Risk management

Credit risk

In addition to the significant macroeconomic challenges posed by the COVID-19 pandemic, the global economy is currently facing a number of exceptional challenges. Russia's invasion of Ukraine has caused significant disruption, instability and volatility in the world markets, as well as increased inflation (including contributing to further increases in oil, gas and other commodity prices and further affecting supply chains), and lower economic growth, which has additionally led to aggressive interest rate hikes by central banks that could affect the most leveraged companies, as well as strain the ability of individuals to pay.

In relation to the relief measures for customers affected by the pandemic, and in the second instance, affected by the economic effects derived from the war in Ukraine, in Spain and Peru, the possibility of carrying out extensions both in the maturity period as well as in the grace period in financing with public guarantees are still in force. In Spain, they can be requested by companies and self-employed from June 30, 2022, after the expiration of the Temporary State Aid Framework approved by the European Commission, and in Peru, the Decree was approved in May, with eligibility in this measure in place until June 30, 2023 after the extension of the initial period that ended on December 31, 2022.

In addition, on November 23, 2022, Royal Decree-Law 19/2022, of November 22, was published. It amends the Code of Good Practices, establishes a new Code of Good Practices easing the interest rates hike on mortgage loans agreements related to primary residences, and provides for other structural measures aiming to improve the loan market. BBVA has adhered to the new Code of Good Practices with effect from January 1, 2023.

Regarding the direct exposure of the Group to Russia and Ukraine, this is limited for BBVA, although the Group has taken different measures aimed at reducing its impact, among which are the initial lowering of limits followed by the suspension of operations with Russia, the lowering of internal ratings and the inclusion of the country and its borrowers as impaired for subjective reasons.

However, the indirect risk is greater due to the activity of customers in the affected area or sectors. The economic effects are mainly shown through higher commodity prices, but also through financial and confidence channels, as well as a further deterioration of global supply chain issues.

Calculation of expected losses due to credit risk

In addition to the individualized and collective estimates of the expected losses and the macroeconomic estimates in accordance with what is described in IFRS 9, the estimate at the end of the quarter includes the effect on the expected losses of the macroeconomic forecasts' update, which considers the current global environment, which has been affected by the war in Ukraine, the evolution of interest rates, inflation rates or the prices of commodities.

Additionally, the Group can supplement the expected losses either by the consideration of additional risk drivers, the incorporation of sectorial particularities or that may affect a set of operations or borrowers, following a formal internal process established for the purpose.

During 2022, in the case of Spain, the expected losses of operations considered unlikely to pay were reviewed with an additional provision of €250 million in the income statement for the year 2022, of which 117 million euros correspond to the last quarter.

The complementary adjustments pending allocation to specific operations or clients as of December 31, 2022 totaled €302 million, of which €163 million correspond to Spain, €92 million to Mexico, €25 million to Peru, €11 million to Colombia, €5 million to Chile and €6 million to Rest of Business of the Group. In comparison, as of December 31, 2021, the complementary adjustments pending allocation to specific operations or clients amounted to €311 million, of which €226 million corresponded to Spain, €68 million to Mexico and €18 million euros to Peru. The variation in the year is due to, on the one hand, the revision or partial consumption of the adjustments that were deemed necessary in connection with payment deferrals, public guarantees or sectors most affected by the pandemic and, on the other hand, the additional losses amounting to €150 million relating to exposures to the corporate portfolios mainly of Spain, Mexico, Peru and Colombia (wholesale borrowers and small and medium enterprises) and Rest of Business of the Group, which could be more affected by the economic context of high inflation, interest rates or energy prices.

BBVA Group's credit risk indicators

The evolution of the Group’s main credit risk indicators is summarized below:

  • Credit risk declined by 1.0% (+2.6% at constant exchange rates) between October and December 2022, with an almost generalized growth, at constant exchange rates at Group level, although Spain was affected by the lower volume of corporate and investment banking operations.
  • Reduction in the balance of non-performing loans at Group level between October and December 2022 (-4.6% in current terms and -1.4% at constant rates) positively affected by a non-performing loan portfolio sale in Spain and the foreign exchange rates evolution. Compared to the end of December 2021, the amount of non-performing loans decreased by 6.3% (-6.6% at constant exchange rates).


