Contents
FINANCIAL STATEMENTS
Balance sheets ................................ ................................ ................................ ................................ ................................ ........................ 4
Income statements ................................................................ ................................ ................................ ................................ ................... 7
Statements of recognized income and expenses ................................ ................................ ................................ ................................ ...... 8
Statements of changes in equity ................................ ................................ ................................ ................................ ............................... 9
Statements of cash flows ................................ ................................ ................................ ................................ ................................ ........ 11
NOTES TO THE ACCOMPANYING FINANCIAL STATEMENTS
1.
Introduction, basis for presentation of the Financial Statements, Internal Control over Financial Information and other
information ................................ ................................ ................................ ................................ ................................ .......... 12
2.
Accounting policies and valuation criteria applied ................................ ................................ ................................ ............... 15
3.
Shareholder remuneration system ................................ ................................ ................................ ................................ ...... 32
4.
Earnings per share................................ ................................ ................................ ................................ .............................. 33
5.
Risk management ................................ ................................ ................................ ................................ ............................... 33
6.
Fair value of financial instruments ................................ ................................ ................................ ................................ ....... 69
7.
Cash, cash balances at central banks and other demand deposits ................................................................ ..................... 79
8.
Financial assets and liabilities held for trading................................................................ ................................ ..................... 80
9.
Non-trading financial assets mandatorily at fair value through profit or loss ................................ ................................ ......... 81
10.
Financial assets and liabilities designated at fair value through profit or loss ................................ ................................ ....... 82
11.
Financial assets at fair value through other comprehensive income ................................ ................................ .................... 82
12.
Financial assets at amortized cost ................................ ................................ ................................ ................................ ...... 85
13.
Hedging derivatives and fair value changes of the hedged items in portfolio hedges of interest rate risk ............................. 88
14.
Investments in subsidiaries, joint ventures and associates ................................ ................................ ................................ .. 91
15.
Tangible assets ................................ ................................ ................................ ................................ ................................ ... 95
16.
Intangible assets ................................ ................................ ................................ ................................ ................................ . 97
17.
Tax assets and liabilities ................................................................ ................................ ................................ ..................... 97
18.
Other assets and liabilities ................................ ................................ ................................ ................................ ................ 101
19.
Non-current assets and disposal groups classified as held for sale and liabilities included in disposal groups classified
as held for sale ................................................................ ................................ ................................ ................................ . 101
20.
Financial liabilities at amortized cost ................................ ................................ ................................ ................................ . 104
21.
Provisions ................................ ................................ ................................ ................................ ................................ ......... 109
22.
Post-employment and other employee benefit commitments................................................................ ............................. 111
23.
Common stock ................................ ................................ ................................ ................................ ................................ .. 117
24.
Share premium ................................ ................................ ................................ ................................ ................................ . 118
25.
Retained earnings, Revaluation reserves and Other ................................ ................................ ................................ ......... 118
26.
Treasury shares ................................ ................................ ................................ ................................ ................................ 120
27.
Accumulated other comprehensive income (loss) ................................ ................................ ................................ ............. 121
28.
Capital base and capital management ................................ ................................ ................................ .............................. 121
29.
Commitments and guarantees given ................................ ................................ ................................ ................................ . 125
30.
Other contingent assets and liabilities ................................ ................................ ................................ ............................... 126
31.
Purchase and sale commitments and future payment obligations ................................................................ ..................... 126
32.
Transactions on behalf of third parties ................................................................ ................................ .............................. 126
33.
Net interest income ................................ ................................ ................................ ................................ ........................... 126
34.
Dividend income ................................................................ ................................ ................................ ............................... 127
35.
Fee and commission income ................................................................ ................................ ................................ ............ 127
36.
Fee and commission expense................................................................ ................................ ................................ ........... 128
37.
Gains (losses) on financial assets and liabilities, hedge accounting and exchange differences, net ................................ .. 128
38.
Other operating income and expense ................................................................ ................................ ............................... 129
39.
Administration expense ................................ ................................ ................................ ................................ ..................... 130
40.
Depreciation ................................ ................................ ................................ ................................ ................................ ..... 132
41.
Provisions or (reversal) of provisions ................................ ................................ ................................ ................................ 132
42.
Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss or net
gains by modification ................................................................ ................................ ................................ ........................ 133
43.
Impairment or (reversal) of impairment on investments in subsidiaries, joint ventures or associates. ................................ 133
44.
Impairment or reversal of impairment on non-financial assets ................................ ................................ ........................... 133
45.
Gain (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued
operations ................................ ................................ ................................ ................................ ................................ ......... 134
46.
Statements of cash flows ................................ ................................ ................................ ................................ .................. 134
47.
Accountant fees and services ................................ ................................ ................................ ................................ ........... 135
48.
Related-party transactions ................................ ................................ ................................ ................................ ................ 136
49.
Remuneration and other benefits for the Board of Directors and members of the Bank's Senior Management .................. 138
50.
Other information ................................ ................................ ................................ ................................ .............................. 145
51.
Subsequent events ................................ ................................ ................................ ................................ ........................... 147
52.
Explanation added for translation into English ................................ ................................ ................................ ................... 147
APPENDICES
APPENDIX I. BBVA Group Consolidated Financial Statements ................................ ................................ ................................ ............. 149
APPENDIX II.
Additional information on subsidiaries and structured entities composing the BBVA Group ................................ ............ 158
APPENDIX III.
Additional information on investments and jointly controlled companies accounted for under the equity method of
consolidation in the BBVA Group as of December 31, 2020 ................................ ................................ .............................. 166
APPENDIX IV.
Changes and notification of investments and divestments in the BBVA Group in 2020 .................................................. 167
APPENDIX V.
Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2020 ....... 169
APPENDIX VI. BBVA Group’s structured entities. Securitization funds as of December, 31 2020 ................................ .......................... 170
APPENDIX VII. BBVA Group’s structured entities. Securitization funds as of December 31, 2020 ................................ .......................... 171
APPENDIX VIII.
Balance sheets held in foreign currency as of December 31, 2020 and 2019 ................................ .............................. 172
APPENDIX IX.
Income statement corresponding to the first and second half of 2020 and 2019............................................................. 173
APPENDIX X. Information on data derived from the special accounting registry and other information bonds ........................................ 174
APPENDIX XI.
Risks related to the developer and real-estate sector in Spain ................................ ................................ ....................... 181
APPENDIX XII.
Refinanced and restructured operations and other requirements under Bank of Spain Circular 6/2012 .......................... 186
APPENDIX XIII.
Agency Network ................................................................ ................................ ................................ ........................ 194
Glossary
MANAGEMENT REPORT
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Balance sheets for the years ended December 31, 2020 and 2019
ASSETS (Millions of Euros)
Notes
2020
2019 (*)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS
7
44,107
18,419
FINANCIAL ASSETS HELD FOR TRADING
8
87,677
83,841
Derivatives
36,545
31,987
Equity instruments
10,682
8,205
Debt securities
9,983
10,213
Loans and advances to central banks
53
484
Loans and advances to credit institutions
19,472
20,688
Loans and advances to customers
10,941
12,263
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH
PROFIT OR LOSS
9
409
855
Equity instruments
183
125
Debt securities
142
128
Loans and advances to customers
84
602
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
10
-
-
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
11
37,528
24,905
Equity instruments
881
1,749
Debt securities
36,648
23,156
FINANCIAL ASSETS AT AMORTIZED COST
12
225,914
225,369
Debt securities
23,241
21,496
Loans and advances to central banks
7
5
Loans and advances to credit institutions
8,762
8,049
Loans and advances to customers
193,903
195,819
DERIVATIVES - HEDGE ACCOUNTING
13
1,011
953
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF
INTEREST RATE RISK
13
51
28
INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
14
18,380
30,563
Subsidiaries
17,547
29,445
Joint ventures
54
54
Associates
780
1,065
TANGIBLE ASSETS
15
3,915
4,467
Properties, plant and equipment
3,836
4,384
For own use
3,836
4,384
Other assets leased out under an operating lease
-
-
Investment properties
80
83
INTANGIBLE ASSETS
16
840
905
Goodwill
-
-
Other intangible assets
840
905
TAX ASSETS
17
12,764
13,760
Current tax assets
633
1,443
Deferred tax assets
12,131
12,317
OTHER ASSETS
18
2,837
2,600
Insurance contracts linked to pensions
22
2,074
2,096
Inventories
-
-
Other
763
504
NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR
SALE
19
9,978
967
TOTAL ASSETS
445,411
407,632
(*) Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Balance sheets for the years ended December 31, 2020 and 2019
LIABILITIES AND EQUITY (Millions of Euros)
Notes
2020
2019 (*)
FINANCIAL LIABILITIES HELD FOR TRADING
8
69,514
73,362
Derivatives
35,396
31,501
Short positions
9,625
9,956
Deposits from central banks
1,256
1,867
Deposits from credit institutions
16,083
24,425
Customer deposits
7,154
5,612
Debt certificates
-
-
Other financial liabilities
-
-
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT
OR LOSS
10
3,267
2,968
Deposits from central banks
-
-
Deposits from credit institutions
-
-
Customer deposits
3,267
2,968
Debt certificates
-
-
Other financial liabilities
-
-
Memorandum item: Subordinated liabilities
-
-
FINANCIAL LIABILITIES AT AMORTIZED COST
20
331,189
285,260
Deposits from central banks
37,903
24,390
Deposits from credit institutions
22,106
18,201
Customer deposits
217,360
191,461
Debt certificates
43,692
40,845
Other financial liabilities
10,127
10,362
Memorandum item: Subordinated liabilities
11,096
10,362
DERIVATIVES - HEDGE ACCOUNTING
13
1,510
1,471
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES
OF INTEREST RATE RISK
13
-
-
PROVISIONS
21
4,449
4,616
Pensions and other post employment defined benefit obligations
3,544
3,810
Other long term employee benefits
18
25
Provisions for taxes and other legal contingencies
439
359
Commitments and guarantees given
270
235
Other provisions
177
188
TAX LIABILITIES
17
1,071
1,120
Current tax liabilities
173
149
Deferred tax liabilities
898
972
OTHER LIABILITIES
18
1,543
1,645
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR
SALE
-
-
TOTAL LIABILITIES
412,543
370,444
(*) Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A
.
Balance sheets for the years ended December 31, 2020 and 2019
LIABILITIES AND EQUITY (Continued) (Millions of Euros)
Notes
2020
2019 (*)
SHAREHOLDERS’ FUNDS
33,992
37,570
Capital
23
3,267
3,267
Paid up capital
3,267
3,267
Unpaid capital which has been called up
-
-
Share premium
24
23,992
23,992
Equity instruments issued other than capital
-
-
Equity component of compound financial instruments
-
-
Other equity instruments issued
-
-
Other equity
34
48
Retained earnings
25
8,859
9,107
Revaluation reserves
25
-
-
Other reserves
25
31
1
Less: treasury shares
26
(9)
-
Profit or loss attributable to owners of the parent
(2,182)
2,241
Less: interim dividends
-
(1,086)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
27
(1,124)
(381)
Items that will not be reclassified to profit or loss
(1,376)
(520)
Actuarial gains (losses) on defined benefit pension plans
(61)
(75)
Non-current assets and disposal groups classified as held for sale
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income
(1,294)
(469)
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair
value through other comprehensive income
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedged item)
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedging instrument)
-
-
Fair value changes of financial liabilities at fair value through profit or loss
attributable to changes in their credit risk
(21)
24
Items that may be reclassified to profit or loss
252
138
Hedge of net investments in foreign operations (effective portion)
-
-
Foreign currency translation
-
-
Hedging derivatives. Cash flow hedges (effective portion)
(100)
(196)
Fair value changes of debt instruments measured at fair value through other
comprehensive income
352
335
Hedging instruments (non-designated items)
-
-
Non-current assets and disposal groups classified as held for sale
-
-
TOTAL EQUITY
32,867
37,189
TOTAL EQUITY AND TOTAL LIABILITIES
445,411
407,632
MEMORANDUM ITEM - OFF BALANCE SHEET EXPOSURES (Millions of Euros)
Notes
2020
2019 (*)
Loan commitments given
29
80,959
73,582
Financial guarantees given
29
8,745
9,086
Other commitments given
29
25,711
28,151
(*) Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Income statements for the years ended December 31, 2020 and 2019.
INCOME STATEMENTS (Millions of Euros)
Notes
2020
2019 (*)
Interest income
33
4,629
4,933
Financial assets at fair value through other comprehensive income
253
285
Financial assets at amortized cost
3,839
4,295
Other interest income
536
353
Interest expense
33
(1,115)
(1,548)
NET INTEREST INCOME
3,514
3,385
Dividend income
34
1,360
2,853
Fee and commission income
35
2,125
2,144
Fee and commission expense
36
(358)
(447)
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through
profit or loss, net
37
87
107
Financial assets at amortized cost
100
35
Other financial assets and liabilities
(13)
72
Gains (losses) on financial assets and liabilities held for trading, net
37
353
375
Reclassification of financial assets from fair value through other comprehensive income
-
-
Reclassification of financial assets from amortized cost
-
-
Other profit or loss
353
375
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net
37
28
35
Reclassification of financial assets from fair value through other comprehensive income
-
-
Reclassification of financial assets from amortized cost
-
-
Other profit or loss
28
35
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net
37
(69)
(101)
Gains (losses) from hedge accounting, net
37
13
21
Exchange differences, net
37
(29)
(133)
Other operating income
38
142
125
Other operating expense
38
(529)
(487)
GROSS INCOME
6,637
7,877
Administrative expense
39
(3,553)
(3,881)
Personnel expense
(2,144)
(2,394)
Other administrative expense
(1,409)
(1,487)
Depreciation and amortization
40
(663)
(673)
Provisions or reversal of provisions
41
(475)
(391)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or
loss or net gains by modification
42
(1,232)
(175)
Financial assets measured at amortized cost
(1,228)
(176)
Financial assets at fair value through other comprehensive income
(4)
1
NET OPERATING INCOME
715
2,757
Impairment or reversal of impairment of investments in subsidiaries, joint ventures and associates
43
(319)
(610)
Impairment or reversal of impairment on non-financial assets
(105)
(78)
Tangible assets
(105)
(80)
Intangible assets
-
-
Other assets
-
2
Gains (losses) on derecognition of non - financial assets and subsidiaries, net
1
(1)
Negative goodwill recognized in profit or loss
-
-
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying
as discontinued operations
44
(43)
(31)
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
249
2,037
Tax expense or income related to profit or loss from continuing operations
17
(36)
49
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS
213
2,086
Profit (loss) after tax from discontinued operations
14
(2,396)
155
PROFIT(LOSS) FOR THE YEAR
(2,182)
2,241
(*) Presented for comparison purposes only (Note 1.3).
(**) Mainly due to BBVA USA (see Note 14).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Statements of recognized income and expenses for the years ended December 31, 2020 and
2019.
STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)
2020
2019 (*)
PROFIT RECOGNIZED IN INCOME STATEMENT
(2,182)
2,241
OTHER RECOGNIZED INCOME (EXPENSE)
(643)
(373)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
(757)
(367)
Actuarial gains (losses) from defined benefit pension plans
13
3
Non-current assets and disposal groups classified as held for sale
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income
(786)
(271)
Gains (losses) from hedge accounting of equity instruments at fair value through other
comprehensive income, net
-
-
Fair value changes of financial liabilities at fair value through profit or loss attributable to
changes in their credit risk
4
(133)
Other valuation adjustments
-
-
Income tax related to items not subject to reclassification to income statement
12
34
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
114
(6)
Hedge of net investments in foreign operations (effective portion)
-
-
Foreign currency translation
-
-
Translation gains (losses) taken to equity
-
-
Transferred to profit or loss
-
-
Other reclassifications
-
-
Cash flow hedges (effective portion)
92
(115)
Valuation gains (losses) taken to equity
92
(115)
Transferred to profit or loss
-
-
Transferred to initial carrying amount of hedged items
-
-
Other reclassifications
-
-
Hedging instruments (non-designated elements)
-
-
Valuation gains (losses) taken to equity
-
-
Transferred to profit or loss
-
-
Other reclassifications
-
-
Debt securities at fair value through other comprehensive income
25
107
Valuation gains (losses) taken to equity
86
173
Transferred to profit or loss
(61)
(66)
Other reclassifications
-
-
Non-current assets and disposal groups held for sale
-
-
Income tax relating to items subject to reclassification to income statements
(3)
2
TOTAL RECOGNIZED INCOME/EXPENSE
(2,825)
1,868
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a
discrepancy, the original Spanish -language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Statements of changes in equity for the years ended December 31, 2020 and 2019.
STATEMENT OF CHANGES IN EQUITY (Millions of Euros)
Capital
(Note 23)
Share
Premium
(Note 24)
Equity
instruments
issued
other than
capital
Other
Equity
Retained
earnings
(Note
25)
Revaluation
reserves
(Note 25)
Other
reserves
(Note
25)
(-)
Treasury
shares
(Note
26)
Profit or
loss
attributable
to owners
of the
parent
Interim
dividends
(Note 3)
Accumulated
other
comprehensive
income
(Note 27)
Total
Balances as of January 1, 2020
3,267
23,992
-
48
9,107
-
1
-
2,241
(1,086)
(381)
37,189
Total income/expense recognized
-
-
-
-
-
-
-
-
(2,182)
-
(643)
(2,825)
Other changes in equity
-
-
-
(14)
(248)
-
30
(9)
(2,241)
1,086
(101)
(1,497)
Issuances of common shares
-
-
-
-
-
-
-
-
-
-
-
-
Issuances of preferred shares
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
Settlement or maturity of other equity instruments issued
-
-
-
-
-
-
-
-
-
-
-
-
Conversion of debt on equity
-
-
-
-
-
-
-
-
-
-
-
-
Common Stock reduction
-
-
-
-
-
-
-
-
-
-
-
-
Dividend distribution
-
-
-
-
(1,067)
-
-
-
-
-
-
(1,067)
Purchase of treasury shares
-
-
-
-
-
-
-
(688)
-
-
-
(688)
Sale or cancellation of treasury shares
-
-
-
-
-
-
(5)
679
-
-
-
674
Reclassification of other equity instruments to financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
Reclassification of financial liabilities to other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
Transfers within total equity
-
-
-
(2)
1,206
-
51
-
(2,241)
1,086
(100)
-
Increase/Reduction of equity due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
-
-
-
-
-
-
-
-
-
Other increases or (-) decreases in equity
-
-
-
(12)
(387)
-
(16)
-
-
-
-
(415)
Balances as of December 31, 2020
3,267
23,992
-
34
8,859
-
31
(9)
(2,182)
-
(1,124)
32,867
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a
discrepancy, the original Spanish -language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Statements of changes in equity for the years ended December 31, 2020 and 2019 (continued)
STATEMENT OF CHANGES IN EQUITY (Millions of Euros)
2019 (*)
Share
Premium
Equity
instruments
issued
other than
capital
Other
Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-)
Treasury
shares
(Note
26)
Profit or
loss
attributable
to owners
of the
parent
Interim
dividends
Accumulated
other
comprehensive
income
Total
0
Balances as of January 1, 2019
3,267
23,992
-
46
8,829
-
(30)
(23)
2,450
(1,114)
(8)
37,409
Effect of changes in accounting policies
-
-
-
-
-
-
1
-
-
-
-
1
Adjusted initial balance
3,267
23,992
-
46
8,829
-
(29)
(23)
2,450
(1,114)
(8)
37,410
Total income/expense recognized
-
-
-
-
-
-
-
-
2,241
-
(373)
1,868
Other changes in equity
-
-
-
1
278
-
29
23
(2,450)
28
-
(2,089)
Issuances of common shares
-
-
-
-
-
-
-
-
-
-
-
-
Issuances of preferred shares
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
Settlement or maturity of other equity instruments issued
-
-
-
-
-
-
-
-
-
-
-
-
Conversion of debt on equity
-
-
-
-
-
-
-
-
-
-
-
-
Common Stock reduction
-
-
-
-
-
-
-
-
-
-
-
-
Dividend distribution
-
-
-
-
(1,067)
-
-
-
-
(1,086)
-
(2,153)
Purchase of treasury shares
-
-
-
-
-
-
-
(933)
-
-
-
(933)
Sale or cancellation of treasury shares
-
-
-
-
-
-
36
956
-
-
-
993
Reclassification of other equity instruments to financial
liabilities
-
-
-
-
-
-
-
-
-
-
-
-
Reclassification of financial liabilities to other equity
instruments
-
-
-
-
-
-
-
-
-
-
-
-
Transfers within total equity
-
-
-
(1)
1,345
-
(8)
-
(2,450)
1,114
-
-
Increase/Reduction of equity due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
-
-
-
-
-
-
-
-
-
Other increases or (-) decreases in equity
-
-
-
2
-
-
1
-
-
-
-
3
Balances as of December 31, 2019
3,267
23,992
-
48
9,107
-
1
-
2,241
(1,086)
(381)
37,189
(*) Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Statements of cash flows for the years ended December 31, 2020 and 2019.
CASH FLOWS STATEMENTS (Millions of Euros)
2020
2019 (*)
A) CASH FLOWS FROM OPERATING ACTIVITIES (1+2+3+4+5)
25,890
(10,032)
1.Profit (loss) for the year
(2,182)
2,241
2.Adjustments to obtain the cash flow from operating activities:
3,320
1,755
Depreciation and amortization
663
673
Other adjustments
2,657
1,082
3.Net increase/decrease in operating assets
(16,183)
(19,739)
Financial assets held for trading
(3,836)
(9,751)
Non-trading financial assets mandatorily at fair value through profit or loss
447
871
Other financial assets designated at fair value through profit or loss
-
-
Financial assets at fair value through other comprehensive income
(12,623)
(5,632)
Financial assets at amortized cost
(683)
(6,514)
Other operating assets
512
1,287
4.Net increase/decrease in operating liabilities
40,338
5,802
Financial liabilities held for trading
(3,848)
6,242
Other financial liabilities designated at fair value through profit or loss
298
1,222
Financial liabilities at amortized cost
45,202
(968)
Other operating liabilities
(1,314)
(693)
5.Collection/Payments for income tax
598
(92)
B) CASH FLOWS FROM INVESTING ACTIVITIES (1+2)
(125)
(102)
1.Investment
(430)
(633)
Tangible assets
(96)
(119)
Intangible assets
(251)
(317)
Investments in subsidiaries, joint ventures and associates
(84)
(196)
Other business units
-
-
Non-current assets classified as held for sale and associated liabilities
-
-
Other collections related to investing activities
-
-
2.Divestments
306
531
Tangible assets
29
10
Intangible assets
-
-
Investments in subsidiaries, joint ventures and associates
70
103
Other business units
-
-
Non-current assets and disposal groups classified as held for sale and associated liabilities
206
418
Other collections related to investing activities
-
-
C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2)
(662)
(2,314)
1. Payments
(3,686)
(6,114)
Dividends
(1,067)
(2,153)
Subordinated liabilities
(1,937)
(3,005)
Treasury stock amortization
-
-
Treasury stock acquisition
(682)
(956)
Other items relating to financing activities
-
-
2. Collections
3,024
3,799
Subordinated liabilities
2,334
2,640
Common stock increase
-
-
Treasury stock disposal
674
993
Other items relating to financing activities
17
167
D) EFFECT OF EXCHANGE RATE CHANGES
584
(54)
E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D)
25,688
(12,503)
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
18,419
30,922
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F)
44,107
18,419
COMPONENTS OF CASH AND EQUIVALENTS AT END OF THE YEAR (Millions of Euros)
Notes
2020
2019 (*)
Cash
7
972
1,046
Balance of cash equivalent in central banks
7
40,485
15,417
Other financial assets
7
2,650
1,956
Less: Bank overdraft refundable on demand
-
-
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR
44,107
18,419
(*) Presented for comparison purposes only (Note 1.3).
The accompanying Notes and Appendices are an integral part of the balance sheets as of December 31, 2020.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Notes to the Financial Statements for the year ended December 31, 2020.
1. Introduction, basis for presentation of the Financial Statements, Internal Control over
Financial Information and other information
1.1 Introduction
Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter “the Bank”, “BBVA" or “BBVA,S.A”) is a private-law entity subject to the laws and
regulations governing banking entities operating in Spain. It carries out its activity through branches and agencies across the country and
abroad.
The Bylaws and other public information are available for consultation at the Bank’s registered address (Plaza San Nicolás, 4 Bilbao) and
on its official website: www.bbva.com.
In addition to the transactions it carries out directly, the Bank heads a group of subsidiaries, jointly controlled and associated entities which
perform a wide range of activities and which together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (hereinafter, “the
Group” or “the BBVA Group”). In addition to its own individual financial statements, the Bank is therefore obliged to prepare the Group’s
Financial Statements.
The Bank’s Financial Statements for the year ended December 31, 2019 were approved by the shareholders at the Bank’s Annual General
Meeting (“AGM”) held on March 13, 2020.
The Bank’s Financial Statements for the year ended December 31, 2020 are pending approval by the Annual General Meeting.
Notwithstanding, the Board of Directors of the Bank understands that said financial statements will be approved without any changes
.
1.2. Basis for the presentation of the Financial Statements
The Bank's Financial Statements for 2020 are presented in accordance with Bank of Spain Circular 4/2017, dated November 27, and as
amended thereafter (in the following, “Circular “4/2017), and with any other legislation governing financial reporting which is applicable and
with the format and mark-up requirements established in the EU Delegated Regulation 2019/815 of the European Commission. The
aforementioned Circular 4/2017 constitutes the development and adaptation to the Spanish credit institutions sector of the International
Financial Reporting Standards adopted by the European Union (IFRS-EU) in accordance with the provisions of Regulation 1606/2002 of
the Parliament and Council regarding the application of these rules.
The Bank's Financial Statements for the year ended December 31, 2020 have been prepared by the Bank’s directors (at the Board of
Directors meeting held on February 8, 2021)
by applying the accounting policies and valuation criteria described in Note 2, so that they
present fairly the Bank's equity and financial position as of December 31, 2020, together with the results of its operations and cash flows
generated during the year ended on that date.
All effective accounting standards and valuation criteria with a significant effect in the Financial Statements were applied in their preparation.
The amounts reflected in the accompanying Financial Statements are presented in millions of euros, unless it is more appropriate to use
smaller units. Some items that appear without a balance in these Financial Statements are due to how units are expressed. Also, in
presenting amounts in millions of euros, the accounting balances have been rounded up or down. It is therefore possible that the amounts
appearing in some tables are not the exact arithmetical sum of their component figures.
The percentage changes in amounts have been calculated using figures expressed in thousands of euros.
1.3. Comparative information
The comparative information included in the accompanying financial statements relating to the year ended December 31, 2019 and 2018,
in accordance to the applicable regulation, has been subject of certain no significant modifications with the purpose of a better comparability
with the 2020 year figures.
Agreement for the sale of BBVA’s U.S. subsidiary
As mentioned in Note 14, in 2020 the sale of the BBVA subsidiary in the United States was announced. The on-balance figures
corresponding headings “Dividend income” and “Impairment or (reversal) of impairment on non-financial assets and investments in
subsidiaries, joint ventures or associates”, net of tax effects, corresponding to the companies held for sale were reclassified under the
heading”
Profit (loss) after tax from discontinued operations “of the accompanying income statement. Additionally, the results corresponding
to 2019 have been reclassified, to facilitate the comparison between years, to that same section of the respective income statements for
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
both years. The balances of assets corresponding to said companies for sale have been reclassified from their corresponding accounting
headings to the headings "Non-current assets and disposal groups classified as held for sale”.
Collection of interest on impaired financial assets
As a consequence of the application of the interpretation issued by the IFRIC in its “IFRIC Update” of March 2019 regarding the collection
of interest on impaired financial assets, such collections are presented since 2020 as reductions in credit-related write-offs whereas
previously they were included as interest income. In order to make the information comparable, the income statement has been restated
by recognizing a €78 million reduction in the heading “Interest income - Financial assets at amortized cost” of 2019, against the heading
“Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification -
Financial assets at amortized cost”. This reclassification has had no impact on the profit for the year ended December 31, 2019, nor on the
net equity as of December 31, 2019.
Trading derivatives recognition
Information as of and for the year ended December 31, 2020 has been subject to certain balance presentation modifications related to non-
significant cross currency swaps transactions. In order to make the information as of and for the years ended December 31, 2019
comparable with the information as of and for the year ended December 31, 2020, figures as of and for the years ended December 31,
2019 have been restated by recognizing a 1,001 million reduction in the Total Assets and Total Liabilities.
1.4. Seasonal nature of income and expenses
The nature of the most significant operations carried out by the Bank is mainly related to typical activities carried out by financial institutions,
which are not significantly affected by seasonal factors within the same year.
1.5. Management and impacts of the COVID-19 pandemic
The appearance of the Coronavirus COVID-19 in China and its global expansion to a large number of countries, motivated the viral outbreak
to be classified as a global pandemic by the World Health Organization since last March 11, 2020. The pandemic has affected and continues
to adversely affect the world economy and economic activity and conditions in the countries in which the Group operates, leading many of
them to economic recession.
The governments of the different countries in which the Group operates have adopted different measures that
have conditioned the evolution of the year (See Note 5.2).
In this pandemic situation, BBVA has focused its attention on ensuring the continuity of the business operational security as a priority and
monitoring the impacts on the business and on the risks of the Bank (such as the impacts on results, capital or liquidity). Additionally, BBVA
adopted from the beginning a series of measures to support its main interest groups. In this sense, the purpose and the Group's long-term
strategic priorities remain the same and are even reinforced, with a commitment to technology and data-driven decision-making.
With the aim of mitigating the impact of COVID-19, various European and International bodies have made pronouncements aimed at
allowing greater flexibility in the implementation of the accounting and prudential frameworks BBVA has taken these pronouncements into
consideration when preparing these financial statements (see Note 5.2.1).
The main impacts of COVID-19 pandemic in the BBVA S.A. Financial Statements are detailed in the following Notes:
Note 1.6 includes information on the consideration of the COVID-19 pandemic in the estimates made.
by the European Central Bank (ECB), which no longer pays any amount as a dividend for the financial year 2020 until as long as
the uncertainties generated by the pandemic remain.
the financial statements of the Bank for the year ended December 31, 2020. Information on the impact of COVID-19 is included in
the macroeconomic forecasts and in the calculation of expected losses.
corresponding governments. Likewise, it contains, among others, information regarding the number of operations and the amount
corresponding to moratorium measures, both public and private, granted by the Bank.
the first quarter of 2020, mainly due to the impact of COVID-19 in updating macroeconomics scenario and the expected evolution
of interest rates.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
1.6. Responsibility for the information and for the estimates made
The information contained in the Bank's Financial Statements is the responsibility of the Bank’s Directors.
Estimates were required to be made at times when preparing these Financial Statements in order to calculate the recorded or disclosed
amount of some assets, liabilities, income, expenses and commitments. These estimates relate mainly to the following:
and commitments (see Note 22).
As mentioned before, on March 11, 2020, COVID-19 was declared as a global pandemic by the World Health Organization (see Note 1.5).
The great uncertainty associated to the unprecedented nature of this pandemic entails a greater complexity of developing reliable
estimations and applying judgment.
Therefore, these estimates were made on the basis of the best available information on the matters analyzed, as of December 31. 2020.
However, it is possible that events may take place in the future which could make it necessary to amend these estimations (upward or
downward), which would be carried out prospectively, recognizing the effects of the change in estimation in the corresponding income
statement.
During 2020 there were no significant changes to the assumptions and estimations made as of December 31, 2019, except as indicated in
these Financial Statements.
1.7. Control of the BBVA Group’s Financial Reporting
The description of the BBVA Group’s Internal Control over Financial Reporting model is described in the management report accompanying
the consolidated Financial Statements for 2020.
1.8. Deposit guarantee fund and Resolution fund
The Bank is part of the “Fondo de Garantía de Depósitos” (Deposit Guarantee Fund). The expense incurred by the contributions made to
this Agency and other similar to those that are subject certain foreign branches in 2020 and 2019 amounted to €216 million and €196 million,
respectively. These amounts are registered under the heading "Other operating expenses" of the accompanying income statements (see
Note 38).
The contributions made to the single European resolution fund in the years 2020 and 2019 have amounted to €166 and €144 million euros
respectively (see Note 38).
1.9. Consolidated Financial Statements
The Consolidated Financial Statements of the BBVA Group for the year ended December 31, 2020 have been prepared by the Group's
Directors (at the Board of Directors meeting held on February 8, 2021) in compliance with IFRS-IASB (International Financial Reporting
Standards as issued by the International Accounting Standards Board), as well as in accordance with the International Financial Reporting
Standards adopted by the European Union (in the following “EU-IFRS”) and applicable at the close of 2020, taking into account Bank of
Spain Circular 4/2017, and with any other legislation governing financial reporting which are applicable and with the format and markup
requirements established in the EU Delegated Regulation 2019/815 of the European Commission
The management of the Group’s operations is carried out on a consolidated basis, independently of the individual allocation of the
corresponding equity changes and their related results. Consequently, the Bank's annual Financial Statements have to be considered within
the context of the Group, due to the fact that they do not reflect the financial and equity changes that result from the application of the
consolidation policies (full consolidation or proportionate consolidation methods) or the equity method.
These changes are reflected in the Consolidated Financial Statements of the BBVA Group for the year 2020, which the Bank's Board of
Directors has also prepared. Appendix I includes the Group's Consolidated Financial Statements. In accordance with the content of these
Consolidated Financial Statements prepared following the International Financial Reporting Standards adopted by the European Union, the
total amount of the BBVA Group’s assets and consolidated equity at the close of 2020 amounted to €736.176 million and €50.020 million,
respectively, while the consolidated net profit attributed to the parent company of this period amounted to €1.305 million.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
2. Accounting policies and valuation criteria applied
The Glossary includes the definition of some of the financial and economic terms used in Note 2 and subsequent Notes.
The accounting standards and policies and valuation criteria used in preparing these financial statements are as follows:
2.1. Financial instruments
Circular 4/2017 became effective as of January 1, 2018 to collect changes in the classification and measurement of financial instruments,
impairment and hedge accounting, as a consequence of the entry into force of IFRS 9. The Bank has chosen to continue applying the
accounting standards for hedges that were applicable up to now and not applying the changes introduced in the Circular 4/2017 on hedge
accounting until the completion of the macro-hedging project as permitted by the Circular itself.
2.1.1 Classification and measurement of financial assets
Classification of financial assets
Circular 4/2017 contains three main categories for financial assets classification: measured at amortized cost, measured at fair value with
changes through other comprehensive income, and measured at fair value through profit or loss.
The classification of financial instruments in the categories of amortized cost or fair value depends on the business model with which the
entity manages the assets and the contractual characteristics of the cash flows, commonly known as the "solely payments of principle and
interest" criterion (hereinafter, the SPPI).
The assessment of the business model should reflect the way the Group manages groups of financial assets and does not depend on the
intention for an individual instrument.
In order to determine the business model, the following aspects are taken into account:
evaluated and reported to the entity's key personnel;
sales.
Regarding the SPPI test, the analysis of the cash flows aims to determine whether the contractual cash flows of the assets correspond only
to payments of principal and interest on the principal amount outstanding at the beginning of the transaction. Interest is understood here as
the consideration for the time value of money, for the credit risk associated with the principal amount outstanding of collection during a
specific period, for financing and structure costs, plus a profit margin.
The most significant judgments used by the Bank in evaluating compliance with the conditions of the SPPI test are the following:
adjustment does not coincide with the term of the reference interest rate (for example, the interest rate reset every six months
to a one-year rate), the Bank assesses, at the time of the initial recognition, this mismatch to determine whether the contractual
cash flows (undiscounted) differ significantly or not from the cash flows (undiscounted) of a benchmark financial asset which
there would be no change in the time value of money. The defined tolerance thresholds are 10% for the differences in each
period and 5% for the analysis accumulated throughout the financial asset life.
contractual cash flows that would be generated during the life of the instrument due to the exercise of that clause are only
payments of principal and interest on the principal amount outstanding. To do this, the contractual cash flows that may be
generated before and after the modification are analyzed.
The main criteria taken into account in the analysis are:
o
maturity is consistent with SPPI when the prepayment amount substantially represents unpaid amounts of principal
and interest on the principal amount outstanding (which may include reasonable additional compensation for the
early termination of the contract)
o
◾
meet the SPPI criterion because of the relationship between missed payments and an increase in credit
risk.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
◾
or is adjusted based on a certain index or stock market value would not meet the SPPI criterion
o
options, they meet the SPPI test if the contractual flows meet it. When the issuer can defer the payment of interest, if
such payment would affect their solvency, they would meet the SPPI test if the deferred interest accrues additional
interest, while if they do not, they would not meet the test.
●
Non-recourse financial instruments: In the case of debt instruments that are repaid primarily with the cash flows of specific
assets or projects and the debtor has no legal responsibility, the underlying assets or cash flows are evaluated to determine
whether the contractual cash flows of the instrument are consistent with payments of principal and interest on the principal
amount outstanding.
o
If the contractual terms do not give rise to additional cash flows to payments of principal and interest on the amount
of principal outstanding or limitations to these payments, the SPPI test is met.
o
If the debt instrument effectively represents an investment in the underlying assets and its cash flows are inconsistent
with principal and interest (because they depend on the performance of a business), the SPPI test is not met.
●
Contractually linked instruments: a look-through analysis is carried out in the case of transactions that are set through the
issuance of multiple financial instruments forming tranches that create concentrations of credit risk (Ex: Securitisations) in which
there is an order of priority that specifies how the flows of cash generated by the underlying set of financial instruments are
allocated to the different tranches. The debt tranches of the instrument will comply with the requirement that their cash flows
represent only payment of principal and interest on the outstanding principal:
a) the contractual terms of the tranche being assessed for classification (without looking through to the underlying pool of
financial instruments) give rise to cash flows that are solely payments of principal and interest on the principal amount
outstanding
b) the underlying pool of financial instruments comprises instruments with cash flow that are solely payments of principal and
interest on the principal amount outstanding, and
c) the exposure to credit risk in the underlying pool of financial instruments inherent in the tranche is equal to or lower than
the exposure to credit risk of the underlying pool of financial instruments (for example, the credit rating of the tranche being
assessed for classification is equal to or higher than the credit rating that would apply to a single tranche that funded the
underlying pool of financial instruments)
In any event, the contractual conditions that, at the time of the initial recognition, have a minimal effect on cash flows or depend on the
occurrence of exceptional and highly unlikely events do not prevent compliance with the conditions of the SPPI test.
Based on the above characteristics, financial assets will be classified and valued as described below.
A debt instrument will be classified in the amortized cost portfolio if the two following conditions are fulfilled:
contractual cash flows; and
A debt instrument will be classified in the portfolio of financial assets at fair value with changes through other comprehensive income if the
two following conditions are fulfilled:
of the assets, and
A debt instrument will be classified at fair value with changes in profit and loss provided that the entity's business model for their management
or the contractual characteristics of its cash flows do not require classification into one of the portfolios described above.
In general, equity instruments will be measured at fair value through profit or loss. However BBVA may make an irrevocable election at
initial recognition to present subsequent changes in the fair value through “other comprehensive income”.
Financial assets will only be reclassified when BBVA decides to change the business model. In this case, all of the financial assets assigned
to this business model will be reclassified. The change of the objective of the business model should occur before the date of the
reclassification.
Measurement of financial assets
All financial instruments are initially recognized at fair value, plus, those transaction costs which are directly attributable to the acquisition
or issue of the particular instrument, with the exception of those financial assets are classified at fair value through profit or loss.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
All changes in the value of financial assets due to the interest accrual and similar items are recorded in the headings "Interest income and
other similar income" or "Interest expenses", of the income statement of the year in which the accrual occurred (see Note 33), except in the
case of trading derivatives that are not part of the economic and accounting hedges.
The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as
described below, according to the categories of financial assets.
“Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit and loss” and “Financial assets
designated at fair value through profit or loss”
Financial assets are recorded under the heading “Financial assets held for trading” if the objective of the business model is to generate
gains by buying and selling these financial instruments or generate short-term results. The financial assets recorded in the heading “Non-
trading financial assets mandatorily at fair value through profit and loss” are assigned to a business model which objective is to obtain the
contractual cash flows and / or to sell those instruments but its contractual cash flows do not comply with the requirements of the SPPI test.
In “Financial assets designated at fair value through profit or loss” the Bank classifies financial assets only if it eliminates or significantly
reduces a measurement or recognition inconsistency (an ‘accounting mismatch’) that would otherwise arise from measuring financial assets
or financial liabilities or recognizing gains or losses on them, on different bases.
The assets recognized under these headings of the balance sheet are measured upon acquisition at fair value and changes in the fair value
(gains or losses) are recognized as their net value under the headings “Gains (losses) on financial assets and liabilities held for trading,
net”, “Gains (losses) on non-trading financial assets mandatorily at fair value through profit and loss, net” and “Gains (losses) on financial
assets designated at fair value through profit or loss, net” in the accompanying income statement (see Note 37). Changes in fair value
resulting from variations in foreign exchange rates are recognized under the heading “Exchange differences, net” (Note 37).
”Financial assets at fair value through other comprehensive income”
Assets recognized under this heading in the balance sheets are measured at their fair value. This category of valuation implies the
recognition of the information in the income statement as if it were an instrument valued at amortized cost, while the instrument is
valued at fair value in the balance sheet. Thus, both interest income of these instruments and the exchange differences and
impairment that arise in their case are recorded in the profit and loss account, while subsequent changes in its fair value (gains or
losses) are recognized temporarily,(by the amount net of tax effect) under the heading “Accumulated other comprehensive income-
Items that may be reclassified to profit or loss - Fair value changes of debt instruments measured at fair value through other
comprehensive income” in the balance sheets (see Note 27).
The amounts recognized under the headings “Accumulated other comprehensive income- Items that may be reclassified to profit or
loss - Fair value changes of financial assets measured at fair value through other comprehensive income” continue to form part of
the Bank's equity until the corresponding asset is derecognized from the balance sheet or until a loss allowance is recognized on the
corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the headings “Gains
(losses) on financial assets and liabilities, net” (see Note 37).
The net loss allowances in financial assets at fair value through other comprehensive income over the year are recognized under the
heading “Loss allowances on financial assets, net – Financial assets at fair value through other comprehensive income” in the income
statements for that year (see Note 42).
Interest income of these instruments are recorded in the profit and loss account (see Note 33) and the changes in foreign exchange
rates are recognized under the heading “Exchange differences, net" in the accompanying income statement (see Note 37).
At the time of initial recognition of specific investments in equity instruments, the BBVA Group may make the irrevocable decision to
present subsequent changes in fair value in other comprehensive income. Subsequent changes in this valuation will be recognized
in the heading "Other accumulated comprehensive income - Items that will not be reclassified in results - Changes in the fair value of
equity instruments measured at fair value with changes in other comprehensive income" (see Note 27). Dividends received from
these investments are recorded in the heading "Dividend income" in the income statement (see Note 34). These instruments are not
subject to the impairment model of IFRS 9.
“Financial assets at amortized cost”
The assets under this category are subsequently measured at amortized cost, using the effective interest rate method.
Net loss allowances of assets recorded under these headings arising in each period are recognized under the heading “Impairment or
reversal of impairment on financial assets not measured at fair value through profit or loss – financial assets measured at cost in the income
statement for that year ” (see Note 42).
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
2.1.2 Classification and measurement of financial liabilities
Classification of financial liabilities
when the Bank’s objective is to generate gains by buying and selling these financial instruments;
Bank has the option to designate irrevocably, on the initial moment of recognition, a financial liability as at fair value through profit
or loss provided that doing so results in the elimination or significant reduction of measurement or recognition inconsistency, or if
a group of financial liabilities, or a group of financial assets and financial liabilities, has to be managed, and its performance
evaluated, on a fair value basis in accordance with a documented risk management or investment strategy.
Measurement of financial liabilities
Financial instruments are initially recognized at fair value, minus, those transaction costs which are directly attributable to the issue of the
particular instrument, except for financial instruments that are classified at fair value through profit or loss.
Variations in the value of financial liabilities due to the interest accrual and similar items are recorded in the headings “Interest income” or
“Interest expense”, of the income statement for the year in which the accrual occurred (see Note 33), except for trading derivatives that are
not economic and accounting hedges.
The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as
described below, according to the categories of financial liabilities.
“Financial liabilities held for trading” and “Financial liabilities designated at fair value through profit or loss“
The subsequent changes in the fair value (gains or losses) of the liabilities recognized under these headings of the balance sheets are
recognized as their net value under the headings “Gains (losses) on financial assets and liabilities held for trading, net” and “Gains (losses)
on financial assets and liabilities designated at fair value through profit or loss, net” in the accompanying income statements (see Note 37).
Nevertheless, the changes in the own credit risk of the liabilities designated under the fair value option is presented in “Accumulated other
comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of financial liabilities at fair value
through profit or loss attributable to changes in their credit risk” (see Note 27), unless this treatment brings about or increases an asymmetry
in the income statement. However, changes in fair value resulting from variations in foreign exchange rates are recognized under the
heading “Exchange differences, net” in the accompanying income statements (see Note 37).
“Financial liabilities at amortized cost”
The liabilities under this category are subsequently measured at amortized cost, using the effective interest rate method.
Hybrid financial liabilities
When a financial liability contains an embedded derivative, BBVA analyzes whether the economic characteristics and risks of the embedded
derivative and the host instrument are closely related.
If the characteristics and risks of the host and the derivative are closely related, the instrument as a whole will be classified and measured
according to the general rules for financial liabilities. If, on the other hand, the economic characteristics and risks of the embedded derivative
are not closely related to the economic characteristics and risks of the host, its terms meet the definition of a derivative and the hybrid
contract is not measured at fair value with changes in fair value recognised in profit or loss, the embedded derivative shall be separated
from the host and accounted for as a derivative separately at fair value with changes in profit and loss and the host instrument will be
classified and measured according to its nature.
2.1.3 “Derivatives-Hedge Accounting” and “Fair value changes of the hedged items in portfolio hedges of
interest-rate risk”
BBVA uses financial derivatives as a tool for managing financial risks, mainly interest rates and exchange rates (See Note 5).
When these operations meet certain requirements, they are considered "hedging".
Changes occurring subsequent to the designation of the hedging relationship in the measurement of financial instruments designated as
hedged items as well as financial instruments designated as hedge accounting instruments are recognized as follows:
recognized under the heading “Gains (losses) from hedge accounting, net” in the income statement (see Note 37), with a
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
corresponding offset under the headings where hedging items ("Hedging derivatives") and the hedged items are recognized, as
applicable, except for interest-rate risks hedges (which are almost all of the hedges used by the Bank). Therefore, the valuation
changes are recognized under the headings “Interest income” or “Interest expense”, as appropriate, in the accompanying income
statement (see Note 33).
the measurement of the hedging instrument are recognized in the income statement with a corresponding offset under the
heading “Derivatives – Hedging derivatives”, and the gains or losses that arise from the change in the fair value of the hedged
item (attributable to the hedged risk) are also recognized in the income statement (in both cases under the heading “Gains
(losses) from hedge accounting, net” (see Note 37), using, as a balancing item, the headings "Fair value changes of the hedged
items in portfolio hedges of interest rate risk" in the balance sheets, as applicable.
other comprehensive income - Items that may be reclassified to profit or loss - Hedging derivatives. Cash flow hedges” in the
balance sheets, with a balancing entry under the heading “Hedging derivatives” of the Assets or Liabilities of the balance sheets
as applicable. These differences are recognized in the accompanying income statement at the time when the gain or loss in the
hedged instrument affects profit or loss, when the forecast transaction is executed or at the maturity date of the hedged item (see
Note 33).
directly in the heading “Gains (losses) from hedge accounting, net” in the income statement (see Note 37).
recognized temporarily under the heading "Accumulated other comprehensive income - Items that may be reclassified to profit
or loss – Hedging of net investments in foreign transactions" in the balance sheets with a balancing entry under the heading
“Hedging derivatives” of the Assets or Liabilities of the balance sheets as applicable. These differences in valuation are recognized
under the heading “Exchange differences, net" in the income statement when the investment in a foreign operation is disposed
of or derecognized (see Note 37).
2.1.4 Loss allowances on financial assets
The “expected losses” impairment model is applied to financial assets valued at amortized cost, to debt instruments valued at fair value
with changes in other accumulated comprehensive income, to financial guarantee contracts and other commitments. All financial
instruments valued at fair value through profit or loss are excluded from the impairment mode.
The standard classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of
initial recognition. The first category includes the transactions when they are initially recognized (Stage 1); the second comprises the
financial assets for which a significant increase in credit risk has been identified since its initial recognition (Stage 2) and the third one, the
impaired financial assets (Stage 3).
The calculation of the provisions for credit risk in each of these three categories must be done differently. In this way, expected loss up to
12 months for the financial assets classified in the first of the aforementioned categories must be recorded, while expected losses estimated
for the remaining life of the financial assets classified in the other two categories must be recorded. Thus, Circular 4/2017 differentiates
between the following concepts of expected loss:
presentation date of the financial statements; and
the remaining life of the financial instrument.
All this requires considerable judgment, both in the modeling for the estimation of the expected losses and in the forecasts, on how the
economic factors affect such losses, which must be carried out on a weighted probability basis.
The Bank has applied the following definitions in accordance with Circular 4/2017:
Default
BBVA has applied a definition of default for financial instruments that is consistent with that used in internal credit risk management, and
coherent with the definition applied by the Bank within the prudential context. The Bank has considered the existence of default when one
of the following situations occurs:
●
payment past-due for more than 90 days; or
●
there are reasonable doubts regarding the full reimbursement of the instrument.
●
documented information that it is appropriate to use a longer term. As of December 31, 2020, the Bank has not considered
periods higher than 90 days for any significant portfolio.
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Credit impaired asset
An asset is credit-impaired according to Circular 4/2017 if one or more events have occurred and they have a detrimental impact on
the estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the
following events:
●
Significant financial difficulty of the issuer or the borrower.
●
A breach of contract (e.g. a default or past due event).
●
A lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s financial
difficulty – that the lender would not otherwise consider.
●
It becoming probable that the borrower will enter bankruptcy or other financial reorganization.
●
The disappearance of an active market for that financial asset because of financial difficulties.
●
The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible to identify a single discrete event. Instead, the combined effect of several events may cause financial assets
to become credit-impaired.
The definition of impaired financial assets in the Bank is aligned with the definition of default explained in the above paragraphs.
Credit risk management for wholesale counterparties is carried out at the customer (or group) level. For this reason, the classification of
any of a client's exposures as impaired, whether due to more than 90 days of default or due to any of the subjective criteria, implies the
classification as impaired of all the client's exposures. There may be some justified exception that, in any case, are not significant.
event of default in any of their transactions, which also triggers the necessary recovery actions, including find the refinancing measures
which, where appropriate, may lead to all the client's operations being considered impaired. Also, given the granularity of the retail portfolios,
the differential behavior of these clients in relation to their products and the given guarantees, as well as the time necessary to find the best
solution, the Bank has established as an indicator that when a there was a default in a retail transaction in excess of 90 days and represents
more than 20% of the client's exposure, all of its operations are considered impaired.
Significant increase in credit risk
The objective of the impairment requirements is to recognize lifetime expected credit losses for financial instruments for which there
have been significant increases in credit risk since initial recognition considering all reasonable and supportable information, including
that which is forward-looking.
The model developed by the Bank for assessing the significant increase in credit risk has a two-prong approach (See Note 5.2.1)
●
Quantitative criterion: the Bank uses a quantitative analysis based on comparing the current expected probability of default over
the life of the transaction with the original adjusted expected probability of default, so that both values are comparable in terms
of expected default probability for their residual life (Note 5.2.1).
●
Qualitative criterion: most indicators for detecting significant risk increase are included in the Bank's systems through rating and
scoring systems or macroeconomic scenarios, so the quantitative analysis covers the majority of circumstances. The Bank will
use additional qualitative criteria to identify a significant risk increase and include circumstances that are not reflected in the
rating/score systems or macroeconomic scenarios used. These qualitative criterion are the following:
o
Non-payment for more than 30 days past due. According to Circular 4/2017, default of more than 30 days is a presumption
that can be rebutted in those cases in which the entity considers, based on reasonable and documented information, that
such non-payment does not represent a significant increase in risk. As of December 31, 2020, the Bank has not considered
periods higher than 30 days.
o
Watch list: They are subject to special watch by the Risk units because they show negative signs in their credit quality, even
though there may be no objective evidence of impairment.
o
Refinance or restructuring that does not show evidence of impairment, or that, have been previously identified, the existence
of significant increase in credit risk is still considered.
Although the standard introduces a series of operational simplifications, also called practical solutions for analyzing the increase in
significant risk, the Bank does not use them as a general rule. However, for high-quality assets, mainly related to certain government
institutions and bodies, the standard allows for considering that their credit risk has not increased significantly because they have a low
credit risk at the presentation date. This possibility is limited to those financial instruments that are classified as having high credit quality
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
and high liquidity to comply with the liquidity coverage ratio (“LCR”). This does not prevent these assets from being assigned the credit risk
coverage that corresponds to their classification as Stage 1 based on their credit rating and macroeconomic expectations.
The classification of financial instruments subject to impairment under Circular 4/2017 is as follows:
Stage 1– without significant increase in credit risk
Financial assets which are not considered to have significantly increased in credit risk have loss allowances measured at an amount
equal to 12 months expected credit losses derived from defaults.
Stage 2– significant increases in credit risk
When the credit risk of a financial asset has increased significantly since the initial recognition, the loss allowances of that financial
instrument is calculated as the expected credit loss during the entire life of the asset.
Stage 3 – Impaired
When there is objective evidence that the instrument is credit impaired, the financial asset is transferred to this category in which the
provision for losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.
When the recovery of any recognized amount is considered remote, such amount is written-off on the balance sheet, without prejudice to
any actions that may be taken in order to collect the amount until the rights extinguish in full either because it is time-barred debt, the debt
is forgiven, or other reasons.
Method for calculating expected credit loss
Method for calculating expected loss
In accordance with Circular 4/2017, the measurement of expected losses must reflect:
forecasts of future economic conditions.
Expected losses are measured both individually and collectively.
The amount of credit losses is calculated as the difference between expected discounted cash flows at the effective interest rate of the
transaction and the carrying amount of the instrument (See Note 5.2.1):
For the collective measurement of expected losses the instruments are grouped into groups of assets based on their risk characteristics.
Exposure within each group is segmented according to the common credit risk characteristics, similar characteristics of the credit risk,
indicative of the payment capacity of the borrower in accordance with their contractual conditions. These risk characteristics have to be
relevant in estimating the future flows of each group. The characteristics of credit risk may consider, among others, the following factors
(See Note 5.2.1):
The estimated losses are derived from the following parameters:
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
presentation date of the financial statements.
including guarantees. For these purposes, the probability of executing the guarantee is considered in the estimation, the moment
until its ownership, the expected cashflows and acquisition and sale costs.
In BBVA, the expected credit losses calculated are based on internal models developed for all portfolios within the scope of Circular 4/201,
except for the cases that are subject to individual estimation.
The calculation and recognition of expected losses includes exposures with governments and credit institutions, for which, despite having
a reduced number of defaults in the information databases, internal models have been developed, considering, as sources of information,
the data provided by external rating agencies or other observed in the market, such as changes in bond yields, prices of credit default
swaps or any other public information on them
Use of present, past and future information
Circular 4/2017 requires incorporation of present, past and future information to detect any significant increase in risk and measure expected
loss.
The standard does not require identification of all possible scenarios for measuring expected loss. However, the probability of a loss event
occurring and the probability it will not occur will also have to be considered, even though the possibility of a loss may be very low. To
achieve this, BBVA generally evaluates the linear relationship between its estimated loss parameters (PD, GDP, EAD) with the history and
future forecasts of the macroeconomic scenarios
one future economic scenario must be used for the measurement.
BBVA uses a methodology based on three scenarios. The first is the most probable scenario (baseline scenario) consistent with the
employee on the Bank's internal management processes, and other additional two, one more positive and the other more negative. The
combined outcome of these three scenarios is calculated considering the weight given to each of them. The main macroeconomic variables
that are valued in each of the scenarios are Gross Domestic Product (GDP), interest rates, unemployment rate and price of real estate
properties. (For more details see Note 5.2.1).
2.1.5 Transfers and derecognition of financial assets and liabilities
The accounting treatment of transfers of financial assets is determined by the form in which risks and benefits associated with the financial
assets involved are transferred to third parties. Thus the financial assets are only derecognized from the balance sheet when the cash flows
that they generate are extinguished, or when their implicit risks and benefits have been substantially transferred to third parties, or when
the control of financial asset is transferred even in case of no physical transfer or substantial retention of such assets. In the latter case, the
financial asset transferred is derecognized from the balance sheet, and any right or obligation retained or created as a result of the transfer
is simultaneously recognized.
Similarly, financial liabilities are derecognized from the balance sheet only if their obligations are extinguished or acquired (with a view to
subsequent cancellation or renewed placement).
The Bank is considered to have transferred substantially all the risks and benefits if such risks and benefits account for the majority of the
risks and benefits involved in ownership of the transferred financial assets. If substantially all the risks and/or benefits associated with the
transferred financial asset are retained:
as those used before the transfer.
or fair value with changes in the income statement, whichever the case.
continue to be recognized.
In the specific case of securitizations, this liability is recognized under the heading “Financial liabilities at amortized cost – Customer
deposits” in the balance sheets (see Note 20). As these liabilities do not constitute a current obligation, when measuring such a financial
liability the Bank deducts those financial instruments owned by it which constitute financing for the entity to which the financial assets have
been transferred, to the extent that these instruments are deemed specifically to finance the transferred assets.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The criteria followed with respect to the most common transactions of this type made by the Bank are as follows:
sheets and the amount received from the sale is considered to be financing from third parties.
amount paid for the purchase is considered to be credit given to third parties.
Securitization: The Bank has applied the most stringent criteria for determining whether or not it retains substantially all the risk
and rewards on such assets for all securitizations performed since January 1, 2004. As a result of this analysis, the Bank has
concluded that none of the securitizations undertaken since that date meet the prerequisites for derecognizing the securitized
assets from the balance sheets (see Note 12 and Appendix VI), as the Bank retains substantially all the expected credit risks and
possible changes in net cash flows, while retaining the subordinated loans and lines of credit extended to these securitization
funds.
2.2. Financial guarantees
Financial guarantees are considered to be those contracts that require their issuer to make specific payments to reimburse the holder of
the financial guarantee for a loss incurred when a specific borrower breaches its payment obligations on the terms – whether original or
subsequently modified – of a debt instrument, irrespective of the legal form it may take. Financial guarantees may take the form of a deposit,
financial guarantee, insurance contract or credit derivative, among others.
In their initial recognition, financial guarantees are recognized as liabilities in the balance sheet at fair value, which is generally the present
value of the fees, commissions and interest receivable from these contracts over the term thereof, and we simultaneously recognize a
corresponding asset in the side of the balance sheet for the amount of the fees and commissions received at the inception of the transactions
and the amounts receivable at the present value of the fees, commissions and interest outstanding.
Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine
the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required for them. The credit risk is determined
by application of criteria similar to those established for quantifying loss allowances on debt instruments measured at amortized cost (see
Note 2.1.4).
The provisions recognized for financial guarantees are recognized under the heading “Provisions - Provisions for contingent risks and
commitments” on the liability side in the balance sheets (see Note 21). These provisions are recognized and reversed with a charge or
credit, respectively, to “Provisions or reversal of provision” in the income statements (see Note 41).
Income from financial guarantees is recorded under the heading “Fee and commission income” in the income statement and is calculated
by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 35).
Synthetic securitizations made by the Bank to date, meet the requirements of the accounting regulations for accounting as guarantees.
2.3. Non-current assets and disposal groups classified as held for sale and liabilities included in
disposal groups classified as held for sale
The heading “Non-current assets and disposal groups classified as held for sale” in the balance sheet includes the carrying amount of
individual items or items integrated in a group ("disposal group") or that form part of a significant business line or geographic area that it is
intended to be disposed of (“discontinued operation”) whose sale is highly probable that it will take place under the conditions in which such
assets are currently located within a period of one year from the date to which the financial statements refer. Additionally, assets that are
expected to be disposed of within a year but which disposal is delayed is caused by events and circumstances beyond the control of the
Bank can be classified as held for sale (see Note 19).
Symmetrically, the heading “Liabilities included in disposal groups classified as held for sale” in the balance sheets reflects the balances
payable arising from disposal groups and discontinued operations.
The heading "Non-current assets and disposal groups as held for sale" includes the assets received for the satisfaction, in whole or in part,
of the payment obligations of their debtors (foreclosed or received in payment of debt or recoveries from financial leasing transactions,
unless the Group has decided to make continued use of those assets.
Non-current assets and disposal groups classified as held for sale are measured, at the acquisition date and at any later date deemed
necessary, at either their carrying amount or the fair value of the property (less costs to sell), whichever is lower. An impairment or reversal
of impairment for the difference is recognized if applicable. When the amount of the sale less estimated costs of sale is higher than the
carrying value, the gain is not recognized until the moment of disposal and derecognition from the balance sheet.
Non-current assets and disposal groups held for sale groups classified as held for sale are not depreciated while included under the heading
“Non-current assets and disposal groups classified as held for sale”.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
In the case of real estate assets foreclosed or received in payment of debts, they are initially recognized at the lower of: the restated carrying
amount of the financial asset and the fair value at the time of the foreclosure or receipt of the asset less estimated sales costs. The carrying
amount of the financial asset is updated at the time of the foreclosure, treating the real property received as a secured collateral and taking
into account the credit risk coverage that would correspond to it according to its classification prior to the delivery. For these purposes, the
collateral will be valued at its current fair value (less sale costs) at the time of foreclosure. This carrying amount will be compared with the
previous carrying amount and the difference will be recognized as a provision increase, if applicable. On the other hand, the fair value of
the foreclosed assets is based mainly on appraisals or valuations carried out by independent experts on an annual basis or more frequently
if there are indications of impairment by appraisal, evaluating the need to apply a discount on the asset derived from the specific conditions
of the asset or the market situation for these assets, and in any case, deducting the company’s estimated sale costs.
Fair value of non-current assets held for sale from foreclosures or recoveries is based mainly in appraisals or valuations made by
independent experts on annual basis or more frequently, should there be indicators of impairment. The Bank applies the rule that these
appraisals may not be older than one year, and their age is reduced if there is an indication of deterioration in the assets. The Bank mainly
uses the services of the following valuation and appraisal companies. None of them is linked to the BBVA Group and all are entered in the
official Bank of Spain register: Sociedad de Tasación, S.A.; Krata, S.A.; Gesvalt, S.A.; Tasvalor, S.A.; Tinsa, S.A.; Valmesa, S.A.; Arco
Valoraciones, S.A., Tecnitasa, S.A., Eurovaloraciones, S.A., JLL Valoraciones, S.A., Tasibérica, S.A., Uve Valoraciones, S.A. and Global
Valuation, S.A.U.
Gains and losses generated on the disposal of assets, disposal groups and liabilities classified as non-current held for sale, and liabilities
included in disposal groups classified as held for sale as well as impairment losses and, where pertinent, the related recoveries, are
recognized in “Profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations”
in the income statements (see Note 45). The remaining income and expense items associated with these assets and liabilities are classified
within the relevant income statement headings.
Income and expense for discontinued operations, whatever their nature, generated during the year, even if they have occurred before their
classification as discontinued operations, are presented net of the tax effect as a single amount under the heading “Profit (loss) after tax
from discontinued operations” in the income statement (see Note 1.3 and 14). This heading includes the earnings from their sale or other
disposal (net of tax effects).
2.4. Tangible assets
Property, plant and equipment for own use
This heading includes the assets under ownership or acquired as right to use assets under lease terms, (right to use) intended for future or
current use by the Bank and that it expects to hold for more than one year. It also includes tangible assets received by the Bank in full or
partial settlement of financial assets representing receivables from third parties and those assets expected to be held for continuing use.
For more information regarding the accounting treatment of right to use assets under lease terms, see Note 2.15 "Leases".
Property, plant and equipment for own use are presented in the balance sheets at acquisition cost, less any accumulated depreciation and,
where appropriate, any estimated impairment losses resulting from comparing the net carrying amount of each item with its corresponding
recoverable value (see Note 15).
Depreciation is calculated using the straight-line method, during the useful life of the asset, on the basis of the acquisition cost of the assets
less their residual value; the land is considered to have an indefinite life and is therefore not depreciated.
The tangible asset depreciation charges are recognized in the accompanying income statements under the heading "Depreciation and
amortization" (see Note 40) and are based on the application of the following depreciation rates (determined on the basis of the average
years of estimated useful life of the various assets):
Depreciation rates for tangible assets
Type of assets
Annual Percentage
Buildings for own use
1% - 4%
Furniture
8% - 10%
Fixtures
6% - 12%
Office supplies and computerization
8% - 25%
Right of use asset by lease
The lesser of the lease term or the useful life of the underlying asset
At each reporting date, the Bank analyzes whether there are internal or external indicators that a tangible asset may be impaired. When
there is evidence of impairment, the entity then analyzes whether this impairment actually exists by comparing the asset’s net carrying
amount with its recoverable amount (as the higher between its recoverable amount less disposal costs and its value in use). When the
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
carrying amount exceeds the recoverable amount, the carrying amount is written down to the recoverable amount and depreciation charges
going forward are adjusted to reflect the asset’s remaining useful life.
Similarly, if there is any indication that the value of a previously impaired tangible asset has been recovered, the entities will estimate the
recoverable amounts of the asset and recognize it in the income statement, registering the reversal of the impairment loss recognized in
previous years and thus adjusting future depreciation charges. Under no circumstances may the reversal of an impairment loss on an asset
raise its carrying amount above that which it would have if no impairment losses had been recognized in prior years.
In BBVA, most of the buildings held for own use are assigned to the different Cash-Generating-Units (CGU) to which they belong. The
corresponding impairment analysis are performed for these CGUs to check whether sufficient cash flows are generated to support the value
of the assets comprised within.
Running and maintenance expense relating to tangible assets held for own use are recognized as an expense in the year they are incurred
and recognized in the income statements under the heading " Administration costs - Other administrative expense - Property, fixtures and
equipment " (see Note 39.2).
Other assets leased out under an operating lease
The criteria used to recognize the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their
respective estimated useful lives and to recognize the impairment losses on them, are the same as those described in relation to tangible
assets for own use.
Investment properties
The heading “Tangible assets - Investment properties” in the balance sheet reflects the net values (purchase cost minus the corresponding
accumulated depreciation and, if appropriate, estimated loss allowance) of the land, buildings and other structures that are held either to
earn rentals or for capital appreciation through sale and that are neither expected to be sold off in the ordinary course of business nor are
destined for own use (see Note 15).
The criteria used to recognize the acquisition cost of investment properties, calculate their depreciation and their respective estimated useful
lives and register the impairment losses on them, are the same as those described in relation to tangible assets held for own use.
BBVA determines periodically the fair value of its investment properties in such a way that, at the end of the financial year, the fair value
reflects the market conditions of investment property assets’ market at such date. This fair value will be determined taking as references
the valuations performed by independent experts.
2.5. Intangible assets
Intangible assets in the financial statements of the Bank have a finite useful life.
The useful life of intangible assets is, at most, equal to the period during which the entity is entitled to use the asset; If the right of use is for
a limited renewable period, the useful life includes the renewal period only when there is evidence that the renewal will be carried out without
a significant cost (see Note 16).
When the useful life of intangible assets cannot be estimated reliably, they are amortized over a ten year period.
Intangible assets are amortized according to the duration of this useful life, using methods similar to those used to depreciate tangible
assets. The defined useful life intangible asset is made up mainly of IT applications acquisition costs which have a useful life of 3 to 5 years.
The depreciation charge for these assets is recognized in the accompanying income statements under the heading "Depreciation and
amortization" (see Note 40).
The Bank recognizes any loss allowance on the carrying amount of these assets with charge to the heading “
Impairment or reversal of
impairment on non - financial assets- Intangible assets
” in the accompanying income statements (see Note 44). The criteria used to
recognize the impairment losses on these assets and, where applicable, the recovery of loss allowances previously recognized, are similar
to those used for tangible assets.
2.6. Tax assets and liabilities
Expense on corporate income tax applicable to Spanish companies are recognized in the income statement, except when they result from
transactions on which the profits or losses are recognized directly in equity, in which case the related tax effect is also recognized in equity.
The total corporate income tax expense is calculated by aggregating the current tax arising from the application of the corresponding tax
rate as per the tax base for the year (after deducting the tax credits or discounts allowable for tax purposes) and the change in deferred tax
assets and liabilities recognized in the income statement.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Deferred tax assets and liabilities include temporary differences, defined as at the amounts to be payable or recoverable in future years
arising from the differences between the carrying amount of assets and liabilities and their tax bases (the “tax value”), and tax loss and tax
credit or discount carry forwards. These amounts are registered by applying to each temporary difference the tax rates that are expected
to apply when the asset is realized or the liability settled (see Note 17).
