associates and joint-ventures accounted for under the equity method
Company
Type of transaction
Activity
Price paid in the
transactions +
expenses directly
attributable to the
transactions
Fair value of equity
instruments
issued for the
transactions
% Participation (net)
acquired
in the year
Total voting rights
controlled after the
transactions
Effective date for the
transaction (or notification
date)
Category
PRIVACYCLOUD S.L.
ACQUISITION
SERVICES
1
-
18.10%
20.00%
11-Oct-19
ASSOCIATED
Millions of Euros
% of Voting rights
Disposal or reduction of interest ownership in associates and joint-ventures companies accounted for under the equity method
Millions of Euros
% of Voting rights
Company
Type of transaction
Activity
Profit (loss)
in the transaction
% Participation
sold
in the year
Total voting rights
controlled after the
disposal
Effective date for the
transaction (or
notification date)
Category
REAL ESTATE DEAL II SA
CANCUN SUN & GOLF COUNTRY CLUB, S.A.P.I. DE C.V.
LIQUIDATION
DISPOSAL
REAL ESTATE
REAL ESTATE
BANK OF HANGZHOU CONSUMER FINANCE CO LTD
DILUTION EFFECT
BANKING
AXIACOM-CRI, S.L. (IN LIQUIDATION)
HABITATGES LLULL, S.L.
PROMOCIONS CAN CATA, S.L. (IN LIQUIDATION)
RESIDENCIAL SARRIA-BONANOVA, S.L. EN LIQUIDACIÓN
INNOVA 31, S.C.R., S.A.( EN LIQUIDACION)
PROVIURE CZF, S.L.
PROVIURE CZF PARC D'HABITATGES, S.L.
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
LIQUIDATION
REAL ESTATE
REAL ESTATE
REAL ESTATE
REAL ESTATE
FINANCIAL SERVICES
REAL ESTATE
REAL ESTATE
-
10
7
-
-
-
-
-
-
-
20.06%
33.33%
18.10%
50.00%
50.00%
64.29%
27.22%
27.04%
50.00%
100.00%
-
-
11.90%
-
-
-
-
-
-
-
11-Nov-19
31-Dec-19
29-Jul-19
30-Oct-19
20-Nov-19
17-Jun-19
31-Dec-19
01-Mar-19
31-Dec-19
31-Dec-19
JOINT VENTURE
ASSOCIATED
ASSOCIATED
JOINT VENTURE
JOINT VENTURE
JOINT VENTURE
ASSOCIATED
ASSOCIATED
JOINT VENTURE
JOINT VENTURE
This Appendix is an integral part of Notes 3 and 16 of the condensed consolidated financial statements for the year ended December 31, 2019.
P.189
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
APPENDIX IV. Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2019
Company
Activity
BBVA BANCO CONTINENTAL SA
BANCO PROVINCIAL SA - BANCO UNIVERSAL
INVERSIONES BANPRO INTERNATIONAL INC NV
PRO-SALUD, C.A.
INVERSIONES P.H.R.4, C.A.
BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES
COMERCIALIZADORA CORPORATIVA SAC
DISTRITO CASTELLANA NORTE, S.A.
GESTION DE PREVISION Y PENSIONES SA
F/403035-9 BBVA HORIZONTES RESIDENCIAL
F/253863 EL DESEO RESIDENCIAL
DATA ARCHITECTURE AND TECHNOLOGY S.L.
VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA
FIDEICOMISO LOTE 6.1 ZARAGOZA
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L.
GARANTI BBVA EMEKLILIK AS
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. EN LIQUIDACION
BBVA INFORMATION TECHNOLOGY ESPAÑA SL
JALE PROCAM, S.L. (IN LIQUIDATION)
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA
BANKING
BANKING
INVESTMENT COMPANY
NO ACTIVITY
NO ACTIVITY
PENSION FUND MANAGEMENT
FINANCIAL SERVICES
REAL ESTATE
PENSION FUND MANAGEMENT
REAL ESTATE
REAL ESTATE
SERVICES
BANKING
REAL ESTATE
REAL ESTATE
SERVICES
INSURANCES
IN LIQUIDATION
SERVICES
IN LIQUIDATION
BANKING
This Appendix is an integral part of Note 3 of the condensed consolidated financial statements for the year ended December 31, 2019.
.
% of voting rights controlled by the Bank
Direct
-
1.46
48.00
-
-
75.00
-
-
60.00
-
-
-
-
-
-
-
-
-
76.00
-
-
Indirect
46.12
53.75
-
58.86
60.46
5.00
50.00
75.54
-
65.00
65.00
51.00
51.00
59.99
42.40
51.00
84.91
60.00
-
50.00
50.00
Total
46.12
55.21
48.00
58.86
60.46
80.00
50.00
75.54
60.00
65.00
65.00
51.00
51.00
59.99
42.40
51.00
84.91
60.00
76.00
50.00
50.00
P.190
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX V. BBVA Group’s structured entities. Securitization funds
Securitization fund (consolidated)
Company
Millions of Euros
Origination
date
Total securitized
exposures at the
origination date
Total securitized
exposures as of
December 31, 2019 (*)
AYT HIPOTECARIO MIXTO IV, FTA
AYT HIPOTECARIO MIXTO, FTA
BBVA CONSUMER AUTO 2018-1
BBVA CONSUMO 7 FTA
BBVA CONSUMO 8 FT
BBVA CONSUMO 9 FT
BBVA EMPRESAS 4 FTA
BBVA LEASING 1 FTA
BBVA RMBS 1 FTA
BBVA RMBS 10 FTA
BBVA RMBS 11 FTA
BBVA RMBS 12 FTA
BBVA RMBS 13 FTA
BBVA RMBS 14 FTA
BBVA RMBS 15 FTA
BBVA RMBS 16 FT
BBVA RMBS 17 FT
BBVA RMBS 18 FT
BBVA RMBS 2 FTA
BBVA RMBS 3 FTA
BBVA RMBS 5 FTA
BBVA RMBS 9 FTA
BBVA VELA SME 2018
BBVA-6 FTPYME FTA
FTA TDA-22 MIXTO
FTA TDA-27
FTA TDA-28
GAT ICO FTVPO 1, F.T.H
HIPOCAT 10 FTA
HIPOCAT 11 FTA
HIPOCAT 7 FTA
HIPOCAT 8 FTA
HIPOCAT 9 FTA
TDA 19 FTA
TDA 20-MIXTO, FTA
TDA 23 FTA
TDA TARRAGONA 1 FTA
VELA CORPORATE 2018-1
BBVA Consumo 10FT
BBVA RMBS 19 FT
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
BBVA, S.A.
06/2005
03/2004
06/2018
07/2015
07/2016
03/2017
07/2010
06/2007
02/2007
06/2011
06/2012
12/2013
07/2014
11/2014
05/2015
05/2016
11/2016
11/2017
03/2007
07/2007
05/2008
04/2010
03/2018
06/2007
12/2004
12/2006
07/2007
06/2009
07/2006
03/2007
06/2004
05/2005
11/2005
03/2004
06/2004
03/2005
12/2007
12/2018
07/2019
11/2019
100
100
800
1,450
700
1,375
1,700
2,500
2,500
1,600
1,400
4,350
4,100
700
4,000
1,600
1,800
1,800
5,000
3,000
5,000
1,295
1,950
1,500
112
275
250
358
1,500
1,600
1,400
1,500
1,000
200
100
300
397
1,000
2,000
2,000
15
10
736
350
337
850
25
25
897
1,076
940
2,959
2,908
447
2,945
1,245
1,460
1,582
1,664
1,312
2,187
788
873
8
22
79
76
64
253
263
192
227
176
21
12
45
103
469
1,946
1,983
Securitization fund (not consolidated)
Company
Millions of Euros
Origination
date
Total securitized
exposures at the
origination date
Total securitized
exposures as of December
31, 2019 (*)
FTA TDA-18 MIXTO
HIPOCAT 6 FTA
(*) Solvency scope.
BBVA, S.A.
BBVA, S.A.
nov.-03
jul.-03
91
850
10
93
P.191
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX VI. Details of the outstanding subordinated debt and preferred securities issued
by the Bank or entities in the Group consolidated as of December 31, 2019, 2018 and 2017
Outstanding as of December 31, 2019, 2018, and 2017 of subordinated issues
Issuer entity and issued date
Currency
December
2019
December
2018
December
2017
Prevailing Interest
Rate
as of December 31,
2019
Maturity
Date
Millions of Euros
Issues in Euros
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
February-07
March-08
July-08
February-14
April-14
February-15
April-16
February-17
February-17
May-17
May-17
September-18
February-19
March-19
Different issues
Subtotal
BBVA SUBORDINATED CAPITAL, S.A.U. (*)
October-05
July-08
Subtotal
Total issues in euros
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
-
125
100
-
-
1,500
1,000
1,000
165
150
500
1,000
750
1,000
379
7,668
-
-
-
-
125
100
1,500
1,494
1,500
1,000
1,000
165
150
500
990
-
-
255
125
100
1,500
1,494
1,500
1,000
997
165
150
500
-
-
-
384
8,906
386
8,171
-
-
-
99
20
119
7,668
8,906
8,290
0.47%
6.03%
6.20%
7.00%
3.50%
6.75%
8.88%
3.50%
16-Feb-22
03-Mar-33
4-Jul-23
Perpetual
11-Apr-24
Perpetual
Perpetual
10-Feb-27
4.00%
24-Feb-32
2.54%
5.88%
5.88%
2.58%
24-May-27
Perpetual
Perpetual
22-Feb-29
6.00%
Perpetual
0.47%
6.11%
13-Oct-20
22-Jul-18
(*) The issuances of BBVA Subordinated Capital, S.A.U. are jointly, severally and unconditionally guaranteed by the Bank.
P.192
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Outstanding as of December 31, 2019, 2018, and 2017 of subordinated issues (continued)
Issuer entity and issued date
Currency
December 2019
Issues in foreign currency
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Millions of Euros
December
2018
December 2017
Prevailing
Interest Rate
as of December
31, 2019
Maturity
Date
May-13
March-17
November-17
May-18
September-19
Subtotal
May-17
Subtotal
BBVA GLOBAL FINANCE, LTD. (*)
December-95
Subtotal
BANCO BILBAO VIZCAYA ARGENTARIA,
CHILE (**)
Different issues
Subtotal
BBVA BANCOMER S.A INSTITUCION DE
BANCA MULTIPLE GRUPO FINANCIERO BBVA
BANCOMER
April-10
March-11
July-12
November-14
January-18
September-19
Subtotal
BANCO BILBAO VIZCAYA ARGENTARIA
URUGUAY S.A
Different issues
Subtotal
BBVA PARAGUAY (***)
November-14
November-15
Subtotal
USD
USD
USD
USD
USD
USD
CHF
CHF
USD
USD
CLP
CLP
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
-
107
890
265
890
2,152
18
18
177
177
-
-
667
667
1,333
178
889
667
4,401
2
2
18
22
40
-
105
873
260
-
1,238
18
18
169
169
-
-
874
1,092
1,311
175
874
-
4,325
-
-
19
23
42
1,251
100
834
-
-
2,185
17
17
162
162
574
574
831
1,039
1,247
166
-
-
3,283
-
-
17
21
38
9.00%
5.70%
6.13%
5.25%
6.50%
Perpetual
31-Mar-32
Perpetual
29-May-33
Perpetual
1.60%
24-May-27
7.00%
01-Dec-25
7.25%
6.50%
6.75%
5.35%
5.13%
22-Apr-20
10-Mar-21
30-Sep-22
12-Nov-29
18-Jan-33
5.875%
13-Sep-34
6.75%
6.70%
05-Nov-21
18-Nov-22
(*) The issuances of BBVA Global Finance, Ltd, are guaranteed (secondary liability) by the Bank
(**) The €574 million subordinated issuances of BBVA Chile as of December 2017 were recorded in the heading "Liabilities included in disposal groups classified as held for sale".
(***) The amount of 2019 is recorded under the heading “Liabilities included in disposal groups classified as held for sale”.
P.193
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Outstanding as of December 31, 2019, 2018, and 2017 of subordinated issues
Millions of Euros
Issuer entity and issued date
(continued)
Currency
December
2019
December
2018
December
2017
Prevailing
Interest Rate
as of December
31, 2019
COMPASS BANK
March-05
March-06
April-15
Subtotal
BBVA COLOMBIA, S.A.
September-11
September-11
September-11
February-13
February-13
November-14
November-14
Subtotal
April-15
Subtotal
BANCO CONTINENTAL, S.A.
June-07
November-07
July-08
September-08
December-08
Subtotal
May-07
February-08
October-13
September-14
Subtotal
TURKIYE GARANTI BANKASI A.S.
May-17
Subtotal
October-19
Subtotal
Total issues in foreign
currencies(Millions of Euros)
USD
USD
USD
USD
COP
COP
COP
COP
COP
COP
COP
COP
USD
USD
PEN
PEN
PEN
PEN
PEN
PEN
USD
USD
USD
USD
USD
USD
USD
TRY
TRY
EUR
203
63
623
889
-
29
42
54
45
24
34
229
333
333
22
19
17
18
11
87
18
18
41
269
346
664
664
38
38
199
62
611
872
-
28
42
53
44
24
43
233
332
332
20
18
16
17
10
82
17
18
40
252
328
652
652
-
-
190
59
584
833
28
30
44
56
46
25
45
273
313
313
20
18
16
17
10
80
17
17
38
244
315
623
623
-
-
9,376
8,291
8,695
Maturity
Date
01-Apr-20
01-Apr-26
10-Apr-25
19-Sep-18
19-Sep-21
19-Sep-26
19-Feb-23
19-Feb-28
26-Nov-29
26-Nov-34
5.50%
5.90%
3.88%
8.31%
8.48%
8.72%
7.65%
7.93%
8.53%
8.41%
4.88%
21-Apr-25
3.47%
3.56%
3.06%
3.09%
4.19%
-
6.00%
6.47%
6.53%
5.25%
18-Jun-32
19-Nov-32
08-Jul-23
09-Sep-23
15-Dec-33
-
14-May-27
28-Feb-28
02-Oct-28
22-Sep-29
6.13%
24-May-27
13.64%
07-Oct-29
-
-
P.194
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Outstanding as of December 31, 2019, 2018, and 2017 of subordinated issues (Millions of euros)
Issuer entity and issued date
BBVA COLOMBIA SA
December-93
BBVA International Preferred, S.A.U.
July-07
Phoenix Loan Holdings Inc.
November-00
Caixa Terrasa Societat de Participacion
August-05
Caixasabadell Preferents, S.A.
July-06
Others
December 2019
December 2018
December 2017
Currency
Amount
Issued
Currency
Amount
Issued
Currency
Amount
Issued
COP
20
COP
19
COP
-
GBP
37
GBP
35
GBP
35
USD
EUR
EUR
-
19
28
56
-
USD
EUR
EUR
-
18
52
56
-
USD
EUR
EUR
-
18
51
56
-
P.195
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX VII Consolidated balance sheets held in foreign currency as of December 31, 2019,
2018 and 2017.