General note: 2020 excludes BBVA USA and the rest of the companies in the United States sold to PNC on June 1, 2021.

  • The NPL ratio stood at 3.4% as of December 31, 2022, 13 basis points below the figure recorded in September 2022 and 70 basis points below the one of December 2021, with an improvement in this indicator in all business areas during the year.
  • Loan-loss provisions decreased by 6.4% compared to the figure of the third quarter (+2.0% with respect to December 2021), mainly due to the foreign exchange evolution, and affected by the Spain's portfolio sale.
  • The NPL coverage ratio stood at 81%, 156 basis points below the figure of September 2022 (664 basis points higher than at the end of 2021), mainly due to the evolution of the indicator in Spain, which includes the aforementioned impact of the portfolio sale.
  • The cumulative cost of risk as of December 31, 2022 stood at 0.91%, higher than at the end of the third quarter of 2022 but still 2 basis points below the close of 2021, due to higher loan-loss provisions in the quarter for the macroeconomic scenario deterioration in the main geographical areas, coverage increase in those sectors and portfolios most vulnerable to the current environment, and recurring flows on normal (pre-pandemic) level.



31-12-22 30-09-22 30-06-22 31-03-22 31-12-21
Credit risk 424,341 428,619 414,128 395,325 376,011
Non-performing loans 14,463 15,162 15,501 15,612 15,443
Provisions 11,764 12,570 12,159 11,851 11,536
NPL ratio (%) 3.4 3.5 3.7 3.9 4.1
NPL coverage ratio (%)(2) 81 83 78 76 75
  • (1) Includes gross loans and advances to customers plus guarantees given.
  • (2) The NPL coverage ratio includes the valuation adjustments for credit risk throughout the expected residual life in those financial instruments that have been acquired (mainly originating from the acquisition of Catalunya Banc, S.A.). If these valuation corrections had not been taken into account, the NPL coverage ratio would have stood at 80% as of December 31, 2022 and 73% as of December 31, 2021.


4Q22 (1) 3Q22 2Q22 1Q22 4Q21
Beginning balance 15,162 15,501 15,612 15,443 14,864
Entries 2,333 1,871 2,085 1,762 2,875
Recoveries (1,171) (1,595) (1,697) (1,280) (1,235)
Net variation 1,162 276 388 482 1,640
Write-offs (928) (683) (579) (581) (832)
Exchange rate differences and other (933) 67 80 269 (228)
Period-end balance 14,463 15,162 15,501 15,612 15,443
Memorandum item:
Non-performing loans 13,493 14,256 14,597 14,731 14,657
Non performing guarantees given 970 906 904 881 786
  • (1) Preliminary data.

Structural risks

Liquidity and funding

Liquidity and funding management 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. In this context, it is important to notice that, given the nature of BBVA's business, the funding of lending activity is fundamentally carried out through the use of stable customer funds.

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 and funding (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 BBVA Group maintains a solid liquidity position in every geographical area in which it operates, with ratios well above the minimum required:

  • The BBVA Group's liquidity coverage ratio (LCR) remained comfortably above 100% throughout the year 2022, and stood at 159% as of December 31, 2022. For the calculation of this ratio, it is assumed that there is no transfer of liquidity among subsidiaries; i.e. no type of excess liquidity levels in foreign subsidiaries is being considered in the calculation of the consolidated ratio. When considering these excess liquidity levels, the BBVA Group's LCR would stand at 201%.
  • The net stable funding ratio (NSFR), defined as the result between the amount of stable funding available and the amount of stable funding required, demands 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 BBVA Group's NSFR ratio, stood at 135% as of December 31, 2022.

The breakdown of these ratios in the main geographical areas in which the Group operates is shown below:


Eurozone (1) Mexico Turkey South America
LCR 186% 199% 185% All countries >100
NSFR 125% 143% 166% All countries >100
  • (1) BBVA, S.A. liquidity management perimeter: Spain + branches of the outside network.