The "Tax Assets" line item in the accompanying balance sheets includes the amount of all the assets of a tax nature, broken down into:
"Current” (amounts of tax recoverable in the next twelve months) and "Deferred" (which includes the amount of tax to be recovered in future
years, including those arising from tax losses or credits for deductions or rebates that can be compensated). The "Tax Liabilities" line item
in the accompanying balance sheets includes the amount of all the liabilities of a tax nature, except for provisions for taxes, broken down
into: "Current” (income tax payable on taxable profit for the year and other taxes payable in the next twelve months) and "Deferred" (the
amount of corporate tax payable in subsequent years).
Deferred tax liabilities attributable to taxable temporary differences associated with investments in subsidiaries, associates or joint venture
entities are recognized as such, except where the Bank can control the timing of the reversal of the temporary difference and it is unlikely
that it will reverse in the future. Deferred tax assets are recognized to the extent that it is considered probable that they will have sufficient
taxable profits in the future against which the deferred tax assets can be utilized and are not from the initial recognition of other assets or
liabilities in a transaction that does not affect the fiscal outcome.
The deferred tax assets and liabilities recognized are reassessed by the Bank at the close of each accounting period in order to ascertain
whether they still qualify as deferred tax assets and liabilities, and the appropriate adjustments are made on the basis of the findings of the
analyses performed. In those circumstances in which it is unclear how a specific requirement of the tax law applies to a particular transaction
or circumstance, and the acceptability of the definitive tax treatment depends on the decisions taken by the relevant taxation authority in
future, the entity recognizes current and deferred tax liabilities and assets considering whether it is probable or not that a taxation authority
will accept an uncertain tax treatment. Thus, if the entity concludes that it is not probable that the taxation authority will accept an uncertain
tax treatment, the entity uses the amount expected to be paid to (recovered from) the taxation authorities.
The income and expense directly recognized in equity that do not increase or decrease taxable income are accounted for as temporary
differences.
2.7. Provisions, contingent assets and contingent liabilities
The heading “Provisions” in the balance sheet includes amounts recognized to cover the Bank’s current obligations arising as a result of
past events. These are certain in terms of nature but uncertain in terms of amount and/or settlement date. The settlement of these obligations
by the Bank is deemed likely to entail an outflow of resources embodying economic benefits (see Note 21). The obligations may arise in
connection with legal or contractual provisions, valid expectations formed by the Bank relative to third parties in relation to the assumption
of certain responsibilities or through virtually certain developments of particular aspects of the regulations applicable to the operation of the
entities; and, specifically, future legislation to which the Bank will certainly be subject.
The provisions are recognized in the balance sheets when each and every one of the following requirements is met:
not.
Among other items, these provisions include the commitments made to employees (mentioned in section 2.8), as well as provisions for tax
and legal litigation.
Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by, the
occurrence or non-occurrence of events beyond the control of the Bank. Contingent assets are not recognized in the balance sheet or in
the income statement; however, they will be disclosed, should they exist
,
provided that it is probable that these assets will give rise to an
increase in resources embodying economic benefits (see Note 30).
Contingent liabilities are possible obligations of the Bank that arise from past events and whose existence is conditional on the occurrence
or non-occurrence of one or more future events beyond the control of the entity. They also include the existing obligations of the entity when
it is not probable that an outflow of resources embodying economic benefits will be required to settle them; or when, in extremely rare cases,
their amount cannot be measured with sufficient reliability.
Contingent liabilities are not recognized in the balance sheet or the income statement (excluding contingent liabilities from business
combination) but are disclosed in the Notes to the Financial Statements, unless the possibility of an outflow of resources embodying
economic benefits is remote.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
2.8. Post-employment and other employee benefit commitments
Below we provide a description of the most significant accounting criteria relating to post-employment and other employee benefit
commitments assumed by the Bank (see Note 22).
Short-term employee benefits
Benefits for current active employees which are accrued and settled during the year and for which a provision is not required in the entity´s
accounts. These include wages and salaries, social security charges and other personnel expense.
Costs are charged and recognized under the heading “Administration costs – Personnel expense – Other personnel expense” of the income
statement (see Note 39.1).
Post-employment benefits – Defined-contribution plans
The Bank sponsors defined-contribution plans for its active employees. The amount of these benefits is established as a percentage of
remuneration and/or as a fixed amount.
The contributions made to these plans in each period by the Bank are charged and recognized under the heading “Administration costs –
Personnel expense – Defined-contribution plan expense” of the income statement (see Note 39.1).
Post-employment benefits – Defined-benefit plans
The Bank maintains pension commitments with employees who have already retired or taken early retirement, certain closed groups of
active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees.
These commitments are covered by insurance contracts, pension funds and internal provisions.
In addition, the Bank have offered certain employees the option to retire before their normal retirement age stipulated, recognizing the
necessary provisions to cover the costs of the associated benefit commitments, which include both the liability for the benefit payments due
as well as the contributions payable to external pension funds during the early retirement period.
Furthermore, the Bank provides welfare and medical benefits which extend beyond the date of retirement of the employees entitled to the
benefits.
Provisions for pensions and similar obligations” and determined as the difference between the value of the defined-benefit commitments
and the fair value of plan assets at the date of the financial statements (see Note 21).
Current service cost are charged and recognized under the heading “Administration costs – Personnel expense – Defined-benefit plan
expense” of the income statement (see Note 39.1).
Interest credits/charges relating to these commitments are charged and recognized in net terms under the headings “Interest income” or,
where appropriated, “Interest expense” of the income statement. (see Note 33).
Past service costs arising from benefit plan changes as well as early retirements granted during the period are recognized under the heading
“Provisions or reversals of provisions” of the income statement (see Note 41).
Other long-term employee benefits
In addition to the above commitments, the Bank provides leave and long-service awards to their employees, consisting of either an
established monetary amounts or shares in Banco Bilbao Argentaria S.A. granted upon completion of a number of years of qualifying
service.
These commitments are quantified based on actuarial valuations and the amounts recorded under the heading “Provisions – Other long-
term employee benefits” of the balance sheet (see Note 21).
Valuation of commitments: actuarial assumptions and recognition of gains/losses
The present value of these commitments is determined based on individual member data. Active employee costs are determined using the
“projected unit credit” method, which treats each period of service as giving rise to an additional unit of benefit and values each unit
separately.
In establishing the actuarial assumptions we take into account that:
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
as price inflation, expected wage increases, discount rates and the expected return on plan assets, etc. Future wage and benefit
levels should be based on market expectations, at the balance sheet date, for the period over which the obligations are to be
settled.
on high quality bonds.
The Bank recognizes actuarial gains/losses relating to early retirement benefits, long service awards and other similar items under the
heading “Provisions or reversal of provisions” of the income statement for the period in which they arise (see Note 41). Actuarial gains/losses
relating to pension benefits are directly charged and recognized under the heading "Accumulated other comprehensive income – Items that
will not be reclassified to profit or loss – Actuarial gains or losses on defined benefit pension plans" of equity in the balance sheet (see Note
27).
2.9. Equity-settled share-based payment transactions
Provided they constitute the delivery of such equity instruments following the completion of a specific period of services, equity-settled
share-based payment transactions are recognized as an expense for services being provided by employees, by way of a balancing entry
under the heading “Shareholders’ funds – Other equity elements” in the balance sheet. These services are measured at fair value for the
employees services received, unless such fair value cannot be calculated reliably. In such case, they are measured by reference to the fair
value of the equity instruments granted, taking into account the date on which the commitments were granted and the terms and other
conditions included in the commitments.
When the initial compensation agreement includes what may be considered market conditions among its terms, any changes in these
conditions will not be reflected in the income statement, as these have already been accounted for in calculating the initial fair value of the
equity instruments. Non-market vesting conditions are not taken into account when estimating the initial fair value of equity instruments, but
they are taken into account when determining the number of equity instruments to be issued. This will be recognized on the income
statement with the corresponding increase in equity.
2.10. Termination benefits
Termination benefits are recognized in the financial statements when the Bank agrees to terminate employment contracts with its employees
and has established a detailed plan.
2.11. Treasury shares
The value of common stock -basically, shares and derivatives over the Bank's shares held by itself that comply with the requirements to be
recognized as equity instruments- is recognized as a decrease to net equity under the heading "Shareholders’ funds – other reserves" in
the balance sheets (see Note 26).
These financial assets are recognized at acquisition cost, and the gains or losses arising on their disposal are credited or debited, as
appropriate, to the heading “Shareholders’ funds – other reserves ” in the balance sheet (see Note 25).
2.12. Foreign-currency transactions
Assets, liabilities and futures transactions
The assets and liabilities in foreign currencies, including those of branches abroad, and the unmatured hedging forward foreign currency
purchase and sale transactions, are converted to euros at the average exchange rates on the Spanish spot currency market (or based on
the price of the U.S. dollar on local markets for the currencies not listed on this market) at the end of each period, with the exception of:
investment currency, which are converted at historical exchange rates.
the forward currency market at the end of each period as published by the Bank of Spain for this purpose.
The exchange differences that arise when converting these foreign-currency assets and liabilities (including those of the branches) into
euros are recognized under the heading “Exchange differences, net" in the income statement, except for those differences that arise in non-
monetary measured at fair value are recorded to equity under the heading “Accumulated other comprehensive income or loss - Items not
subject to reclassification to income statement - Fair value changes of equity instruments measured at fair value through other
comprehensive income”.
The breakdown of the main balances in foreign currencies as of December 31, 2020 and 2019, with reference to the most significant foreign
currencies, is set forth in Appendix VIII.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Structural currency positions
As a general policy, the Bank’s investments in foreign subsidiaries and the endowment funds provided to branches abroad are financed in
the same currency as the investment in order to eliminate the future currency risk arising from these transactions. However, the investments
made in countries whose currencies do not have a market which permits the obtainment of unlimited, lasting and stable long-term financing
are financed in another currency.
2.13. Recognition of income and expense
The most significant policies used by the Bank to recognize its income and expense are as follows.
As a general rule,
interest income and expense and similar items are recognized on the basis of their period of accrual using the
effective interest rate method.
They shall be recognized within the income statement according to the following criteria, independently from the financial instruments’
portfolio which generates the income or expense:
●
The interest income past-due before the initial recognition and pending to be received will form part of the gross carrying amount
of the debt instrument.
●
The interest income accrued after the initial recognition will form part of the gross carrying amount of the debt instrument until
it will be received.
The financial fees and commissions that arise on the arrangement of loans and advances (basically origination and analysis fees) are
deferred and recognized in the income statement over the expected life of the loan.
From that amount, the transaction costs identified
as directly attributable to the arrangement of the loans and advances will be deducted. These fees are part of the effective interest rate
for the loans and advances.
Once a debt instrument has been impaired, interest income is recognized applying the effective interest rate used to discount the
estimated recoverable cash flows on the carrying amount of the asset.
Dividends shall be recognized within the income statement according to the following criteria, independently from the financial
instruments’ portfolio which generates this income:
●
When the right to receive payment has been declared before the initial recognition and when the payment is pending to be
received, the dividends will not form part of the gross carrying amount of the equity instrument and will not be recognized as
income. Those dividends are accounted for as financial assets separately from the net equity instrument.
●
If the right to receive payment is received after the initial recognition, the dividends from the net equity instruments will be
recognized within the income statement. If the dividends correspond indubitable to the profits of the issuer before the date of
initial recognition, they will not be recognized as income but as reduction of the gross carrying amount of the equity instrument
because it represents a partly recuperation of the investment. Amongst other circumstances, the generation date can be
considered to be prior to the date of initial recognition if the amounts distributed by the issuer as from the initial recognition are
higher than its profits during the same period.
Income and expense relating to commissions and
similar fees are recognized in the income statement using criteria that vary
according
to the nature of such items. The most significant items in this connection are:
●
Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized when
collected/paid.
●
Those arising from transactions or services that are provided over a period of time, which are recognized over the life of these
transactions or services.
●
Those relating to a singular transaction, which are recognized when this single act is carried out.
These are recognized for accounting purposes on an accrual basis.
These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
2.14. Sales of assets and income from the provision of non-financial services
The heading “Other operating income” in the income statement includes the proceeds of sales of assets and income from the provision of
non-financial services (see Note 38).
2.15. Leases
As of January 1, 2019, Circular 2/2018 came into force and includes changes in the lessee accounting model. The single lessee accounting
model requires the lessee to record assets and liabilities for all lease contracts. The standard provides two exceptions to the recognition of
lease assets and liabilities that can be applied in the case of short-term contracts and those in which the underlying assets have low value.
BBVA elected to apply both exceptions. A lessee is required to recognize a right-of-use asset representing its right to use the underlying
leased asset, which is recorded under the headings ‘‘ Tangible assets – Property plants and equipment’’ and‘‘ Tangible assets – Investment
properties’’ of the balance sheet (see Note 15) and a lease liability representing its obligation to make lease payments which are recorded
under the heading ‘‘ Financial liabilities at amortized cost – Other financial liabilities’’ in the balance sheet (see Note 20.5).
At the initial date of the lease, the lease liability represents the present value of all lease unpaid payments. The liabilities registered under
this heading of the balance sheets are measured after their initial recognition at amortized cost, this being determined in accordance with
the “effective interest rate” method.
The right to use assets are initially recorded at cost. This cost consists of the initial measurement of the lease liability, any payment made
before the initial date less any lease incentives received, all direct initial expenses incurred, as well as an estimate of the expenses to be
incurred by the lessee, such as expenses related to the removal and dismantling of the underlying asset. The assets recorded under this
heading of the balance sheets are measured after their initial recognition at cost less:
The interest expense on the lease liability is recorded in the income statements under the heading “Interest expense” (see note 33). Variable
payments not included in the initial measurement of the lease liability are recorded under the heading “Administration costs – Other
administrative expense” (see Note 39).
Amortization is calculated using the straight-line method over the lifetime of the lease contract, on the basis of the cost of the assets. The
tangible asset depreciation charges are recognized in the accompanying income statements under the heading "Depreciation and
Amortization" (see Note 40).
In case of electing one of the exceptions in order not to recognize the corresponding right to use and the liability in the balance sheets,
payments related to the corresponding lease are recognized in the income statements, over the contract period, lineally, or in the way that
best represents the structure of the lease operation, under the heading "Operating expense -Other administrative expense” (see note 39).
Operating leases and subleases incomes are recognized in the income statements under the heading “Other operating income” (see Note
38).
As a lessor, lease
contracts are classified as finance leases from the inception of the transaction if they substantially transfer all the risks
and rewards incidental to ownership of the asset forming the subject-matter of the contract. Leases other than finance leases are classified
as operating leases.
When the entities act as the lessor of an asset under finance leases, the aggregate present values of the lease payments receivable from
the lessee plus the guaranteed residual value (normally the exercise price of the lessee’s purchase option on expiration of the lease
agreement) are recognized as financing provided to third parties and, therefore, are included under the heading “Loans and receivables” in
the accompanying balance sheets (see Note 12).
When the entities act as lessors of an asset in operating leases, the acquisition cost of the leased assets is recognized under "Tangible
assets – Property, plant and equipment – Other assets leased out under an operating lease" in the balance sheets (see Note 15). These
assets are depreciated in line with the criteria adopted for items of tangible assets for own use, while the income arising from the lease
arrangements is recognized in the income statement on a straight-line basis within “Other operating income” and "Other operating expense"
(see Note 38)
If a fair value sale and leaseback results in a lease, the profit or loss generated from the sale (only for the effectively transmitted part) is
recognized in the income statement at the time of sale.
2.16.
Entities and branches located in countries with hyperinflationary economies
None of the functional currencies of the branches located abroad relate to hyperinflationary economies as defined by Circular 4/2017 and
subsequent amendments. Accordingly, as of December 31, 2020 and 2019 it was not necessary to adjust the financial statements of any
branch to correct for the effect of inflation.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
2.17. Statements of recognized income and expense
The statements of recognized income and expense reflect the income and expenses generated each year. They distinguish between income
and expense recognized as results in the income statements and “Accumulated other comprehensive income” (see Note 27) recognized
directly in equity. “Accumulated other comprehensive income” include the changes that have taken place in the year in the “Accumulated
other comprehensive income” broken down by item.
The sum of the changes to the heading “Accumulated other comprehensive income” of the total equity and the net income of the year forms
the “Accumulated other comprehensive income”.
2.18. Statements of changes in equity
The statements of changes in equity reflect all the movements generated in each year in each of the headings of the equity, including those
from transactions undertaken with shareholders when they act as such, and those due to changes in accounting criteria or corrections of
errors, if any.
The applicable regulations establish that certain categories of assets and liabilities are recognized at their fair value with a charge to equity.
These charges, known as “Accumulated other comprehensive income” (see Note 27), are included in the Bank’s total equity net of tax
effect, which has been recognized as deferred tax assets or liabilities, as appropriate.
2.19. Statements of cash flows
The indirect method has been used for the preparation of the statement of cash flows. This method starts from the Bank’s net income and
adjusts its amount for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or
payments, and items of income or expense associated with cash flows classified as investment or finance. As well as cash, short-term,
highly liquid investments subject to a low risk of changes in value, such as cash and deposits in central banks, are classified as cash and
cash equivalents.
When preparing these financial statements the following definitions have been used:
financing activities.
cash equivalents or in operating activities.
form part of operating activities.
2.20. Recent pronouncements
During 2020, several modifications to Circular 4/2017 have come into force in order to respond to aspects related to the uncertainty
generated by the COVID-19 pandemic in the classification of refinanced operations, as well as to include some of the modifications
necessary to attend to the accounting effects caused by the uncertainty in the period prior to the replacement of the IBOR benchmarks.
Additionally, it has been modified with minor changes to obtain a greater alignment with the international IFRS regulations.
Circular 3/2020 enables entities to make greater use of the flexibility incorporated by international regulations in relation to the classification
of refinancing or restructuring that serves as the basis for estimating their credit risk coverage. Thus, refinancing may be classified as stage
1 on the refinancing date provided that the entity can justify that there has not been a significant increase in credit risk since initial recognition.
Likewise, refinancing previously classified in stage 2 may be reclassified to stage 1 if the significant increase in risk has reversed, without
having to wait for the 2-year cure period. In any case, they will continue to be identified as refinanced operations for a period of 2 years.
Circular 2/2020, introduces minor changes to Circular 4/2017 to achieve greater alignment with IFRS by incorporating the new definition of
business introduced in IFRS 3 and clarifying that when control of an investee is lost, the gain or loss from the revaluation of the remaining
interest at fair value is recognized in the income statement.
Circular 5/2020 introduces an amendment to Circular 4/2017 to simplify in the retrospective analysis of the effectiveness of the hedging
relationships directly affected by the reform of the benchmark interest rate indices. Specifically, it details that the result of the hedging
instrument will not be required to fluctuate within a variation range of 80% to 125% with respect to the result of the hedged item, provided
the rest of the conditions allowed for the application of hedge accounting are met.
On the other hand, this Circular 5/2020 also includes minor amendments to Circular 4/2017 that will enter into force in January 2021, and
that aim to maintain its alignment with the European accounting framework and the guidance of the European Central Bank for credit
institutions on non-performing loans, expressly regulates issues not covered and introduces clarifications that facilitate their understanding.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
3. Shareholder remuneration system
Cash Dividends
Throughout 2019 and 2020, BBVA’s Board of Directors approved the payment of the following dividends (interim or final dividends) fully in
cash, recorded in “Total Equity- Interim Dividends” and “Total Equity – Retained earnings” of the balance sheet of the relevant year:
dividend for 2018, in addition to other dividends previously paid, in cash for an amount equal to €0.16 (€0.1296 withholding tax)
per BBVA share. The total amount paid to shareholders on April 10, 2019, after deducting treasury shares held by the Group’s
Companies, amounted to €1,067 million and is recognized under the heading “Total equity- Interim dividends” of the balance
sheet as of December 31, 2019.
tax rate of 19%) per BBVA share, as gross interim dividend based on 2019 results. The total amount paid to shareholders on
October 15, 2019, after deducting treasury shares held by the Group´s companies, amounted 667 million and is recognized under
heading “Total equity- Interim dividends” of the balance sheet as of December 31, 2019.
dividend for 2019, in addition to other dividends previously paid, in cash for an amount equal to €0.16 (€0.1296 net of
withholding tax) per BBVA share, which was paid to shareholders on April 9, 2020. The total amount paid to shareholders,
amounted to €1,067 million and is recognized under the heading “Total equity- Retained Earnings” of the balance sheet as of
December 31, 2020.
In accordance with recommendation ECB/2020/19 issued by the ECB on March 27, 2020 on dividend distributions during the COVID-19
pandemic, the Board of Directors of BBVA resolved to modify for the financial year corresponding to 2020 the dividend policy of the
Group, announced on February 1, 2017, determining as new policy for the year 2020 not to pay any dividend amount corresponding to
2020 until the uncertainties caused by COVID-19 disappear and, in any case, never before the end of such fiscal year. On July 27, 2020,
the ECB prolonged this recommendation until January 1, 2021 by adopting recommendation ECB/2020/35.
On December 15, 2020 the ECB issued recommendation ECB/2020/62, repealing recommendation ECB/2020/35 and recommending that
significant credit institutions exercise extreme prudence when deciding on or paying out dividends or performing share buy-backs aimed
at remunerating shareholders. Recommendation ECB/2020/62 circumscribes prudent distributions to results of 2019 and 2020 but
excluding distributions regarding 2021 until September 30, 2021, when the ECB will reevaluate the economic situation. BBVA intends to
reinstate its dividend policy of the Group announced on February 1, 2017 once the recommendation ECB/2020/62 is repealed and there
are no additional restrictions or limitations. (See Note 51).
Proposal on application of earnings for 2020
The Board of Directors will submit for the approval of the Ordinary General Shareholders’ Meeting the proposal to apply the result of Banco
Bilbao Vizcaya Argentaria, S.A. for the 2020 financial year amounting to €2,182 million of losses to the prior years’ losses account.
Furthermore, the offsetting of the prior years’ losses will likewise be submitted for approval, the amount of which amounts to €2,182 million,
after the application of the 2020 financial year results in accordance with the previous paragraph, against the voluntary reserves account
under the "Retained earnings" heading.
Other shareholder remuneration
On January 29, 2021, it was announced that a cash distribution in the amount of €0.059 gross per share as shareholder remuneration in
relation to the Group’s result in the 2020 financial year was expected to be submitted to the relevant governing bodies of BBVA for
consideration (see Note 51).
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
4. Earnings per share
Basic and diluted earnings per share are calculated in accordance with the criteria established by IAS 33. For more information see Glossary
of terms.
The calculation of earnings per share of BBVA is as follows:
Basic and Diluted Earnings per Share
2020
2019
Numerator for basic and diluted earnings per share (millions of euros)
Profit attributable to parent company
1,305
3,512
Adjustment: Additional Tier 1 securities (1)
(387)
(419)
Profit adjusted (millions of euros) (A)
917
3,093
Of which: profit from discontinued operations (net of non-controlling interest) (B) (See Note 14)
(1,729)
(758)
Denominator for basic earnings per share (number of shares outstanding)
-
-
Weighted average number of shares outstanding (2)
6,668
6,668
Weighted average number of shares outstanding x corrective factor (3)
6,668
6,668
Adjusted number of shares - Basic earnings per share (C)
6,655
6,648
Adjusted number of shares - diluted earnings per share (D)
6,655
6,648
Earnings (losses) per share (*)
0.14
0.47
Basic earnings (losses) per share from continued operations (Euros per share)A-B/C
0.40
0.58
Diluted earnings (losses) per share from continued operations (Euros per share)A-B/D
0.40
0.58
Basic earnings (losses) per share from discontinued operations (Euros per share)B/C
(0.26)
(0.11)
Diluted earnings (losses) per share from discontinued operations (Euros per share)B/D
(0.26)
(0.11)
(1) Remuneration in the year related to contingent convertible securities recognized in equity (See Note 20.4).
(2) Weighted average number of shares outstanding (millions of euros), excluding weighted average of treasury shares during the year.
(3) Corrective factor, due to the capital increase with pre-emptive subscription right, applied for the previous years.
to €387 million and €419 million respectively.
(**) Amounts in December 2019 have been restated (see Note 1.3).
As of December 31, 2020 and 2019 there were no other financial instruments or share option commitments to employees that could
potentially affect the calculation of the diluted earnings per share for the years presented. For this reason, basic and diluted earnings per
share are the same for both dates.
5. Risk management
5.1. Risk factors
BBVA has processes in place for identifying risks and analyzing scenarios in order to enable to manage risks in a dynamic and proactive
way.
The risk identification processes are forward looking to seek the identification of emerging risks and take into account the concerns of both
the business areas, which are close to the reality of the different geographical areas, and the corporate areas and senior management.
Risks are identified and measured consistently using the methodologies deemed appropriate in each case. Their measurement includes
the design and application of scenario analyses and stress testing and considers the controls to which the risks are subjected. As part of
this process, a forward projection of the risk appetite framework variables in stress scenarios is conducted in order to identify possible
deviations from the established thresholds. If any such deviations are detected, appropriate measures are taken to keep the variables within
the target risk profile.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
In this context, there are a number of emerging risks that could affect the evolution of the Group's business, where the Bank operates,
including the below:
The coronavirus (COVID-19) pandemic is affecting adversely the world economy and economic activity and conditions in the
countries in which the Group operates, leading many of them to economic recession in 2020 and a relatively moderated increase
of the activity in 2021 in such a way that probably the GDP levels observed before the crisis will only start recovering in 2022.
Among other challenges, these countries are experiencing widespread increases in unemployment levels and falls in production,
while public debt has increased significantly due to support and spending measures implemented by government authorities. In
addition, there has been an increase in debt defaults by both companies and individuals, volatility in the financial markets including
exchange rates and falls in the value of assets and investments, all of which have a negative impact on the Group’s results in the
year 2020, and are expected to continue affecting the results in the future.
Furthermore, the Group may be affected by the specific measures adopted by regulatory authorities in the banking sector,
including but not limited to, the recent reductions in reference interest rates, the relaxation of prudential requirements, the
suspension of dividend payments, the adoption of moratorium measures for bank customers (such as those included in Royal
Decree Law 11/2020 in Spain, as well as in the CECA-AEB agreement to which BBVA has adhered and which, among other
things, allows loan debtors to extend maturities and defer interest payments) and facilities to grant credit with the benefit of public
guarantees, especially to companies and self-employed individuals, as well as changes in the financial asset purchase programs.
Since the outbreak of COVID-19, the Group has experienced a decline in its activity. For example, the granting of new loans to
individuals has significantly decreased since the beginning of mobility restriction measures decreed in certain countries in which
the Group operates. In addition, the Group faces various risks, such as an increased risk of deterioration in the value of its assets
(including financial instruments valued at fair value, which may suffer significant fluctuations) and of the securities held for liquidity
reasons, a possible significant increase in non-performing loans and a negative impact on the Group’s cost of financing and on
its access to financing (especially in an environment where credit ratings are affected).
In addition, in several of the countries in which the Group operates, including Spain, the Group has temporarily closed a significant
number of its offices and reduced hours of working with the public, and the teams that provide central services have been working
remotely. These measures are being gradually, however, due to the continued expansion of the COVID-19 pandemic, it is unclear
how long it will take for normal operations to be fully resumed. The COVID-19 pandemic could also adversely affect the business
and operations of third parties that provide critical services to the Group and, in particular, the greater demand and/or reduced
availability of certain resources could in some cases make it more difficult for the Group to maintain the required service levels.
Furthermore, the increase in remote working has increased the risks related to cybersecurity, as the use of non-corporate
networks has increased.
As a result of the above, the COVID-19 pandemic has had an adverse effect on the Group's results and capital base. During the
year 2020 the main accumulated impacts were:
(i) an increase in the cost of risk associated with the lending activity, mainly due to the deterioration of the macroeconomic
environment, which has had a negative impact of €2,009 million in the Group (including the initial adverse effect of the
deferment of payment) and provisions for credit risk and contingent commitments for €95 million, (see Notes 6.2, 41
and 42); and
(ii) a deterioration on the participation on BBVA USA Bancshares Inc., mainly due to the deterioration of the
macroeconomic scenario in the United States, which has had a net negative impact of €2,084 million on the Group's
attributed profit in this period (although this impact does not affect the tangible book value, nor the solvency or the
liquidity of the Group).
As of June 30, 2020, and as a consequence of the general deterioration of the global macroeconomic scenario, the specific
effects of the same cannot be isolated, affecting all of the Bank Financial Statements.
The Global economy is being severely affected by the COVID-19 pandemic. Supply, demand and financial factors caused an
unprecedented fall in GDP in the first half of 2020. Supported by strong fiscal and monetary policy measures, as well as
greater control over the spread of the virus, global growth rebounded more than expected in the third quarter, before slowing
down in the fourth, when the number of infections rose again in many regions, mainly in the United States and Europe. As for
2021, the unfavorable evolution of the pandemic is expected to adversely affect activity in the short term, while new fiscal and
monetary stimuli, as well as the administering of coronavirus vaccines, are expected to support recovery from mid-year
onwards.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Following the massive fiscal and monetary stimuli to support economic activity and reduce financial tensions, government
debt has increased across the board and interest rates have been cut, and are now at historical low levels. Additional
countercyclical measures may be required. Similarly, a significant reduction in current stimuli is not expected, at least until
the recovery takes hold.
Tensions in the financial markets have moderated rapidly since the end of March 2020, following the decisive actions taken
by the main central banks and the fiscal packages announced in many countries. In recent months, the markets have shown
relative stability and, at certain times, risk-taking movements. Likewise, progress related to the development of COVID-19
vaccines and prospects for economic recovery should pave the way for financial volatility to persist at relatively low levels in
general going forward.
BBVA Research estimates that global GDP contracted by around 2.6% in 2020 and will expand by around 5.3% in 2021 and
4.1% in 2022. Activity will recover gradually and heterogeneously among countries. Various epidemiological, financial and
geopolitical factors are also contributing to the persistent exceptionally high uncertainty.
With regard to the banking system, in an environment in which much of the economic activity has been at a stand still for
several months, the services provided have played an essential role, basically for two reasons: firstly, the banks have ensured
the proper functioning of collections and payments for households and companies, thereby contributing to the maintenance
of economic activity; secondly, the granting of new lending or the renewal of existing lending has reduced the impact of the
economic slowdown on household and business income. The support provided by the banks over the months of lockdown
and public guarantees have been essential in softening the impact of the crisis on companies' liquidity and solvency, meaning
that banking has become its main source of funding for most companies.
In terms of profitability, European and Spanish banking have deteriorated, primarily because many entities recorded high
provisions for impairment on financial assets in the first two quarters of 2020 as a result of the worsening macroeconomic
environment following the pandemic outbreak. Pre-pandemic profitability levels remained far from the levels prior to the
previous financial crisis. This is in addition to the accumulation of capital since the previous crisis and the very low interest
rate environment that we have been experiencing for several years. Nevertheless, the banks are facing this situation from a
healthy position and with solvency that has been constantly increasing since the 2008 crisis, with reinforced capital and
liquidity buffers and, therefore, with a greater lending capacity.
The BBVA Group has a General Risk Management and Control Model appropriate to its business model, its organization, the
countries in which it operates and its corporate governance system, which allows it to carry out its activity within the framework
of the risk management and control strategy and policy defined by the corporate bodies. This model deals with management
in global form adapting itself to the circumstances of each moment. This Model is applied integrally in the Group
of these associated risks, establishing different global initiatives that define the risk management strategy during the crisis,
with common action protocols that should be implemented and adapted, when needed, to local needs.
The BBVA Group global risk unit - Global Risk Management (hereinafter, “GRM”) - has increased the frequency and intensity
of the evaluation of potential impacts on the different groups and clients, in order to prevent their future evolution, and carried
out appropriate adjustments and reclassifications, reinforcing its processes, governance and teams in Holding and countries
to act in a coordinated manner, focusing priority on crisis management.
Over the past year, it has been found that the pandemic has a global impact, affecting to a greater extent the sectors in
which there is a high level of human interaction (transport, especially air transport, leisure, especially hotel establishments,
as well as industries and activities dependent on them), regardless of the regional area in question. For this reason, the
Bank's risk management has clearly been intensified by sectorial vectors over other conditioning factors such as geographic
●
and regulators. This can affect their ability to grow and the capacity of certain businesses to develop, and result in
stricter liquidity and capital requirements with lower profitability ratios. The Group constantly monitors changes in the
regulatory framework that allow for anticipation and adaptation to them in a timely manner, adopt industry practices
and more efficient and rigorous criteria in its implementation.
●
activities, situations which might cause relevant reputational damage to the entity could raise and might affect the
regular course of business. The attitudes and behaviors of the Group and its members are governed by the principles
of integrity, honesty, long-term vision and industry practices through, inter alia, the internal control model, the Code of
Conduct, the Corporate Principles in tax matters and Responsible Business Strategy of the Group.
●
technologies pose significant challenges for financial institutions, entailing threats (new competitors, disintermediation,
etc.) but also opportunities (new framework of relations with customers, greater ability to adapt to their needs, new
products and distribution channels, etc.). Digital transformation is a priority for the Group as it aims to lead digital
banking of the future as one of its objectives.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
●
and customer databases, fraud in payment systems, etc. that require major investments in security from both the
technological and human point of view. The Group gives great importance to the active operational and technological
risk management and control.
●
entities are usually party to individual or collective judicial proceedings (including class actions) resulting from their
activity and operations, as well as arbitration proceedings. The Group is also party to other government procedures
and investigations, such as those carried out by the antitrust authorities in certain countries which, among other things,
have in the past and could in the future result into sanctions, as well as lead to claims by customers and others. In
addition, the regulatory framework, in the jurisdictions in which the Group operates, is evolving towards a supervisory
approach more focused on the opening of sanctioning proceedings while some regulators are focusing their attention
on consumer protection and behavioral risk.
●
financial institutions, prompted in part by certain judgments in favor of consumers handed down by national and
supranational courts, have increased significantly in recent years and this trend could continue in the future. The legal
and regulatory actions and proceedings faced by other financial institutions in relation to these and other matters,
especially if such actions or proceedings result in favorable resolutions for the consumer, could also adversely affect
the Group.
●
and it is possible that an adverse outcome in any proceedings (depending on the amount thereof, the penalties imposed
or the procedural or management costs for the Group) could damage the Group's reputation, generate a knock-on
effect or otherwise adversely affect the Group.
●
currently exposed and those that may arise in the future, including actions and proceedings relating to former Group
subsidiaries or in respect of which the Group may have indemnification obligations, but such outcome could be
significantly adverse to the Group. In addition, a decision in any matter, whether against the Group or against another
credit entity facing similar claims as those faced by the Group, could give rise to other claims against the Group. In
addition, these actions and proceedings attract resources from the Group and may occupy a great deal of attention on
part of the Group's management and employees.
●
"Provisions for litigation and pending tax cases" in the consolidated balance sheet) which €574 million correspond to
legal contingencies and €38 million to fiscal contingencies. However, the uncertainty arising from these proceedings
(including those for which no provisions have been made, either because it is not possible to estimate them or for other
reasons) makes it impossible to guarantee that the possible losses arising from these proceedings will not exceed,
where applicable, the amounts that the Group currently has provisioned and, therefore, could affect the Group's
consolidated results in a given period.
●
become subject in the future or otherwise affected by, individually or in the aggregate, if resolved in whole or in part
adversely to the Group´s interests, could have a material adverse effect on the Group’s business, financial condition
and results of operations.
●
(Cenyt). Such investigation includes the provision of services by Cenyt to the Bank. On 29th July, 2019, the Bank was
named as an official suspect (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017
– Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could be constitutive
of bribery, revelation of secrets and corruption. On February 3, 2020, the Bank was notified by the Central Investigating
Court No. 6 of the National High Court of the order lifting the secrecy of the proceedings. Certain current and former
officers and employees of the Group, as well as former directors have also been named as official suspects in
connection with this investigation. The Bank has been and continues to proactively collaborate with the Spanish
judicial authorities, including sharing with the courts the relevant information obtained in the internal investigation
hired by the entity in 2019 to contribute to the clarification of the facts. As of the date of the approval of the consolidated
financial statements, no formal accusation against the Bank has been made. This criminal judicial proceeding is at the
pre-trial phase. Therefore, it is not possible at this time to predict the scope or duration of such proceeding or any
related proceeding or its or their possible outcomes or implications for the Group, including any fines, damages
or harm to the Group’s reputation caused thereby.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
5.2. Credit risk
Credit risk arises from the probability that one party to a financial instrument will fail to meet its contractual obligations for reasons of
insolvency or inability to pay and cause a financial loss for the other party.
The general principles governing credit risk management in the BBVA are as follows:
and avoiding relevant concentrations.
to sound mitigation and control mechanisms.
type of risk. In addition, portfolios should be actively managed on the basis of a common metric (economic capital).
income without depending upon guarantors, bondsmen or pledged assess, it’s the main criterion when granting credit risks.
on personalized advice.
development
Credit risk management in the Group has an integrated structure for all its functions, allowing decisions to be taken objectively and
independently throughout the life cycle of the risk.
procedures, structure and supervision.
and for direct management of risk according to the decision-making channels:
o
of each business area with regard to risks. The changes in weighting and variables of these tools must be validated by
the GRM area.
o
with regard to risks, which incorporates the delegation rule and the Group's corporate policies
The risk function has a decision-making process supported by a structure of committees with a solid governance scheme, which describes
their purposes and functioning for a proper performance of their tasks.
Payment deferral
This governance scheme has been fundamental in managing the COVID-19 crisis in all the geographies where the Group operates,
including Spain, where both, assessing the flow of necessary funds for the economies with the rigor in the analysis and monitoring of the
credit quality of the exposures.
Since the beginning of the pandemic, the Bank has offered payment deferral to its customers (retail, SMEs and wholesale). These
moratoriums have been both legislative (protected by Royal Decree Law 8/2020 and 11/202) and non-legislative (based on the agreement
promoted by the Spanish Banking Association (hereinafter “AEB”) to which BBVA has joined), aimed at mitigating the effects of COVID-19.
Depending on the cases, the payment of principal and / or interest has been postponed, maintaining the original contract. Generally, these
deferrals have been given for a period of less than one year. This measure has been extended to different sectors, being hostelry, tourism
and transport those who have used it the most.
The moratoriums covered by the Royal Decree Law have been proposed to the especially vulnerable groups indicated in the regulation.
These measures consist of payment deferral of three months of principal and interest. In addition, the possibility of customers joining sector
agreements for the remaining term until the limit established has been offered that, once said legal moratorium has expired. By type of
customer, they are aimed at individuals, individual or self-employed entrepreneurs, and by type of product, mortgage, personal loans or
consumer loans.
The moratoriums granted under the sectorial agreement of the AEB are aimed at individuals for up to 12 months of capital deferral in the
case of mortgage loans and up to 6 months in personal loans. Said sector agreement has been in force until September 29, 2020, but it
has been extended until March 30, 2021, although the new conditions only provide for the payment deferral of capital in mortgages up to 9
months, remaining 6 months on personal loans.
In addition, the Official Credit Institute (ICO) has published several aid programs aimed at the self-employed, SMEs and companies, through
which a guarantee of between 60% and 80% is granted for a period of up to 5 years to the new financing granted. The amount of the
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
guarantee and its length depends on the size of the company and the type of product. The ICO has also subsidized individuals the amount
of the rent up to 6 months in loans up to 6 years.
The amount of payment deferrals (existing and completed) and the financing granted with public guarantees given at Bank level, as well as
the number of customers, as of December 31, 2020 are as follows:
Amount of payment deferral and financing with public guarantees as of December 31, 2020 (Millions of Euros)
Payment deferral
Public guarantees
Existing
Completed
Total
Number of
Total
Number of
customers
Total
deferment
of
payments
guarantees
(%) credit
investment
BBVA, S.A.
4,120
1,694
5,814
81,334
11,811
133,334
17,625
8.5%
The amount of payment deferrals (existing and completed) and the financing granted with public guarantees given at Bank level, as well as
the number of customers, as of December 31, 2020 are as follows:
Amount of payment deferral and financing with public guarantees by concept as of December 31, 2020 (Millions of Euros)
Payment deferral
Financing with
Existing
Completed
Total
BBVA, S.A.
4,120
1,694
5,814
11,811
Customers
3,617
1,629
5,246
972
Of which: Mortgages
3,290
1,056
4,347
-
SMEs
361
29
390
6,957
Non-financial corporations
138
22
160
3,870
Other
4
13
18
12
Amount of deferment of payments by stages as of December 31, 2020 (Millions of Euros)
Stage 1
Stage 2
Stage 3
Total
BBVA, S.A.
3,155
2,014
645
5,814
Customers
2,782
1,850
614
5,246
Of which: Mortgages
2,288
1,538
520
4,347
SMEs
269
98
23
390
Non-financial corporations
100
53
8
160
Other
5
13
-
18
These payment deferral measures result in the temporary suspension, total or partial, of the contractual obligations with a deferral for a
specific period of time. Considering that the payment deferrals granted by COVID-19 provide temporary relief to debtors and that the
economic value of the affected loans has not been significantly impacted, the payment deferral measures granted have not been considered
substantial contractual modifications and, therefore, modified loans are accounted for as a continuation of the originals. Therefore when a
payment deferral does not generate interest collection rights, a temporary loss of value is triggered for the operation, which is calculated as
the difference in current value of the original and modified cash flows, both discounted at the effective interest rate of the original operation.
The difference is recognized at the original time in the income statement under the heading “Impairment or (reversal) of impairment on
financial assets not measured at fair value through profit or loss or net gains by modification” in the balance as a reduction of the asset
value of the loans. From that point on, said correction accrues as net interest income at the original effective interest rate within the period
of the payment deferral. Thus, at the end of the moratorium period, the impact on net attributed profit is practically neutral. As of December
31, 2020, the temporary loss of value of the payment deferrals included in the Income Statement amounted to € 15 million, which was
already recognized as a higher interest margin as of that date.
Regarding the classification of exposures according to their credit risk, BBVA has maintained a rigorous application of IFRS 9 when granting
the payment deferrals and has reinforced the procedures for monitoring credit risk both throughout the life of the transactions and at their
maturity.
transactions subject to the payment deferrals are initially classified in the stage they had previously, unless, based on their risk profile, they
should be classified in a worse stage. On the other hand, as evidence of payment has ceased to exist or has been reduced, BBVA has
introduced additional indicators or segmentations to identify the significant increase in credit risk that may have occurred in some
transactions or a set of them and, where appropriate, it has been classified in Stage 2. Furthermore, the indications provided by the
European Banking Authority (EBA) have been taken into account to not consider forbearance the payment deferrals that meet a series of
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
requirements. All this without prejudice to maintaining its consideration as a forbearance if it was previously qualified as such or classifying
the exposure in the corresponding stage previously stated.
On the other hand, the treatment for the payment deferrals that expire and may require additional support will be in accordance with the
updated evaluation of the customer's credit quality and the characteristics of the solution granted. If applicable, they will be treated as
Refinancing or Restructuring.
Regarding public support for the loans’ lending, it does not affect the evaluation of the significant increase in risk since it is valued through
the credit quality of the instrument. However, in estimating the expected loss, the existence of the guarantor implies a possible reduction in
the level of provisions necessary since, for the hedged part, the loss that would be incurred in the foreclose of the guarantee is taken into
account.
The public guarantees granted by the Official Credit Institute (ICO) have been considered as an integral part of the terms and conditions of
the loans granted under the consideration that the guarantees are granted at the same time that the financing is granted to the client and
in a way inseparable from it.
5.2.1 Measurement Expected Credit Loss (ECL)
Bank of Spain Circular 4/2017 requires determining the expected credit loss of a financial instrument in a way that reflects an unbiased
estimation removing any conservatism or optimism, including the time value of money and a forward looking perspective (including the
economic forecast) all this based on the information that is available at a certain moment and that is reasonable and bearable with respect
to future economic condition.
Therefore the recognition and measurement of expected credit losses (ECL) is highly complex and involves the use of significant analysis
and estimation including formulation and incorporation of forward-looking economic conditions into ECL.
The modeling of the ECL calculation is subject to a governance system that is common to the entire Group. Within this common framework,
the necessary adaptations have been made to capture the particularities of BBVA S.A. The methodology, assumptions and observations
are reviewed annually, and after a validation and approval process, the outcome of this review is incorporated into the ECL calculations.
Risk parameters by homogeneous groups
Expected losses can be estimated both individually and collectively. Regarding the collective estimate, the instruments are distributed in
homogeneous groups (segments) that share similar risk characteristics. Following the guidelines established by the Group for the
development of models under the applied norm, the Bank performed the grouping based on the information available, its representativeness
or relevance and compliance with the necessary statistical requirements.
Depending on the portfolio or the parameter being estimated, one risk driver or another will apply and different segments will reflect
differences in PDs and LGDs. Thus, in each segment, changes in the level of credit risk will respond to the impact of changing conditions
on the common range of credit risk drivers. The effect on the group’s credit risk in response to changes in forward-looking information will
be considered as well. Macroeconomic modeling for each segment is carried out using some of the shared risk characteristics.
These segments share credit risk characteristics such that changes in credit risk in a part of the portfolio are not concealed by the
performance of other parts of the portfolio. In that sense, the methodology developed for ECL estimation indicates the risk drivers that have
to be taken into account for PD segmentation purposes, depending on whether the estimation is for retail or wholesale portfolios.
As an example of the variables that can be taken into consideration to determine the final models, the following stand out:
maturity, nationality of the debtor, sale channel, original term, indicator of credit card activity, percentage of initial drawn balance.
balance (y/n), write off, grace period.
business area, debtor’s commercial segment, forbearance (account) EAD (this risk driver could be correlated with the time on
books or the LTV so, before including it, an assessment should be done in order to avoid a double counting effect), time on default
of the account (for defaulted exposures), geographical location.
business area,forbearance (client), debtor’s commercial segment time on default of the deal (for defaulted exposures).
activity, time on books.
In BBVA , the expected losses calculated are based on the internal models developed for all the portfolios, unless clients/contracts are
subject to individualized estimates.
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Exposures with other credit institutions, sovereign debt or with public administrations are characterized by a low number of defaults, so the
Bank's historical bases do not contain sufficiently representative information to build impairment models based on them. However, there
are external sources of information that, based on broader observations, are capable of providing the necessary inputs to develop models
of expected losses. Therefore, based on the rating assigned to these exposures and taking into account the inputs obtained from these
sources, the calculations of expected losses are developed internally, including their projection based on the macroeconomic perspectives.
Individual estimation of expected credit losses
The Bank periodically and individually reviews the situation and credit rating of its customers, regardless of their classification, counting on
the information deemed necessary to do so. It also has procedures in place within the risk management framework to identify the factors
that may lead to increased risk and, consequently, to a greater need for provisions.
The monitoring model established by the Bank consists of continuously monitoring the risks to which it is exposed, which guarantees their
proper classification in the different categories of the Norm. The original analysis of the exposures is reviewed through the procedures for
updating the rating tools (rating and scoring), which periodically review the financial situation of clients, influencing the classification by
stages of exposures.
Within this credit risk management framework, the Bank has procedures that guarantee the review, at least annually, of all its wholesale
counterparties through the so-called financial programs, which include the current and proposed positioning of the Bank with the customer
in terms of credit risk. This review is based on a detailed analysis of the client's up-to-date financial situation, which is complemented by
other information available in relation to individual perspectives on business performance, industry trends, macroeconomic prospects or
other public data. As a result of this analysis, the preliminary rating of the client is obtained, which, after undergoing the internal procedure,
can be revised down if deemed appropriate (for example, general economic environment or evolution of the sector). These factors in
addition to the information that the client can provide are used to review the ratings even before the scheduled financial plan reviews are
conducted if circumstances warrant.
Additionally, the Bank has established procedures to identify wholesale customers in the internal Watch List category, which is defined as
that risk in which, derived from an individualized credit analysis, an increase in credit risk is observed, either due to economic or financial
difficulties or because they have suffered, or are expected to suffer, adverse situations in their environment, without meeting the criteria for
classification as impaired risk. Under this procedure, all a customer's Watch List exposures are considered Stage 2 regardless of when they
originated, if as a result of the analysis the customer is considered to have significantly increased risk.
Finally, the Bank has so-called Workout Committee, which analyze not only the situation and evolution of significant clients in Watch List
and doubtful situations, but also those significant clients in which, without having still rated on Watch List, they may present some Stage 2
rated exposure for a quantitative reason (PD comparison from origination). This analysis is carried out in order to decide if, derived from
this situation, all the client's exposures should be considered in the Watch List category, which would imply the migration of all the client's
operations to Stage 2 regardless of the date on which they originated.
With this, the Bank ensures an individualized review of the credit quality of its wholesale counterparties, identifying the situations in which
a change in the risk profile of these clients may have occurred and proceeding, where appropriate, to estimate individualized credit losses.
Along with this review, the Group individually estimates the expected losses of those clients whose total exposure exceeds certain
thresholds, including those that part of their operations may be classified in stage 1 and part in stage 2. In setting thresholds, each geography
determines the minimum amount of a client's exposure whose expected losses must be estimated individually taking into account the
following:
•For clients with exposure at stage 3: The analysis of clients with total risk above this threshold implies analyzing at least 40% of
the total risk of the wholesale portfolio in stage 3. Although the calibration of the threshold is done on the wholesale portfolio, clients
of other portfolios must be analyzed if they exceed the threshold, staying in Stage 3.
•For the rest of situations: The analysis of clients with total risk above this threshold implies analyzing at least 20% of the total risk
of the Watch List wholesale portfolio. Although the threshold calibration is carried out on the exposure classified as Watch List,
wholesale clients or clients belonging to other portfolios that have exposures classified in stage 2, and whose total exposure,
exceeds said threshold must be analyzed individually, considering both the exposures classified in stage 1 as in stage 2.
Regarding the methodology for the individual estimation of expected losses, it should be mentioned, firstly, that these are measured as the
difference between the asset’s carrying amount and the estimated future cash flows discounted at the financial asset’s effective interest
The estimated recoverable amount should correspond to the amount calculated under the following method:
liquidation of the collateral.
The estimated future cash flows depend on the type of approach applied, which can be:
holders or guarantors. The operating cash flows of the debtor, or the guarantor, continue and can be used to repay the financial
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
debt to all creditors. In addition, collateral may be exercised to the extent it does not influence operating cash flows. The
following aspects should be taken into account:
●
●
must be used over a maximum growth period of 3 to 5 years, and subsequently constant cash flows
●
applicable business restructuring plan, taking into account the resulting changes in the structure of the company (for
example, due to divestments or the interruption of unprofitable lines of business).
●
flow changes (e.g. if a patent or a long-term loan expires).
●
price should reflect the estimated future cash flows that may result from the sale of the assets less the estimated costs
associated with the disposal.
of loan receivable flows is of high uncertainty. Estimation should be carried out through the estimation of recoverable amounts
from the effective real guarantees received. It will not be admissible as effective guarantees, those whose effectiveness
depends substantially on the creditworthiness of the debtor or economic group in which it takes part. Under a gone concern
scenario, the collateral is exercised and the operating cash flows of the debtor cease. This could be the case if:
o
estimated under a gone concern criterion when arrears are greater than 18 months.
o
o
o
case if the earnings before interest, taxes, depreciation and amortization (EBITDA) of the two previous years had
been negative, or if the business plans of the previous years had been flawed (due to material discrepancies in the
back-testing)
o
Significant increase in credit risk
As indicated in Note 2.1, in the identification of significant increase in risk, distinguishing between quantitative criteria or by comparison of
probabilities of default and qualitative reasons (more than 30 days of default, watch list consideration or non-impaired refinancing).
To manage credit risk, the Bank uses all relevant information that is available and that may affect the credit quality of the exposures. This
information may come mainly from the internal processes of admission, analysis and monitoring of operations, from the strategy defined by
the Bank regarding the price of operations or distribution by geographies, products or sectors of activity, from the observance of the
macroeconomic environment, from market data such as interest rate curves, or prices of the different financial instruments, or from external
sources of credit rating.
This set of information is the basis for determining the rating and scoring (see note 5.1.4 for more information on rating and scoring systems)
corresponding to each of the exposures and which are assigned a probability of default (PD) that, as already mentioned, it undergoes an
annual review process that assesses its representativeness (backtesting) and is updated with new observations. Furthermore, the projection
of these PDs over time has been modeled based on macroeconomic expectations, which allows obtaining the probabilities of default
throughout the life of the operations.
Based on this methodology, and in accordance with the provisions of the standard and the EBA guidelines on credit risk management
practices (EBA / GL / 2017/06), the Bank has established absolute and relative thresholds for identify whether the expected changes in the
probabilities of default have increased significantly compared to the initial moment, adapted to the particularities of each one of them in
terms of origination levels, product characteristics, distribution by sectors or portfolios, and macroeconomic situation. To establish the
aforementioned thresholds, a series of general principles are considered, such as:
recognition and not only to identify those situations in which it is already foreseeable that they will reach the level of impairment.
For this reason, it is to be expected that of the total exposures there will always be a representative group for which said
increased risk is identified.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
the exposures as impaired or even before a real default occurs. The calibration of the thresholds should minimize the cases in
which the instruments are classified in stage 3 without having previously been recognized as stage 2.
them to develop an anticipatory management of them before, where appropriate, they end up migrating to stage 3.
it has disappeared, so the thresholds also work to improve the credit classification of exposures. In this sense, it is expected
that the cases in which the exhibitions that improve from stage 3 are directly classified into stage 1 will be minimal.
The identification of the significant increase in risk from the comparison of the probabilities of default should be the main reason why
exposures in stage 2 are recognized.
Specifically, a contract will be transferred to stage 2 when the following two conditions are met by comparing the current PD values and the
origination PD values:
Current PD – Origination PD > Absolute threshold (pbs)
These absolute and relative thresholds are consistently established for each portfolio, taking into account their particularities and based on
the principles described. The thresholds are included within the annual review process and, generally speaking, are in the range of 30% to
200% for the relative threshold and from 50 to 150 basis points for the absolute threshold.
The establishment of absolute and relative thresholds, as well as their different levels, comply with the provisions of Circular 4/2017 when
it indicates that a certain change, in absolute terms, in the risk of a default will be more significant for a financial instrument with a lower
initial risk of default compared to a financial instrument with higher initial risk of default.
For existing contracts before the implementation of the standard, given the limitations in the information available on them, the thresholds
are calibrated based on the PDs obtained from the prudential or economic models for calculating capital.
Risk Parameters Adjusted by Macroeconomic Scenarios
Expected Credit Loss must include forward looking information, in accordance with Bank of Spain 4/2017 which states that the
comprehensive credit risk information must incorporate not only historical information but also all relevant credit information, including
forward-looking macroeconomic information. BBVA uses the classical credit risk parameters PD, LGD and EAD in order to calculate the
ECL for the credit portfolios.
BBVA´s methodological approach in order to incorporate the forward looking information aims to determine the relation between
macroeconomic variables and risk parameters following three main steps:
capacity.
How economic scenarios are reflected in calculation of ECL
The forward looking component is added to the calculation of the ECL through the introduction of macroeconomic scenarios as an input.
Inputs highly depend on the particular combination of region and portfolio, so inputs are adapted to available data regarding each of them.
Based on economic theory and analysis, the main indicators most directly relevant for explaining and forecasting the selected risk
parameters (PD, LGD and EAD) are:
The Bank approximates these variables by using a proxy indicator from the set included in the macroeconomic scenarios provided by the
economic research department.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Only a single specific indicator for each of the three categories can be used and only one of the following core macroeconomic indicators
should be chosen as first option:
of all potentially relevant macro-financial scenarios on internal PDs and LGD.
exchange rates expressed in real terms.
loans and a representative and real term index of the price of the relevant commodity for corporate loan portfolios concentrated
in exporters or producer of such commodity.
Real GDP growth is given priority over any other indicator not only because it is the most comprehensive indicator of income and economic
activity but also because it is the central variable in the generation of macroeconomic scenarios.
Multiple scenario approach under Bank of Spain Circular 4/2017
Bank of Spain Circular 4/2017 requires calculating an unbiased probability weighted measurement of expected credit losses (“ECL”) by
evaluating a range of possible outcomes, including forecasts of future economic conditions.
The BBVA Research teams within the BBVA Group produce forecasts of the macroeconomic variables under the baseline scenario, which
are used in the rest of the related processes of the Bank, such as budgeting, ICAAP and risk appetite framework, stress testing, etc.
Additionally, the BBVA Research teams produced alternative scenarios to the baseline scenario so as to meet the requirements under the
Circular 4/2017.
Alternative macroeconomic scenarios
about the most likely scenario and risks that impact BBVA’s footprint. To build economic scenarios, BBVA Research combines
official data, econometric techniques and expert criteria.
projections of the economic variables.
baseline scenario, where the scenario’s probability depends on the distance of the alternative scenarios from the base one.
alternative scenario and 33% for the best alternative scenario.
The approach in BBVA consists on using the scenario that is the most likely scenario, which is the baseline scenario, consistent with the
rest of internal processes (ICAAP, budgeting…) and then applying an overlay adjustment that is calculated by taking into account the
weighted average of the ECL determined by each of the scenarios.
It should be noted that in general, it is expected that the resulting effect of using multiple scenarios will be to increase the expected losses
with respect to those estimated in the central scenario, although it could be possible that this effect would not occur in the event that the
relationship between the macro scenarios and losses were linear.
On the other hand, the Bank also takes into account the range of possible scenarios when defining its significant increase in risk. In this
way, the PDs used in the quantitative process to identify the significant increase in risk will be those that result from making a weighted
average of the PDs calculated under the three scenarios.
Macroeconomic scenarios as a result of the COVID-19 pandemic
The COVID-19 pandemic has generated a macroeconomic uncertainty situation with a direct impact on credit risk of the entities, particularly,
on the expected credit losses under Circular 4/2017. Even if the situation is unclear and of an unforeseeable time length, the expectation is
that this situation will provoke a severe recession followed by an economic recovery, which will not achieve the pre-crisis GDP levels in the
short-term, supported by the measures issued by governments and monetary authorities.
This situation has allowed the accounting authorities and the banking supervisors to adopt measures in order to mitigate the impacts that
this crisis could imply on the calculation of expected credit losses under the applicable norm as well as on solvency, urging:
situation
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
this crisis.
Almost all accounting and prudential authorities have issued recommendations or measures within the COVID-19 crisis framework regarding
the estimation of the expected losses under the applicable norm in a coordinated way.
The common denominator of all of these recommendations is that, given the difficulty to elaborate reliable macroeconomic forecasts, the
transitory term of the economic shock and the need to incorporate the effect of the mitigating measures issued by the governments, a review
the automatic application of the models in order to increase the weight of the long-term macroeconomic forecasts in the calculation of the
expected losses is needed. As a result, the expected outcome over the lifetime of the transactions will have more weight than the short-
term macroeconomic impact.
In this respect, the Bank has taken into account those recommendations in the calculation of the expected credit losses under the applicable
norm, considering that the economic situation caused by the COVID-19 pandemic is transitory and will be followed by a recovery, even if
there is uncertainty over the level and the time period of such recovery. As a consequence, different scenarios have been taken into
consideration in the calculation of expected losses, resulting in the model management believes suits best the current economic situation
and the combined recommendations issued by the authorities. In addition to the outcome of the calculation of the scenarios, individual
analysis of exposures which could be most affected by the circumstances caused by the COVID-19, have been taken into account.
The estimate for the next five years of the Gross Domestic Product (GDP), of the variation in the unemployment rate and of the House Price
Index (HPI), for the most relevant countries where it represents a significant factor, is determined by BBVA Research and it has been used
at the time of the calculation of the expected credit loss as of December 31, 2020:
Main BBVA, S.A. variables.
Date
GDP negative
scenario
GDP base
scenario
GDP positive
scenario
HPI negative
scenario
HPI base
scenario
HPI positive
scenario
Unemployment
negative scenario
Unemployment
base scenario
Unemployment
positive scenario
2020
(11.76%)
(11.48%)
(11.20%)
(2.60%)
(1.98%)
(1.44%)
17.44%
16.95%
16.44%
2021
5.37%
5.99%
6.63%
(6.69%)
(5.08%)
(3.28%)
18.94%
17.51%
16.03%
2022
5.82%
6.04%
6.27%
2.49%
3.48%
4.56%
15.92%
14.35%
12.72%
2023
2.88%
2.93%
2.95%
4.94%
5.44%
5.79%
13.99%
12.41%
10.82%
2024
2.03%
2.07%
2.07%
2.45%
3.20%
3.66%
12.70%
11.14%
9.58%
2025
1.97%
2.01%
2.01%
2.36%
3.12%
3.57%
11.45%
9.99%
8.55%
Sensitivity to macroeconomic scenarios
A sensitivity exercise has been carried out on the expected losses due to variations in the key hypotheses as they are the ones that introduce
the greatest uncertainty in estimating such losses. As a first step, GDP and House Prices have been identified as the most relevant variables.
These variables have been subjected to shocks of +/- 100 bps in their entire projection window. Independent sensitivities have been
assessed, under the assumption of assigning a 100% probability to each determined scenario with these independent shocks.
Variation in provisions is determined both by re-staging (that is: in worse scenarios due to the recognition of lifetime credit losses for
additional operations that are transferred to stage 2 from stage1 where 12 months of losses are valued: or vice versa in improvement
scenarios) as well as variations in the collective risk parameters (PD and LGD) of each financial instrument due to the changes defined in
the macroeconomic forecasts of the scenario.
Expected loss variation
Spain
GPD
Total Portfolio
Mortgages
Companies
-100pb
3.72%
4.39%
3.96%
+100pb
(3.32%)
(3.57%)
(3.53%)
Housing price
-100pb
5.41%
0.79%
+100pb
(5.35%)
(0.77%)
Additional adjustments to expect loss measurement
In addition to what is described on individualized and collective estimates of expected losses and macroeconomic estimates, the Bank may
supplement the expected losses if it deems it necessary to collect the effects that may not be included, either by considering risk drivers.
Additional, the incorporation of sectorial particularities or that may affect a set of operations or borrowers. These adjustments should be
temporary, until the reasons that motivated them disappear.
For this reason, the expected losses have been supplemented with additional amounts that have been considered necessary to collect the
particular characteristics of borrowers, sectors or portfolios and that may not be identified in the general process. Of the supplementary
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
amounts recognized throughout the year, at the end of the year 2020, 223 million euros are pending allocation to specific borrowers, (mainly
57 million euros based on the volume of arrears pending maturity and whose behavior pattern is still subject to uncertainty, 127 million
euros in sectors most affected by the pandemic and 40 million euros as a complement to the individualized analyzes).
5.2.2 Credit risk exposure
BBVA’s maximum credit risk exposure (see definition below) by headings in the balance sheets as of December 31, 2020 and 2019 is
provided below. It does not consider the loss allowances, and the availability of collateral or other credit enhancements to guarantee
compliance with payment obligations are not deducted. The details are broken down by financial instruments and counterparties:
Maximum credit risk exposure (Millions of Euros)
Notes
December
Stage 1
Stage 2
Stage 3
Financial assets held for trading
51,131
Debt securities
8
9,983
Government
8,062
Credit institutions
560
Other sectors
1,361
Equity instruments
8
10,682
Loans and advances
8
30,467
Non-trading financial assets mandatorily at fair value through
profit or loss
409
Loans and advances to customers
9
84
Debt securities
9
142
Government
-
Credit institutions
49
Other sectors
93
Equity instruments
183
Financial assets designated at fair value through profit or loss
10
-
Derivatives (trading and hedging) (*)
15,761
Financial assets at fair value through other comprehensive
income
37,539
-
-
-
Debt securities
11.3
36,659
36,659
-
-
Government
30,053
30,053
-
-
Credit institutions
1,595
1,595
-
-
Other sectors
5,010
5,010
-
-
Equity instruments
11.2
881
Financial assets at amortized cost
231,590
207,006
16,390
8,193
Loans and advances to central banks
7
7
-
-
Loans and advances to credit institutions
8,763
8,762
-
-
Loans and advances to customers
12.3
199,568
174,990
16,385
8,193
Debt securities
12.2
23,253
23,247
5
1
Total financial assets risk
336,431
-
-
-
Total loan commitments and financial guarantees
29
115,415
110,379
4,474
562
Loan commitments given
80,959
78,602
2,257
100
Financial guarantees given
8,745
8,006
582
156
Other commitments given
25,711
23,770
1,636
305
Total maximum credit exposure
451,846
(*) Without considering derivatives whose counterparty are BBVA Group companies.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Maximum credit risk exposure (Millions of Euros)
Notes
December
2019
Stage 1
Stage 2
Stage 3
Financial assets held for trading
51,853
Debt securities
8
10,213
Government
9,225
Credit institutions
439
Other sectors
549
Equity instruments
8
8,205
Loans and advances
8
33,435
Non-trading financial assets mandatorily at fair value
through profit or loss
855
Loans and advances to customers
9
602
Debt securities
9
128
Government
-
Credit institutions
51
Other sectors
77
Equity instruments
125
Financial assets designated at fair value through profit or
loss
10
-
Derivatives (trading and hedging) (*)
31,557
Financial assets at fair value through other comprehensive
income
24,912
Debt securities
11.3
23,163
23,163
-
-
Government
19,601
19,601
-
-
Credit institutions
742
742
-
-
Other sectors
2,820
2,820
-
-
Equity instruments
11.2
1,749
Financial assets at amortized cost
230,673
207,471
14,612
8,590
Loans and advances to central banks
5
5
-
-
Loans and advances to credit institutions
8,050
8,037
12
-
Loans and advances to customers
12.3
201,109
177,922
14,597
8,589
Debt securities
12.2
21,509
21,506
3
1
Total financial assets risk
339,852
Total loan commitments and financial guarantees
29
110,819
106,182
4,015
621
Loan commitments given
73,582
71,022
2,403
158
Financial guarantees given
9,086
8,410
523
153
Other commitments given
28,151
26,751
1,089
311
Total maximum credit exposure
450,671
(*) Without considering derivatives whose counterparty are BBVA Group companies.
The maximum credit exposure presented in the table above is determined by type of financial asset as explained below:
carrying amount (not including loss allowances) with the only exception of trading and hedging derivatives.
these guarantees were called in, or the higher amount pending to be disposed from the customer in the case of commitments.
risk (or "add-on").
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The breakdown by counterparty of the maximum credit risk exposure, the accumulated allowances recorded, as well as the carrying
amount by stages of loans and advances to customers as of December 2020 and 2019 is shown below:
December 2020 (Millions of Euros)
Gross exposure
Accumulated allowances
Net amount
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Public administrations
13,336
13,102
158
76
(41)
(10)
(7)
(25)
13,295
13,093
151
51
Other financial corporations
9,103
9,021
77
5
(16)
(5)
(6)
(5)
9,087
9,016
71
0
Non-financial corporations
79,943
67,810
8,455
3,678
(2,889)
(359)
(405)
(2,124)
77,054
67,451
8,049
1,554
Individuals
97,185
85,057
7,695
4,434
(2,719)
(335)
(444)
(1,941)
94,466
84,722
7,251
2,493
Loans and advances to
customers (*)
199,568
174,990
16,385
8,193
(5,665)
(708)
(862)
(4,094)
193,903
174,282
15,523
4,099
Of which: individual
(1,044)
-
(139)
(905)
Of which: collective
(4,620)
(708)
(723)
(3,189)
provisions were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc, S.A. (as of December 31, 2020, the
remained balance was €363 million). These valuation adjustments are recognized in the income statement during the residual life of the operations or are applied to the value
corrections when the losses materialize.