December 2019 (Millions of Euros)
Assets
Cash, cash balances at central banks and other
demand deposits
Financial assets held for trading
Non- trading financial assets mandatorily at fair
value through profit or loss
Financial assets at fair value through
comprehensive income
Financial assets at amortized cost
Joint ventures and associates
Tangible assets
Other assets
Total
Liabilities
Financial liabilities held for trading
Financial liabilities at amortized cost
Other liabilities
Total
December 2018 (Millions of Euros)
Assets
Cash, cash balances at central banks and other
demand deposits
Financial assets held for trading
Non- trading financial assets mandatorily at fair
value through profit or loss
Financial assets at fair value through
comprehensive income
Financial assets at amortized cost
Joint-ventures and associates
Tangible assets
Other assets
Total
Liabilities
Financial liabilities held for trading
Financial liabilities at amortized cost
Other liabilities
Total
USD
Mexican
pesos
Turkish lira
Other foreign
currencies
Total foreign
currencies
16,930
5,549
900
14,269
107,865
5
921
1,946
148,384
4,063
136,661
5,555
146,280
4,414
18,543
3,509
6,178
56,963
20
2,214
2,147
93,989
16,064
54,733
6,757
77,555
499
242
4
2,748
29,125
-
1,050
1,174
34,842
170
20,681
881
21,732
5,330
5,257
116
5,541
35,906
252
1,026
5,508
58,934
2,465
36,758
8,172
47,394
27,173
29,591
4,529
28,735
229,859
277
5,211
10,775
336,149
22,762
248,834
21,365
292,961
USD
Mexican
pesos
Turkish lira
Other foreign
currencies
Total foreign
currencies
15,184
3,133
6,869
15,500
650
2,303
476
366
3
3,031
28,094
-
1,007
1,361
4,704
47,550
54
1,964
2,911
81,856
34,336
13,626
48,169
6,081
67,876
360
20,878
750
21,987
5,547
3,614
58
2,931
34,075
267
850
2,879
50,221
1,507
37,342
7,200
46,049
28,076
22,614
3,014
27,232
211,085
326
4,490
10,595
307,433
17,864
242,696
17,904
278,464
16,566
101,366
5
670
3,444
141,019
2,372
136,307
3,874
142,552
P.196
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2017 (Millions of euros)
Assets
Cash, cash balances at central banks and other demand
deposits
Financial assets held for trading
Available-for-sale financial assets
Loans and receivables
Investments in entities accounted for using the equity method
Tangible assets
Other assets
Total
Liabilities
Financial liabilities held for trading
Financial liabilities at amortized cost
Other liabilities
Total
USD
Mexican
Pesos
Turkish Lira
Other Foreign
Currencies
Total Foreign
Currencies
17,111
2,085
14,218
93,069
5
659
7,309
134,456
935
135,546
3,907
140,387
4,699
14,961
8,051
39,717
124
1,953
5,041
827
484
4,904
32,808
-
1,289
4,426
74,546
44,738
5,714
51,492
8,720
65,926
506
27,079
1,039
28,623
4,264
4,583
3,010
26,902
22,113
30,183
34,488
200,081
147
673
18,662
65,826
533
39,062
16,593
56,188
276
4,573
35,438
319,566
7,688
253,178
30,259
291,124
This Appendix is an integral part of Notes 2.2.16 of the condensed consolidated financial statements for the year ended December 31,
2019.
P.197
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX VIII. Consolidated income statements for the first and second half of 2019 and
2018
Consolidated income statements for the first and second half of 2019 and 2018
CONSOLIDATED INCOME STATEMENTS FOR THE FIRST AND SECOND HALF OF 2019 AND 2018
Six months ended
June 30, 2019
Six months ended
December 31, 2019
Six months ended
June 30, 2018
Six months ended
December 31, 2018
Interest and other income
Interest expense
MARGEN DE INTERESES
Dividend income
Share of profit or loss of entities accounted for using the equity method
Fee and commission income
Fee and commission expense
Gains (losses) on derecognition of financial assets and liabilities not measured at fair
value through profit or loss, net
Gains (losses) on financial assets and liabilities held for trading, net
Gains (losses) on non-trading financial assets mandatorily at fair value through profit
or loss, net
Gains (losses) on financial assets and liabilities designated at fair value through profit
or loss, net
Gains (losses) from hedge accounting, net
Exchange differences, net
Other operating income
Other operating expense
Income from insurance and reinsurance contracts
Expense from insurance and reinsurance contracts
GROSS INCOME
Administration costs
Personnel expense
Other administrative expense
Depreciation and amortization
Provisions or reversal of provisions
Impairment or reversal of impairment on financial assets not measured at fair value
through profit or loss or net gains by modification
Financial assets measured at amortized cost
Financial assets at fair value through other comprehensive income
NET OPERATING INCOME
Impairment or reversal of impairment of investments in joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Gains (losses) on derecognition of non - financial assets and subsidiaries, net
Gains (losses) from non-current assets and disposal groups classified as held for sale
not qualifying as discontinued operations
15,678
(6,691)
8,987
103
(19)
3,661
(1,191)
67
173
98
(3)
73
134
337
(995)
1,547
(983)
11,989
(5,084)
(3,131)
(1,953)
(790)
(261)
(1,777)
(1,772)
(5)
4,077
-
(44)
8
11
15,383
(6,168)
9,215
60
(23)
3,861
(1,298)
172
278
45
(91)
(14)
452
334
(1,011)
1,342
(769)
12,553
(5,219)
(3,210)
(2,010)
(809)
(356)
(2,374)
(2,297)
(77)
3,794
(46)
(1,403)
(11)
10
14,418
(5,828)
8,590
83
13
3,553
(1,073)
130
329
3
107
51
74
554
(1,062)
1,601
(1,091)
11,863
(5,297)
(3,104)
(2,193)
(599)
(184)
(1,606)
(1,618)
12
4,177
-
-
80
29
PROFIT OR LOSS BEFORE TAX FROM CONTINUING OPERATIONS
4,052
2,346
4,286
15,413
(6,411)
9,001
74
(20)
3,580
(1,181)
85
378
92
35
20
(84)
396
(1,039)
1,348
(803)
11,884
(5,197)
(3,016)
(2,181)
(609)
(189)
(2,375)
(2,362)
(13)
3,513
-
(138)
(2)
786
4,161
Tax expense or income related to profit or loss from continuing operations
PROFIT OR LOSS AFTER TAX FROM CONTINUING OPERATIONS
Profit (loss) after tax from discontinued operations, net
PROFIT FOR THE YEAR
Attributable to minority interest (non-controlling interest)
Attributable to owners of the parent
Euros
EARNINGS PER SHARE
Basic earnings per share from continued operations
Diluted earnings per share from continued operations
Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations
(1,136)
2,916
-
2,916
475
2,442
(917)
1,429
-
1,429
359
1,070
(1,184)
(1,035)
3,102
-
3,102
528
2,574
3,125
-
3,125
299
2,826
First
semester 2019
Second
semester
2019
First
semester
2018
Second
semester 2018
0.34
0.34
-
-
0.13
0.13
-
-
0.35
0.35
-
-
0.40
0.40
-
-
P.198
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX IX. Financial Statements of Banco Bilbao Vizcaya Argentaria, S.A.
ASSETS (Millions of Euros)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS
FINANCIAL ASSETS HELD FOR TRADING
Derivatives
Equity instruments
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS
Equity instruments
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
FINANCIAL ASSETS AT FAIR VALUE THROUGH COMPREHENSIVE INCOME
Equity instruments
Debt securities
FINANCIAL ASSETS AT AMORTIZED COST
Debt securities
Loans and advances to central banks
Loans and advances to credit institutions
Loans and advances to customers
DERIVATIVES - HEDGE ACCOUNTING
2019
18,419
84,842
32,988
8,205
10,213
484
20,688
12,263
855
125
128
-
-
602
-
24,905
1,749
23,156
225,369
21,496
5
8,049
195,819
953
2018 (*)
30,922
75,210
30,217
4,850
11,453
2,073
14,588
12,029
1,726
200
150
-
-
1,376
-
19,273
2,020
17,253
219,127
19,842
5
5,271
194,009
1,090
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK
28
(21)
INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
Subsidiaries
Joint ventures
Associates
TANGIBLE ASSETS
Property, plant and equipment
For own use
Other assets leased out under an operating lease
Investment property
INTANGIBLE ASSETS
Goodwill
Other intangible assets
TAX ASSETS
Current tax assets
Deferred tax assets
OTHER ASSETS
Insurance contracts linked to pensions
Inventories
Other
NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
30,563
29,445
54
1,065
4,467
4,384
4,384
-
83
905
-
905
13,760
1,443
12,317
2,600
2,096
-
504
967
30,734
29,634
58
1,042
1,739
1,737
1,737
-
2
898
-
898
13,990
1,410
12,580
4,187
2,032
-
2,155
1,065
TOTAL ASSETS
408,634
399,940
(*)
Presented for comparison purposes only.
P.199
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
LIABILITIES AND EQUITY (Millions of Euros)
FINANCIAL LIABILITIES HELD FOR TRADING
Derivatives
Short positions
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates
Other financial liabilities
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT
OR LOSS
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates issued
Other financial liabilities
Subordinated liabilities
FINANCIAL LIABILITIES AT AMORTIZED COST
Deposits from central banks
Deposits from credit institutions
Customer deposits
Debt certificates
Other financial liabilities
Of which: Subordinated liabilities
DERIVATIVES - HEDGE ACCOUNTING
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF
INTEREST RATE RISK
PROVISIONS
Pensions and other post employment defined benefit obligations
Other long term employee benefits
Provisions for taxes and other legal contingencies
Commitments and guarantees given
Other provisions
TAX LIABILITIES
Current tax liabilities
Deferred tax liabilities
OTHER LIABILITIES
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR
SALE
2019
74,364
32,503
9,956
1,867
24,425
5,612
-
-
2018 (*)
68,242
29,748
9,235
5,149
15,642
8,468
-
-
2,968
1,746
-
-
-
-
2,968
1,746
-
-
-
285,260
24,390
18,201
191,461
40,845
10,362
10,362
1,471
-
4,616
3,810
25
359
235
188
1,120
149
972
1,645
-
-
-
-
283,157
26,605
20,539
192,419
35,769
7,825
10,588
1,068
-
5,125
4,043
29
348
238
467
1,197
126
1,071
1,996
-
TOTAL LIABILITIES
371,445
362,531
(*)
Presented for comparison purposes only.
P.200
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
LIABILITIES AND EQUITY (continued) (Millions of Euros)
STOCKHOLDERS’ FUNDS
Capital
Paid up capital
Unpaid capital which has been called up
Share premium
Equity instruments issued other than capital
Equity component of compound financial instruments
Other equity instruments issued
Other equity
Retained earnings
Revaluation reserves
Other reserves
Less: treasury shares
Profit or loss attributable to owners of the parent
Less: interim dividends
ACCUMULATED OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to profit or loss
Actuarial gains (losses) on defined benefit pension plans
Non-current assets and disposal groups classified as held for sale
Fair value changes of equity instruments measured at fair value through other comprehensive
income
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through
other comprehensive income
Fair value changes of equity instruments measured at fair value through other comprehensive
income (hedged item)
Fair value changes of equity instruments measured at fair value through other comprehensive
income (hedging instrument)
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes
in their credit risk
Items that may be reclassified to profit or loss
Hedge of net investments in foreign operations (effective portion)
Foreign currency translation
Hedging derivatives. Cash flow hedges (effective portion)
Fair value changes of debt instruments measured at fair value through other comprehensive
income
Hedging instruments (non-designated items)
Non-current assets and disposal groups classified as held for sale
TOTAL EQUITY
TOTAL EQUITY AND TOTAL LIABILITIES
MEMORANDUM ITEM - OFF BALANCE SHEET EXPOSURES (Millions of Euros)
Loan commitments given
Financial guarantees given
Other commitments given
(*)
Presented for comparison purposes only.
2019
2018 (*)
37,570
3,267
3,267
-
37,417
3,267
3,267
-
23,992
23,992
-
-
-
48
9,107
-
1
-
2,241
(1,086)
(381)
(520)
(75)
-
(469)
-
-
-
24
138
-
-
(196)
335
-
-
-
-
-
46
8,829
-
(30)
(23)
2,450
(1,114)
(8)
(152)
(78)
-
(190)
-
-
-
116
144
-
-
(116)
260
-
-
37,189
37,409
408,634
399,940
2019
2018 (*)
73,582
9,086
28,151
69,513
9,197
27,202
P.201
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
INCOME STATEMENTS (Millions of Euros)
Interest income
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other interest income
Interest expense
NET INTEREST INCOME
Dividend income
Fee and commission income
Fee and commission expense
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or
loss, net
Financial assets at amortized cost
Other financial assets and liabilities
Gains or (losses) on financial assets and liabilities held for trading, net
Reclassification of financial assets from fair value through other comprehensive income
Reclassification of financial assets from amortized cost
Other profit or loss
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net
Reclassification of financial assets from fair value through other comprehensive income
Reclassification of financial assets from amortized cost
Other profit or loss
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net
Gains (losses) from hedge accounting, net
Exchange differences, net
Other operating income
Other operating expense
GROSS INCOME
Administrative expense
Personnel expense
Other administrative expense
Depreciation and amortization
Provisions or reversal of provisions
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or
net gains by modification
Financial assets measured at amortized cost
Financial assets at fair value through other comprehensive income
NET OPERATING INCOME
Impairment or reversal of impairment of investments in subsidiaries, joint ventures and associates
Impairment or reversal of impairment on non-financial assets
Tangible assets
Intangible assets
Other assets
Gains (losses) on derecognition of non - financial assets and subsidiaries, net
Negative goodwill recognized in profit or loss
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as
discontinued operations
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
Tax expense or income related to profit or loss from continuing operations
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS
Profit (loss) after tax from discontinued operations
PROFIT FOR THE YEAR
(*)
Presented for comparison purposes only.
2019
5,011
285
4,373
353
(1,548)
3,464
3,304
2,144
(447)
107
35
72
375
-
-
375
35
-
-
35
(101)
21
(133)
125
(487)
8,406
(3,881)
(2,394)
(1,487)
(673)
(391)
(254)
(254)
1
3,208
(889)
(78)
(80)
-
2
(1)
-
(31)
2,208
33
2,241
-
2,241
2018 (*)
4,877
394
4,293
190
(1,386)
3,491
3,115
2,083
(407)
109
3
106
364
-
-
364
78
-
-
78
(41)
46
(60)
108
(474)
8,412
(4,077)
(2,328)
(1,749)
(452)
(566)
(267)
(278)
11
3,050
(1,537)
(27)
(23)
-
(4)
(16)
-
1,004
2,474
(24)
2,450
-
2,450
P.202
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)
2019
2018 (*)
PROFIT RECOGNIZED IN INCOME STATEMENT
OTHER RECOGNIZED INCOME (EXPENSE)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
Actuarial gains (losses) from defined benefit pension plans
Non-current assets and disposal groups classified as held for sale
Fair value changes of equity instruments measured at fair value through other comprehensive income
Gains (losses) from hedge accounting of equity instruments at fair value through other comprehensive income,
net
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit
risk
Other valuation adjustments
Income tax related to items not subject to reclassification to income statement
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
Hedge of net investments in foreign operations (effective portion)
Foreign currency translation
Translation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Cash flow hedges (effective portion)
Valuation gains (losses) taken to equity
Transferred to profit or loss
Transferred to initial carrying amount of hedged items
Other reclassifications
Hedging instruments (non-designated elements)
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Debt securities at fair value through other comprehensive income
Valuation gains (losses) taken to equity
Transferred to profit or loss
Other reclassifications
Non-current assets and disposal groups held for sale
Income tax relating to items subject to reclassification to income statements
TOTAL RECOGNIZED INCOME/EXPENSE
(*)
Presented for comparison purposes only.