One of the key elements in BBVA's Group liquidity and funding management is the maintenance of large high quality liquidity buffers in all the geographical areas. In this respect, the Group has maintained for the last 12 months an average volume of high quality liquid assets (HQLA) accounting to €140.3 billion, among which, 95% correspond to maximum quality assets (LCR Tier 1).

It should be noted that the war in Ukraine has not had a significant impact on the liquidity and financing situation of the BBVA Group units during the year 2022. In addition to the above, the most relevant aspects related to the main geographical areas are the following:

  • BBVA, S.A. has maintained a comfortable position with a large high-quality liquidity buffer. During the year 2022, commercial activity has generated liquidity due to the growth in customer deposits above that of lending activity, especially in the last quarter. In December, the Bank started to repay the TLTRO III program for an amount of €12 billion, corresponding to approximately one third of the total drawdown amount. BBVA's solid liquidity situation has allowed the Bank to bring forward a part of the maturities while maintaining, in any case, regulatory liquidity metrics well above the established minimums. At the same time, collateral generation activities have been carried out during the year with the issuance of mortgage and regional bonds to be retained for an amount of €2 billion and the creation of two new mortgage securitization funds, the first one for an amount of €12.4 billion, which groups the assets previously held in seven funds, generating an additional collateral of approximately €3 billion; and the second one for an amount of €1.4 billion.
  • In BBVA Mexico, commercial activity has drained liquidity during 2022, supported by the growth in lending activity, that exceeded the growth of customer funds. Despite this, BBVA Mexico continues to hold a comfortable liquidity position, which has contributed to a cost-efficient funding management in an environment of rising rates.
  • In Turkey, in the year 2022, the lending gap in local currency has been reduced, due to a greater growth in deposits than in loans. The lending gap in foreign currency has increased due to reductions in deposits as a result of the mechanism established to encourage Turkish lira deposits, partially offset by lower loans in foreign currency. Garanti BBVA continues to maintain a stable liquidity position with comfortable ratios. For its part, the Central Bank of Turkey has continued to implement measures in order to reduce the dollarization of the economy.
  • In South America, the liquidity situation remains adequate throughout the region. In Argentina, liquidity continues to increase in the system and in BBVA due to a higher growth in deposits than in loans in local currency. In BBVA Colombia, a greater growth in lending activity is shown, compared to the growth in funds, non-compromising the liquidity situation of the bank due to the increase in the collection of longer-term deposits. BBVA Peru maintains solid liquidity levels, thanks to the solid growth of deposits in an environment of reduced local currency lending due to the expiration of loans covered by COVID-19 programs. The recent political instability is not having material impacts in terms of liquidity.

The main wholesale financing transactions carried out by the companies of the BBVA Group are listed below:

In relation to BBVA, S.A., during the year 2022 the following issuances were made:

  Type of issue Date of issue Nominal (millions) Currency Coupon Early redemption Maturity date
  Senior non-preferred Jan-22 1,000 EUR 0.875 % Jan-28 Jan-29
  Senior preferred May-22 1,250 EUR 1.750 % Nov-25
  Senior preferred May-22 500 EUR Euribor 3M + 1% Nov-25
  Senior preferred May-22 100 EUR 1.000 % May-24
  Senior preferred Jul-22 865 EUR Euribor 3M + 0.7% Jul-24
  Senior non-preferred Sep-22 1,000 USD 5.862 % Sep-25 Sep-26
  Senior non-preferred Sep-22 750 USD 6.138 % Sep-27 Sep-28
  Senior preferred Sep-22 1,250 EUR 3.375 % Sep-27
Bono verde Senior preferred (green bond) Oct-22 1,250 EUR 4.375 % Oct-29
  Seniorpreferred Oct-22 100 EUR 4.250 % Oct-34
Bono verde Senior preferred (green bond) Nov-22 215 CHF 2.408 % Nov-25
Bono verde Senior preferred (green bond) Nov-22 210 CHF 2.770 % Nov-28

Additionally, in May 2022, the preferred shares eventually convertible into common shares of BBVA (CoCos) issued by BBVA in May 2017 were redeemed early. In June 2022, a securitization of loans for the financing of vehicles was completed for an amount of €1,200m.