December 2019 (Millions of Euros)
Gross exposure
Accumulated allowances
Net amount
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Public administrations
14,694
14,409
198
88
(38)
(8)
(9)
(21)
14,656
14,401
189
66
Other financial corporations
8,142
8,127
9
7
(11)
(4)
-
(6)
8,132
8,123
8
-
Non-financial corporations
79,234
67,938
7,152
4,144
(3,017)
(346)
(313)
(2,357)
76,217
67,592
6,839
1,786
Individuals
99,038
87,448
7,238
4,351
(2,224)
(308)
(358)
(1,557)
96,814
87,140
6,880
2,793
Loans and advances to
customers
201,109
177,922
14,597
8,589
(5,291)
(668)
(681)
(3,942)
195,819
177,256
13,917
4,647
Of which: individual
(1,233)
-
(59)
(1,175)
Of which: collective
(4,058)
(668)
(622)
(2,767)
(*) The amount of the accumulated impairment includes the provisions recorded for credit risk over the remaining expected lifetime of purchased financial instruments. Those provisions
were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc S.A. (as of December 31, 2019 the remained balance
was €433 million). These valuation adjustments are recognized in the income statement during the residual life of the operations or are applied to the value corrections when the losses
materialize.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The breakdown by counterparty and product of loans and advances, net of loss allowances, as well as the gross carrying amount by type
of product, classified in the different headings of the assets, as of December 31, 2020 and 2019 is shown below:
December 2020 (Millions of Euros)
Central
banks
General
governments
Credit
institutions
Other
financial
corporations
Non-
financial
corporations
Households
Total
Gross
carrying
amount
On demand and
short notice
-
2
-
371
41
33
447
541
Credit card debt
-
-
-
-
92
2,083
2,175
2,319
Trade receivables
894
-
303
11,406
23
12,626
12,819
Finance leases
-
86
-
3
4,427
216
4,731
4,886
Reverse
repurchase loans
-
-
203
-
-
-
203
203
Other term loans
3
12,140
2,169
5,858
60,289
92,007
172,466
177,545
Advances that are
not loans
4
258
6,390
2,553
799
105
10,108
10,109
Loans and
advances
7
13,379
8,762
9,087
77,054
94,466
202,756
208,421
By secured loans
Of which:
mortgage loans
collateralized by
immovable
property
318
-
156
9,571
75,181
85,227
87,252
Of which: other
collateralized
loans
-
-
25
1,576
535
2,136
2,245
By purpose of the
loan
-
-
-
-
-
-
-
-
Of which: credit
for consumption
12,149
12,149
12,987
Of which:
lending for
house purchase
75,166
75,166
76,386
By subordination
-
-
-
-
-
-
-
-
Of which:
project finance
loans
4,353
4,353
4,394
December 2019 (Millions of Euros)
Central
banks
General
governments
Credit
institutions
Other
financial
corporations
Non-financial
corporations
Households
Total
Gross
carrying
amount
On demand and short
notice
-
3
-
4
100
46
153
256
Credit card debt
-
-
-
1
137
2,241
2,379
2,474
Trade receivables
963
-
215
12,661
46
13,885
14,067
Finance leases
-
85
-
3
4,689
244
5,021
5,208
Reverse repurchase
loans
-
-
87
-
-
-
87
87
Other term loans
5
13,338
2,324
5,723
57,586
94,124
173,100
177,823
Advances that are not
loans
-
869
5,639
2,187
1,044
113
9,852
9,851
LOANS AND
ADVANCES
5
15,258
8,050
8,133
76,217
96,814
204,477
209,766
By secured loans
Of which: mortgage
loans collateralized
by immovable
property
360
-
186
9,901
77,954
88,401
90,397
Of which: other
collateralized loans
-
-
6
1
1,751
596
2,355
2,496
By purpose of the loan
Of which: credit for
consumption
11,976
11,976
12,571
Of which: lending for
house purchase
76,339
76,339
77,379
By subordination
Of which: project
finance loans
5,525
5,525
5,593
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
5.2.3 Mitigation of credit risk, collateralized credit risk and other credit enhancements
In most cases, maximum credit risk exposure is reduced by collateral, credit enhancements and other actions which mitigate the Group’s
exposure. The BBVA Group applies a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship
banking. The existence of guarantees could be a necessary but not sufficient instrument for accepting risks, as the assumption of risks by
the Group requires prior evaluation of the debtor’s capacity for repayment, or that the debtor can generate sufficient resources to allow the
amortization of the risk incurred under the agreed terms.
The policy of accepting risks is therefore organized into three different levels in the BBVA Group:
accepted forms: monetary, secured, personal or hedge guarantees; and finally,
This is carried out through a prudent risk policy that consists in the analysis of the financial risk, based on the capacity of reimbursement or
generation of resources of the borrower, the analysis of the guarantee assessing, among others, the efficiency, the robustness and the risk,
the adequacy of the guarantee with the operation and other aspects such as the location, currency, concentration or the existence of
limitations. Additionally, the necessary tasks for the constitution of guarantees must be carried out - in any of the generally accepted forms
(collaterals, personal guarantees and financial hedge instruments) - appropriate to the risk assumed.
The procedures for the management and valuation of collateral are set out in the corporate policies (retail and wholesale), which establish
the basic principles for credit risk management, including the management of collaterals assigned in transactions with customers. The
criteria for the systematic, standardized and effective treatment of collateral in credit transaction procedures in Bank’s wholesale and retail
banking are included in the Specific Collateral Rules.
The methods used to value the collateral are in line with the best market practices and imply the use of appraisal of real-estate collateral,
the market price in market securities, the trading price of shares in mutual funds, etc. All the collaterals received must be correctly assigned
and entered in the corresponding register. They must also have the approval of the Bank’s legal units.
The valuation of the collateral is taken into account in the calculation of the expected losses. The Bank has developed internal models to
estimate the realization value of the collaterals received, the time that elapses until then, the costs for their acquisition, maintenance and
subsequent sale, from real observations based on its own experience. This modeling is part of the LGD estimation processes that are
applied to the different segments, and is included within the annual review and validation procedures.
The following is a description of the main types of collateral for each financial instrument class:
in the clauses of the instrument (mainly guarantees of the issuer).
and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of
guarantees and collaterals, depending on counterparty solvency and the nature of the transaction (mainly collaterals).
income: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the structure of the
instrument (mainly personal guarantees).
As of December 31, 2020 and 2019 BBVA had no credit risk exposure of impaired financial assets at fair value through other
comprehensive income (see Note 5.2.2).
●
Loans and advances to credit institutions: These usually have the counterparty’s personal guarantee or pledged securities in
the case of repos
●
Loans and advances to customers: Most of these loans and advances are backed by personal guarantees extended by the
customer. There may also be collateral to secure loans and advances to customers (such as mortgages, cash collaterals,
pledged securities and other collateral), or to obtain other credit enhancements (bonds or insurances).
●
Debt securities: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the
structure of the instrument.
types of collaterals.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The disclosure of impaired loans and advances at amortized cost (see Note 5.2.5) covered by collateral, by type of collateral, as of
December 31, 2020 and 2019, is the following:
December 2020 (Millions of Euros)
Maximum
exposure to
credit risk
Of which secured by collateral
Residential
properties
Commercial
properties
Cash
Others
Financial
Impaired loans and advances at amortized cost
8,193
2,077
655
2
4
17
Total
8,193
2,077
655
2
4
17
December 2019 (Millions of Euros)
Maximum
exposure to
credit risk
Of which secured by collateral
Residential
properties
Commercial
properties
Cash
Others
Financial
Impaired loans and advances at amortized cost
8,589
2,352
721
3
4
6
Total
8,589
2,352
721
3
4
6
The maximum credit risk exposure of impaired financial guarantees and other commitments as of December 31, 2020 and 2019
amounts to €562 and €621 million (see Note 5.2.2).
5.2.4 Credit quality of financial assets that are neither past due nor impaired
The BBVA Group has tools that enable it to rank the credit quality of its transactions and customers based on an assessment and its
correspondence with the probability of default (“PD”) scales. To analyze the performance of PD, the Group has a series of tracking tools
and historical databases that collect the pertinent internally generated information. These tools can be grouped together into scoring and
rating models.
Scoring
Scoring is a decision-making model that contributes to both the arrangement and management of retail loans: consumer loans, mortgages,
credit cards for individuals, etc. Scoring is the tool used to decide to originate a loan, what amount should be originated and what strategies
can help establish the price, because it is an algorithm that sorts transactions by their credit quality. This algorithm enables the BBVA Group
to assign a score to each transaction requested by a customer, on the basis of a series of objective characteristics that have statistically
been shown to discriminate between the quality and risk of this type of transactions. The advantage of scoring lies in its simplicity and
homogeneity: all that is needed is a series of objective data for each customer, and this data is analyzed automatically using an algorithm.
There are three types of scoring, based on the information used and on its purpose:
transaction and to the customer’s socio-economic data available at the time of the request. The new transaction is approved or
rejected depending on the score.
to be tracked and the customer’s needs to be anticipated. It uses transaction and customer variables available internally.
Specifically, variables that refer to the behavior of both the product and the customer.
to his/her payment behavior in all the contracted products. The purpose is to track the customer’s credit quality and it is used to
pre-approve new transactions.
Rating
Rating tools, as opposed to scoring tools, do not assess transactions but focus on the rating of customers instead: companies, corporations,
SMEs, general governments, etc. A rating tool is an instrument that, based on a detailed financial study, helps determine a customer’s
ability to meet his/her financial obligations. The final rating is usually a combination of various factors: on one hand, quantitative factors,
and on the other hand, qualitative factors. It is a middle road between an individual analysis and a statistical analysis.
The main difference between ratings and scorings is that the latter are used to assess retail products, while ratings use a wholesale banking
customer approach. Moreover, scorings only include objective variables, while ratings add qualitative information. And although both are
based on statistical studies, adding a business view, rating tools give more weight to the business criterion compared to scoring tools.
For portfolios where the number of defaults is low (sovereign risk, corporates, financial entities, etc.) the internal information is supplemented
by “benchmarking” of the external rating agencies (Moody’s, Standard & Poor’s and Fitch). To this end, each year the PDs compiled by the
rating agencies at each level of risk rating are compared, and the measurements compiled by the various agencies are mapped against
those of the BBVA master rating scale.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Once the probability of default of a transaction or customer has been calculated, a "business cycle adjustment" is carried out. This is a
means of establishing a measure of risk that goes beyond the time of its calculation. The aim is to capture representative information of the
behavior of portfolios over a complete economic cycle. This probability is linked to the Master Rating Scale prepared by the BBVA Group
to enable uniform classification of the Group’s various asset risk portfolios.
The table below shows the abridged scale used to classify the BBVA Group’s outstanding risk as of December 31, 2020:
External
rating
Internal
rating
Probability of default
(basis points)
Standard&Poor's List
Reduced List (22 groups)
Average
Minimum from
>=
Maximum
AAA
AAA
1
-
2
AA+
AA+
2
2
3
AA
AA
3
3
4
AA-
AA-
4
4
5
A+
A+
5
5
6
A
A
8
6
9
A-
A-
10
9
11
BBB+
BBB+
14
11
17
BBB
BBB
20
17
24
BBB-
BBB-
31
24
39
BB+
BB+
51
39
67
BB
BB
88
67
116
BB-
BB-
150
116
194
B+
B+
255
194
335
B
B
441
335
581
B-
B-
785
581
1,061
CCC+
CCC+
1,191
1,061
1,336
CCC
CCC
1,500
1,336
1,684
CCC-
CCC-
1,890
1,684
2,121
CC+
CC+
2,381
2,121
2,673
CC
CC
3,000
2,673
3,367
CC-
CC-
3,780
3,367
4,243
These different levels and their probability of default were calculated by using as a reference the rating scales and default rates provided
by the external agencies Standard & Poor’s and Moody’s. These calculations establish the levels of probability of default for the BBVA
Group’s Master Rating Scale. Although this scale is common to the entire Group, the calibrations (mapping scores to PD sections/Master
Rating Scale levels) are carried out at tool level for each country in which the Group has tools available.
The table below outlines the distribution of exposure, including derivatives, by internal ratings, to corporates, financial entities and institutions
(excluding sovereign risk), of the main BBVA Group entities as of December 31, 2020 and 2019:
2020
2019
Credit Risk Distribution by Internal Rating
Amount
(Millions of Euros)
%
Amount
(Millions of Euros)
%
AAA/AA
32,252
11.51%
36,127
13.88%
A
98,743
35.23%
81,864
31.45%
BBB+
39,325
14.03%
41,524
15.95%
BBB
34,816
12.42%
28,880
11.09%
BBB-
32,994
11.77%
36,586
14.05%
BB+
15,216
5.43%
12,543
4.82%
BB
7,931
2.83%
7,253
2.79%
BB-
7,569
2.70%
6,318
2.43%
B+
4,149
1.48%
3,786
1.45%
B
3,013
1.07%
2,569
0.99%
B-
2,033
0.73%
1,466
0.56%
CCC/CC
2,237
0.80%
1,395
0.54%
Total
280,276
100%
260,312
100%
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
5.2.5 Impaired secured loan risks
The breakdown of loans and advances, within financial assets at amortized cost, non-performing and accumulated impairment as well as
the gross carrying amount by counterparties as of December 31, 2020 and 2019 is as follows:
December 2020 (Millions of Euros)
Gross
carrying
amount
Non-
performing
loans and
advances
Accumulated
impairment
Non-
performing
loans and
advances as a
% of the total
Central banks
7
-
-
-
General governments
13,336
76
(41)
0.6%
Credit institutions
8,762
-
-
-
Other financial corporations
9,103
5
(16)
0.1%
Non-financial corporations
79,943
3,678
(2,889)
4.6%
Agriculture, forestry and fishing
1,409
71
(41)
5.0%
Mining and quarrying
1,956
8
(15)
0.4%
Manufacturing
17,807
636
(445)
3.6%
Electricity, gas, steam and air conditioning supply
6,909
45
(42)
0.7%
Water supply
842
17
(14)
2.0%
Construction
7,021
767
(563)
10.9%
Wholesale and retail trade
11,589
804
(536)
6.9%
Transport and storage
4,753
182
(88)
3.8%
Accommodation and food service activities
4,868
278
(156)
5.7%
Information and communications
4,401
61
(45)
1.4%
Financial and insurance activities
5,075
112
(106)
2.2%
Real estate activities
5,892
359
(221)
6.1%
Professional, scientific and technical activities
2,271
132
(83)
5.8%
Administrative and support service activities
2,245
81
(90)
3.6%
Public administration and defense, compulsory social security
73
3
(3)
4.3%
Education
235
11
(8)
4.7%
Human health services and social work activities
903
57
(43)
6.4%
Arts, entertainment and recreation
766
43
(28)
5.6%
Other services
927
11
(362)
1.2%
Households
97,185
4,434
(2,719)
4.6%
LOANS AND ADVANCES
208,336
8,193
(5,665)
3.9%
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
December 2019 (Millions of Euros)
Gross carrying
amount
Non-
performing
loans and
advances
Accumulated
impairment
Non-
performing
loans and
advances as a
% of the total
Central banks
5
-
-
-
General governments
14,694
88
(38)
0.6%
Credit institutions
8,050
-
(1)
-
Other financial corporations
8,142
7
(11)
0.1%
Non-financial corporations
79,234
4,144
(3,017)
5.2%
Agriculture, forestry and fishing
1,364
61
(45)
4.5%
Mining and quarrying
1,523
9
(7)
0.6%
Manufacturing
19,929
657
(521)
3.3%
Electricity, gas, steam and air conditioning supply
5,782
62
(46)
1.1%
Water supply
844
14
(14)
1.7%
Construction
7,038
1,009
(647)
14.3%
Wholesale and retail trade
11,013
1,074
(765)
9.8%
Transport and storage
4,531
135
(108)
3.0%
Accommodation and food service activities
3,514
194
(115)
5.5%
Information and communications
4,685
79
(47)
1.7%
Financial and insurance activities
5,719
151
(114)
2.6%
Real estate activities
6,332
412
(294)
6.5%
Professional, scientific and technical activities
2,093
98
(69)
4.7%
Administrative and support service activities
2,024
80
(61)
4.0%
Public administration and defense, compulsory social
security
150
4
(4)
2.6%
Education
177
17
(9)
9.8%
Human health services and social work activities
976
22
(17)
2.3%
Arts, entertainment and recreation
547
35
(26)
6.4%
Other services
993
30
(107)
3.0%
Households
99,038
4,351
(2,224)
4.4%
LOANS AND ADVANCES
209,164
8,589
(5,291)
4.1%
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The changes during the years 2020 and 2019 of impaired financial assets and contingent risks are as follow:
Changes in impaired financial assets and contingent risks (Millions of Euros)
2020
2019
Balance at the beginning
9,053
10,509
Additions
2,508
2,689
Decreases (*)
(2,190)
(2,763)
Net additions
318
(75)
Transfers to write-off
(666)
(1,251)
Exchange differences and others
(51)
(130)
Balance at the end
8,654
9,053
Recoveries on entries (%)
87%
103%
(*) Reflects the total amount of impaired loans derecognized from the balance sheet throughout the period as a result of mortgage foreclosures and real estate
assets received in lieu of payment as well as monetary recoveries (see Note 19).
The changes in the year 2020 and 2019 in financial assets derecognized from the accompanying balance sheet as their recovery is
considered unlikely ("write-offs"), is shown below:
Changes in Impaired financial assets written-off from the balance sheet (Millions of Euros)
Notes
2020
2019
Balance at the beginning
17,042
24,484
Increase
1,000
1,856
Assets of remote collectability
666
1,251
Past-due and not collected income
334
605
Decrease
(737)
(9,300)
Re-financing or restructuring
(6)
(1)
Cash recovery
42
(238)
(791)
Foreclosed assets
(20)
(46)
Sales (*)
-
(7,400)
Debt forgiveness
(416)
(379)
Time-barred debt and other causes
(57)
(682)
Net exchange differences
(8)
1
Balance at the end
17,297
17,042
As indicated in Note 2.1, although they have been derecognized from the balance sheet, the BBVA continues to attempt to collect on these
written-off financial assets, until the rights to receive them are fully extinguished, either because it is time-barred financial asset, the financial
asset is condoned, or other reasons.
5.2.6 Loss allowances
Below are the changes in the years ended December 31, 2020 and 2019 in the accumulated allowances and gross accounting balances
and impairment losses recorded on the accompanying balance sheets to cover estimated loss allowances in loans and advances measured
at amortized cost:
Changes in gross accounting balances of financial assets at amortized cost. December 2020 (Millions of Euros)
Stage 1
Stage 2
Stage 3
Total
Opening balance
185,965
14,609
8,589
209,163
Transfers of financial assets:
(3,793)
2,800
993
-
Transfers from stage 1 to Stage 2
(5,970)
5,970
-
-
Transfers from stage 2 to Stage 1
2,665
(2,665)
-
-
Transfers to Stage 3
(537)
(1,077)
1,614
-
Transfers from Stage 3
49
572
(621)
-
Net annual origination of financial assets
2,358
(999)
(723)
636
Becoming
write-
offs
-
-
(666)
(666)
Changes in model / methodology
-
-
-
-
Foreign exchange
(770)
(25)
-
(795)
Modifications that do not result in derecognition
-
-
-
-
Other
-
-
-
-
Closing balance
183,760
16,385
8,193
208,338
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Changes in allowances of financial assets at amortized cost. December 2020 (Millions of Euros)
Stage 1
Stage 2
Stage 3
Total
Opening balance
668
681
3,942
5,291
Transfers of financial assets:
(6)
97
380
471
Transfers from stage 1 to Stage 2
(16)
225
-
209
Transfers from stage 2 to Stage 1
14
(110)
-
(96)
Transfers to Stage 3
(4)
(52)
471
415
Transfers from Stage 3
-
34
(91)
(57)
Net annual origination of allowances
93
211
410
714
Becoming
write-
offs
-
-
(572)
(572)
Changes in model / methodology
-
-
-
-
Foreign exchange
-
-
-
-
Modifications that do not result in derecognition
-
-
-
-
Other
(46)
(127)
(66)
(239)
Closing balance
709
862
4,094
5,665
Changes in gross accounting balances of loans and advances at amortized cost. 2019 (Millions of Euros)
Stage 1
Stage 2
Stage 3
Total
Opening balance
182,317
12,831
9,976
205,124
Transfers of financial assets:
(3,605)
3,041
564
-
Transfers from stage 1 to Stage 2
(5,996)
5,996
-
-
Transfers from stage 2 to Stage 1
2,868
(2,868)
-
-
Transfers to Stage 3
(512)
(1,031)
1,543
-
Transfers from Stage 3
35
944
(979)
-
Net annual origination of financial assets
7,059
(1,267)
(701)
5,092
Becoming
write-
offs
-
-
(1,251)
(1,251)
Changes in model / methodology
-
-
-
-
Foreign exchange
194
5
-
199
Modifications that do not result in derecognition
-
-
-
-
Other
-
-
-
-
Closing balance
185,965
14,609
8,589
209,164
Changes in allowances of loans and advances at amortized cost. 2019 (Millions of Euros)
Stage 1
Stage 2
Stage 3
Total
Opening balance
664
895
4,279
5,839
Transfers of financial assets:
(26)
60
369
403
Transfers from stage 1 to Stage 2
(29)
145
-
116
Transfers from stage 2 to Stage 1
6
(123)
-
(117)
Transfers to Stage 3
(4)
(36)
525
485
Transfers from Stage 3
-
74
(156)
(82)
Net annual origination of allowances
11
(69)
451
393
Becoming
write-
offs
-
-
(1,004)
(1,004)
Changes in model / methodology
-
-
-
-
Foreign exchange
-
-
1
1
Modifications that do not result in derecognition
-
-
-
-
Other
18
(206)
(154)
(341)
Closing balance
668
681
3,942
5,291
5.3. Market risk
Market risk originates from the possibility of losses in the value of positions held as a result of movements in market variables that affect
the valuation of financial assets and liabilities. The scope of market risk in the Bank's trading portfolios stems mainly from the portfolios
originated by Global Markets valued at fair value and held for the purpose of trading and generating short-term results. Market risk in the
field of banking book is clearly delimited and separated into structural risks of interest rate, exchange rate and equity (see Note 5.4).
5.3.1 Market risk in trading portfolios
The main risks in trading portfolios can be classified as follows:
Although the typical products that generate sensitivity to the movements in interest rates are money-market products (deposits,
interest-rate futures, call money swaps, etc.) and traditional interest-rate derivatives (swaps and interest-rate options such as
caps, floors, swaptions, etc.), practically all the financial products are exposed to interest-rate movements due to the effect that
such movements have on the valuation of the financial discount.
products whose underlying asset is a share or an equity index. Dividend risk is a sub-risk of equity risk, arising as an input for
any equity option. Its variation may affect the valuation of positions and it is therefore a factor that generates risk on the books.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
in the case of equity risk, this risk is generated in spot currency positions, and in any derivative product whose underlying asset
is an exchange rate. In addition, the quanto effect (operations where the underlying asset and the instrument itself are
denominated in different currencies) means that in certain transactions in which the underlying asset is not a currency, an
exchange-rate risk is generated that has to be measured and monitored.
spread of both corporate and government issues, and affects positions in bonds and credit derivatives.
derivatives are traded. This risk, unlike the others, is exclusively a component of trading in derivatives and is defined as a first-
order convexity risk that is generated in all possible underlying assets in which there are products with options that require a
volatility input for their valuation.
The metrics developed to control and monitor market risk in BBVA Group are aligned with market practices and are implemented
consistently across all the local market risk units.
Measurement procedures are established in terms of the possible impact of negative market conditions on the trading portfolio of the
Group's Global Markets units, both under ordinary circumstances and in situations of heightened risk factors.
The standard metric used to measure market risk is Value at Risk (VaR), which indicates the maximum loss that may occur in the portfolios
at a given confidence level (99%) and time horizon (one day). This statistic value is widely used in the market and has the advantage of
summing up in a single metric the risks inherent to trading activity, taking into account how they are related and providing a prediction of
the loss that the trading book could sustain as a result of fluctuations in equity prices, interest rates, foreign exchange rates and credit
spreads. The market risk analysis considers various risks, such as credit spread, basis risk as well as volatility and correlation risk.
With respect to the risk measurement models used in BBVA, the Bank of Spain authorized the use of the internal model to determine bank
capital requirements deriving from risk positions on BBVA’s trading book.
The current management structure includes the monitoring of market-risk limits, consisting of a scheme of limits based on VaR, economic
capital (based on VaR measurements) and VaR sub-limits, as well as stop-loss limits for each of the Group’s business units.
The model used estimates VaR in accordance with the "historical simulation" methodology, which involves estimating losses and gains that
would have taken place in the current portfolio if the changes in market conditions that took place over a specific period of time in the past
were repeated. Based on this information, it predicts the maximum expected loss of the current portfolio within a given confidence level.
This model has the advantage of reflecting precisely the historical distribution of the market variables and not assuming any specific
distribution of probability. The historical period used in this model is two years.
VaR figures are estimated with the following methodologies:
methodology for measuring market risks for the purpose of monitoring compliance with risk limits.
The use of VaR by historical simulation methodology as a risk metric has many advantages, but also certain limitations, among which it is
worth highlighting:
market movements of the last two years, not picking up the impact of large market events if they have not occurred within that
historical window
different stress exercises are also performed, described later.
At the same time, and following the guidelines established by the Spanish and European authorities, BBVA incorporates metrics in addition
to VaR with the aim of meeting the Bank of Spain's regulatory requirements with respect to the calculation of bank capital for the trading
book. Specifically, the measures incorporated in the Group since December 2011 (stipulated by Basel 2.5) are:
is calculated. This quantifies the losses associated with the movements of the risk factors inherent to market operations (including
interest-rate risk, exchange-rate risk, equity risk and credit risk, etc.). Both VaR and stressed VaR are rescaled by a regulatory
multiplier set at three and by the square root of ten to calculate the capital charge.
bond and credit derivative positions in the portfolio. The IRC charge is exclusively applied in entities in respect of which the
internal market risk model is used (i.e., BBVA, S.A. and BBVA Mexico). The IRC charge is determined based on the associated
losses (calculated at 99.9% confidence level over a one year horizon under the hypothesis of constant risk) due to a rating change
and/or default of the issuer with respect to an asset. In addition, the price risk is included in sovereign positions for the specified
items.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
0
10
20
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
based on the potential losses associated with the rating level of a specific credit structure. They are calculated by the standard
model. The scope of the correlation portfolios refers to the First To Default (FTD)-type market operation and/or tranches of market
CDOs and only for positions with an active market and hedging capacity.
Validity tests are performed regularly on the risk measurement models used by the Group. They estimate the maximum loss that could
have been incurred in the assessed positions with a certain level of probability (backtesting), as well as measurements of the impact of
extreme market events on risk positions (stress testing). As an additional control measure, backtesting is conducted at a trading desk level
in order to enable more specific monitoring of the validity of the measurement models.
Market risk in 2020
The Bank’s market risk in 2020 remains at low levels compared with other aggregates of risks managed by BBVA, particularly credit risk.
This is due to the nature of the business. In 2020, the market risk of trading book increase versus the previous year and, in terms of VaR,
stood at €13 million at the close of the period.
The average VaR for 2020 stood at €11 million, in comparison with the €8 million registered in 2019, with a high for the year on March 18,
2020 at €18 million.
By type of market risk assumed by the Bank’s trading portfolio, the main risk factor in BBVA at the end of 2020 is linked to the interest rates
(this figure includes the spread risk) which represents a 44% of the total weight, decreasing slightly its relative weight compared to the year
end 2019 (47%). The risk related to volatility and correlation accounts for 27% of the total weight at the end of 2020, with no changes
compared to the year end 2019 (27%).
Exchange-rate risk accounts for 27% which represents a slight decrease on the figure 12 months prior (14%), while equity risk has
decreased from 12%, at the end of 2019 to 2% at the end of 2020
.
Market risk by risk factor (Millions of euros)
2020
2019
Interest + credit spread
15
12
Exchange rate
9
3
Equity
1
3
Volatility
10
7
Diversification effect (*)
(22)
(16)
Total
13
9
Average VaR
11
8
Maximum VaR
18
10
Minimum VaR
7
6
(*) The diversification effect is the difference between the sum of the average individual risk factors and the total VaR figure that includes the implied
correlation between all the variables and scenarios used in the measurement.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Validation of the internal market risk model
The internal market risk model is validated on a regular basis by backtesting in BBVA S.A. The aim of backtesting is to validate the quality
and precision of the internal market risk model used by BBVA Group to estimate the maximum daily loss of a portfolio, at a 99% level of
confidence and a 250-day time horizon, by comparing the Group's results and the risk measurements generated by the internal market risk
model. These tests showed that the internal market risk model of BBVA, S.A. is adequate and precise.
Two types of backtesting have been carried out in 2020 and 2019:
changes in the portfolio positions. This validates the appropriateness of the market risk metrics for the end-of-day position.
minimum charges or fees involved. This type of backtesting includes the intraday risk in portfolios.
In addition, each of these two types of backtesting was carried out at a risk factor or business type level, thus making a deeper comparison
of the results with respect to risk measurements.
For the period between the year ended December 31, 2019 and the year ended December 31, 2020, the backtesting of the internal VaR
calculation model was carried out, comparing the daily results obtained to the estimated risk level by the internal VaR calculation model. In
that period, there were no negative exceptions in BBVA, S.A.
At the end of the year the comparison showed the internal VaR calculation model was working correctly, within the "green" zone (0-4
exceptions), thus validating the internal VaR calculation model, as has occurred each year since the internal market risk model was
approved for the Group.
Stress testing
A number of stress tests are carried out on the BBVA Group's trading portfolios. First, global and local historical scenarios are used that
replicate the behavior of an extreme past event, such as for example the collapse of Lehman Brothers or the "Tequila zo" crisis. These
stress tests are complemented with simulated scenarios, where the aim is to generate scenarios that have a significant impact on the
different portfolios, but without being anchored to any specific historical scenario. Finally, for some portfolios or positions, fixed stress tests
are also carried out that have a significant impact on the market variables affecting these positions.
Historical scenarios
The historical benchmark stress scenario for the BBVA Group is Lehman Brothers, whose sudden collapse in September 2008 led to a
significant impact on the behavior of financial markets at a global level. The following are the most relevant effects of this historical scenario:
equity, debt).
of the euro and dollar curves.
Simulated scenarios
Unlike the historical scenarios, which are fixed and therefore not suited to the composition of the risk portfolio at all times, the scenario used
for the exercises of economic stress is based on resampling methodology. This methodology is based on the use of dynamic scenarios that
are recalculated periodically depending on the main risks affecting the trading portfolios. On a data window wide enough to collect different
periods of stress (data are taken from January 1, 2008 until the date of the assessment), a simulation is performed by resampling of historic
observations, generating a distribution of losses and gains that serve to analyze the most extreme of births in the selected historical window.
The advantage of this methodology is that the period of stress is not predetermined, but depends on the portfolio maintained at each time,
and making a large number of simulations (10,000 simulations) allows a greater richness of information for the analysis of expected shortfall
than what is available in the scenarios included in the calculation of VaR.
The main features of this approach are: a) the generated simulations respect the correlation structure of the data, b) there is flexibility in the
inclusion of new risk factors and c) it allows the introduction of a lot of variability in the simulations (desirable for considering extreme
events).
5.3.2 Financial instruments offset
Financial assets and liabilities may be netted, i.e. they are presented for a net amount on the balance sheet only when the Bank complies
with the provisions of Bank of Spain Circular 4/2017 and IAS 32-Paragraph 42, so they have both the legal right to net recognized amounts,
and the intention of settling the net amount or of realizing the asset and simultaneously paying the liability.
In addition, the Bank has presented as gross amounts assets and liabilities on the balance sheet for which there are master netting
arrangements in place, but for which there is no intention of settling net. The most common types of events that trigger the netting of
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
reciprocal obligations are bankruptcy of the entity, surpassing certain level of indebtedness threshold, failure to pay, restructuring and
dissolution of the entity.
In the current market context, derivatives are contracted under different framework contracts being the most widespread developed by the
International Swaps and Derivatives Association (ISDA) and, for the Spanish market, the Framework Agreement on Financial Transactions
(CMOF). Almost all portfolio derivative transactions have been concluded under these framework contracts, including in them the netting
clauses mentioned in the preceding paragraph as "Master Netting Agreement", greatly reducing the credit exposure on these instruments.
Additionally, in contracts signed with professional counterparts, the collateral agreement annexes called Credit Support Annex (CSA) are
included, thereby minimizing exposure to a potential default of the counterparty.
Moreover, in transactions involving acquisitions and assets sold under repurchase agreements there is a high volume transacted through
clearing houses that articulate mechanisms to reduce counterparty risk, as well as through the signing of various master agreements for
bilateral transactions, the most widely used being the Global Master Repurchase Agreement (GMRA), published by International Capital
Market Association (“ICMA”), to which the clauses related to the collateral exchange are usually added within the text of the master
agreement itself.
Finally, the Bank, in line with its strategy to actively reduce the counterparty risk, has established new settlement to market agreements
with clearing houses which allows the daily liquidation of OTC market operations.
A summary of the effect of offsetting (via netting and collateral) for derivatives and securities operations is presented below as of December
31, 2020 and 2019:
Assets and liabilities subject to contractual netting rights (Millions of Euros)
2020
2019
Gross amounts not
offset in the
balance sheets (D)
Gross amounts not
offset in balance
sheets (D)
Gross
amounts
recognize
d (A)
Gross
amount
s offset
in the
balanc
e
sheets
(B)
Net
amount
presente
d in the
balance
sheets
(C=A-B)
Financial
instrumen
ts
Cash
collater
al
receive
d/
Pledge
d
Net
amou
nt
(E=C-
D)
Gross
amounts
recognize
d (A)
Gross
amount
s offset
in the
balanc
e
sheets
(B)
Net
amount
presente
d in the
balance
sheets
(C=A-B)
Financial
instrumen
ts
Cash
collater
al
receive
d/
Pledge
d
Net
amou
nt
(E=C-
D)
Trading
and
hedging
derivatives
43,245
5,688
37,557
29,368
8,286
(97)
35,328
2,388
32,940
24,259
7,721
960
Reverse
repurchase
, securities
borrowing
and similar
agreement
s
30,060
-
30,060
30,306
161
(407)
33,260
-
33,260
32,994
204
62
Total
assets
73,305
5,688
67,617
59,674
8,446
(503)
68,588
2,388
66,200
57,253
7,926
1,021
Trading
and
hedging
derivatives
42,629
5,722
36,906
29,368
7,604
(65)
35,367
2,394
32,973
24,259
9,193
(479)
Repurchas
e,
securities
lending
and similar
agreement
s
28,706
-
28,706
28,990
1,619
(1,903)
33,584
-
33,584
32,936
420
229
Total
liabilities
71,335
5,722
65,612
58,358
9,223
(1,968)
68,951
2,394
66,558
57,195
9,612
(249)
The amount of recognized financial instruments within derivatives includes the effect in case of compensation with counterparties with which
the bank holds netting agreements, while, for repos, it reflects the market value of the collateral associated with the transaction.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
5.4 Structural risk
The structural risks are defined, in general terms, as the possibility of sustaining losses due to adverse movements in market risk factors
as a result of mismatches in the financial structure of an entity´s balance sheet.
In BBVA the following types of structural risks are defined, according to the nature and the following market factors: interest rate, exchange
rate and equity.
The scope of structural risks in the Bank is limited to the banking book, excluding market risks in the trading book that are clearly delimited
and separated and make up the Market Risks.
The Assets and Liabilities Committee (ALCO) is the main responsible body for the management of structural risks regarding liquidity/ funding
interest rate, currency, equity and solvency. Every month, with the assistance of the CEO and representatives from the areas of Finance,
Risks and Business Areas, this committee monitors and controls the structural risks and is presented with action plans proposals for
managing them for its approval. These management proposals are made proactively by the Finance area, taking into account the risk
appetite framework and with the aim of guaranteeing recurrent earnings and financial stability and preserving the entity's solvency. All
balance management units have a local ALCO, which is permanently attended by members of the corporate center, and there is a corporate
ALCO where management strategies are monitored and presented in the Group's subsidiaries.
GRM area acts as an independent unit, ensuring adequate separation between the management and risk control functions, and is
responsible for ensuring that the structural risks in the Group are managed according to the strategy approved by the Board of Directors.
Consequently, GRM deals with the identification, measurement, monitoring and control of those risks and their reporting to the
corresponding corporate bodies. Through the Global Risk Management Committee (GRMC), it performs the function of control and risk
assessment and is responsible for developing the strategies, policies, procedures and infrastructure necessary to identify, evaluate,
measure and manage the significant risks that the BBVA Group faces. To this end, GRM, through the corporate unit of Structural Risks,
proposes a scheme of limits and alerts that declines the risk appetite set for each of the relevant structural risk types, both at Group level
and by management units, which will be reviewed annually, reporting the situation periodically to Group’s corporate bodies as well as to the
GRMC.
In addition, both, the management as well as the control and measurement system of the structural risks need to be adjusted necessarily
to BBVA’s internal control model, complying therefore with the evaluation and certification processes included. In this regard, the required
tasks and controls have been identified and documented which allows the Bank to dispose of a regulatory framework that includes precise
processes and measures for structural risks with a global perspective from a geographical point of view.
BBVA’s internal control model, which is based on the high standards, is included within the three lines of defense. Finance is the first line
of defense being in charge of the structural risk management, whereas GRM is in charge of the identification of the risks and establishes
policies and control models which are periodically evaluated with regard to their performance.
In the second line of defense are located Internal Risk Control, which independently reviews the structural risk controls, and one entity of
Internal Financial Control which reviews the design and the effectiveness of the operating structural risks management controls.
Internal Audit, which works with total independence, represents the third line of defense and reviews specific controls and processes.
5.4.1 Structural interest rate risk
The structural interest-rate risk (“IRRBB”) is related to the potential impact that variations in market interest rates have on an entity's net
interest income and equity. In order to properly measure IRRBB, the Group BBVA takes into account the main sources that generate this
risk: repricing risk, yield curve risk, option risk and basis risk, which are analyzed with an integral vision, combining two complementary
points of view: net interest income (short term) and economic value (long term).
The exposure of a financial entity to adverse interest rates movements is a risk inherent to the development of the banking business, which
is also, in turn, an opportunity to create economic value. Therefore, interest rate risk must be effectively managed so that it is limited in
accordance with the entity’s equity and in line with the expected economic result.
This function falls to the ALM (Asset & Liability Management) unit, within the Finance area, who, through ALCO, aims to guarantee the
recurrence of results and preserve the solvency of the entity, always adhering to the risk profile defined by the management bodies of the
BBVA Group. The interest rate risk management of the balance sheet aims to promote the stability of the net interest income and book
value in the face of changes in the market interest rates, types in the different balance-sheets, while respecting solvency and internal limits,
and complying with current and future regulatory requirements. Likewise, a specific monitoring of the banking book instruments registered
at market value (fair value) is developed, which due to their accounting treatment have an impact on results and / or equity.
In this regard, BBVA maintains an exposure to fluctuations on interest rates according to its objective strategy and risk profile, being carried
out in a decentralized and independent manner in each of the banking entities that compose its structural balance-sheet.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The management is carried out in accordance with the guidelines established by the European Banking Authority (EBA), with a monitoring
of interest rate risk metrics, with the aim of analyzing the potential impact that could be derived from the range of scenarios in the different
balance-sheets of the Group.
Nature of Interest Rate Risk
Repricing risk arises due to the difference between the repricing or maturity terms of the assets and liabilities, and represents the most
frequent interest rate risk faced by financial entities. Notwithstanding, other sources of risk as changes in the slope and shape of the yield
curve, the reference to different indexes and the optionality risk embedded in certain banking transactions, are also taken into account by
the risk control system.
BBVA's structural interest-rate risk management process is formed from a set of metrics and tools that enables to properly monitor the risk
profile of the Group, backed-up by an assumptions set that aims to characterize the behavioral of the balance sheet items with the maximum
accuracy.
The IRRBB measurement is carried out on a monthly basis, and includes probabilistic measures based on methods of scenario simulation,
which enables to capture additional sources of risk to the parallel shifts, as the changes in slope and shape of the yield curve. Besides,
sensitivity analysis to multiple parallel shocks of different magnitude are also assessed on a regular basis. The process is run separately
for each currency to which the Group is exposed, considering, at a later stage, the diversification effect among currencies and business
units.
The risk measurement model is complemented by the assessment of ad-hoc scenarios and stress tests. As stress testing has become
more relevant during the recent years, the evaluation of extreme scenarios of rupture of historical interest rates levels, correlations and
volatility has continued to be enhanced, while assessing, also, BBVA Research market scenarios and incorporating the set of scenarios
defined according to EBA guidelines.
During the year 2020, BBVA worked to improve the control and management model in accordance with the guidelines established by the
EBA on the management of interest rate risk in the banking book. It is worth highlighting, among other aspects, the reinforcement of the
stress analysis, including the evaluation of the impacts on the main balance sheet accounts of the Bank that could derive from the range of
interest rate scenarios defined according to the EBA guidelines mentioned above.
Key assumptions of the model
In order to measure structural interest rate risk, the setting of assumptions on the evolution and behavior of certain balance sheet items is
particularly relevant, especially those related to products without an explicit or contractual maturity.
The assumptions that characterize these balance sheet items must be understandable for the areas and bodies involved in risk management
and control and remain duly justified and documented. The modeling of these assumptions must be conceptually reasonable and consistent
with the evidence based on historical experience, reviewed at least once a year.
In view of the heterogeneity of the financial markets and the availability of historical data, each one of the entities of the Group is responsible
for determining the behavior assumptions to be applied to the balance sheet items, always under the guidelines and the applicability of the
corporate models existing in the Group.
Among the balance sheet assumptions stand out those established for the treatment of items without contractual maturity, mainly for
demand customer deposits, and those related to the expectations on the exercise of interest rate options, especially those relating to loans
and deposits subject to prepayment risk.
For the modeling of demand deposits, a segmentation of the accounts in several categories is previously carried out depending on the
characteristics of the customer (retail / wholesale) and the product (type of account / transactionality / remuneration), in order to outline the
specific behavior of each segment.
In order to establish the remuneration of each segment, the relationship between the evolution of market interest rates and the interest
rates of managed accounts is analyzed, with the aim of determining the translation dynamic (percentages and lags) of interest rates
variations to the remuneration of the accounts.
The behavior assigned to each category of accounts is determined by an analysis of the historical evolution of the balances and the
probability of cancellation of the accounts. For this, the volatile part of the balance assigned to a short-term maturity is isolated, thus avoiding
fluctuations in the level of risk caused by specific variations in the balances and promoting stability in the management of the balance. Once
the stable part is identified, a medium / long term maturity model is applied through a decay distribution based on the average term of the
accounts and the conditional cancellation probabilities throughout the life of the product.
Additionally, the relationship of the evolution of the balance of deposits with the levels of market interest rates is taken into account, where
appropriate, including the potential migration between the different types of deposits (on demand / time deposits) in the different interest
rate scenarios.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Equally relevant is the treatment of early cancelation options embedded in credit loans, mortgage portfolios and customer deposits. The
evolution of market interest rates may condition, along with other variables, the incentive that customers have to prepay loans or deposits,
modifying the future behavior of the balance amounts with respect to the forecasted contractual maturity schedule.
The detailed analysis of the historical information related to prepayment data, both partial and total prepayment, combined with other
variables such as interest rates, allows estimating future amortizations and, where appropriate, their behavior linked to the evolution of such
variables.
The approval and updating of the risk behavior models of structural interest rate risk are subject to corporate governance under the scope
of GRM-Analytics. In this way, the models must be properly inventoried and cataloged and comply with the requirements established in the
internal procedures for their development, updating and management of the changes. The models are also subject to the corresponding
internal validations based on their relevance and the established monitoring requirements.
In 2020, central Banks and governments have implemented a new package of measures to boost the economy in response to a weaker
economy caused by the COVID-19 pandemic that has affected significantly the global economy and most of the countries. In Europe, the
monetary stimulus measures of the European Central Bank have continued, and the Euribor have fallen, reaching historical low records. In
the United States, the reference rates (Libor) have maintained a downward trend, in line with the cuts made by the Federal Reserve in the
first quarter of the year. Also in Mexico, the monetary policy rate has fallen significantly during the year. In Turkey, although it initially showed
a downward trend in interest rates, aggressive increases have been registered since August, reversing the declines of previous quarters,
ending the year with an increase of 500 basis points above December's level of 2019.
BBVA continues to maintain a moderate risk profile, in accordance with the established objective, showing a favorable position to a rise in
interest rates on net interest income. Effective management of the balance sheet structural risk has mitigated the negative impact of the
downward trend in interest rates and the volatility experienced as a result of the effects of COVID-19, and is reflected in the strength and
recurrence of the margin of interests.
In Europe, the downward trend in interest rates remains limited by current levels, preventing extremely adverse scenarios from occurring.
Both balance sheets are characterized by a loan portfolio with a high proportion referenced to a variable interest rate (mainly mortgages in
Spain and loans to companies in both countries) and a liability composed mainly of customer deposits. The COAP portfolios act as hedging
of the bank balance, mitigating its sensitivity to interest rate movements. This profile has remained stable during 2020 on both balance
sheets. In Spain, the sensitivity of the interest margin has increased in the year due to the maintenance of higher balances of sensitive
liquid assets as a result of the generation of liquidity on the balance sheet and the additional financing of TLTRO III (see Note 20), and due
to maturity of a part of the coverage of the mortgage portfolio.
5.4.2 Structural equity risk
Structural equity risk refers to the possibility of suffering losses in the value of positions in shares and other equity instruments held in the
banking book with long or medium term investment horizons due to fluctuations in the value of equity indexes or shares.
BBVA's exposure to structural equity risk arises largely from minority shareholdings held on industrial and financial companies. This
exposure is modulated in some portfolios with positions held on derivative instruments on the same underlying assets, in order to adjust
the portfolio sensitivity to potential changes in equity prices.
The management of structural equity portfolios is a responsibility of Global ALM and others group's units specialized in this area. Their
activity is subject to the risk management corporate policy on structural equity risk management, complying with the defined management
principles and Risk Appetite Framework.
The structural equity risk metrics, designed by GRM according to the corporate model, contribute to the effective monitoring of the risk by
estimating the sensitivity and the capital necessary to cover the possible unexpected losses due to changes in the value of the shareholdings
in the Group's investment portfolio, with a level of confidence that corresponds to the objective rating of the entity, taking into account the
liquidity of the positions and the statistical behavior of the assets to be considered
Stress tests and scenario analysis of sensitivity to different simulated sc enarios are carried out periodically to analyze the risk profile in
more depth. They are based on both past crisis situations and forecasts made by BBVA Research. These analyses are carried out regularly
to assess the vulnerabilities of structural equity exposure not contemplated by the risk metrics and to serve as an additional tool when
making management decisions.
Backtesting is carried out on a regular basis on the risk measurement model used.
Equity markets globally have been strongly affected by the outbreak of the coronavirus in the first quarter of the year. The strong fiscal and
monetary response supported its recovery, although it has been very uneven according to geographies and sectors. In this sense, the
Spanish stock market has been one of the worst performers, yielding 15% in the year.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
In the group, structural equity risk, measured in terms of economic capital has been significantly reduced due to the loss of value of the
investments. The aggregate sensitivity of the BBVA Group’s consolidated equity to a 1% fall in the price of shares of the companies making
up the equity portfolio decreased to -€20 million as of December 31, 2020, compared to -€26 million of December 31, 2019. This estimation
takes into account the exposure in shares valued at market prices, or if not applicable, at fair value (excluding the positions in the Treasury
Area portfolios) and the net delta-equivalent positions in derivatives on the same underlyings.
5.5 Liquidity and Funding risk
Liquidity and Funding risk is defined as the incapacity of a bank in meeting its payment commitments for missing resources or that, to face
those commitments, should have to make use of funding under burdensome terms.
5.5.1 Liquidity and Funding strategy and planning
BBVA is a multinational financial institution whose business is focused mainly on retail and commercial banking activities. In addition to the
retail business model, which forms the core of its business, the Group engages in corporate and investment banking, through the global
CIB (Corporate & Investment Banking) division.
Liquidity and Funding risk management aims to maintain a solid balance sheet structure which allows a sustainable business. The Group’s
Funding and Liquidity strategy is based on the following pillars:
cover its funding needs independently on the markets where it operates. This avoids possible contagion due to a crisis affecting
one or more of the LMUs.
recurring access to the markets.
instruments as required by regulations with the capacity to absorb losses.
LMU at any time.
Liquidity and funding risk management aims to ensure that in the short term a bank does not have any difficulties in meeting its payment
commitments in due time and form, and that it does not have to make use of funding under burdensome terms, or conditions that deteriorate
its image or reputation
In the medium term the aim is to ensure that the Group’s financing structure is ideal and that it is moving in the right direction with respect
to the economic situation, the markets and regulatory changes.
This management of structural and liquidity funding is based on the principle of financial self-sufficiency of the entities that make it up. This
approach helps prevent and limit liquidity risk by reducing the Group’s vulnerability during periods of high risk. This decentralized
management prevents possible contagion from a crisis affecting only one or a few Group entities, which must act independently to meet
their liquidity requirements in the markets where they operate.
As one aspect of this strategy, BBVA is organized into eleven LMUs composed of the parent and the banking subsidiaries in each
geographical area, plus the independent branches.
In addition, the policy for managing liquidity and funding risk is also based on the model’s robustness and on the planning and integration
of risk management into the budgeting process of each LMU, according to the appetite for funding risk it decides to assume in its business.
Liquidity and Funding planning is drawn up as part of the strategic processes for the Bank’s budgetary and business planning. It allows a
recurring growth of the banking business with suitable maturities and costs within the established risk tolerance levels by using a wide range
of instruments which allow the diversification of the funding sources and the maintenance of a high volume and quality of available liquid
assets.
5.5.2 Governance and monitoring
The responsibility for Liquidity and Funding management in normal business activity lies with the Finance area as a first line of defense in
managing the risks inherent to this activity, in accordance with the principles established by the EBA and in line with the standards, policies,
procedures and controls in the framework established by the governing bodies. The Finance department, through the Balance-Sheet
Management area, plans and executes the funding of the structural long-term gap of each LMU and proposes to the Assets and Liabilities
Committee (ALCO) the actions to be taken on this matter, in accordance with the policies and limits established by the Executive Committee
(EC).
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Finance, in its regulatory liquidity reporting function, coordinates the processes necessary to meet any requirements that may be generated
at corporate and regulatory level, with the areas responsible for this reporting in each LMU, thereby monitoring the integrity of the information
supplied.
The corporate Global Risk Management (GRM) area is as a second line of defense responsible for ensuring that liquidity and funding risk
in the Bank is managed according to the strategy approved by the Board of Directors. It is also responsible for identifying, measuring,
monitoring and controlling those risks and reporting to the proper corporate governing bodies. To carry out this work adequately, the risk
function in the Group has been set up as a single, global function that is independent of the management areas.
In addition, the Bank has an Internal Risk Control unit that conducts an independent review of Liquidity and Funding Risk control and
management, independently of the functions performed in this area by Internal Audit.
As a third line of defense in the Bank’s internal control model, Internal Audit is in charge of reviewing specific controls and processes in
accordance with an annual work plan.
BBVA’s fundamental objectives regarding the liquidity and funding risk are determined through the Liquidity Coverage Ratio (LCR) and
through the Loan-to-Stable Customer Deposits (LtSCD) ratio.
The LCR ratio is a regulatory metric that aims to guarantee the resilience of entities in a scenario of liquidity tension within a time horizon
of 30 days. Within its risk appetite framework and system of limits and alerts, BBVA has established a required LCR compliance level for
the entire Group and for each individual LMU. The required internal levels aim to comply efficiently and sufficiently in advance with the
implementation of the 2018 regulatory requirement at a level above 100%.
The LtSCD ratio measures the relationship between net lending and stable customer funds. The aim is to preserve a stable funding structure
in the medium term for each LMU making up BBVA Group, taking into account that maintaining an adequate volume of stable customer
funds is key to achieving a sound liquidity profile. In geographical areas with balance sheets with two currencies, the indicator is also
controlled by currency to manage the mismatches that might occur.
As stable customer funds can be considered those which the LMUs are obtaining and managing from their target customers. Those funds
are characterized by their low sensitivity to market changes and by their less volatile behavior at aggregated level per operation due to the
loyalty of the customer to the entity. The stable resources are calculated by applying to each identified customer segment a haircut
determined by the analysis of the stability if the balances by which different aspects are evaluated (concentration, stability, level of loyalty).
The main source of stable resources represents the both wholesale funding and retail customer funds.
In order to establish the target (maximum) levels of LtSCD in each LMU and provide an optimal funding structure reference in terms of risk
appetite, the corporate Structural Risks unit of GRM identifies and assesses the economic and financial variables that condition the funding
structures in the different geographical areas.
Additionally, liquidity and funding risk management aims to achieve a proper diversification of the funding structure, avoiding excessive
reliance on short-term funding by establishing a maximum level for the short-term funds raised, including both wholesale funding and
customer funds. The residual maturity profile of long-term wholesale funding has no significant concentrations, which matches the schedule
of planned issues to the best possible financial conditions of markets, as shown in the table below. Finally, concentration risk is monitored
at LMU level, with the aim of ensuring a correct diversification of both the counterparty and type of instrument.
One of the fundamental metrics within the general management framework of the liquidity and funding risk is the maintaining of a liquidity
buffer consisting of high quality assets free of charges which can be sold or offered as guarantees to obtain funding, either under normal
market conditions or in stress situations.
Finance is the area responsible for the collateral management and the determining of the liquidity buffer within BBVA Group. According to
the principle of auto-sufficiency of the subsidiaries, BBVA is responsible for the holding of a buffer of liquid assets which comply with the
regulatory requirements applicable under each jurisdiction. In addition, the liquidity buffer of each LMU should be aligned with the liquidity
and funding risk tolerance as well as the management limits set and approved for each case.
In this context, the short-term resistance of the liquidity risk profile is promoted, guaranteeing that each LMU has sufficient collateral to deal
with the risk of the close of wholesale markets. Basic capacity is the short-term liquidity risk management and control metric that is defined
as the relationship between the available explicit assets and the maturities of wholesale liabilities and volatile funds, at different terms up to
one year, with special relevance being given to 30-day 90-day maturities, in order to maintain the survivability period above the 3 months
with the available buffer, not taking into consideration the inflows of the balance sheet.
Stress tests are carried out as a fundamental element of the liquidity and funding risk monitoring scheme. They enable deviations from the
liquidity targets and limits set in the appetite to be anticipated, and establish tolerance ranges in the different management areas. They also
play a major role in the design of the Liquidity Contingency Plan and the definition of specific measures to be adopted to rectify the risk
profile if necessary.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
For each scenario, it is checked whether BBVA has a sufficient stock of liquid assets to guarantee its capacity to meet the liquidity
commitments/outflows in the different periods analyzed. The analysis considers four scenarios: one central and three crisis-related
(systemic crisis; unexpected internal crisis with a considerable rating downgrade and/or affecting the ability to issue in wholesale markets
and the perception of business risk by the banking intermediaries and the Entity’s customers; and a mixed scenario, as a combination of
the two aforementioned scenarios). Each scenario considers the following factors: existing market liquidity, customer behavior and sources
of funding, the impact of rating downgrades, market values of liquid assets and collateral, and the interaction between liquidity requirements
and the development of the LMU’s asset quality.
The stress tests conducted on a regular basis reveal that BBVA maintains a sufficient buffer of liquid assets to deal with the estimated
liquidity outflows in a scenario resulting from the combination of a systemic crisis and an unexpected internal crisis, during a period of longer
than 3 months in general for the different LMUs, including in the scenario a significant downgrade of the Bank’s rating by up to three notches.
Together with the results of the stress tests and the risk metrics, the early warning indicators play an important role within the corporate
model and the Liquidity Contingency Plan. They are mainly indicators of the funding structure, in relation to asset encumbrance, counterparty
concentration, flights of customer deposits, unexpected use of credit facilities, and of the market, which help anticipate possible risks and
capture market expectations.
Finance is the area responsible for the elaboration, monitoring, execution and update of the liquidity and funding plan and of the market
access strategy to guarantee and improve the stability and diversification of the wholesale funding sources.
In order to implement and establish an anticipated management, limits are set on an annual basis for the main management metrics that
form part of the budgeting process for the liquidity and funding plan. This framework of limits contributes to the planning of the joint future
performance of:
funding.
considered to be stable or volatile funds based on the principle of sustainability and recurrence of these funds.
book and stable customer funds.
and are classified as financial assets at fair value through other comprehensive income and at amortized cost and additionally on
trading portfolios.
portfolio in the banking book, together with the rest of on-balance-sheet wholesale funding needs, excluding trading portfolios.
This gap therefore needs to be funded with customer funds that are not considered stable or on wholesale markets.
As a result of these funding needs, BBVA Group plans the target wholesale funding structure according to the tolerance set in each LMU
target.
Thus, once the structural gap has been identified and after resorting to wholesale markets, the amount and composition of wholesale
structural funding is established in subsequent years, in order to maintain a diversified funding mix and guarantee that there is not a high
reliance on short-term funding (short-term wholesale funding plus volatile customer funds).
In practice, the execution of the principles of planning and self-funding at the different LMUs results in the Group’s main source of funding
being customer deposits, which consist mainly of demand deposits, savings deposits and time deposits.
As sources of funding, customer deposits are complemented by access to the interbank market and the domestic and international capital
markets in order to address additional liquidity requirements, implementing domestic and international programs for the issuance of
commercial paper and medium and long-term debt.
The process of analysis and assessment of the liquidity and funding situation and of the inherent risks is a process carried out on an ongoing
basis in BBVA Group, with the participation of all the Group areas involved in liquidity and funding risk management. This process is carried
out at both local and corporate level. It is incorporated into the decision- making process for liquidity and funding management, with
integration between the risk appetite strategy and establishment and the planning process, the funding plan and the limits scheme.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The table below shows the liquidity available by instrument as of December 31, 2020 and 2019 for the most significant entities based on
prudential supervisor’s information (Commission Implementing Regulations (EU) 2017/2114 of November 9, 2017):
December (Millions of Euros)
Eurozone
2020
2019
Cash and withdrawable central bank reserves
39,330
14,516
Level 1 tradable assets
48,858
41,961
Level 2A tradable assets
5,119
403
Level 2B tradable assets
6,080
5,196
Other tradable assets (*)
20,174
22,213
Non tradable assets eligible for central banks
-
-
Cumulated counterbalancing capacity
119,560
84,288
The Net Stable Funding Ratio (NSFR), defined as the ratio between the amount of stable funding available and the amount of stable funding
required, is one of the Basel Committee's essential reforms, and requires 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 NSFR of BBVA in the Eurozone at December 31, 2020, calculated based on the Basel requirements, is 121%.
Below is a breakdown by contractual maturity of the balances of certain headings in the accompanying balance sheets, excluding any
valuation adjustments or loss allowances:
December 2020. Contractual maturities (Millions of euros)
Demand
Up to
1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over
5
years
Total
ASSETS
Cash, cash balances at central
banks and other demand deposits
36,374
5,604
-
-
-
-
-
-
-
-
41,978
Deposits in credit entities
-
220
424
767
215
369
92
97
-
30
2,214
Deposits in other financial
institutions
-
1,590
364
469
327
192
562
279
296
2,566
6,646
Reverse repo, securities borrowing
and margin lending
-
15,945
4,578
1,351
364
368
3,320
1,849
891
1,089
29,753
Loans and Advances
-
9,531
10,000
9,418
6,377
7,296
20,748
19,117
29,080
69,637
181,205
Securities' portfolio settlement
-
302
3,681
4,187
3,449
10,499
3,879
9,250
8,704
34,312
78,263
December 2020. Contractual maturities (Millions of euros)
Demand
Up to
1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over
5
years
Total
LIABILITIES
Wholesale funding
-
4,263
1,213
2,012
792
1,270
6,685
5,837
8,755
17,157
47,984
Deposits in financial institutions
2,002
7,246
86
7
1
6
91
46
76
347
9,908
Deposits in other financial
institutions and international
agencies
11,573
3,311
2,481
255
133
213
474
355
1,038
3,419
23,253
Customer deposits
168,091
13,919
6,460
3,709
3,045
2,751
1,955
686
222
483
201,319
Security pledge funding
-
23,958
5,063
1,494
1,046
307
11,172
28,151
352
1,395
72,937
Derivatives, net
-
(66)
4
(871)
(10)
47
(28)
83
(72)
(173)
(1,088)
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
December 2018. Contractual Maturities (Millions of euros)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
ASSETS
Cash, cash balances at
central banks and other
demand deposits
14,803
2,406
-
-
-
-
-
-
-
-
17,209
Deposits in credit entities
-
808
100
346
458
460
157
1
115
33
2,478
Deposits in other financial
institutions
-
777
375
350
278
701
475
414
205
2,367
5,941
Reverse repo, securities
borrowing and margin lending
-
18,661
3,858
2,259
290
808
4,121
1,838
411
803
33,050
Loans and Advances
-
12,047
9,527
11,694
6,628
7,908
18,363
15,572
26,328
75,147
183,216
Securities' portfolio
settlement
-
446
1,918
979
1,022
5,188
15,242
1,323
5,728
30,537
62,384
December 2019. Contractual Maturities (Millions of euros)
Demand
Up to 1
month
1 to 3
months
3 to 6
months
6 to 9
months
9 to 12
months
1 to 2
years
2 to 3
years
3 to 5
years
Over 5
years
Total
LIABILITIES
Wholesale funding
-
645
298
2,347
543
2,919
4,688
6,403
7,722
18,737
44,304
Deposits in financial
institutions
1,853
6,358
183
32
-
130
56
36
101
465
9,214
Deposits in other financial
institutions and international
agencies
9,082
2,816
565
167
86
175
485
320
497
3,706
17,898
Customer deposits
145,424
10,844
9,434
4,688
3,592
3,377
2,213
1,275
361
625
181,833
Security pledge funding
-
31,999
3,072
15,803
946
637
3,094
7,097
207
1,114
63,969
Derivatives, net
-
(37)
14
(35)
(12)
(18)
(119)
(85)
6
(411)
(696)
The matrix shows the retail nature of the funding structure, with a loan portfolio being mostly funded by customer deposits. On the outflows
side of the matrix, the “demand” maturity bucket mainly contains the retail customer sight accounts whose behavior historically showed a
high level of stability and little concentration. According to a behavior analysis which is done every year in every entity, this type of account
is considered to be stable and for liquidity risk purposes receive a better treatment.
In the Euro Liquidity Management Unit (LMU), the liquidity and funding position continued to be solid and stable with a large high-quality
liquidity buffer that has been increased during the year as a result of the growth in customer deposits and shares of the company. European
Central Bank, which have meant an injection of liquidity in the system. As a result of the COVID-19 crisis, there was initially a greater
demand for credit through the increase in the use of credit lines by the Corporate & Investment Banking wholesale business, which was
also accompanied by a growth in customer deposits. Subsequently, there were partial refunds of those lines while deposits have continued
to grow. In addition, it is important to note the measures implemented by the ECB to deal with this crisis, which have included different
actions such as: the expansion of asset purchase programs, especially through the PEPP (Pandemic Emergency Purchase Program) for
750,000 million of euros in a first tranche announced in March and expanded with a second tranche for an additional 600,000 million euros
until June 2021 or until the ECB considers that the crisis has ended, the coordinated action of central banks for the provision of US dollars,
a temporary package of measures to make flexible the collateral eligible for financing operations, the relaxation and improvement of the
conditions of the TLTRO III program and the creation of the new program of long-term refinancing operations without specific emergency
objective (PELTRO). In this regard, BBVA attended the TLTRO III program windows in December, 2019 and March and June,2020 (with
an amount drawn down at the end of December,2020 of 34,902 million euros) due to its favorable conditions in terms of cost and term,
amortizing the corresponding part of the TLTRO II program (see Note 20).
The wholesale financing markets in which the Group operates, after the first two months of 2020 of great stability were followed by a strong
correction derived from the COVID-19 crisis and limited access to the primary market. This situation has been stabilizing due to the evolution
of the pandemic, the development of vaccines, various geopolitical events and the actions of the Central Banks. Secondary market ended
the year reaching the levels of January 2020, while primary market volumes have been reactivated, lowering the issue premiums
During the first quarter of 2020, BBVA, S.A. carried out two issuances of senior non-preferred debt totaling €1,400 million and a Tier 2
issuance totaling €1,000 million (see the "Solvency" chapter of the management report for more information). In the second quarter of 2020,
it issued preferred senior debt totaling €1,000 million as a COVID-19 social bond, the first of its kind from a private financial institution in
Europe (see the "Solvency" and "Responsible banking" sections of the Consolidated Management Report). In the third quarter, three public
issues were made: the first is the first green convertible bond of a financial institution world-wide for an amount of 1,000 million euros; the
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
second is a Tier 2 subordinated securities issue denominated in pound sterling, for an amount of 300 million pounds; and the third is an
issuance of preferred securities registered with the US SEC (Securities Exchange Commission) in two tranches with maturities of three and
five years, for a total of 2,000 million dollars. On the other hand, in February 2020, BBVA exercised the call option of a convertible bond of
1,500 million euros, and in January 2021, the entity has early amortized three preferred issuances (for more information on these
transactions see the section “Solvency” of this report).
5.5.3 Asset encumbrance
As of December 31, 2020 and 2019, the encumbered (given as collateral for certain liabilities) and unencumbered assets ate broken down
as follows:
Encumbered and unencumbered assets (Millions of Euros)
2020
2019
Encumbered assets
Unencumbered
assets
Encumbered assets
Unencumbered
assets
Book
value
Market
value
Book
value
Market
value
Book
value
Market
value
Book
value
Market
value
Equity instruments
2,134
2,134
9,611
9,611
3,526
3,526
6,758
6,758
Debt Securities
14,283
11,044
55,731
58,970
14,780
15,048
40,214
39,946
Loans and other assets
75,843
-
299,610
-
55,229
-
288,131
-
The committed value of "Loans and Advances and other assets" corresponds mainly to loans linked to the issue of covered bonds, territorial
bonds or long-term securitized bonds (see Note 20) as well as those used as a guarantee to access certain funding transactions with central
banks. Debt securities and equity instruments correspond to underlying that are delivered in repos with different types of counterparties,
mainly clearing houses or credit institutions, and to a lesser extent central banks. Collateral provided to guarantee derivative operations is
also included as committed assets.
As of December 31, 2020 and 2019, collateral pledge mainly due to repurchase agreements and securities lending, and those which could
be committed in order to obtain funding are provided below:
Collateral received (Millions of Euros)
Fair value of
encumbered
collateral
received or own
debt securities
issued
Fair value of
collateral
received or own
debt securities
issued available
for encumbrance
Fair value of
collateral
received or own
debt securities
issued not
available for
encumbrance
Fair value of
encumbered
collateral
received or own
debt securities
issued
Fair value of
collateral
received or own
debt securities
issued available
for encumbrance
Fair value of
collateral
received or own
debt securities
issued not
available for
encumbrance
Collateral received
27,529
6,614
899
35,258
7,091
-
Equity instruments
220
204
-
44
70
-
Debt securities
27,309
6,410
899
35,214
7,021
-
Loans and other assets
-
-
-
-
-
-
Own debt securities issued
other than own covered
bonds or ABSs
3
94
-
-
82
-
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
As of December 31, 2020 and 2019, financial liabilities issued related to encumbered assets in financial transactions as well as their book
value were as follows:
Sources of encumbrance (Millions of Euros)
2020
2019
Matching liabilities,
contingent liabilities or
securities lent
Assets, collateral
received and own
debt securities issued
other than covered
bonds and ABSs
encumbered
Matching liabilities,
contingent liabilities or
securities lent
Assets, collateral
received and own
debt securities issued
other than covered
bonds and ABSs
encumbered
Book value of financial
liabilities
101,241
119,792
96,730
105,051
Derivatives
12,853
12,949
15,449
15,355
Loans and Advances
72,272
83,442
64,267
68,759
Outstanding subordinated
debt
15,958
19,312
17,014
20,936
Other sources
158
4,088
231
3,742
6. Fair value of financial instruments
Framework and processes control
As part of the process established in the Bank for determining the fair value in order to ensure that financial assets and liabilities are valued
following the principles: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the principal market or most advantageous market, at the measurement date
BBVA has established, at a geographic level, a structure of Risk Operational Admission and Product Governance Committees responsible
for validating and approving new products or types of financial assets and liabilities before being contracted. Local management responsible
for valuation, which are independent from the business (see Management Report - Risk), are members of these committees.
These areas are required to ensure, prior to the approval stage, the existence of not only technical and human resources, but also adequate
informational sources to measure the fair value of these financial assets and liabilities, in accordance with the rules established by the
valuation global area and using models that have been validated and approved by the responsible areas.
Fair value hierarchy
All financial instruments, both assets and liabilities are initially recognized at fair value, which at that point is equivalent to the transaction
price, unless there is evidence to the contrary in the market. Subsequently, depending on the type of financial instrument, it may continue
to be recognized at amortized cost or fair value through adjustments in the income statement or equity.
When possible, the fair value is determined as the market price of a financial instrument. However, for many of the financial assets and
liabilities of the Bank, especially in the case of derivatives, there is no market price available, so its fair value is estimated on the basis of
the price established in recent transactions involving similar instruments or, in the absence thereof, by using mathematical measurement
models that are sufficiently tried and trusted by the international financial community. The estimates of the fair value derived from the use
of such models take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of
risk associated with such asset or liability. However, the limitations inherent in the measurement models and possible inaccuracies in the
assumptions and parameters required by these models may mean that the estimated fair value of an asset or liability does not exactly
match the price for which the asset or liability could be exchanged or settled on the date of its measurement.
