The Assets and Liabilities Management unit is responsible for managing structural interest-rate and foreign-exchange positions, the Group’s overall liquidity as well as shareholders’ funds.
Earnings from the management of liquidity and the structural interest-rate positions in each balance sheet are registered in the corresponding areas.
With respect to the management of exchange-rate risk of the BBVA Group’s corporate investments, the results are included in the Corporate Center and explained in detail in the Risk Management section, under the sub-section “Structural Risks”.
The Bank’s capital management has a twofold aim: to maintain levels of capitalization appropriate to the business targets in all the countries in which it operates; and to maximize return on shareholders’ funds through the efficient allocation of capital to the various units, good management of the balance sheet and proportionate use of the various instruments that comprise the Group’s equity: common stock, preferred securities, conditional convertible bonds and subordinated debt.
The highlights of the first quarter of 2014 in the Group’s capital management were as follows:
- The entry into force of Royal Decree 14/2013 of 29 November and Bank of Spain Circular 2/2014, which aim to adapt the European solvency regulations CRD IV (CRR 575/2013 and CRD 2013/36, both of 26 June) to Spanish law. These regulations have a limited impact on the Group’s capital adequacy ratios as can be seen in the Capital base section.
- Two debt issues have strengthened the Group’s capital base and helped optimize its structure under CRD IV:
1. The first was the second issue of contingent convertible securities, eligible as additional Tier I under the new regulations in force, for €1.5 billion and a coupon of 7%. Demand for the issue was over €14 billion, reflecting the high investor appetite for these instruments issued by BBVA.
2. The second was issued early in April. It was a subordinated debt issue for €1.5 billion at 3.5%, and had a demand of over €7 billion, eligible as Tier II under the new solvency requirements.
- The Annual General Meeting held on March 14, 2014 approved the continuation of the “dividend option” shareholder remuneration program, under which shareholders can continue to obtain a broader range of remuneration alternatives for their shares.
All these measures mean that the current levels of the Group’s capitalization easily meet the legal limits, and enable appropriate compliance with all the capital targets, as has been reflected in the Capital Base chapter.