2,241
(373)
(367)
3
-
(271)
-
(133)
34
(6)
-
-
-
-
-
(115)
(115)
-
-
-
-
-
-
-
107
173
(66)
-
-
2
1,868
2,450
(383)
(125)
(48)
-
(199)
-
166
(45)
(257)
-
-
-
-
-
29
29
-
-
-
-
-
-
-
(396)
(292)
(104)
-
-
110
2,067
P.203
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Statement of changes in equity for the year ended December 31, 2019 of BBVA, S.A.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
2019
Capital
Share
premium
Equity instruments
issued other than
capital
Other Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-) Treasury
shares
Balances as of January 1, 2019
Effect of changes in accounting policies
Adjusted initial balance
Total income/expense recognized
Other changes in equity
Issuances of common shares
Issuances of preferred shares
Issuance of other equity instruments
Period or maturity of other issued equity
instruments
Conversion of debt on equity
Common Stock reduction
Dividend distribution
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of financial liabilities to other
equity instruments
Reclassification of other equity instruments to
financial liabilities
Transfers between total equity entries
Increase/Reduction of equity due to business
combinations
Share based payments
Other increases or (-) decreases in equity
3,267
23,992
-
-
3,267
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balances as of December 31, 2019
3,267
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46
-
46
-
1
-
-
-
-
-
-
-
-
-
-
-
8,829
-
8,829
-
278
-
-
-
-
-
-
(1,067)
-
-
-
-
(1)
1,345
-
-
2
-
-
-
48
9,107
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30)
1
(29)
-
29
-
-
-
-
-
-
-
-
36
-
-
(8)
-
-
1
1
(23)
-
(23)
-
23
-
-
-
-
-
-
-
(933)
956
-
-
-
-
-
-
-
Profit or
loss
attributable
to owners
of the
parent
Interim
dividends
Accumulated
other
comprehensive
income
Total
2,450
(1,114)
-
-
(8)
37,409
-
1
2,450
(1,114)
(8)
37,410
2,241
(2,450)
-
-
-
-
-
-
-
-
-
-
-
-
28
-
-
-
-
-
-
(1,086)
-
-
-
-
(2,450)
1,114
-
-
-
-
-
-
(373)
1,868
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,089)
-
-
-
-
-
-
(2,153)
(933)
993
-
-
-
-
-
3
2,241
(1,086)
(381)
37,189
P.204
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Statement of changes in equity for the year ended December 31, 2018 of BBVA, S.A.
STATEMENT OF CHANGES IN EQUITY (Millions of Euros)
2018 (*)
Balances as of January 1, 2018
Effect of changes in accounting policies
Adjusted initial balance
Total income/expense recognized
Other changes in equity
Issuances of common shares
Issuances of preferred shares
Issuance of other equity instruments
Settlement or maturity of other equity instruments
issued
Conversion of debt on equity
Common Stock reduction
Dividend distribution
Purchase of treasury shares
Sale or cancellation of treasury shares
Reclassification of other equity instruments to
financial liabilities
Reclassification of financial liabilities to other
equity instruments
Transfers within total equity
Increase/Reduction of equity due to business
combinations
Share based payments
Other increases or (-) decreases in equity
Capital
Share
Premium
3,267
23,992
-
-
3,267
23,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balances as of December 31, 2018
3,267
23,992
(*)
Presented for comparison purposes only.
Equity
instruments
issued other
than capital
47
(47)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-) Treasury
shares
Profit or
loss
attributable
to owners
of the
parent
Interim
dividends
Accumulated
other
comprehensive
income
Total
-
47
47
-
(1)
-
-
-
-
-
-
-
-
-
-
-
-
8,766
8,766
-
63
-
-
-
-
-
-
(1,000)
-
-
-
-
(1)
1,063
-
-
-
-
-
-
46
8,829
12
(12)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,445
(9,421)
24
-
(54)
-
-
-
-
-
-
-
-
(5)
-
-
(25)
(23)
-
(1)
(30)
2,083
(1,045)
-
-
-
-
129
2,212
2,450
(23)
(2,212)
(129)
(1,174)
-
60
-
-
-
-
-
-
(1,114)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,212)
1,174
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,288)
1,265
-
-
-
-
-
-
409
(35)
374
38,211
(702)
37,509
(382)
2,067
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,167)
-
-
-
-
-
-
(2,114)
(1,288)
1,260
-
-
-
(23)
-
(1)
(23)
2,450
(1,114)
(8)
37,409
P.205
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
CASH FLOWS STATEMENTS (Millions of Euros)
A) CASH FLOWS FROM OPERATING ACTIVITIES (1+2+3+4+5)
1.Profit for the year
2.Adjustments to obtain the cash flow from operating activities:
Depreciation and amortization
Other adjustments
3.Net increase/decrease in operating assets
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Other financial assets designated at fair value through profit or loss
Financial assets at fair value through other comprehensive income
Financial assets at amortized cost
Other operating assets
4.Net increase/decrease in operating liabilities
Financial liabilities held for trading
Other financial liabilities designated at fair value through profit or loss
Financial liabilities at amortized cost
Other operating liabilities
5.Collection/Payments for income tax
B) CASH FLOWS FROM INVESTING ACTIVITIES (1+2)
1.Investment
Tangible assets
Intangible assets
Investments in subsidiaries, joint ventures and associates
Other business units
Non-current assets and disposal groups classified as held for sale and associated liabilities
Other settlements related to investing activities
2.Divestments
Tangible assets
Intangible assets
Investments in subsidiaries, joint ventures and associates
Other business units
Non-current assets classified as held for sale and associated liabilities
Other collections related to investing activities
(*)
Presented for comparison purposes only.
2019
(9,761)
2,241
1,755
673
1,082
(19,440)
(9,632)
871
-
(5,632)
(6,242)
1,195
5,716
6,122
1,222
(968)
(660)
(33)
(373)
(904)
(119)
(317)
(196)
-
(272)
-
531
10
-
103
-
418
-
2018 (*)
17,079
2,450
1,227
452
775
10,926
2,178
3,087
-
3,409
3,081
(829)
2,451
(2,718)
754
5,735
(1,320)
24
(2,049)
(7,081)
(372)
(314)
(6,083)
-
(312)
-
5,032
50
-
1,678
-
3,304
-
P.206
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
CASH FLOWS STATEMENTS (Continued) (Millions of Euros)
C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2)
1. Payments
Dividends
Subordinated liabilities
Treasury stock amortization
Treasury stock acquisition
Other items relating to financing activities
2. Collections
Subordinated liabilities
Common stock increase
Treasury stock disposal
Other items relating to financing activities
D) EFFECT OF EXCHANGE RATE CHANGES
2019
2018 (*)
(2,314)
(6,114)
(2,153)
(3,005)
-
(956)
-
3,799
2,640
-
993
167
(54)
(2,468)
(5,006)
(2,114)
(1,627)
-
(1,265)
-
2,538
1,262
-
1,260
16
(143)
E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D)
(12,503)
12,418
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F)
30,922
18,419
18,503
30,922
COMPONENTS OF CASH AND EQUIVALENTS AT END OF THE YEAR (Millions of Euros)
Cash
Balance of cash equivalent in central banks
Other financial assets
Less: Bank overdraft refundable on demand
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR
(*)
Presented for comparison purposes only.
2019
1,046
15,417
1,956
-
18,419
2018 (*)
975
27,290
2,656
-
30,922
This Appendix is an integral part of Notes 2.1 of the condensed consolidated financial statements for the year ended December 31, 2019.
P.207
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX X. Information on data derived from the special accounting registry and other
information bonds
The Bank has implemented policies and procedures for its activities in the mortgage market and in the financing of exportation of goods
and services or the process of internationalization of companies, which allow ensuring compliance with the applicable regulations of the
mortgage market and for the issuance of bonds.
a)
Mortgage market policies and procedures
Information required pursuant to Circular 5/2011 of the Bank of Spain is indicated as follows.
The mortgage origination policy is based on principles focused on assessing the adequate ratio between the amount of the loan, and the
payments, and the income of the applicant. Applicants must in all cases prove sufficient repayment ability (present and future) to meet
their repayment obligations, for both the mortgage debt and for other debts detected in the financial system. Therefore, the applicant’s
repayment ability is a key aspect within the credit decision-making tools and retail risk acceptance manuals, and has a high weighting in
the final decision.
During the mortgage risk transaction analysis process, documentation supporting the applicant’s income (payroll, etc.) is required, and
the applicant’s position in the financial system is checked through automated database queries (internal and external). This information
is used for calculation purposes in order to determine the level of indebtedness/compliance with the remainder of the system. This
documentation is kept in the transaction’s file.
In addition, the mortgage origination policy assesses the adequate ratio between the amount of the loan and the appraisal value of the
mortgaged asset. The policy also establishes that the property to be mortgaged be appraised by an independent appraisal company as
established by Circular 3/2010 and Circular 4/2016. BBVA selects those companies whose reputation, standing in the market and
independence ensure that their appraisals adapt to the market reality in each region. Each appraisal is reviewed and checked before the
loan is granted and, in those cases where the loan is finally granted, it is kept in the transaction’s file.
As for issues related to the mortgage market, the Finance area annually defines the strategy for wholesale finance issues, and more
specifically mortgage bond issues, such as mortgage covered bonds or mortgage securitization. The Assets and Liabilities Committee
tracks the budget monthly. The volume and type of assets in these transactions is determined in accordance with the wholesale finance
plan, the trend of the Bank’s “Loans and receivables” outstanding balances and the conditions in the market.
The Board of Directors of the Bank authorizes each of the issues of Mortgage Transfer Certificates and/or Mortgage Participations issued
by BBVA to securitize the credit rights derived from loans and mortgage loans. Likewise, the Board of Directors authorizes the
establishment of a Base Prospectus for the issuance of fixed-income securities through which the mortgage-covered bonds are
implemented.
As established in article 24 of Royal Decree 716/2009, of April, 24, by virtue of which certain aspects of Law 2/1981, of 25 March, of
regulation of the mortgage market and other rules of the mortgage and financial system are developed, “the volume of outstanding
mortgage-covered bonds issued by a bank may not exceed 80% of a calculation base determined by adding the outstanding principal of all
the loans and mortgage loans in the bank’s portfolio that are eligible” and which are not covered by the issue of mortgage bonds, mortgage
participations or mortgage transfer certificates. For these purposes, in accordance with the aforementioned Royal Decree 716/2009, in
order to be eligible, loans and mortgage loans, on a general basis: (i) must be secured by a first mortgage on the freehold; (ii) the loan’s
amount may not exceed 80% of the appraisal value for residential mortgages, and 60% for other mortgage lending; (iii) must be
established on assets exclusively and wholly owned by the mortgagor; (iv) must have been appraised by an independent appraisal
company unrelated to the Group and authorized by the Bank of Spain; and (v) the mortgaged property must be covered at least by a
current damage insurance policy.
The Bank has set up a series of controls for mortgage covered bonds, which regularly control the total volume of issued mortgage covered
bonds issued and the remaining eligible collateral, to avoid exceeding the maximum limit set by Royal Decree 716/2009, and outlined in
the preceding paragraph. In the case of securitizations, the preliminary portfolio of loans and mortgage loans to be securitized is checked
according to an agreed procedures engagement, by the Bank’s external auditor as required by the Spanish Securities and Exchange
Commission. There is also a series of filters through which some mortgage loans and credits are excluded in accordance with legal,
commercial and risk concentration criteria.
P.208
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
b) Quantitative information on activities in the mortgage market
The quantitative information on activities in the mortgage market required by Bank of Spain Circular 5/2011 as of December 31, 2019 and
2018 is shown below.
b.1) Ongoing operations
Mortgage loans. Eligibility for the purpose of the mortgage market (Millions of Euros)
Nominal value of outstanding loans and mortgage loans
December
2019
92,757
December
2018
97,519
Minus: Nominal value of all outstanding loans and mortgage loans that form part of the portfolio, but
have been mobilized through mortgage bond holdings or mortgage transfer certificates
(30,173)
(29,781)
Nominal value of outstanding loans and mortgage loans, excluding securitized loans
62,584
67,738
Of which: Loans and mortgage loans which would be eligible if the calculation limits set forth in
article 12 of Spanish Royal Decree 716/2009 were not applied.
44,759
45,664
Of which: Minus: Loans and mortgage loans which would be eligible but, according to the criteria
set forth in Article 12 of Spanish Royal Decree 716/2009, cannot be used to collateralize any
issuance of mortgage bonds.
(1,191)
(1,240)
Eligible loans and mortgage loans that, according to the criteria set forth in article 12 of
Spanish Royal Decree 716/2009, can be used as collateral for the issuance of mortgage bonds
43,568
44,424
Issuance limit: 80% of eligible loans and mortgage loans that can be used as collateral
Issued Mortgage-covered bonds
Outstanding Mortgage-covered bonds
Capacity to issue mortgage-covered bonds
Memorandum items:
Percentage of overcollateralization across the portfolio
Percentage of overcollateralization across the eligible used portfolio
Nominal value of available sums (committed and unused) from all loans and mortgage loans
Of which: Potentially eligible
Of which: Ineligible
34,854
32,422
14,832
2,432
193%
134%
5,841
4,935
906
35,539
24,301
15,207
11,238
279%
183%
5,267
4,517
750
Nominal value of all loans and mortgage loans that are not eligible, as they do not meet the thresholds
set in Article 5.1 of Spanish Royal Decree 716/2009, but do meet the rest of the eligibility requirements
indicated in Article 4 of the Royal Decree
9,989
12,827
Nominal value of the replacement assets subject to the issue of mortgage-covered bonds
-
-
P.209
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Mortgage loans. Eligibility for the purpose of the mortgage market (Millions of Euros)
Total loans
Issued mortgage participations
Of which: recognized on the balance sheet
Issued mortgage transfer certificates
Of which: recognized on the balance sheet
Mortgage loans as collateral of mortgages bonds
December
2019
December
2018
92,757
97,519
4,494
3,213
4,360
2,927
25,679
25,422
22,899
23,590
-
-
(1)
(2)
(3)
(4)
Loans supporting the issuance of mortgage-covered bonds
1-2-3-4
62,584
67,738
Non-eligible loans
Comply requirements to be eligible except the limit provided for under the article 5.1 of the
Spanish Royal Decree 716/2009
Other
Eligible loans
That cannot be used as collateral for issuances
That can be used as collateral for issuances
Loans used to collateralize mortgage bonds
Loans used to collateralize mortgage-covered bonds
Mortgage loans. Classification of the nominal values according to different characteristics (Millions of Euros)
17,825
22,074
9,989
7,836
12,827
9,247
44,759
45,664
1,191
1,240
43,568
44,424
-
-
43,568
44,424
TOTAL
By source of the operations
Originated by the bank
Subrogated by other institutions
Rest
By Currency
In Euros
In foreign currency
By payment situation
Normal payment
Other situations
By residual maturity
Up to 10 years
10 to 20 years
20 to 30 years
Over 30 years
By Interest rate
Fixed rate
Floating rate
Mixed rate
By target of operations
For business activity
Of which: public housing
Of which: For households
By type of guarantee
Secured by completed assets/buildings
Residential use
Of which: public housing
Commercial
Other
Secured by assets/buildings under construction
Residential use
Of which: public housing
Commercial
Other
Secured by land
Urban
Non-urban
December 2019
December 2018
Total mortgage
loans
Eligible
loans(*)
Eligible that can be
used as collateral
for issuances (**)
Total mortgage
loans
Eligible
loans(*)
Eligible that can
be used as
collateral for
issuances (**)
62,584
44,759
43,568
67,738
45,664
44,424
57,541
838
4,205
62,263
321
53,983
8,601
13,788
26,923
17,528
4,345
11,408
51,176
-
-
11,709
2,333
50,875
60,638
52,831
4,039
7,779
28
1,103
862
5
241
-
843
321
522
40,462
650
3,647
44,564
195
41,331
3,428
10,376
22,521
10,562
1,300
6,768
37,991
-
-
6,825
1,529
37,934
43,823
39,329
3,238
4,484
10
671
560
1
111
-
265
98
167
39,316
644
3,608
43,373
195
40,608
2,960
10,071
21,836
10,398
1,263
6,720
36,848
-
-
5,918
743
37,650
42,920
38,594
3,094
4,316
10
446
335
1
111
-
202
43
159
62,170
797
4,771
67,255
483
56,621
11,117
15,169
28,317
18,195
6,057
10,760
56,978
-
13,308
2,770
54,430
65,535
56,880
4,464
8,618
37
1,014
721
18
293
-
1,189
478
711
40,962
664
4,038
45,362
302
41,688
3,976
11,226
22,907
9,973
1,558
5,545
40,119
-
7,107
1,455
38,557
44,912
40,098
3,423
4,803
11
369
234
1
135
-
383
134
249
39,799
660
3,965
44,122
302
41,057
3,367
10,808
22,344
9,752
1,520
5,467
38,957
-
6,196
682
38,228
43,884
39,276
3,278
4,597
11
261
150
1
111
-
279
47
232
(*) Not taking into account the thresholds established by article 12 of Spanish Royal Decree 716/2009.