Additionally, for financial assets and liabilities that show significant uncertainty in inputs or model parameters used for valuation, criteria is
established to measure said uncertainty and activity limits are set based on these. Finally, these measurements are compared, as much as
possible, against other sources such as the measurements obtained by the business teams or those obtained by other market participants.
The process for determining the fair value requires the classification of the financial assets and liabilities according to the measurement
processes used as set forth below:
price sources and referenced to active markets that the entity can access at the measurement date. The instruments classified
within this level are fixed-income securities, equity instruments and certain derivatives.
markets.
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Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
December 31, 2020, the affected instruments at fair value accounted for approximately 0.51% of financial assets and 0.21% of
the Bank’s financial liabilities. Model selection and validation is undertaken by control areas outside the business areas.
6.1. Fair value of financial instruments
The fair value of the Bank’s financial instruments in the accompanying balance sheets and its corresponding carrying amounts as of
December 31, 2020 and 2019 are presented below:
Fair value and carrying amount (Millions of Euros)
Notes
2020
2019
Carrying
amount
Fair value
Carrying
amount
Fair value
ASSETS
Cash, cash balances at central banks and other demand
deposits
7
44,107
44,107
18,419
18,419
Financial assets held for trading
8
87,677
87,677
83,841
83,841
Non-trading financial assets mandatorily at fair value through
profit or loss
9
409
409
855
855
Financial assets designated at fair value through profit or loss
10
-
-
-
-
Financial assets at fair value through other comprehensive
income
11
37,528
37,528
24,905
24,905
Financial assets at amortized cost
12
225,914
228,665
225,369
226,475
Hedging derivatives
13
1,011
1,011
953
953
LIABILITIES
Financial liabilities held for trading
8
69,514
69,514
73,362
73,362
Financial liabilities designated at fair value through profit or
loss
10
3,267
3,267
2,968
2,968
Financial liabilities at amortized cost
20
331,189
332,618
285,260
287,411
Hedging derivatives
13
1,510
1,510
1,471
1,471
Not all financial assets and liabilities are recorded at fair value, so below we provide the information on financial instruments recorded at
fair value and subsequently the information of those recorded at amortized cost (including their fair value), although this value is not used
when accounting for these instruments.
6.1.1. Fair value of financial instruments recognized at fair value, according to valuation criteria
Below are the different elements used in the valuation technique of financial instruments.
Active Market
BBVA considers active market as “a market that allows the observation of bid and offer prices representative of the levels to which the
market participants are willing to negotiate an asset, with sufficient frequency and volume”.
By default, all would internally considered approved “Organized Markets” as active markets, without considering this an unchangeable list.
Furthermore, BBVA would consider as traded in an “Organized Market” quotations for assets or liabilities from Over The Counter (OTC)
markets when they are obtained from independent sources, observable on a daily basis and fulfil certain conditions.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The following table shows the financial instruments carried at fair value in the accompanying balance sheets, broken down by the valuation
technique used to determine their fair value as of December 31, 2020 and 2019:
Fair value of financial instruments by levels (Millions of Euros)
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
ASSETS
Financial assets held for trading
19,879
66,087
1,711
19,299
63,241
1,301
Loans and advances
-
28,858
1,609
-
32,250
1,186
Debt securities
7,214
2,744
25
9,214
972
27
Equity instruments
10,645
-
37
8,146
-
59
Derivatives
2,020
34,486
39
1,939
30,019
29
Non-trading financial assets mandatorily at fair
value through profit or loss
120
74
214
71
54
730
Loans and advances
-
-
84
-
-
602
Debt securities
-
65
77
-
53
75
Equity instruments
120
10
53
71
1
53
Financial assets designated at fair value through
profit or loss
-
-
-
-
-
-
Financial assets at fair value through other
comprehensive income
36,731
687
111
24,122
680
104
Loans and advances
-
-
-
-
-
-
Debt securities
35,867
687
94
22,464
602
91
Equity instruments
864
-
17
1,658
78
13
Hedging derivatives
-
1,003
8
-
953
-
LIABILITIES
Financial liabilities held for trading
11,890
56,992
633
12,050
60,633
679
Deposits
-
23,930
563
-
31,255
649
Derivatives
2,271
33,055
70
2,095
29,378
30
Other financial liabilities
9,618
7
-
9,955
1
-
Financial liabilities designated at fair value through
profit or loss
-
3,026
241
-
2,915
53
Deposits
-
3,026
241
-
2,915
53
Debt certificates
-
-
-
-
-
-
Other financial liabilities
-
-
-
-
-
-
Derivatives – Hedge accounting
-
1,510
-
-
1,471
-
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The following table sets forth the main valuation techniques, hypothesis and inputs used in the estimation of fair value of the financial
instruments classified under Levels 2 and 3, based on the type of financial asset and liability and the corresponding balances as of
December 31, 2020 and 2019:
Fair Value of financial Instruments by Levels (Millions of euros)."
2020
2019
Level 2
Level 3
Level 2
Level 3
Valuation technique(s)
Observable inputs
Unobservable inputs
ASSETS
Financial assets held for trading
66,087
1,711
63,241
1,301
- Issuer´s credit risk
- Current market interest rates
- Funding Interest rates
observed in the market or in
consensus services
- Exchange rates
- Prepayment rates
- Issuer´s credit risk
- Recovery rates
- Funding interest rates not
observed in the market or in
consensus services
Loans and advances
28,858
1,609
32,250
1,186
Present-value method
(Discounted future cash flows)
Debt securities
2,744
25
972
27
Present-value method
(Discounted future cash flows)
Observed prices in non active
markets
- Issuer´s credit risk
- Current market interest rates
- Non active markets prices
- Prepayment rates
- Issuer´s credit risk
- Recovery rates
Equity instruments
-
37
-
59
Comparable pricing (Observable
price in a similar market)
Net asset value
- Brokers quotes
- Market operations
- NAVs published
- NAV not published
Derivatives
34,486
39
30,019
29
Interest rate
Interest rate products (Interest
rate swaps, Call money swaps y
FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y
SABR
Bond options: Black
LGM
Other Interest rate options:
Black, Hull-White y LGM
Constant maturity swaps: SABR
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices:
shares, funds, commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Beta
- Implicit correlations between
tenors
- Interest rates volatility
Equity
Future and Equity Forward:
Discounted future cash flows
Equity Options: Local Volatility,
Momentum adjustment
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
- Implicit dividends and long term
repos
Foreign exchange and gold
Future and Equity Forward:
Discounted future cash flows
Foreign exchange Options:
Local Volatility, moments
adjustment
- Volatility of volatility
- Implicit assets correlations
- Long term implicit correlations
Credit
Credit Derivatives: Default
model and Gaussian copula
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
Commodities
Commodities: Momentum
adjustment and discounted cash
flows
Non-trading financial assets mandatorily at
fair value through profit or loss
74
214
54
730
Loans and advances
-
84
-
602
Specific liquidation criteria
regarding losses of the EPA
proceedings
PD and LGD of the internal
models, valuations and specific
criteria of the EPA proceedings
- Issuer credit risk
- Current market interest rates
- Interest rates for the financing
of assets
- Exchange rates
- Property valuation
Debt securities
65
77
53
75
Present-value method
(Discounted future cash flows)
- Issuer credit risk
- Current market interest rates
- Issuer credit risk
- Recovery rates
Equity instruments
10
53
1
53
Comparable pricing (Observable
price in a similar market)
Net asset value
- Brokers quotes
- Market operations
- NAVs published
- NAV provided by the administrator
of the fund
Financial assets at fair value through other
comprehensive income
687
111
680
104
Debt securities
687
94
602
91
Present-value method
(Discounted future cash flows)
Observed prices in non active
markets
- Issuer´s credit risk
- Current market interest rates
- Non active market prices
- Prepayment rates
- Issuer credit risk
- Recovery rates
Equity instruments
-
17
78
13
Comparable pricing (Observable
price in a similar market)
Net asset value
- Brokers quotes
- Market operations
- NAVs published
- NAV provided by the administrator
of the fund
Hedging derivatives
1,003
8
953
-
Interest rate
Interest rate products (Interest
rate swaps, Call money swaps y
FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y
SABR
Bond options: Black
LGM
Other interest rate options:
Black, Hull-White y LGM
Constant maturity swaps: SABR
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices:
shares, funds, commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
Equity
Future and Equity Forward:
Discounted future cash flows
Equity Options: Local volatility,
Momentum adjustment
Foreign exchange and gold
Future and Equity Forward:
Discounted future cash flows
Foreign exchange Options:
Local volatility, moments
adjustment
Credit
Credit Derivatives: Default
model and Gaussian copula
Commodities
Commodities: Momentum
adjustment and Discounted cash
flows
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
December 2020. Fair Value of financial Instruments by valuation techniques (Millions of euros)
2020
2019
Valuation technique(s)
Observable inputs
Unobservable inputs
LIABILITIES
Level 2
Level 3
Level 2
Level 3
Financial liabilities held for trading
56,992
633
60,633
679
- Interest rate yield
- Funding Interest rates
observed in the market or in
consensus services
- Exchange rates
-Funding interest rates not
observed in the market or
in consensus services
Deposits
23,930
563
31,255
649
Present-value method
(Discounted future cash flows)
Derivatives
33,055
70
29,378
30
Interest rate
Interest rate products (Interest rate swaps, Call money
swaps y FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Other Interest rate options: Black, Hull-White y LGM
Constant Maturity swaps: SABR
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices:
shares, funds, commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Beta
- Correlation between
tenors
- Interest rates volatility
Equity
Future and Equity Forward: Discounted future cash flows
Equity options: Local volatility, momentum adjustment
- Volatility of volatility
- Assets correlation
Foreign exchange and gold
Future and Equity Forward: Discounted future cash flows
Foreign exchange options: Local volatility, moments
adjustment
- Volatility of volatility
- Assets correlation
Credit
Credit Derivatives: Default model and Gaussian copula
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
Commodities
Commodities: Momentum adjustment and Discounted cash
flows
Short positions
7
-
1
-
Present-value method
(Discounted future cash flows)
- Issuer's credit risk
- Current market interest
rates
- Value of the underlying
assets
Financial liabilities designated at fair
value through profit or loss
3,026
241
2,915
53
Present-value method
(Discounted future cash flows)
- Prepayment rates
- Issuer´s credit risk
- Current market interest rates
- Prepayment rates
- Issuer´s credit risk
- Current market interest
rates
Derivatives – Hedge accounting
1,510
-
1,471
-
Interest rate
Interest rate products (Interest rate swaps, Call money
swaps y FRA): Discounted cash flows
Caps/Floors: Black, Hull-White y SABR
Bond options: Black
Other Interest rate options: Black, Hull-White y LGM
Constant Maturity swaps: SABR
- Exchange rates
- Market quoted future prices
- Market interest rates
- Underlying assets prices:
shares, funds, commodities
- Market observable volatilities
- Issuer credit spread levels
- Quoted dividends
- Market listed correlations
- Beta
- Implicit correlations
between tenors
- interest rates volatility
Equity
Future and Equity forward: Discounted future cash flows
Equity options: Local Volatility, momentum adjustment
- Volatility of volatility
- Implicit assets
correlations
- Long term implicit
correlations
- Implicit dividends and
long term repos
Foreign exchange and gold
Future and Equity Forward: Discounted future cash flows
Foreign exchange Options: Local volatility, moments
adjustment
- Volatility of volatility
- Implicit assets
correlations
- Long term implicit
correlations
Credit
Credit Derivatives: Default model and Gaussian copula
- Correlation default
- Credit spread
- Recovery rates
- Interest rate yield
- Default volatility
Commodities
Commodities: Momentum adjustment and discounted cash
flows
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Main valuation techniques
The main techniques used for the assessment of the majority of the financial instruments classified in Level 3, and its main unobservable
inputs, are described below:
are established in the different contracts, and discounted to their present value. This technique often includes many observable
inputs, but may also include unobservable inputs, as described below:
●
Credit Spread: This input represents the difference in yield of a debt security and the reference rate, reflecting the additional
return that a market participant would require to take the credit risk of that debt security. Therefore, the credit spread of the
debt security is part of the discount rate used to calculate the present value of the future cash flows.
●
Recovery rate: This input represents the percentage of principal and interest recovered from a debt instrument that has
defaulted.
used to calculate a reference yield based on relative movements from the entry price or current market levels. Further adjustments
to account for differences that may exist between financial instrument being valued and the comparable financial instrument may
be added. It can also be assumed that the price of the financial instrument is equivalent to the comparable instrument.
Net asset value: This technique utilizes certain assumptions to use net asset value as representative of fair value, which is
equal to the total value of the assets and liabilities of a fund published by the managing entity
.
CDS. The joint density function used to value the instrument is constructed by using a Gaussian copula that relates the marginal
densities by a normal distribution, usually extracted from the correlation matrix of events approaching default by CDS issuers.
where the behavior of the Forward and not the Spot itself, is directly modeled.
under the risk neutral measure is the risk free interest rate. Under this assumption, the price of vanilla options can be obtained
analytically, so that inverting the Black- Scholes formula, the implied volatility for process of the price can be calculated.
volatility follows a process that reverts to a long-term level and is correlated with the underlying equity instrument. As opposed to
local volatility models, in which the volatility evolves deterministically, the Heston model is more flexible, allowing it to be similar
to that observed in the short term today.
contracts that compose the underlying interest rate. The correlation matrix is parameterized on the assumption that the correlation
between any two forward contracts decreases at a constant rate, beta, to the extent of the difference in their respective due dates.
The input “Credit default volatility applied in rate/credit hybrid operative. The multifactorial frame of this model makes it ideal for
the valuation of instruments sensitive to the slope or curve, including interest rate option.
moneyness of the underlying, capturing the existence of smiles. These models are appropriate for pricing path dependent options
when use Monte Carlo simulation technique is used.
Adjustments to the valuation for risk of default
Under Circular 4/2017, the entity must estimate the fair value taking into account the assumptions and conditions that market participants
would have when setting the price of the asset or liability on the valuation date. In any case, the fair value of the liabilities must reflect the
entity's default risk, which includes, among other components, its own credit risk. Taking this into account, the Bank makes valuation
adjustments for credit risk in the estimates of the fair value of its assets and liabilities.
These adjustments are calculated by estimating Exposure At Default, Probability of Default and Loss Given Default, which are based on
the recovery levels for all derivative products on any instrument, deposits and repos at the legal entity level (all counterparties under a same
master agreement), in which BBVA has exposure.
The credit valuation adjustments (“CVA”) and debit valuation adjustments (“DVA”) are a part of derivative instrument valuation, both
financial assets and liabilities, to reflect the impact in the fair value of the credit risk of the counterparty and BBVA, respectively. The Bank
incorporates in its valuation, for all exposures classified in any of the categories valued at fair value, both the counterparty credit risk and
its own. In the trading portfolio, and in the specific case of derivatives, credit risk is recognized through such adjustments.
As a general rule, the calculation of CVA is the sum product of the expected positive exposure in time t, the probability of default between
t-1 and t, and the Loss Given Default of the counterparty. Consequently, the DVA is calculated as the sum product of the expected negative
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
exposure in time t, the probability of default of BBVA between t-1 and t, and the Loss Given Default of BBVA. Both calculations are performed
throughout the entire period of potential exposure.
The calculation of the expected positive and negative exposure is done through a Montecarlo simulation of the market variables involved in
all trades’ valuation under the same legal netting set.
The information needed to calculate the probability of default and the loss given default of a counterparty comes from the credit markets.
The counterparty’s Credit Default Swaps are used if liquid quotes are available. If a market price is not available, BBVA has implemented
a mapping process based on the sector, rating and geography of the counterparty to assign probabilities of default and loss given default
calibrated directly to market.
The amounts recognized in the balance sheet as of December 31, 2020 and 2019 related to the valuation adjustments to the credit
assessment of the derivative asset as “Credit Valuation Adjustments” (“CVA”) was €-110 million and €-81 million respectively, and the
valuation adjustments to the derivative liabilities as “Debit Valuation Adjustment” (DVA) was €66 million and €64 million respectively. The
impact recorded under “Gains or (-) losses on financial assets and liabilities held for trading, net” in the income statement as of December,
2020 and 2019 corresponding to the mentioned adjustments was a net impact of €-26 million and €11 million respectively.
As a result of the value variations of the inherent credit risk, which is included in the deposits classified as liabilities designated at fair value
through profit and loss, the amount recognized in the heading “Accumulated other comprehensive income” has amounted to €-29 million
and €-33 million as of December 31, 2020 and 2019, respectively.
Additionally, as of December, 2020 and 2019, €-9 and €-8 million related to the “Funding Valuation Adjustments” (“FVA”) were recognized
in the balance sheet, being the impact on results €-1 million and €4 million, respectively.
Unobservable inputs
Quantitative information of unobservable inputs used to calculate Level 3 valuations is presented below as of December 31, 2020:
Unobservable inputs. December 2020
Financial instrument
Valuation technique(s)
Significant
unobservable inputs
Min
Average
Max
Units
Debt Securities
Present value method
Credit Spread
4.32
47.01
564.22
p.b.
Recovery Rate
0.00%
37.06%
40.00%
%
0.10%
99.92%
143.87%
%
Equity/Fund instruments (*)
Net Asset Value
Comparable Pricing
Security Finance
Present value method
Repo funding curve
(1.18%)
(0.25%)
0.74%
Abs Repo
rate
Credit Derivatives
Gaussian Copula
Correlation Default
30.40%
44.87%
60.95%
%
Black 76
Price Volatility
-
Vegas
Equity Derivatives
Option models on
equities, baskets of
equity, funds
Dividends (**)
Correlations
(77%)
51%
98%
%
Volatility
6.52
29.90
141.77
Vegas
FX Derivatives
Option models on FX
underlyings
Volatility
4.11
10.00
16.14
Vegas
IR Derivatives
Option models on IR
underlyings
Beta
0.25
2.00
18.00
%
Correlation Rate/Credit
(100)
100
%
Credit Default Volatility
-
-
-
Vegas
(**) The range of non-observable dividends has too wide range to be relevant.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Unobservable inputs. December 2019
Financial instrument
Valuation technique(s)
Significant
unobservable inputs
Min
Average
Max
Units
Loans and advances
Present value method
Repo funding curve
(6)
16
100
p.b.
Debt securities
Comparable pricing
Credit spread
18
83
504
p.b
Recovery rate
0.00%
28.38%
40.00%
%
0.01%
98.31%
135.94%
%
Equity instruments (*)
Comparable pricing
Net asset value
Credit option
Gaussian Copula
Correlation default
19.37%
44.33%
61.08%
%
Corporate Bond option
Black 76
Price volatility
-
-
-
Vegas
Equity OTC option
Heston
Forward volatility skew
35.12
35.12
35.12
Vegas
Local volatility
Dividends (**)
Volatility
2.49
23.21
60.90
Vegas
FX OTC options
Black Scholes/Local Vol
Volatility
3.70
6.30
10.05
Vegas
Interest rate options
Libor Market Model
Beta
0.25
2.00
18.00
%
Correlation rate/Credit
(100)
100
%
Credit default Volatility
-
-
-
Vegas
(*) Due to the diversity of valuation models in equity valuations, we would not include all the unobservable inputs or the quantitative ranges of them.
(**) The range of non-observable dividends has too wide range to be relevant.
Financial assets and liabilities classified as Level 3
The changes in the balance of Level 3 financial assets and liabilities included in the accompanying balance sheets during the financial years
2020 and 2019, are as follows:
Financial assets Level 3. Changes in the period (Millions of Euros)
2020
2019
Assets
Liabilities
Assets
Liabilities
Balance at the beginning
2,135
732
1,758
108
Changes in fair value recognized in profit and loss (*)
484
455
45
28
Changes in fair value not recognized in profit and loss
(1)
-
4
-
Acquisitions, disposals and liquidations
(1,080)
(601)
(123)
668
Net transfers to level 3
505
288
452
(72)
Exchange differences and others
-
-
-
-
Balance at the end
2,044
873
2,135
732
adjustments are recorded under the heading “Gains (losses) on financial assets and liabilities (net)”.
.
During 2020, the level of significance of the unobservable inputs used to determine the hierarchy of the fair value of loans and advances to
customers at amortized cost has been analyzed, resulting in a higher exposure classified as Level 3.
This review has been carried out in
the context of availability of new information, more adjusted to the changes that have occurred both in market conditions and in the
composition of the credit portfolio. The effect on the results and equity, as a consequence of this revision, does not represent any change
(See Note 6.2).
During 2019, certain reverse repurchase and repurchase agreements were classified as Level 3 (about 1,186 million euros of financial
assets held for trading and 649 million euros of financial liabilities held for trading), due to the non-observability and liquidity in the interest
rate yield for the financing of assets applied in the calculation of their fair value.
During the years 2020 and 2019, the profit/loss on sales of financial instruments classified as Level 3 recognized in the accompanying
income statement was not material.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Transfers between levels
The Global Valuation Area, in collaboration with the Group, has established the rules for a proper financial instruments held for trading
classification according to the fair value hierarchy defined by international accounting standards.
On a monthly basis, any new assets added to the portfolio are classified, according to this criterion, by the subsidiaries. Then, there is a
quarterly review of the portfolio in order to analyze the need for a change in classification of any of these assets.
The financial instruments transferred between the different levels of measurement for the year ended December 31, 2020 are at the following
amounts in the accompanying balance sheets as of December 31, 2020 and 2019:
Transfer between levels. December 2020 (Millions of Euros)
2020
2019
From:
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
To:
Level
2
Level
3
Level
1
Level
3
Level
1
Level
2
Level
2
Level
3
Level
1
Level
3
Level
1
Level
2
ASSETS
Financial assets held for trading
1,447
-
28
523
-
22
21
-
1,118
467
-
-
Non-trading financial assets mandatorily at
fair value through profit or loss
9
-
-
19
-
17
-
-
23
2
-
37
Financial assets at fair value through other
comprehensive income
9
-
19
-
-
6
6
6
4
-
-
-
Derivatives
-
-
-
8
-
-
-
-
-
22
-
8
Total
1,465
-
47
550
-
45
27
6
1,144
491
-
46
LIABILITIES
Financial liabilities held for trading
6
-
-
266
-
6
1
-
-
-
-
-
Financial liabilities designated at fair value
through profit or loss
-
-
-
56
-
27
-
-
-
27
-
-
Derivatives
-
-
-
-
-
-
-
-
-
12
-
110
Total
6
-
-
321
-
34
1
-
-
39
-
110
The amount of financial instruments that were transferred between levels of valuation during the year ended December 31, 2020 is not
material relative to the total portfolios, and corresponds to the above changes in the classification between levels these financial instruments
modified some of their features, specifically:
an active market (transfer from Level 1 to 2) or have just started to be listed (transfer from Level 2 to 1).
mandatorily valued at fair value, hedging derivatives, financial liabilities held for trading and financial liabilities designated at fair
value through profit or loss.
market have not been obtained.
Sensitivity analysis
Sensitivity analysis is performed on financial instruments with significant unobservable inputs (financial instruments included in level 3), in
order to obtain a reasonable range of possible alternative valuations. This analysis is carried out on a monthly basis, based on the criteria
defined by the Global Valuation Area taking into account the nature of the methods used for the assessment and the reliability and availability
of inputs and proxies used. In order to establish, with a sufficient degree of certainty, the valuating risk that is incurred in such assets without
applying diversification criteria between them
.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
As of December 31, 2020, the effect on profit for the year and total equity of changing the main unobservable inputs used for the
measurement of Level 3 financial instruments for other reasonably possible unobservable inputs, taking the highest (most favorable input)
or lowest (least favorable input) value of the range deemed probable, would be as follows:
Financial instruments Level 3: Sensitivity Analysis (Millions of Euros)
Potential impact on income
statement
Potential impact on
other comprehensive income
Most favorable
hypothesis
Least favorable
hypothesis
Most favorable
hypothesis
Least favorable
hypothesis
ASSETS
Financial assets held for trading
10
(40)
-
-
Loans and Advances
1
(1)
-
-
Debt securities
5
(5)
-
-
Equity instruments
1
(31)
-
-
Derivatives
3
(3)
-
-
Non-trading financial assets mandatorily at fair value
through profit or loss
150
(45)
-
-
Loans and Advances
125
(13)
-
-
Debt securities
15
(15)
-
-
Equity instruments
9
(16)
-
-
Financial assets at fair value through other
comprehensive income
-
-
22
(23)
Total
160
(85)
22
(23)
6.2. Fair value of financial instruments carried at cost by valuation criteria
The valuation technique used to calculate the fair value of financial assets and liabilities carried at cost as of December 31, 2020 are
presented below:
Financial assets
Repurchase agreements: in general, their fair value is assimilated to their book value, due to the nature of the counterparty and
because they are mainly short-term balances in which the book value is the most reasonable estimation of the value of the asset.
determined by the discount of expected future cash flows, using market interest rates at the time of valuation adjusted by the
credit spread and taking all kind of behavior hypothesis if it is considered to be relevant (prepayment fees, optionality, etc.).
Financial liabilities
deposits, from credit institutions / repurchase agreements / short term customer deposits: their book value is considered to be the
best estimation of their fair value.
future cash flows using the interest rate curve in effect at the time of the adjustment adjusted by the credit spread and incorporating
any behavioral assumptions if this proves relevant (early repayments, optionalities, etc.).
the present value method: discount of future cash flows, using market interest rates at valuation time and taking into account the
credit spread.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
The following table presents the fair value of key financial instruments carried at amortized cost in the accompanying balance sheets as of
December 31, 2020 and 2019, broken down according to the method of valuation used for the estimation:
Fair value of financial instruments at amortized cost by Levels (Millions of Euros)
2020
2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
ASSETS
-
-
-
Cash, cash balances at central banks and other
demand deposits
44,107
-
-
18,419
-
-
Financial assets at amortized cost
18,088
9,962
200,615
15,148
210,852
475
LIABILITIES
Financial liabilities at amortized cost
76,011
256,348
259
59,645
227,766
-
The main valuation techniques and inputs used to estimate the fair value of financial instruments accounted for at cost and classified in
levels 2 and 3 is shown below. These are broken down by type of financial instrument and the balances correspond to those as of December
31, 2020:
Fair value of financial instruments at amortized cost by levels. December 2020 (Millions of Euros)
Level 2
Level 3
Valuation technique(s)
ASSETS
Financial assets at amortized cost
9,962
200,615
Present-value method
(Discounted future cash flows)
Central Banks
-
-
- Credit spread
- Prepayment rates
- Interest rate yield
Loans and advances to credit institutions
148
8,627
- Credit spread
- Prepayment rates
- Interest rate yield
Loans and advances to customers
3,294
191,600
- Credit spread
- Prepayment rates
- Interest rate yield
Debt securities
6,520
389
- Credit spread
- Interest rate yield
LIABILITIES
Financial liabilities at amortized cost
256,348
259
Central Banks
-
-
Present-value method
(Discounted future cash flows)
- Issuer´s credit risk
- Prepayment rates
- Interest rate yield
Loans and advances to credit institutions
22,111
-
Loans and advances to customers
215,628
46
Debt securities
8,482
213
Other financial liabilities
10,126
-
7. Cash, cash balances at central banks and other demand deposits
The breakdown of the balance under the heading “Cash, cash balances at central banks and other demand deposits” in the accompanying
balance sheets is as follows:
Cash, cash balances at central banks and other demand deposits (Millions of Euros)
Notes
2020
2019
Cash on hand
972
1,046
Cash balances at central banks (*)
40,485
15,417
Other demand deposits
2,650
1,956
Total
6.1
44,107
18,419
(*) The variation is mainly due to an increase in balances at the Bank of Spain.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
8. Financial assets and liabilities held for trading
8.1. Breakdown of the balance
The breakdown of the balance under these headings in the accompanying balance sheets is as follows:
Financial assets and liabilities held-for-trading (Millions of Euros)
Notes
2020
2019
ASSETS
Derivatives (*)
36,545
31,987
Debt securities
5.2.2
9,983
10,213
Issued by central banks
19
70
Issued by public administrations
8,043
9,156
Issued by financial institutions
560
439
Other debt securities
1,361
549
Equity instruments
5.2.2
10,682
8,205
Credit institutions
826
1,149
Other sectors
9,353
6,178
Shares in the net assets of mutual funds
503
879
Loans and advances
5.2.2
30,467
33,435
Loans and advances to central banks
53
484
Reverse repurchase agreement (**)
53
484
Loans and advances to credit institutions
19,472
20,688
Reverse repurchase agreement (**)
19,465
20,621
Loans and advances to customers
10,941
12,263
Reverse repurchase agreement (**)
10,566
12,068
Total assets
6.1
87,677
83,841
LIABILITIES
Derivatives (*)
35,396
31,501
Short positions
9,625
9,956
Deposits
24,493
31,905
Deposits from central banks
1,256
1,867
Repurchase agreement (**)
1,256
1,867
Deposits from credit institutions
16,083
24,425
Repurchase agreement (**)
15,725
24,016
Customer deposits
7,154
5,612
Repurchase agreement (**)
6,988
5,418
Total liabilities
6.1
69,514
73,362
modifications related to the operation of non-significant cross currency swaps in order to improve comparability with the figures for 2020 (See Note 1.3)
(**) See Note 31.
As of December 31, 2020, and 2019 the heading “short positions” included €9.085 million and €9.414 million from general governments,
respectively.
8.2. Derivatives
The derivatives portfolio arises from the Bank’s need to manage the risks it is exposed to in the normal course of business and also to
market products amongst the Bank’s customers. As of December 31, 2020 and 2019, trading derivatives were mainly contracted in over-
the-counter (OTC) markets, with counterparties, consisting primarily of foreign credit institutions and other financial corporations, and are
related to foreign-exchange, interest-rate and equity risk.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Below is a breakdown of the net positions by transaction type of the fair value and notional amounts of derivatives recognized in the
accompanying balance sheets, divided into organized and OTC markets:
Derivatives by type of risk and by product or by type of market. (Millions of Euros)
2020
2019
Assets
Liabilities
Notional amount -
Total
Assets
Liabilities
Notional amount -
Total
Interest rate
23,145
20,767
3,089,483
19,921
17,908
2,826,711
OTC
23,145
20,767
3,075,587
19,921
17,908
2,804,950
Organized market
-
-
13,896
-
-
21,761
Equity instruments
2,532
3,657
69,796
2,284
3,141
84,643
OTC
526
1,389
41,629
363
1,048
41,134
Organized market
2,006
2,268
28,168
1,921
2,093
43,509
Foreign exchange and gold
10,723
10,803
474,669
9,444
10,158
510,874
OTC
10,723
10,803
474,669
9,444
10,158
510,874
Organized market
-
-
-
-
-
-
Credit
146
169
21,462
338
294
26,462
Credit default swap
146
169
21,462
338
292
26,312
Credit spread option
-
-
-
-
2
150
Total return swap
-
-
-
-
-
-
Other
-
-
-
-
-
-
Commodities
-
-
-
-
-
-
Other
-
-
-
-
-
-
DERIVATIVES
36,545
35,396
3,655,411
31,987
31,501
3,448,690
Of which: OTC - credit institutions
21,163
23,020
856,212
19,596
21,907
928,055
Of which: OTC - other financial
corporations
9,185
7,427
2,652,216
7,268
5,354
2,349,893
Of which: OTC - other
4,192
2,681
104,919
3,202
2,147
105,472
9. Non-trading financial assets mandatorily at fair value through profit or loss
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Non-trading financial assets mandatorily at fair value through profit or loss (Millions of Euros)
Notes
2020
2019
Equity instruments
5.2.2
183
125
Debt securities
5.2.2
142
128
Loans and advances to customers
5.2.2
84
602
Total
6.1
409
855
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
10. Financial assets and liabilities designated at fair value through profit or loss
As of December 31, 2020, and 2019 there was no balance in the heading "Financial assets designated at fair value
through profit or loss, has no balance (See Note 5.2.2).As of December 31, 2020 and 2019 the heading "Financial liabilities
designated at fair value through profit or loss" included customer deposits for an amount of €3.267 and €2.968 million
respectively.
The recognition of assets and liabilities in these headings is made to reduce inconsistencies (asymmetries) in the valuation
of those operations and those used to manage their risk.
11. Financial assets at fair value through other comprehensive income
11.1. Breakdown of the balance
The breakdown of the balance by the main financial instruments in the accompanying balance sheets is as follows:
Financial assets designated at fair value through other comprehensive income (Millions of Euros)
Notes
2020
2019
Equity instruments
5.2.2
881
1,749
Debt securities (*)
36,648
23,156
Subtotal
6.1
37,528
24,905
Of which: loss allowances of debt securities
(11)
(7)
(*) The variation corresponds mainly to the increase in financial assets issued by governments in BBVA, S.A.
During financial years 2020 and 2019, there have been no significant reclassifications from “Financial assets at fair value
through other comprehensive income” to other headings or from other headings to “Financial assets at fair value through
other comprehensive income”.
11.2. Equity instruments
The breakdown of the balance under the heading "Equity instruments" of the accompanying financial statements as of
December 31, 2020 and 2019, is as follows:
Financial assets at fair value through other comprehensive income (Millions of Euros)
2020
2019
Amortize
d
cost
Unrealize
d
gains
Unrealize
d
losses
Fair
valu
e
Amortize
d
cost
Unrealize
d
gains
Unrealize
d
losses
Fair
valu
e
Equity instruments
Spanish company shares
2,162
-
(1,299)
864
2,162
-
(505)
1,657
Foreign company shares
-
-
-
-
-
-
-
-
Subtotal equity instruments listed
2,162
-
(1,299)
864
2,162
-
(505)
1,657
Equity instruments
Spanish company shares
4
-
-
4
4
-
-
4
Credit institutions
-
-
-
-
-
-
-
-
Other entities
4
-
-
4
4
-
-
4
Foreign companies shares
7
6
-
13
36
52
-
88
The United States
-
-
-
-
30
48
-
78
Other countries
7
6
-
13
6
4
-
10
Subtotal equity instruments
unlisted
11
6
-
17
40
52
-
92
Total
2,173
6
(1,299)
881
2,202
52
(505)
1,749
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
11.3. Debt securities
The breakdown of the balance under the heading “Debt securities” of the accompanying financial statements as of
December 31, 2020 and 2019, broken down by issuers, is as follows:
Financial assets at fair value through other comprehensive income. Debt securities (Millions of Euros)
2020
2019
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
Amortized
cost
Unrealized
gains
Unrealized
losses
Fair
value
Domestic debt
securities
Government and other
government agency debt
securities
20,626
346
(14)
20,958
12,091
399
(17)
12,473
Central banks
-
-
-
-
-
-
-
-
Credit institutions
668
10
-
678
394
3
-
397
Other issuers
469
13
-
482
490
13
-
502
Subtotal
21,764
368
(14)
22,118
12,975
415
(18)
13,373
Foreign debt securities
Mexico
191
2
(1)
192
436
3
(1)
438
Government and other
government agency debt
securities
21
-
-
21
129
2
-
131
Central banks
-
-
-
-
-
-
-
-
Credit institutions
-
-
-
-
5
-
-
5
Other issuers
170
2
(1)
171
302
1
(1)
302
The United States
2,957
43
(1)
2,999
3,649
26
(2)
3,672
Government securities
1,372
8
-
1,380
2,813
16
-
2,829
Treasury and other
government agencies
1,372
8
-
1,380
2,813
16
-
2,829
States and political
subdivisions
-
-
-
-
-
-
-
-
Central banks
-
-
-
-
-
-
-
-
Credit institutions
104
3
-
107
77
2
-
79
Other issuers
1,481
32
(1)
1,513
759
8
(2)
764
Other countries
11,038
305
(5)
11,338
5,499
180
(6)
5,673
Other foreign
governments and other
government agency debt
securities
7,367
244
(3)
7,607
4,001
166
(2)
4,166
Central banks
81
-
-
81
-
-
-
-
Credit institutions
802
8
-
810
260
1
-
261
Other issuers
2,789
53
(2)
2,840
1,238
13
(5)
1,246
Subtotal
14,186
350
(7)
14,530
9,584
209
(10)
9,783
Total
35,950
718
(21)
36,648
22,559
624
(27)
23,156
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The credit ratings of the issuers of debt securities as of December, 31, 2020, 2019, are as follows:
Debt securities by
rating
2020
2019
Fair value
(Millions of Euros)
%
Fair value
(Millions of Euros)
%
AAA
1,472
4.0%
2,958
12.8%
AA+
224
0.6%
403
1.7%
AA
255
0.7%
47
0.2%
AA-
236
0.6%
134
0.6%
A+
5,531
15.1%
3,175
13.7%
A
1,714
4.7%
11,963
51.7%
A-
21,649
59.1%
1,178
5.1%
BBB+
1,535
4.2%
1,275
5.5%
BBB
719
2.0%
499
2.2%
BBB-
3,187
8.7%
1,461
6.3%
BB+ or below
4
0.0%
-
-
Unclassified
122
0.3%
63
0.3%
Total
36,648
100.0%
23,156
100.0%
11.4. Gains/losses
The changes in the gains/losses (net of taxes) recognized in December 31, 2020 and 2019 of debt securities recognized
under the equity heading “Accumulated other comprehensive income – Items that may be reclassified to profit or loss -
Financial assets at fair value through other comprehensive income” and equity instruments recognized under the equity
heading “Accumulated other comprehensive income – Items that may be reclassified to profit or loss – Changes in fair
value of equity instruments designated at fair value through other comprehensive income” in the accompanying balance
sheets are as follows:
Other comprehensive income - Changes in the gains / losses (Millions of Euros)
Debt securities
Equity instruments
Notes
2020
2019
2020
2019
Balance at the beginning
335
260
(469)
(190)
Valuation gains and losses
85
173
(786)
(271)
Amounts transferred to income
(61)
(66)
-
-
Income tax
(7)
(32)
14
(8)
Other reclassifications
-
-
(53)
-
Balance at the end
27
352
335
(1,294)
(469)
In 2020, equity securities presented a decrease of 786 million euros in the heading “Gains and losses from valuation -
Accumulated other comprehensive income - Items that will not be reclassified to profit and loss - Fair value changes of
equity instruments measured at fair value through other comprehensive income”, mainly due to the
Telefónica
During 2020 and 2019 and there has been no significant impairment recorded in equity instruments under the heading
“Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by
modification- Financial assets at fair value through other comprehensive income” (see Note 42).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
12. Financial assets at amortized cost
12.1. Breakdown of the balance
The breakdown of the balance under this heading in the accompanying balance sheets, according to the nature of the
financial instrument, is as follows:
Financial assets at amortized cost (Millions of Euros)
Notes
2020
2019
Debt securities
23,241
21,496
Government
17,574
15,920
Credit institutions
16
17
Other financial and non-financial corporations
5,651
5,559
Loans and advances to central banks
7
5
Loans and advances to credit institutions
8,762
8,049
Reverse repurchase agreements (**)
203
87
Other loans
8,559
7,961
Loans and advances to customers
193,903
195,819
Government
13,295
14,656
Other financial corporations
9,087
8,132
Non-financial corporations
77,055
76,217
Other
94,466
96,814
Total
6.1
225,914
225,369
Of which: impaired assets of loans and advances to customers (*)
8,193
8,589
Of which: loss allowances of loans and advances (*)
(5,665)
(5,291)
Of which: loss allowances of debt securities
(12)
(13)
(*) See Note 5.2.
(**) See Note 31.
During financial years 2020 and 2019, there have been no significant reclassifications neither from “Financial assets at
amortized cost” to other headings or form other headings to “Financial assets at amortized cost”.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
12.2. Debt securities
The breakdown of the balance under this heading in the accompanying balance sheets, according to the issuer of the
debt securities, is as follows:
Financial assets at amortized cost (Millions of Euros)
2020
2019
Amortiz
ed
cost
Unrealiz
ed
gains
Unrealiz
ed
losses
Fair
value
Amortiz
ed
cost
Unrealiz
ed
gains
Unrealiz
ed
losses
Fair
value
Domestic debt securities
Government and other government agency debt
securities
13,644
1,210
-
14,85
4
12,730
630
(2)
13,35
7
Central banks
-
-
-
-
-
-
-
-
Credit institutions
-
-
-
-
-
-
-
-
Other issuers
4,838
59
(7)
4,890
4,904
38
(3)
4,938
Subtotal
18,482
1,269
(7)
19,74
4
17,634
667
(5)
18,29
5
Foreign debt securities
The United States
26
-
(1)
25
29
-
(1)
28
Government securities
-
-
-
-
-
-
-
-
Treasury and other government agencies
-
-
-
-
-
-
-
-
States and political subdivisions
-
-
-
-
-
-
-
-
Central banks
-
-
-
-
-
-
-
-
Credit institutions
16
-
(1)
15
17
-
(1)
17
Other issuers
11
-
(1)
10
12
-
(1)
11
Other countries
4,732
489
(1)
5,220
3,833
82
(1)
3,915
Other foreign governments and other government
agency debt securities
3,931
455
(1)
4,385
3,190
82
(1)
3,271
Central banks
-
-
-
-
-
-
-
-
Credit institutions
-
-
-
-
-
-
-
-
Other issuers
802
34
-
835
643
-
-
644
Subtotal
4,759
489
(2)
5,246
3,862
82
(2)
3,942
Total
23,241
1,757
(9)
24,98
9
21,496
749
(8)
22,23
8
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
As of December 31, 2020 and 2019, the distribution, based on the credit quality (ratings) of the issuers of debt securities
classified as financial assets at amortized cost, is as follows:
Debt securities by r
ating
2020
2019
Fair value
(Millions of Euros)
%
Fair value
(Millions of Euros)
%
AAA
-
-
33
0.2%
AA+
70
0.3%
51
0.2%
AA
-
-
12
0.1%
AA-
-
-
609
2.8%
A+
-
-
-
-
A
590
2.5%
14,337
66.7%
A-
16,717
71.9%
517
2.4%
BBB+
1,017
4.4%
1,575
7.3%
BBB
162
0.7%
470
2.2%
BBB-
4,387
18.9%
3,194
14.9%
BB+ or below
298
1.3%
213
1.0%
Unclassified
-
-
484
2.3%
Total
23,241
100.0%
21,496
100.0%
12.3. Loans and advances to customers
The breakdown of the balance under this heading in the accompanying balance sheets, according to their nature, is as
follows:
Loans and advances to customers (Millions of Euros)
2020
2019
On demand and short notice
447
153
Credit card debt
2,175
2,379
Trade receivables
12,626
13,884
Finance leases
4,731
5,021
Other term loans
170,294
170,772
Advances that are not loans
3,630
3,610
Total
(*)
193,903
195,819
The heading “Financial assets at amortized cost –Loans and advances to customers” in the accompanying balance sheets
also includes certain secured loans that, as mentioned in Appendix X and pursuant to the Mortgage Market Act, are linked
to long-term mortgage-covered bonds.
As of December 31, 2020 and 2019, 34.6% and 30.2%, respectively, of "Loans and advances to customers" with maturity
greater than one year have fixed-interest rates and 65.3% and 69.8%, respectively, have variable interest rates.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
This heading also includes some loans that have been securitized and not derecognized since the risks or substantial
benefits related to them are retained because the Bank granted subordinated loans or other types of credit enhancements
that substantially keep all the expected credit losses for the transferred asset or the probable variation of its net cash
flows. The balances recognized in the accompanying balance sheets corresponding to these securitized loans are as
follows:
Securitized loans (Millions of Euros)
2020
2019
Securitized mortgage assets
23,458
25,496
Other securitized assets
6,599
4,761
Total
30,057
30,257
13. Hedging derivatives and fair value changes of the hedged items in portfolio
hedges of interest rate risk
The balance of these headings in the accompanying balance sheets is as follows:
Hedging derivatives and fair value changes of the hedged items in portfolio hedge of interest rate risk (Millions of
Euros)
2020
2019
ASSETS
Derivatives – Hedge accounting
1,011
953
Fair value changes of the hedged items in portfolio hedges of interest rate
risk
51
28
LIABILITIES
Derivatives – Hedge accounting
1,510
1,471
Fair value changes of the hedged items in portfolio hedges of interest rate
risk
-
-
As of December 31, 2020 and 2019, the main positions hedged by the Bank and the derivatives assigned to hedge those
positions were:
●
Fixed-interest debt securities at fair value through other comprehensive income and at amortized cost: The
interest rate risk of these securities is hedged using interest rate derivatives (fixed-variable swaps) and forward
sales.
●
Long-term fixed-interest debt securities issued by the Bank: the interest rate risk of these securities is hedged
using interest rate derivatives (fixed-variable swaps).
●
Fixed-interest loans: The equity price risk of these instruments is hedged using interest rate derivatives (fixed-
variable swaps).
●
Fixed-interest and/or embedded derivative deposit portfolio hedges: it covers the interest rate risk through fixed-
variable swaps. The valuation of the borrowed deposits corresponding to the interest rate risk is in the heading
"Fair value changes of the hedged items in portfolio hedges of interest rate risk”.
of the financial assets at fair value through other comprehensive income portfolio. This risk is hedged using foreign-
exchange and interest-rate swaps, inflation and FRA’s (“Forward Rate Agreement”).
subsidiaries based abroad. This risk is hedged mainly with foreign-exchange options and forward currency sales and
purchases.
Note 5 analyzes the Bank's main risks that are hedged using these derivatives.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The details of the net positions by type of product and hedged risk of the fair value of the hedging derivatives recognized
in the accompanying balance sheets are as follows:
Derivatives - Hedge accounting. Breakdown by type of risk and type of hedge. (Millions of Euros)
2019
2019
Assets
Liabilities
Assets
Liabilities
Interest rate
711
332
800
346
OTC
-
-
800
346
Organized market
-
-
-
-
Equity instruments
-
-
-
-
Foreign exchange and gold
-
-
-
-
Credit
-
-
-
-
Commodities
-
-
-
-
Other
-
-
-
-
FAIR VALUE HEDGES
711
332
800
346
Interest rate
8
868
105
666
OTC
-
-
105
666
Organized market
-
-
-
-
Equity instruments
-
-
-
-
Foreign exchange and gold
107
-
-
3
OTC
15
-
-
3
Organized market
-
-
-
-
Credit
-
-
-
-
Commodities
-
-
-
-
Other
-
-
-
-
CASH FLOW HEDGES
115
868
105
669
HEDGE OF NET INVESTMENTS IN A FOREIGN
OPERATION
166
139
12
242
PORTFOLIO FAIR VALUE HEDGES OF
INTEREST RATE RISK
18
170
36
214
PORTFOLIO CASH FLOW HEDGES OF
INTEREST RATE RISK
-
-
-
-
DERIVATIVES -HEDGE ACCOUNTING
1,011
1,510
953
1,471
Of which: OTC - credit institutions
866
1,269
750
1,150
Of which: OTC - other financial corporations
145
241
203
321
Of which: OTC - other
-
-
-
-
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The cash flows forecasts for the coming years for cash flow hedging recognized on the accompanying balance sheet as
of December 31, 2020 are:
Hedged items in fair value hedges. December 2020 (Millions of Euros)
Carrying
amount
Hedge
adjustments
included in the
carrying
amount of
assets/liabilities
Remaining
adjustments
for
discontinued
micro hedges
including
hedges of net
positions
Hedged items
in portfolio
hedge of
interest rate
risk
ASSETS
Financial assets measured at fair value
through other comprehensive income
25,620
267
-
-
Interest rate
25,620
Financial assets measured at amortized cost
10,704
483
-
2,500
Interest rate
10,704
LIABILITIES
Financial liabilities measured at amortized
costs
18,880
(1,179)
-
-
Interest rate
18,880
The following is the calendar of the notional maturities of the hedging instruments as of December 31, 2020:
A profile of the timing of the nominal amount of the hedging instrument (Millions of Euros)
3 months
or less
From 3
months
to 1 year
From 1 to
5 years
More
than 5
years
Total
FAIR VALUE HEDGES
2,946
10,816
22,638
17,895
54,295
Of which: Interest rate
2,946
10,816
22,638
17,895
54,295
CASH FLOW HEDGES
8,474
2,200
1,000
5,902
17,576
Of which: Interest rate
6,600
-
1,000
5,902
13,502
HEDGE OF NET INVESTMENTS IN A FOREIGN OPERATION
1,853
2,910
-
-
4,763
PORTFOLIO FAIR VALUE HEDGES OF INTEREST RATE RISK
299
576
1,533
1,029
3,437
PORTFOLIO CASH FLOW HEDGES OF INTEREST RATE RISK
-
-
-
-
-
DERIVATIVES-HEDGE ACCOUNTING
13,573
16,502
25,171
24,825
80,071
In 2020 and 2019, there was no reclassification in the accompanying income statements of any amount corresponding to
cash flow hedges that was previously in accompanying statements of recognized income and expenses. (See Note 41)
The amount for derivatives designated as accounting hedges that did not pass the effectiveness test in December 31,
2020 and 2019 were not material.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
14. Investments in subsidiaries, joint ventures and associates
14.1. Investments in subsidiaries
The heading “Investments in subsidiaries, joint venture and associates- Subsidiaries” in the accompanying balance sheets
includes the carrying amount of the shares of companies forming part of the BBVA Group. The percentages of direct and
indirect ownership and other relevant information on these companies are provided in Appendix II.
The breakdown, by currency and listing status, of this heading in the accompanying balance sheets is as follows:
Investments in subsidiaries (Millions of Euros)
2020
2019
Subsidiaries
By currency
33,755
46,179
In euros
19,131
19,293
In foreign currencies
14,624
26,886
By share price
33,755
46,179
Listed
6,838
7,015
Unlisted
26,917
39,164
Loss allowances
(16,208)
(16,734)
Total
17,547
29,445
Garanti Bank
During 2020 and 2019, the negative evolution of the Turkish economy caused a depreciation of the Turkish lira in
accordance with the accounting standards applicable to the individual financial statements, the Bank holds the stake in
Garanti BBVA, A.S. valued at historic cost (weighted average price in euros of the various acquisitions made since 2011)
and at each closing date the recoverability of the investment in euros is evaluated whenever there is any indication of
impairment.
As of December 31, 2020 and 2019, BBVA estimated impairment in its holding stake in Garanti BBVA, A.S. affecting the
Bank's individual financial statements. This estimation had a net negative impact on the individual result of the Bank, net
of taxes, of 288 and 543 million euros respectively, which is mainly as a result of the depreciation of the Turkish Lira. The
Net Equity of the Bank was reduced by the same amount.
This impairment had no impact on the financial statements of the Bank, since currency translation differences are
recognized under "Other accumulated comprehensive income" of the Group's consolidated equity, in accordance with the
accounting standards applicable to the consolidated financial statements, so that the depreciation of the Turkish Lira was
already recorded, reducing the consolidated net equity of the Group.
BBVA USA
In 2020, the sale of the BBVA subsidiary in the United States was announced. Thus, the balances of the headings
“Dividend income” and “Impairment or reversal of impairment of investments in subsidiaries, joint ventures or associates”,
net of their corresponding tax effects, corresponding to companies for sale have been reclassified to "Profit (loss) after
tax from discontinued activities" in the accompanying income statement. Additionally, the results corresponding to the
year 2019 have also been reclassified to that same heading to facilitate the comparison between years. The balances of
the assets corresponding to the investment in such companies for sale have been reclassified from their corresponding
accounting headings in the balance sheet to the heading "Non-current assets and disposal groups that have been
classified as held for sale" (see Notes 1.3 and 19).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
As of March 31, 2020, BBVA estimated an impairment in BBVA USA Bancshares, Inc that affected the Bank financial
statements. That estimation supposed a negative net impact on the Bank’s benefit of €1.475 million, which was mainly
due to the negative impact of the update of the macroeconomic scenario following the COVID-19 pandemic and the
expected evolution of interest rates (See Note 1.5). Bank´s net equity decreased in the same amount.
In 2020, an additional impairment has been recorded in this holding stake to adjust its book value to the price set for its
sale (see below “Sale of BBVA’s U.S. subsidiary to PNC Financial Service Group”), which has had a negative impact on
the individual result of the Bank of 933 million euros.
As of December 31, 2019, BBVA estimated an impairment in its holding stake in BBVA USA Bancshares, Inc. affecting
the Bank's individual financial statements. This estimation had a net negative impact on the individual result of the Bank
of 279 million euros, which is mainly as a result of the negative evolution of interest rates, especially in the second
semester of 2019, which accompanied by the slowdown of the economy causes the expected evolution of results below
the previous estimation. The Net Equity of the Bank was reduced by the same amount.
Movements
The changes in 2020 and 2019 in the balance under this heading in the balance sheets, disregarding the balance of the
loss allowances, are as follows:
Investments in subsidiaries: changes in the year (Millions of Euros)
2020
2019
Balance at the beginning
46,179
45,575
Acquisitions and capital increases
37
39
Merger transactions
(141)
-
Disposals and capital reductions
(208)
(84)
Transfers (*)
(11,681)
(23)
Exchange differences and others
(431)
672
Balance at the end
33,755
46,179
The movement in 2020
corresponds to BBVA USA Bancshares Inc (See Note 1.3 and 19)
Changes in the holdings in Group entities
The most notable transactions performed in 2020 and 2019 are as follows:
Significant changes in the Group in 2020
Sale of BBVA’s U.S. subsidiary to PNC Financial Service Group
On November 15, 2020, BBVA reached an agreement with The PNC Financial Services Group, Inc. for the sale of 100%
of the capital stock of its subsidiary BBVA USA Bancshares, Inc., which in turn owns all the capital stock of the bank,
BBVA USA, as well as other companies of the BBVA group in the United States with activities related to this banking
business. The agreement reached does not include the sale of the institutional business of the BBVA group developed
through its broker dealer BBVA Securities Inc. nor the participation in Propel Venture Partners US Fund I, L.P. which will
be transferred by BBVA USA Bancshares, Inc. to entities of the BBVA group prior to the closing of the Transaction. In
addition, BBVA will continue to develop the wholesale business that it currently carries out through its branch in New York.
The price of the Transaction amounts to approximately $11.600 million. The price will be fully paid in cash.
The closing of the Transaction is subject to obtaining regulatory authorizations from the competent authorities. It is
estimated that the closing of the Transaction would take place in mid 2021.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Significant changes in the Group in 2019
Divestitures
Sale of BBVA’s stake in BBVA Paraguay
On August 7, 2019, BBVA reached an agreement with Banco GNB Paraguay S.A., a subsidiary of Grupo Financiero
Gilinski, for the sale of its shareholding, directly and indirectly, in Banco Bilbao Vizcaya Argentaria Paraguay, S.A. ("BBVA
Paraguay"). BBVA S.A. owned, direct and indirect 100% of its share capital in BBVA Paraguay.
On January 22, 2021 and after obtaining all required authorizations, BBVA has completed the sale of its shareholding,
directly and indirectly in Banco Bilbao Vizcaya Argentaria Paraguay, S.A. ("BBVA Paraguay"), an affiliate of Grupo Gilinski.
The amount received by BBVA Group amounts to approximately USD250 million (€210 million). The transaction results
in a capital loss of approximately 9 million euros net of taxes on the Group income statement. Furthermore, this operation
will have a positive impact on BBVA Group’s Common Equity Tier 1 (fully loaded) of approximately 6 basis points is
estimated to be recognized during the first quarter of 2021 (See Note 51).
14.2. Investments in joint ventures and associates
The breakdown, by currency and listings status, of this heading in the accompanying balance sheets is as follows:
Joint ventures and associates (Millions of Euros)
2020
2019
Associates
By currency
1,103
1,148
In euros
887
932
In foreign currencies
216
216
By share price
1,103
1,148
Listed
284
284
Unlisted
819
864
Loss allowances
(323)
(83)
Subtotal
780
1,065
Joint ventures
-
-
By currency
55
55
In euros
55
55
In foreign currencies
-
-
By share price
55
55
Listed
-
-
Unlisted
55
55
Loss allowances
(1)
(1)
Subtotal
54
54
Total
834
1,119
The investments in associates as of December 31, 2020 as well as the most important data related to them, can be seen
in Appendix III.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The following is a summary of the gross changes in 2020 and 2019 under this heading in the accompanying balance
sheets:
Joint ventures and associates: changes in the year (Millions of Euros)
2020
2019
Balance at the beginning
1,203
1,161
Acquisitions and capital increases
2
157
Losses due to merger transactions
-
-
Disposals and capital reductions
(47)
(92)
Transfers
-
(23)
Exchange differences and others
-
-
Balance at the end
1,158
1,203
During 2020 and 2019, there has been no significant change.
14.3. Notifications about acquisition of holdings
Appendix IV provides notifications on acquisitions and disposals of holdings in associates or jointly-controlled entities, in
compliance with Article 155 of the Corporations Act and Article 125 of the Securities Market Act 4/2015.
14.4. Impairment
The breakdown of the changes in loss allowances in 2020 and 2019 under this heading is as follows:
Impairment (Millions of Euros)
Notes
2020
2019
Balance at the beginning
16,818
16,002
Increase in impairment losses charged to income
43
626
652
Decrease in loss allowances credited to income
43
(307)
(42)
Companies held for sale (*)
(279)
279
Merger transactions
(141)
-
Amount used
(185)
(73)
Transfers
-
-
Balance at the end
16,532
16,818
that has been reclassified for comparison purposes in the line of "Profit (loss) after taxes from discontinued activities" of the income
statement attached. The 2020 movement refers to the reclassification of the impairment associated with the stake to the heading "Non-
current assets and disposal groups classified as held for sale" in the balance sheet attached. Additionally, in 2020 there were additional
impairments associated with this stake for the amount of 2,409 million euros in the heading "Profit (loss) after taxes from discontinued
activities" of the accompanying income statement (see Note 1.3, 14.1 and 19).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
15. Tangible assets
The breakdown and movement of the balance and changes of this heading in the accompanying balance sheets,
according to the nature of the related items, is as follows:
Tangible assets. Breakdown by type of assets and changes in the year 2020 (Millions of Euros)
Investment
properties
Right to use asset
Total
Notes
Land and
buildings
Work in
progress
Furniture,
fixtures
and
vehicles
Tangible
asset of
own use
Investment
properties
Revalued cost
Balance at the beginning
1,360
-
3,063
15
3,143
100
7,681
Additions
25
2
69
-
10
-
106
Contributions from merger transactions
-
-
-
-
-
-
-
Retirements
0
-
(216)
-
(36)
-
(252)
Transfers
(229)
-
(25)
1
(60)
25
(288)
Exchange difference and other
-
-
(3)
-
-
-
(3)
Balance at the end
1,156
2
2,888
16
3,057
125
7,244
Accrued depreciation
-
-
-
-
-
-
-
Balance at the beginning
215
-
2,404
2
215
10
2,845
Additions
40
16
-
105
-
214
12
347
Contributions from merger transactions
-
-
-
-
-
-
-
Retirements
-
-
(188)
-
(6)
-
(194)
Transfers
(38)
-
(16)
-
(9)
4
(59)
Exchange difference and other
-
-
(3)
-
-
-
(3)
Balance at the end
193
-
2,301
2
414
26
2,936
Impairment
-
-
-
-
-
-
-
Balance at the beginning
162
-
-
6
187
14
369
Additions
44
-
-
26
-
68
12
105
Contributions from merger transactions
-
-
-
-
-
-
-
Retirements
44
-
-
-
-
-
-
-
Transfers
(68)
-
-
1
10
-
(57)
Exchange difference and other
-
-
(26)
-
-
-
(26)
Balance at the end
94
-
-
7
265
26
392
Net tangible assets
-
-
-
-
-
-
-
Balance at the beginning
983
-
660
7
2,741
76
4,467
Balance at the end
869
2
587
7
2,377
73
3,915
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Tangible assets. Breakdown by type of assets and changes in the year 2019 (Millions of Euros)
Investment
properties
Right to use asset
Total
Notes
Land and
buildings
Work in
progress
Furniture,
fixtures
and
vehicles
Tangible
asset of
own use
Investment
properties
Revalued cost
Balance at the beginning
1,408
-
3,207
16
-
-
4,631
Additions
26
-
93
-
3,200
100
3,419
Contributions from merger transactions
-
-
-
-
-
-
-
Retirements
-
-
(224)
-
(57)
-
(282)
Transfers
(74)
-
(14)
(1)
-
-
(89)
Exchange difference and other
-
-
1
-
-
-
1
Balance at the end
1,360
-
3,063
15
3,143
100
7,681
Accrued depreciation
Balance at the beginning
215
-
2,486
2
-
-
2,703
Additions
40
17
-
119
-
217
10
362
Contributions from merger transactions
-
-
-
-
-
-
-
Retirements
-
-
(194)
-
(2)
-
(195)
Transfers
(16)
-
(9)
-
-
-
(25)
Exchange difference and other
-
-
1
-
-
-
1
Balance at the end
215
-
2,404
2
215
10
2,845
Impairment
Balance at the beginning
178
-
-
12
-
-
190
Additions
44
-
-
20
1
60
-
80
Retirements
-
-
-
(1)
-
-
(1)
Transfers
(16)
-
-
(5)
127
14
120
Exchange difference and other
-
-
(20)
-
-
-
(20)
Balance at the end
162
-
-
6
187
14
369
Net tangible assets
Balance at the beginning
1,016
-
721
2
-
-
1,739
Balance at the end
983
-
660
7
2,741
76
4,467
The right to use asset consists mainly of the rental of commercial real estate premises for central services and
the network branches. The clauses included in rental contracts correspond to a large extent to rental contracts
under normal market conditions in the country where the property is rented.
As of December 31, 2020 and 2019, the cost of fully amortized tangible assets that remained in use were €1,636 million
and €1,686 million, respectively
.
The main activity of the Bank is carried out through a network of bank branches located geographically as shown in the
following table:
Branches by geographical location (Number of branches)
2020
2019
Spain
2,482
2,642
Rest of the world
24
24
Total
2,506
2,666
As of December 31, 2020 and 2019, the percentage of branches leased from third parties in Spain was 67.65% and
67.30%, respectively.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
16. Intangible assets
The breakdown of the balance under this heading in the balance sheets as of December 31, 2020 and 2019 relates mainly
to the net balance of the disbursements made on the acquisition of computer software. The average life of the Bank's
intangible assets is 5 years.
The breakdown of the balance under this heading in the balance sheets, according to the nature of the related items, is
as follows:
Other intangible assets (Millions of Euros)
2020
2019
Transactions in progress
783
836
Accruals
57
70
Total
840
905
The breakdown of the changes in 2020 and 2019 in the balance under this heading in the balance sheets is as follows:
Other intangible assets. Changes over the year (Millions of Euros)
2020
2019
Notes
Computer
software
Other
intangible
assets
Total of
intangible
assets
Computer
software
Other
intangible
assets
Total of
intangible
assets
Balance at the beginning
836
70
905
816
82
898
Additions
251
-
251
318
-
318
Contributions from merger transactions
-
-
-
-
-
-
Amortization in the year
40
(304)
(13)
(316)
(298)
(13)
(311)
Balance at the end
783
57
840
836
70
905
17. Tax assets and liabilities
The balance of the heading “Tax Liabilities” in the accompanying balance sheets contains the liability for applicable taxes,
including the provision for corporation tax of each year, net of tax withholdings and prepayments for that period, and the
provision for current period corporation tax in the case of companies with a net tax liability. The amount of the tax refunds
due to Group companies and the tax withholdings and prepayments for the current period are included under “Tax Assets”
in the accompanying balance sheets.
Banco Bilbao Vizcaya Argentaria, S.A. and its tax-consolidable subsidiaries file consolidated tax returns. The subsidiaries
of Argentaria, which had been in Tax Group 7/90, were included in Tax Group 2/82 from 2000, since the merger had been
carried out under the tax neutrality system provided for in Title VIII, Chapter VIII of Corporation Tax Law 43/1995. On
December, 30, 2002, the pertinent notification was made to the Ministry of Economy and Finance to extend its taxation
under the consolidated taxation regime indefinitely, in accordance with current legislation. Similarly, on the occasion of
the acquisition of Unnim Group in 2012, the companies composing the Tax Group No. 580/11 which met the requirements
became part of the tax group 2/82 from January 1, 2013. Lastly, on the occasion of the acquisition of Catalunya Banc
Group in 2015, the companies composing the Tax Group No. 585/11 which met the requirements became part of the tax
group 2/82 from January 1, 2016.
In 2018, the Bank carried out an intra-community cross-border merger by absorption of Banco Bilbao Vizcaya Argentaria
(Portugal), S.A. as well as merger by absorption of BBVA Renting. These transactions carried out under the special regime
for mergers, divisions, transfers of assets and exchanges of securities provided for in Chapter VII of Title VII of the
Corporate Tax Law, approved by Law 27/2014, of November 27. The information requirements under the above legislation
are included in the financial statements for 2018 as well as in the merger by absorption deed, other official documents
and internal records of the Bank, available to the tax authorities.
In 2016, the Bank carried corporate restructuring operations, under the special regime for mergers, divisions, transfers of
assets and exchanges of securities provided for in Chapter VII of Title VII of the Corporate Tax Law, approved by Law
27/2014, of November 27. The information requirements under the above legislation are included in the financial
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
statements for 2016 as well as in the merger by absorption deed, other official documents and internal records of the
Bank, available to the tax authorities.
In 2013, 2011 and 2009, the Bank also participated in corporate restructuring operations subject to the special regime for
mergers, splits, transfers of assets and exchanges of securities under Chapter VIII of Title VII of the Corporation Tax Act,
approved by Royal Legislative Decree 4/2004, of March 5. The reporting requirements under the above legislation are
included in the financial statements of the relevant entities for 2013, 2011 and 2009 as well as in the merger by absorption
deed, other official documents and internal records of the Bank, available to the tax authorities.
Also, in 2003, as in previous years, the Bank performed corporate restructuring operations under the special system of
tax neutrality regulated by Act 29/1991 of December 16 (which adapted certain tax provisions to the Directives and
Regulations of the European Communities) and by Title VIII, Chapter VIII of Corporation Tax Act 43/1995, of December
27. The disclosures required under the aforementioned legislation are included in the financial statements of the relevant
entities for the period in which the transactions took place.
17.1. Years open for review by the tax authorities
At the date these financial statements were prepared, the Bank has 2014 and subsequent years open for review by the
tax authorities for the main taxes applicable to it.
In 2020, as a result of the tax audit conducted by the tax authorities, tax inspection proceedings were issued against
several companies of the previous Catalunya Banc Group 585/11 for the years 2013 to 2015. These proceedings became
final in 2020 and did not represent a material amount for the understanding of the financial statements as a whole.
In view of the different interpretations that can be made of some applicable tax legislation, the outcome of the tax
inspections of the open years that could be conducted by the tax authorities in the future could give rise to contingent tax
liabilities which cannot be objectively quantified at the present time. However, the Bank considers that the possibility of
these contingent liabilities becoming actual liabilities is remote and, in any case, the tax charge which might arise therefore
would not materially affect the Bank’s financial statements.
17.2. Reconciliation
The reconciliation of the corporation tax expense resulting from the application of the standard tax rate to the recognized
corporation tax expense is as follows:
Reconciliation of the Corporate Tax Expense Resulting from the Application of the Standard Rate and the Expense
Registered by this Tax (Millions of Euros)
2020
2019
Corporation tax
75
611
Decreases due to permanent differences:
-
-
Tax credits and tax relief at consolidated Companies
(49)
(44)
Other items net
(106)
(711)
Net increases (decreases) due to temporary differences
94
33
Charge for income tax and other taxes
-
-
Deferred tax assets and liabilities recorded (utilized)
(94)
(33)
Income tax and other taxes accrued in the period
(80)
(144)
Adjustments to prior years' income tax and other taxes
116
95
Income tax and other taxes
36
(49)
The item “Other taxes” of the above table includes in 2020 the effect in income tax of non-deductible impairments for
approximately €2,727 million. In 2019, the effect on income tax of those dividends and capital gains with the right to
exemption in order to avoid double taxation is fundamentally included, for approximately €2,900 million euros.
The Bank avails itself of the tax credits for investments in new fixed assets (in the scope of the Canary Islands tax regime,
for a non-material amount), tax relief, R&D tax credits, donation tax credits and double taxation tax credits, in conformity
with corporate income tax legislation.
Under the regulations in force until December 31, 2001, the Bank and the savings banks which would form Unnim Banc
and Catalunya Banc were available to the tax deferral for reinvestment. The information related to this tax credit can be
found in the corresponding annual reports.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
From 2002 to 2014, the Bank and the savings banks which would form Unnim Banc and Catalunya Banc were available
to the tax credit for reinvestment of extraordinary income obtained on the transfer for consideration of properties and
shares representing ownership interests of more than 5%. The information related to this tax credit can be found in the
corresponding annual reports.