In January 2023 BBVA carried out two public bond issuance operations: a senior non-preferred bond for €1,000m with a term of 8 years and an early redemption option in the 7th year at 4.625% and a €1,500m mortgage bond with a term of 4 and a half years at 3.125%.

For its part, on June 21, BBVA Mexico issued a sustainable bond for 10 billion Mexican pesos (€480m, approximately), thus becoming the first private bank to carry out an issue of this type in Mexico, using the TIIE (Balanced Interbank Interest Rate used in Mexico) rate as benchmark.

Garanti BBVA renewed, on June 7, 100% of a syndicated loan indexed to environmental, social and corporate governance (ESG) criteria that consists of two separate tranches of USD 283.5m and €290.5m, both with a maturity of one year. On December 5, Garanti BBVA renewed the second part of a syndicated loan (USD 155m and €239m) with a ratio of 65% according to its strategy and in line with the banks of the peer group. The price was higher than the previous tranche due to market risk (E+400; SOFR 425). Garanti BBVA also provided sustainable funding of USD 75m in 2022.

Lastly, BBVA Colombia closed a financing with the International Finance Corporation (IFC) in November for USD 60m for a 3- year term. This operation joins the USD 200m for a 5-year term signed in June and the USD 40m for a 3-year term signed in September. The use of funds is applied to boost the financing and construction of energy-sustainable buildings and reduce CO2 emissions, among others.

Foreign exchange

Foreign exchange risk management aims to reduce both the sensitivity of the capital ratios and the net attributable profit variability to currency fluctuations.

In the year 2022, foreign exchange markets have been influenced by the central banks' actions to control inflation -aggravated by the war in Ukraine- and the political uncertainties in some countries. This context has benefited the U.S. dollar, which has appreciated 6.2% against a euro, which was particularly penalized until October. The currencies of Latin America have presented an uneven performance in the year 2022. The Mexican peso and the Peruvian sol appreciated by 11.0% against the euro, and the Chilean peso by 4.4%. For its part, the Argentine peso accumulated a depreciation of 38.3% and the Colombian peso of 12.1%. With regard to the Turkish lira, the high inflation environment and the very lax monetary policies continue to negatively affect the currency, losing a 23.7% against the euro during the year.


Year-end exchange rates Average exchange rates

∆% on
∆% on

∆% on
U.S. dollar 1.0666 6.2 (8.6) 1.0532 12.3
Mexican peso 20.8560 11.0 (5.8) 21.1889 13.2
Turkish lira (1) 19.9649 (23.7) (9.4) - -
Peruvian sol 4.0572 11.0 (4.6) 4.0309 13.8
Argentine peso (1) 188.51 (38.3) (23.9) - -
Chilean peso 916.75 4.4 2.7 917.69 (2.2)
Colombian peso 5,130.56 (12.1) (13.9) 4,469.08 (0.9)
  • (1) According to IAS 21 "The effects of changes in foreign exchange rates", the year-end exchange rate is used for the conversion of the Turkey and Argentina income statement.

In relation to the hedging of the capital ratios, BBVA covers, in aggregate, 70% of its subsidiaries capital excess. The sensitivity of the Group's CET1 fully-loaded ratio to 10% depreciations in major currencies is estimated at: +19 basis points for the U.S. dollar, -5 basis points for the Mexican peso and -5 basis points for the Turkish lira. With regard to the hedging of results, BBVA hedges between 40% and 50% of the aggregate net attributable profit it expects to generate in the next 12 months. For each currency, the final amount hedged depends on its expected future evolution, the costs and the relevance of the incomes related to the Group's results as a whole.

Interest rate

Interest rate risk management seeks to limit the impact that BBVA may suffer, both in terms of net interest income (short-term) and economic value (long-term), from adverse movements in the interest rate curves in the various currencies in which the Group operates. BBVA carries out this work through an internal procedure, pursuant to the guidelines established by the European Banking Authority (EBA), in order to analyze the potential impact that could derive from 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 observed behavior.

At the aggregate level, BBVA continues to maintain a moderate risk profile, in accordance with the established objective, showing positive sensitivity toward interest rate increases in the net interest income.

