The BBVA board determines, and reviews on a recurrent basis, the risk appetite for its various activities. As the business cycle changes, so does the Group’s risk exposure. In its pursuit of superior returns to shareholders, the board is aware that BBVA must take on a proportionate amount of risk.
In its risk management tasks, the board is assisted by the executive committee and a risk committee. In parallel, the corporate risk unit establishes global risk management strategies and policies while the business areas’ risk units set customer risk profiles within the corporate policy framework.
The economic capital required to cover losses is calculated by integrating the various risks managed by the Group. Through risk diversification, BBVA’s needs of total economic capital are lower than the sum of the economic capital needs of its individual activities.
Risk integration at BBVA recognizes the benefit of diversification. Measurement of risk is a two-stage process: first, risks (credit, market and other) are defined individually according to their specific features; then, they are aggregated using a model that takes risk inter-dependency into account.