In 2020, following the approval of Royal Decree-Law 3/2016, of December 2, by which certain measures in the tax field
directed to the consolidation of the public finances and other urgent measures in social matter are adopted, the Bank has
included in its tax base €84 million as a reversal of the impairment losses on instruments representing participation in the
capital or in the equity of companies which have been tax deductible from the tax base of Corporate Income Tax in tax
periods started prior to January, 1, 2013. After this adjustment, there is no amount pending to be included in the tax base.
Millions of Euros
2020
Pending addition to taxable income as of January 1, 2020
84
Decrease income (included) 2020
(84)
Sales and liquidations 2020
-
Pending addition to taxable income as of December 31, 2020
-
In the year 2020, and as a consequence of what is established in the transitory provision thirty-ninth of the Corporate
Income Tax Law, in accordance with the wording given by Royal Decree-Law 27/2018, of December 28, which adopts
certain measures in tax and cadastral matters, the Bank has made a decrease of €47 million in its tax base, as the last
third of the charges and credit to reserves accounts for the first application of Circular 4/2017 and which were considered
deductible as of January 1, 2018. After this adjustment, there is no amount pending to be integrated in the tax base.
Integration in taxable base of accounting operations due to application of Circular 4/2017 (Millions of
Euros)
2020
Income pending to integrate at January 1, 2020
47
Integration 2020
(47)
2018 Income tax declaration adjustments 2019
-
Income pending to integrate at December 31, 2020
-
17.3. Income tax recognized in equity
In addition to the income tax registered in the income statements, in 2020 and 2019 the Bank recognized the following
amounts in equity:
Tax recognized in Total Equity (Millions of Euros)
2020
2019
Charges to total equity
Debt securities
(142)
(154)
Equity instruments
(2)
(15)
Other
-
-
Subtotal
(144)
(169)
Credits to total equity
Debt securities
-
-
Equity instruments
-
-
Other
114
109
Subtotal
114
109
Total
(30)
(60)
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
17.4. Current and deferred taxes
The balance under the heading "Tax assets" in the accompanying balance sheets includes the tax receivables relating to
deferred tax assets. The balance under the “Tax liabilities” heading includes the liabilities relating to the Bank's various
deferred tax liabilities. The details of the most important tax assets and liabilities are as follows:
Tax Assets and Liabilities. Breakdown (Millions of Euros)
2020
2019
Variation
Tax assets
Current tax assets
633
1,443
(810)
Deferred tax assets
12,131
12,317
(186)
Pensions
312
302
10
Financial Instruments
227
373
(146)
Other assets
81
249
(168)
Impairment losses
251
206
45
Other
422
402
20
Secured tax assets (*)
9,360
9,362
(2)
Tax losses
1,478
1,423
55
Total
12,764
13,760
(996)
Tax Liabilities
Current tax liabilities
173
149
24
Deferred tax liabilities
898
972
(74)
Charge for income tax and other taxes
898
972
(74)
Total
1,071
1,120
(49)
(*)
The Law guaranteeing the deferred tax assets was approved in Spain in 2013
.
Based on the available information, including historical profit levels and projections that the Bank handles for the coming
15 years results, it is considered that sufficient taxable income to recover deferred tax assets above would be generated
when they become deductible under the provisions of tax legislation.
With respect to the changes in assets and liabilities due to deferred tax contained in the above table, the following should
be pointed out:
of the deferred tax liabilities are due mainly to the adjustments on the corporate income tax finally presented for year
2019 and the estimation for 2020.
deferred taxes recorded in the balance carried out on the occasion of each accounting closing.
Of the assets and liabilities due to deferred tax contained in the above table, those included in section 17.3 above have
been recognized against the entity's equity, and the rest against earnings for the year or, in its case, Reserves.
From the guaranteed tax assets contained in the above table, the detail of the items and amounts guaranteed by the
Spanish Government is as follows:
Secured tax assets (Millions of Euros)
2020
2019
Pensions
1,924
1,924
Impairment losses
7,436
7,438
Total
9,360
9,362
On the other hand, BBVA, S.A., has not recognized certain negative tax bases and deductions for which, in general, there
is no legal period for offsetting, which are mainly originated by Catalunya Banc.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
18. Other assets and liabilities
The composition of the balance of these captions in the accompanying balance sheets is:
Other assets and liabilities (Millions of Euros)
Notes
2020
2019
ASSETS
Insurance contracts linked to pensions
22
2,074
2,096
Rest of other assets
763
504
Transactions in progress
106
72
Accruals
269
242
Other items
388
190
Total
2,837
2,600
LIABILITIES
Transactions in progress
68
32
Accruals
726
895
Other items
749
718
Total
1,543
1,645
19. Non-current assets and disposal groups classified as held for sale and
liabilities included in disposal groups classified as held for sale
The composition of the balances under the headings “Non-current assets and disposal groups classified as held for sale”
and “liabilities included in disposal groups classified as held for sale” in the accompanying balance sheets, broken down
by the origin of the assets, is as follows:
Non-current assets and disposal groups classified as held for sale: Breakdown by items (Millions of Euros)
2020
2019
Foreclosures and recoveries
993
1,021
Foreclosures
959
980
Recoveries from financial leases
34
41
Other assets from tangible assets
476
280
Business sale - Assets (*)
11,699
23
Accrued amortization (**)
(89)
(49)
Impairment losses
(3,100)
(308)
Total non-current assets and disposal groups classified as held for sale
9,978
967
of the participation in BBVA Paraguay (See Note 14)
classified as held for sale".
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The changes in the balances under this heading in 2020 and 2019 are as follows:
Non-current assets and disposal groups classified as held for sale. Changes in the year 2020 (Millions of Euros)
Notes
Foreclosed
assets
From own use
assets
(*)
Business
sale -
assets (**)
Total
Cost (1)
Balance at the beginning
1,021
231
23
1,275
Additions
212
-
2
215
Retirements (sales and other decreases)
(163)
(44)
-
(206)
Exchange differences
-
-
(7)
(7)
Transfers and other movements.
14
(79)
199
11,681
11,801
Balance at the end
992
387
11,699
13,078
Impairment (2)
Balance at the beginning
183
125
-
308
Additions
14.45
47
28
933
1,008
Retirements (sales and other decreases)
(20)
(13)
-
(33)
Other movements and exchange differences
14
(5)
66
1,755
1,816
Balance at the end
205
206
2,688
3,100
Balance at the end of Net carrying value (1)-(2)
787
180
9,011
9,978
(*) Net of accumulated amortization until reclassified as non-current assets and disposal groups held for sale.
(** ) The balance of 2020 corresponds to the state in BBVA USA Bancshares Inc and BBVA Paraguay (See Note 14).
Non-current assets and disposal groups classified as held for sale. Changes in the year 2019 (Millions of Euros)
Notes
Foreclosed
assets
From own use assets
(*)
Business
sale -
assets (**)
Total
Cost
(1)
Balance at the beginning
1,259
211
-
1,470
Additions
459
1
-
460
Contributions from merger transactions
-
-
-
-
Retirements (sales and other decreases)
(488)
(44)
-
(532)
Transfers, other movements and exchange
differences
(209)
63
23
(123)
Balance at the end
1,021
231
23
1,275
Impairment
(2)
Balance at the beginning
283
122
-
405
Additions
45
40
10
-
50
Contributions from merger transactions
-
-
-
-
Retirements (sales and other decreases)
(111)
(22)
-
(133)
Other movements and exchange
differences
(29)
15
-
(14)
Balance at the end
183
125
-
308
Balance at the end of net carrying value
(1)-(2)
838
106
23
967
As indicated in Note 2.3, “Non-current assets and disposal groups held for sale” and “liabilities included in disposal groups
classified as held for sale” are valued at the lower amount between its fair value less costs to sell and its book value. As
of December 31, 2020, practically all of the carrying amount of the assets recorded at fair value on a non-recurring basis
coincides with their fair value.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Assets from foreclosures or recoveries
The table below shows the main non-current assets held for sale from foreclosures or recoveries:
Non-current assets and disposal groups classified as held for sale. From foreclosures or recoveries (Millions of Euros)
2020
2019
Residential assets
628
677
Industrial assets
141
145
Agricultural assets
13
15
Total
782
838
The table below shows the length of time for which the main assets from foreclosures or recoveries that were on the
balance sheet as of December 31, 2020 and 2019 had been held:
Assets from foreclosures or recoveries. Period of ownership (Millions of Euros)
2020
2019
Up to one year
105
282
From 1 to 3 years
353
313
From 3 to 5 years
163
154
Over 5 years
161
89
Total
782
838
In 2020 and 2019, some of the sales of these assets were financed by the Bank. The amount of the loans granted to the
buyers of these assets in those years totaled €14 and €21 million respectively, with a mean percentage financed of 83%
and 92%, respectively, of the price of sale. The total nominal amount of these loans, which are recognized under “Loans
and receivables”, is €1,503 and €1,622 million, as of December 31, 2020 and 2019, respectively.
As of December 31, 2020 and 2019, there were no gains not recognized in the income statement from the sale of assets
financed by the Bank.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
20. Financial liabilities at amortized cost
20.1. Breakdown of the balance
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Financial liabilities measured at amortized cost (Millions of Euros)
2020
2019
Deposits
277,369
234,052
Deposits from central banks
37,903
24,390
Demand deposits
162
22
Time deposits
37,741
24,368
Deposits from credit institutions
22,106
18,201
Demand deposits
6,569
4,859
Time deposits
11,419
11,060
Repurchase agreements (*)
4,118
2,282
Customer deposits
217,360
191,461
Demand deposits
137,115
115,419
Time deposits
36,332
34,656
Repurchase agreements (*)
619
-
Savings deposits
43,294
41,385
Debt certificates issued
43,692
40,845
Other financial liabilities
10,127
10,362
Total
331,189
285,260
The amount recorded in Deposits from central banks - Time deposits includes the provisions of the TLTRO III facilities of
the European Central Bank amounting to €34.902 million de euros as of December 31, 2020, that basically explains the
change compared to the previous year (See Note 5.5.2).
On April 30, 2020, the European Central Bank modified some of the terms and conditions of the TLTRO III facilities in
order to support the continued access of companies and households to bank credit in the face of interruptions and
temporary shortages of funds associated with the COVID-19 pandemic. Entities whose eligible net lending exceeds 0%
between March 1, 2020 and March 31, 2021 will pay an interest rate 0.5% lower than the average rate of the deposit
facilities during the period that includes from June 24, 2020 to June 23, 2021. This means that the interest rate applicable
to the facilities drawn down is -1%. Outside of this period, the average interest rate of the deposit facilities will be applied
(currently -0.5%) provided that the financing objectives are met according to the conditions of the European Central Bank.
The Bank is reasonably certain about the fulfillment of these financing objectives. Therefore, the effective interest rate of
each facility is -0.5% and the accounting registration of the discount in the interest rate associated with the COVID-19
pandemic is recognized during the annual period from June 24, 2020 to June 23, 2021.
The positive remuneration currently being generated by the drawdowns of the TLTRO III facilities is recorded under the
heading of "Interest income and other similar income – Other income" in the income statements and amounts to €211
million as of December 31, 2020 (See Note 33.1).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
20.2. Deposits from credit institutions
The breakdown of this heading by geographical area and the nature of the related instruments in the accompanying
balance sheets, is as follows:
Demand
deposits
Time deposits
and other
Repurchase
agreements
Total
Spain
1,983
1,366
-
3,349
Rest of Europe
2,885
3,548
4,051
10,484
Mexico
106
-
-
106
South America
460
498
-
958
The United States
758
3,734
-
4,492
Rest of the world
377
2,273
67
2,717
Total
6,569
11,419
4,118
22,106
Demand
deposits
Time deposits
and other
Repurchase
agreements
Total
Spain
1,968
1,096
-
3,064
Rest of Europe
1,784
3,607
2,282
7,673
Mexico
396
-
-
396
South America
293
922
-
1,216
The United States
235
2,972
-
3,208
Rest of the world
183
2,462
-
2,645
Total
4,859
11,060
2,282
18,201
20.3. Customer deposits
The breakdown of this heading in the accompanying balance sheets, by type of instrument and geographical area, is as
follows:
Demand
deposits
Savings
Deposits
Time deposits
and other
Repurchase
agreements
Total
Spain
129,385
42,627
20,520
-
192,532
Rest of Europe
5,656
297
10,359
619
16,931
Mexico
176
22
70
-
268
South America
692
100
609
-
1,401
The United States
563
38
4,086
-
4,687
Rest of the world
643
210
688
-
1,541
Total
137,115
43,294
36,332
619
217,360
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Demand
deposits
Savings
deposits
Time deposits
and other
Repurchase
agreements
Total
Spain
109,278
40,673
24,080
-
174,032
Rest of Europe
4,333
315
5,986
-
10,634
Mexico
238
26
317
-
582
South America
779
106
1,189
-
2,074
The United States
242
39
2,214
-
2,494
Rest of the world
549
226
870
-
1,645
Total
115,419
41,385
34,656
-
191,461
Previous table includes as of 31, December 2020 and 2019, subordinated deposits amounted to €360 million and €303
million, respectively, vinculated to subordinated debt issues and preferred shares launched BBVA International Preferred,
S.A.U., (call exercised) BBVA Global Finance, Ltd., Caixa Terrassa Societat de Participacions Preferents, S.A.
Unipersonal and CaixaSabadell Preferents, S.A. Unipersonal, which are unconditionally and irrevocably secured by the
Bank.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
20.4. Debt certificates
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Debt certificates issued (Millions of Euros)
2020
2019
In Euros
37,949
36,503
Promissory bills and notes
759
554
Non-convertible bonds and debentures
14,794
12,637
Mortgage Covered bonds (**)
10,320
12,316
Other securities
2,831
2,317
Accrued interest and others (*)
837
794
Subordinated liabilities
8,407
7,885
Convertible perpetual certificates
4,500
5,000
Non-convertible preferred stock
-
-
Other non-convertible subordinated liabilities
3,613
2,668
Valuation adjustments (*)
294
217
In Foreign Currency
5,743
4,342
Promissory bills and notes
333
235
Non-convertible bonds and debentures
1,956
1,072
Mortgage Covered bonds (**)
105
112
Other securities
1,016
740
Accrued interest and others (*)
3
10
Subordinated liabilities
2,329
2,173
Convertible perpetual certificates
1,630
1,780
Non-convertible preferred stock
-
-
Other non-convertible subordinated liabilities
693
390
Valuation adjustments (*)
7
3
Total
43,692
40,845
(*) Accrued interest but pending payment, valuation adjustments and issuance costs included
(**) See Appendix X.
As of December 31, 2020 and 2019, 64% and 71% of “Debt certificates” have fixed-interest rates, and 36% and 29% have
variable interest rates, respectively.
The total cost of the accrued interest under “Debt securities issued” in 2020 and 2019 totaled €600 million and €622
million, respectively.
As of December 31, 2020 and 2019 the accrued interest pending payment from promissory notes and bills and bonds and
debentures amounted to €354 million and €348 million, respectively.
The heading “Nonconvertible bonds and debentures” as of December 31, 2020 includes several issues, the latest maturing
in 2039.
The heading “Mortgage Covered Bonds" as of December 31, 2020 includes issues with various maturities, the latest in
2037.
Subordinated liabilities included in this heading and in Note 20.3, and accordingly, for debt seniority purposes, they rank
behind ordinary debt, but ahead of the Bank’s shareholders, without prejudice to any different seniority that may exist
between the different types of subordinated debt instruments according to the terms and conditions of each issue. The
breakdown of this heading in the accompanying balance sheets, disregarding valuation adjustments, by currency of
issuance and interest rate is shown in Appendix VII.
The variations of the balance under this heading are mainly the result of the following transactions:
Convertible perpetual liabilities
The AGM held on March 17, 2017, resolved, under agenda item five, to confer authority to the Board of Directors to issue
securities convertible into newly issued BBVA shares, on one or several occasions, within the maximum term of five years
to be counted from the approval date of the authorization, up to a maximum overall amount of €8 billion or its equivalent
in any other currency. Likewise, the AGM resolved to confer to the Board of Directors the authority to totally or partially
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
exclude shareholders’ pre-emptive subscription rights within the framework of a specific issue of convertible securities,
although this power was limited to ensure the nominal amount of the capital increases resolved or effectively carried out
to cover the conversion of mandatory convertible issuances made under this authority (without prejudice to anti-dilution
adjustments), with exclusion of pre-emptive subscription rights and of those likewise resolved or carried out with exclusion
of pre-emptive subscription rights in use of the authority to increase the share capital conferred by the AGM held on March
17, 2017, under agenda item four, do not exceed the maximum nominal amount, overall, of 20% of the share capital of
BBVA at the time of the authorization, this limit not being applicable to contingent convertible issues.
Under that delegation, BBVA made the following issuances that qualifies as additional tier 1 capital of the Bank and the
Group in accordance with Regulation (EU) 575/2013:
1 capital instruments) excluding shareholders' pre-emptive rights, for a nominal amount of 500 million euros
and 1,000 million U.S. dollars, respectively. These issues are listed on the Global Exchange Market of Euronext
Dublin of the Irish Stock Exchange and were directed only to qualified investors and foreign private banking
clients, and cannot be placed or subscribed in Spain or among investors resident in Spain.
securities (additional tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a
total nominal amount of €1,000 million each. These issuances are listed in the AIAF Fixed Income Securities
Market and were targeted only at professional clients and eligible counterparties, and not being offered or sold
to any retail clients.
tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount
of $1,000 million. This issuance is listed in the Global Exchange Market of Euronext Dublin and was targeted
only at qualified investors, not being offered to, and not being subscribed for, in Spain or by Spanish residents.
instruments), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of €1
billion. This issuance is listed in the AIAF Fixed Income Securities Market and was targeted only at professional
clients and eligible counterparties, not being offered or sold to any retail clients.(See Note 5.5.1)
Additionally, an issue of perpetually convertible securities (additional Tier 1 capital instruments) would remain in
circulation, which was carried out in April 2016, for an amount of 1,000 million euros, by virtue of previous delegations of
the shareholders' meeting. This issue was directed only to qualified investors and foreign private banking clients, and
cannot be placed or subscribed in Spain or among investors residing in Spain. This issue is listed on the Global Exchange
Market of Euronext Dublin of the Irish Stock Exchange and is computed as additional Tier 1 capital of the Bank and the
Group, in accordance with Regulation (EU) 575/2013.
These perpetual securities will be converted into newly issued ordinary shares of BBVA if the CET 1 ratio of the Bank or
the Group is less than 5.125%, in accordance with their respective terms and conditions.
These issues may be fully redeemed at BBVA´s option only in the cases contemplated in their respective terms and
conditions, and in any case, in accordance with the provisions of the applicable legislation. In particular:
(additional tier 1 instrument), carried out by the Bank on February 19, 2014, for a total amount of €1,5 billion
and once the prior consent from the Regulator has been obtained.
(additional tier 1 instruments) carried out by the Bank on February 18, 2015, for an amount of €1.5 billion on
the First Reset Date of the issuance and once the prior consent from the Regulator had been obtained.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
20.5. Other financial liabilities
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Other financial liabilities (Millions of Euros)
2020
2019
Lease liabilities
2,886
3,111
Creditors for other financial liabilities
3,223
3,289
Collection accounts
2,728
2,666
Creditors for other payment obligations
1,289
1,296
Total
10,127
10,362
A breakdown of the maturity of the lease liabilities, due after December 31, 2020 is provided below:
Maturity of future payment obligations (Millions of Euros)
Up to 1
year
1 to 3
years
3 to 5
years
Over 5
years
Total
Leases
192
380
379
1,936
2,886
The information required by Final Provision second of Law 31/2014 of December 3, which amends the Corporate Law to
improve corporate governance modifies Additional Provision third of Law 15/2010, of July 5, amending the Law 3/2004 of
December 29, through which measures for combating late payment in commercial transactions are set, is as follows:
Payments made and pending payments (*) (Millions of Euros)
2020
2019
BBVA S.A.
BBVA
GROUP IN
SPAIN
BBVA S.A.
BBVA
GROUP IN
SPAIN
Average payment period to suppliers (days)
22
22
28
28
Ratio of outstanding payment transactions (days)
22
22
28
28
Ratio outstanding payment transactions (days)
19
19
20
20
Total payments
2,342
2,352
2,519
2,524
Total outstanding payments
104
104
92
92
(*) It is considered on time payments made within 60 days, and not on time those which exceeds 60 days.
The data shown in the table above on payments to suppliers refer to those which by their nature are trade creditors for
the supply of goods and services, so data relating to "Other financial liabilities other liabilities -Trade pay " is included in
the balance.
21. Provisions
The breakdown of the balance under this heading in the accompanying balance sheets, based on type of provisions, is
as follows:
Provisions: Breakdown by concepts (Millions of Euros)
Notes
2020
2019
Pensions and other post employment defined benefit obligations
22
3,544
3,810
Other long term employee benefits
22
18
25
Provisions for taxes and other legal contingencies
439
359
Commitments and guarantees given
270
235
Other provisions (*)
177
188
Total
4,449
4,616
(*) Individually insignificant provisions or contingencies, for various concepts in different geographies.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The changes in 2020 and 2019 in the balances under this heading in the accompanying balance sheets are as follows:
Provisions for pensions and similar obligations. Changes over the year (Millions of Euros)
2020
2019
Balance at the beginning
3,835
4,072
Add
Charges to income for the year
235
233
Interest expense and similar charges
2
7
Personnel expense
4
4
Provision expense
228
222
Charges to equity (*)
-
1
Transfers and other changes
3
66
Less
Benefit payments
(475)
(533)
Employer contributions
(24)
(2)
Unused amounts reversed during the period
(11)
(2)
Balance at the end
3,563
3,835
(*)Corresponds to actuarial losses (gains) arising from certain post-employment defined-benefit commitments for pensions (see Note 2.8).
Provisions for taxes, legal contingents and other provisions. Changes over the year (Millions of Euros)
2020
2019
Balance at beginning
782
1,053
Additions
555
410
Acquisition of subsidiaries
-
-
Unused amounts reversed during the period
(297)
(239)
Amount used and other variations
(154)
(442)
Balance at the end
886
782
Ongoing legal proceedings and litigation
The financial sector faces an environment of increased regulatory pressure and litigation. In this environment, the various
Group entities are often sued on lawsuits and are therefore involved in individual or collective legal proceedings and
litigation arising from their activity and operations, including proceedings arising from their lending activity, from their labor
relations and from other commercial, regulatory or tax issues, as well as in arbitration.
On the basis of the information available, the Group considers that, as of December 31, 2020, the provisions
made in relation to judicial proceedings and arbitration, where so required, are adequate and reasonably cover
the liabilities that might arise, if any, from such proceedings. Furthermore, on the basis of the information
available and with the exceptions indicated in Note 5.1 "Risk factors", BBVA considers that the liabilities that
may arise from such proceedings will not have, on a case-by-case basis, a significant adverse effect on the, the
Group´s business, financial situation or results of operations.
IRPH index
In relation to consumer mortgage loan contracts linked to the interest rate index known as IRPH (average rate for mortgage
loans over three years for the acquisition of free housing), the Spanish Supreme Court issued on 14 December 2017 its
judgment 669/2017 confirming that it was not possible to determine the lack of transparency of the interest rate of the loan
merely by reference to one or other of the official indexes nor, therefore, was it abuse according to Directive 93/13. In a
separate legal proceeding, albeit concerning the same clause, the matter was referred to the Court of Justice of the
European Union (the EU Court of Justice), raising a preliminary question in which the application of the above referred
IRPH index and the decision of the Supreme Court on the matter was questioned again. On March 3, 2020, the EU Court
of Justice resolved the referred question for a preliminary ruling.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
In that resolution, the EU Court of Justice concluded that the fact that the main elements relating to the calculation of the
saving banks IRPH index used by the bank to which the question referred refers (Bankia, S.A.) were provided in the Bank
of Spain Regulation (Circular 8/1990), published in the Spanish Official Gazette, which allowed consumers to understand
the calculation of such index. In addition, the EU Court of Justice indicated that the national court shall determine whether
the bank that is party to this proceeding complied with the applicable information obligations under national legislation. In
the event that the entity had not complied with the applicable transparency regulations, the EU Court of Justice decision
does not declare the contract null and void but provides that the national court could replace the IRPH index applied in
the case under trial for a substitute index. The resolution sets forth that, in the absence of an agreement to the contrary
of the parties to the contract, the referred substitute index could be the IRPH index for credit entities in Spain (as
established in the fifteenth additional provision of Law 14/2013, of September 27, 2013).
On November 13, 2020, the Supreme Court has issued new judgments on which it has again analyzed the legality of the
above referred clause after the EU Court of Justice ruling which indicated that it was up to the national judge to rule on its
transparency and possible abuse. In the particular cases analyzed, the Supreme Court has ruled that, even if the entity
had not adequately complied with some regulatory requirement of transparency, such as reporting the evolution of the
index in the past, this would not mean that the clause was abusive. In short, it considers that the control rules are different
from transparency and abuse, so that if the clause is not abusive, the possible breach of any obligation of transparency
cannot have legal consequences. Following these rulings, the Supreme Court is rejecting the appeals on the grounds of
the existence of case law on the matter and lack of interest in the case. Therefore, BBVA considers that the ruling of the
EU Court of Justice and these recent rulings of the Supreme Court should not have significant effects on the Group's
business, financial situation or results of operations.
Revolving credit cards
There are also claims before the Spanish courts challenging the application of certain interest rates and other mandatory
regulations to certain revolving credit card contracts. On March 4, 2020, the Supreme Court issued a ruling (number
149/2020) confirming the nullity of a revolving credit card agreement entered into by another entity (Wizink Bank) on the
grounds that the interest applied to the card was usurious. In that ruling, the Supreme Court recognized that the reference
to the "normal interest on money" to be used for this product must be the average interest applicable to credit transactions
by means of credit and revolving cards published in the Bank of Spain's statistics, which is slightly higher than 20%
annually. The Supreme Court also considered usurious a rate of 26.82% annually, when compared to such average rate.
The Supreme Court concluded that for an interest rate to be usurious, it must be "manifestly disproportionate to the
circumstances of the case", and therefore the ruling limits its effects to the case under analysis, and the marketing by
credit entities of this product must be analyzed on a case-by-case basis.
BBVA considers that this ruling of the Supreme Court should not have a significant effect on the Group's business, financial
situation or results of operations.
22. Post-employment and other employee benefit commitments
As stated in Note 2.8, the Bank has assumed commitments with employees including short-term employee benefits (Note
39.1), defined contribution and defined benefit plans, as well as other long-term employee benefits.
The main Employee Welfare System has been implemented in Spain. Under the collective labor agreement, Spanish
banks are required to supplement the social security benefits received by employees or their beneficiary right-holders in
the event of retirement (except for those hired after March 8, 1980), permanent disability, death of spouse or death of
parent.
The Employee Welfare System in place at the Bank supersedes and improves the terms and conditions of the collective
labor agreement for the banking industry; including benefits in the event of retirement, death and disability for all
employees, including those hired after March 8, 1980. The Bank externally funded all its pension commitments with active
and retired employees pursuant to Royal Decree 1588/1999, of October 15. These commitments are instrumented in
external pension plans, insurance contracts with non-Group companies and insurance contracts with BBVA Seguros, S.A.
de Seguros y Reaseguros, which is 99.96% owned by the Banco Bilbao Vizcaya Argentaria Group.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The table below shows a breakdown of recorded balance sheet liabilities relating to defined benefit plans as at December
31, 2020 and 2019:
Net liability (asset) on the balance sheet (Millions of Euros)
Notes
2020
2019
Pension commitments
3,464
3,523
Early retirement commitments
1,236
1,478
Other long-term employee benefits
18
25
Total commitments
4,718
5,026
Pension plan assets
1,172
1,200
Total plan assets
1,172
1,200
Total net liability/asset on the balance sheet
3,546
3,826
Of which: provisions- provisions for pensions and similar
obligations
21
3,544
3,810
Of which: provisions-other long-term employee benefits
21
18
25
Other net assets in pension plans
(16)
(9)
Of which: Insurance contracts linked to pensions
18
(2,074)
(2,096)
The following table shows defined benefit plan costs recorded in the income statement for fiscal years 2020 and 2019:
Notes
2020
2019
Interest and similar expense
2
7
Interest expense
2
7
Interest income
-
-
Personnel expense
51
52
Defined contribution plan expense
39.1
44
47
Defined benefit plan expense
39.1
2
1
Other benefit expense
5
4
Provisions or reversal of provisions
41
217
220
Early retirement expense
220
189
Past service cost expense
-
1
Remeasurements (*)
(7)
23
Other provision expense
4
7
Total effects in income statements: debit (credit)
270
279
Total effects on equity: debit (credit) (**)
-
1
(*) Actuarial losses (gains) on remeasurement of the net defined benefit liability relating to early retirements in Spain and other
long-term employee benefits that are charged to the income statement (see Note 2.8).
(**) Actuarial gains (losses) on remeasurement of the net defined benefit pension liability before income taxes (see Note 2.8).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
22.1. Defined benefit plans
Defined benefit commitments relate mainly to employees who have already retired or taken early retirement, certain closed
groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided
to most active employees. For the latter, BBVA pays the required premiums to fully insure the related liability.
The change in these commitments as of December 31, 2020 and 2019 was as follows:
Defined benefit plans (Millions of Euros)
2020
2019
Defined
benefit
obligation
Plan
assets
Net
liability
(asset)
Insurance
contracts
linked to
pensions
Defined
benefit
obligation
Plan
assets
Net
liability
(asset)
Insurance
contracts
linked to
pensions
Balance at the beginning
5,001
1,200
3,801
2,096
5,164
1,126
4,038
2,032
Current service cost
6
-
6
-
5
-
5
-
Interest income or expense
36
13
23
20
53
18
35
28
Contributions by plan participants
-
-
-
-
-
-
-
-
Employer contributions
-
-
-
-
-
-
-
-
Past service costs
(1)
223
-
223
-
191
-
191
-
Remeasurements:
149
70
79
99
342
157
185
168
Return on plan assets
(2)
-
70
(70)
99
-
157
(157)
168
From changes in demographic
assumptions
60
-
60
-
(1)
-
(1)
-
From changes in financial
assumptions
96
-
96
-
286
-
286
-
Other actuarial gain and losses
(7)
-
(7)
-
57
-
57
-
Benefit payments
(710)
(113)
(597)
(132)
(774)
(121)
(653)
(132)
Settlement payments
-
-
-
-
-
-
-
-
Business combinations and
disposals
-
-
-
-
-
-
-
-
Effect on changes in foreign
exchange rates
(7)
(7)
-
-
7
6
1
-
Other effects
2
9
(7)
(9)
13
14
(1)
-
Balance at the end
4,700
1,172
3,528
2,074
5,001
1,200
3,801
2,096
(1)
(2)
The balance under the heading “Provisions – Pensions and other post-employment defined benefit obligations” of the
accompanying balance sheet as of December 31, 2020 includes €356 million for commitments for post-employment
benefits maintained with previous members of the Board of Directors and the Bank’s Management Committee.(see Note
49)
Both the costs and the present value of the commitments are determined by independent qualified actuaries using the
“projected unit credit” method.
In order to guarantee the good governance of these plans, the Bank has established an Employee Benefits Committee
including members from the different areas to ensure that all decisions are made taking into consideration all of the
associated impacts.
The following table sets out the key actuarial assumptions used in the valuation of these commitments as at December
31, 2020 and 2019:
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Actuarial Assumptions. Commitments in Spain
2020
2019
Discount rate
0.53%
0.68%
Rate of salary increase
-
-
Mortality tables
PER 2020
PERM/F 2000P
The discount rate shown as of December, 31, 2020, corresponds to the weighted average rate, the actual discount rates
used are 0% and 0.75% depending on the type of commitment.
The discount rate used to value future benefit cash flows has been determined by reference to Eurozone high quality
corporate bonds (see Note 2.8).
The expected return on plan assets has been set in line with the adopted discount rate.
Assumed retirement ages have been set by reference to the earliest age at which employees are entitled to retire or the
contractually agreed age in the case of early retirements.
Changes in the actuarial main assumptions can affect the calculation of the commitments. Should the discount rate have
increased or decreased by 50 basis points, an impact on equity for the commitments in Spain would have been registered
amounting to approximately an increase or decrease of €19 million net of tax.
In addition to the commitments to employees shown above, the Group has other less material long-term employee
benefits. These include leave and long-service awards, which consist of either an established monetary award or shares
in Banco Bilbao Argentaria A.A. granted to employees when they complete a given number of years of qualifying service.
As of December 31, 2020 and 2019 the value of these commitments amounted to €18 and €25 million respectively. These
amounts are recorded under the heading "Provisions - Other long-term employee benefits" of the accompanying balance
sheet (see Note 21).
Information on the various commitments is provided in the following sections.
Pension commitments
These commitments relate mainly to retirement, death and disability pension payments. They are covered by insurance
contracts, pension funds and internal provisions.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The change in pension commitments as of December 31, 2020 and 2019 is as follows:
Pensions commitments (Millions of Euros)
2020
2019
Defined
benefit
obligatio
n
Plan
asset
s
Net
liabilit
y
(asset
)
Insuranc
e
contract
s linked
to
pension
s
Defined
benefit
obligatio
n
Plan
asset
s
Net
liabilit
y
(asset
)
Insuranc
e
contract
s linked
to
pension
s
Balance at the beginning
3,523
1,200
2,323
2,096
3,379
1,126
2,253
2,032
Net commitments addition
-
-
-
-
-
-
-
-
Current service cost
6
-
6
-
5
-
5
-
Interest income or expense
36
13
23
20
49
18
31
28
Contributions by plan participants
-
-
-
-
-
-
-
-
Employer contributions
-
-
-
-
-
-
-
-
Past service costs (1)
3
-
3
-
2
-
2
-
Remeasurements:
160
70
90
99
335
157
178
168
Return on plan assets
(2)
-
70
(70)
99
-
157
(157)
168
From changes in demographic
assumptions
58
-
58
-
(1)
-
(1)
-
From changes in financial assumptions
96
-
96
-
273
-
273
-
Other actuarial gain and losses
6
-
6
-
63
-
63
-
Benefit payments
(262)
(113)
(149)
(132)
(271)
(121)
(150)
(132)
Settlement payments
-
-
-
-
-
-
-
-
Business combinations and disposals
-
-
-
-
-
-
-
-
Defined contribution transformation
-
-
-
-
-
-
-
-
Effect on changes in foreign exchange
rates
(7)
(7)
-
-
7
6
1
-
Other effects
5
9
(4)
(9)
17
14
3
-
Balance at the end
3,464
1,172
2,292
2,074
3,523
1,200
2,323
2,096
Of Which: vested benefit obligation
relating to current employees
3,284
-
-
-
3,349
-
-
-
Of Which: vested benefit obligation
relating to retired employees
180
-
-
-
174
-
-
-
(1)
(2)
In Spain, local regulation requires that pension and death benefit commitments must be funded, either through a qualified
pension plan or an insurance contract.
These pension commitments are insured through policies with the insurer belonging to the Group, and with other unrelated
insurers whose policyholder is BBVA. There are also commitments in the Group's insurance company whose policyholder
is the BBVA Employment Pension Plan.
All the policies meet the requirements established by the accounting regulations regarding the non-recoverability of
contributions. However, the policies whose policyholder is the Entity that have been carried out with BBVA Seguros –a
BBVA related party – and consequently these policies cannot be considered plan assets under the applicable standards.
For this reason, the liabilities insured under these policies are fully recognized under the heading "Provisions – Pensions
and other post-employment defined benefit obligations" of the accompanying balance sheet (see Note 21), while the
related assets held by the insurance company are included under the heading “Insurance contracts linked to pensions “.
Additionally, there are commitments in insurance policies of the Pension Plan and with insurance companies not related
to the Bank. In this case the accompanying balance sheet reflects the value of the obligations net of the fair value of the
qualifying insurance policies.
As of December 31, 2020 and 2019, the plan assets related to the aforementioned insurance
contracts equaled the amount of the commitments covered; therefore, no amount for this item is included in the
accompanying balance sheets.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Pension benefits are paid by the insurance companies with whom BBVA has insurance contracts and to whom all
insurance premiums have been paid. The premiums are determined by the insurance companies using “cash flow
matching” techniques to ensure that benefits can be met when due, guaranteeing both the actuarial and interest rate risk.
The Bank signed a Social Benefit Standardization Agreement for its employees in Spain. The agreement standardizes
the existing social benefits for the different groups of employees and, in some cases where a service was provided,
quantified it as an annual amount in cash.
In addition, some overseas branches of the Bank maintain defined-benefit pension commitments with some of their active
and inactive personnel. These arrangements are closed to new entrants who instead participate in defined-contribution
plans.
Early retirement commitments
In 2020 the Bank offered certain employees the possibility of taking retirement or early retirement before the age stipulated
in the collective labor agreement in force. This offer was accepted by 769 employees (611 in 2019). The commitments to
early retirees include the compensation and indemnities and contributions to external pension funds payable during the
period of early retirement.
The change in these commitments during financial years 2020 and 2019 is shown below:
Early retirement commitments (Millions of Euros)
2020
2019
Defined Benefit
Obligation
Plan
assets
Net
liability
(asset)
Defined
benefit
obligation
Plan
assets
Net
liability
(asset)
Balance at the beginning
1,478
-
1,478
1,785
-
1,785
Current service cost
-
-
-
-
-
-
Interest income or expense
-
-
-
4
-
4
Contributions by plan participants
-
-
-
-
-
-
Employer contributions
-
-
-
-
-
-
Past service costs
(1)
220
-
220
189
-
189
Remeasurements:
(11)
-
(11)
7
-
7
Return on plan assets
(2)
-
-
-
-
-
-
From changes in demographic assumptions
2
-
2
-
-
-
From changes in financial assumptions
-
-
-
13
-
13
Other actuarial gain and losses
(13)
-
(13)
(6)
-
(6)
Benefit payments
(448)
-
(448)
(503)
-
(503)
Settlement payments
-
-
-
-
-
-
Business combinations and disposals
-
-
-
-
-
-
Defined contribution transformation
-
-
-
-
-
-
Effect on changes in foreign exchange rates
-
-
-
-
-
-
Other effects
(3)
-
(3)
(4)
-
(4)
Balance at the end
1,236
-
1,236
1,478
-
1,478
(1)
(2)
The valuation and account treatment of these commitments is the same as that of the pension commitments, except for
the treatment of actuarial gains and losses (see Note 2.8).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Estimated benefit payments
As of December, 31, 2020 the estimated payments over the next ten years are as follows:
Estimated future payments (Millions of Euros)
2021
2022
2023
2024
2025
2026 -
2030
Commitments in Spain
556
474
388
313
257
856
Of which: Early retirements
362
287
209
142
95
141
22.2. Defined contribution plans
The Bank sponsors defined contribution plans, in some cases with employees making contributions which are matched
by the employer.
These contributions are accrued and charged to the income statement in the corresponding financial year. No liability is
therefore recognized in the accompanying balance sheets for this purpose (see Note 2.8).
23. Common stock
As of December 31, 2020, 2019 and 2018, BBVA’s common stock amounted to €3,267,264,424.20 divided into
6,667,886,580 fully subscribed and paid-up registered shares, all of the same class and series, at €0.49 par value each,
represented through book-entries. All of the Bank shares carry the same voting and dividend rights, and no single
stockholder enjoys special voting rights. Each and every share is part of the Bank’s common stock.
The Bank’s shares are traded on the stock markets of Madrid, Barcelona, Bilbao and Valencia through the Sistema de
Interconexión Bursátil Español (Mercado Continuo), as well as on the London and Mexico stock markets. BBVA American
Depositary Shares (ADSs) traded on the New York Stock Exchange under the ticker “BBVA”.
Additionally, as of December 31, 2020, the shares of Banco BBVA Peru, S.A.; BBVA Banco Provincial, S.A.; Banco BBVA
Colombia, S.A.; Banco BBVA Argentina, S.A. and Garanti BBVA A.S., were listed on their respective local stock markets.
Banco BBVA Argentina, S.A. was also quoted in the Latin American market (Latibex) of the Madrid Stock Exchange and
the New York Stock Exchange. Also, the Depositary Receipts (“DR”) of Garanti BBVA, A.S. are listed in the London Stock
Exchange. BBVA is also currently included, amongst other indexes, in the IBEX 35® Index, which is made up by the 35
most liquid securities traded on the Spanish Market and, technically, it is a price index that is weighted by capitalization
and adjusted according to the free float of each company comprised in the index.
As of December 31, 2020, State Street Bank and Trust Co., The Bank of New York Mellon SA NV and Chase Nominees
Ltd in their capacity as international custodian/depositary banks, held 10.94%, 1.31%, and 8.36% of BBVA common stock,
respectively. Of said positions held by the custodian banks, BBVA is not aware of any individual shareholders with direct
or indirect holdings greater than or equal to 3% of BBVA common stock outstanding.
On April 18, 2019, Blackrock, Inc. reported to the Spanish Securities and Exchange Commission (CNMV) that, it had an
indirect holding of BBVA common stock totaling 5.917%, of which 5.480% are voting rights attributed to shares and
0.437% are voting rights through financial instruments.
On February 3, 2020, Norges Bank reported to the Spanish Securities and Exchange Commission (CNMV) that it had an
indirect holding of BBVA S.A. common stock totaling 3.366%, of which 3.235% are voting rights attributed to shares, and
0.131% are voting rights through financial instruments.
On the other hand, BBVA is not aware of any direct or indirect interests through which control of the Bank may be
exercised. Furthermore, BBVA has not received any information on stockholder agreements including the regulation of
the exercise of voting rights at its annual general meetings or restricting or placing conditions on the free transferability of
BBVA shares. No agreement is known that could give rise to changes in the control of the Bank.
Agreements of the AGM
Capital increase
BBVA’s AGM held on March 17, 2017 resolved, under agenda item four, to confer authority on the Board of Directors to
increase Bank’s share capital, on one or several occasions, within the legal term of five years of the approval date of the
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
authorization, up to the maximum amount corresponding to 50% of Bank’s share capital at the time on which the resolution
was adopted, likewise conferring authority to the Board of Directors to totally or partially exclude shareholders’ pre-emptive
subscription rights over any specific issue that may be made under such authority.
However, the power to exclude pre-emptive subscription rights was limited, such that the nominal amount of the capital
increases resolved or effectively carried out with the exclusion of pre-emptive subscription rights in use of the referred
authority and those that may be resolved or carried out to cover the conversion of mandatory convertible issues that may
also be made with the exclusion of pre-emptive subscription rights in use of the authority to issue convertible securities
conferred by the AGM held on March 17, 2017, under agenda item five (without prejudice to the anti-dilution adjustments
and this limit not being applicable to contingent convertible issues) shall not exceed the nominal maximum overall amount
of 20% of the share capital of BBVA at the time of the authorization.
As of the date of this document, the Bank’s Board of Directors has not exercised the authority conferred by the AGM.
Convertible and/or exchangeable securities
Convertible and/or exchangeable securities are detailed in Note 20.4.
24. Share premium
As of December 31, 2020 and 2019, the balance under this heading in the accompanying balance sheets was €23,992
million.
The amended Spanish Corporation Act expressly permits the use of the share premium balance to increase capital and
establishes no specific restrictions as to its use.
25. Retained earnings, Revaluation reserves and Other
25.1. Breakdown of the balance
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Retained earnings, revaluation reserves and other reserves (Millions of Euros)
2020
2019
Restricted reserves
Legal reserve
653
653
Restricted reserve for retired capital
120
124
Revaluation Royal Decree-Law 7/1996
-
-
Voluntary reserves
Voluntary and others
8,117
8,331
Total
8,890
9,108
25.2. Legal reserve
Under the amended Corporations Act, 10% of any profit made each year must be transferred to the legal reserve. The
transfer must be made until the legal reserve reaches 20% of the common stock.
The legal reserve can be used to increase the common stock provided that the remaining reserve balance does not fall
below 10% of the increased capital. While it does not exceed 20% of the common stock, it can only be allocated to offset
losses exclusively in the case that there are not sufficient reserves available.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
25.3. Restricted reserves
As of December 31, 2020 and 2019, the Bank’s restricted reserves are as follows:
Restricted reserves. Breakdown by concepts (Millions of Euros)
2020
2019
Restricted reserve for retired capital
88
88
Restricted reserve for parent company shares and loans for those shares
30
34
Restricted reserve for redenomination of capital in euros
2
2
Total
120
124
The restricted reserve for retired capital resulted from in the reduction of the nominal par value of the BBVA shares made
in April 2000.
The second heading corresponds to restricted reserves related to the amount of shares issued by the Bank in its
possession at each date, as well as the amount of customer loans outstanding at those dates that were granted for the
purchase of, or are secured by, the Parent Company shares.
Finally, pursuant to Law 46/1998 on the Introduction of the Euro, a restricted reserve is recognized as a result of the
rounding effect of the redenomination of the Bank’s common stock in euros.
25.4. Revaluation and regularizations of the balance shee t
Prior to the merger, Banco de Bilbao, S.A. and Banco de Vizcaya, S.A. availed themselves of the legal provisions
applicable to the regularization and revaluation of balance sheets. Thus, on December 31, 1996, Banco Bilbao Vizcaya,
S.A. revalued its tangible assets pursuant to Royal Decree-Law 7/1996 of June 7 by applying the maximum coefficients
authorized, up to the limit of the market value arising from the existing valuations. As a result of these updates, the
increases in the cost and depreciation of tangible fixed assets were calculated and allocated as follows.
Following the review of the balance of the “Revaluation reserve pursuant to Royal Decree-Law 7/1996 of June 7" account
by the tax authorities in 2000, this balance could only be used, free of tax, to offset recognized losses and to increase
share capital until January 1, 2007. From that date, the remaining balance of this account can also be allocated to
unrestricted reserves, provided that the surplus has been depreciated or the revalued assets have been transferred or
derecognized.
The breakdown of the calculation and movement to voluntary reserves under this heading are:
Revaluation and regularization of the balance sheet (Millions of Euros)
Legal revaluations and regularizations of tangible assets:
-
Cost
187
Less:
-
Single revaluation tax (3%)
(6)
Balance as of December 31, 1999
181
Rectification as a result of review by the tax authorities in 2000
(5)
Transfer to voluntary reserves
(176)
Total as of December 31, 2020 and 2019
-
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
26. Treasury shares
In 2020 and 2019 the Group companies performed the following transactions with shares issued by the Bank:
Treasury shares (Millions of euros)
2020
2019
Number of
Shares
Millions of
Euros
Number of
Shares
Millions of
Euros
Balance at beginning
12,617,189
62
47,257,691
296
234,691,887
807
214,925,699
1,088
(232,956,244)
(830)
(249,566,201)
(1,298)
-
7
-
(23)
-
-
-
-
Balance at the end
14,352,832
46
12,617,189
62
Of which:
-
-
-
-
Held by BBVA, S.A.
592,832
9
-
-
Held by Corporación General Financiera, S.A.
13,760,000
37
12,617,189
62
Held by other subsidiaries
-
-
-
-
Average purchase price in Euros
3.44
-
5.06
-
Average selling price in Euros
3.63
-
5.20
-
Net gains or losses on transactions
-
13
The percentages of treasury shares held by the Group in 2020 and 2019 are as follows:
Treasury Stock
2020
2019
Min
Max
Closing
Min
Max
Closing
% treasury stock
0.008%
0.464%
0.215%
0.138%
0.746%
0.213%
The number of BBVA shares accepted by the Bank in pledge of loans as of December 31, 2020 and 2019 is as follows:
Shares of BBVA accepted in pledge
2020
2019
Number of shares in pledge
39,407,590
43,018,382
Nominal value (Euros)
0.49
0.49
% of share capital
0.59%
0.65%
The number of BBVA shares owned by third parties but under management of a company within the Group as of
December 31, 2020 and 2019 is as follows:
Shares of BBVA owned by third parties but managed by the Group
2020
2019
Number of shares owned by third parties
18,266,509
23,807,398
Nominal value (Euros)
0.49
0.49
% of share capital
0.27%
0.36%
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
27. Accumulated other comprehensive income (loss)
The breakdown of the balance under this heading in the accompanying balance sheets is as follows:
Accumulated other comprehensive income (Millions of Euros)
Notes
2020
2019
Items that will not be reclassified to profit or loss
(1,376)
(520)
Actuarial gains (losses) on defined benefit pension plans
(61)
(75)
Non-current assets and disposal groups classified as held for sale
-
-
Fair value changes of equity instruments measured at fair value through
other comprehensive income
11.4
(1,294)
(469)
Hedge ineffectiveness of fair value hedges for equity instruments
measured at fair value through other comprehensive income
-
-
Fair value changes of financial liabilities at fair value through profit or loss
attributable to changes in their credit risk
(21)
24
Items that may be reclassified to profit or loss
252
138
Hedge of net investments in foreign operations [effective portion]
-
-
Foreign currency translation
-
-
Hedging derivatives. Cash flow hedges (effective portion)
(100)
(196)
Fair value changes of debt instruments measured at fair value through
other comprehensive income
11.4
352
335
Hedging instruments (non-designated items)
-
-
Non-current assets and disposal groups classified as held for sale
-
-
Total
(1,124)
(381)
The balances recognized under these headings are presented net of tax.
28. Capital base and capital management
As of December 31, 2020 and 2019, equity is calculated in accordance to the applicable regulation of each year on
minimum capital base requirements for Spanish credit institutions –both as individual entities and as consolidated group–
and how to calculate them, as well as the various internal capital adequacy assessment processes they should have in
place and the information they should disclose to the market.
The minimum capital base requirements established by the current regulation are calculated according to BBVA S.A.’s
exposure to credit and dilution risk, counterparty and liquidity risk relating to the trading portfolio, exchange-rate risk and
operational risk. In addition, BBVA S.A. must fulfill the risk concentration limits established in said regulation and the
internal corporate governance obligations.
With respect to de capital requirement the ECB, in its announcement on March 12, 2020, in reaction to COVID-19, has
allowed the banks to use additional Tier 1 or Tier 2 capital instruments to meet the Pillar II (P2R) requirements for 2021,
which is known as "Pillar 2 tiering". This measure has been reinforced by the relaxation of the Countercyclical Capital
Buffer (CCyB) announced by various national macroprudential authorities and by other complementary measures
published by the ECB. All of this has resulted in a reduction of 66 basis points in the fully-loaded CET1 requirement for
BBVA, with that requirement standing at 7.84% and the total ratio requirement at 12.01%, both at individual level. The
reduction in the requirement at the total ratio level is only around 2 basis points, as a result of the lower applicable
countercyclical buffer.
This total capital requirement includes: i) a Pillar 1 requirement of 8% that should be fulfilled by a minimum of 4.5% of
CET1; ii) a Pillar 2 requirement of 1.5% of CET1 that remains at the same level as the one included in the previous SREP
decision; iii) a Capital Conservation buffer of 2.5% of CET1; and iv) the Countercyclical Capital buffer 0.03% of CET1.
The ECB Pillar 2 requirement remains at the same level as the one established in the last SREP decision, being the sole
difference the evolution of the Countercyclical Capital buffer of 0.01% approximately.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
A reconciliation of the main figures between the accounting and regulatory own funds as of December 31, 2020 and 2019
is shown below:
Eligible capital resources (Millions of Euros)
Notes
2020 (*)
2019 (**)
Capital
23
3,267
3,267
Share premium
24
23,992
23,992
Retained earnings, revaluation reserves and other reserves
25.1
8,890
9,108
Other equity instruments, net
34
48
Treasury shares
26
(9)
-
Profit for the year
(2,182)
2,241
Attributable dividend
-
(1,086)
Total Equity
33,992
37,570
Accumulated other comprehensive income
(1,124)
(381)
Shareholders´ equity
32,867
37,189
Intangible assets
(355)
(884)
Fin. treasury shares
(98)
(107)
Indirect treasury shares
(259)
(377)
Deductions
(712)
(1,368)
Temporary CET 1 adjustments
618
544
Equity not eligible at solvency level
618
544
Other adjustments and deductions
(2,113)
(2,784)
Common Equity Tier 1 (CET 1)
30,660
33,581
Additional Tier 1 before regulatory adjustments
6,130
5,400
Tier 1
36,790
38,981
Tier 2
5,106
3,585
Total Capital (Total Capital=Tier 1 + Tier 2)
41,896
42,566
Total Minimum equity required
24,325
24,603
(**) December 31, 2019 and 2018 figures have been restated (See Note 1.3)
(1) Other adjustments and deductions includes the amount of minority interest not eligible as capital, amount of dividends not
distributed and other deductions and filters set by the CRR.
(Capital Requirements Regulation)
. Additionally includes
shareholder remuneration (See Note 3).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The BBVA S.A.’s capital in accordance with the aforementioned applicable regulation as of December 31, 2020 and 2019
is shown below:
Amount of capital CC1 (Millions of Euros)
2020 (*)
2019 (**)
Capital and share premium
27,259
27,259
Retained earnings and equity instruments
9,509
9,652
Other accumulated income and other reserves
(996)
(194)
Net interim attributable profit
(2,182)
2,241
Ordinary Tier 1 (CET 1) before other reglamentary adjustments
33,590
38,958
Goodwill and intangible assets
(355)
(884)
Direct and indirect holdings in equity
-
-
Deferred tax assets
(1,478)
(1,419)
Other deductions and filters (***)
(1,096)
(3,074)
Total common equity Tier 1 reglamentary adjustments
(2,930)
(5,377)
Common equity TIER 1 (CET1)
30,660
33,581
Equity instruments and share premium classified as liabilities
6,130
5,400
Additional Tier 1 (CET 1) before regulatory adjustments
6,130
5,400
Temporary CET 1 adjustments
-
Total regulatory adjustments of additional equity l Tier 1
-
-
Additional equity Tier 1 (AT1)
6,130
5,400
Tier 1 (Common equity TIER 1+ additional TIER 1)
36,790
38,981
Equity instruments and share premium accounted as Tier 2
4,540
3,242
Credit risk adjustments
576
344
Tier 2 before regulatory adjustments
5,116
3,585
Tier 2 reglamentary adjustments
(10)
-
Tier 2
5,106
3,585
Total capital (Total capital=Tier 1 + Tier 2)
41,896
42,566
Total RWA's
202,559
204,512
CET 1 (phased-in)
15.1%
16.4%
Tier 1 (phased-in)
18.2%
19.1%
Total capital (phased -in)
20.7%
20.8%
(**) According to EBA Standards published in June 2020 (EBA / ITS / 2020/04), the table has been adapted according to the format established by
the EBA in those rows that are applicable to the date of the report, between which is the transitory impact by IFRS 9 in CET1, which has been
reclassified from the row "Common Equity Tier 1 before regulatory adjustments" as a regulatory adjustment of Common Equity Tier 1 capital, within
the row "Other deductions and filters ". Likewise, the information corresponding to December 2019 and December 2018 has been restated for
comparative purposes (see Note 1.3)
(***) Additionally includes shareholder remuneration (See Note 3).
The situation of uncertainty that is causing the COVID-19, has led to strong variations in asset prices in financial markets,
accompanied by a very pronounced increase in volatility; Stock markets have experienced declines as a reflection of the
impact of the crisis on corporate profits and the increase in risk aversion that has also spread to the debt markets, as well
as the evolution of currency exchange rates. All of this has had a negative impact on the Group's capital ratios until June
30, 2020. However, during the second quarter of the year the stability of the financial markets was largely motivated by
the measures to stimulate the economy announced by the different national and supranational authorities, has partially
recovered the shocks produced in the price of assets and has reduced volatility, which has had a positive contribution to
capital ratios during the last quarter.
Additionally, the approval by the European Parliament and Council of Regulation 2020/873 (known as “CRR Quick Fix”),
which modifies Regulation 575/2013 (Capital Requirements Regulation (CRR)) has contributed positively to capital ratios.
As of December 2020 Common Equity Tier 1 (CET1) phased-in ratio stood at 14,82% which represented a decrease of
+135 basis point compared to 2019 due to the worsening in the capital base due to the negative result for the year, mainly
driven by impairments on loan losses carried out at the end of March in the stakes of the USA and Turkey (see note 14),
provisions as a consequence of the economic effects of the COVID-19 pandemic (see note 5.2.1) and, finally, the negative
result from the sale of the business in the USA (see note 14).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
Risk-weighted assets (APR) decreased by approximately €1,941 million euros in 2020 as a result of the increase in
exposures focused on financing programs guaranteed by the ICO, with a lower consumption of APRs, as well as the
effects of the advanced application of the new SME and Infrastructure reducing factors in response to the economic effects
of the COVID-19 pandemic and the relative stabilization of financial markets that began during the second quarter, largely
motivated by the measures to stimulate the economy and the announced guaranteed programs by the different national
and supranational authorities as well as the approval by the Parliament and the European Council of regulation 2020/873
(known as CRR quick fix)
The fully-loaded additional Tier 1 capital (AT1) stood at 3.02% as of December 31, 2020. For these purposes, it should
be noted that BBVA S.A. carried out a green AT1 issuance for an amount of 1,000 million euros with a coupon of 6% and
an early redemption option in favor of the issuer after the fifth year and a half. Moreover, an AT1 issuance for an amount
of €1,500 million (coupon of 6.75%) was amortized in February, on the first date of the early amortization option.
Finally, in terms of issues eligible as Tier 2 capital, BBVA S.A, issued two issuances in 2020: an issuance of €1,000 million
in January, with a maturity of 10 years and an early amortization option in favor of the issuer from the fifth year, with a
coupon of 1%; and another issuance of 300 million pounds sterling in July, with a coupon of 3.104% and maturity of 11
years and with an early amortization option in favor of the issuer from the sixth year.
All of this, together with the evolution of the remaining elements eligible as Tier 2 capital, set the Tier 2 fully-loaded ratio
at 2.40% as of December 31, 2020.
The CET1 phased-in ratio stood at 15.14% as of December 31, 2020, taking into account the effect of the IFRS 9 standard.
AT1 reached 3.03% and Tier 2 2.52% resulting in a total capital ratio of 20.68%.
The aim of capital management within BBVA and the Group is to ensure that both BBVA and the Group have the
necessary capital at any given time to develop the corporate strategy reflected in the Strategic Plan, in line with the risk
profile set out in the Group Risk Appetite Framework (RAF).
In this regard, BBVA's capital management is also part of the most relevant forward-looking strategic decisions in the
Group's management and monitoring, which include the Annual Budget and the Liquidity and Funding Plan, with which it
is coordinated — all with the aim of achieving the Group's overall strategy.
Capital must be allocated optimally in order to meet the need to preserve the solvency of BBVA and the Group at all times.
Together with the Group's solvency risk profile included in the RAF, this optimal allocation serves as a guide for the
Group's capital management and means a continuous need for a solid capital position that makes it possible to:
allocating resources appropriately and efficiently;
time.
The areas involved in capital management in the Group shall follow and respect the following principles in their respective
areas of responsibility:
Budget and other strategic-prospective processes, to help achieve the Group's long-term sustainability.
Group is—or may be—exposed when conducting its business (economic vision), when establishing a target
capital level, all while adopting a forward-looking vision that takes adverse scenarios into consideration.
for the evolution of activity meet the strategic objectives of the Group and anticipating the ordinary and
extraordinary consumption that may occur.
liabilities (MREL), required at any given time.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
To achieve the aforementioned principles, capital management will be based on the following essential elements:
resources and quality data necessary to do so.
deviations from the target capital level.
the Group.
adequate capital management
29. Commitments and guarantees given
The breakdown of the balance under these headings in the accompanying balance sheets is as follows:
Commitments and guarantees given (Millions of Euros)
Notes
2020
2019
Loan commitments given
80,959
73,582
Of which: defaulted
100
157
Central banks
-
-
General governments
2,177
2,128
Credit institutions
11,313
11,545
Other financial corporations
4,571
3,404
Non-financial corporations
49,259
42,714
Households
13,639
13,791
Financial guarantees given
8,745
9,086
Of which: defaulted
156
153
Central banks
-
-
General governments
85
103
Credit institutions
258
359
Other financial corporations
4,416
4,385
Non-financial corporations
3,862
4,107
Households
124
132
Other commitments given
25,711
28,151
Of which: defaulted
305
311
Central banks
112
1
General governments
77
77
Credit institutions
3,114
4,326
Other financial corporations
3,541
2,947
Non-financial corporations
18,746
20,685
Households
121
115
Total commitments and guarantees given
5.2.2
115,415
110,819
The amount registered recorded in the balance sheet as of December 31, 2020, for loan commitments given, financial
guarantees given and other commitments given is €83 million, €75 million and €112 million, respectively (see Note 21).
Since a significant portion of the amounts above will expire without any payment obligation materializing for the
companies, the aggregate balance of these commitments cannot be considered the actual future requirement for financing
or liquidity to be provided by the Bank to third parties.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
In 2020 and 2019 no issuance of debt securities carried out by associates, or non-Group entities have been guaranteed.
30. Other contingent assets and liabilities
As of December 31, 2020 and 2019, there were no material contingent assets or liabilities other than those disclosed in
these Financial Statements.
31. Purchase and sale commitments and future payment obligations
The purchase and sale commitments of BBVA are disclosed in notes 8, 12 and 20.
Future payment obligations other than those mentioned in the notes above correspond to leases payable derived
from operating lease contracts (see Note 20.5) and estimated employee benefit payments, as detailed in (see
Note 22.1)
32. Transactions on behalf of third parties
As of December 31, 2020 and 2019 the details of the relevant transactions on behalf of third parties are as follows:
Transactions on behalf of third parties. Breakdown by concepts (Millions of Euros)
2020
2019
Financial instruments entrusted by third parties
318,218
518,077
Conditional bills and other securities received for collection
3,935
4,109
Securities lending
6,991
8,807
Total
329,144
530,993
33. Net interest income
33.1. Interest and similar income
The breakdown of the interest and similar income recognized in the accompanying income
statement is as follows:
Interest income. Breakdown by origin (Millions of Euros)
2020
2019
Financial assets held for trading
176
285
Financial assets designated at fair value through profit or loss
4
3
Financial assets at fair value through other comprehensive income
253
285
Financial assets at amortized cost
3,839
4,295
Hedging derivatives
(126)
(177)
Cash flow hedges (effective portion)
45
23
Fair value hedges
(171)
(200)
Other assets
57
27
Liabilities interest income
425
215
Total
4,629
4,933
(*) Includes accrued interest following TLTRO III transactions in 2019 and 2020 (see Note 20.1).
The amounts recognized in equity during both years in connection with hedging derivatives and the amounts derecognized
from equity in 2020 and 2019 and taken to the income statement during those years are disclosed in the accompanying
statements of recognized income and expenses.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
33.2. Interest expense
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Interest expense. Breakdown by origin (Millions of Euros)
2020
2019
Financial liabilities held for trading
120
293
Financial liabilities designated at fair value through profit or loss
45
-
Financial liabilities at amortized cost
1,080
1,344
Hedging derivatives and interest rate risk
(369)
(296)
Cash flow hedges
3
2
Fair value hedges
(372)
(298)
Other liabilities
10
69
Assets interest expense
228
137
Total
1,115
1,548
34. Dividend income
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Dividend income (Millions of Euros)
2020
2019
Investments in associates
3
3
Investments in joint-ventures
2
-
Investments in subsidiaries
1,245
2,732
Other shares and dividend income
110
118
Total
1,360
2,853
35. Fee and commission income
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Fee and commission income (Millions of Euros)
2020
2019
Bills receivables
15
21
Demand accounts
223
174
Credit and debit cards and TPVs
339
402
Checks
5
7
Transfers and other payment orders
155
129
Insurance product commissions
142
157
Loan commitments given
105
87
Other commitments and financial guarantees given
159
166
Asset management
126
104
Securities fees
65
95
Custody securities
94
98
Other fees and commissions
697
704
Total
2,125
2,144
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
36. Fee and commission expense
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Fee and commission expense (Millions of Euros)
2020
2019
Credit and debit cards
126
191
Transfers and others payment orders
4
4
Custody securities
13
14
Other fees and commissions
215
238
Total
358
447
37. Gains (losses) on financial assets and liabilities, hedge accounting and
exchange differences, net
The breakdown of the balance under this heading, by source of the related items, in the accompanying income statements
is as follows:
Gains (losses) on financial assets and liabilities, hedge accounting and exchange differences, net. Breakdown by
heading (Millions of Euros)
2020
2019
Gains (losses) on derecognition of financial assets and liabilities not measured at fair
value through profit or loss, net
87
107
Financial assets at amortized cost
100
35
Other financial assets and liabilities
(13)
72
Gains (losses) on financial assets and liabilities held for trading, net
353
375
Reclassification of financial assets from fair value through other comprehensive income
-
-
Reclassification of financial assets from amortized cost
-
-
Other gains (losses)
353
375
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or
loss, net
28
35
Reclassification of financial assets from fair value through other comprehensive income
-
-
Reclassification of financial assets from amortized cost
-
-
Other gains (losses)
28
35
Gains (losses) on financial assets and liabilities designated at fair value through profit or
loss, net
(69)
(101)
Gains (losses) from hedge accounting, net
13
21
Subtotal gains (losses) on financial assets and liabilities
412
438
Exchange Differences
(29)
(133)
Total
383
304
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The breakdown of the balance (excluding exchange rate differences) under this heading in the accompanying income
statements by the nature of financial instruments is as follows:
Gains (losses) on financial assets and liabilities. Breakdown by nature of the financial instrument (Millions of Euros)
2020
2019
Debt instruments
299
284
Equity instruments
(36)
1,167
Loans and advances to customers
4
114
Derivatives
286
(1,042)
Derivatives held for trading
274
(1,063)
Interest rate agreements
(252)
(58)
Security agreements
118
(1,061)
Commodity agreements
-
-
Credit derivative agreements
(25)
41
Foreign-exchange agreements
433
16
Hedging Derivatives Ineffectiveness
13
21
Fair value hedges
13
21
Hedging derivative
(316)
(11)
Hedged item
329
32
Cash flow hedges
-
-
Customer deposits
(139)
(84)
Other
(2)
(1)
Total
412
438
In addition, in 2020 and 2019, under the heading “Exchange differences, net” of the income statements, net amounts of
negative €57 million and negative €225 million, respectively, are recognized for transactions with foreign exchange trading
derivatives.
38. Other operating income and expense
The breakdown of the balance under the heading “Other operating income” and in the accompanying income statements
is as follows:
Other operating income (Millions of Euros)
2020
2019
Real estate income
28
29
Financial income from non-financial services
104
81
Other operating income
11
15
Total
142
125
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
The breakdown of the balance under the heading “Other operating expense” in the accompanying income statements is
as follows:
Other operating expense (Millions of Euros)
Notes
2020
2019
Contributions to guaranteed banks deposits funds
1.8
382
340
Real estate agencies
47
41
Other operating expense
100
106
Total
529
487
39. Administration expense
39.1 Personnel expense
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Personnel expense (Millions of Euros)
Notes
2020
2019
Wages and salaries
1,639
1,833
Social security costs
377
394
Defined contribution plan expense
22
44
47
Defined benefit plan expense
22
2
1
Other personnel expense
83
120
Total
2,144
2,394
Share-based employee remuneration
The amounts registered under the heading “Personnel expense - Other personnel expense” in the income statements for
the years 2020 and 2020, corresponding to the plans for remuneration based on equity instruments in force in each year,
amounted to €10 million and €24 million for BBVA, respectively. These amounts have been registered with a balancing
entry under the heading “Shareholders’ funds – Other equity instruments” in the accompanying balance sheets, net of tax
effect.
The characteristics of the Group's remuneration plans based on equity instruments are described below.
System of Variable Remuneration in Shares
BBVA has a specific remuneration system applicable to those employees whose professional activities may have a
material impact on the risk profile of the Group (hereinafter “Identified Staff”), designed within the framework of applicable
regulations to credit institutions and considering best practices and recommendations at the local and international levels
in this matter.
In 2020, this remuneration scheme is reflected in the following remuneration policies:
BBVA Group Remuneration Policy
, approved by the Board of Directors on 29 of November 2017, that applies
in general to all employees of BBVA and of its subsidiaries that form part of the consolidated group. This policy
includes in a specific chapter the remuneration system applicable to the members of BBVA Group Identified
Staff, including Senior Management.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
BBVA Directors’ Remuneration Policy
, approved by the Board of Directors and by the General Shareholders’
Meeting held on March 15, 2019, that it’s applicable to BBVA Directors. The remuneration system for executive
directors corresponds, generally, with the applicable system to the Identified Staff, to which they belong,
incorporating some particularities of their own, derived from their condition of directors.