(**) Taking into account the thresholds established by article 12 of Spanish Royal Decree 716/2009.
P.210
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
December 2019. Nominal value of the total mortgage loans (Millions of Euros)
Home mortgages
Other mortgages
Total
Loan to value (Last available appraisal risk)
Less than or
equal to
40%
Over 40%
but less than
or equal to
60%
Over 60%
but less than
or equal to
80%
Over 80% Total
13,713
2,484
16,197
14,821
2,179
17,000
11,562
11,562
-
-
40,096
4,663
44,759
December 2018. Nominal value of the total mortgage loans (Millions of Euros)
Loan to Value (Last available appraisal risk)
Less than or
equal to
40%
Over 40%
but less
than or
equal to
60%
Over 60%
but less
than or
equal to
80%
Over 80%
Total
Home mortgages
Other mortgages
Total
13,792
2,506
16,298
15,459
2,203
17,662
11,704
-
11,704
40,955
4,709
45,664
Eligible and non-eligible mortgage loans. Changes of the nominal values in the year (Millions of Euros)
Balance at the beginning
Retirements
Held-to-maturity cancellations
Anticipated cancellations
Subrogations to other institutions
Rest
Additions
Originated by the bank
Subrogations to other institutions
Rest
Balance at the end
December 2019
December 2018
Eligible (*) Non-eligible
Eligible (*)
Non-eligible
45,664
22,074
48,003
24,762
7,447
4,363
2,231
22
831
6,542
3,219
4
3,319
44,759
8,498
1,062
2,054
10
5,372
4,249
3,235
2
1,012
17,825
7,994
4,425
2,227
25
1,317
5,655
2,875
15
2,765
45,664
7,483
1,883
2,625
13
2,962
4,795
3,376
7
1,412
22,074
(*) Not taking into account the thresholds established by Article 12 of Spanish Royal Decree 716/2009.
Mortgage loans supporting the issuance of mortgage-covered bonds. Nominal value (Millions of Euros)
Potentially eligible
Non eligible
Total
December 2019
December 2018
4,935
906
5,841
4,517
750
5,267
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
b.2) Liabilities operations
Issued mortgage bonds (Millions of Euros)
December 2019
December 2018
Nominal value
Average
residual
maturity
Nominal value
Average
residual
maturity
Mortgage bonds
Mortgage-covered bonds
Of which: Not recognized as liabilities on balance
Of Which: Outstanding
Debt certificates issued through public offer
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
Debt certificates issued without public offer
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
Deposits
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
Mortgage participations
Issued through public offer
Issued without public offer
Mortgage transfer certificates
Issued through public offer
Issued without public offer
-
32,422
14,832
17,590
12,501
2,051
2,750
1,250
3,250
3,000
200
17,662
50
1,500
2,000
9,000
5,112
-
2,260
246
425
368
100
471
650
3,213
3,213
-
22,899
22,899
-
-
24,301
9,093
15,207
12,501
-
2,051
2,750
3,500
4,000
200
9,161
-
50
1,500
2,500
5,111
-
2,640
380
246
425
468
471
650
2,927
2,927
-
23,590
23,590
-
267
267
-
267
267
-
269
269
-
269
269
-
Given the characteristics of the type of covered bonds issued by the Bank, there is no substituting collateral related to these issues.
The Bank does not hold any derivative financial instruments relating to mortgage bond issues, as defined in the aforementioned Royal
Decree.
c) Quantitative information on internationalization covered bonds
Below is the quantitative information of BBVA, S.A. internationalization covered bonds required by Bank of Spain Circular 4/2017 as of
December 31, 2019 and 2018.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
c.1) Assets operations
Principal outstanding payment of loans (Millions of Euros)
Eligible loans according to article 34.6 y 7 of the Law 14/2013
3,621
3,369
Minus: Loans that support the issuance of internationalization bonds
Minus: NPL to be deducted in the calculation of the issuance limit, according to
article 13 del Royal Decree 579/2014
-
1
-
4
Total loans included in the base of all issuance limit
3,620
3,365
Nominal value
December 2019
Nominal value
December 2018
c.2) Liabilities operations
Internationalization covered bonds (Millions of Euros)
(1) Debt certificates issued through public offer (a)
Of which: Treasury shares
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
(2) Debt certificates issued without public offer (a)
Of which: Treasury shares
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
(3) Deposits (b)
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
TOTAL: (1) + (2) + (3)
Coverage ratio of internationalization covered bonds on loans (c)
Nominal value
December
2019
Nominal value
December
2018
1,500
1,500
-
-
1,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500
1,500
1,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500
1,500
Percentage
Percentage
41%
45%
(a) Balance that includes all internationalization covered bonds issued by the entity pending amortization, although they are not recognized in the liability
(because they have not been placed to third parties or have been repurchased).
(b) Nominative bonds.
(c)
Percentage that results from the value of the quotient between the nominal value of the issued and non-overdue bonds, even if they are not recognized in the
liability, and the nominal value balance pending collection of the loans that serve as guarantee.
Given the characteristics of the Bank's internationalization covered bonds, there are no substitute assets assigned to these issuances.
P.213
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union
(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
d) Territorial bonds
d.1) Assets operations
December 2019. Loans that serves as collateral for the territorial bonds (Millions of euros)
Nominal value (a)
Total
Spanish residents
Residents in other countries of
the European Economic Area
Central governments
Regional governments
Local governments
Total loans
(a) Principal pending payment of loans.
1,473
7,691
4,151
13,315
1,345
7,662
4,151
13,158
December 2018. Loans that serves as collateral for the territorial bonds (Millions of Euros)
128
29
-
157
Central governments
Regional governments
Local governments
Total loans
(a) Principal pending payment of loans.
d.2) Liabilities operations
Territorial bonds (Millions of Euros)
Territorial bonds issued (a)
Issued through a public offering
Of which: Treasury stock
Residual maturity up to 1 year
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
Other issuances
Of which: Treasury stock
Residual maturity over 1 year and less than 2 years
Residual maturity over 2 years and less than 3 years
Residual maturity over 3 years and less than 5 years
Residual maturity over 5 years and less than 10 years
Residual maturity over 10 years
Coverage ratio of the territorial bonds on loans (b)
Nominal value (a)
Total
Spanish residents
Residents in other
countries of the
European Economic Area
1,637
8,363
5,145
15,145
1,592
8,333
5,145
15,070
45
30
-
75
Nominal value
December 2019
Nominal value
December 2018
8,040
8,040
7,540
4,500
2,000
840
700
-
-
-
-
-
-
-
-
-
7,540
7,540
7,040
-
4,500
2,000
1,040
-
-
-
-
-
-
-
-
-
Percentage
Percentage
60%
50%
(a) Includes the nominal value of all loans that serve as collateral for the territorial bonds, regardless of the item in which they are included in the
balance sheet. Principal pending payment of loans. The territorial bonds include all the instruments issued by the entity pending amortization,
although they are not recognized in the liability (because they have not been placed to third parties or have been repurchased).
(b) Percentage that results from the value of the quotient between the nominal value of the issued and non-overdue bonds, even if they are not
recognized in the liability, and the nominal value balance pending collection of the loans that serve as guarantee.
This Appendix is an integral part of Notes 14.3 and 22.4 of the condensed consolidated financial statements for the year ended December
31, 2019.
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language version prevails.
APPENDIX XI.
Spain Circular 6/2012
Quantitative information on refinancing and restructuring operations and other requirement under Bank of
a) Quantitative information on refinancing and restructuring operations
The breakdown of refinancing and restructuring operations as of December 31, 2019, 2018 and 2017 is as follows:
Unsecured loans
DECEMBER 2019 BALANCE OF FORBEARANCE
(Millions of Euros)
TOTAL
Secured loans
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
-
73
387
68,121
1,131
173,403
241,984
-
93
8
5,085
400
1,510
6,696
-
64
62
18,283
1,314
67,513
85,922
-
64
4
3,646
688
5,827
9,541
Real estate
mortgage secured
-
49
3
1,810
393
4,414
6,276
Rest of secured
loans
-
-
-
178
32
33
211
-
11
6
3,252
428
1,519
4,788
Maximum amount of secured loans that
can be considered
Accumulated impairment or
accumulated losses in fair
value due to credit risk
Unsecured loans
Of which: IMPAIRED
Secured loans
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Maximum amount of secured loans that
can be considered
Real estate
mortgage secured
Rest of secured
loans
Accumulated impairment or
accumulated losses in fair
value due to credit risk
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
(*) Number of operations does not include Garanti BBVA.
-
45
241
-
41
6
-
30
30
-
21
2
-
16
1
39,380
3,148
11,706
2,466
1,020
819
96,429
136,095
321
758
3,954
790
34,463
46,229
445
2,908
5,396
210
2,006
3,044
-
-
-
50
4
17
67
-
7
6
2,923
392
1,229
4,164
Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €624 million of collective loss allowances and €4,164 million of specific loss allowances.
P.215
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-
language version prevails.
Unsecured loans
DECEMBER 2018 BALANCE OF FORBEARANCE
(Millions of Euros)
TOTAL
Secured loans
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Real estate
mortgage secured
Rest of secured
loans
Maximum amount of secured loans that
can be considered
Accumulated impairment or
accumulated losses in fair
value due to credit risk
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
-
75
252
-
111
13
-
46
29.360
-
64
5
-
52
3
44.271
4,483
15,493
4,177
2,200
734
193.061
237.659
258
1,326
5,933
1,627
355.466
400,365
962
6,990
11,236
501
5,083
7,338
-
-
-
221
12
150
371
-
15
6
3,148
517
1,716
4,885
Unsecured loans
Of which: IMPAIRED
Secured loans
Maximum amount of secured loans that
can be considered
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Real estate
mortgage secured
Rest of secured
loans
-
46
133
-
65
4
-
12
29.320
-
16
4
-
8
2
-
-
-
25.420
2,723
9,922
2,777
1,192
100
631
116.916
142.515
200
741
3,533
1,145
42.403
81,657
656
3,673
6,470
254
2,435
3,636
1
26
126
Accumulated impairment or
accumulated losses in fair
value due to credit risk
-
10
5
2,773
477
1,414
4,202
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
(*) Number of operations does not include Garanti BBVA.
Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €682 million of collective loss allowances and €4,202 million of specific loss allowances.
P.216
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-
language version prevails.
Unsecured loans
DECEMBER 2017 BALANCE OF FORBEARANCE
(Millions of Euros)
TOTAL
Secured loans
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Real estate
mortgage secured
Rest of secured
loans
Maximum amount of secured loans that
can be considered
Accumulated impairment or
accumulated losses in fair
value due to credit risk
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
-
69
4,727
-
105
36
-
135
93
-
430
8
-
112
1
113,464
4,672
17,890
6,258
3,182
1,812
163,101
281,361
398
1,325
6,138
3,495
109,776
127,894
2,345
8,477
15,173
1,995
6,891
10,186
-
302
-
251
-
18
571
-
18
21
3,579
1,327
1,373
4,991
Unsecured loans
Secured loans
Of which: IMPAIRED
Number of operations
Gross carrying
amount
Number of operations Gross carrying amount
Real estate
mortgage secured
Rest of secured
loans
Maximum amount of secured loans that
can be considered
Accumulated impairment or
accumulated losses in fair
value due to credit risk
Credit institutions
General Governments
Other financial corporations and individual entrepreneurs (financial
business)
Non-financial corporations and individual entrepreneurs (corporate
non-financial activities)
Of which: financing the construction and property (including
land)
Other households (*)
Total
-
50
126
-
72
5
-
45
16
-
29
2
-
22
-
95,427
2,791
10,994
4,144
1,983
1,538
105,468
201,071
208
747
3,615
2,779
47,612
58,667
1,961
4,330
8,506
1,273
3,270
5,275
-
-
-
66
-
6
72
-
16
5
3,361
1,282
1,231
4,612
(*) Number of operations does not include Garanti BBVA.
Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.
The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €378 million of collective loss allowances and €4,612 million of specific loss allowances.
P.217
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language version prevails.
In addition to the restructuring and refinancing transactions mentioned in this section, loans that were not considered impaired or renegotiated have been modified based on the criteria set out
in the accounting regulation that applies. These loans have not been classified as renegotiated or impaired, since they were modified for commercial or competitive reasons (for instance, to
improve relationships with clients) rather than for economic or legal reasons relating to the borrower's financial situation.
The table below provides a breakdown by segments of the forbearance operations (net of provisions) as of December 31, 2019, 2018 and 2017:
Forbearance operations. Breakdown by segments (Millions of Euros)
Credit institutions
Central governments
Other financial corporations and individual entrepreneurs (financial activity)
Non-financial corporations and individual entrepreneurs (non-financial
activity)
Of which: Financing the construction and property development (including
land)
Households
Total carrying amount
Financing classified as non-current assets and disposal groups held for sale
NPL ratio by type of renegotiated loan
December 2019
December 2018
December 2017
-
147
6
5,479
660
5,818
11,450
-
-
160
13
5,512
702
6,600
12,284
-
-
518
24
7,351
1,416
8,428
16,321
-
The non-performing ratio of the renegotiated portfolio is defined as the impaired balance of renegotiated loans that shows signs of difficulties as of the closing of the reporting period, divided by
the total payment outstanding in that portfolio.
As of December 31, 2019 and December 31, 2018, the non-performing ratio for each of the portfolios of renegotiated loans is as follows:
P.218
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-
language version prevails.
December 2019. NPL ratio renegotiated loan portfolio
General governments
Commercial
Of which: Construction and developer
Other consumer
December 2018. NPL ratio renegotiated loan portfolio
General governments
Commercial
Of which: Construction and developer
Other consumer
b) Qualitative information on the concentration of risk by activity and guarantees
Loans and advances to customers by activity (carrying amount)
Ratio of impaired loans - past due
39%
64%
70%
50%
Ratio of impaired loans - past due
47%
64%
70%
53%
P.219
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-
language version prevails.
December 2019 (Millions of Euros)
Collateralized loans and receivables -Loans and advances to customers.
