BBVA’s business model is one that aims to forge and maintain lasting relations with its customers. Because of this, the basic goal of preparing refinanced or restructured operations it to provide customers with a lasting financial viability over time in the face of temporary difficulties, and to adapt debt payments to the Bank to the customers’ new situation of fund generation. In other words, this tool is used to resolve problems of temporary liquidity, and not solvency, that customers may have with the Bank at any given time. Refinancing and restructuring is therefore a management tool; its use for other purposes, such as delaying loss recognition, is against the BBVA Group’s policy. It should be noted that BBVA has always had each of the refinancing/restructuring operations it has carried out duly identified and classified. These operations are monitored closely and, depending on their development, the Group’s philosophy on this question is to classify refinanced risks as non-performing, substandard or normal according to the recommendations issued by the supervisor for these operations.
With respect to the classification of refinanced loans, the supervisor’s recommendations have been applied in the third quarter. It is important to note that this application has entailed no changes in BBVA’s management criteria, as it only involves the implementation of stricter accounting standards that will enable greater comparability with the system as a whole, once the banks have implemented these changes. The main impacts of the application of these recommendations are described below:
- Increase of €3,864m in the balance of non-performing loans in Spain due to this classification of refinanced loans. This increase is concentrated mainly on the retail mortgage and real-estate portfolios.
- The volume of loans classified as non-performing is classified as subjective non-performing loans, as they correspond to customers who are currently up to date with their payments.
- In terms of loan-loss provisions, the application of this recommendation has resulted in an additional provisioning of €600m against impairment losses on financial assets, which has been registered in the third quarter.