The Annual Variable Remuneration for the Identified Staff members is subject to specific rules for settlement and payment
established in their corresponding remuneration policies, specifically:
ex ante
so that it shall be reduced at the time of the performance assessment in the event of negative performance of
the Group’s results or other parameters such as the level of achievement of budgeted targets, and it shall not
accrue or it will accrue in a reduced amount, should certain level of profits and capital ratios not be achieved.
it corresponds (the “Upfront Portion”). For executive directors, members of the Senior Management and
Identified Staff members with particularly high variable remuneration, the Upfront Portion will be 40% of the
Annual Variable Remuneration. The remaining portion will be deferred in time (hereinafter, the “Deferred
Component”) for a 5 year-period for executive directors and members of the Senior Management, and 3 years
for the remaining Identified Staff.
established in BBVA shares. As regards executive directors and Senior Management, 60% of the Deferred
Component shall be established in shares.
for the transfer of those shares required to honor the payment taxes.
increased, based on the result of multi-year performance indicators aligned with the Group’s core risk
management and control metrics related to the solvency, capital, liquidity, profitability or to the share
performance and the recurring results of the Group.
year performance indicators, finally delivered, shall be updated following the Consumer Price Index (CPI),
measured as the year-on-year change prices, as agreed by the Board of Directors.
malus
clawback
whole deferral and withholding period, both linked to a downturn in the financial performance of the Bank as a
whole, of a specific unit or area, or of exposure generated by an Identified Staff member, when such a downturn
in financial performance arises from any of the circumstances expressly named in the remuneration policies.
undermine the effects of alignment with sound risk management.
of the fixed component of the total remuneration, unless the General Meeting resolves to increase this
percentage up to a maximum of 200%.
In this regard, the General Meeting held on March 13, 2020 resolved to increase this limit to a maximum level of 200% of
the fixed component of the total remuneration for a given number of the Identified Staff members, in the terms indicated
in the report issued for this purpose by the Board of Directors dated February 10, 2020.
According to the settlement and payment scheme indicated, during 2020, a total amount of 2.845.924 BBVA shares
corresponding to the Upfront Portion of 2019 Annual Variable Remuneration has been delivered to the Identified Staff.
Additionally, according to the Remuneration Policy applicable in 2016, during 2020 a total amount of 2.302.154 BBVA
shares corresponding to the Deferred Component of 2016 Variable Remuneration has been delivered to the Identifies
Staff. This amount has been subject to a downward adjustment due to multi-year performance indicators evaluation.
Likewise, the aforesaid policy established that the deferred amounts in shares of the Annual Variable Remuneration finally
vested, subject to multi-year performance indicators, will be updated in cash, based on the terms established by the Board
of Directors. In this regard, during 2020 a total amount of 1.682.872 euros has been delivered to the Identified Staff as
updates of the corresponding shares of the Deferred Component of 2016 Annual Variable Remuneration.
Detailed information on the delivery of shares to executive directors and Senior Management is included in Note 49.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
39.2. Other administrative expense
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Other administrative expense. Breakdown by main concepts (Millions of Euros)
2020
2019
Technology and systems
662
649
Communications
48
47
Advertising
75
89
Property, fixtures and materials
128
140
Taxes
49
45
Surveillance and cash courier services
35
39
Other administration expense
413
478
Total
1,409
1,487
40. Depreciation
The breakdown of the balance under this heading in the accompanying income statements is as follows:
Depreciation (Millions of Euros)
Notes
2020
2019
Tangible assets
15
347
362
For own use
121
135
Right-of-use assets
226
227
Intangible assets
16
316
311
Total
663
673
41. Provisions or (reversal) of provisions
In 2020 and 2019, the net provisions recognized in the income statement line item were as follows:
Provisions or reversal of provisions (Millions of Euros)
Notes
2020
2019
Pensions and other post employment defined benefit obligations
22
217
220
Commitments and guarantees given (*)
41
9
Other provisions
217
162
Total
475
391
(*) In 2020, the amount of commitments and guarantees given includes the negative impact of the update of the macroeconomic scenario following
the Covid-19 pandemic (see Notes 1.5 and 5.2)
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
42. Impairment or (reversal) of impairment on financial assets not measured at
fair value through profit or loss or net gains by modification
The breakdown of impairment or reversal of impairment on financial assets not measured at fair value through profit or
loss by the nature of those assets in the accompanying income statements is as follows:
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss (Millions of
Euros)
Notes
2020
2019
Financial assets at fair value through other comprehensive income
4
(1)
Financial assets at amortized cost (*)
1,228
176
Of which: recovery of written-off assets
5.2.5
(238)
(791)
Total
1,232
175
(*) In 2020, the amount includes the negative impact of the update of the macroeconomic scenario following the Covid-19 pandemic (see Notes 1.5
and 5.2)
43. Impairment or (reversal) of impairment on investments in subsidiaries, joint
ventures or associates.
The impairment losses on non-financial assets and investments in subsidiaries, joint ventures or associates broken
down by the nature of these assets in the accompanying income statements is as follows:
Impairment or reversal of impairment on Investments in subsidiaries, joint ventures or associates (Millions of Euros)
2020
2019
Investments in subsidiaries, joint ventures or associates
319
610
Total
319
610
44. Impairment or reversal of impairment on non-financial assets
The impairment losses on non-financial assets broken down by the nature of those assets in the accompanying income
statements are as follows:
Impairment or reversal of impairment on non-financial assets (Millions of Euros)
Notes
2020
2019
Tangible assets
15
105
80
Intangible assets
16
-
-
Other
-
(2)
Total
105
78
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
45. Gain (losses) from non-current assets and disposal groups classified as held
for sale not qualifying as discontinued operations
The main items included in the balance under this heading in the accompanying consolidated income statements are as
follows:
Gains (losses) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued
operations (Millions of Euros)
Notes
2020
2019
Gains on sale of real estate
33
19
Impairment of non-current assets held for sale
19
(75)
(50)
Gains (losses) on sale of investments classified as non-current assets
held for sale
-
-
Gains on sale of equity instruments classified as non-current assets
held for sale
-
-
Total
(43)
(31)
46. Statements of cash flows
The table below shows the breakdown of the main cash flows related to financing activities as of December 31, 2020
and 2019:
Main Cash Flows in financing activities 2020 (Millions of Euros)
December 31,
2020
December
31, 2019
Net Cash
Flows
Foreign
Exchange
movements
and other
Subordinated deposits
360
304
Issuances of subordinated liabilities
10,736
10,058
Total
11,096
10,362
784
(50)
Main cash flows in financing activities in 2019 (Millions of Euros)
December
31, 2019
December
31, 2018
Net Cash
Flows
Foreign
Exchange
movements
and other
Subordinated deposits
304
300
Issuances of subordinated liabilities
10,058
10,288
Total
10,362
10,588
(365)
139
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
47. Accountant fees and services
The details of the fees for the services contracted by BBVA for the year ended December 31, 2020 and 2019 with its
auditors and other audit entities are as follows:
Fees for Audits Conducted and other related services (Millions of Euros) (**)
2020
2019
Audits of the companies audited by firms belonging to the KPMG worldwide
organization and other reports related with the audit (*)
12.6
12.6
Other reports required pursuant to applicable legislation and tax regulations
issued by the national supervisory bodies of the countries in which the Group
operates, reviewed by firms belonging to the Deloitte worldwide organization
0.5
0.5
Fees for audits conducted by other firms
-
-
(*) Including fees pertaining to annual legal audits (€11.1 and €11.1 million as of December 31, 2020 and December 31, 2019,
respectively)
(**) Regardless of the billed period.
In addition, in 2020 and 2019, the Bank contracted services (other than audits) as follows:
Other Services Rendered (Millions of euros)
2020
2019
Firms belonging to the KPMG worldwide organization
-
-
This total of contracted services includes the detail of the services provided by KPMG Auditores, S.L. to BBVA, S.A. at
the date of preparation of these financial statements as follows:
Fees for Audits Conducted (*) (Millions of euros)
2020
2019
Legal audit of BBVA,S.A.
4.9
4.9
Other audit services of BBVA, S.A.
5.4
5.5
Limited Review of BBVA, S.A.
0.9
0.9
Reports related to issuances
0.3
0.3
Assurance services and other required by the regulator
0.6
0.6
Other
-
-
Information related to the services provided by KPMG AUDITORES, S.L., to companies controlled by BBVA, S.A.,
during the year ended December 31, 2020, is in the accompanying financial statement and dependent companies as of
December 31, 2020.
The services provided by the auditors meet the independence requirements of the external auditor established under
Audit of Accounts Law (Law 22/2015) and under the Sarbanes-Oxley Act of 2002 adopted by the Securities and
Exchange Commission (SEC).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
48.
Related-party transactions
As a financial institution, BBVA engages in transactions with related parties in the normal course of business. These
transactions are not relevant and are carried out under normal market conditions. As of December 31, 2020 and 2019
the following are the transactions with related parties:
48.1. Transactions with significant shareholders
As of December 31, 2020 and 2019 there were no shareholders considered significant (see Note 23).
48.2. Transactions with BBVA Group entities
The balances of the main captions in the accompanying balance sheets arising from the transactions carried out by the
Group companies, which consist of ordinary business and financial transactions carried out under normal market
conditions, are as follows:
Balances arising from transactions with entities of the Group (Millions of Euros)
2020
2019
Assets
Loans and advances to credit institutions
258
158
Loans and advances to customers
3,659
3,769
Debt securities
316
201
Liabilities
-
Deposits from credit institutions
887
1,135
Customer deposits
8,814
8,517
Debt certificates
-
-
Memorandum accounts
-
Financial guarantees given
4,251
4,230
Contingent commitments
1,210
1,275
Other commitments given
1,693
1,442
(*) Includes balances with BBVA USA.
The balances of the main captions in the accompanying income statements resulting from transactions carried out by
the Bank with Group companies, which consist of ordinary business and financial transactions carried out under normal
market conditions, are as follows:
Balances of income statement arising from transactions with entities of the Group (Millions of Euros)
2020
2019
Income statement
Financial incomes
40
29
Financial costs
110
119
Fee and commission income
513
526
Fee and commission expense
78
91
(*) Includes balances with BBVA USA.
There were no other material effects in the financial statements arising from dealings with these entities, and from the
insurance policies to cover pension or similar commitments, which are described in Note 22.
In addition, as part of its normal activity, the Bank has entered into agreements and commitments of various types with
shareholders of subsidiaries and associates, which have no material effects on the financial statements.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
48.3. Transactions with members of the Board of Directors and Senior Management
The amount and nature of the transactions carried out with members of the Board of Directors and Senior Management
of the Bank, as well as their respective related parties is given below. All of these transactions belong to the Bank's normal
course of business, are not material and have being carried out under normal market conditions.
As of December 31, 2020, there were no loans or credits granted by the Group’s entities to the members of the Board of
Directors. As of December 2019, the amount availed against the loans and credits granted by the Group’s entities to the
members of the Board of Directors amounted to €607. On this same date, there were no loans or credits granted to parties
related to the members of the Board of Directors.
As of December 31, 2020 and 2019, the amount availed against the loans granted by the Group’s entities to the members
of Senior Management (excluding executive directors) amounted to €5,349 and €4,414 thousand, respectively. On those
same dates, the amount availed against the loans granted by the Group’s entities to parties related to members of Senior
Management amounted to €580 and €57, respectively.
As of December 31, 2020 and 2019 no guarantees had been granted to any member of the Board of Director or their
related parties.
As of December 31, 2020 and 2019 the amount availed against guarantees arranged with members of Senior
Management amounted to €10 thousand, on both dates.
As of December 31, 2020 and 2019, the amount availed against guarantees and commercial loans arranged with parties
related to the Senior Management amounted to €25 thousand, on both dates.
The information on the remuneration and other benefits of the members of the BBVA Board of Directors and Senior
Management is included in Note 49.
48.4. Transactions with other related parties
As of December 31, 2020 and 2019 the Bank did not conduct any transactions with other related parties that are not in
the ordinary course of its business, which were carried out at arm's-length market conditions and of marginal relevance;
whose information is not necessary to give a true picture of the BBVA Group’s net equity, net earnings and financial
situation.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
49.
Remuneration and other benefits for the Board of Directors and members of the Bank's
Senior Management
Remuneration received by non-executive directors in 2020
The remuneration paid to non-executive members of the Board of Directors during the 2020 financial year is indicated
below, individualized and itemized:
Remuneration for non-executive directors (thousands of euro)
Board of
Directors
Executive
Committee
Audit
Committee
Risk and
Compliance
Committee
Remunerations
Committee
Appointments
and
Corporate
Governance
Committee
Technology
and
Cybersecurity
Committee
Other
positions
(1)
Total
José Miguel
Andrés
Torrecillas
129
111
66
36
115
50
507
Jaime Caruana
Lacorte
129
167
165
107
567
Raúl Galamba
de Oliveira
(2)
107
71
32
211
Belén Garijo
López
129
66
107
46
349
Sunir Kumar
Kapoor
129
43
172
Lourdes Máiz
Carro
129
66
43
238
José
Maldonado
Ramos
129
167
46
342
Ana Peralta
Moreno
129
66
43
238
Juan Pi Llorens
129
214
46
43
80
512
Ana Revenga
Shanklin
(2)
97
71
168
Susana
Rodríguez
Vidarte
129
167
107
46
449
Carlos Salazar
Lomelín
(2)
97
29
125
Jan Verplancke
129
29
43
200
Total
(3)
1,588
611
431
606
250
301
161
130
4,078
(1) Amounts received during the 2020 financial year by José Miguel Andrés Torrecillas, in his capacity as Deputy Chair of the Board of
Directors, and by Juan Pi Llorens, in his capacity as Lead Director.
(2) Directors appointed by the General Shareholders’ Meeting held on 13 March 2020. Remunerations paid based on the date on which
the position was accepted.
(3) Includes remuneration paid for membership on the Board and its various committees during the 2020 financial year. The composition
of these committees was amended by resolution of the Board of Directors dated 29 April 2020.
Also, during 2020 financial year, €95 thousand was paid out in casualty and healthcare insurance premiums for non-
executive members of the Board of Directors.
In addition, Tomás Alfaro Drake and Carlos Loring Martínez de Irujo, who left their roles as directors on 13 March 2020,
received a total of €54 thousand and €111 thousand, respectively, for their membership of the Board and of the various
Board Committees during the first quarter of the financial year. The Bank has also paid out a total of €18 thousand in
casualty and healthcare insurance premiums.
Remuneration received by executive directors in 2020
During the 2020 financial year, the executive directors received the amount of the Annual Fixed Remuneration
corresponding to such financial year, established for each director in the Remuneration Policy for BBVA Directors, which
was approved by the General Shareholders’ Meeting held on 15 March 2019.
In addition, the executive directors received their Annual Variable Remuneration (“AVR”) for the 2019 financial year, which,
in accordance with the settlement and payment system set out in the remuneration policy applicable to such year, was
due to be paid to them during the 2020 financial year.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
In application of this settlement and payment system:
●
40% of the 2019 Annual Variable Remuneration corresponding to executive directors was paid in the 2020
financial year (the Upfront Portion); in equal parts in cash and BBVA shares.
●
The remaining 60% of the Annual Variable Remuneration has been deferred (40% in cash and 60% in shares) for
a period of five years (the Deferred Portion), and its accrual and payment will be subject to compliance with a series
of multi-year indicators. The application of these indicators, calculated over the first three years of deferral, may
lead to the reduction or even forfeit of the Deferred Portion, even in its entirety, but in no event may it be increased.
Provided that the relevant conditions are met, the resulting amount will then be paid, in cash and in BBVA shares,
according to the following payment schedule: 60% in 2023, 20% in 2024 and the remaining 20% in 2025.
●
All of the shares delivered to the executive directors as AVR, including both as part of the Upfront Portion and the
Deferred Portion, will be withheld for a one year lock-up period after delivery, except for the shares transferred to
honor the payment of taxes accruing on the shares received.
●
The Deferred Portion of the Annual Variable Remuneration payable in cash will be subject to updating under the
terms established by the Board of Directors.
●
Executive directors may not use personal hedging strategies or insurance in connection with the remuneration and
responsibility that may undermine the effects of alignment with prudent risk management.
●
Over the entire deferral and withholding period, the Annual Variable Remuneration for the executive directors will
be subject to variable remuneration reduction and recovery arrangements ("malus" and "clawback").
●
The variable component of the remuneration for executive directors corresponding to the 2019 financial year is
limited to a maximum amount of 200% of the fixed component of the total remuneration, as agreed by the General
Shareholders’ Meeting held during such financial year.
Additionally, upon receipt of the shares, executive directors will not be allowed to transfer a number equivalent to twice
their Annual Fixed Remuneration for at least three years after their delivery.
In 2020, the Group Executive Chairman and the Chief Executive Officer likewise received the deferred portion of their
Annual Variable Remuneration due that year for the 2016 financial year (50% of the Annual Variable Remuneration), after
being adjusted downwards following the results of the multi-year performance indicators. This remuneration was paid in
equal parts in cash and in shares, together with the corresponding update in cash, thus concluding the payment of the
Annual Variable Remuneration to the executive directors for the 2016 financial year.
In accordance with the above, the remunerations paid to executive directors during the 2020 financial year are indicated
below, individualized and itemized:
Annual Fixed Remuneration for 2020 (thousands of euro)
Group Executive Chairman
2,453
Chief Executive Officer
2,179
Total
4,632
In addition, in accordance with the current Remuneration Policy for BBVA Directors, during the 2020 financial year, the
Chief Executive Officer has received €654 thousand for the cash in lieu of pension item (equivalent to 30% of his Annual
Fixed Remuneration)—given that he does not have a retirement pension (see the Pension commitments section of this
Note)—and €600 thousand for the mobility allowance item.
2019 Annual Variable Remuneration (Upfront payment)
In cash
(1)
(thousands of euro)
In shares
(1)
Group Executive Chairman
636
126,470
Chief Executive Officer
571
113,492
Total
1,207
239,962
(1) Remuneration corresponding to the Upfront Portion (40%) of the AVR for the 2019 financial year (50% in cash and 50% in BBVA
shares).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
2016 Deferred Annual Variable Remuneration (Deferred Portion)
In cash
(1)
(thousands of euro)
In shares
(1)
Group Executive Chairman
656
89,158
Chief Executive Officer
204
31,086
Total
861
120,244
(1) Remunerations corresponding to deferred AVR for the 2016 financial year (50% of the AVR for 2016, in equal parts in cash and
shares), payment of which was due in 2020, together with its corresponding update in cash, and after a downwards adjustment
following the results of the multi-year performance indicators. In the case of both the Chairman and Chief Executive Officer, this
remuneration is associated with their previous positions.
In addition, the executive directors received remuneration in kind during the 2020 financial year, including insurance and
other premiums, amounting to a total of €360 thousand of which €228 thousand corresponds to the Group Executive
Chairman and €132 thousand to the Chief Executive Officer.
As Head of Global Economics & Public Affairs (Head of GE&PA), former executive director José Manuel González-
Páramo Martínez-Murillo, who left his role of director on 13 March 2020, received €168 thousand as fixed remuneration;
€174 thousand and 28,353 BBVA shares corresponding to the Upfront Portion (40%) of the AVR for the 2019 financial
year and to the Deferred Portion of the AVR for the 2016 financial year, payment of which was due in the 2020 financial
year, including the corresponding cash update; as well as €33 thousand as remuneration in kind.
Remuneration received by Senior Management in 2020
During the 2020 financial year, the members of Senior Management, excluding executive directors, received the amount
of the Annual Fixed Remuneration corresponding to such financial year.
In addition, they received the Annual Variable Remuneration for the 2019 financial year, which, in accordance with the
settlement and payment system set out in the remuneration policy applicable for such financial year, was due to be paid
to them during the 2020 financial year.
Under this settlement and payment system, the same rules as set out above for executive directors are applicable. These
include, among other things: 40% of the Annual Variable Remuneration, in equal parts cash and in BBVA shares, will be
paid in the financial year following the year to which it corresponds (the Upfront Portion), and the remaining 60% will be
deferred (40% in cash and 60% in shares) for a five-year period, with its accrual and payment being subject to compliance
with a series of multi-year indicators (the Deferred Portion), applying the same payment schedule established for executive
directors. The shares received will be withheld for a one year lock-up period (this will not apply to those shares transferred
to honor the payment of taxes arising therefrom). Likewise, senior management may not use personal hedging strategies
or insurance in connection with the remuneration; the variable component of the remuneration for senior management
corresponding to the 2019 financial year will be limited to a maximum amount of 200% of the fixed component of the total
remuneration; and over the entire deferral and withholding period, the Annual Variable Remuneration will be subject to
reduction and recovery (malus and clawback) arrangements.
Similarly, in accordance with the remuneration policy for this group applicable in 2016 and in application of the settlement
and payment system of the Annual Variable Remuneration for said financial year, the members of Senior Management
who were beneficiaries of such remuneration received in 2020 the deferred portion of the Annual Variable Remuneration
for the 2016 financial year, after being adjusted downwards following the results of the multi-year performance indicators.
This remuneration has been paid in equal parts in cash and in shares, along with its update in cash, concluding the
payment of this remuneration to the members of Senior Management for the 2016 financial year.
In accordance with the above, the remuneration paid during the 2020 financial year to all members of Senior Management
as a whole, who held that position as of 31 December, 2020 (15 members, excluding executive directors), is indicated
and itemized below:
Annual Fixed Remuneration for 2020 (thousands of euro)
Senior Management total
14,101
2019 Annual Variable Remuneration (Upfront Portion)
In cash
(thousands of euro)
In shares
Senior Management total
1,402
280,055
(1) Remuneration corresponding to the Upfront Portion (40%) of the AVR for the 2019 financial year (paid 50% in cash and 50% in
BBVA shares), as well as the upfront portion of the retention plans for two members of Senior Management.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
2016 Annual Variable Remuneration (Deferred Portion)
In cash
(thousands of euro)
In shares
Senior Management total
1,380
182,461
(1) Remuneration corresponding to deferred AVR for the 2016 financial year (50% of the AVR for 2016, in equal parts in cash and
in shares), payment of which was due in 2020, together with its corresponding update in cash, and after being adjusted
downwards following the results of the multi-year performance indicators.
In addition, all members of Senior Management, excluding executive directors, have received remuneration in kind during
the 2020 financial year, including insurance and other premiums, amounting to a total of €1,086 thousand.
Remuneration of executive directors due in 2021 and subsequent financial years
●
Annual Variable Remuneration for executive directors for the 2020 financial year
In view of the exceptional circumstances arising from the COVID-19 crisis, the two executive directors have voluntarily
waived the generation of the whole of the Annual Variable Remuneration corresponding to the 2020 financial year, so
they will not accrue any remuneration in this respect.
●
Deferred Annual Variable Remuneration for executive directors for the 2017 financial year
Following the end of 2020 financial year, the amount corresponding to the deferred Annual Variable Remuneration of
executive directors for the 2017 financial year has been determined, with delivery in 2021, if conditions are met in
accordance with the conditions set out in the remuneration policies applicable to the 2017 financial year and applicable to
each of them.
Thus, based on the result of each of the multi-year performance indicators set by the Board of Directors in 2017 to calculate
the deferred portion of this remuneration, and in application of the corresponding scales of achievement and their
corresponding targets and weightings, the final amount of the deferred Annual Variable Remuneration for the 2017
financial year has been determined.
As a result, the remuneration has been determined in an amount of €411 thousand and 83,692 BBVA shares, in the case
of the Group Executive Chairman and €307 thousand and 39,796 BBVA shares, in the case of the Chief Executive Officer,
which includes in both cases the corresponding updates.
●
Outstanding deferred Annual Variable Remuneration for executive directors
At year-end 2020, in accordance with the conditions established in the remuneration policies applicable in previous years,
in addition to 40% of the 2017 deferred AVR of the Group Executive Chairman, 60% of the Annual Variable Remuneration
corresponding to financial years 2018 and 2019 of both executive directors, remains deferred and is pending payment to
them, and will be received in future years if the applicable conditions are met.
Remunerations of Senior Management due in 2021 and subsequent financial years
●
Annual Variable Remuneration for Senior Management for the 2020 financial year
In view of the exceptional circumstances arising from the COVID-19 crisis, the members of Senior Management have,
like the executive directors, voluntarily waived the generation of the whole of the Annual Variable Remuneration
corresponding to the 2020 financial year, so they will not accrue any remuneration in this respect.
●
Deferred Annual Variable Remuneration for Senior Management for the 2017 financial year
Following the end of the 2020 financial year, the amount corresponding to the deferred Annual Variable Remuneration of
members of Senior Management (15 members as at 31 December, 2020, excluding executive directors) for the 2017
financial year has been determined, with delivery in 2021, if conditions are met, in accordance with the payment schedule
set out in the remuneration policies applicable to the 2017 financial year and applicable to each of them.
Thus, based on the result of each of the multi-year performance indicators set by the Board of Directors in 2017 to calculate
the deferred portion of this remuneration, and in application of the corresponding scales of achievement and their
corresponding targets and weightings, the amount of the deferred portion of the 2017 Annual Variable Remuneration for
members of Senior Management, with delivery in 2021, has been determined in the aggregate total amount, excluding
executive directors, of €610 thousand and 107,740 BBVA shares, including the corresponding updates.
●
Outstanding deferred Annual Variable Remuneration for the members of Senior Management
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
At year-end 2020, in accordance with the conditions established in the remuneration policies applicable in previous years,
in addition to 40% of the 2017 deferred AVR in the case of some members of Senior Management, 60% of the Annual
Variable Remuneration corresponding to financial years 2018 and 2019 remains deferred and is pending payment to all
members of Senior Management, and will be received in future years if the applicable conditions are met.
Fixed remuneration system with deferred delivery of shares for non-executive directors
BBVA has a fixed remuneration system in shares with deferred delivery for its non-executive directors, which was
approved by the General Shareholders' Meeting held on 18 March 2006 and extended by resolutions of the General
Shareholders' Meetings held on 11 March 2011 and 11 March 2016 for a further five year period in each case.
This system is based on the annual allocation to non-executive directors of a number of "theoretical shares" of BBVA
equivalent to 20% of the total remuneration in cash received by each director in the previous financial year, calculated
according to the average closing prices of BBVA shares during the 60 trading sessions prior to the dates of the Annual
General Shareholders' Meetings approving the corresponding financial statements for each financial year.
These shares will be delivered to each beneficiary, where applicable, after they leave directorship for any reason other
than serious breach of their duties.
The “theoretical shares” allocated to non-executive directors who are beneficiaries of the remuneration system in shares
with deferred delivery in the 2020 financial year, corresponding to 20% of the total remuneration received in cash by each
of them in the 2019 financial year, were as follows:
Theoretical shares
allocated in 2020
Theoretical shares
accumulated as at
31 December 2020
José Miguel Andrés Torrecillas
20,252
75,912
Jaime Félix Caruana Lacorte
22,067
31,387
Raúl Galamba de Oliveira
-
-
Belén Garijo López
14,598
62,126
Sunir Kumar Kapoor
7,189
22,915
Lourdes Máiz Carro
10,609
44,929
José Maldonado Ramos
14,245
108,568
Ana Peralta Moreno
10,041
15,665
Juan Pi Llorens
20,676
92,817
Ana Revenga Shanklin
-
-
Susana Rodríguez Vidarte
18,724
141,138
Carlos Salazar Lomelín
-
-
Jan Verplancke
7,189
12,392
Total
(1)
145,590
607,849
(1)
Furthermore, 8,984 “theoretical shares” were assigned to Tomás Alfaro Drake and 18,655 “theoretical shares” were assigned
Carlos Loring Martínez de Irujo, who left their roles as directors on 13 March 2020. After leaving their roles, both directors
received a number of BBVA shares equivalent to the total number of “theoretical shares” that each of them had accumulated
until that date (102,571 and 135,046 BBVA shares, respectively) by application of the system.
Pension commitments with executive directors and Senior Management
The Bank has not made pension commitments with non-executive directors.
With regard to the Group Executive Chairman, the Remuneration Policy for BBVA Directors establishes a pension
framework whereby he is eligible, provided that he does not leave his position as a result of a serious breach of his duties,
to receive a retirement pension, paid as a lump sum or in instalments, when he reaches the legally established retirement
age. The amount of this pension will be determined by the annual contributions made by the Bank, together with their
corresponding accumulated yields at that date.
The annual contribution to cover the retirement contingency for the Group Executive Chairman's defined-contribution
system, as established in the Remuneration Policy for BBVA Directors approved by the General Shareholders’ Meeting
in 2019, was determined as a result of the conversion of his previous defined-benefit rights into a defined-contribution
system, in the annual amount of €1,642 thousand. The Board of Directors may update this amount during the term of the
Policy, in the same way and under the same terms as it may update the Annual Fixed Remuneration.
15% of the aforementioned agreed annual contribution will be based on variable components and considered
“discretionary pension benefits”, and therefore subject to the conditions regarding delivery in shares, retention and
clawback established in the applicable regulations.
In the event the Group Executive Chairman’s contract terminates before reaching retirement age for reasons other than
serious breach of duties, the retirement pension due to the Group Executive Chairman upon reaching the legally
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
established age will be calculated based on the funds accumulated through the contributions made by the Bank under the
terms set out, up to that date, plus the corresponding accumulated yield, with no additional contributions to be made by
the Bank in any event from the time of termination.
With respect to the commitments to cover the contingencies for death and disability benefits for the Group Executive
Chairman, the Bank will undertake the payment of the corresponding annual insurance premiums in order to top up the
coverage of these contingencies.
In line with the above, during the 2020 financial year, the following amounts have been recorded to meet the pension
commitments for the Group Executive Chairman: an amount of €1,642 thousand with regard to the retirement contingency
and an amount of €377 thousand for the payment of premiums for the death and disability contingencies, as well as an
upwards adjustment of €15 thousand for “discretionary pension benefits” for the 2019 financial year, which were declared
at such financial year-end and had to be registered in the accumulated fund in 2020.
As of 31 December, 2020, the total accumulated amount of the fund to meet the retirement commitments for the Group
Executive Chairman amounts to €23,057 thousand.
With regard to the agreed annual contribution to the retirement contingency corresponding to the 2020 financial year, 15%
(€246 thousand) was registered in this financial year as “discretionary pension benefits”. Following year-end, the amount
was adjusted applying the same criteria used to determine the Annual Variable Remuneration for the rest of the Bank's
staff. Thus, the “discretionary pension benefits” for the 2020 financial year were determined in an amount of €148
thousand, following a downwards adjustment of €98 thousand. These “discretionary pension benefits” will be included in
the accumulated fund in the 2021 financial year and will be subject to the conditions established for these benefits in the
Remuneration Policy for BBVA Directors.
With regard to the Chief Executive Officer, in accordance with the provisions of the current Remuneration Policy for BBVA
Directors approved by the General Shareholders’ Meeting and his contract, the Bank is not required to make any
contributions to a retirement pension, although he is entitled to an annual cash sum instead of a retirement pension equal
to 30% of his Annual Fixed Remuneration. However, the Bank does have pension commitments to cover the death and
disability contingencies, for which purpose the corresponding annual insurance premiums are paid.
In accordance with the above, in the 2020 financial year, the Bank paid the Chief Executive Officer the fixed-remuneration
amount set out for cash in lieu of pension in the 'Remuneration received by executive directors in 2020' section of this
Note and furthermore, €253 thousand was recorded for the payment of the annual insurance premiums to cover the death
and disability contingencies.
In the case of the former executive director, the Head of GE&PA, €89 thousand were registered as contributions to fulfil
the pension commitments undertaken in proportion to the time he spent in office during the 2020 financial year. This
corresponds to: the sum of the annual contribution made to cover the retirement pension and the adjustment made to the
“discretionary pension benefits`” for the 2019 financial year that fell due in the 2020 financial year once the AVR for the
year 2019 had been determined (€52 thousand); and to the death and disability premiums (€37 thousand).
As of the date on which he left his position, the total accumulated fund to meet the retirement commitments for the former
executive director Head of GE&PA amounted to €1,404 thousand, with no additional contributions to be made by the Bank
from that point on.
In accordance with the same criteria used in the case of the Group Executive Chairman, the “discretionary pension
benefits” for the 2020 financial year of the former executive director Head of GE&PA (calculated in proportion to the time
he remained in office in 2020) were determined in an amount of €5 thousand, following a downwards adjustment of €3
thousand, and will be included in the accumulated fund in the 2021 financial year, subject to the conditions established in
the Remuneration Policy for BBVA Directors.
Furthermore, in the 2020 financial year, to meet the pension commitments for members of Senior Management
(15 members holding that position as at 31 December, 2020, excluding executive directors) it was recorded an amount of
€2,739 thousand corresponding to the contribution to the retirement contingency and of €978 thousand corresponding to
premiums to cover the death and disability contingencies, as well as an upwards adjustment of €12 thousand for
“discretionary pension benefits” for the 2019 financial year, which were declared at 2019 year-end and had to be registered
in the accumulated fund in 2020.
As at 31 December, 2020, the total accumulated amount of the fund to meet the retirement commitments for members of
Senior Management amounts to €22,156 thousand.
As for the executive directors, 15% of the agreed annual contributions for members of Senior Management to cover
retirement contingencies will be based on variable components and considered “discretionary pension benefits”, and are
therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with
the remuneration policy applicable to members of Senior Management.
For this purpose, with regard to the annual contribution for the retirement contingency registered in the 2020 financial
year, an amount of €405 thousand was registered in the 2020 financial year as “discretionary pension benefits” and,
following the end of the 2020 financial year, as for the Group Executive Chairman, this amount was adjusted applying the
same criteria used to determine the Annual Variable Remuneration for the rest of the Bank's staff, taking into account as
well the area and individual results of each senior manager established to this effects by the executive area. Accordingly,
the “discretionary pension benefits” for such financial year, corresponding to all members of Senior Management, were
determined to amount to a total of €255 thousand, following a downwards adjustment of €150 thousand. These
“discretionary pension benefits” will be included in the accumulated fund in the 2021 financial year, and will be subject to
the conditions established for these benefits in the remuneration policy applicable to members of Senior Management, in
accordance with the regulations applicable to BBVA on this matter.
Payments for the extinction of the contractual relationship
In accordance with the Remuneration Policy for BBVA Directors, the Bank has no commitments to pay severance benefits to
executive directors.
The contractual framework defined for the executive directors, in accordance with the Remuneration Policy for BBVA Directors,
establishes a post-contractual non-compete clause for executive directors, effective for a period of two (2) years after they leave
their role as BBVA executive directors, provided that they do not leave due to retirement, disability or serious breach of duties.
In compensation for this agreement, the Bank shall award them remuneration of an amount equivalent to their Annual Fixed
Remuneration for each year of the non-compete agreement, which will be awarded monthly over the course of the two years.
Accordingly, the former executive director Head of GE&PA, who left his role on 13 March 2020, received for this concept, €625
thousand during the 2020 financial year.
With regard to Senior Management, excluding executive directors, during the 2020 financial year, the Bank paid out a total of
€2,185 thousand resulting from the extinction of the contractual relationship with one member of Senior Management and in
fulfilment of the provisions of the member’s contract (for the payment of legal severance benefits and notice). This contract
includes the right to receive the corresponding legal severance pay, provided that the member of Senior Management does not
leave of his own will, for retirement, disability or due to a serious breach of duties, which will be calculated in accordance with
the provisions of applicable labor regulations, and a notice clause. In addition, the contract establishes a non-compete clause,
effective for a period of one (1) year after the member leaves the role as a senior manager of BBVA, provided that the member
does not leave due to retirement, disability or serious breach of duties. In compensation for this agreement, the member of
Senior Management received a total of €898 thousand during 2020.
These payments comply with the conditions set out in the regulations applicable to the group of employees with a
material impact on the Group's risk profile, to which members of Senior Management belong.
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as
amended thereafter, which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language
version prevails.
50. Other information
50.1 Environmental impact
Given the activities the Bank engage in, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that could
have a significant effect on its equity, financial situation and profits. Consequently, as of December 31, 2020, there is no item included that
requires disclosure in an environmental information report pursuant to Ministry JUS/471/2018, of March 21, by which the new model for the
presentation in the Commercial Register of the consolidated annual accounts of the subjects obliged to its publication is approved.
50.2 Breakdown of agents of credit institutions
Appendix XIII contains a list of the Bank's agents as required by article 21 of Royal Decree 84/2015, dated February 13, of the Ministry of
Economy and Finance.
50.3 Report on the activity of the Customer Care Service and the Customer Ombudsman
The report on the activity of the Customer Care Service and the Customer Ombudsman, required pursuant to Article 17 of Ministry of
Economy Order ECO/734/2004 dated March 11, is included in the Management Report accompanying these financial statements.
50.4 Mortgage market policies and procedures
The disclosure required by Bank of Spain Circular 5/2011 under the provisions of Spanish Royal Decree 716/2009, of April 24, (implementing
certain aspects of Act 2/1981, of March 25, on the regulation of the mortgage market and other mortgage and financial market regulations)
is detailed in Appendix X.
50.5 Reporting requirements of the Spanish National Securities Market Commission (CNMV)
Dividends paid
The table below presents the dividends per share paid in cash in 2020 and 2019 (cash basis accounting, regardless of the year in which
they are accrued). For a complete analysis of all remuneration awarded to shareholders in 2020 and 2019 (see Note 3).
Dividends Paid
2020
2019
% Over
Nominal
Euros per
Share
Amount
(Millions of
Euros)
% Over
Nominal
Euros per
share
Amount
(Millions of
Euros)
Ordinary shares
32.65%
0.16
1,067
53.06%
0.26
1,734
Rest of shares
-
-
-
-
-
-
Total dividends paid in cash
32.65%
0.16
1,067
53.06%
0.26
1,734
Dividends with charge to income
32.65%
0.16
1,067
53.06%
0.26
1,734
Dividends with charge to reserve or share
premium
-
-
-
-
-
-
Dividends in kind
-
-
-
-
-
-
Interest income by geographical area
The breakdown of the balance under the heading “Interest Income and similar income” in the accompanying income statements by
geographical area is as follows:
Interest income. Breakdown by geographical area (Millions of Euros)
Notes
2020
2019
Domestic
4,168
4,352
Foreign
461
581
European Union
154
209
Eurozone
154
162
No Eurozone
-
47
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Rest of countries
307
372
Total
33.1
4,629
4,933
Number of employees
The breakdown of the average number of employees in the Bank in 2020 and 2019, by gender, is as follows:
Average number of employees
2020
2019
Male
Female
Male
Female
Management team
764
249
799
250
Other line personnel
10,259
10,696
10,577
10,861
Clerical staff
826
1,366
1,014
1,612
General services
-
-
-
-
Branches abroad
556
423
561
439
Total
12,405
12,734
12,952
13,162
During 2020 and 2019, the average number of handicap employees with disabilities greater than or equal to 33% was 152 employees and
148, respectively.
The breakdown of the number of employees in the Bank as of December 31, 2020 and 2019, by category and gender, is as follows:
Number of employees at the end of year. Professional category and gender
2020
2019
Male
Female
Male
Female
Management team
755
251
801
252
Other line personnel
10,153
10,639
10,454
10,814
Clerical staff
806
1,367
1,001
1,599
General services
-
-
-
-
Branches abroad
548
421
558
433
Total
12,262
12,678
12,814
13,098
50.6. Responsible lending and consumer credit granting
BBVA has incorporated the best practices of responsible lending and credit granting to Retail Customers, and has policies and procedures
that contemplate these practices complying with the provisions of the Central Bank of Spain and the Ministry of Economy and Finance.
Specifically, the Corporate Retail Credit Risk Policy (approved by the Executive Committee of the Board of Directors of the Bank on
September 18, 2019) and the Rules and the Operating Frameworks derived from it, establish policies, practices and procedures in relation
to responsible granting of loans and credit to Retail Customers.
In compliance with the different Regulation of the Bank of Spain of Economy and Finance, the following summary of those policies contained
in the Corporate Retail Credit Risk Policy BBVA is provided:
contracting financial products to hedge interest rate and exchange rate risks.
extensions and value of collateral, regardless revaluations thereof;
personal guarantee;
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
in default;
In order to maintain an effective monitoring of these policies, BBVA has the following control mechanisms:
these principles in management;
51. Subsequent events
On January 22, 2021 and after obtaining all required authorizations, BBVA has completed the sale to Banco GNB Paraguay, S.A., an
affiliate of Grupo Gilinski, of its 100% direct and indirect stake share capital in Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (“BBVA
Paraguay”).
The amount received by BBVA Group amounts to approximately USD250 million (€210 million). The transaction results in a capital loss of
approximately 9 million euros net of taxes on the Group income statement. Also this operation will have a positive impact on BBVA Group’s
Common Equity Tier 1 (fully loaded) of approximately 6 basis points, that will be recognized in BBVA Group´s 2021 first quarter consolidated
financial statements (See Note 14).
On January 29, 2021, it was announced that a cash distribution in the amount of €0.059 gross per share as shareholder remuneration in
relation to the Group’s result in the 2020 financial year was expected to be submitted to the relevant governing bodies of BBVA for
consideration (see Note 3).
From January 1, 2020 to the date of preparation of these Financial Statements, no other subsequent events not mentioned above in these
financial statements have taken place that could significantly affect the Group’s earnings or its equity position.
52. Explanation added for translation into English
Translation of financial statements originally issued in Spanish and prepared in accordance with Spanish generally accepted accounting
principles (Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU-IFRS for banks).
P.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
Appendices
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.149
APPENDIX I. BBVA Group Consolidated Financial Statements
Consolidated balance sheets as of December 31, 2020, 2019 and 2018
ASSETS (Millions of Euros)
2020
2019 (*)
2018 (*)
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS
65,520
44,303
58,196
FINANCIAL ASSETS HELD FOR TRADING
108,257
101,735
89,103
Derivatives
40,183
32,232
29,523
Equity instruments
11,458
8,892
5,254
Debt securities
23,970
26,309
25,577
Loans and advances to central banks
53
535
2,163
Loans and advances to credit institutions
20,499
21,286
14,566
Loans and advances to customers
12,095
12,482
12,021
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS
5,198
5,557
5,135
Equity instruments
4,133
4,327
3,095
Debt securities
356
110
237
Loans and advances to customers
709
1,120
1,803
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
1,117
1,214
1,313
Debt securities
1,117
1,214
1,313
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
69,440
61,183
56,337
Equity instruments
1,100
2,420
2,595
Debt securities
68,308
58,731
53,709
Loans and advances to credit institutions
33
33
33
FINANCIAL ASSETS AT AMORTIZED COST
367,668
439,162
419,660
Debt securities
35,737
38,877
32,530
Loans and advances to central banks
6,209
4,275
3,941
Loans and advances to credit institutions
14,575
13,649
9,163
Loans and advances to customers
311,147
382,360
374,027
DERIVATIVES - HEDGE ACCOUNTING
1,991
1,729
2,892
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK
51
28
(21)
JOINT VENTURES AND ASSOCIATES
1,437
1,488
1,578
Joint ventures
149
154
173
Associates
1,288
1,334
1,405
INSURANCE AND REINSURANCE ASSETS
306
341
366
TANGIBLE ASSETS
7,823
10,068
7,229
Properties, plant and equipment
7,601
9,816
7,066
For own use
7,311
9,554
6,756
Other assets leased out under an operating lease
290
263
310
Investment properties
222
252
163
INTANGIBLE ASSETS
2,345
6,966
8,314
Goodwill
910
4,955
6,180
Other intangible assets
1,435
2,010
2,134
TAX ASSETS
16,526
17,083
18,100
Current tax assets
1,199
1,765
2,784
Deferred tax assets
15,327
15,318
15,316
OTHER ASSETS
2,513
3,800
5,472
Insurance contracts linked to pensions
-
-
-
Inventories
572
581
635
Other
1,941
3,220
4,837
NON-CURRENT ASSETS AND DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
85,987
3,079
2,001
TOTAL ASSETS
736,176
697,737
675,675
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.150
Consolidated balance sheets as of December 31, 2020, 2019 and 2018
LIABILITIES AND EQUITY (Millions of Euros)
2020
2019 (*)
2018 (*)
FINANCIAL LIABILITIES HELD FOR TRADING
86,488
88,680
79,761
Derivatives
41,680
34,066
30,801
Short positions
12,312
12,249
11,025
Deposits from central banks
6,277
7,635
10,511
Deposits from credit institutions
16,558
24,969
15,687
Customer deposits
9,660
9,761
11,736
Debt certificates
-
-
-
Other financial liabilities
-
-
-
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
10,050
10,010
6,993
Deposits from central banks
-
-
-
Deposits from credit institutions
-
-
-
Customer deposits
902
944
976
Debt certificates
4,531
4,656
2,858
Other financial liabilities
4,617
4,410
3,159
Memorandum item: Subordinated liabilities
-
-
-
FINANCIAL LIABILITIES AT AMORTIZED COST
490,606
516,641
509,185
Deposits from central banks
45,177
25,950
27,281
Deposits from credit institutions
27,629
28,751
31,978
Customer deposits
342,661
384,219
375,970
Debt certificates
61,780
63,963
61,112
Other financial liabilities
13,358
13,758
12,844
Memorandum item: Subordinated liabilities
16,488
18,018
18,047
DERIVATIVES - HEDGE ACCOUNTING
2,318
2,233
2,680
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST
RATE RISK
-
-
-
LIABILITIES UNDER INSURANCE AND REINSURANCE CONTRACTS
9,951
10,606
9,834
PROVISIONS
6,141
6,538
6,772
Pensions and other post employment defined benefit obligations
4,272
4,631
4,787
Other long term employee benefits
49
61
62
Provisions for taxes and other legal contingencies
612
677
686
Commitments and guarantees given
728
711
636
Other provisions
479
457
601
TAX LIABILITIES
2,355
2,808
3,276
Current tax liabilities
545
880
1,230
Deferred tax liabilities
1,809
1,928
2,046
OTHER LIABILITIES
2,802
3,742
4,301
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE
75,446
1,554
-
TOTAL LIABILITIES
686,156
642,812
622,801
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.151
Consolidated balance sheets for the years ended December 31, 2020, 2019 and 2018
LIABILITIES AND EQUITY (Continued) (Millions of Euros)
2020
2019 (*)
2018 (*)
SHAREHOLDERS’ FUNDS
58,904
58,950
57,333
Capital
3,267
3,267
3,267
Paid up capital
3,267
3,267
3,267
Unpaid capital which has been called up
-
-
-
Share premium
23,992
23,992
23,992
Equity instruments issued other than capital
-
-
-
Other equity
42
56
50
Retained earnings
30,508
29,388
26,063
Revaluation reserves
-
-
3
Other reserves
(164)
(119)
(37)
Reserves or accumulated losses of investments in joint ventures and associates
(164)
(119)
(37)
Other
-
-
-
Less: treasury shares
(46)
(62)
(296)
Profit or loss attributable to owners of the parent
1,305
3,512
5,400
Less: interim dividends
-
(1,084)
(1,109)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(14,356)
(10,226)
(10,223)
Items that will not be reclassified to profit or loss
(2,815)
(1,875)
(1,284)
Actuarial gains (losses) on defined benefit pension plans
(1,474)
(1,498)
(1,245)
Non-current assets and disposal groups classified as held for sale
(65)
3
-
associates
-
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income
(1,256)
(404)
(155)
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair
value through other comprehensive income
-
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedged item)
-
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income (hedging instrument)
-
-
-
Fair value changes of financial liabilities at fair value through profit or loss attributable
to changes in their credit risk
(21)
24
116
Items that may be reclassified to profit or loss
(11,541)
(8,351)
(8,939)
Hedge of net investments in foreign operations (effective portion)
(62)
(896)
(218)
Foreign currency translation
(14,185)
(9,147)
(9,630)
Hedging derivatives. Cash flow hedges (effective portion)
10
(44)
(6)
Fair value changes of debt instruments measured at fair value through other
comprehensive income
2,069
1,760
943
Hedging instruments (non-designated items)
-
-
-
Non-current assets and disposal groups classified as held for sale
644
(18)
1
Share of other recognized income and expense of investments in joint ventures and
associates
(17)
(5)
(29)
MINORITY INTERESTS (NON-CONTROLLING INTERESTS)
5,471
6,201
5,764
Accumulated other comprehensive income (loss)
(6,949)
(5,572)
(5,290)
Other items
12,421
11,773
11,053
TOTAL EQUITY
50,020
54,925
52,874
TOTAL EQUITY AND TOTAL LIABILITIES
736,176
697,737
675,675
MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES) (Millions of Euros)
2020
2019 (*)
2018 (*)
Loan commitments given
132,584
130,923
118,959
Financial guarantees given
10,665
10,984
16,454
Other commitments given
36,190
39,209
35,098
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.152
Consolidated income statements for the years ended December 31, 2020, 2019 and 2018
CONSOLIDATED INCOME STATEMENTS (Millions of Euros)
2020
2019 (*)
2018 (*)
Interest and other income
22,389
27,762
26,954
Interest expense
(7,797)
(11,972)
(11,669)
NET INTEREST INCOME
14,592
15,789
15,285
Dividend income
137
153
145
Share of profit or loss of entities accounted for using the equity method
(39)
(42)
(7)
Fee and commission income
5,980
6,786
6,462
Fee and commission expense
(1,857)
(2,284)
(2,059)
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value
through profit or loss, net
139
186
191
Gains (losses) on financial assets and liabilities held for trading, net
777
419
640
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss,
net
208
143
96
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss,
net
56
(98)
139
Gains (losses) from hedge accounting, net
7
55
69
Exchange differences, net
359
581
13
Other operating income
492
639
929
Other operating expense
(1,662)
(1,943)
(2,021)
Income from insurance and reinsurance contracts
2,497
2,890
2,949
Expense from insurance and reinsurance contracts
(1,520)
(1,751)
(1,894)
GROSS INCOME
20,166
21,522
20,936
Administration costs
(7,799)
(8,769)
(9,020)
(4,695)
(5,351)
(5,205)
(3,105)
(3,418)
(3,816)
Depreciation and amortization
(1,288)
(1,386)
(1,034)
Provisions or reversal of provisions
(746)
(614)
(395)
Impairment or reversal of impairment on financial assets not measured at fair value through
profit or loss or net gains by modification
(5,179)
(3,552)
(3,681)
(5,160)
(3,470)
(3,680)
(19)
(82)
(1)
NET OPERATING INCOME
5,153
7,202
6,807
Impairment or reversal of impairment of investments in joint ventures and associates
(190)
(46)
-
Impairment or reversal of impairment on non-financial assets
(153)
(128)
(137)
(125)
(94)
(4)
(19)
(12)
(83)
(9)
(23)
(50)
Gains (losses) on derecognition of non-financial assets and subsidiaries, net
(7)
(5)
80
Negative goodwill recognized in profit or loss
-
-
-
Gains (losses) from non-current assets and disposal groups classified as held for sale not
qualifying as discontinued operations
444
23
815
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS
5,248
7,046
7,565
Tax expense or income related to profit or loss from continuing operations
(1,459)
(1,943)
(2,042)
PROFIT (LOSS) AFTER TAX FROM CONTINUING OPERATIONS
3,789
5,103
5,523
Profit (loss) after tax from discontinued operations
(1,729)
(758)
704
PROFIT FOR THE YEAR
2,060
4,345
6,227
ATTRIBUTABLE TO MINORITY INTEREST (NON-CONTROLLING INTERESTS)
756
833
827
ATTRIBUTABLE TO OWNERS OF THE PARENT
1,305
3,512
5,400
2020
2019 (*)
2018 (*)
EARNINGS PER SHARE (Euros)
0.14
0.47
0.75
0.40
0.58
0.64
0.40
0.58
0.64
(0.26)
(0.11)
0.11
(0.26)
(0.11)
0.11
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.153
Statements of Recognized Income and Expenses for the year ended December 31, 2020, 2019 and 2018
CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSE (Millions of Euros)
2020
2019 (*)
2018 (*)
PROFIT RECOGNIZED IN INCOME STATEMENT
2,060
4,345
6,227
OTHER RECOGNIZED INCOME (EXPENSE)
(5,375)
(286)
(2,605)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
(822)
(584)
(141)
Actuarial gains (losses) from defined benefit pension plans
(88)
(364)
(79)
Non-current assets and disposal groups held for sale
17
2
-
Share of other recognized income and expense of entities accounted for using
the equity method
-
-
-
Fair value changes of equity instruments measured at fair value through other
comprehensive income, net
(796)
(229)
(172)
Gains (losses) from hedge accounting of equity instruments at fair value through
other comprehensive income, net
-
-
-
Fair value changes of financial liabilities at fair value through profit or loss
attributable to changes in their credit risk
4
(133)
166
Income tax related to items not subject to reclassification to income statement
40
140
(56)
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT
(4,553)
298
(2,464)
Hedge of net investments in foreign operations (effective portion)
378
(687)
(244)
Valuation gains (losses) taken to equity
378
(687)
(244)
Transferred to profit or loss
-
-
-
Other reclassifications
-
-
-
Foreign currency translation
(4,873)
(104)
(2,186)
Translation gains (losses) taken to equity
(4,873)
(123)
(2,191)
Transferred to profit or loss
-
1
5
Other reclassifications
-
18
-
Cash flow hedges (effective portion)
230
(203)
(10)
Valuation gains (losses) taken to equity
230
(193)
(69)
Transferred to profit or loss
-
(10)
58
Transferred to initial carrying amount of hedged items
-
-
-
Other reclassifications
-
-
-
Debt securities at fair value through other comprehensive income
460
1,131
(860)
Valuation gains (losses) taken to equity
515
1,280
(725)
Transferred to profit or loss
(54)
(149)
(135)
Other reclassifications
-
-
-
Non-current assets and disposal groups held for sale
(492)
461
581
Valuation gains (losses) taken to equity
(472)
472
561
Transferred to profit or loss
(20)
-
20
Other reclassifications
-
(11)
-
Entities accounted for using the equity method
(13)
31
11
Income tax relating to items subject to reclassification to income
statements
(243)
(332)
244
TOTAL RECOGNIZED INCOME/EXPENSE
(3,315)
4,060
3,622
Attributable to minority interest (non-controlling interests)
(606)
552
(443)
Attributable to the parent company
(2,709)
3,509
4,065
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU -IFRS for banks (see notes 1 to 51). In the
event of a discrepancy, the original Spanish-language version prevails.
P.154
Consolidated statements of changes in equity for the years ended December 31, 2020, 2019 and 2018
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
Capital
Share
Premium
Equity
instruments
issued other
than capital
Other Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-) Treasury
shares
Profit or loss
attributable to
owners of the
parent
(-) Interim
dividends
Accumulated
other
comprehensive
income (loss)
Non-controlling interest
Total
2020
Accumulated
other
comprehensive
income (loss)
(Note 31)
Other
(Note 31)
Balances as of January 1, 2020 (*)
3,267
23,992
-
56
26,402
-
(125)
(62)
3,512
(1,084)
(7,235)
(3,526)
9,727
54,925
Effect of changes in accounting policies
-
-
-
-
2,985
-
6
-
-
-
(2,992)
(2,045)
2,045
-
Adjusted initial balance
3,267
23,992
-
56
29,388
-
(119)
(62)
3,512
(1,084)
(10,226)
(5,572)
11,773
54,925
Total income/expense recognized
-
-
-
-
-
-
-
-
1,305
-
(4,013)
(1,362)
756
(3,315)
Other changes in equity
-
-
-
(14)
1,120
-
(45)
16
(3,512)
1,084
(116)
(16)
(107)
(1,590)
Issuances of common shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuances of preferred shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Settlement or maturity of other equity instruments issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Conversion of debt on equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Common Stock reduction
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dividend distribution
-
-
-
-
(1,065)
-
-
-
-
-
-
-
(124)
(1,190)
Purchase of treasury shares
-
-
-
-
-
-
-
(807)
-
-
-
-
-
(807)
Sale or cancellation of treasury shares
-
-
-
-
-
-
-
823
-
-
-
-
-
822
Reclassification of other equity instruments to financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reclassification of financial liabilities to other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Transfers within total equity
-
-
-
-
2,585
-
(40)
-
(3,512)
1,084
(116)
(16)
16
-
Increase/Reduction of equity due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
(22)
-
-
-
-
-
-
-
-
-
(22)
Other increases or (-) decreases in equity
-
-
-
8
(399)
-
(4)
-
-
-
-
-
1
(394)
Balances as of December 31, 2020
3,267
23,992
-
42
30,508
-
(164)
(46)
1,305
-
(14,356)
(6,949)
12,421
50,020
(*) Balances as of December 31, 2019 as originally reported in the consolidated Financial Statements for the year 2019.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU -IFRS for banks (see notes 1 to 51). In the
event of a discrepancy, the original Spanish-language version prevails.
P.155
Consolidated statements of changes in equity for the years ended December 31, 2020, 2019 and 2018
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
Capital
Share
Premium
Equity
instruments
issued other
than capital
Other Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-) Treasury
shares
Profit or loss
attributable
to owners of
the parent
(-) Interim
dividends
Accumulated
other
comprehensive
income (loss)
Non-controlling interest
Total
2019 (*)
Accumulated
other
comprehensive
income (loss)
Other
Balances as of January 1, 2019 (**)
3,267
23,992
-
50
23,017
3
(57)
(296)
5,324
(975)
(7,215)
(3,236)
9,000
52,874
Effect of changes in accounting policies
-
-
-
-
3,045
-
20
-
76
(134)
(3,007)
(2,054)
2,054
-
Adjusted initial balance
3,267
23,992
-
50
26,063
3
(38)
(296)
5,400
(1,109)
(10,223)
(5,290)
11,054
52,874
Total income/expense recognized
-
-
-
-
-
-
-
-
3,512
-
(3)
(282)
833
4,060
Other changes in equity
-
-
-
6
3,326
(3)
(82)
234
(5,400)
25
-
-
(115)
(2,009)
Issuances of common shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuances of preferred shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Settlement or maturity of other equity instruments issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Conversion of debt on equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Common Stock reduction
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dividend distribution
-
-
-
-
(1,063)
-
-
-
-
(1,084)
-
-
(142)
(2,289)
Purchase of treasury shares
-
-
-
-
-
-
-
(1,088)
-
-
-
-
-
(1,088)
Sale or cancellation of treasury shares
-
-
-
-
13
-
-
1,322
-
-
-
-
-
1,335
Reclassification of other equity instruments to financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reclassification of financial liabilities to other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Transfers within total equity
-
-
-
-
4,364
(3)
(70)
-
(5,400)
1,109
-
-
-
-
Increase/Reduction of equity due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
(4)
-
-
-
-
-
-
-
-
-
(4)
Other increases or (-) decreases in equity
-
-
-
11
13
-
(13)
-
-
-
-
-
27
38
Balances as of December 31, 2019
3,267
23,992
-
56
29,388
-
(119)
(62)
3,512
(1,084)
(10,226)
(5,572)
11,773
54,925
(*) Presented for comparison purposes only.
(**) Balances as of December 31, 2018 as originally reported in the consolidated Financial Statements for the year 2018.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter, which adapts the EU -IFRS for banks (see notes 1 to 51). In the
event of a discrepancy, the original Spanish-language version prevails.
P.156
Consolidated statements of changes in equity for the years ended December 31, 2020, 2019 and 2018
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Millions of Euros)
Capital
Share
Premium
Equity
instruments
issued other
than capital
Other Equity
Retained
earnings
Revaluation
reserves
Other
reserves
(-) Treasury
shares
Profit or loss
attributable to
owners of the
parent
(-) Interim
dividends
Accumulated
other
comprehensive
income (loss)
Non-controlling interest
Total
2018 (*)
Accumulated
other
comprehensive
income (loss)
(Note 31)
Other
(Note 31)
Balances as of January 1, 2018 (**)
3,267
23,992
-
54
25,474
12
(44)
(96)
3,519
(1,043)
(8,792)
(3,378)
10,358
53,323
Effect of changes in accounting policies
-
-
-
-
348
-
30
-
(5)
(129)
(1,192)
(1,181)
1,209
(919)
Adjusted initial balance
3,267
23,992
-
54
25,822
12
(13)
(96)
3,514
(1,172)
(9,984)
(4,559)
11,567
52,404
Total income/expense recognized
-
-
-
-
-
-
-
-
5,400
-
(1,335)
(1,270)
827
3,622
Other changes in equity
-
-
-
(4)
240
(10)
(24)
(199)
(3,514)
63
1,096
540
(1,341)
(3,152)
Issuances of common shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuances of preferred shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of other equity instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Settlement or maturity of other equity instruments issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Conversion of debt on equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Common Stock reduction
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Dividend distribution
-
-
-
-
(996)
-
-
-
-
(1,109)
-
-
(378)
(2,483)
Purchase of treasury shares
-
-
-
-
-
-
-
(1,684)
-
-
-
-
-
(1,684)
Sale or cancellation of treasury shares
-
-
-
-
(24)
-
-
1,484
-
-
-
-
-
1,460
Reclassification of other equity instruments to financial
liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reclassification of financial liabilities to other equity
instruments
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Transfers within total equity
-
-
-
-
1,278
(10)
(23)
-
(3,514)
1,172
1,096
540
(540)
-
Increase/Reduction of equity due to business combinations
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
(19)
-
-
-
-
-
-
-
-
-
(19)
Other increases or (-) decreases in equity
-
-
-
15
(17)
-
(1)
-
-
-
-
-
(423)
(426)
Balances as of December 31, 2018
3,267
23,992
-
50
26,063
3
(38)
(296)
5,400
(1,109)
(10,223)
(5,290)
11,054
52,874
(*) Presented for comparison purposes only.
(**) Balances as of December 31, 2017 as originally reported in the consolidated Financial Statements for the year 2017.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.157
Consolidated statements of cash flows for the years ended December 31, 2020, 2019 and 2018
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS (Millions of Euros)
2020
2019 (*)
2018 (*)
A) CASH FLOWS FROM OPERATING ACTIVITIES (1 + 2 + 3 + 4 + 5)
39,349
(10,654)
13,436
1. Profit for the year
2,060
4,345
6,227
2. Adjustments to obtain the cash flow from operating activities
11,653
9,582
7,619
Depreciation and amortization
1,288
1,386
1,034
Other adjustments
10,365
8,196
6,585
3. Net increase/decrease in operating assets
(57,484)
(39,247)
(7,762)
Financial assets held for trading
(10,465)
(11,724)
1,524
Non-trading financial assets mandatorily at fair value through profit or loss
(241)
(318)
(643)
Other financial assets designated at fair value through profit or loss
97
99
349
Financial assets at fair value through other comprehensive income
(16,649)
(3,755)
(206)
Financial assets at amortized cost
(30,212)
(26,559)
(7,880)
Other operating assets
(15)
3,010
(906)
4. Net increase/decrease in operating liabilities
85,074
16,268
10,141
Financial liabilities held for trading
361
8,121
(611)
Other financial liabilities designated at fair value through profit or loss
647
2,680
1,338
Financial liabilities at amortized cost
84,853
8,016
10,481
Other operating liabilities
(787)
(2,549)
(1,067)
5. Collection/Payments for income tax
(1,955)
(1,602)
(2,789)
B) CASH FLOWS FROM INVESTING ACTIVITIES (1 + 2)
(37)
98
7,516
1. Investment
(1,185)
(1,494)
(2,154)
Tangible assets
(632)
(852)
(943)
Intangible assets
(491)
(528)
(552)
Investments in joint ventures and associates
(62)
(114)
(150)
Other business units
-
-
(20)
Non-current assets classified as held for sale and associated liabilities
-
-
(489)
Other settlements related to investing activities
-
-
-
2. Divestments
1,148
1,592
9,670
Tangible assets
558
128
731
Intangible assets
-
-
-
Investments in joint ventures and associates
307
98
558
Subsidiaries and other business units
-
5
4,268
Non-current assets classified as held for sale and associated liabilities
283
1,198
3,917
Other collections related to investing activities
-
162
196
C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2)
(2,069)
(2,702)
(5,092)
1. Payments
(5,316)
(7,418)
(8,995)
Dividends
(1,065)
(2,147)
(2,107)
Subordinated liabilities
(2,820)
(3,571)
(4,825)
Treasury stock amortization
-
-
-
Treasury stock acquisition
(807)
(1,088)
(1,686)
Other items relating to financing activities
(624)
(612)
(377)
2. Collections
3,247
4,716
3,903
Subordinated liabilities
2,425
3,381
2,451
Treasury shares increase
-
-
-
Treasury shares disposal
822
1,335
1,452
Other items relating to financing activities
-
-
-
D) EFFECT OF EXCHANGE RATE CHANGES
(4,658)
(634)
(344)
E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D)
32,585
(13,892)
15,516
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
44,303
58,196
42,680
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F)
76,888
44,303
58,196
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR (Millions of Euros)
2020
2019 (*)
2018 (*)
Cash
6,447
7,060
6,346
Balance of cash equivalent in central banks
53,079
31,755
43,881
Other financial assets
5,994
5,488
7,970
Less: Bank overdraft refundable on demand
-
-
-
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR
65,520
44,303
58,196
TOTAL CASH AND CASH EQUIVALENTS CLASSIFIED AS NON-CURRENT ASSETS AND DISPOSABLE
GROUPS CLASSIFIED AS HELD FOR SALE IN THE UNITED STATES
11,368
-
-
This Appendix is an integral part of Note 1.9 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.158
APPENDIX II. Additional information on subsidiaries and structured entities composing the
BBVA Group
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excluding
profit
(loss)
31.12.20
Profit
(loss)
31.12.20
ACTIVOS MACORP SL
SPAIN
REAL ESTATE
50.63
49.37
100.00
21
22
-
ADQUIRA MEXICO SA DE CV
MEXICO
COMMERCIAL
-
100.00
100.00
3
3
-
ALCALA 120 PROMOC. Y GEST.IMMOB. S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
15
19
(3)
ANIDA GRUPO INMOBILIARIO SL
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
1,464
1,552
(101)
ANIDA INMOBILIARIA, S.A. DE C.V.
MEXICO
INVESTMENT COMPANY
-
100.00
100.00
71
41
5
ANIDA OPERACIONES SINGULARES, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
1,341
1,443
(102)
ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V.
MEXICO
REAL ESTATE
-
100.00
100.00
27
23
4
ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA
PORTUGAL
REAL ESTATE
-
100.00
100.00
27
7
10
ANTHEMIS BBVA VENTURE PARTNERSHIP LLP
UNITED KINGDOM
INVESTMENT COMPANY
-
100.00
100.00
4
4
-
APLICA NEXTGEN OPERADORA S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
-
-
-
APLICA NEXTGEN SERVICIOS S.A. DE C.V
MEXICO
SERVICES
-
100.00
100.00
1
-
-
APLICA TECNOLOGIA AVANZADA SA DE CV
MEXICO
SERVICES
100.00
-
100.00
203
199
10
ARIZONA FINANCIAL PRODUCTS, INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
799
798
-
ARRAHONA AMBIT, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
12
21
-
ARRAHONA IMMO, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
53
114
-
ARRAHONA NEXUS, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
58
67
-
ARRELS CT FINSOL, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
64
79
-
ARRELS CT LLOGUER, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
5
6
-
ARRELS CT PATRIMONI I PROJECTES, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
22
23
(1)
ARRELS CT PROMOU SA
SPAIN
REAL ESTATE
-
100.00
100.00
28
32
(2)
AZLO BUSINESS, INC
UNITED STATES
SERVICES
-
100.00
100.00
-
23
(23)
BAHIA SUR RESORT S.C.
SPAIN
INACTIVE
99.95
-
99.95
-
1
-
BANCO BBVA ARGENTINA S.A.
ARGENTINA
BANKING
39.97
26.59
66.55
157
488
333
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY SA
URUGUAY
BANKING
100.00
-
100.00
110
164
28
BANCO INDUSTRIAL DE BILBAO SA
SPAIN
BANKING
-
99.93
99.93
48
47
-
BANCO OCCIDENTAL SA
SPAIN
BANKING
49.43
50.57
100.00
17
18
-
BANCO PROVINCIAL OVERSEAS NV
CURAÇAO
BANKING
-
100.00
100.00
49
47
2
BANCO PROVINCIAL SA - BANCO UNIVERSAL
VENEZUELA
BANKING
1.46
53.75
55.21
33
143
(9)
BBV AMERICA SL
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
79
627
12
BBVA (SUIZA) SA
SWITZERLAND
BANKING
100.00
-
100.00
98
122
9
BBVA AGENCIA DE SEGUROS COLOMBIA LTDA
COLOMBIA
INSURANCES SERVICES
-
100.00
100.00
-
-
-
BBVA ASSET MANAGEMENT SA SAF
PERU
FINANCIAL SERVICES
-
100.00
100.00
9
5
4
BBVA ASSET MANAGEMENT SA SGIIC
SPAIN
OTHER INVESTMENT COMPANIES
100.00
-
100.00
43
(66)
113
BBVA ASSET MANAGEMENT SA SOCIEDAD FIDUCIARIA (BBVA FIDUCIARIA)
COLOMBIA
FINANCIAL SERVICES
-
100.00
100.00
28
19
9
BBVA AUTOMERCANTIL COMERCIO E ALUGER DE VEICULOS AUTOMOVEIS LDA.
