financial statements 2012

7. BBVA Group solvency and capital ratios

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The Group capital base Millions of Euros
2012 2011 % Change
Stockholders' funds 43,614 40,952 6.5
Adjustments (9,401) (10,221) (8.0)
Mandatory convertible bonds 1,238 3,430 (63.9)
CORE CAPITAL 35,451 34,161 3.8
Preferred securities 1,860 1,759 5.7
Adjustments (1,860) (1,759) 5.7
CAPITAL (TIER I) 35,451 34,161 3.8
Subordinated debt and other 10,022 11,258 (11.0)
Deductions (2,636) (2,649) (0.5)
CAPITAL BASE (TIER I + TIER II) (a) 42,836 42,770 0.2
Minimum capital requirement (BIS II Regulations) 26,323 26,462 (0.5)
CAPITAL SURPLUS 16,514 16,308 1.3
RISK WEIGHTED ASSETS (b) 329,033 330,771 (0.5)

BIS RATIO (a)/(b)



CORE CAPITAL 10.8% 10.3%
TIER I 10.8% 10.3%
TIER II 2.2% 2.6%

The BBVA Group’s capital base, calculated in accordance with the rules defined in the Basel II capital accord, stood at €42,836 million as of December 31, 2012, in line with the figure as of December 31, 2011.

Risk-weighted assets (RWA) barely decreased over the period, reaching €329,033 million as of December 31, 2012. The deleveraging process in Spain, reduced activity with wholesale customers, and the sale of the Puerto Rico subsidiary have countered the positive effects on this item, such as the strength of the banking business in emerging countries and the incorporation of Unnim.

The minimum capital requirements under BIS II (8% of RWA) amounted to €26,323 million as of December 31, 2012. Thus the excess capital resources over and above the 8% of the risk-weighted assets required by the regulations stood at €16,514 million. Therefore, the Group has 62.7% of capital above the minimum required levels.

The quality of the capital base has improved, since core capital as of December 31, 2012 amounted to €35,451 million, up on the €34,161 million as of December 31, 2011. The increase is basically due to the generation of earnings attributed both to the Group and to non-controlling interests, and to foreign exchange differences (see Note 4 to the accompanying consolidated financial statements).

Core capital accounted for 10.8% of risk-weighted assets, compared with 10.3% as of December 31, 2011, an increase of 50 basis points.

Tier I capital stood at €35,451 million as of December 31, 2012. This amounts to 10.8% of risk-weighted assets, 50 basis points up on the figure for December 31, 2011. Preferred securities account for 5.25% of Tier I capital.

As of December 31, 2012, Tier II capital reached €7,386 million, i.e. 2.2% of risk-weighted assets, and is down 40 basis points, due mainly to repurchases and conversions of subordinated debt.

By aggregating Tier I and Tier II capital, as of December 31, 2012, the BIS total capital ratio is 13.0%, similar to the figure as of December 31, 2011.

Other requirements on minimum capital levels

Irrespective of the aforementioned requirements, in 2011, the European Banking Authority (EBA) issued the recommendation of reaching, as of June 30, 2012, a new minimum capital level of 9%, in the ratio known as Core Tier 1 (CT1). In addition, this minimum ratio should have a sufficient excess amount to absorb the “sovereign buffer”, calculated based on sovereign exposure (see section on “Exposure to sovereign risk in Europe”). As of June 30, 2012, the BBVA Group’s EBA Core Tier I capital stood at 9.9%, thus complying with the minimum required level.

The Bank of Spain endorsed these recommendations for the Spanish banks that took part in the exercise conducted by the EBA, extending beyond June 30, 2012 the maintenance of that recommended minimum ratio. As of December 31, 2012, the BBVA Group continues to maintain an EBA Core Tier I above the required minimum, at 9.7% (provisional figure).