Loan to value
Total (*)
Mortgage
loans
Secured
loans
Less than
or equal to
40%
Over 40% but
less than or
equal to 60%
Over 60% but
less than or
equal to 80%
Over 80%
but less than
or equal to
100%
Over 100%
29,257
23,114
176,474
15,171
7,146
154,157
104,661
49,496
167,117
110,178
46,356
10,583
1,067
281
26,608
4,497
756
21,355
8,665
12,690
108,031
104,796
507
2,728
10,886
13,699
30,313
2,114
468
27,731
19,058
8,673
5,582
2,332
2,075
1,175
4,914
1,856
22,901
2,313
499
20,089
12,647
7,442
23,057
20,831
450
1,776
1,510
219
10,082
1,765
248
8,069
3,620
4,449
27,714
26,639
316
759
1,077
103
8,478
1,476
152
6,850
3,828
3,022
32,625
31,707
174
744
3,651
11,688
5,270
457
106
4,707
2,727
1,980
20,529
18,701
1,502
326
801
115
10,190
600
219
9,371
4,901
4,470
9,688
9,250
140
298
395,962
135,987
60,480
52,728
39,525
42,283
41,138
20,794
General governments
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs (**) and individual entrepreneurs
Rest of households and NPISHs (***)
Housing
Consumption
Other purposes
TOTAL
MEMORANDUM ITEM:
Forbearance operations (****)
11,450
7,396
256
1,547
1,427
1,572
1,247
1,859
(*)
The amounts included in this table are net of loss allowances.
(**)
Small and medium enterprises.
(***)
Nonprofit institutions serving households.
(****) Net of provisions.
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language version prevails.
December 2018 (Millions of Euros)
Collateralized loans and receivables -Loans and advances to customers.
Loan to value
Total (*)
Mortgage
loans
Secured
loans
Less than
or equal to
40%
Over 40% but
less than or
equal to 60%
Over 60% but
less than or
equal to 80%
Over 80%
but less than
or equal to
100%
Over 100%
30,488
20,802
173,493
14,323
7,775
151,394
97,132
54,262
163,068
111,007
40,124
11,938
1,056
233
29,001
5,226
1,082
22,694
9,912
12,782
109,578
105,817
522
3,239
7,750
12,549
32,371
2,539
620
29,212
19,069
10,143
5,854
2,419
2,600
835
1,729
1,167
25,211
1,979
703
22,529
13,918
8,611
21,974
19,981
489
1,505
1,856
221
11,121
2,556
285
8,281
3,979
4,302
27,860
26,384
587
888
1,119
93
9,793
2,140
195
7,459
4,019
3,440
33,200
32,122
306
772
3,514
11,209
5,087
486
200
4,401
2,245
2,156
21,490
19,345
1,597
547
588
92
10,160
605
319
9,235
4,820
4,416
10,908
10,404
142
362
387,850
139,868
58,524
50,082
41,058
44,206
41,300
21,747
General governments
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs (**) and individual entrepreneurs
Rest of households and NPISHs (***)
Housing
Consumption
Other purposes
TOTAL
MEMORANDUM:
Forbearance operations (****)
12,284
8,325
523
1,508
1,421
1,769
1,527
2,623
(*)
The amounts included in this table are net of loss allowances.
(**)
Small and medium enterprises
(***)
Nonprofit institutions serving households.
(****) Net of provisions.
P.221
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language version prevails.
December 2017 (Millions of Euros)
Collateralized credit risk. Loan to value
Total (*)
Mortgage
loans
Secured
loans
Less than
or equal to
40%
Over 40% but
less than or
equal to 60%
Over 60% but
less than or
equal to 80%
Over 80%
but less than
or equal to
100%
Over 100%
32,294
18,669
172,338
14,599
7,733
150,006
93,604
56,402
165,024
114,709
40,705
9,609
998
319
39,722
10,664
1,404
27,654
10,513
17,142
114,558
111,604
670
2,284
7,167
12,910
24,793
1,066
521
23,206
16,868
6,338
8,395
128
4,784
3,483
1,540
314
11,697
1,518
449
9,729
2,769
6,960
19,762
18,251
1,058
452
179
277
5,878
876
358
4,644
1,252
3,392
22,807
22,222
256
330
475
106
5,183
1,049
289
3,845
1,023
2,823
25,595
25,029
192
374
532
11,349
9,167
1,313
162
7,692
3,631
4,061
22,122
21,154
316
652
5,440
1,183
32,591
6,974
667
24,950
18,706
6,244
32,667
25,076
3,632
3,959
388,325
155,597
53,266
33,312
29,142
31,359
43,170
71,882
General governments
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs (**) and individual entrepreneurs
Rest of households and NPISHs (***)
Housing
Consumption
Other purposes
TOTAL
MEMORANDUM:
Forbearance operations (****)
16,321
6,584
5,117
1,485
1,315
1,871
1,580
5,451
(*)
The amounts included in this table are net of loss allowances.
(**)
Small and medium enterprises
(***)
Nonprofit institutions serving households.
(****) Net of provisions.
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language version prevails.
c) Information on the concentration of risk by activity and geographical areas
December 2019 (Millions of Euros)
Credit institutions
General governments
Central Administration
Other
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs and individual entrepreneurs
Other households and NPISHs
Housing
Consumer
Other purposes
TOTAL
TOTAL(*)
Spain
European Union
Other
America
Other
109,471
134,929
96,639
38,290
52,406
232,034
18,915
10,607
202,512
147,643
54,869
167,379
110,178
46,358
10,843
696,219
23,127
56,478
39,573
16,905
13,822
70,762
3,538
5,403
61,821
37,402
24,419
90,829
75,754
11,954
3,121
255,018
40,332
9,861
9,505
356
19,828
25,963
361
1,303
24,299
23,310
989
3,180
725
675
1,780
99,165
31,851
57,174
36,287
20,887
15,749
92,198
11,688
1,431
79,079
61,858
17,221
62,098
30,557
25,897
5,644
259,070
14,161
11,416
11,274
142
3,007
43,111
3,328
2,470
37,313
25,073
12,240
11,272
3,142
7,832
298
82,967
(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances”, “Debt securities”, “Equity instruments”, “Other equity
securities”, “Derivatives and hedging derivatives”, “Investments in subsidiaries, joint ventures and associates” and “Guarantees given and contingent risks”. The amounts included in this table are net of loss allowances.
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language version prevails.
December 2018 (Millions of Euros)
Credit institutions
General governments
Central Administration
Other
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs and individual entrepreneurs
Other households and NPISHs
Housing
Consumer
Other purposes
TOTAL
TOTAL (*)
Spain
European Union
Other
America
Other
113,978
123,382
87,611
35,771
49,166
226,487
17,697
11,430
197,361
137,150
60,211
163,443
111,007
40,124
12,312
35,728
53,686
35,691
17,995
13,784
70,536
3,497
5,789
61,250
36,964
24,286
91,977
78,414
10,303
3,259
33,440
11,081
10,756
325
17,977
24,565
244
1,535
22,786
22,114
672
3,383
765
629
1,989
31,234
50,092
32,735
17,357
15,345
87,419
10,113
1,762
75,543
53,423
22,120
56,777
28,034
22,036
6,707
676,456
265,710
90,447
240,867
13,575
8,523
8,428
95
2,061
43,967
3,843
2,343
37,781
24,649
13,132
11,306
3,794
7,155
357
79,432
(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances”, “Debt securities”, “Equity instruments”, “Other equity
securities”, “Derivatives and hedging derivatives”, “Investments in subsidiaries, joint ventures and associates” and “Guarantees given and contingent risks”. The amounts included in this table are net of loss allowances.
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language version prevails.
December 2017 (Millions of Euros)
Credit institutions
General governments
Central Administration
Other
Other financial institutions
Non-financial institutions and individual entrepreneurs
Construction and property development
Construction of civil works
Other purposes
Large companies
SMEs and individual entrepreneurs
Other households and NPISHs
Housing
Consumer
Other purposes
TOTAL
TOTAL(*)
Spain
European Union
Other
America
Other
70,141
121,863
83,673
38,190
48,000
228,227
18,619
12,348
197,260
134,454
62,807
165,667
114,710
40,705
10,251
10,606
55,391
35,597
19,794
19,175
78,507
4,623
6,936
66,948
43,286
23,662
93,774
81,815
8,711
3,248
34,623
11,940
11,625
316
14,283
20,485
339
1,302
18,843
17,470
1,373
3,609
2,720
649
241
13,490
44,191
26,211
17,980
12,469
80,777
8,834
2,267
69,676
48,016
21,660
53,615
24,815
22,759
6,041
11,422
10,341
10,240
101
2,074
48,458
4,822
1,843
41,793
25,681
16,112
14,669
5,361
8,587
721
633,899
257,453
84,940
204,542
86,964
(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: “Loans and advances to credit institutions”, “Loans and advances”, “Debt securities”, “Equity instruments”, “Other equity
securities”, “Derivatives and hedging derivatives”, “Investments in subsidiaries, joint ventures and associates” and “Guarantees given and contingent risks”. The amounts included in this table are net of loss allowances.
This Appendix is an integral part of Note 7.1 and 55.2 of the condensed consolidated financial statements for the year ended December 31, 2019.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX XII. Additional information on risk concentration
a) Sovereign risk exposure
The table below provides a breakdown of exposure to financial assets (excluding derivatives and equity instruments), as of December 31,
2019, 2018 and 2017 by type of counterparty and the country of residence of such counterparty. The below figures do not take into account
accumulated other comprehensive income, loss allowances or loan-loss provisions:
Risk exposure by countries (Millions of Euros)
Spain
Italy
Turkey
Portugal
Germany
United Kingdom
France
Netherlands
Romania
Rest of Europe
Subtotal Europe
Mexico
The United States
Colombia
Argentina
Peru
Venezuela
Rest of countries
Subtotal rest of countries
Sovereign risk
December 2019 December 2018 December 2017
55,575
7,810
7,999
924
224
43
93
1
480
142
73,291
32,630
19,802
1,828
1,557
582
7
3,726
60,131
52,970
9,249
7,998
529
362
51
122
9
493
197
71,981
26,562
18,645
2,577
628
750
1
955
50,118
54,625
9,827
9,825
722
259
41
383
16
417
229
76,343
25,114
14,059
2,320
1,192
535
137
1,761
45,119
Total exposure to financial instruments
133,421
122,099
121,462
The exposure to sovereign risk set out in the above table includes positions held in government debt securities in countries where the
Group operates. They are used for ALCO’s management of the interest-rate risk on the balance sheets of the Group’s entities in these
countries, as well as for hedging of pension and insurance commitments by insurance entities within the BBVA Group.
The table below provides a breakdown of the exposure of the Group’s credit institutions to sovereign risk as of December 31, 2019 by
type of financial
instrument and the country of residence of the counterparty, under EBA (European Banking Authority)
requirements:
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Exposure to Sovereign Risk by European Union Countries. December 2019 (Millions of Euros)
Derivatives
Direct exposure
Indirect exposure
Debt securities
Loans and
advances
Total
%
Notional
value
Fair value
+
Fair value
-
Notional
value
Fair value
+
Fair value
-
Spain
Italy
Portugal
Germany
United Kingdom
France
Netherlands
Romania
Rest of European Union
Total Exposure to Sovereign
Counterparties (European Union)
Mexico
The United States
Turkey
Rest of other countries
Total other countries
23,925
26,980
800
30
4,887
3,183
1,854
486
-
468
-
479
370
180
-
37
35
-
-
61
32,467
30,476
-
-
-
-
-
-
-
142
942
(17)
-
(77)
-
-
-
-
-
(877)
(722)
377
199
-
388
-
-
(2)
(35)
1,191
(2,195)
49,836 39%
287
(1,088)
6,547
5%
1,788
(1,347)
2,775
2%
6
-
(16)
675
1%
-
37
0%
208
(17)
1,082
1%
-
-
2
-
-
-
0%
480
0%
(2)
537
0%
-
-
-
-
-
-
-
-
30
(96)
(670)
3,482
(4,665)
61,967 48%
21,399
8,414
1,492
8,741
11,023
3,739
4,234
29
-
5,376
2,212
39,255
25,883
2,463
3,983
2
1
-
46
49
(104)
-
-
8
112
(7)
-
45
-
(6)
31,204 24%
(45)
19,906
15%
(8)
7,957
6%
(200)
(304)
(572)
(459)
3,593
(4,766)
8,152
6%
3,638
(4,826)
67,219 52%
Total
71,722
56,359
4,925
79
(400)
(1,129)
7,120
(9,491) 129,186 100%
This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of European countries of the Group’s insurance
companies (€11,614 million as of December 31, 2019) is not included. Includes credit derivatives CDS (Credit Default Swaps) shown at fair
value.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
b) Concentration of risk on activities in the real-estate market in Spain
Quantitative information on activities in the real-estate market in Spain
The following quantitative information on real-estate activities in Spain has been prepared using the reporting models required by Bank of
Spain Circular 5/2011, of November 30.
As of December 31, 2019, 2018 and 2017, exposure to the construction sector and real-estate activities in Spain stood at €9,943 €11,045
and €11,981 million, respectively. Of that amount, risk from loans to construction and real-estate development activities accounted for
€2,649, €3,183 and €5,224 million, respectively, representing 1.4%, 1.7% and 2.9% of loans and advances to customers of the balance
of business in Spain (excluding the general governments) and 0.4%, 0.5% and 0.8% of the total assets of the Consolidated Group,
respectively.
Lending for real estate development of the loans as of December 31, 2019, 2018 and 2017is shown below:
December 2019. Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase (Millions of Euros)
Gross amount
Drawn over the
guarantee value
Accumulated
impairment
Financing to construction and real estate development (including land) (Business in Spain)
Of which: Impaired assets
Memorandum item:
Write-offs
Memorandum item:
Total loans and advances to customers, excluding the General Governments (Business in Spain) (book
value)
Total consolidated assets (total business) (book value)
Impairment and provisions for normal exposures
2,649
567
2,265
-
185,893
698,690
(4,934)
688
271
(286)
(252)
December 2018. Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase (Millions of Euros)
Gross amount
Drawn over the
guarantee value
Accumulated
impairment
Financing to construction and real estate development (including land) (Business in Spain)
Of which: Impaired assets
Memorandum item:
Write-offs
Memorandum item:
Total loans and advances to customers, excluding the General Governments (Business in Spain) (book
value)
Total consolidated assets (total business) (book value)
Impairment and provisions for normal exposures
3,183
875
2,619
183,196
676,689
(4,938)
941
440
(537)
(463)
December 2017. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of Euros)
Gross amount
Drawn over the
guarantee value
Accumulated
impairment
Financing to construction and real estate development (including land) (Business in Spain)
Of which: Impaired assets
Memorandum item:
Write-offs
Memorandum item:
Total loans and advances to customers, excluding the General Governments (Business in Spain)
(book Value)
Total consolidated assets (total business) (book value)
Impairment and provisions for normal exposures
5,224
2,660
2,289
174,014
690,059
(5,843)
The following is a description of the real estate credit risk based on the types of associated guarantees:
2,132
1,529
(1,500)
(1,461)
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Financing allocated by credit institutions to construction and real estate development and lending for house
purchase (Millions of Euros)
December 2019 December 2018 December 2017
Without secured loan
With secured loan
Terminated buildings
Homes
Other
Buildings under construction
Homes
Other
Land
Urbanized land
Rest of land
Total
298
2,351
1,461
1,088
373
545
348
197
345
240
105
2,649
324
2,859
1,861
1,382
479
432
408
24
566
364
202
3,183
552
4,672
2,904
2,027
877
462
439
23
1,306
704
602
5,224
As of December 31, 2019, 2018 and 2017, 55.2%, 58.5%, and 55.6% of loans to developers were guaranteed with buildings (74.5%, 74.3%
and 69.8%, are homes), and only 13.0%, 17.8% and 25.0% by land, of which 69.6%, 64.3% and 53.9% % are in urban locations,
respectively.