PORTUGAL
FINANCIAL SERVICES
100.00
-
100.00
6
6
-
BBVA BANCO CONTINENTAL SA (1)
PERU
BANKING
-
46.12
46.12
972
1,944
164
BBVA BANCOMER GESTION, S.A. DE C.V.
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
19
11
8
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
(1)
Full consolidation method is used according to accounting rules (see Glossary).
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.159
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excludin
g profit
(loss)
31.12.20
Profit
(loss)
31.12.20
BBVA BANCOMER OPERADORA SA DE CV
MEXICO
SERVICES
-
100.00
100.00
20
17
3
BBVA BANCOMER SA INSTITUCION DE BANCA MULTIPLE GRUPO FINANCIERO BBVA BANCOMER
MEXICO
BANKING
-
100.00
100.00
9,920
8,443
1,474
BBVA BANCOMER SEGUROS SALUD SA DE CV
MEXICO
INSURANCES SERVICES
-
100.00
100.00
8
8
1
BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
49
40
9
BBVA BOLSA SOCIEDAD AGENTE DE BOLSA S.A.
PERU
SECURITIES DEALER
-
100.00
100.00
4
3
1
BBVA BRASIL BANCO DE INVESTIMENTO SA
BRAZIL
BANKING
100.00
-
100.00
16
19
-
BBVA BROKER ARGENTINA SA
ARGENTINA
INSURANCES SERVICES
-
99.96
99.96
-
3
4
BBVA BROKER CORREDURIA DE SEGUROS Y REASEGUROS SA
SPAIN
FINANCIAL SERVICES
99.94
0.06
100.00
-
1
5
BBVA COLOMBIA SA
COLOMBIA
BANKING
77.41
18.06
95.47
355
1,155
112
BBVA CONSOLIDAR SEGUROS SA
ARGENTINA
INSURANCES SERVICES
87.78
12.22
100.00
9
18
17
BBVA CONSUMER FINANCE ENTIDAD DE DESARROLLO A LA PEQUEÑA Y MICRO EMPRESA
EDPYME SA (BBVA CONSUMER FINANCE - EDPYME)
PERU
FINANCIAL SERVICES
-
100.00
100.00
24
20
3
BBVA DATA & ANALYTICS SL
SPAIN
SERVICES
-
100.00
100.00
6
4
-
BBVA DISTRIBUIDORA DE SEGUROS S.R.L.
URUGUAY
FINANCIAL SERVICES
-
100.00
100.00
4
2
2
BBVA FINANCIAL CORPORATION
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
210
212
(2)
BBVA FINANZIA SPA
ITALY
IN LIQUIDATION
100.00
-
100.00
3
3
-
BBVA FOREIGN EXCHANGE INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
26
20
7
BBVA FRANCES ASSET MANAGMENT S.A. SOCIEDAD GERENTE DE FONDOS COMUNES DE
INVERSIÓN
ARGENTINA
FINANCIAL SERVICES
-
100.00
100.00
14
9
5
BBVA FUNDOS S.GESTORA FUNDOS PENSOES SA
PORTUGAL
PENSION FUND
MANAGEMENT
100.00
-
100.00
8
8
2
BBVA GLOBAL FINANCE LTD
CAYMAN
ISLANDS
PENSION FUNDS
MANAGEMENT
100.00
-
100.00
-
4
-
BBVA GLOBAL MARKETS BV
NETHERLANDS
FINANCIAL SERVICES
100.00
-
100.00
-
-
-
BBVA GLOBAL SECURITIES, B.V.
NETHERLANDS
OTHER ISSUERS
COMPANIES
100.00
-
100.00
-
-
-
BBVA HOLDING CHILE SA
CHILE
INVESTMENT COMPANY
61.22
38.78
100.00
139
315
26
BBVA INFORMATION TECHNOLOGY ESPAÑA SL
SPAIN
SERVICES
76.00
-
76.00
1
2
1
BBVA INSTITUIÇAO FINANCEIRA DE CREDITO SA
PORTUGAL
FINANCIAL SERVICES
49.90
50.10
100.00
39
54
4
BBVA INSURANCE AGENCY, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
48
43
5
BBVA INTERNATIONAL PREFERRED SOCIEDAD ANONIMA
SPAIN
FINANCIAL SERVICES
100.00
-
100.00
-
-
-
BBVA IRELAND PLC ( IN LIQUIDATION)
IRELAND
FINANCIAL SERVICES
100.00
-
100.00
2
3
-
BBVA LEASING MEXICO SA DE CV
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
51
126
8
BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A.
SPAIN
FINANCIAL SERVICES
-
100.00
100.00
10
(8)
17
BBVA MORTGAGE CORPORATION
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
2,799
2,730
68
BBVA NEXT TECHNOLOGIES OPERADORA, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
-
1
-
BBVA NEXT TECHNOLOGIES SLU
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
37
27
5
BBVA NEXT TECHNOLOGIES, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
1
2
1
BBVA OP3N S.L.
SPAIN
SERVICES
-
100.00
100.00
-
3
-
BBVA OPEN PLATFORM INC
UNITED STATES
SERVICES
-
100.00
100.00
2
10
(8)
BBVA PARAGUAY SA
PARAGUAY
BANKING
100.00
-
100.00
23
144
23
BBVA PENSIONES SA ENTIDAD GESTORA DE FONDOS DE PENSIONES
SPAIN
PENSION FUNDS
MANAGEMENT
100.00
-
100.00
13
17
8
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.160
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation (**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net carrying
amount
Equity
excluding
profit
(loss)
31.12.20
Profit (loss)
31.12.20
BBVA PERU HOLDING SAC
PERU
INVESTMENT COMPANY
100.00
-
100.00
124
902
76
BBVA PLANIFICACION PATRIMONIAL SL
SPAIN
FINANCIAL SERVICES
80.00
20.00
100.00
-
1
-
BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES
BOLIVIA
PENSION FUNDS MANAGEMENT
75.00
5.00
80.00
1
4
9
BBVA PROCESSING SERVICES INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
1
1
-
BBVA PROCUREMENT SERVICES AMERICA DEL SUR SpA IN LIQUIDATION
CHILE
IN LIQUIDATION
-
100.00
100.00
4
6
(1)
BBVA RE INHOUSE COMPAÑIA DE REASEGUROS, S.E.
SPAIN
INSURANCES SERVICES
-
100.00
100.00
39
47
12
BBVA REAL ESTATE MEXICO, S.A. DE C.V.
MEXICO
IN LIQUIDATION
-
100.00
100.00
-
-
-
BBVA SECURITIES INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
223
186
37
BBVA SEGUROS COLOMBIA SA
COLOMBIA
INSURANCES SERVICES
94.00
6.00
100.00
10
13
10
BBVA SEGUROS DE VIDA COLOMBIA SA
COLOMBIA
INSURANCES SERVICES
94.00
6.00
100.00
14
104
26
BBVA SEGUROS SA DE SEGUROS Y REASEGUROS
SPAIN
INSURANCES SERVICES
99.96
-
99.96
713
462
594
BBVA SERVICIOS, S.A.
SPAIN
COMMERCIAL
-
100.00
100.00
-
-
-
BBVA SOCIEDAD TITULIZADORA S.A.
PERU
FINANCIAL SERVICES
-
100.00
100.00
1
1
-
BBVA TRADE, S.A.
SPAIN
INVESTMENT COMPANY
-
100.00
100.00
13
13
-
BBVA TRANSFER HOLDING INC
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
104
87
18
BBVA TRANSFER SERVICES INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
77
66
11
BBVA USA
UNITED STATES
BANKING
-
100.00
100.00
8,687
10,394
(1,707)
BBVA USA BANCSHARES, INC.
UNITED STATES
INVESTMENT COMPANY
100.00
-
100.00
9,018
11,136
(1,632)
BBVA VALORES COLOMBIA SA COMISIONISTA DE BOLSA
COLOMBIA
SECURITIES DEALER
-
100.00
100.00
10
9
-
BBVA WEALTH SOLUTIONS, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
15
10
4
BILBAO VIZCAYA HOLDING SA
SPAIN
INVESTMENT COMPANY
89.00
11.00
100.00
67
132
(77)
CAIXA MANRESA IMMOBILIARIA ON CASA SL
SPAIN
REAL ESTATE
100.00
-
100.00
2
2
-
CAIXA TERRASSA SOCIETAT DE PARTICIPACIONS PREFERENTS SAU
SPAIN
FINANCIAL SERVICES
100.00
-
100.00
-
1
(1)
CAIXASABADELL PREFERENTS SA
SPAIN
FINANCIAL SERVICES
100.00
-
100.00
-
1
-
CARTERA E INVERSIONES SA CIA DE
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
92
127
(3)
CASA DE BOLSA BBVA BANCOMER SA DE CV
MEXICO
SECURITIES DEALER
-
100.00
100.00
39
20
19
CATALONIA GEBIRA, S.L. (IN LIQUIDATION)
SPAIN
REAL ESTATE
-
100.00
100.00
-
-
-
CATALONIA PROMODIS 4, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
1
1
-
CATALUNYACAIXA IMMOBILIARIA SA
SPAIN
REAL ESTATE
100.00
-
100.00
315
314
-
CATALUNYACAIXA SERVEIS SA
SPAIN
SERVICES
100.00
-
100.00
2
2
-
CDD GESTIONI S.R.L.
ITALY
REAL ESTATE
100.00
-
100.00
-
-
-
CETACTIUS SL
SPAIN
REAL ESTATE
100.00
-
100.00
1
1
-
CIDESSA DOS, S.L.
SPAIN
INVESTMENT COMPANY
-
100.00
100.00
15
15
-
CIERVANA SL
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
53
54
(2)
COMERCIALIZADORA CORPORATIVA SAC
PERU
FINANCIAL SERVICES
-
50.00
50.00
-
-
-
COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A.
COLOMBIA
SERVICES
-
100.00
100.00
5
4
2
COMPAÑIA CHILENA DE INVERSIONES SL
SPAIN
INVESTMENT COMPANY
99.97
0.03
100.00
221
249
10
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.161
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excluding
profit
(loss)
31.12.20
Profit
(loss)
31.12.20
COMPASS CAPITAL MARKETS, INC.
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
6,866
6,799
67
COMPASS GP, INC.
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
41
41
-
COMPASS INSURANCE TRUST
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
COMPASS LIMITED PARTNER, INC.
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
6,027
5,960
66
COMPASS LOAN HOLDINGS TRS, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
68
68
-
COMPASS MORTGAGE FINANCING, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
COMPASS SOUTHWEST, LP
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
4,973
4,925
48
COMPASS TEXAS MORTGAGE FINANCING, INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
CONSOLIDAR A.F.J.P SA
ARGENTINA
IN LIQUIDATION
46.11
53.89
100.00
1
1
-
CONTENTS AREA, S.L.
SPAIN
SERVICES
-
100.00
100.00
4
4
-
CONTINENTAL DPR FINANCE COMPANY
CAYMAN ISLANDS
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
CONTRATACION DE PERSONAL, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
8
7
1
CORPORACION GENERAL FINANCIERA SA
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
510
1,453
9
COVAULT, INC
UNITED STATES
SERVICES
-
100.00
100.00
-
3
(2)
DALLAS CREATION CENTER, INC
UNITED STATES
SERVICES
-
100.00
100.00
2
2
-
DATA ARCHITECTURE AND TECHNOLOGY MEXICO SA DE CV
MEXICO
SERVICES
-
100.00
100.00
1
1
-
DATA ARCHITECTURE AND TECHNOLOGY S.L.
SPAIN
SERVICES
-
51.00
51.00
-
3
-
DATA ARQUITECTURE AND TECHNOLOGY OPERADORA SA DE CV
MEXICO
SERVICES
-
100.00
100.00
-
-
-
DENIZEN FINANCIAL, INC
UNITED STATES
SERVICES
-
100.00
100.00
1
1
-
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1859
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1860
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
DISTRITO CASTELLANA NORTE, S.A.
SPAIN
REAL ESTATE
-
75.54
75.54
107
153
(4)
ECASA, S.A.
CHILE
FINANCIAL SERVICES
-
100.00
100.00
30
24
6
EMPRENDIMIENTOS DE VALOR S.A.
URUGUAY
PAYMENT ENTITIES
-
100.00
100.00
2
2
-
ENTRE2 SERVICIOS FINANCIEROS E.F.C SA
SPAIN
FINANCIAL SERVICES
100.00
-
100.00
9
9
-
EUROPEA DE TITULIZACION SA SGFT
SPAIN
FINANCIAL SERVICES
88.24
-
88.24
2
17
3
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION(1)
MEXICO
REAL ESTATE
-
42.40
42.40
-
1
-
F/253863 EL DESEO RESIDENCIAL
MEXICO
REAL ESTATE
-
65.00
65.00
-
1
-
FIDEICOMISO 28991-8 TRADING EN LOS MCADOS FINANCIEROS
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
3
2
-
FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
48
45
4
FIDEICOMISO F/403112-6 DE ADMINISTRACION DOS LAGOS
MEXICO
REAL ESTATE
-
100.00
100.00
-
-
-
FIDEICOMISO HARES BBVA BANCOMER F/ 47997-2
MEXICO
REAL ESTATE
-
100.00
100.00
4
1
3
FIDEICOMISO INMUEBLES CONJUNTO RESIDENCIAL HORIZONTES DE VILLA CAMPESTRE
COLOMBIA
REAL ESTATE
-
100.00
100.00
-
1
-
FIDEICOMISO LOTE 6.1 ZARAGOZA
COLOMBIA
REAL ESTATE
-
59.99
59.99
-
2
-
FIDEICOMISO SCOTIABANK INVERLAT S A F100322908
MEXICO
REAL ESTATE
-
100.00
100.00
2
2
-
FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER
MEXICO
IN LIQUIDATION
-
100.00
100.00
5
4
-
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. IN LIQUIDATION
SPAIN
IN LIQUIDATION
-
60.00
60.00
-
-
-
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
(1) Full consolidation method is used according to accounting rules (see Glossary).
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.162
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excluding
profit (loss)
31.12.20
Profit (loss)
31.12.20
FORUM COMERCIALIZADORA DEL PERU SA
PERU
SERVICES
-
100.00
100.00
-
-
-
FORUM DISTRIBUIDORA DEL PERU SA
PERU
FINANCIAL SERVICES
-
100.00
100.00
6
5
-
FORUM DISTRIBUIDORA, S.A.
CHILE
FINANCIAL SERVICES
-
100.00
100.00
43
39
1
FORUM SERVICIOS FINANCIEROS, S.A.
CHILE
FINANCIAL SERVICES
-
100.00
100.00
244
208
25
FUTURO FAMILIAR, S.A. DE C.V.
MEXICO
IN LIQUIDATION
-
100.00
100.00
1
1
-
G NETHERLANDS BV
NETHERLANDS
INVESTMENT COMPANY
-
100.00
100.00
340
282
(3)
GARANTI BANK SA
ROMANIA
BANKING
-
100.00
100.00
258
316
17
GARANTI BBVA AS(1)
TURKEY
BANKING
49.85
-
49.85
4,679
6,228
775
GARANTI BBVA EMEKLILIK AS
TURKEY
INSURANCES SERVICES
-
84.91
84.91
105
63
59
GARANTI BBVA FACTORING AS
TURKEY
FINANCIAL SERVICES
-
81.84
81.84
19
17
6
GARANTI BBVA FILO AS
TURKEY
SERVICES
-
100.00
100.00
1
3
39
GARANTI BBVA LEASING AS
TURKEY
FINANCIAL SERVICES
-
100.00
100.00
126
108
18
GARANTI BBVA PORTFOY AS
TURKEY
FINANCIAL SERVICES
-
100.00
100.00
22
14
8
GARANTI BBVA YATIRIM AS
TURKEY
FINANCIAL SERVICES
-
100.00
100.00
89
28
61
GARANTI BILISIM TEKNOLOJISI VE TIC TAS
TURKEY
SERVICES
-
100.00
100.00
11
12
1
GARANTI DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY
CAYMAN ISLANDS
FINANCIAL SERVICES
-
100.00
100.00
-
(16)
(17)
GARANTI FILO SIGORTA ARACILIK HIZMETLERI A.S.
TURKEY
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
GARANTI HOLDING BV
NETHERLANDS
INVESTMENT COMPANY
-
100.00
100.00
280
340
-
GARANTI KONUT FINANSMANI DANISMANLIK HIZMETLERI AS (GARANTI MORTGAGE)
TURKEY
SERVICES
-
100.00
100.00
-
-
-
GARANTI KULTUR AS
TURKEY
SERVICES
-
100.00
100.00
-
-
-
GARANTI ODEME SISTEMLERI AS (GOSAS)
TURKEY
FINANCIAL SERVICES
-
100.00
100.00
-
2
-
GARANTI YATIRIM ORTAKLIGI AS(1)(2)
TURKEY
INVESTMENT COMPANY
-
3.61
3.61
-
4
-
GARANTIBANK BBVA INTERNATIONAL N.V.
NETHERLANDS
BANKING
-
100.00
100.00
595
585
7
GARRAF MEDITERRANIA, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
2
2
-
GESCAT GESTIO DE SOL SL
SPAIN
REAL ESTATE
100.00
-
100.00
11
11
-
GESCAT LLEVANT, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
5
3
3
GESCAT LLOGUERS SL
SPAIN
REAL ESTATE
100.00
-
100.00
3
4
-
GESCAT VIVENDES EN COMERCIALITZACIO SL
SPAIN
REAL ESTATE
100.00
-
100.00
89
89
-
GESTION DE PREVISION Y PENSIONES SA
SPAIN
PENSION FUND MANAGEMENT
60.00
-
60.00
9
15
7
GESTION Y ADMINISTRACION DE RECIBOS, S.A. - GARSA
SPAIN
SERVICES
-
100.00
100.00
1
1
-
GRAN JORGE JUAN SA
SPAIN
REAL ESTATE
100.00
-
100.00
424
423
14
GRUPO FINANCIERO BBVA BANCOMER SA DE CV
MEXICO
FINANCIAL SERVICES
99.98
-
99.98
6,678
9,374
1,747
GUARANTY BUSINESS CREDIT CORPORATION
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
30
30
-
GUARANTY PLUS HOLDING COMPANY
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
-
-
-
HOLVI PAYMENT SERVICE OY
FINLAND
FINANCIAL SERVICES
-
100.00
100.00
-
27
(17)
HUMAN RESOURCES PROVIDER, INC
UNITED STATES
SERVICES
-
100.00
100.00
302
299
3
HUMAN RESOURCES SUPPORT, INC
UNITED STATES
SERVICES
-
100.00
100.00
296
294
2
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
(1)
Full consolidation method is used according to accounting rules (see Glossary)
(2)
The percentage of voting rights owned by the Group entities in this company is 99.97%
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.163
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excluding
profit
(loss)
31.12.20
Profit
(loss)
31.12.20
INMESP DESARROLLADORA, S.A. DE C.V.
MEXICO
REAL ESTATE
-
100.00
100.00
17
16
1
INMUEBLES Y RECUPERACIONES CONTINENTAL SA
PERU
REAL ESTATE
-
100.00
100.00
39
37
2
INPAU, S.A.
SPAIN
REAL ESTATE
-
100.00
100.00
25
25
-
INVERAHORRO SL
SPAIN
INVESTMENT COMPANY
100.00
-
100.00
100
107
(7)
INVERPRO DESENVOLUPAMENT, S.L.
SPAIN
INVESTMENT COMPANY
-
100.00
100.00
4
9
1
INVERSIONES ALDAMA, C.A.
VENEZUELA
PENSION FUNDS MANAGEMENT
-
100.00
100.00
-
-
-
INVERSIONES BANPRO INTERNATIONAL INC NV(1)
CURAÇAO
INVESTMENT COMPANY
48.00
-
48.01
16
43
2
INVERSIONES BAPROBA CA
VENEZUELA
FINANCIAL SERVICES
100.00
-
100.00
-
-
-
INVERSIONES P.H.R.4, C.A.
VENEZUELA
INACTIVE
-
60.46
60.46
-
-
-
IRIDION SOLUCIONS IMMOBILIARIES SL
SPAIN
REAL ESTATE
100.00
-
100.00
2
2
-
JALE PROCAM, S.L. (IN LIQUIDATION)
SPAIN
IN LIQUIDATION
-
50.00
50.00
-
(57)
(4)
LIQUIDITY ADVISORS LP
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
1,071
1,055
16
MADIVA SOLUCIONES, S.L.
SPAIN
SERVICES
-
100.00
100.00
9
2
-
MISAPRE, S.A. DE C.V.
MEXICO
FINANCIAL SERVICES
-
100.00
100.00
-
-
-
MOMENTUM SOCIAL INVESTMENT HOLDING, S.L.
SPAIN
INVESTMENT COMPANY
-
100.00
100.00
7
7
1
MOTORACTIVE IFN SA
ROMANIA
FINANCIAL SERVICES
-
100.00
100.00
35
27
3
MOTORACTIVE MULTISERVICES SRL
ROMANIA
SERVICES
-
100.00
100.00
-
2
-
MULTIASISTENCIA OPERADORA S.A. DE C.V.
MEXICO
INSURANCES SERVICES
-
100.00
100.00
-
-
-
MULTIASISTENCIA SERVICIOS S.A. DE C.V.
MEXICO
INSURANCES SERVICES
-
100.00
100.00
-
-
-
MULTIASISTENCIA, S.A. DE C.V.
MEXICO
INSURANCES SERVICES
-
100.00
100.00
32
24
8
NOVA TERRASSA 3, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
6
6
-
OPCION VOLCAN, S.A.
MEXICO
REAL ESTATE
-
100.00
100.00
2
2
-
OPENPAY COLOMBIA SAS
COLOMBIA
PAYMENT ENTITIES
-
100.00
100.00
1
1
-
OPENPAY S.A. DE C.V.
MEXICO
PAYMENT ENTITIES
-
100.00
100.00
18
2
2
OPENPAY SERVICIOS S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
-
-
-
OPERADORA DOS LAGOS S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.00
1
1
-
OPPLUS OPERACIONES Y SERVICIOS SA
SPAIN
SERVICES
100.00
-
100.00
1
2
17
OPPLUS SAC (IN LIQUIDATION)
PERU
IN LIQUIDATION
-
100.00
100.00
1
1
-
P.I. HOLDINGS NO. 3, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
1
1
-
PARCSUD PLANNER, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
1
1
-
PECRI INVERSION SL
SPAIN
OTHER INVESTMENT COMPANIES
100.00
-
100.00
264
260
5
PENSIONES BBVA BANCOMER, S.A. DE C.V., GRUPO FINANCIERO BBVA BANCOMER
MEXICO
INSURANCES SERVICES
-
100.00
100.00
281
213
68
PHOENIX LOAN HOLDINGS, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
258
256
2
PI HOLDINGS NO. 1, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
77
77
-
PORTICO PROCAM, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
26
26
-
PROMOCIONES Y CONSTRUCCIONES CERBAT, S.L.U.
SPAIN
REAL ESTATE
-
100.00
100.00
8
8
-
PROMOTORA DEL VALLES, S.L.
SPAIN
REAL ESTATE
-
100.00
100.00
51
36
16
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
(**) In accordance with Article 3 of Royal Decree 1159/2010, of September 17, in order to determine the state, the voting power relating to subsidiaries was added to the voting power
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
(1)
Full consolidation method is used according to accounting rules (see Glossary)
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.164
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirec
t
Total
Net
carryin
g
amount
Equity
excludin
g profit
(loss)
31.12.20
Profit
(loss)
31.12.2
0
PROMOU CT 3AG DELTA, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
1
1
-
PROMOU CT EIX MACIA, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
4
4
-
PROMOU CT GEBIRA, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
2
2
-
PROMOU CT OPENSEGRE, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
5
5
1
PROMOU CT VALLES, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
2
2
-
PROMOU GLOBAL, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
17
18
-
PRONORTE UNO PROCAM, S.A.
SPAIN
PAYMENT ENTITIES
-
100.00
100.0
0
-
-
-
PROPEL VENTURE PARTNERS BRAZIL S.L.
SPAIN
PAYMENT ENTITIES
-
99.80
99.80
10
11
(1)
PROPEL VENTURE PARTNERS GLOBAL, S.L
SPAIN
FINANCIAL SERVICES
-
99.50
99.50
59
87
-
PROPEL VENTURE PARTNERS US FUND I, L.P.
UNITED STATES
VENTURE CAPITAL
-
100.00
100.0
0
144
122
22
PRO-SALUD, C.A.
VENEZUELA
INACTIVE
-
58.86
58.86
-
-
-
PROVINCIAL DE VALORES CASA DE BOLSA CA
VENEZUELA
SECURITIES DEALER
-
90.00
90.00
1
1
-
PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA
VENEZUELA
FINANCIAL SERVICES
-
100.00
100.0
0
1
1
-
PROV-INFI-ARRAHONA, S.L.
SPAIN
REAL ESTATE
-
100.00
100.0
0
6
6
-
PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A.
BOLIVIA
PENSION FUND MANAGEMENT
-
100.00
100.0
0
2
2
-
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA
ARGENTINA
BANKING
-
50.00
50.00
8
11
4
PUERTO CIUDAD LAS PALMAS, S.A.
SPAIN
REAL ESTATE
-
96.64
96.64
-
(26)
(1)
QIPRO SOLUCIONES S.L.
SPAIN
SERVICES
-
100.00
100.0
0
3
3
2
RALFI IFN SA
ROMANIA
FINANCIAL SERVICES
-
100.00
100.0
0
37
17
2
RPV COMPANY
CAYMAN
ISLANDS
FINANCIAL SERVICES
-
100.00
100.0
0
-
(1)
-
RWHC, INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.0
0
719
706
13
SAGE OG I, INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.0
0
-
-
-
SAGE OG2, LLC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.0
0
-
-
-
SATICEM GESTIO SL
SPAIN
REAL ESTATE
100.0
0
-
100.0
0
4
4
-
SATICEM HOLDING SL
SPAIN
REAL ESTATE
100.0
0
-
100.0
0
5
5
-
SATICEM IMMOBILIARIA SL
SPAIN
REAL ESTATE
100.0
0
-
100.0
0
16
16
-
SATICEM IMMOBLES EN ARRENDAMENT SL
SPAIN
REAL ESTATE
100.0
0
-
100.0
0
2
2
-
SEGUROS BBVA BANCOMER SA DE CV GRUPO FINANCIERO BBVA BANCOMER
MEXICO
INSURANCES SERVICES
-
100.00
100.0
0
373
177
196
SEGUROS PROVINCIAL CA
VENEZUELA
INSURANCES SERVICES
-
100.00
100.0
0
9
11
(1)
SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.0
0
5
5
-
SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V.
MEXICO
SERVICES
-
100.00
100.0
0
3
2
1
SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V.
MEXICO
SERVICES
-
100.00
100.0
0
15
14
2
SIMPLE FINANCE TECHNOLOGY CORP.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.0
0
40
67
(26)
SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA
SPAIN
SERVICES
100.0
0
-
100.0
0
63
71
(8)
SOCIEDAD GESTORA DEL FONDO PUBLICO DE REGULACION DEL MERCADO HIPOTECARIO
SA
SPAIN
PENSION FUNDS
MANAGEMENT
77.20
-
77.20
-
-
-
SPORT CLUB 18 SA
SPAIN
INVESTMENT COMPANY
100.0
0
-
100.0
0
9
10
(1)
TEXAS LOAN SERVICES LP
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.0
0
1,089
1,070
19
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2019. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.165
Additional information on subsidiaries and structured entities composing the BBVA Group
(Continued)
% Legal share of participation
(**)
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Equity
excluding profit
(loss)
31.12.20
Profit (loss)
31.12.20
TMF HOLDING INC.
UNITED STATES
INVESTMENT COMPANY
-
100.00
100.00
15
15
1
TRIFOI REAL ESTATE SRL
ROMANIA
REAL ESTATE
-
100.00
100.00
1
1
-
TUCSON LOAN HOLDINGS, INC.
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
16
15
1
UNIVERSALIDAD TIPS PESOS E-9
COLOMBIA
FINANCIAL SERVICES
-
100.00
100.00
-
26
-
UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA
SPAIN
REAL ESTATE
100.00
-
100.00
623
523
(3)
UPTURN FINANCIAL INC
UNITED STATES
FINANCIAL SERVICES
-
100.00
100.00
2
6
(4)
URBANIZADORA SANT LLORENC SA
SPAIN
INACTIVE
60.60
-
60.60
-
-
-
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L.
SPAIN
SERVICES
-
51.00
51.00
1
3
1
VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA
ARGENTINA
BANKING
-
51.00
51.00
13
19
7
(*) Amount without considering the interim dividends of the year, according to the provisional financial statements of each company, generally as of December 31, 2020. In the carrying
amount (net of provision), the Group´s ownership percentage has been applied, without considering the impairment of goodwill. Information on foreign companies at exchange rate as of
December 31, 2020.
directly held by the parent. Therefore, the number of votes corresponding to the parent company (including indirect control subsidiaries), corresponds to each subsidiary holding a direct
ownership interest.
This Appendix is an integral part of Note 14.1 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.166
APPENDIX III. Additional information on investments and jointly controlled companies
accounted for under the equity method of consolidation in the BBVA Group as of December 31,
2020
Acquisitions or increases of interest ownership in consolidated subsidiaries
Most significant companies are included, which together represent 99% of the total investment in this group.
% Legal share of
participation
Millions of Euros (*)
Affiliate entity data
Company
Location
Activity
Direct
Indirect
Total
Net
carrying
amount
Assets
31.12.20
Liabilities
31.12.20
Equity
excluding
profit
(loss)
31.12.20
Profit
(loss)
31.12.20
ASSOCIATES
ADQUIRA ESPAÑA, S.A.
SPAIN
COMMERCIAL
4
19
11
8
1
ATOM BANK PLC
UNITED KINGDOM
BANKING
64
3,253
3,089
239
(75)
AUREA, S.A. (CUBA)
CUBA
REAL ESTATE
4
9
1
8
-
BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A.
SPAIN
INSURANCES SERVICES
250
753
204
548
-
COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA
SPAIN
PUBLIC ENTITIES AND INSTITUTIONS
25
155
6
140
10
DIVARIAN PROPIEDAD, S.A.U.
SPAIN
REAL ESTATE
567
2,976
143
2,922
(89)
FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA
EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A
LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO
ELECTRONICOS
MEXICO
FINANCIAL SERVICES
1
5
-
7
(2)
METROVACESA SA
SPAIN
REAL ESTATE
285
2,910
652
2,341
(82)
REDSYS SERVICIOS DE PROCESAMIENTO SL
SPAIN
FINANCIAL SERVICES
14
103
32
69
2
ROMBO COMPAÑIA FINANCIERA SA
ARGENTINA
BANKING
7
91
72
16
2
SERVICIOS ELECTRONICOS GLOBALES SA DE CV
MEXICO
SERVICES
11
23
-
20
3
SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA
ESPAÑA
FINANCIAL SERVICES
8
45
19
27
(1)
SOLARISBANK AG (2)
GERMANY
BANKING
39
1,434
1,368
90
(24)
TELEFONICA FACTORING ESPAÑA SA
SPAIN
FINANCIAL SERVICES
4
81
67
7
8
TF PERU SAC
PERU
FINANCIAL SERVICES
1
5
1
3
1
JOINT VENTURES
ALTURA MARKETS SOCIEDAD DE VALORES SA
SPAIN
SECURITY DEALER
77
3,122
2,969
143
10
COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV
MEXICO
SERVICES
8
16
-
15
1
CORPORACION IBV PARTICIPACIONES EMPRESARIALES, (1)
SPAIN
INVESTMENT COMPANY
29
63
5
58
-
DESARROLLOS METROPOLITANOS DEL SUR, S.L.
SPAIN
REAL ESTATE
17
81
47
30
4
FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA (1)
MEXICO
REAL ESTATE
15
158
-
158
-
FIDEICOMISO F/402770-2 ALAMAR
MEXICO
REAL ESTATE
7
16
-
16
-
PROMOCIONS TERRES CAVADES, S.A.
SPAIN
REAL ESTATE
4
15
-
15
-
RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO
COLOMBIA
FINANCIAL SERVICES
36
571
499
65
7
VITAMEDICA ADMINISTRADORA, S.A. DE C.V (1)
MEXICO
SERVICES
5
18
9
8
1
(2) The percentage of voting rights owned by the Group entities in this company is 22.22%
This Appendix is an integral part of Note 14.2 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.167
APPENDIX IV. Changes and notification of investments and divestments in the BBVA Group in
2020
Acquisitions or increases of interest ownership in consolidated subsidiaries
Company (*)
Type of transaction
Total voting rights
controlled after the
disposal
Effective Date for the
Transaction (or Notification
Date)
ADQUIRA MEXICO SA DE CV
ACQUISITION
100.00
30-Sep-20
PROPEL VENTURE PARTNERS BRAZIL S.L.
CONSTITUTION
99.80
28-May-20
BBVA GLOBAL SECURITIES, B.V.
CONSTITUTION
100.00
07-Dec-20
(*)Variations of less than 0.1% have not been considered due to immateriality
Changes and notifications of participations in the BBVA Group in 2020 (continued)
Disposals or reduction of interest ownership in consolidated subsidiaries
Company (*)
Type of transaction
Total voting rights
controlled after the
disposal
Effective date for the
transaction (or notification
date)
CIDESSA UNO SL
MERGER
-
24-Nov-20
EL ENCINAR METROPOLITANO, S.A.
LIQUIDATION
-
1-Aug-20
DENIZEN GLOBAL FINANCIAL SAU
LIQUIDATION
-
25-Nov-20
FIDEICOMISO N.989 EN THE BANK OF NEW YORK MELLON SA INSTITUCION DE BANCA MULTIPLE FIDUCIARIO
(FIDEIC.00989 6 EMISION)
MERGER
-
30-Sep-20
FIDEICOMISO Nº 847 EN BANCO INVEX SA INSTITUCION DE BANCA MULTIPLE INVEX GRUPO FINANCIERO
FIDUCIARIO (FIDEIC. INVEX 4ª EMISION)
MERGER
-
30-Jun-20
BBVA CONSULTING ( BEIJING) LIMITED
LIQUIDATION
-
2-Dec-20
EL MILANILLO, S.A.
LIQUIDATION
-
27-Oct-20
F/403035-9 BBVA HORIZONTES RESIDENCIAL
DISPOSAL
-
31-Oct-20
HOLAMUNO AGENTE DE SEGUROS VINCULADO, S.L.U. IN LIQUIDATION
LIQUIDATION
-
14-Feb-20
HOLVI DEUTSCHLAND SERVICE GMBH (IN LIQUIDATION)
LIQUIDATION
-
14-Feb-20
ARRAHONA RENT, S.L.U.
LIQUIDATION
-
27-Jul-20
L'EIX IMMOBLES, S.L.
LIQUIDATION
-
27-Jul-20
ESPAIS SABADELL PROMOCIONS INMOBILIARIES, S.A.
LIQUIDATION
-
28-Jul-20
HABITATGES FINVER, S.L.
LIQUIDATION
-
28-Jul-20
HABITATGES JUVIPRO, S.L.
LIQUIDATION
-
28-Jul-20
CATALUNYACAIXA CAPITAL SA
MERGER
-
21-Sep-20
CLUB GOLF HACIENDA EL ALAMO, S.L.(IN LIQUIDATION)
LIQUIDATION
-
12-Aug-20
GESCAT SINEVA, S.L.
LIQUIDATION
-
29-Jul-20
GESCAT POLSKA SP ZOO
LIQUIDATION
-
12-Feb-20
EXPANSION INTERCOMARCAL SL
LIQUIDATION
-
28-Jul-20
NOIDIRI SL
LIQUIDATION
-
28-Jul-20
CAIXA MANRESA IMMOBILIARIA SOCIAL SL
LIQUIDATION
-
27-Jul-20
(*)Variations of less than 0.1% have not been considered due to immateriality
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.168
Changes and notifications of participations in the BBVA Group in 2020 (continued)
Business combinations and other acquisitions or increases of interest ownership in associates and
joint-ventures accounted for under the equity method
Company (*)
Type of transaction
Total voting rights
controlled after the
disposal
Effective date for the transaction
(or notification date)
ADQUIRA ESPAÑA, S.A.
CAPITAL REDUCTION
44.44
31-Mar-20
FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA
ACQUISITION
44.09
18-Aug-20
BBVA ALLIANZ SEGUROS Y REASEGUROS, S.A.
CONSTITUTION
50.00
05-May-20
PLAY DIGITAL SA
CONSTITUTION
33.33
27-May-20
(*)Variations of less than 0.1% have not been considered due to immateriality
Changes and notifications of participations in the BBVA Group in 2020 (continued)
Disposal or reduction of interest ownership in associates and joint-ventures companies accounted for
under the equity method
Company (*)
Type of transaction
Total voting rights
controlled after the
disposal
Effective date for the
transaction (or notification
date)
CAJA DE EMI. CON GAR. DE ANUALIDADES DEBIDA POR EL ESTADO SA
LIQUIDATION
-
13-Oct-20
BATEC MOBILITY, S.L.
DISPOSAL
-
28-Jan-20
CAPIPOTA PRODUCTIONS S.L.
DISPOSAL
-
10-Dec-20
FIDEICOMISO DE ADMINISTRACION REDETRANS
DISPOSAL
-
18-Sep-20
SOCIEDADE ALTITUDE SOFTWARE-SISTEMA E SERVIÇOS SA
DISPOSAL
-
30-Dec-20
SOLARISBANK AG(1)
CAPITAL INCREASE
17.59
30-Sep-20
PLAY DIGITAL SA
DILUTION
13.00
15-Dec-20
NOVA LLAR SANT JOAN, S.A. IN LIQUIDATION
LIQUIDATION
-
03-Apr-20
(*)Variations of less than 0.1% have not been considered due to immateriality
(1) The percentage of voting rights owned by the Group entities in this company is 22.22%
This Appendix is an integral part of Note 14.3 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.169
APPENDIX V. Fully consolidated subsidiaries with more than 10% owned by non-Group
shareholders as of December 31, 2020
% of voting rights controlled by the Bank
Company
Activity
Direct
Indirect
Total
BBVA BANCO CONTINENTAL SA
BANKING
-
46.12
46.12
BANCO PROVINCIAL SA - BANCO UNIVERSAL
BANKING
1.46
53.75
55.21
INVERSIONES BANPRO INTERNATIONAL INC NV
INVESTMENT COMPANY
48.00
-
48.01
PRO-SALUD, C.A.
NO ACTIVITY
-
58.86
58.86
INVERSIONES P.H.R.4, C.A.
NO ACTIVITY
-
60.46
60.46
BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES
PENSION FUND MANAGEMENT
75.00
5.00
80.00
COMERCIALIZADORA CORPORATIVA SAC
FINANCIAL SERVICES
-
50.00
50.00
DISTRITO CASTELLANA NORTE, S.A.
REAL ESTATE
-
75.54
75.54
GESTION DE PREVISION Y PENSIONES SA
PENSION FUND MANAGEMENT
60.00
-
60.00
F/253863 EL DESEO RESIDENCIAL
REAL ESTATE
-
65.00
65.00
DATA ARCHITECTURE AND TECHNOLOGY S.L.
SERVICES
-
51.00
51.00
VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA
BANKING
-
51.00
51.00
FIDEICOMISO LOTE 6.1 ZARAGOZA
REAL ESTATE
-
59.99
59.99
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION
REAL ESTATE
-
42.40
42.40
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L.
SERVICES
-
51.00
51.00
GARANTI BBVA EMEKLILIK AS
SERVICES
-
84.91
84.91
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. IN LIQUIDATION
IN LIQUIDATION
-
60.00
60.00
BBVA INFORMATION TECHNOLOGY ESPAÑA SL
SERVICES
76.00
-
76.00
JALE PROCAM, S.L. (IN LIQUIDATION)
IN LIQUIDATION
-
50.00
50.00
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA
BANKING
-
50.00
50.00
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.170
APPENDIX VI. BBVA Group’s structured entities. Securitization funds as of December, 31 2020
Millions of Euros
Securitization fund (consolidated)
Company
Origination
date
Total securitized
exposures at the
origination date
Total securitized
exposures as of
December 31, 2020 (*)
TDA 27 MIXTO, FTA
BBVA, S.A.
Dec-06
275
71
BBVA RMBS 16 FT
BBVA, S.A.
May-16
1,600
1,151
HIPOCAT 9 FTA
BBVA, S.A.
Nov-05
1,016
150
TDA TARRAGONA 1 FTA
BBVA, S.A.
Nov-07
397
85
BBVA RMBS15 FT
BBVA, S.A.
May-15
4,000
2,725
BBVA RMBS 5 FTA
BBVA, S.A.
May-08
5,000
2,043
TDA 22 MIXTO, FTA (UNNIM)
BBVA, S.A.
Dec-04
592
19
HIPOCAT 10 FTA
BBVA, S.A.
Jul-06
1,526
220
BBVA VELA SME 2020-1
BBVA, S.A.
Jun-20
1,245
957
TDA 19 MIXTO, FTA
BBVA, S.A.
Feb-04
600
18
BBVA CONSUMER AUTO 2020-1
BBVA, S.A.
Jun-20
1,100
1,100
BBVA RMBS 10 FTA
BBVA, S.A.
Jun-11
1,600
993
HIPOCAT 8 FTA
BBVA, S.A.
May-05
1,500
196
AYT HIP MIXTO V
BBVA, S.A.
Jul-06
120
26
BBVA RMBS 2 FTA
BBVA, S.A.
Mar-07
5,000
1,485
BBVA RMBS 18 FT
BBVA, S.A.
Nov-17
1,800
1,475
TDA 20 MIXTO, FTA
BBVA, S.A.
Jun-04
100
10
TDA 23 MIXTO, FTA
BBVA, S.A.
Mar-05
860
34
BBVA CONSUMO 9 FT
BBVA, S.A.
Mar-17
1,375
582
BBVA RMBS 14 FTA
BBVA, S.A.
Nov-14
700
406
AYT HIPOTECARIO MIXTO IV, FTA
BBVA, S.A.
Jun-05
100
13
BBVA RMBS 9 FTA
BBVA, S.A.
Apr-10
1,295
725
BBVA LEASING 2 FT
BBVA, S.A.
Jul-20
2,100
1,941
BBVA EMPRESAS 4 FTA
BBVA, S.A.
Jul-10
1,700
20
TDA 28 MIXTO, FTA
BBVA, S.A.
Jul-07
250
71
HIPOCAT 6 FTA
BBVA, S.A.
Sep-03
850
81
TDA 18 MIXTO, FTA
BBVA, S.A.
Nov-03
91
9
BBVA RMBS 3 FTA
BBVA, S.A.
Jul-07
3,000
1,222
BBVA CONSUMO 10 FT
BBVA, S.A.
Jul-19
2,000
1,945
BBVA LEASING 1 FTA
BBVA, S.A.
Jun-07
2,500
14
BBVA RMBS 11 FTA
BBVA, S.A.
Jun-12
1,400
875
BBVA RMBS 13 FTA
BBVA, S.A.
Jul-14
4,100
2,707
BBVA CONSUMO 8 FT
BBVA, S.A.
Jul-16
700
222
BBVA RMBS 12 FTA
BBVA, S.A.
Dec-13
4,350
2,735
BBVA CONSUMER AUTO 2018-1
BBVA, S.A.
Jun-18
800
557
BBVA RMBS 1 FTA
BBVA, S.A.
Feb-07
2,500
799
BBVA RMBS 19 FT
BBVA, S.A.
Nov-19
2,000
1,852
BBVA-6 FTPYME FTA
BBVA, S.A.
Jun-07
1,500
5
GAT VPO (UNNIM)
BBVA, S.A.
Jun-09
780
48
HIPOCAT 11 FTA
BBVA, S.A.
Mar-07
1,628
237
BBVA RMBS 17 FT
BBVA, S.A.
Nov-16
1,800
1,340
HIPOCAT 7 FTA
BBVA, S.A.
Jun-04
1,400
165
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.171
APPENDIX VII. BBVA Group’s structured entities. Securitization funds as of December 31, 2020
Issue type and data (Millions of Euros)
2020
2019
Interest rate in force in
2020
Fix (F) or variable (V)
Maturity date
Subordinated debt - Non-
convertible
January-05
-
49
0.64%
V
1/28/20
August-06
40
40
0.56%
V
8/9/21
August-06
46
46
0.56%
V
8/9/21
March-07
73
73
0.82%
V
Perpetual
April-07
68
68
0.80%
V
4/4/22
March-08
125
125
6.03%
V
3/3/33
50
50
4.06%
V
5/19/23
July-08
100
100
6.20%
F
7/4/23
February-17
1,000
1,000
3.50%
F
2/10/27
February-17
99
99
4.00%
F
2/24/32
March-17
65
65
4.00%
F
2/24/32
March-17
53
53
2.00%
V
3/16/27
March-17
98
107
5.70%
F
3/31/32
May-17
19
18
1.60%
F
5/24/27
May-17
150
150
2.54%
F
5/24/27
May-18
243
265
5.25%
F
5/29/33
February-19
750
750
2.58%
F
2/22/29
January-20
994
-
1.00%
F
1/16/30
July-20
334
-
3.10%
F
7/15/31
Subordinated debt -
convertible
February-15
-
1,500
6.75%
V
Perpetual
April-16
1,000
1,000
8.88%
V
Perpetual
May-17
500
500
5.88%
V
Perpetual
November-17
815
890
6.13%
V
Perpetual
September-18
1,000
1,000
5.88%
V
Perpetual
March-19
1,000
1,000
6.00%
V
Perpetual
September-19
815
890
6.50%
V
Perpetual
July-20
1,000
-
6.00%
V
Perpetual
Subtotal
10,437
9,839
Subordinated deposits
360
303
Total
10,797
10,142
This Appendix is an integral part of Note 20.4 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.172
APPENDIX VIII. Balance sheets held in foreign currency as of December 31, 2020 and 2019
2020 (Millions of Euros)
USD
Pounds
sterling
Other
currencies
TOTAL
Assets
Financial assets held for trading
4,955
3,019
1,049
9,022
Non-trading financial assets mandatorily at fair value through
profit or loss
84
5
48
137
Financial assets designated at fair value through other
comprehensive income
3,552
91
4,690
8,334
Financial assets at amortized cost
18,330
1,737
2,542
22,609
Investments in subsidiaries, joint ventures and associates
-
-
12,313
12,313
Tangible assets
8
4
8
20
Other assets
6,600
439
8,967
16,005
Total
33,528
5,295
29,618
68,440
Liabilities
-
-
-
-
Financial assets held for trading
4,553
210
234
4,997
Other financial liabilities designated at fair value through profit
or loss
2,028
263
469
2,760
Financial liabilities at amortized cost
26,183
4,035
1,557
31,776
Other liabilities
190
41
39
269
Total
32,954
4,550
2,299
39,802
2019 (Millions of Euros)
USD
Pounds
sterling
Other
currencies
TOTAL
Assets
Financial assets held for trading
4,408
1,636
1,290
7,334
Non-trading financial assets mandatorily at fair value through
profit or loss
42
-
52
94
Financial assets designated at fair value through other
comprehensive income
4,817
137
2,823
7,777
Financial assets at amortized cost
19,352
2,528
2,207
24,087
Investments in subsidiaries, joint ventures and associates
205
-
24,380
24,585
Tangible assets
10
6
9
25
Other Assets
2,924
173
787
3,884
Total
31,758
4,480
31,548
67,786
Liabilities
Financial assets held for trading
3,897
680
517
5,094
Other financial liabilities designated at fair value through profit
or loss
1,913
139
377
2,429
Financial liabilities at amortized cost
22,255
1,848
1,930
26,033
Other Liabilities
170
45
50
265
Total
28,235
2,712
2,874
33,821
This Appendix is an integral part of Note 2.12 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.173
APPENDIX IX. Income statement corresponding to the first and second half of 2020 and 2019
INCOME STATEMENTS (Millions of Euros)
Six months
ended June 30,
2020
Six months
ended June 30,
2019
Six months ended
December 31, 2020
Six months ended
December 31, 2019
Interest income
2,394
2,440
2,234
2,493
Interest expense
(614)
(784)
(501)
(764)
NET INTEREST INCOME
1,780
1,656
1,734
1,729
Dividend income
927
1,335
434
1,518
Fee and commission income
1,067
1,022
1,058
1,122
Fee and commission expense
(172,865)
(207,052)
(184,688)
(240,177)
Gains (losses) on derecognition of financial assets and
liabilities not measured at fair value through profit or
loss, net
140,816
18,491
(53,963)
88,936
Gains (losses) on financial assets and liabilities held for
trading, net
300,207
200,021
52,543
174,595
Gains (losses) on non-trading financial assets
mandatorily at fair value through profit or loss, net
8
8
21
28
Gains (losses) on financial assets and liabilities
designated at fair value through profit or loss, net
(65)
(82)
(4)
(19)
Gains (losses) from hedge accounting, net
10
34
3
(13)
Exchange differences, net
(65)
(117)
36
(16)
Other operating income
71
64
70
62
Other operating expense
(248)
(227)
(281)
(260)
GROSS INCOME
3,752
3,704
2,885
4,174
Administrative expense
(1,785)
(1,939)
(1,768)
(1,942)
Personnel expense
(1,057)
(1,185)
(1,087)
(1,209)
Other administrative expense
(728)
(753)
(680)
(733)
Depreciation and amortization
(332)
(333)
(331)
(340)
Provisions or reversal of provisions
(372)
(208)
(102)
(184)
Impairment or reversal of impairment on financial assets
not measured at fair value through profit or loss or net
gains by modification
(945)
73
(287)
(248)
NET OPERATING INCOME
318
1,297
396
1,460
Impairment or reversal of impairment of investments in
subsidiaries, joint ventures and associates
(348)
(311)
29
(299)
Impairment or reversal of impairment on non-financial
assets
(46)
(26)
(60)
(52)
Gains (losses) on derecognition of non - financial assets
and subsidiaries, net
-
-
1
(1)
Negative goodwill recognized in profit or loss
-
-
-
-
Gains (losses) from non-current assets and disposal
groups classified as held for sale not qualifying as
discontinued operations
(24)
(3)
(19)
(28)
PROFIT (LOSS) BEFORE TAX FROM CONTINUING
OPERATIONS
(99)
956
347
1,081
Tax expense or income related to profit or loss from
continuing operations
(24)
28
(12)
21
PROFIT (LOSS) AFTER TAX FROM CONTINUING
OPERATIONS
(122)
984
335
1,102
Profit (loss) after tax from discontinued operations
(1,468)
145
(927)
10
PROFIT(LOSS) FOR THE YEAR
(1,590)
1,129
(592)
1,111
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.174
APPENDIX X. Information on data derived from the special accounting registry and other
information bonds
The Bank has implemented policies and procedures for its activities in the mortgage market and in the financing of exportation of goods
and services or the process of internationalization of companies, which allow ensuring compliance with the applicable regulations of the
mortgage market and for the issuance of bonds.
a) Mortgage market policies and procedures
Information required pursuant to Circular 5/2011 of the Bank of Spain is indicated as follows.
The mortgage origination policy is based on principles focused on assessing the adequate ratio between the amount of the loan, and the
payments, and the income of the applicant. Applicants must in all cases prove sufficient repayment ability (present and future) to meet their
repayment obligations, for both the mortgage debt and for other debts detected in the financial system. Therefore, the applicant’s repayment
ability is a key aspect within the credit decision-making tools and retail risk acceptance manuals, and has a high weighting in the final
decision.
During the mortgage risk transaction analysis process, documentation supporting the applicant’s income (payroll, etc.) is required, and the
applicant’s position in the financial system is checked through automated database queries (internal and external). This information is used
for calculation purposes in order to determine the level of indebtedness/compliance with the remainder of the system. This documentation
is kept in the transaction’s file.
In addition, the mortgage origination policy assesses the adequate ratio between the amount of the loan and the appraisal value of the
mortgaged asset. The policy also establishes that the property to be mortgaged be appraised by an independent appraisal company as
established by Circular 3/2010 and Circular 4/2016. BBVA selects those companies whose reputation, standing in the market and
independence ensure that their appraisals adapt to the market reality in each region. Each appraisal is reviewed and checked before the
loan is granted and, in those cases where the loan is finally granted, it is kept in the transaction’s file.
As for issues related to the mortgage market, the Finance area annually defines the strategy for wholesale finance issues, and more
specifically mortgage bond issues, such as mortgage covered bonds or mortgage securitization. The Assets and Liabilities Committee
tracks the budget monthly. The volume and type of assets in these transactions is determined in accordance with the wholesale finance
plan, the trend of the Bank’s “Loans and advances” outstanding balances and the conditions in the market.
The Board of Directors of the Bank authorizes each of the issues of Mortgage Transfer Certificates and/or Mortgage Participations issued
by BBVA to securitize the credit rights derived from loans and mortgage loans. Likewise, the Board of Directors authorizes the establishment
of a Base Prospectus for the issuance of fixed-income securities through which the mortgage-covered bonds are implemented.
As established in article 24 of Royal Decree 716/2009, of April, 24, by virtue of which certain aspects of Law 2/1981, of 25 March, of
regulation of the mortgage market and other rules of the mortgage and financial system are developed,
“the volume of outstanding
mortgage-covered bonds issued by a bank may not exceed 80% of a calculation base determined by adding the outstanding principal of all
the loans and mortgage loans in the bank’s portfolio that are eligible”
participations or mortgage transfer certificates. For these purposes, in accordance with the aforementioned Royal Decree 716/2009, in
order to be eligible, loans and mortgage loans, on a general basis: (i) must be secured by a first mortgage on the freehold; (ii) the loan’s
amount may not exceed 80% of the appraisal value for residential mortgages, and 60% for other mortgage lending; (iii) must be established
on assets exclusively and wholly owned by the mortgagor; (iv) must have been appraised by an independent appraisal company unrelated
to the Group and authorized by the Bank of Spain; and (v) the mortgaged property must be covered at least by a current damage insurance
policy.
The Bank has set up a series of controls for mortgage covered bonds, which regularly control the total volume of issued mortgage covered
bonds issued and the remaining eligible collateral, to avoid exceeding the maximum limit set by Royal Decree 716/2009, and outlined in
the preceding paragraph. In the case of securitizations, the preliminary portfolio of loans and mortgage loans to be securitized is checked
according to an agreed procedures engagement, by the Bank’s external auditor as required by the Spanish Securities and Exchange
Commission. There is also a series of filters through which some mortgage loans and credits are excluded in accordance with legal,
commercial and risk concentration criteria.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.175
b)
Quantitative information on activities in the mortgage market
The quantitative information on activities in the mortgage market required by Bank of Spain Circular 5/2011 as of December 31, 2020 and
2019 is shown below.
b.1) Ongoing operations
Mortgage loans. Eligibility for the purpose of the mortgage market (Millions of Euros)
2020
2019
Nominal value of outstanding loans and mortgage loans
88,753
92,757
Minus: Nominal value of all outstanding loans and mortgage loans that form part of the portfolio, but
have been mobilized through mortgage bond holdings or mortgage transfer certificates.
(27,549)
(30,173)
Nominal value of outstanding loans and mortgage loans, excluding securitized loans
61,204
62,584
Of which: Loans and mortgage loans which would be eligible if the calculation limits set forth in
Article 12 of Spanish Royal Decree 716/2009 were not applied.
44,854
44,759
Minus: Loans and mortgage loans which would be eligible but, according to the criteria set forth in
Article 12 of Spanish Royal Decree 716/2009, cannot be used to collateralize any issuance of mortgage
bonds.
(1,169)
(1,191)
Eligible loans and mortgage loans that, according to the criteria set forth in Article 12 of
Spanish Royal Decree 716/2009, can be used as collateral for the issuance of mortgage bonds
43,685
43,568
Issuance limit: 80% of eligible loans and mortgage loans that can be used as collateral
34,948
34,854
Issued Mortgage-covered bonds
32,069
32,422
Outstanding Mortgage-covered bonds
12,559
14,832
Capacity to issue mortgage-covered bonds
2,879
2,432
Memorandum items:
-
-
Percentage of overcollateralization across the portfolio
191%
193%
Percentage of overcollateralization across the eligible used portfolio
136%
134%
Nominal value of available sums (committed and unused) from all loans and mortgage loans.
5,549
5,841
Of which: Potentially eligible
4,885
4,935
Of which: Ineligible
664
906
Nominal value of all loans and mortgage loans that are not eligible, as they do not meet the thresholds
set in Article 5.1 of Spanish Royal Decree 716/2009, but do meet the rest of the eligibility requirements
indicated in Article 4 of the Royal Decree.
9,006
9,989
Nominal value of the replacement assets subject to the issue of mortgage-covered bonds.
-
-
Mortgage loans. Eligibility for the purpose of the mortgage market (Millions of Euros)
2020
2019
Total loans
(1)
88,753
92,757
Issued mortgage participations
(2)
4,114
4,494
Of which: recognized on the balance sheet
2,928
3,213
Issued mortgage transfer certificates
(3)
23,435
25,679
Of which: recognized on the balance sheet
21,098
22,899
Mortgage loans as collateral of mortgages bonds
(4)
-
-
Loans supporting the issuance of mortgage-covered bonds
1-2-3-4
61,204
62,584
Non eligible loans
16,350
17,825
Comply requirements to be eligible except the limit provided for
under the article 5.1 of the Spanish Royal Decree 716/2009
9,006
9,989
Other
7,344
7,836
Eligible loans
44,854
44,759
1,169
1,191
43,685
43,568
Loans used to collateralize mortgage bonds
-
-
Loans used to collateralize mortgage-covered bonds
43,685
43,568
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.176
Mortgage loans. Classification of the nominal values according to different characteristics (Millions of Euros)
2020
2019
Total mortgage
loans
Eligible
Loans(*)
Eligibles that
can be used as
collateral for
issuances (**)
Total mortgage
loans
Eligible
Loans(*)
Eligibles that can
be used as
collateral for
issuances (**)
TOTAL
61,204
44,854
43,685
62,584
44,759
43,568
By source of the operations
-
-
-
Originated by the bank
56,593
40,975
39,846
57,541
40,462
39,316
Subrogated by other institutions
763
589
584
838
650
644
Rest
3,848
3,290
3,255
4,205
3,647
3,608
By Currency
-
-
-
In Euros
61,033
44,742
43,573
62,263
44,564
43,373
In foreign currency
171
112
112
321
195
195
By payment situation
-
-
-
Normal payment
54,197
42,245
41,388
53,983
41,331
40,608
Other situations
7,007
2,609
2,297
8,601
3,428
2,960
By residual maturity
-
-
-
Up to 10 years
13,031
10,037
9,759
13,788
10,376
10,071
10 to 20 years
25,898
22,116
21,359
26,923
22,521
21,836
20 to 30 years
18,713
11,718
11,613
17,528
10,562
10,398
Over 30 years
3,562
983
954
4,345
1,300
1,263
By Interest rate
-
-
-
Fixed rate
13,412
9,318
9,260
11,408
6,768
6,720
Floating rate
47,792
35,536
34,425
51,176
37,991
36,848
Mixed rate
-
-
-
-
-
-
By target of operations
-
-
-
For business activity
10,699
6,598
5,681
11,709
6,825
5,918
Of which: public housing
2,215
1,555
757
2,333
1,529
743
Of which: For households
50,505
38,256
38,004
50,875
37,934
37,650
By type of guarantee
-
-
-
Secured by completed
assets/buildings
59,190
43,696
42,868
60,638
43,823
42,920
Residential use
52,145
39,454
38,781
52,831
39,329
38,594
Of which: public housing
3,791
3,078
2,942
4,039
3,238
3,094
Commercial
7,015
4,233
4,078
7,779
4,484
4,316
Other
30
9
9
28
10
10
Secured by assets/buildings under
construction
1,303
942
660
1,103
671
446
Residential use
1,004
734
453
862
560
335
Of which: public housing
1
-
-
5
1
1
Commercial
299
208
207
241
111
111
Other
-
-
-
-
-
-
Secured by land
711
216
157
843
265
202
Urban
275
88
34
321
98
43
Non-urban
436
128
123
522
167
159
(**) Taking into account the thresholds established by article 12 of Spanish Royal Decree 716/2009.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.177
December 2020. Nominal value of the total mortgage loans (Millions of Euros)
Loan to Value (Last available appraisal risk)
Less than or
equal to 40%
Over 40% but less
than or equal to 60%
Over 60% but less
than or equal to 80%
Over 80%
Total
Home mortgages
13,665
14,339
12,211
-
40,215
Other mortgages
2,351
2,288
4,639
Total
16,016
16,627
12,211
-
44,854
December 2019. Nominal value of the total mortgage loans (Millions of Euros)
Loan to Value (Last available appraisal risk)
Less than or
equal to 40%
Over 40% but less
than or equal to 60%
Over 60% but less
than or equal to 80%
Over 80%
Total
Home mortgages
13,713
14,821
11,562
-
40,096
Other mortgages
2,484
2,179
4,663
Total
16,197
17,000
11,562
-
44,759
Eligible and non eligible mortgage loans. Changes of the nominal values in the period (Millions of Euros)
2020
2019
Eligible (*)
Non eligible
Eligible (*)
Non eligible
Balance at the beginning
44,759
17,825
45,664
22,074
Retirements
6,429
4,535
7,447
8,498
Held-to-maturity cancellations
3,918
736
4,363
1,062
Anticipated cancellations
1,913
930
2,231
2,054
Subrogations to other institutions
48
19
22
10
Rest
550
2,850
831
5,372
Additions
6,524
3,060
6,542
4,249
Originated by the bank
3,740
2,396
3,219
3,235
Subrogations to other institutions
3
1
4
2
Rest
2,781
664
3,319
1,012
Balance at the end
44,854
16,350
44,759
17,825
Mortgage loans supporting the issuance of mortgage-covered bonds. Nominal value (Millions of Euros)
2020
2019
Potentially eligible
4,885
4,935
Ineligible
664
906
Total
5,549
5,841
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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b.2) Liabilities operations
Issued Mortgage Bonds (Millions of Euros)
2020
2019
Nominal value
Average
residual
maturity
Nominal value
Average
residual
maturity
Mortgage bonds
-
-
Mortgage-covered bonds
32,069
32,422
Of which: Non recognized as liabilities on balance
19,510
17,590
Of Which: outstanding
12,559
14,832
Debt securities issued through public offer
10,450
12,501
Residual maturity up to 1 year
2,750
2,051
Residual maturity over 1 year and less than 2 years
1,250
2,750
Residual maturity over 2 years and less than 3 years
2,250
1,250
Residual maturity over 3 years and less than 5 years
3,000
3,250
Residual maturity over 5 years and less than 10 years
1,000
3,000
Residual maturity over 10 years
200
200
Debt securities issued without public offer
19,605
17,662
Residual maturity up to 1 year
1,500
50
Residual maturity over 1 year and less than 2 years
2,000
1,500
Residual maturity over 2 years and less than 3 years
9,000
2,000
Residual maturity over 3 years and less than 5 years
4,000
9,000
Residual maturity over 5 years and less than 10 years
3,105
5,112
Residual maturity over 10 years
-
-
Deposits
2,014
2,260
Residual maturity up to 1 year
425
246
Residual maturity over 1 year and less than 2 years
368
425
Residual maturity over 2 years and less than 3 years
100
368
Residual maturity over 3 years and less than 5 years
371
100
Residual maturity over 5 years and less than 10 years
100
471
Residual maturity over 10 years
650
650
Mortgage participations
2,928
257
3,213
267
Issued through public offer
2,928
257
3,213
267
Issued without public offer
-
-
-
-
Mortgage transfer certificates
21,098
257
22,899
267
Issued through public offer
21,098
257
22,899
267
Issued without public offer
-
-
-
-
Given the characteristics of the type of covered bonds issued by the Bank, there is no substituting collateral related to these issues.
The Bank does not hold any derivative financial instruments relating to mortgage bond issues, as defined in the aforementioned Royal
Decree.
c) Quantitative information on internationalization covered bonds
Below is the quantitative information of BBVA, S.A. internationalization covered bonds required by Bank of Spain Circular 4/2017 as of
December 31, 2020 and 2019:
c.1) Assets operations
Principal outstanding payment of loans (Millions of Euros)
Nominal value 2020
Nominal value 2019
Eligible loans according to article 34.6 y 7 of the Law 14/2013
3,284
3,621
Minos: Loans that support the issuance of internationalization bonds
-
-
Minos: NPL to be deducted in the calculation of the issuance limit, according to
Article 13 del Royal Decree 579/2014
8
1
Total Loans included in the base of all issuance limit
3,276
3,620
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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c.2) Liabilities
operations
Internationalization covered bonds (Millions of Euros)
Nominal value 2020
Nominal value 2019
(1) Debt securities issued through public offer (a)
1,500
1,500
Of which: Treasury shares
1,500
1,500
Residual maturity up to 1 year
-
-
Residual maturity over 1 year and less than 2 years
1,500
-
Residual maturity over 2 years and less than 3 years
-
1,500
Residual maturity over 3 years and less than 5 years
-
-
Residual maturity over 5 years and less than 10 years
-
-
Residual maturity over 10 years
-
-
(2) Debt securities issued without public offer (a)
-
-
Of which: Treasury shares
-
-
Residual maturity up to 1 year
-
-
Residual maturity over 1 year and less than 2 years
-
-
Residual maturity over 2 years and less than 3 years
-
-
Residual maturity over 3 years and less than 5 years
-
-
Residual maturity over 5 years and less than 10 years
-
-
Residual maturity over 10 years
-
-
(3) Deposits (b)
-
-
Residual maturity up to 1 year
-
-
Residual maturity over 1 year and less than 2 years
-
-
Residual maturity over 2 years and less than 3 years
-
-
Residual maturity over 3 years and less than 5 years
-
-
Residual maturity over 5 years and less than 10 years
-
-
Residual maturity over 10 years
-
-
TOTAL: (1) + (2) + (3)
1,500
1,500
Percentage
Percentage
Coverage ratio of internationalization covered bonds on loans (c )
46%
41%
(a) Balance that includes all internationalization covered bonds issued by the entity pending amortization, although they are not recognized in the liability (because
they have not been placed to third parties or have been repurchased).
(b) Nominative bonds.
(c) Percentage that results from the value of the quotient between the nominal value of the issued and non-overdue bonds, even if they are not recognized in the
liability, and the nominal value balance pending collection of the loans that serve as guarantee.
Given the characteristics of the Bank's internationalization covered bonds, there are no substitute assets assigned to these issuances.
d) Territorial bonds
d.1) Assets operations
December 2020. Loans that serves as collateral for the territorial bonds
Nominal Value(a)
Total
Spanish Residents
Residents in other
countries of the
European Economic Area
Central governments
1,505
1,396
109
Regional governments
7,633
7,605
28
Local governments
3,665
3,665
-
Total loans
12,803
12,666
137
(a) Principal pending payment of loans.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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December 2019. Loans that serves as collateral for the territorial bonds
Nominal Value(a)
Total
Spanish Residents
Residents in other
countries of the
European Economic
Area
Central Governments
1,473
1,345
128
Regional Governments
7,691
7,662
29
Local Governments
4,151
4,151
-
Total loans
13,315
13,158
157
(a) Principal pending payment of loans.
d.2) Liabilities operations
Territorial bonds (Millions of Euros)
Nominal value 2020
Nominal value
2019
Territorial bonds issued (a)
6,540
8,040
Issued through a public offering
6,540
8,040
Of which: Treasury stock
6,040
7,540
Residual maturity up to 1 year
2,000
4,500
Residual maturity over 1 year and less than 2 years
840
2,000
Residual maturity over 2 years and less than 3 years
200
840
Residual maturity over 3 years and less than 5 years
3,500
700
Residual maturity over 5 years and less than 10 years
-
-
Residual maturity over 10 years
-
-
Other issuances
-
-
Of which: Treasury stock
-
-
Residual maturity over 1 year and less than 2 years
-
-
Residual maturity over 2 years and less than 3 years
-
-
Residual maturity over 3 years and less than 5 years
-
-
Residual maturity over 5 years and less than 10 years
-
-
Residual maturity over 10 years
-
-
Percentage
Percentage
Coverage ratio of the territorial bonds on loans (b)
51%
60%
(a) Includes the nominal value of all loans that serve as collateral for the territorial bonds, regardless of the item in which they are included in the balance sheet.
Principal pending payment of loans. The territorial bonds include all the instruments issued by the entity pending amortization, although they are not recognized
in the liability (because they have not been placed to third parties or have been repurchased).
(b) Percentage that results from the value of the quotient between the nominal value of the issued and non-overdue bonds, even if they are not recognized in the
liability, and the nominal value balance pending collection of the loans that serve as guarantee.