Regarding relevant events in financial markets, the ECB, with the aim of curbing inflation, began the process of raising interest rates in July 2022, with a 250 basis points increase in the year. Although additional increases are expected in 2023 if inflation remains at high levels. For its part, the FED accumulates 425 basis points increase in 2022. Regarding fixed-income markets, the valuations were affected by the strong general increase of the interest rates and the widening of risk premiums, in line with the inflation estimation, which is expected to continue above the reference levels. The Spanish and Italian debt spreads deteriorate with widening compared to the German curve, especially in Italy. With regard to Mexico and South America, similar flattening moves to those of the United States, continuing with the rate hikes cycle. For its part, Turkey has set the monetary policy rate at 9.0%, making successive cuts of 500 basis points between August and November of 2022.

By area, the main features are:

  • Spain has a balance sheet characterized by a high proportion of variable-rate loans (mortgages and corporate lending) and liabilities composed mainly by customer demand deposits. The ALCO portfolio acts as a management lever and hedging for the balance sheet, mitigating its sensitivity to interest rate fluctuations. The balance sheet interest rate risk profile remained stable during the year, with Spain as the franchise with the highest positive sensitivity to rates in the Group.

    On the other hand, as mentioned, at the end of December 2022 the ECB set the benchmark interest rate at 2.5%, held the marginal deposit facility rate at 2.0% and the marginal loan facility rate at 2.75%. Thus, the European benchmark interest rates (Euribor) showed significant increases in the year. In this regard, customer spread is starting to benefit from interest rate hikes, expected to continue in the coming quarters.

  • Mexico continues to show a balance between fixed and variable interest rates balances, which represents a limited sensitivity to interest rates fluctuations. In terms of assets that are most sensitive to interest rate fluctuations, the commercial portfolio stands out, while consumer loans and mortgages are mostly at a fixed rate. With regard to the customer funds, the high proportion of non-interest bearing deposits should be highlighted, which are insensitive to interest rate movements. The ALCO portfolio is invested primarily in fixed-rate sovereign bonds with limited maturities. The monetary policy rate stands at 10,50%, 500 basis points above the end-of-year level of 2021. Regarding client spread, there has been improvement so far in 2022, favored by both the contained cost of deposits and the positive evolution of yield on loan.
  • In Turkey, the sensitivity of loans, which are mostly fixed-rate but with relatively short maturities, and the ALCO portfolio balance the sensitivity of deposits on the liability side. The interest rate risk is thus limited, both in Turkish lira and in foreign currencies. However, the economic value risk increases in 2022 mainly due to the compulsory purchases of bonds required by the local supervisor. Customer spread improved in 2022 due to the lower cost of deposits.
  • In South America, the interest rate risk profile remains low as most countries in the area have a fixed/variable composition and maturities that are very similar for assets and liabilities, with limited net interest income sensitivity. 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. Regarding the benchmark rates of the central banks of Peru and Colombia, they rose the interest rates by 500 and 900 basis points, respectively, in 2022. Customer spreads improved in Peru, impacted by an interest rates hikes environment, while falling in Colombia, affected by the highest increase in the cost of deposits derived from a faster liabilities repricing than assets repricing as a result of a sharp interest rates hikes.


31-12-22 30-09-22 30-06-22 31-03-22 31-12-21 30-09-21 30-06-21 31-03-21
Official ECB rate 2.50 1.25 0.00 0.00 0.00 0.00 0.00 0.00
Euribor 3 months (1) 2.06 1.01 (0.24) (0.50) (0.58) (0.55) (0.54) (0.54)
Euribor 1 year (1) 3.02 2.23 0.85 (0.24) (0.50) (0.49) (0.48) (0.49)
USA Federal rates 4.50 3.25 1.75 0.50 0.25 0.25 0.25 0.25
TIIE (Mexico) 10.50 9.25 7.75 6.50 5.50 4.75 4.25 4.00
CBRT (Turkey) 9.00 12.00 14.00 14.00 14.00 18.00 19.00 19.00
  • (1) Calculated as the month average.