The table below provides the breakdown of the financial guarantees given as of December 31, December 31, 2019, 2018 and 2017:
Financial guarantees given (Millions of Euros)
Houses purchase loans
Without mortgage
December 2019
December 2018 December 2017
44
5
48
24
64
12
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The information on the retail mortgage portfolio risk (housing mortgage) as of December 31, December 31, 2019, 2018 and 2017is as
follows:
December 2019. Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase. (Millions of euros)
Houses purchase loans
Without mortgage
With mortgage
Gross amount
Of which: impaired loans
76,961
1,672
75,289
2,943
22
2,921
December 2018. Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase. (Millions of
Euros)
Houses purchase loans
Without mortgage
With mortgage
Gross amount
Of which: impaired loans
80,159
1,611
78,548
3,852
30
3,822
December 2017. Financing allocated by credit institutions to construction and Real Estate development and lending for house purchase. (Millions of Euros)
Houses purchase loans
Without mortgage
With mortgage
Gross amount
Of which: impaired loans
83,505
1,578
81,927
4,821
51
4,770
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The loan to value (LTV) ratio of the above portfolio is as follows:
LTV breakdown of mortgage to households for the purchase of a home (business in Spain) (Millions of Euros)
Total risk over the amount of the last valuation available (Loan to value-LTV)
Less than or
equal to
40%
Over 40%
but less than
or equal to
60%
Over 60%
but less than
or equal to
80%
Over 80% but
less than or
equal to
100%
Over 100%
Total
15,105
182
14,491
204
14,485
293
19,453
313
18,822
323
18,197
444
20,424
506
21,657
507
20,778
715
11,827
544
13,070
610
14,240
897
8,480
1,376
10,508
2,178
14,227
2,421
75,289
2,921
78,548
3,822
81,927
4,770
Gross amount 2019
Of which: Impaired loans
Gross amount 2018
Of which: Impaired loans
Gross amount 2017
Of which: Impaired loans
Outstanding home mortgage loans as of December 31, 2019, 2018 and 2017 had an average LTV of 47%, 49%, and 51% respectively.
The breakdown of foreclosed, acquired, purchased or exchanged assets from debt from loans relating to business in Spain, as well as the
holdings and financing to non-consolidated entities holding such assets is as follows:
Information about assets received in payment of debts (Business in Spain) (Millions of euros)
Real estate assets from loans to the construction and real estate development sectors
in Spain.
Terminated buildings
Homes
Other
Buildings under construction
Homes
Other
Land
Urbanized land
Rest of land
Real estate assets from mortgage financing for households for the purchase of a home
Rest of foreclosed real estate assets
Equity instruments, investments and financing to non-consolidated companies holding
said assets
Total
December 2019
Gross
Value
Provisions
Of which: Valuation
adjustments on
impaired assets,
from the time of
foreclosure
Carrying
amount
1,048
378
221
157
79
78
1
591
547
44
1,192
451
1,380
4,071
555
150
81
69
44
43
1
361
338
23
612
233
293
1,693
266
58
33
25
24
24
-
184
167
17
153
37
255
711
493
228
140
88
35
35
-
230
209
21
580
218
1,087
2,378
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Information about assets received in payment of debts (Business in Spain) (Millions of Euros)
December 2018
Gross
Value
Provisions
Of which: Valuation
adjustments on
impaired assets, from
the time of foreclosure
Carrying
amount
Real estate assets from loans to the construction and real estate development
sectors in Spain.
2,165
1,252
Terminated buildings
Homes
Other
Buildings under construction
Homes
Other
Land
Urbanized land
Rest of land
Real estate assets from mortgage financing for households for the purchase of a
home
Rest of foreclosed real estate assets
Equity instruments, investments and financing to non-consolidated companies
holding said assets
Total
991
588
403
209
194
15
965
892
73
1,797
348
1,345
5,655
445
245
200
131
117
14
676
633
43
932
192
234
2,610
828
274
144
130
96
85
11
458
421
37
331
40
913
546
343
203
78
77
1
289
259
30
865
156
234
1,433
1,111
3,045
Additionally, in December 18, there was an increase of BBVA, S.A.’s stake in Garanti Yatirim Ortakligi AS through its contribution to the
capital increase carried out by the latter entity.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Information about assets received in payment of debts (Business in Spain) (Millions of Euros)
Real estate assets from loans to the construction and real estate development
sectors in Spain.
Finished buildings
Homes
Other
Buildings under construction
Homes
Other
Land
Urbanized land
Rest of land
Real estate assets from mortgage financing for households for the purchase of
a home
Rest of foreclosed real estate assets
Foreclosed equity instruments
Total
December 2017
Gross
value
Provisions
Of which: Valuation
adjustments on
impaired assets, from
the time of foreclosure
Carrying amount
6,429
2,191
1,368
823
541
521
20
3,697
1,932
1,765
3,592
1,665
1,135
12,821
4,350
1,184
742
442
359
347
12
2,807
1,458
1,349
2,104
905
325
7,684
2,542
606
366
240
192
188
4
1,744
1,031
713
953
268
273
4,036
2,079
1,007
626
381
182
174
8
890
474
416
1,488
760
810
5,137
Additionally, in March 2017, there was an increase of BBVA, S.A.’s stake in Testa Residencial through its contribution to the capital
increase carried out by the latter entity by contributing assets from the Bank’s real estate assets
As of December 31, 2019, 2018 and 2017, the gross book value of the Group’s real-estate assets from corporate financing of real-estate
construction and development was €1.048, €2,165 and €6,429 million, respectively, with an average coverage ratio of 53.0%, 57.8% and
67.7%, respectively.
The gross book value of real-estate assets from mortgage lending to households for home purchase as of December 31, 2019, 2018 and
2017, amounted to €1.192, €1,797 and €3,592 million, respectively, with an average coverage ratio of 51.3%, 51.9% and 58.6%.
As of December 31, 2019, 2018 and 2017, the gross book value of the BBVA Group’s total real-estate assets (business in Spain), including
other real-estate assets received as debt payment, was €2.691, €4,310 and €11,686 million, respectively. The coverage ratio was 52.0%,
55.1% and 63.0%, respectively.
This Appendix is an integral part of Note 7.1 of the condensed consolidated financial statements for the year ended December 31, 2019.
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prevails.
c) Concentration of risk by geography
Below is a breakdown of the balances of financial instruments registered in the accompanying consolidated balance sheets by their concentration in geographical areas and according to the residence of the
customer or counterparty. As of December 31, 2019, 2018 and 2017 it does not take into account loss allowances or loan-loss provisions:
Risks by geographical areas. December 2019 (Millions of Euros)
Spain
Europe, excluding
Spain
Mexico
The United
States
Turkey
South America
Other
Total
Derivatives
Equity instruments (*)
Debt securities
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Loans and advances
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total risk in financial assets
Loan commitments given
Financial guarantees given
Other commitments given
Off-balance sheet exposures
5,346
3,745
48,806
-
41,510
1,237
5,643
416
171,668
14
14,477
6,621
3,103
50,718
96,735
229,564
33,146
3,182
16,204
52,532
17,251
6,184
13,283
-
9,403
1,672
1,001
1,207
52,024
(3)
394
20,544
13,351
14,215
3,523
88,742
26,687
1,605
9,125
37,417
1,344
3,829
28,053
-
6,425
1,311
17,733
-
25,852
14,465
150
2,085
1,034
189
55
7,934
-
7,921
9
3
1
1,854
268
5,383
1,785
2,732
263
433
170
65,044
45,872
40,787
-
5,342
648
2,313
34,960
21,781
90,512
35,185
754
2,075
38,014
3,647
111
1,996
1,248
26,099
12,773
54,050
8,665
3,170
5,065
16,900
684
1,536
1,012
704
17,963
18,888
48,292
8,060
911
2,808
11,779
658
317
1,226
63,505
-
6,820
2,050
1,611
24,823
28,201
96,731
17,361
656
1,534
19,551
777
247
4,210
70
2,846
611
136
548
9,267
478
637
2,112
752
5,130
158
14,501
1,819
705
2,397
4,922
33,185
15,639
125,403
1,855
104,728
4,600
9,619
4,602
448,166
4,820
29,316
34,982
23,082
173,907
182,059
622,393
130,923
10,984
39,209
181,116
Total risks in financial instruments
282,096
126,159
116,282
128,526
70,950
60,072
19,423
803,508
(*)
Equity instruments are shown net of valuation adjustment.
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Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version
prevails.
Risks by geographical areas. December 2018 (Millions of Euros)
Derivatives
Equity instruments (*)
Debt securities
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Loans and advances
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total risk in financial assets
Loan commitments given
Financial guarantees given
Other commitments given
Off-balance sheet exposures
Spain
3,979
3,228
43,777
-
36,553
1,130
5,769
325
177,077
294
16,671
5,422
4,616
51,942
98,131
228,061
32,582
3,242
15,995
51,819
Europe, excluding
Spain
16,055
3,669
14,908
-
10,675
1,821
1,048
1,364
43,034
-
329
13,600
10,893
14,317
3,783
77,666
21,983
1,708
9,229
32,920
Mexico
1,550
2,459
23,134
-
20,891
573
227
1,443
55,248
-
5,727
1,476
1,303
22,426
24,316
82,392
14,503
1,528
532
16,563
The United
States
Turkey
South America
Other
Total
7,057
1,139
16,991
-
13,276
74
2,595
1,046
62,193
-
5,369
696
2,255
32,480
21,393
87,381
32,136
796
2,118
35,050
161
29
8,048
-
7,887
155
5
1
45,285
3,688
99
956
766
26,813
12,963
53,523
7,914
6,900
2,230
17,043
1,150
212
5,274
1,982
2,431
297
432
132
40,007
342
1,923
984
637
18,518
17,602
46,644
8,590
989
2,782
12,360
583
207
1,312
71
164
463
114
500
7,089
1,674
453
639
304
3,852
168
9,191
1,252
1,291
2,213
4,756
30,536
10,944
113,445
2,052
91,877
4,514
10,190
4,812
429,933
6,110
30,572
23,774
20,773
170,349
178,355
584,858
118,959
16,454
35,098
170,511
Total risks in financial instruments
279,880
110,586
98,955
122,430
70,567
59,004
13,947
755,369
(*)
Equity instruments are shown net of valuation adjustment.
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prevails.
Risks by geographical areas. December 2017 (Millions of Euros)
Derivatives
Equity instruments (*)
Debt securities
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Loans and advances
Central banks
General governments
Credit institutions
Other financial corporations
Non-financial corporations
Households
Total risk in financial assets
Loan commitments given
Financial guarantees given
Other commitments given
Off-balance sheet exposures
Spain
Europe, excluding
Spain
Mexico
The United
States
Turkey
South America
Other
Total
6,336
3,539
44,773
49
36,658
1,364
6,492
259
185,597
-
18,116
5,564
7,769
54,369
99,780
240,245
31,100
4,635
25,279
61,014
20,506
4,888
15,582
-
11,475
2,095
994
1,018
41,426
626
352
15,493
6,231
14,615
4,110
82,401
16,203
1,427
9,854
27,484
1,847
2,050
21,594
-
19,323
289
337
1,645
50,352
-
5,868
1,889
588
19,737
22,269
75,842
1,691
82
1,582
3,356
4,573
991
13,280
2,734
8,894
98
3,026
1,262
113
36
10,601
-
9,668
884
7
42
977
333
5,861
2,685
2,246
387
315
228
921
71
1,450
-
221
752
194
234
35,273
11,908
113,141
5,468
88,485
5,869
11,365
4,688
54,315
56,062
42,334
4,585
434,670
-
5,165
789
1,732
29,396
17,233
73,159
29,539
717
1,879
32,134
5,299
152
1,073
1,297
31,691
16,550
66,812
2,944
7,993
1,591
12,527
1,375
2,354
1,145
664
19,023
17,773
49,504
11,664
1,174
3,750
16,588
-
398
345
270
3,345
227
7,027
1,126
519
1,804
3,450
7,300
32,405
26,297
18,551
172,175
177,942
594,990
94,268
16,546
45,738
156,552
Total risks in financial instruments
301,259
109,885
79,198
105,293
79,339
66,092
10,477
751,542
(*)
Equity instruments are shown net of valuation adjustment.
The breakdown of the main figures in the most significant foreign currencies in the accompanying consolidated balance sheets is set forth in Appendix VII.
P.236
Translation of the Consolidated Financial Statements originally issued in Spanish and prepared in accordance with EU-IFRS, as adopted by
the European Union (see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
The breakdown of loans and advances in the heading of “Loans and receivables”, impaired by geographical area as
December 31, 2019, 2018 and 2017is as follows:
Impaired financial assets by geographic area (Millions of Euros)
Spain
Rest of Europe
Mexico
South America
The United States
Turkey
Rest of the world
IMPAIRED RISKS
December
2019
8,616
175
1,478
1,769
632
3,289
2
15,959
December
2018
10,025
225
1,138
1,715
733
2,520
2
16,359
December
2017
13,318
549
1,124
1,468
631
2,311
-
19,401
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
APPENDIX XIII.
European Parliament and its application to Spanish Law through Law 10/2014
Information in accordance with article 89 of Directive 2013/36/EU of the
December 31, 2019 (Millions of Euros)
Country
Mexico
Spain (**)
Turkey
United States
Colombia
Argentina
Peru
Venezuela
Chile
Romania
Uruguay
Paraguay
Bolivia
Netherlands
Switzerland
Finland
Ireland
Brasil
Curaçao
Portugal
United Kingdom
Hong Kong
France
Italy
Germany
Belgium
China
Singapore
Japan
Taiwan
Cyprus
CIT
payments
cash basis
964
(15)
246
135
97
27
205
-
30
4
11
8
3
1
12
-
-
-
-
5
2
-
17
3
21
-
-
1
-
-
6
CIT expense
consol
PBT consol
Gross
income
993
226
289
123
128
37
172
1
19
7
8
3
3
3
1
-
-
-
-
10
3
5
11
9
(11)
-
-
1
-
(1)
7
3,544
(911)
1,151
751
438
234
636
(8)
69
43
53
34
11
10
6
(20)
-
-
6
46
45
38
39
26
9
2
(2)
8
1
(2)
31
7,873
5,558
3,269
3,225
1,000
1,026
1,286
35
201
106
175
85
29
61
41
1
1
2
8
94
83
50
61
55
37
7
4
9
2
5
36
Nº
Employees
(*)
37,805
30,283
20,634
10,825
6,899
6,402
6,420
2,516
956
1,267
576
428
424
247
116
112
-
6
16
458
120
85
71
51
44
23
26
9
3
11
111
Activity
Main Entity
Finance, banking and insurance services BBVA Bancomer S.A.
Finance, banking and insurance services BBVA S.A.
Finance, banking and insurance services Garanti BBVA AS
Finance and banking services
BBVA USA
Finance, banking and insurance services BBVA Colombia S.A.
Finance, banking and insurance services Banco BBVA Argentina S.A.
Finance and banking services
BBVA Banco Continental S.A.
Finance, banking and insurance services BBVA Banco Provincial S.A.
Financial services
Forum Servicios Financieros, S.A.
Finance and banking services
GBR Garanti Bank SA
Finance and banking services
BBVA Uruguay S.A.
Finance and banking services
BBVA Paraguay S.A.
Pensions
BBVA Previsión AFP SA
Finance and banking services
Garantibank BBVA International N.V.
Finance and banking services
BBVA (Switzerland) S.A.
Financial services
Financial services
Financial services
Holvi Payment Service OY
BBVA Ireland PCL
BBVA Brasil Banco de Investimento, S.A.
Finance and banking services
Banco Provincial Overseas N.V.
Finance and banking services
BBVA - Portugal Branch Office
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
Banking services
BBVA -London Branch Office
BBVA -Hong-Kong Branch Office
BBVA -Paris Branch Office
BBVA -Milan Branch Office
BBVA -Frankfurt Branch Office
BBVA -Brussels Branch Office
BBVA -Shanghai Branch Office
BBVA -Singapur Branch Office
BBVA -Tokio Branch Office
BBVA -Taipei Branch Office
Garanti - Nicosia Branch Office
Garanti -Valletta Branch Office
Malta
Total
(*) Full time employees. The 15 employees of representative offices are not included in the total number.
14
126,958
117
24,542
111
6,398
8
2,053
9
1,792
Banking services
(**) In “CIT payments cash basis”, the methodology for calculating advance payments of the annual tax return provided for in Corporate Income Tax legislation, may lead to differences
between the advance payments made in the current year and the refund of those advance payments made in previous years resulting once the annual corporate income tax return has
been submitted. As a result of these differences, there has been a net cash refund. The amount of “Profit before taxes includes Corporate Center (see Note 6).
The results of this breakdown of the branches are integrated in the financial statements of the parent companies on which they depend.
As of December 31, 2019, the return of the Group’s assets calculated by dividing the “Profit” between “Total Assets” is 0.62%.
In 2019 (*), BBVA group has not received public aid for the financial sector which has the aim of promoting the carrying out of banking
activities and which is significant. This statement is made for the purposes of article 89 of Directive 2013/36/UE of the European
Parliament and of the Council of June 26 (on access to the activity of credit institutions and the prudential supervision of credit institutions
and investment firms) and its transposition to Spanish legislation by means of Law 10/2014 on Monitoring, Supervision and Solvency of
Credit Institutions of June 26.
(*) BBVA disclosed by means of public relevant events: (i) on 07/27/2012 the closing of the acquisition of UNNIM Banc, S.A. and (ii) on
04/24/2015 the closing of the acquisition of Catalunya Banc, S.A.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Glossary
Additional Tier 1 Capital
Includes: Preferred stock and convertible perpetual securities and deductions.
Adjusted acquisition cost
The acquisition cost of the securities less accumulated amortizations, plus interest accrued, but not net
of any other valuation adjustments.
Amortized cost
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or
financial liability is measured at initial recognition minus the principal repayments, plus or minus, the
cumulative amortization using the effective interest rate method of any difference between the initial
amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
Associates
Companies in which the Group has a significant influence, without having control. Significant influence is
deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.
Available-for-sale financial
assets
Available-for-sale (AFS) financial assets are debt securities that are not classified as held-to-maturity
investments or as financial assets designated at fair value through profit or loss (FVTPL) and equity
instruments that are not subsidiaries, associates or jointly controlled entities and have not been
designated as at FVTPL. The AFS category belongs to IAS 39 standard, replaced by “Financial Assets at
fair value through other comprehensive income” under IFRS 9.
Baseline macroeconomic
scenarios
IFRS 9 requires that an entity must evaluate a range of possible outcomes when estimating provisions and
measuring expected credit losses, through macroeconomic scenarios. The baseline macroeconomic
scenario presents the situation of the particular economic cycle.
Basic earnings per share
Calculated by dividing “Profit attributable to Parent Company” corresponding to ordinary shareholders of
the entity by the weighted average number of shares outstanding throughout the year (i.e., excluding the
average number of treasury shares held over the year).
Basis risk
Risk arising from hedging exposure to one interest rate with exposure to a rate that reprices under slightly
different conditions.
Business combination
A business combination is a transaction, or any other event, through which a single entity obtains the
control of one or more businesses.
Business Model
The assessment as to how an asset shall be classified is made on the basis of both the business model for
managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI
Criterion). Financial assets are classified on the basis of its business model for managing the financial
assets. The Group’s business models shall be determined at a level that reflects how groups of financial
assets are managed together to achieve a particular business objective and generate cash flows.
Cash flow hedges
Those that hedge the exposure to variability in cash flows attributable to a particular risk associated with
a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss.
Income and expenses relating to commissions and similar fees are recognized in the consolidated income
statement using criteria that vary according to their nature. The most significant income and expense
items in this connection are:
Commissions
· Fees and commissions relating linked to financial assets and liabilities measured at fair value through
profit or loss, which are recognized when collected.
· Fees and commissions arising from transactions or services that are provided over a period of time,
which are recognized over the life of these transactions or services.
· Fees and commissions generated by a single act are accrued upon execution of that act.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Consolidated statements
of cash flows
Consolidated statements
of changes in equity
Consolidated statements
of recognized income and
expenses
Consolidation method
The indirect method has been used for the preparation of the consolidated statement of cash flows. This
method starts from the entity’s consolidated profit and adjusts its amount for the effects of transactions
of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and
items of income or expense associated with cash flows classified as investment or finance. As well as cash,
short-term, highly liquid investments subject to a low risk of changes in value, such as cash and deposits
in
equivalents.
When preparing these financial statements the following definitions have been used:
classified
central
banks,
cash
and
are
as
· Cash flows: Inflows and outflows of cash and equivalents.
· Operating activities: The typical activities of credit institutions and other activities that cannot be
classified as investment or financing activities.
· Investing activities: The acquisition, sale or other disposal of long-term assets and other investments
not included in cash and cash equivalents or in operating activities.
· Financing activities: Activities that result in changes in the size and composition of the Group’s equity
and of liabilities that do not form part of operating activities.
The consolidated statements of changes in equity reflect all the movements generated in each year in each
of the headings of the consolidated equity, including those from transactions undertaken with
shareholders when they act as such, and those due to changes in accounting criteria or corrections of
errors, if any.
The applicable regulations establish that certain categories of assets and liabilities are recognized at their
fair value with a charge to equity. These charges, known as “Valuation adjustments” (see Note 31), are
included in the Group’s total consolidated equity net of tax effect, which has been recognized as deferred
tax assets or liabilities, as appropriate.
The consolidated statement of recognized income and expenses reflect the income and expenses
generated in each fiscal year, distinguishing between those recognized in the consolidated profit and loss
accounts and the “Other recognized income and expenses”; which are recorded directly in the
consolidated equity.
The “Other recognized income and expenses” includes the variations that have occurred in the period in
“accumulated other comprehensive income”, detailed by concepts.
The sum of the variations recorded in the “accumulated other comprehensive income” caption of the
consolidated equity and the consolidated profit for the year represents the “Total income and expenses”.
in
full of
Method used for the consolidation of the accounts of the Group’s subsidiaries. The assets and liabilities of
the Group entities are incorporated line-by-line on the consolidate balance sheets, after conciliation and
including amounts payable and receivable.
the elimination
Group entity income statement income and expense headings are similarly combined line by line into the
following consolidation eliminations:
consolidated
a)
full.
transactions are eliminated
b) profits and losses resulting from intragroup transactions are similarly eliminated. The carrying
amount of the parent's investment and the parent's share of equity in each subsidiary are eliminated.
statement, having made
in respect of
income
income and expenses
the
intragroup
intragroup balances,
in
Contingencies
Current obligations of the entity arising as a result of past events whose existence depends on the
occurrence or non-occurrence of one or more future events independent of the will of the entity.
Contingent
commitments
Possible obligations of the entity that arise from past events and whose existence depends on the
occurrence or non-occurrence of one or more future events independent of the entity’s will and that could
lead to the recognition of financial assets.
P.240
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Control
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. An investor
controls an investee if and only if the investor has all the following:
a) Power; An investor has power over an investee when the investor has existing rights that give it the
current ability to direct the relevant activities, i.e. the activities that significantly affect the investee’s
returns.
b) Returns; An investor is exposed, or has rights, to variable returns from its involvement with the
investee when the investor’s returns from its involvement have the potential to vary as a result of the
investee’s performance. The investor’s returns can be only positive, only negative or both positive and
negative.
c) Link between power and returns; An investor controls an investee if the investor not only has power
over the investee and exposure or rights to variable returns from its involvement with the investee, but also
has the ability to use its power to affect the investor’s returns from its involvement with the investee.
Correlation risk
Correlation risk is related to derivatives whose final value depends on the performance of more than one
underlying asset (primarily, stock baskets) and indicates the existing variability in the correlations between
each pair of assets.
Credit Valuation
Adjustment (CVA)
An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC
derivative counterparties.
Current service cost
Current service cost is the increase in the present value of a defined benefit obligation resulting from
employee service in the current period.
Current tax assets
Taxes recoverable over the next twelve months.
Current tax liabilities
Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve
months.
Debit Valuation
Adjustment (DVA)
An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the
entity’s own credit risk.
Debt certificates
Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer,
including debt securities issued for trading among an open group of investors, that accrue interest, implied
or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form
of securities or book-entries, irrespective of the issuer.
Default
An asset will be considered as defaulted whenever it is more than 90 days past due.
Deferred tax assets
Taxes recoverable in future years, including loss carry forwards or tax credits for deductions and tax
rebates pending application.
Deferred tax liabilities
Income taxes payable in subsequent years.
Defined benefit plans
Post-employment obligation under which the entity, directly or indirectly via the plan, retains the
contractual or implicit obligation to pay remuneration directly to employees when required or to pay
additional amounts if the insurer, or other entity required to pay, does not cover all the benefits relating to
the services rendered by the employees when insurance policies do not cover all of the corresponding
post-employees benefits.
Defined contribution plans
Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement
benefits are determined by contributions to a fund together with investment earnings thereon. The
employer's obligations in respect of its employees current and prior years' employment service are
discharged by contributions to the fund.
Deposits from central
banks
Deposits of all classes, including loans and money market operations, received from the Bank of Spain and
other central banks.
Deposits from credit
institutions
Deposits of all classes, including loans and money market operations received, from credit entities.
P.241
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Deposits from customers
Redeemable cash balances received by the entity, with the exception of debt certificates, money market
operations through counterparties and subordinated liabilities, which are not received from either central
banks or credit entities. This category also includes cash deposits and consignments received that can be
readily withdrawn.
Derivatives
The fair value in favor (assets) or again (liabilities) of the entity of derivatives not designated as accounting
hedges.
Derivatives - Hedging
derivatives
Derivatives designated as hedging instruments in an accounting hedge. The fair value or future cash flows
of those derivatives is expected to offset the differences in the fair value or cash flows of the items hedged.
Diluted earnings per share
Calculated by using a method similar to that used to calculate basic earnings per share; the weighted
average number of shares outstanding, and the profit attributable to the parent company corresponding
to ordinary shareholders of the entity, if appropriate, is adjusted to take into account the potential dilutive
effect of certain financial instruments that could generate the issue of new Bank shares (share option
commitments with employees, warrants on parent company shares, convertible debt instruments, etc.).
Dividends and retributions
Dividend income collected announced during the year, corresponding to profits generated by investees
after the acquisition of the stake.
Domestic activity
Domestic balances are those of BBVA´s Group entities domiciled in Spain, which reflect BBVA´s domestic
activities, being the allocation of assets and liabilities based on the domicile of the Group entity at which
the relevant asset or liability is accounted for.
Early retirements
Employees that no longer render their services to the entity but which, without being legally retired, remain
entitled to make economic claims on the entity until they formally retire.
Economic capital
Methods or practices that allow banks to consistently assess risk and attribute capital to cover the
economic effects of risk-taking activities.
Effective interest rate
(EIR)
Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the
expected life of the instrument based on its contractual period as well as its anticipated amortization, but
without taking the future losses of credit risk into consideration.
Employee expenses
All compensation accrued during the year in respect of personnel on the payroll, under permanent or
temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the
current costs of servicing pension plans, own share based compensation schemes and capitalized
personnel expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect
of employee illness are deducted from personnel expenses.
Equity
The residual interest in an entity's assets after deducting its liabilities. It includes owner or venturer
contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities,
and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, non-
controlling interests.
Equity instruments
An equity instrument that evidences a residual interest in the assets of an entity, that is after deducting all
of its liabilities.
Equity instruments issued
other than capital
Includes equity instruments that are financial instruments other than “Capital” and “Equity component of
compound financial instruments”.
Equity Method
Is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter
for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or
loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income
includes its share of the investee’s other comprehensive income.
Exchange/translation
differences
Exchange differences (P&L): Includes the earnings obtained in currency trading and the differences arising
on translating monetary items denominated in foreign currency to the functional currency. Exchange
differences (valuation adjustments): those recorded due to the translation of the financial statements in
foreign currency to the functional currency of the Group and others recorded against equity.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Expected credit losses are a probability-weighted estimate of credit losses over the expected life of the
financial instrument. Hence, credit losses are the present value of expected cash shortfalls. The
measurement and estimate of these expected credit losses should reflect:
Expected Credit Loss
(ECL)
1. An unbiased and probability-weighted amount.
2. The time value of money by discounting this amount to the reporting date using a rate that approximates
the EIR of the asset, and
3. Reasonable and supportable information that is available without undue cost or effort.
The expected credit losses must be measured as the difference between the asset’s gross carrying
amount and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate or an approximation thereof (forward looking).
Exposure at default
EAD is the amount of risk exposure at the date of default by the counterparty.
Fair value
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Fair value hedges
Derivatives that hedge the exposure to changes in the fair value of assets and liabilities or firm
commitments that have not be recognized, or of an identified portion of said assets, liabilities or firm
commitments, attributable to a specific risk, provided it could affect the income statement.
Financial Assets at
Amortized Cost
Financial assets that do not meet the definition of financial assets designated at fair value through profit or
loss and arise from the financial entities' ordinary activities to capture funds, regardless of their
instrumentation or maturity.
Financial Assets at fair
value through other
comprehensive income
Financial instruments with determined or determinable cash flows and in which the entire payment made
by the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category
includes both the investments from the typical lending activity as well as debts contracted by the
purchasers of goods, or users of services, that form part of the entity’s business. It also includes all finance
lease arrangements in which the consolidated subsidiaries act as lessors.
Financial guarantees
Contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
when a specified debtor fails to make payment when due in accordance with the original or modified terms
of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits,
technical or financial guarantees, insurance contracts or credit derivatives.
Financial guarantees given
Transactions through which the entity guarantees commitments assumed by third parties in respect of
financial guarantees granted or other types of contracts.
Financial instrument
A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial
liability or equity instrument of another entity.
Financial liabilities at
amortized cost
Financial liabilities that do not meet the definition of financial liabilities designated at fair value through
profit or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their
instrumentation or maturity.
Foreign activity
Goodwill
International balances are those of BBVA´s Group entities domiciled outside of Spain, which reflect our
foreign activities, being the allocation of assets and liabilities based on the domicile of the Group entity at
which the relevant asset or liability is accounted for.
Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation
of future economic benefits from assets that are not able to be individually identified and separately
recognized.
Hedges of net investments
in foreign operations
Foreign currency hedge of a net investment in a foreign operation.
Held for trading (assets
and liabilities)
Financial assets and liabilities acquired or incurred primarily for the purpose of profiting from variations in
their prices in the short term.
This category also includes financial derivatives not qualifying for hedge accounting, and in the case of
borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under
repurchase agreements or received on loan (“short positions”).
Held-to-maturity
investments
Held-to-maturity investments are financial assets traded on an active market, with fixed maturity and fixed
or determinable payments and cash flows that an entity has the positive intention and financial ability to
hold to maturity. The Held-to-maturity category belongs to IAS 39 standard, replaced by IFRS 9.
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Impaired financial assets
An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a
detrimental impact on the estimated future cash flows of the asset. Evidence that a financial asset is credit-
impaired includes observable data about the following events:
a) significant financial difficulty of the issuer or the borrower,
b) a breach of contract (e.g. a default or past due event),
c) a lender having granted a concession to the borrower --- for economic or contractual reasons
relating to the borrower’s financial difficulty --- that the lender would not otherwise consider,
d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization,
e) the disappearance of an active market for that financial asset because of financial difficulties, or
f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit
losses.
Income from equity
instruments
Dividends and income on equity instruments collected or announced during the year corresponding to
profits generated by investees after the ownership interest is acquired. Income is recognized gross, i.e.,
without deducting any withholdings made, if any.
Insurance contracts linked
to pensions
Inventories
The fair value of insurance contracts written to cover pension commitments.
Assets, other than financial instruments, under production, construction or development, held for sale
during the normal course of business, or to be consumed in the production process or during the rendering
of services. Inventories include land and other properties held for sale at the real estate development
business.
Investment properties
Investment property is property (land or a building—or part of a building—or both) held (by the owner or
by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own
use or sale in the ordinary course of business.
Joint arrangement
An arrangement of which two or more parties have joint control.
Joint control
The contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require the unanimous consent of the parties sharing control.
Joint operation
Joint venture
Leases
its
its
including
participation
its
assets,
liabilities,
from
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the
assets of the arrangement and obligations for the liabilities. A joint venturer shall recognize the following
for
operation:
in
ownership;
a)
jointly;
b)
the
c)
venture;
joint venturer; and
d)
expenses.
joint
e)
A joint venturer shall account for the assets, liabilities, income and expenses related to its participation in
a joint operation in accordance with IFRS applicable to the assets, liabilities, income and expenses specific
question.
any
income
its
its share of the proceeds from the sale of production from the
of
share of production
joint
of
liabilities
from
joint
incurred
joint
expenses,
including
including
sale of
assets
share
share
share
any
any
the
the
the
the
its
of
of
a
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. A joint venturer shall recognize its interest in a joint venture as an investment
and shall account for that investment using the equity method in accordance with IAS 28 Investments in
Associates and Joint Ventures.
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of
payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially
loan agreement.
equivalent to the combination of principal and
a) A lease is classified as a finance lease when it substantially transfers all the risks and rewards incidental
to
contract.
subject-matter
b) A lease will be classified as operating lease when it is not a financial lease.
interest payments under a
ownership
forming
asset
the
the
the
of
of
Lease liability
Lease that represents the lessee’s obligation to make lease payments during the lease term.
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Liabilities included in
disposal groups classified
as held for sale
The balance of liabilities directly associated with assets classified as non-current assets held for sale,
including those recognized under liabilities in the entity's balance sheet at the balance sheet date
corresponding to discontinued operations.
Liabilities under insurance
contracts
The technical reserves of direct insurance and inward reinsurance recorded by the consolidated entities
to cover claims arising from insurance contracts in force at period-end.
Loans and advances to
customers
Loans and receivables
Loans and receivables, irrespective of their type, granted to third parties that are not credit entities.
Financial instruments with determined or determinable cash flows and in which the entire payment made
by the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category
includes both the investments from the typical lending activity (amounts of cash available and pending
maturity by customers as a loan or deposits lent to other entities, and unlisted debt certificates), as well
as debts contracted by the purchasers of goods, or users of services, that form part of the entity’s
business. It also includes all finance lease arrangements in which the consolidated subsidiaries act as
lessors. The Loans and receivables category belongs to IAS 39 standard, replaced by “Financial Assets at
Amortized Cost” under IFRS 9.
Loss given default (LGD)
It is the estimate of the loss arising in the event of default. It depends mainly on the characteristics of the
counterparty, and the valuation of the guarantees or collateral associated with the asset.
Mortgage-covered bonds
Financial asset or security created from mortgage loans and backed by the guarantee of the mortgage loan
portfolio of the entity.
Non performing financial
guarantees given
The balance of non performing risks, whether for reasons of default by customers or for other reasons, for
financial guarantees given. This figure is shown gross: in other words, it is not adjusted for value corrections
(loan loss reserves) made.
Non Performing Loans
(NPL)
The balance of non performing risks, whether for reasons of default by customers or for other reasons, for
exposures on balance loans to customers. This figure is shown gross: in other words, it is not adjusted for
value corrections (loan loss reserves) made.
Non-controlling interests
The net amount of the profit or loss and net assets of a subsidiary attributable to associates outside the
group (that is, the amount that is not owned, directly or indirectly, by the parent), including that amount in
the corresponding part of the consolidated earnings for the period.
Non-current assets and
disposal groups held for
sale
A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale
transaction, rather than through continuing use, and which meets the following requirements:
a) it is immediately available for sale in its present condition at the balance sheet date, i.e. only normal
procedures are required for the sale of the asset.
b) the sale is considered highly probable.
Non-monetary assets
Non-trading financial
assets mandatorily at fair
value through
Profit or loss
Assets and liabilities that do not provide any right to receive or deliver a determined or determinable
amount of monetary units, such as tangible and intangible assets, goodwill and ordinary shares
subordinate to all other classes of capital instruments.
The financial assets registered under this heading are assigned to a business model whose objective is
achieved by obtaining contractual cash flows and / or selling financial assets but which the contractual
cash flows have not complied with the SPPI test conditions.
Option risk
Risks arising from options, including embedded options.
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Other financial
assets/liabilities at fair
value through profit or loss
than
Instruments designated by the entity from the inception at fair value with changes in profit or loss.
An entity may only designate a financial instrument at fair value through profit or loss, if doing so more
relevant information is obtained, because:
a) It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes called
"accounting mismatch") that would otherwise arise from measuring assets or liabilities or recognizing the
gains and losses on them on different bases. It might be acceptable to designate only some of a number of
similar financial assets or financial liabilities if doing so a significant reduction (and possibly a greater
reduction
achieved.
b) The performance of a group of financial assets or financial liabilities is managed and evaluated on a
fair value basis, in accordance with a documented risk management or investment strategy, and
information about the group is provided internally on that basis to the entity´s key management personnel.
These are financial assets managed jointly with “Liabilities under insurance and reinsurance contracts”
measured at fair value, in combination with derivatives written with a view to significantly mitigating
exposure to changes in these contracts' fair value, or in combination with financial liabilities and derivatives
designed to significantly reduce global exposure to interest rate risk.
These headings include customer loans and deposits effected via so-called unit-linked life insurance
contracts, in which the policyholder assumes the investment risk.
inconsistency
designations)
allowable
other
the
in
is
This heading is broken down as follows:
Other Reserves
i) Reserves or accumulated losses of investments in subsidiaries, joint ventures and associate: include the
accumulated amount of income and expenses generated by the aforementioned investments through
profit or loss in past years.
ii) Other: includes reserves different from those separately disclosed in other items and may include legal
reserve and statutory reserve.
Other retributions to
employees long term
Includes the amount of compensation plans to employees long term.
Own/treasury shares
The amount of own equity instruments held by the entity.
Past service cost
It is the change in the present value of the defined benefit obligation for employee service in prior periods,
resulting in the current period from the introduction of, or changes to, post-employment benefits or other
long-term employee benefits.
Post-employment benefits
Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on
or after termination of service.
Probability of default (PD)
It is the probability of the counterparty failing to meet its principal and/or interest payment obligations.
The PD is associated with the rating/scoring of each counterparty/transaction.
Property, plant and
equipment/tangible
assets
Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired
under finance leases.
Provisions
Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past
events, certain in terms of nature but uncertain in terms of amount and/or cancellation date.
Provisions for contingent
liabilities and
commitments
Provisions recorded to cover exposures arising as a result of transactions through which the entity
guarantees commitments assumed by third parties in respect of financial guarantees granted or other
types of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may
arise upon recognition of financial assets.
Provisions for pensions
and similar obligation
Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis-
à-vis beneficiaries of early retirement and analogous schemes.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Provisions or (-) reversal
of provisions
Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the
exception of provisions for pensions and contributions to pension funds which constitute current or
interest expense.
Refinanced Operation
An operation which is totally or partially brought up to date with its payments as a result of a refinancing
operation made by the entity itself or by another company in its group.
Refinancing Operation
An operation which, irrespective of the holder or guarantees involved, is granted or used for financial or
legal reasons related to current or foreseeable financial difficulties that the holder(s) may have in settling
one or more operations granted by the entity itself or by other companies in its group to the holder(s) or
to another company or companies of its group, or through which such operations are totally or partially
brought up to date with their payments, in order to enable the holders of the settled or refinanced
operations to pay off their loans (principal and interest) because they are unable, or are expected to be
unable, to meet the conditions in a timely and appropriate manner.
Renegotiated Operation
An operation whose financial conditions are modified when the borrower is not experiencing financial
difficulties, and is not expected to experience them in the future, i.e. the conditions are modified for reasons
other than restructuring. In any case, these definitions are adapted to the local terminology, so that they
are integrated into the management.
Repricing risk
Risks related to the timing mismatch in the maturity and repricing of assets and liabilities and off-balance
sheet short and long-term positions.
Restructured Operation
An operation whose financial conditions are modified for economic or legal reasons related to the holder's
(or holders') current or foreseeable financial difficulties, in order to enable payment of the loan (principal
and interest), because the holder is unable, or is expected to be unable, to meet those conditions in a timely
and appropriate manner, even if such modification is provided for in the contract. In any event, the
following are considered restructured operations: operations in which a haircut is made or assets are
received in order to reduce the loan, or in which their conditions are modified in order to extend their
maturity, change the amortization table in order to reduce the amount of the installments in the short term
or reduce their frequency, or to establish or extend the grace period for the principal, the interest or both;
except when it can be proved that the conditions are modified for reasons other than the financial
difficulties of the holders and, are similar to those applied on the market on the modification date for
operations granted to customers with a similar risk profile. In any case, these definitions are adapted to
the local terminology, so that they are integrated into the management.
Retained earnings
Accumulated net profits or losses recognized in the income statement in prior years and retained in equity
upon distribution.
Right of use asset
Asset that represents the lessee’s right to use an underlying asset during the lease term.
Securitization fund
A fund that is configured as a separate equity and administered by a management company. An entity that
would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by
said assets.
Share premium
The amount paid in by owners for issued equity at a premium to the shares' nominal value.
Shareholders' funds
Short positions
Contributions by stockholders, accumulated earnings recognized in the income statement and
the equity components of compound financial instruments.
Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase
agreements or received on loan.
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(see Notes 1 to 56). In the event of a discrepancy, the Spanish-language version prevails.
Significant increase in
credit risk
In order to determine whether there has been a significant increase in credit risk for lifetime expected
losses recognition, the Group has develop a two-prong approach:
a) Quantitative criterion: based on comparing the current expected probability of default over the
life of the transaction with the original adjusted expected probability of default. The thresholds
used for considering a significant increase in risk take into account special cases according to
geographic areas and portfolios.
b) Qualitative criterion: most indicators for detecting significant risk increase are included in the
Group's systems through rating/scoring systems or macroeconomic scenarios, so quantitative
analysis covers the majority of circumstances. The Group will use additional qualitative criteria
when it considers it necessary to include circumstances that are not reflected in the rating/score
systems or macroeconomic scenarios used.
Significant influence
Is the power to participate in the financial and operating policy decisions of the investee but is not control
or joint control of those policies. If an entity holds, directly or indirectly (i.e. through subsidiaries), 20 per
cent or more of the voting power of the investee, it is presumed that the entity has significant influence,
unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or
indirectly (i.e. through subsidiaries), less than 20 per cent of the voting power of the investee, it is
presumed that the entity does not have significant influence, unless such influence can be clearly
demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an
entity from having significant influence.
The existence of significant influence by an entity is usually evidenced in one or more of the following ways:
a) representation on the board of directors or equivalent governing body of the investee;
b) participation in policy-making processes, including participation in decisions about dividends or
other distributions;
c) material transactions between the entity and its investee;
d) interchange of managerial personnel; or
e) provision of essential technical information.
Solely Payments of
Principle and Interest
(SPPI)
Stages
The assessment as to how an asset shall be classified is made on the basis of both the business model for
managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI
Criterion). To determine whether a financial asset shall be classified as measured at amortized cost or
FVOCI, a
Group assesses (apart from the business model) whether the cash flows from the financial asset
represent, on specified dates, solely payments of principal and interest on the principal amount
outstanding (SPPI).
IFRS 9 classifies financial instruments into three categories, which depend on the evolution of their credit
risk from the moment of initial recognition. The first category includes the transactions when they are
initially recognized - without significant increase in credit risk (Stage 1); the second comprises the
operations for which a significant increase in credit risk has been identified since its initial recognition -
significant increase in credit risk (Stage 2) and the third one, the impaired operations Impaired (Stage 3).
The transfer logic is defined in a symmetrical way, whenever the condition that
triggered a transfer to Stage 2 is no longer met, the exposure will be transferred to
Stage 1. In the case of forbearances transferred to stage 2, as long as the loan is flagged as forbearance it
will keep its status as Stage 2. However, when the loan is not flagged as forbearance it will be transferred
back to Stage 1.
Structured credit products Special financial instrument backed by other instruments building a subordination structure.
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Structured Entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks
only and the relevant activities are directed by means of contractual arrangements. A structured entity
often has some or all of the following features or attributes:
a) restricted activities.
b) a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and
development activities, provide a source of capital or funding to an entity or provide investment
opportunities for investors y passing on risks and rewards associated with the assets of the structured
entity to investors.
c) insufficient equity to permit the structured entity to finance its activities without subordinated
financial support.
d) financing in the form of multiple contractually linked instruments to investors that create
concentrations of credit or other risks (tranches).
Subordinated liabilities
Financing received, regardless of its instrumentation, which ranks after the common creditors in the event
of a liquidation.
Subsidiaries
Companies over which the Group exercises control. An entity is presumed to have control over another
when it possesses the right to oversee its financial and operational policies, through a legal, statutory or
contractual procedure, in order to obtain benefits from its economic activities. Control is presumed to exist
when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity's voting
power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an
entity's voting rights does not constitute control of it. Control also exists when the parent owns half or less
of the voting power of an entity when there is:
a) an agreement that gives the parent the right to control the votes of other shareholders;
b) power to govern the financial and operating policies of the entity under a statute or an agreement;
power to appoint or remove the majority of the members of the board of directors or equivalent governing
body and control of the entity is by that board or body;
c) power to cast the majority of votes at meetings of the board of directors or equivalent governing
body and control of the entity is by that board or body.
Tax liabilities
All tax related liabilities except for provisions for taxes.
Territorial bonds
Tier 1 Capital
Financial assets or fixed asset security issued with the guarantee of portfolio loans of the public sector of
the issuing entity.
Mainly includes: Common stock, parent company reserves, reserves in consolidated companies, non-
controlling interests, deductions and others and attributed net income.
Tier 2 Capital
Mainly includes: Subordinated, preferred shares and non- controlling interest.
Unit-link
Write- off
This is life insurance in which the policyholder assumes the risk. In these policies, the funds for the technical
insurance provisions are invested in the name of and on behalf of the policyholder in shares of Collective
Investment Institutions and other financial assets chosen by the policyholder, who bears the investment
risk.
When the recovery of any recognized amount is considered to be remote, this amount is removed from
the consolidated balance sheet, without prejudice to any actions taken by the consolidated entities in order
to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.
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Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk
metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time
level
horizon
confidence
given
and
Value at Risk (VaR)
VaR figures are estimated following two methodologies:
VaR with smoothing, which weighs more recent market information more heavily. This is a
a) VaR without smoothing, which awards equal weight to the daily information for the immediately
preceding last two years. This is currently the official methodology for measuring market risks vis-à-vis
limits compliance of the risk.
b)
metric which supplements the previous one.
c)
VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR
without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when
the markets show less volatile trends, while it will tend to be lower when they present upturns in
uncertainty.
Yield curve risk
Risks arising from changes in the slope and the shape of the yield curve.