This Appendix is an integral part of Notes 12.3, 20.4 and 50.4 of the consolidated financial statements for the year ended December 31,
2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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APPENDIX XI. Risks related to the developer and real-estate sector in Spain
a) Policies and strategies established by the Group to deal with risks related to the developer and
real-estate sector
BBVA has teams specializing in the management of the Real-Estate Sector risk, given its economic importance and specific technical
component. This specialization is not only in the Risk-Acceptance teams, but throughout the handling, commercial, problematic
management and legal aspects, and includes the research department (BBVA Research), which helps determine the medium/long-term
vision needed to manage this portfolio. Specialization has been increased and the management teams in the areas of recovery and the
Real Estate Unit itself have been reinforced.
The portfolio management policies, established to address the risks related to the developer and real-estate sector, aim to accomplish,
among others, the following objectives: to avoid concentration in terms of customers, products and regions; to estimate the risk profile for
the portfolio; and to anticipate possible worsening of the portfolio.
Specific policies for analysis and admission of new real estate developer risk transactions
In the analysis of new operations, the assessment of the commercial operation in terms of the economic and financial viability of the project
has been one of the constant points that have helped ensure the success and transformation of construction land operations for our
customers’ developments.
As regards the participation of the Risk Acceptance teams, they have a direct link and participate in the committees of areas such as
Recoveries and the Real Estate Unit. This guarantees coordination and exchange of information in all the processes.
The following strategies have been implemented with customers: avoidance of large corporate transactions, which had already reduced
their share in the years of greatest market growth; non-participation in the second-home market; commitment to public housing financing;
and participation in land operations with a high level of urban development security, giving priority to land open to urban development.
Risk monitoring policies
The base information for analyzing the real estate portfolios is updated monthly. The tools used include the so-called “watch-list”, which is
updated monthly with the progress of each client under watch, and the different strategic plans for management of special groups. There
are plans that involve an intensification of the review of the portfolio for financing land, while, in the case of ongoing promotions, they are
classified for monitoring purposes based on the rate of progress of the projects.
These actions have enabled the Bank to anticipate possible impairment situations, by always keeping an eye on BBVA’s position with each
customer (whether or not as first creditor).In this regard, key aspects include management of the risk policy to be followed with each
customer, contract review, deadline extension, improved collateral, rate review (repricing) and asset purchase.
Proper management of the relationship with each customer requires knowledge of various aspects such as the identification of the source
of payment difficulties, an analysis of the company’s future viability, the updating of the information on the debtor and the guarantors (their
current situation and business course, economic-financial information, debt analysis and generation of funds), and the updating of the
appraisal of the assets offered as collateral.
BBVA has a classification of debtors in accordance with legislation in force in each country, usually categorizing each one’s level of difficulty
for each risk.
Based on the information above, a decision is made whether to use the refinancing tool, whose objective is to adjust the structure of the
maturity of the debt to the generation of funds and the customer’s payment capacity.
As for the policies relating to risk refinancing with the developer and real-estate sector, they are the same as the general policies used for
all of the Group’s risks. In the developer and real estate sector, they are based on clear solvency and viability criteria for projects, with
demanding terms for guarantees and legal compliance. The policy on refinancing uses outstanding risk rather than nonperforming assets,
with a refinancing tool that standardizes criteria and values up to a total of 19 variables when considering any refinancing operation.
In the case of refinancing, the tools used for enhancing the Bank’s position are: the search for new intervening parties with proven solvency
and initial payment to reduce the principal debt or outstanding interest; the improvement of the debt bond in order to facilitate the procedure
in the event of default; the provision of new or additional collateral; and making refinancing viable with new conditions (period, rate and
repayments), adapted to a credible and sufficiently verified business plan.
Policies applied in the management of real estate assets in Spain
The policy applied for managing these assets depends on the type of real-estate asset, as detailed below.
In the case of completed homes, the final aim is the sale of these homes to private individuals, thus diluting the risk and beginning a new
business cycle. Here, the strategy has been to help subrogation (the default rate in this channel of business is notably lower than in any
other channel of residential mortgages) and to support our customers’ sales directly, using BBVA’s own channel (BBVA Services and our
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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branches), creating incentives for sale and including sale orders for BBVA that set out sale prices which are notably lower than initial ones.
In exceptional case we have even accepted partial haircuts, with the aim of making the sale easier.
In the case of ongoing construction work, our strategy has been to help and promote the completion of the works in order to transfer the
investment to completed homes. The whole developer Works in Progress portfolio has been reviewed and classified into different stages
with the aim of using different tools to support the strategy. This includes the use of developer accounts-payable financing as a form of
payment control, the use of project monitoring supported by the Real Estate Unit itself, and the management of direct suppliers for the
works as a complement to the developer’s own management.
With respect to land, our presence at advanced stages in land development, where risk of rustic land is not significant, simplifies our
management. Urban management and liquidity control to tackle urban planning costs are also subject to special monitoring.
b) Quantitative information on activities in the real-estate market in Spain
Lending for real estate development according to the purpose of the loans as of December 31, 2020 and 2019 is shown below:
December 2020 - Financing Allocated to Construction and Real Estate Development and its Coverage (Millions of Euros)
Gross amount
Drawn over the
guarantee value
Accumulated
impairment
Financing to construction and real estate development (including land)
(Business in Spain)
2,565
650
(317)
Of which: Impaired assets
473
213
(254)
Memorandum item:
Write-offs
2,288
Memorandum item:
Total loans and advances to customers, excluding the Public Sector
(Business in Spain)
166,589
Total consolidated assets (total business)
445,411
Impairment and provisions for normal exposures
(1,709)
December 2019 - Financing Allocated to Construction and Real Estate Development and its Coverage (Millions of Euros)
Gross
amount
Drawn over the
guarantee
value
Accumulated
impairment
Financing to construction and real estate development (including land)
(Business in Spain)
2,649
688
(336)
Of which: Impaired assets
567
271
(282)
Memorandum item:
Write-offs
2,265
Memorandum item:
Total loans and advances to customers, excluding the public sector (Business in
Spain)
167,217
Total consolidated assets (total business)
407,632
Impairment and provisions for normal exposures
(1,460)
The following is a description of the real estate credit risk based on the types of associated guarantees:
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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Financing Allocated by credit institutions to construction and real estate development and lending for house purchase (Millions of Euros)
2020
2019
Without secured loan
372
298
With secured loan
2,193
2,351
Terminated buildings
1,307
1,461
Homes
991
1,088
Other
316
373
Buildings under construction
614
545
Homes
430
348
Other
184
197
Land
272
345
Urbanized land
143
240
Rest of land
129
105
Total
2,565
2,649
As of December 31, 2020 and 2019, 51.0% and 55.2% of loans to developers were guaranteed with buildings (75.8% and 74.5%, are
homes), and only 10.6% and 13.0% by land, of which 52.6% and 69.6% are in urban locations, respectively.
The table below provides the breakdown of the financial guarantees given as of December 31, 2020 and 2019:
Financial guarantees given (Millions of Euros)
2020
2019
Houses purchase loans
58
44
Without mortgage
5
5
The information on the retail mortgage portfolio risk (housing mortgage) as of December 31, 2020 and 2019 is as follows:
Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase - December
2020 (Millions of Euros)
Gross amount
Of which: impaired
loans
Houses purchase loans
74,689
2,841
Without mortgage
1,693
20
With mortgage
72,996
2,821
Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase - December
2019 (Millions of Euros)
Gross amount
Of which: impaired loans
Houses purchase loans
76,961
2,943
Without mortgage
1,672
22
With mortgage
75,289
2,921
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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The loan to value (LTV) ratio of the above portfolio is as follows:
December 2020 - LTV Breakdown of mortgage to households for the purchase of a home (Business in Spain) (Millions of Euros)
Total risk over the amount of the last valuation available (Loan To Value-LTV)
Less than or
equal to 40%
Over 40%
but less than
or equal to
60%
Over 60%
but less than
or equal to
80%
Over 80%
but less than
or equal to
100%
Over 100%
Total
Gross amount
15,197
18,891
20,716
10,624
7,568
72,996
Of which: Impaired loans
170
294
426
470
1,461
2,821
December 2019 - LTV Breakdown of mortgage to households for the purchase of a home (Business in Spain) (Millions of Euros)
Total risk over the amount of the last valuation available (Loan To Value-LTV)
Less than or
equal to 40%
Over 40%
but less than
or equal to
60%
Over 60%
but less than
or equal to
80%
Over 80%
but less than
or equal to
100%
Over 100%
Total
Gross amount
15,105
19,453
20,424
11,827
8,480
75,289
Of which: Impaired loans
182
313
506
544
1,376
2,921
Outstanding home mortgage loans as of December 31, 2020 had an average LTV of 46% (47% as of December 31, 2019).
The breakdown of foreclosed, acquired, purchased or exchanged assets from debt from loans relating to business in Spain, as well as the
holdings and financing to non-consolidated entities holding such assets is as follows:
Information about Assets Received in Payment of Debts (Business in Spain) (Millions of Euros)
December 2020
Gross
Value
Provisions
Of which: Valuation
adjustments on
impaired assets, at
the time of
foreclosure
Carrying
Amount
Real estate assets from loans to the construction and real
estate development sectors in Spain.
28
(20)
(1)
8
Terminated buildings
4
(2)
-
2
Homes
3
(1)
-
2
Other
1
(1)
-
-
Buildings under construction
-
-
-
-
Homes
-
-
-
-
Other
-
-
-
-
Land
24
(18)
(1)
6
Urbanized land
24
(18)
(1)
6
Rest of land
-
-
-
-
Real estate assets from mortgage financing for households for
the purchase of a home
1,090
(570)
(144)
520
Rest of foreclosed real estate assets
481
(259)
(48)
222
Equity instruments, investments and financing to non-
consolidated companies holding said assets
1,022
(317)
(279)
705
Total
2,621
(1,166)
(472)
1,455
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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Information about assets received in payment of debts (Business in Spain) (Millions of Euros)
December 2019
Gross
Value
Provisions
Of which: Valuation
adjustments on
impaired assets, at
the time of
foreclosure
Carrying
Amount
Real estate assets from loans to the construction and real
estate development sectors in Spain.
26
(17)
(1)
9
Terminated buildings
5
(2)
-
3
Homes
4
(1)
-
3
Other
1
(1)
-
-
Buildings under construction
-
-
-
-
Homes
-
-
-
-
Other
-
-
-
-
Land
21
(15)
(1)
6
Urbanized land
21
(15)
(1)
6
Rest of land
-
-
-
-
Real estate assets from mortgage financing for households for
the purchase of a home
1,149
(586)
(131)
563
Rest of foreclosed real estate assets
450
(233)
(37)
217
Equity instruments, investments and financing to non-
consolidated companies holding said assets
1,092
(247)
(209)
845
Total
2,717
(1,083)
(378)
1,634
The gross book value of real-estate assets from mortgage lending to households for home purchase as of December 31, 2020 and 2019
amounted to €1,090 and €1,149 million, respectively, with an average coverage ratio of 52.3% and 51.0%, respectively.
As of December 31, 2020 and 2019, the gross book value of the BBVA Group’s total real-estate assets (business in Spain), including other
real-estate assets received as debt payment, was €1,599 and €1,625 million, respectively. The coverage ratio was 53.1% and 51.4%,
respectively.
This Appendix is an integral part of Note 5 of the financial statements for the year ended December 31, 2020.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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APPENDIX XII. Refinanced and restructured operations and other requirements under
Bank of Spain Circular 6/2012
REFINANCING AND RESTRUCTURING OPERATIONS
a) Policies and strategies established by the Group to deal with risks related to refinancing and
restructuring operations.
Refinancing and restructuring operations (see definition in the Glossary) are carried out with customers who have requested such an
operation in order to meet their current loan payments if they are expected, or may be expected, to experience financial difficulty in making
the payments in the future.
The basic aim of a refinancing and restructuring operation is to provide the customer with a situation of financial viability over time by
adapting repayment of the loan incurred with the Group to the customer’s new situation of fund generation. The use of refinancing and
restructuring for other purposes, such as to delay loss recognition, is contrary to BBVA Group policies.
The BBVA Group’s refinancing and restructuring policies are based on the following general principles:
identifying the origin of the payment difficulties and then carrying out an analysis of the customers’ viability, including an updated
analysis of their economic and financial situation and capacity to pay and generate funds. If the customer is a company, the analysis
also covers the situation of the industry in which it operates.
where possible. An essential part of this process is an analysis of the effectiveness of both the new and original guarantees.
to the operation itself.
These general principles are adapted in each case according to the conditions and circumstances of each geographical area in which the
Group operates, and to the different types of customers involved.
In the case of retail customers (private individuals), the main aim of the BBVA Group’s policy on refinancing and restructuring loan is to
avoid default arising from a customer’s temporary liquidity problems by implementing structural solutions that do not increase the balance
of customer’s loan. The solution required is adapted to each case and the loan repayment is made easier, in accordance with the following
principles:
nevertheless be present. The customer must therefore repay at least the interest on the operation in all cases. No arrangements may
be concluded that involve a grace period for both principal and interest.
In the case of non-retail customers (mainly companies, enterprises and corporates), refinancing/restructuring is authorized according to an
economic and financial viability plan based on:
and a business development plan that can help reduce the level of leverage to sustainable levels (capacity to access the financial
markets).
deleveraging process.
In accordance with the Group’s policy, the conclusion of a loan refinancing and restructuring operation does not meet the loan is
reclassified from "impaired" or "standard under special monitoring" to outstanding risk. The reclassification to the "standard under special
monitoring" or normal risk categories must be based on the analysis mentioned earlier of the viability, upon completion of the probationary
periods described below.
The Group maintains the policy of including risks related to refinanced and restructured loans as either:
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default when there are significant doubts that the terms of their refinancing may not be met; or
The conditions established for assets classified as “standard under special monitoring” to be reclassified out of this category are as follows:
or other objective criteria, demonstrating the borrower´s ability to pay, have been verified; and
payment obligations (principal and interest) in a timely manner.
The BBVA Group’s refinancing and restructuring policy provides for the possibility of two modifications in a 24 month period for loans that
are not in compliance with the payment schedule.
The internal models used to determine allowances for loan losses consider the restructuring and renegotiation of a loan, as well as re-
defaults on such a loan, by assigning a lower internal rating to restructured and renegotiated loans than the average internal rating assigned
to non-restructured/renegotiated loans. This downgrade results in an increase in the probability of default (PD) assigned to
restructured/renegotiated loans (with the resulting PD being higher than the average PD of the non- renegotiated loans in the same
portfolios).
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which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
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a) Quantitative information on refinancing and restructuring operations
BALANCE OF FORBEARANCE
TOTAL
Unsecured loans
Secured loans
Accumulated
impairment or
accumulated losses in
fair value due to credit
risk
Maximum amount of secured loans that
can be considered
Number of
operations
Gross carrying
amount
Number of
operations
Gross carrying
amount
Real estate
mortgage secured
Rest of secured
loans
Credit institutions
General Governments
65
76
64
62
45
-
14
Other financial corporations and individual entrepreneurs
(financial business)
251
5
22
2
2
-
2
Non-financial corporations and individual entrepreneurs
(corporate non-financial activities)
42,142
2,663
7,421
2,144
1,374
29
1,644
Of which: financing the construction and property
(including land)
336
48
932
526
302
8
242
Rest homes
55,669
804
44,877
4,846
3,566
2
1,154
Total
98,127
3,548
52,384
7,054
4,987
31
2,814
Of which: IMPAIRED
Unsecured loans
Secured loans
Accumulated
impairment or
accumulated losses in
fair value due to credit
risk
Maximum amount of secured loans that
can be considered
Number of
operations
Gross carrying
amount
Number of
operations
Gross carrying
amount
Real estate
mortgage secured
Rest of secured
loans
Credit institutions
General Governments
39
36
29
20
14
-
11
Other financial corporations and individual entrepreneurs
(financial business)
151
2
11
1
1
-
2
Non-financial corporations and individual entrepreneurs
(corporate non-financial activities)
25,133
1,542
4,632
1,323
687
20
1,493
Of which: financing the construction and property
(including land)
313
44
633
356
164
8
217
Rest homes
31,460
456
22,319
2,425
1,597
1
978
Total
56,783
2,036
26,991
3,769
2,299
21
2,484
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.189
BALANCE OF FORBEARANCE
TOTAL
Unsecured loans
Secured loans
Accumulated
impairment or
accumulated losses in
fair value due to credit
risk
Maximum amount of secured loans that
can be considered
Number of
operations
Gross carrying
amount
Number of
operations
Gross carrying
amount
Real estate
mortgage secured
Rest of secured
loans
Credit institutions
-
-
-
-
-
-
-
General Governments
72
92
64
64
49
-
11
Other financial corporations and individual entrepreneurs
(financial business)
228
5
23
3
2
-
3
Non-financial corporations and individual entrepreneurs
(corporate non-financial activities)
39,015
2,585
8,582
2,365
1,467
35
1,829
Of which: financing the construction and property
(including land)
458
47
1,092
631
376
10
265
Rest homes
46,560
646
46,782
5,132
3,956
2
1,046
Total
85,875
3,328
55,451
7,564
5,474
37
2,889
Of which: IMPAIRED
Unsecured loans
Secured loans
Accumulated
impairment or
accumulated losses in
fair value due to credit
risk
Maximum amount of secured loans that
can be considered
Number of
operations
Gross carrying
amount
Number of
operations
Gross carrying
amount
Real estate
mortgage secured
Rest of secured
loans
Credit institutions
-
-
-
-
-
-
-
General Governments
45
41
30
21
16
-
7
Other financial corporations and individual entrepreneurs
(financial business)
129
3
12
1
1
-
3
Non-financial corporations and individual entrepreneurs
(corporate non-financial activities)
22,465
1,719
5,062
1,563
825
9
1,696
Of which: financing the construction and property
(including land)
428
43
715
423
206
-
244
Rest homes
28,332
408
23,261
2,514
1,775
1
841
Total
50,971
2,171
28,365
4,099
2,617
10
2,547
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.190
b) Loans and advances to customers by activity (carrying amount)
December 2020 (Millions of euros)
Collateralized loans and receivables -Loans and advances to customers. Loan to value
TOTAL (*)
Of which:
Mortgage
loans
Of which:
Secured
loans
Less than or
equal to 40%
Over 40% but
less than or
equal to 60%
Over 60% but
less than or
equal to 80%
Over 80% but less
than or equal to
100%
Over 100%
General governments
13,621
318
500
75
176
50
511
6
Other financial institutions and financial individual entrepreneurs
16,410
162
9,577
34
1,418
2,600
5,414
273
Non-financial institutions and non-financial individual entrepreneurs
80,806
10,545
1,964
4,462
3,766
1,961
1,001
1,319
Construction and property development
1,970
1,794
18
752
628
290
90
52
Construction of civil works
5,270
586
264
258
189
88
41
274
Other purposes
73,566
8,165
1,682
3,452
2,949
1,583
870
993
Large companies
48,028
2,494
692
1,031
895
530
221
509
SMEs (**) and individual entrepreneurs
25,538
5,671
990
2,421
2,054
1,053
649
484
Rest of households and NPISHs (***)
90,376
74,201
371
16,173
19,714
21,424
10,489
6,772
Housing
75,166
73,087
112
15,859
19,433
21,181
10,260
6,466
Consumption
12,149
88
163
62
71
77
12
29
Other purposes
3,061
1,026
96
252
210
166
217
277
TOTAL
201,213
85,226
12,412
20,744
25,074
26,035
17,415
8,370
MEMORANDUM:
Forbearance operations (****)
7,788
5,663
40
991
982
1,186
860
1,684
(*) The amounts included in this table are net of loss allowances.
(**) Small and medium enterprises
(***) Nonprofit institutions serving households.
(****) Net of provisions.
December 2019 (Millions of euros)
Collateralized loans and receivables -Loans and
advances to customers. Loan to value
TOTAL
(*)
Of
which:
Mortgage
loans
Of
which:
Secured
loans
Less
than or
equal to
40%
Over
40% but
less than
or equal
to 60%
Over
60% but
less than
or equal
to 80%
Over
80% but
less than
or equal
to 100%
Over
100%
General governments
14,828
360
439
59
209
63
460
8
Other financial institutions and financial individual entrepreneurs
17,614
194
11,634
88
36
3
11,637
64
Non-financial institutions and non-financial individual entrepreneurs
79,389
11,113
1,936
4,498
3,770
2,168
1,069
1,544
Construction and property development
1,989
1,864
21
685
546
405
125
124
Construction of civil works
5,192
676
155
276
206
134
48
167
Other purposes
72,208
8,573
1,760
3,537
3,018
1,629
896
1,253
Large companies
48,777
2,265
621
953
753
344
212
624
SMEs (**) and individual entrepreneurs
23,431
6,308
1,139
2,584
2,265
1,285
684
629
Rest of households and NPISHs (***)
92,644
76,735
407
15,995
20,442
21,173
11,812
7,720
Housing
76,339
74,272
121
15,175
19,692
20,493
11,560
7,473
Consumption
11,976
116
177
63
73
101
32
24
Other purposes
4,329
2,347
109
757
677
579
220
223
TOTAL
204,475
88,402
14,416
20,640
24,457
23,407
24,978
9,336
MEMORANDUM:
Forbearance operations (****)
8,003
6,131
43
1,024
1,152
1,285
1,054
1,659
(*) The amounts included in this table are net of loss allowances.
(**) Small and medium enterprises
(***) Nonprofit institutions serving households.
(****) Net of provisions.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.191
c)
Concentration of risks by activity and geographical area (carrying amount)
December 2020 (Millions of euros)
TOTAL(*)
Spain
European
Union Other
America
Other
Credit institutions
104,580
41,466
27,162
14,647
21,305
General governments
69,969
52,317
10,441
1,660
5,551
Central Administration
54,332
37,302
10,159
1,601
5,270
Other
15,637
15,015
282
59
281
Other financial institutions and financial individual entrepreneurs
55,136
18,222
17,664
14,479
4,771
Non-financial institutions and non-financial individual entrepreneurs
124,529
78,705
20,832
12,979
12,013
Construction and property development
3,046
3,046
-
-
-
Construction of civil works
7,571
5,629
1,034
231
677
Other purposes
113,912
70,030
19,798
12,748
11,336
Large companies
86,553
43,403
19,336
12,543
11,271
SMEs and individual entrepreneurs
27,359
26,627
462
205
65
Other households and NPISHs
90,651
88,546
1,571
103
431
Housing
75,167
73,383
1,317
93
374
Consumer
12,149
12,117
16
7
9
Other purposes
3,335
3,046
238
3
48
TOTAL
444,865
279,256
77,670
43,868
44,071
(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and
advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and
guarantees given and Contingent risks. The amounts included in this table are net of loss allowances.
December 2019 (Millions of Euros)
TOTAL(*)
Spain
European
Union Other
America
Other
Credit institutions
77,047
22,717
34,254
11,268
8,808
General governments
60,876
46,080
7,949
3,386
3,461
Central Administration
43,830
29,594
7,508
3,363
3,365
Other
17,046
16,486
441
23
96
Other financial institutions and financial individual entrepreneurs
64,398
17,434
22,142
23,611
1,211
Non-financial institutions and non-financial individual entrepreneurs
121,440
75,266
24,063
14,005
8,106
Construction and property development
2,997
2,997
-
-
-
Construction of civil works
7,489
5,734
1,153
203
399
Other purposes
110,954
66,535
22,910
13,802
7,707
Large companies
85,731
42,137
22,220
13,695
7,679
SMEs and individual entrepreneurs
25,223
24,398
690
107
28
Other households and NPISHs
92,917
90,704
1,880
114
219
Housing
76,340
75,754
283
101
202
Consumer
11,977
11,953
9
8
7
Other purposes
4,600
2,997
1,588
5
10
TOTAL
416,678
252,201
90,288
52,384
21,805
(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and
advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and
guarantees given and Contingent risks. The amounts included in this table are net of loss allowances.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.192
December 2020 - Spain (Millions of euros)
TOTAL
(*)
Andalucia
Aragon
Asturias
Baleares
Canarias
Cantabria
Castilla
La
Mancha
Castilla
y León
Cataluña
Credit institutions
41,466
355
14
-
18
-
1,117
-
-
329
Government agencies
52,317
1,189
581
366
500
583
14
248
954
2,229
Central Administration
37,302
-
-
-
-
-
-
-
-
-
Other
15,015
1,189
581
366
500
583
14
248
954
2,229
Other financial institutions and financial individual entrepreneurs
18,222
133
51
2
90
3
1
1
18
551
Non-financial institutions and non-financial individual entrepreneurs
78,705
6,598
1,549
1,165
2,425
2,309
475
1,292
1,492
14,221
Construction and property development
3,046
405
27
47
49
105
7
43
28
727
Construction of civil works
5,629
497
82
49
130
130
27
97
77
1,091
Other purposes
70,030
5,696
1,440
1,069
2,246
2,074
441
1,152
1,387
12,403
Large companies
43,403
1,850
695
734
1,561
859
235
376
529
6,371
SMEs and individual entrepreneurs
26,627
3,846
745
335
685
1,215
206
776
858
6,032
Other households and NPISHs
88,546
13,139
1,413
1,251
2,019
3,864
857
2,572
2,924
27,448
Housing
73,383
10,796
1,171
950
1,724
2,888
721
2,068
2,338
23,477
Consumer
12,117
2,021
211
246
270
882
105
452
477
2,934
Other purposes
3,046
322
31
55
25
94
31
52
109
1,037
TOTAL
279,256
21,414
3,608
2,784
5,052
6,759
2,464
4,113
5,388
44,778
December 2020 -Spain (Millions of euros)
Extremadura
Galicia
Madrid
Murcia
Navarra
Comunidad
Valenciana
País
Vasco
La
Rioja
Ceuta
y
Melilla
Credit institutions
-
39
38,705
-
-
713
176
-
-
Government agencies
321
788
3,845
113
421
1,042
1,700
78
43
Central Administration
-
-
-
-
-
-
-
-
-
Other
321
788
3,845
113
421
1,042
1,700
78
43
Other financial institutions and financial individual entrepreneurs
1
48
16,688
1
-
14
620
-
-
Non-financial institutions and non-financial individual entrepreneurs
902
2,171
28,792
1,616
912
5,070
7,311
298
107
Construction and property development
12
84
1,097
33
5
205
159
4
9
Construction of civil works
45
188
2,568
96
66
246
220
10
10
Other purposes
845
1,899
25,127
1,487
841
4,619
6,932
284
88
Large companies
201
950
20,459
608
507
1,864
5,509
89
6
SMEs and individual entrepreneurs
644
949
4,668
879
334
2,755
1,423
195
82
Other households and NPISHs
1,424
3,133
13,928
1,897
502
8,240
2,850
331
754
Housing
1,106
2,425
11,788
1,501
402
6,792
2,331
272
633
Consumer
283
555
1,515
363
76
1,209
360
48
110
Other purposes
35
153
625
33
24
239
159
11
11
TOTAL
2,648
6,179
101,958
3,627
1,835
15,079
12,657
707
904
(*)
The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and
advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and
guarantees given and Contingent risks. The amounts included in this table are net of loss allowances.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.193
December 2019 - Spain (Millions of euros)
TOTAL
(*)
Andalucia
Aragon
Asturias
Baleares
Canarias
Cantabria
Castilla
La
Mancha
Castilla
y León
Cataluña
Credit institutions
22,717
1,175
319
-
174
-
1,112
7
-
393
Government agencies
46,080
1,707
718
454
517
426
25
430
947
2,493
Central Administration
29,594
-
-
-
-
-
-
-
-
-
Other
16,486
1,707
718
454
517
426
25
430
947
2,493
Other financial institutions and financial individual entrepreneurs
17,434
82
48
4
167
5
1
1
59
745
Non-financial institutions and non-financial individual entrepreneurs
75,266
5,946
1,330
970
1,954
2,090
422
1,176
1,224
13,266
Construction and property development
2,997
404
46
36
54
97
5
36
35
777
Construction of civil works
5,734
425
64
43
160
112
26
81
75
1,115
Other purposes
66,535
5,117
1,220
891
1,740
1,881
391
1,059
1,114
11,374
Large companies
42,137
1,669
557
588
1,191
742
189
334
343
5,883
SMEs and individual entrepreneurs
24,398
3,448
663
303
549
1,139
202
725
771
5,491
Other households and NPISHs
90,704
12,950
1,381
1,250
2,040
3,840
852
2,572
2,888
27,706
Housing
75,754
10,927
1,194
985
1,771
2,956
739
2,141
2,385
24,292
Consumer
11,953
1,707
174
211
242
794
83
377
394
2,333
Other purposes
2,997
316
13
54
27
90
30
54
109
1,081
TOTAL
252,201
21,860
3,796
2,678
4,852
6,361
2,412
4,186
5,118
44,603
December 2019 -Spain (Millions of euros)
Extremadura
Galicia
Madrid
Murcia
Navarra
Comunidad
Valenciana
País Vasco
La Rioja
Ceuta y
Melilla
Credit institutions
-
528
17,634
-
-
363
1,012
-
-
Government agencies
191
833
3,855
246
645
995
1,863
79
62
Central Administration
-
-
-
-
-
-
-
-
-
Other
191
833
3,855
246
645
995
1,863
79
62
Other financial institutions and
financial individual
entrepreneurs
1
59
15,981
2
-
5
274
-
-
Non-financial institutions and
non-financial individual
entrepreneurs
799
2,121
29,846
1,377
1,009
4,335
7,010
276
115
Construction and property
development
16
93
993
16
6
213
150
9
11
Construction of civil works
39
180
2,815
71
58
234
217
10
9
Other purposes
744
1,848
26,038
1,290
945
3,888
6,643
257
95
Large companies
246
963
21,391
513
629
1,473
5,322
96
8
SMEs and individual
entrepreneurs
498
885
4,647
777
316
2,415
1,321
161
87
Other households and NPISHs
1,390
3,005
16,336
1,896
491
8,251
2,779
332
745
Housing
1,119
2,444
12,604
1,531
412
7,011
2,325
281
637
Consumer
237
458
3,130
326
63
997
292
39
96
Other purposes
34
103
602
39
16
243
162
12
12
TOTAL
2,381
6,546
83,652
3,521
2,145
13,949
12,938
687
922
(*)
The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and
advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and
guarantees given and Contingent risks. The amounts included in this table are net of loss allowances.
Translation of Financial Statements originally issued in Spanish and prepared in accordance with Bank of Spain Circular 4/2017, and as amended thereafter,
which adapts the EU-IFRS for banks (see notes 1 to 51). In the event of a discrepancy, the original Spanish-language version prevails.
P.194
Appendix XIII Agency Network
PEÑA PEÑA, MANUEL
GESTIONES MARTIN BENITEZ, S.L.
LINARES LOPEZ, RAMÓN
TORRECILLAS BELMONTE, JOSE MARIA
LIMONCHI LOPEZ, HERIBERTO
VIDAL JAMARDO, LUIS RAMON
ROMAN BERMEJO, MARIA ISABEL
NOVAGESTION MARINA BAIXA, S.L.
FERNANDEZ ALMANSA, ANGEL ALEJANDRINO
CLIMENT MARTOS, MARIA ROSARIO
GARCIA FONDON, CONSTANTINO
GOMEZ EBRI, CARLOS
CAMPOS CARRERO, MARIA JOSEFA
DOBLAS GEMAR, ANTONIO
MUÑOZ BERZOSA, JOSE RAMON
FERNANDEZ ONTAÑON, DANIEL
ASESORIA CM, C.B.
GOPAR MARRERO, PABLO
DELGADO GARCIA, JOSE LUIS
ASESORIA VELSINIA, S.L.
FERNANDO BAENA, S.L.
TORRES MONTEJANO, FELIX
LOSADA LOPEZ, ANTONIO
SERVIGEST GESTION EMPRESARIAL, S.L.
ESTHA PATRIMONIOS, S.L.
GESTIONS I ASSEGURANCES PERSONALIZADES, S.L.
GESPIME ROMERO MIR, S.L.
GUTIERREZ DE GUEVARA, S.L.
ACREMUN, S.L.
ENRIQUE AMOR CORREDURIA DE SEGUROS, S.L.
FORUARGI, S.L.
MESANZA QUERAL, ALBERTO GUILLERMO
POGGIO, S.A.
PYME'S ASESORIA, S.L.
RUIZ DEL RIO, ROSA MARIA
SERRANO QUEVEDO, RAMON
ASESORIA LIZARDI, S.L.
FERNANDEZ-MARDOMINGO BARRIUSO, MIGUEL JOSE
ROGADO ROLDAN, ROSA
MARTINEZ PUJANTE, ALFONSO
CERTOVAL, S.L.
CASTELL AMENGUAL, MARIA
CAMPDEPADROS CORREDURIA D'ASSEGURANCES, S.L.
COSTA CALAF, MONTSERRAT
SIERRA TORRE, MIGUEL
MARTINEZ MOYA, DIEGO
CAPAFONS Y CIA, S.L.
CARBO ROYO, JOSE JORGE
PRADA PRADA, MARIA CARMEN
SABATE NOLLA, TERESA
MONTEAGUDO NAVARRO, MARIA
DOMINGUEZ JARA, RAFAEL JESUS
SALVIA FABREGAT, MARIA PILAR
CARDENO CHAPARRO, FRANCISCO MANUEL
MARTINEZ CASTRO, MANUEL FRANCISCO
SAMPER CAMPANALS, PILAR
PELLICER BARBERA, MARIANO
GARCIA OVALLE, OSCAR
CAÑAS AYUSO, FRANCISCO
MUÑOZ VIÑOLES, S.L.
GESTORIA HERMANOS FRESNEDA, S.L.
CASADO GALLARDO, GERARDO
SANCHEZ ELIZALDE, JUAN FRANCISCO
ALBIÑANA BOLUDA, AMPARO
GABINETE AFIMECO ASESORES, S.A.L.
CERQUEIRA CRUCIO, FERNANDO
REYES BLANCO, RAFAEL
GESTION FINANCIERA MIGUELTURRA, S.L.
LOPEZ RASCON, MARIA JESUS
EKO - LAN CONSULTORES, S.L.
ESINCO CONSULTORIA, S.L.
MORILLO MUÑOZ, C.B.
RODRIGUEZ DELGADO, RENE
PUJOL HUGUET, AMADEU
DE DIEGO MARTI, FRANCISCO JOSE
OFICINAS EMA, S.L.
GABINET D'ECONOMISTES ASSESSORS FISCALS, C.B.
AULES ASESORES, S.L.
CARRASCO MARTIN, ELOY
ASESORIA MERFISA, C.B.
INVAL 02, S.L.
MUIÑO DIAZ, MARIA DEL MAR
LOGARILL & ASOCIADOS, S.L,
MARTI TORRENTS, MIQUEL
AMOEDO MOLDES, MARIA JOSE
PEÑA LOPEZ, MILAGROS
GRASSA VARGAS, FERNANDO
ISACH GRAU, ANA MARIA
VAZQUEZ DIEGUEZ, JOSE ANDRES
ALONSO BAJO, LORENZO
B&S GLOBAL OPERATIONS CONSULTING, S.A.
ORTUÑO CAMARA, JOSE LUIS
GARCIA ALVAREZ-REMENTERIA, ANTONIO
SANCHEZ MESA, FRANCISCO
RUIZ ESCALONA, ANTONIO
ASESORIA ASETRA, S.L.
SERTE RIOJA, S.A.P.
NANOBOLSA, S.L.
PEREZ MASCUÑAN, JORGE
SOCIEDAD COOPERATIVA AGRARIA SAN ANTONIO
ABAD,
FERNANDEZ-LERGA GARRALDA, JESUS
EPC ASSESORS LEGALS I TRIBUTARIS, S.L.
JULIAN SANZ, MARIA
ESPALLARGAS MONTSERRAT, MARIA TERESA
ARANDA GARRANCHO, ANA MARIA
GRUP DE GESTIO PONENT DOS ASSEGURANCES, S.L.
JUAN JOSE ORTIZ, S.L.
FRANCES Y BARCELO, C.B.
SALADICH OLIVE, LUIS
ESPARCIA CUESTA, FELISA
MOLINA LOPEZ, RAFAEL
FERNANDEZ RIOS, MARIA GORETTI
GARCIA GONZALEZ, PILAR
REGLERO BLANCO, MARIA ISABEL
CLEMENTE BLANCO, PAULA ANDREA
GONZALEZ RODRIGUEZ, FRANCISCO
CADENAS DE LLANO, S.L.
GESTORED CONSULTING, S.L.
SANCHEZ ROMERO, BENITO
RUIZ-ESTELLER HERNANDEZ, GUSTAVO
LAR CENTRO EMPRESARIAL, S.A.
ASESORES MOLINA, S.L.
PROYECTOS INTEGRALES FINCASA, S.L.
OLIVA PAPIOL, ENRIQUE
PERALTA Y ARENSE ASESORES Y CONSULTORES, S.L.
FINANCIAL TOOLS BCN, S.L.
DOMUS AVILA, S.L.
GIL USON, MARTA
RIVAS ANORO, FERNANDO
ARIZA GIL, JESUS
MOLINA LUCAS, MARIA ALMUDENA
PEREZ GUILARTE Y ASOCIADOS, S.L.
SINTAS NOGALES, FRANCISCO
SANCHEZ SAN VICENTE, GUILLERMO JESUS
PEREZ-ARCOS ALONSO, JUANA MARIA
VADILLO ALMAGRO, MARIA VICTORIA
ALZO CAPITAL, S.L.
TIO & CODINA ASSESSOR D'INVERSIONS, S.L.
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SERRANO ROJAS, JOSE MANUEL
IZQUIERDO DOLS, MIGUEL
ASESORIAS ISADOR, S.L.
SERRANO DOMINGUEZ, FRANCISCO JAVIER
ASESORIA BERCONTA, S.L.
COVIBAN ASESORES INMOBILIARIOS, S.L.
LORENZO SEGOVIA, SUSANA
USKARTZE, S.L.
GROS MONSERRAT, S.L.
ASESORES Y CONSULTORES AFICO, S.L.
ALONSO ZARRAGA, MIKEL
FRANCIAMAR, S.L.
MONTE AZUL CASAS, S.L.
QUERO GUTIERREZ, CARIDAD
OLCADIA INVERSIONES, S.L.
RAVELO RAMIREZ, JUAN ALFONSO
FAUSBE 2005, S.L.
ASESORIA SAGASTIZABAL, S.L.
MARTINEZ PEREZ, JOSE FRANCISCO
CANOVAS 1852, S.L.
ECBATAN, S.L.
SOCIEDAD COOPERATIVA AGRICOLA NTRA SRA DEL
CARMEN,
AYCE CONSULTING, S.L.
PUENTE B GESTION INTEGRAL, S.L.
TOMAS SECO ASESORES, S.L.
GARCIA MUÑOZ, MARIA OLGA
VELASCO ROCA, IGNACIO
GESTION Y FINANZAS ZARAGOZA, S.A.
YANES CARRILLO, MARIA JESUS
SANTAMANS ASESORES LEGALES Y TRIBUTARIOS, S.L.
SOLUCIONES FISCALES DE GALICIA, S.L.L.
ALONSO FERNANDEZ, LUIS MIGUEL
ALBELLA ESTEVE, MARIA MERCEDES
ABONA GESTION SERVICIOS INTEGRADOS, S.L.
OBJETIVO MERCADO, S.L.
GARRIDO GOMEZ, ISABEL
MAC PRODUCTOS DE INVERSION Y FINANCIACION, S.L.
REYMONDEZ, S.L.
GANDARA DUQUE, MARIA DE LOS MILAGROS
MENDEZ BANDERAS, LUIS FELIPE
PADRON GARCIA, HERCILIO JOSE
AESTE, S.L.
MUR CEREZA, ALVARO JESUS
GESTIONES ORT-BLANC, S.L.
TRES U EMPRESA DE SERVICIOS PROFESIONALES, S.L.
CONSULTORIA SANTA FE, S.L.
GAGO COMES, PABLO
REMENTERIA LECUE, AITOR
GABIÑO DIAZ, JUAN ANTONIO
LLANA CONSULTORES, S.L.
MONTESINOS CONTRERAS, VICENTE
FONTAN ZUBIZARRETA, RAFAEL
SAIZ SEPULVEDA, FRANCISCO JAVIER
INVERSIONES Y GESTION AINARCU, S.L.
LUNA ARIZA, RAFAEL IGNACIO
DE LA TORRE DEL CASTILLO, CANDELARIA
EMASFA, S.L.
BENALWIND, S.L.
MORENO DEL PINO, NICOLAS
INVERTIA SOLUCIONES, S.L.
NAVARRO UNAMUNZAGA, FRANCISCO JAVIER
SERRANO RODRIGUEZ, RAFAEL
RENTEK 2005, S.L.
PISONERO PEREZ, JAVIER
ARANE PROMOCION Y GESTION, S.L.
INGARBO, S.L.
DE LA FUENTE TORRES, ANAIS BEATRIZ
DURFERAL, S.L.
GONZALEZ BORINAGA, IVANA
CUBERO PATRIMONIOS, S.L.
MEDONE SERVEIS, S.L.
ROJAS TRONCOSO, PEDRO
LOPEZ FERNANDEZ, RAQUEL
CASTRO VEGA, XOSE
SAFIN 2062, S.L.
P V 1, S.L.
ORTIZ ACUÑA, FRANCISCO
URBANSUR GLOBAL, S.L.
JAVIER CARRETERO Y ASOCIADOS, S.L.
ARIAS DELGADO, MARIA MERCEDES
AURVIR & PEÑA CONSULTORES, S.L.
GESCOFI OFICINAS, S.L.
PALAU DE LA NOGAL, JORGE IVAN
PERUCHET GRUP CONSULTOR D'ENGINYERIA, S.C.P.
BALLESTER VAZQUEZ, IGNACIO JAVIER
MARCELINO DIAZ Y BARREIROS, S.L.
CLUB AVOD, S.L.
GABINETE JURIDICO-FINANCIERO SERRANO, S.L.
J. RETA ASOCIADOS, S.L.
GRUP SBD ASSESSORAMENT I GESTIO, S.L.
VINYES SABATA, MERCÉ
ASESORIA MERCANTIL DE ZALLA, S.L.
SOCOGADEM, S.L.
CASADO RODRIGUEZ, MARIA MARBELLA
CROWE LEGAL Y TRIBUTARIO, S.L.P.
SIMON BENITO, JOSE JUAN
GOMEZ FERNANDEZ, JOSE IGNACIO
MARTIN MAYOR, ANTONIO
CORSAN FINANCE, S.L.
CEJUDO RODRIGUEZ, JUAN CARLOS
LEASING E INVERSION EMPRESARIAL, S.L.
RETAMERO VEGA, MANUEL
SAENZ DE TEJADA ASESORES, S.L.
CAMPOS DE PALACIOS ASESORES CORREDURIA DE
SEGUROS, S.L.
ASESORES DE EMPRESA Y GESTION ADMINISTRATIVA
MARIN & MARIN, S.L.
TURBON ASESORES LEGALES Y TRIBUTARIOS, S.L.
IBERFIS GESTION FINANCIERA, S.L.
SISTHEMA GESTION EMPRESARIAL, S.L.
ASESORIA INFIS, S.L.
MIQUEL VALLS ECONOMISTES & ASSOCIATS, S.L.P.
VERGEL CRESPO, MARIA ISABEL
FELEZ BIELSA, S.L.
GRAÑON LOPEZ, LUIS ALBERTO
MALMAGRO BLANCO, ANTONIO
ARTI INVERSIONES Y PATRIMONIOS, S.L.
SERVICIOS FINANCIEROS AZMU, S.L.
CARCOLE ARDEVOL, JOSE
PREVISION PERSONAL CORREDURIA DE SEGUROS, S.A.
BAZAR NAVAS, S.L.
POU ADVOCATS, S.L.P.
NAVARRO SAENZ, MARIA MAR
ORTIZ MARTIN, FRANCISCO EULOGIO
MARESME CONSULTORS, S.L.
TOLOCONSULTING, S.L.
IGNACIO CONSTANTINO, S.L.
AVELLANEDA GARCIA, ANGEL FERNANDO
TELLECHEA ABASCAL, PEDRO MANUEL
MITECA PROMOCIONES E INVERSIONES, S.L.
LIARTE BENEDI, MARIA INMACULADA
SINDIN RODRIGUEZ, NOELIA
TECNIFISCAL, S.L.
RODRIGUEZ ALVAREZ, MARIA ISABEL
CENTRE CORPORATIU INI 6, S.L.
NIETO GONZALEZ, RUFINO
INVERSIONES GEFONT, S.L.
SOTO PASTOR, RAFAEL
HERMO MARTINEZ, MARTA
ALL ABOUT FUNDS, S.L.
ESTUDIO FINANCIERO AVANZADO, S.L.
LENADER, S.L.
RENTA JUBILADOS, S.L.
MORENO SILVERIA, MARIA ISABEL
PAZOS SANCHEZ, JAVIER
FEO CLEMENTE, ALEJANDRO
DOMINGO BALTA, MARIANO
VIVIAL ASESORAMIENTO Y ALQUILERES, S.L.
HIDALGO PEREZ, JOSE ANTONIO
ALONSO ZAPICO, JUAN DE DIOS
DONAIRE MOLANO, LUIS
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AVANTIS ASESORES JURIDICOS, S.L.
PEREZ ANDREU, ALEJANDRO
PEREZ CORDOBA, VICTOR MIGUEL
SEGURALIA 2050, S.L.
IZQUIERDO - PARDO, S.L.P.
DIAZ Y FERRAZ ASOCIADOS, S.L.
GESTIO I ASSESSORAMENT OROPESA, S.L.
ESCRIVA DE ROMANI, S.L.
REY FERRIN, PAULA
NOVOSELOVA, ELENA
ROMERO SIERRA, BENJAMIN
GESTION ESTUDIO Y AUDITORIA DE EMPRESAS GEA,
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POLO ACCIONES, S.L.
GARVIN Y FISAC CONSULTORES, S.L.
GESTION INTEGRAL DE EMPRESAS FUSTER, S.L.
ROLO GESTION E INVERSION, S.L.
ASESORIA RANGEL 2002, S.L.
ILURCE ASESORES Y CONSULTORES, S.L.
ASESORIA GESTION PATRIMONIAL DE ENTIDADES
RELIGIOSAS, S.L.
GAMEZ MARTINEZ, ANTONIO MANUEL
GONZALEZ JIMENEZ, FRANCISCO
ORTUÑO FERNANDEZ, JOSE LUIS
CENTRE GESTOR, S.L.
FISLAC ASESORES, S.L.
ROCA VILA I JURADO ASSOCIATS, S.L.P.
VILAR RIBA, S.A.
CRESPO CRESPO, ANGEL MANUEL
DE ASTOBIZA AGUADO, IGNACIO
IBERBROKERS ASESORES LEGALES Y TRIBUTARIOS,
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MENDEZ HERNANDEZ, CAYETANO
REY PAZ, ROCIO
SALAMERO MORENO, JOAQUIN
LEON ACOSTA, MANUEL TOMAS
LOGROSA SOLUCIONES, S.L.
OTC ORIENTA PYMES, S.L.
CALVO HERNAN, ALICIA
OTERO ALVAREZ, JULIA
MITJAVILA Y ASOCIADOS ESTUDIO JURIDICO FISCAL,
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ESPIÑA GALLEGO, ANA MARIA
RENTA INMOBILIARIA ARAGONESA, S.L.
ABELENDA MONTES, MANUEL
SANZ FUENTES, LUIS ALBERTO
GRANDA RODRIGUEZ DE LA FLOR, ARMANDO
TARSIUS FINANCIAL ADVICE, S.L.
GOMEZ DE MAINTENANT, MARTA MARIA
MARTINEZ VECINO, MARIA CONCEPCION
MARTIN PEREZ ASSESSMENT, S.L.P.
ROMAN CAMPOS, MARIA ETELVINA
FIRVIDA PLAZA, BELEN
ASESORIA Y SERVICIOS DE GESTORIA CABELLO, S.L.
DELGADO OJEDA, MARIA ANGELES
AFYSE INIESTA ASESORES, S.L.
GESTITRAMI FINANCIAL, S.L.
FERREIRA FRAGA, JULIAN
ACTIVIDADES FINANCIERAS Y EMPRESARIALES, S.L.
SERBANASER 2000, S.L.
RODRIGUEZ OTERO, MIRIAN
RODRIGUEZ CIFUENTES, IVAN
CRESPO GOMEZ, LUCAS
RECIO CEÑA, TOMAS
COMES & ASOCIADOS ASESORES, S.L.P.
SARA Y LETICIA, S.L.
SERVICIOS JURIDICOS VENTANOVA, C.B.
HERNANDEZ SANCHEZ, MARIA ISABEL
WIZNER FAMILY OFFICE, S.L.
ARROYO DIAZ, CARLOS HUGO
MARTINEZ GARCIA, PEDRO RAFAEL
CAFARES, S.L.U.
JUNQUERA FRESCO, BEATRIZ INMACULADA
ALVAMAR GESTIONES Y CONTRATACIONES, S.L.
ALVAREZ, CORCHERO
FINACO ASESORES, S.L.
INVESTIMENTOS XURDE PABLO, S.L.
SALAET FERRES, MARISA
HERAS HERNANDEZ, FERNANDO
CASTAÑEDA PEREZ, PABLO
RAMOS SOBRIDO, JOSE ANDRES
FUENTE RODRIGUEZ, MARIA PILAR
PAZ GRANDIO, FRANCISCO JOSE
AROSTEGUI ARGALUZA, MARIA VICTORIA
GESDIA ASESORES, S.L.U.
PERELLO Y TOMAS, S.L.
ILIEVA NENKOVA, KATIA
GARCIA DIAZ, RAMON JESUS
IDF ALL FINANCING, S.L.
SUBIRATS ESPUNY, MARIA DOLORES
C. BURGOS GATON, S.L.
COLON DE CARVAJAL SOLANA CARDONA ABOGADOS,
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CENTRO ASESOR MONTEHERMOSO, S.L.
HOY DE 2004, S.L.
VILLORO OLLE, ROGER
TORRES PEREZ, JOSE ARISTIDES
DUQUE MEDRANO, JUAN CARLOS
HELP CONTROL DE GESTION, S.L.
BALSEIRO PEREZ DE VILLAR, RICARDO
ZUBIZARRETA UNCETA, AITOR
FRANCISCO JOSE PEÑUELA SANCHEZ, S.L.
GONZALEZ MONZON, MARIO
CANO LOBATO, BEATRIZ
REZA MONTES, FRANCISCO JAVIER
GARCIA SANCHEZ, LUIS
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M. L. BROKERS, S.L.
MARBAR ASESORES 2014, S.L.
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ORTEGA ALTUNA, FERNANDO MARIA
CLUSTER ASESORES, S.L.
RODRIGUEZ PEREZ, MARIA JOSE
ABADIA EXPLOTACIONES HOTELERAS, S.L.
AGORA PROFESS, S.L.
EZEQUIEL & SANCHEZ CONSULTORES, S.L.
DE FALGUERA MARTINEZ-ALARCON, ANTONIO
ARTAJO JARQUE, FERNANDO MARIA
SERRANO VACAS, JUAN CARLOS
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GESTORIA MONTSERRAT, S.L.
MARTIN NADAL, ALBERTO
GARCIA LORENZO, JAVIER
SANTANA GONZALEZ, TEODOMIRO
GASCON VAL, JESUS
LANERO PEREZ, MIGUEL ANGEL
GESTAE VALENCIA, S.L.
JUESAS FERNANDEZ, ENRIQUE
FLORES MOLERO, GREGORIO
CLAPES ESQUERDA, RAMON LUIS
MISTO, MARCO
SALOR XVI, C.B.
INFOGES PYME, S.L.
TELEMEDIDA Y GAS, S.L.
BARBA VALDIVIESO, MARIA ISABEL
MARQUES BARO, S.L.
SOMOZA SIMON Y GARCIA, C.B.
CUTTER BUSINESS, S.L.
YBIS XXI, S.L.
FERREIRO GARCIA, MARIA CRISTINA
ALBA ASESORIA INTEGRAL, S.L.
NEGOCIOS DIZMOR, S.L.
FRANK ASESORES, S.L.
REDIS INVERSIONS, S.L.
MORENES SOLIS, MARIA ROCIO
ZONA JURIDICA AGENTE, S.L.
ALDAIA 94, S.L.
LUNA GARCIA MINA, ANTONIO FERMIN
FORCADA RIFA, DAVID
PROYECTOS PINTON, S.L.
POLO PRIETO, BORJA
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SMITH BASTERRA, FRANCISCO JAVIER
CASTILLO YBARRA, MARIA DEL CARMEN
CUÑAT ALVAREZ OSSORIO, JUAN LUIS
FOGARPI SINERGIAS, S.L.P.
RIVAS URBANO, JOSE
GINES LAHERA, DARIO ALFONSO
ZUECO GIL, JESUS ANGEL
ACERTIUS SUMA CAPITAL, S.L.
PATRIAL, S.A.
MARTINEZ RIVADAS, FRANCISCO
FINANCIAL LIFE PLANNING, S.L.
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GESTION Y SERVICIOS SAN ROMAN DURAN, S.L.
GINE ABAD, FRANCISCO JOSE
JUAN TORTOSA, FEDERICO
PUERTAS Y GALERA CONSULTING, S.L.
MENDEZ ZAPATA, MARIA DEL PILAR
MIGUEL HERNANDEZ, JAVIER
FORUMLEX XXI, S.L.
DURAN VIDAL, ANNA
SANCHEZ POUSADA, JULIA
AGUT RODRIGO, OMAR
SEGURA MASSOT, MARIA TERESA
LORES FANDIÑO, JUAN JOSE
PARDO CANO, FRANCISCO JAVIER
GRANADOS ASSESSORS CONSULTORS, S.L.
CHAVARRI GONZALEZ, ALVARO
CISTERO BOFARULL, MARIA
DIENTE ALONSO, SERGIO
VALLS BENAVIDES, IGNACIO
MARTIN LOPEZ, CARLOS FRANCISCO
PADILLA CABRERA, ROMINA DEL CARMEN
ASESORIA LEMA Y GARCIA, S.L.
SEGOVIA GOMEZ, JUAN ANTONIO
GONZALEZ MAYO, GONZALO
ALONSO FERNANDEZ, AGUSTIN
DEL BARCO ASENCIO, MANUEL LUIS
GONZALEZ GARCIA, JUSTO
OLMO BARONA, ANDRES
FAMILYSF SALUFER, S.L.
GARCIA RODRIGUEZ, ANA ISABEL
BAY NAMRATA, S.L.
MESA VIÑAS, ARGEO
ANDISARU, S.L.
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LARA MARTINEZ, CARLOS
ALPHALYNX CAPITAL, S.L.
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LOPEZ PRO, DIEGO
JAEN CLAVEL, LEONARDO
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GESTORA PAMASA S.L,
NEWLAM INVEST, S.L.
SAPRO INVESTMENT, S.L.
VALENCIA MUÑOZ, JOSE JAVIER
XESTION CERCEDA, S.L.
ROBIPAL 2016, S.L.
TAPIAS & BELLIDO CONSULTING, S.L.
MODOL RUIZ, CRISTINA
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PANDAVENES CANAL, AZUCENA MARIA
KANOPA, S.L.
FERNANDEZ DOMINGUEZ, PABLO
TOIMIL SOMESO, MARIA DOLORES
LOPEZ GARCIA, ANTONIO
MAYA MONTERO, ANGEL
SAYAR & RIVAS ASOCIADOS, S.L.
GARCIA DEL HOYO, VIRGINIA
PROELIA, S.L.
PUJOLS SERRA, RAMON
GARCIA PUJADAS, MONTSERRAT
CAMPS ALBERCH, ENRIC
DIAZ FLORES, JUAN FRANCISCO
SERVICIOS FINANCIEROS CONTABLES 2000, S.L.
GUMBAU RODA, JAIME JOSE
VILLEGAS SABIO, RAMON
FRESNO CAPITAL, S.L.
EUGENIO CUBEROS, ANGEL ENRIQUE
RODRIGUEZ RODRIGUEZ, JUAN CARLOS
RUBIALES REGORDAN, RAFAEL
MOREIRA GARCIA, JULIO CESAR
ASESORIA INTEGRAL RONDA, S.L.
OSTROWSKA, JOANNA
JIMENEZ BETANZOS, DAVID
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MI CONSULTORIA, S.L.
ALONSO CUESTA, LETICIA
AXENTES FINANCEIROS DE BALTAR, S.L.
DE GUILLERMO DE SAN SEGUNDO, MARIA SONSOLES
GOMEZ MARTINEZ, ALBERTO
ORTIZ GARCIA, JUAN ANTONIO
TUTUSAUS LASHERAS, MONTSERRAT
MARTIN CARLOSENA, RAFAEL
FARRE BOSCH, CRISTINA
ARESTI MUGICA, REGINA MARIA
CIUDAD BRONCANO, JUAN FRANCISCO
PARNAU BOSCH, JOAN
ALZO SOLAR, S.L.
GESTIONES PATRIMONIALES CANARIAS, S.L.
DEL AGUILA FERRER Y ASOCIADOS, S.L.
LOPEZ LOPEZ, DORLETA
HELLIN PYMES GESTION, S.L.
CEBALLOS URCELAY, CRISTINA
GONZALEZ HERNANDEZ, ALBERTO
DE PRADO MANEIRO, JOSE IGNACIO
QUILEZ SANCHEZ, ANDRES
RUIZ MOLINA ASESORES, S.L.
BK ASESORIA JURIDICA, S.L.
SASUKE XXI, S.L.
RIVERA FERNANDEZ, MARIA DEL CAMINO
FERTAPDO, S.L.
ALONSO RUISANCHEZ, ENRIQUE
LAMONEDA PRIETO, DIEGO
CAPITEL ASESORES ALMANSA, S.L.
CASAS CASTELLA, LLUIS
CALVA CORTES, DANTE HUMBERTO
SANCHEZ MUÑOZ, RAQUEL
DIAZ PEREZ, CARLOS
GONZALEZ LANZA, ALEXIA MARIA
ARCONES GARCIA, ROCIO
LACMAC 2012 INVESTMENTS, S.L.
V.S. SERVICIOS EMPRESARIALES, S.L.
SANCHEZ SANCHEZ, JOSE ANTONIO
CARBO PRACHNER, GUILLERMO
DONOSO BUENO, CARLOS
VEGA RODRIGUEZ, REGINA DOMINICA
CALVET REVERTE, MARIA PILAR
CALLES VAQUERO, IVAN
GARCIA PEREZ DE ARRILUCEA, RAMON
BOULLOSA MOURE, BENITO
GISTAU LATRE, LAURA
ESCRIG CASTAÑO, PILAR
MARTI AVILES, MARIA JOSE
PAPOI AND PARTNERS, S.L.
BELRIVER PARTNERS, S.L.
BAIKAL ESTRATEGIAS, S.L.
ASTORGA SANCHEZ, JUAN ANTONIO
LARREA ORCOYEN, ASIER
EUGERCIO HERRA, FRANCISCO JAVIER
LOMBIDE HERNANDEZ, NAGORE
GUTIERREZ FERNANDEZ, MARIA
BENITO BARONA, ANDER
DBSER INVEPAT, S.L.
BARRAL CASADO, RICARDO
ARIAS HERREROS, JOSE IGNACIO
MARTINEZ BERMUDEZ, LEOPOLDO
ROBLES ALONSO, SARA
ACOFI ASESORES Y CONSULTORES, S.L.
BOSCH ASSESSORIA TECNICA LABORAL, S.L.U.
CAYUELA, LINA
FRANCIAMAR AREATZA, S.L.
P.198
FRANCIAMAR GORLIZ, S.L.
PRADO RECOLETOS ASESORES, S.L.
MATA SANTIN, ENRIQUE
BELLO NAVARRO, MIQUEL
ROSALES ROMERO, ANA CARMEN
FINANTZA ETA ETXEBIZITZAK, S.L.
GLOBE FINANCIAL SERVICES & CONSULTANCIES, S.L.U.
PDCE CONSULTING DE EMPRESAS, S.L.P.
LAFUENTE SERVICIOS EXTERNOS, S.L.
PACHA PRIOR, BEATRIZ
MARIN PEREZ, ANA MERCEDES
IBAÑEZ LERA, ALEJANDRO
SOCIEDAD CONSULTORA DE ACTUARIOS ASESORES,
S.L.
CRESPO MARTINEZ, JUAN ENRIQUE
ASEFINSO, S.C.
GRUPO SUBVENCION DIRECTA ASESORES
INTEGRALES, S.L.
BERTOLOTTI, ALAIN
SOTO DE PRADO, ISABEL
TRYCICLO ADVISORS, S.L.
ENDOR INVERSIONES, S.L.
ROIG MARTORELL, NURIA
APPROACH TO FINANCIAL SERVICES, S.L.
JEDA GROUP SABA, S.L.
Q-INVEST FAMILY OFFICE, S.L.
PECINO MARTIN, MARIA NINOSKA
GOMEZ JUEZ, ARTURO MARIA
GIT CANARIAS, S.L.
GOMEZ RODRIGUEZ, FRANCISCO MANUEL
VARELA PAZ, ANABEL
BLANCO OVIEDO, ALBERTO
MEDITERRANEA BLAVA, S.L.
ALABMAX FUER CONSULTING, S.L.
PINO RUIZ, MARIA DEL ROSARIO
PIÑERO MARTINEZ, MARIA ISABEL
ALERCIA INTERNATIONAL WEALTH MANAGEMENT, S.L.
ADENBERG ABOGADOS, C.B.
GABINETE AGUAR-GARCIA, S.L.P.
FREZ TORIBIO, HERMINIA
BELTRAN BENITEZ, VICENTE
PINEDA ALCALA, JAIME
CANO Y MARTIN ASESORES FINANCIEROS, S.L.
COLLADO VALDIVIESO, JAVIER JESUS
DURAN LOPEZ, LAURA
ATANES GONZALEZ, SILVIA
FONTECHA MAISO, S.L.
SERRANO TEJADA, DOMINGO
RODRIGUEZ RODRIGUEZ-VILA, ENRIQUE
GARCIA LOPEZ, PEDRO JOSE
FAUS GOMAR, ESTEBAN
VAZQUEZ GALIANO, MIGUEL
PARES FONTANALS, JAUME
GALAN DEL POZO, JAVIER
MOREJON ALTURA, JOSE CARLOS
ASESORAMIENTO INTEGRAL DE PYMES, S.L.
ASESORES MASAED, S.L.
CONTABCN ASSESSORAMENT I GESTIO D'EMPRESES,
S.L.
CORREDURIA DE SEGUROS E INVERSIONES GONZALEZ
DEL ALAMO, S.L.
DUETS EXUS SL,
GALARRETA Y PROVEDO, S.L.
GF CONSULTORIA DE EMPRESAS, S.L.
MODESTO PEREZ & CIA, S.L.
RUIZ BARCELO SERVICIOS JURIDICOS, S.L.
TAT TECNICA ASESORA TRIBUTARIA, S.L.
LOPEZ PARDO, SILVIA
SAHUN JOVE, IMMACULADA
LOPEZ GARCIA, ANDRES
CAÑAS BLANCO, ANA
ASESORES E CONSULTORES GESCON, S.L.
DORA MAIPU, S.L.
PASTOR ARANDA, C.B.
GUTIERREZ ORTEGA, FERNANDO
WORKUP ASESORES, S.L.
STUDIUM CONSULTORES VALLADOLID, S.L.L.
ARGENTE Y MERIDA ASOCIADOS, S.L.
ARROYO GARCIA ASESORES, S.L.
SERVEIS ALDOMA MAS, S.L.
CUEVAS MARTINEZ ASESORES, S.C.
FERNANDEZ RODRIGUEZ, TRINIDAD
ASESORIA DEL VALLE, C.B.
BLOTUH, S.L.
JARAIZ SELECCION, S.L.
PUERTAS NAVARRO, VANESSA
GONZALEZ GOMEZ, JAVIER ANTONIO
BPRADOS ASESORES FINANCIEROS, S.L.
GARCIA RODRIGUEZ, FRANCISCO JOSE
SARMIENTO CONESA, MARIA ESTELA
GEFGIRONA, S.L.
INVERSIONES SUAREZ IBAÑEZ, S.L.
TOT GESTIO ROMIA LLOP, S.L.
MANZANARES RODRIGUEZ, JAVIER
INIGO LOPEZ, LUIS ALBERTO
ABADIAS ANORO, ALFREDO
OKAPI SES SALINES, S.L.U.
BV CORUÑA, S.L.
ASESCO MALLORCA ASESORES E INVERSORES, S.L.
ASESORIA DE EMPRESAS URBANO Y ASOCIADOS, S.L.
ARCADIO INVERSIONES Y ASESORAMIENTO, S.L.
RUIZ SORIA, ANTONIO
PEGUERO LANZOS, FERNANDO
NUÑO BALLESTEROS, ALFONSO
AISF PARTNERS, S.L.
CONTAL ASSESSORS, S.C.V.
GUIMERA ASSESSORS, S.L.
PEÑALVA CONSULTING, S.L.
VORZEBOL ASESORIA, S.L.
ASESORIA ZULOR, S.L.
ESZACAR, S.L.
ACEBES MAYA, DAVID
AGRICOLA DE ALBATARREC, S. COOP. CAT. LTDA.
MASCARO VECINO, INMACULADA
GARCIA LATORRE, ANTONIO DAVID
GIBERT GATELL, JOSEP
ADICOR ASESORES INTEGRALES, S.L.
ORGAZ REDAJO, JOSE EMILIO
MARTIN MOLINERO, CARLOS JESUS
BARRIADA GARCIA, PEDRO JOAQUIN
BELATELES INVERSIONES, S.L.
CASTRILLO PEREZ, TRINIDAD
AVANZA ABOGADOS Y ASESORES, S.L.
FREEDOM INVESTMENTS, S.L.
LAZARO CONSULTORS I ASSESSORS, S.L.
MAP ESFISA, S.L.
BG ASESORIA DE FINANZAS E INVERSIONES, S.L.
TRUC PEBE SALLENT, S.L.
ADIRCA CONSULTING, S.L.U.
LINARES LOPEZ, MANUEL
TORRALBO HINOJOSA, SERGIO JESUS
PASCUAL HERRERO, MIGUEL
RODRIGUEZ FERNANDEZ, ENRIQUE
OLLER CARRILLO, SIMON
FORCEN LOPEZ, MARIA ESTHER
GESTORIA OFISEM, S.L.
CONCORDES TAX & LEGAL, S.L.
GESTORIA CORONA, S.L.P.
ABAC GESTION INTEGRAL DE EMPRESAS, S.L.
RODRIGUEZ PARIS, FELIX JOSE
ALVEAR PARDO, ENRIQUE
FERNANDEZ MOYANO, ONOFRE
MARTOS LOPEZ, JESUS
CANALES FUENTE, JAVIER
GIL TEJADA, MARCOS BERNARDO
MIRO SALA, MARIA ANGELES
LOPEZ IRIARTE, JOSE MANUEL
CASELLAS GASSO, SALVADOR
DELGADO ESPINOLA, ANTONIO
ALLIED CAPITAL, S.L.
CONSEJEROS Y PROYECTOS DE GESTION, S.L.
CORCUERA ABOGADOS Y ASESORES DE PATRIMONIO
S.L.
EASY MODE, S.C,
GESTIO ABP, S.L.
P.199
JAMANROCRIS, S.L.
MEDINA FINANZAS S.L.
MSJN FINANCIAL ADVISORS SLU,
VALDELASIERRA ASESORES SL,
TORRELLAS GRAMAJE, NOELIA
ARDAO ESPUCH, CRISTINA
DE ZAYAS CAMPOS, MARIA TERESA
PROALIA CONSULTING EMPRESARIAL, S.L.
FERNANDEZ AYALA, CARLOS
DEBCO ESTRUCTURA PROFESIONAL, S.L.P.
ALAMA SELMA, VICENTE IDELFONSO
TERRADILLOS PEREZ, LEIRE
FINANCES Y DINERO SL,
GALLEGO Y ASOCIADOS CONSULTORIA EMPRESARIAL
SL PROFESIONAL,
PEINADO ANGUITA, PABLO
PLEGUEZUELO WITTE, ANTONIO JOSE
SOTERAS MORERA, DAVID
VAZQUEZ CARRASCO, NURIA
VAZQUEZ ALVAREZ, GRACIELA NOEMI
REINA BETTIGHOFER, JOSE CARLOS
MUÑOZ EZQUERRO, JOSE MANUEL
EMPRENDE SERVICIOS FINANCIEROS S.L.
MOYÁ & EMERY ASESORIA Y CONSULTING SL,
SERRANO MORAL, ANTONIO
ALDAVERO ROMERO INVERSIONES S.L.
STRAFY 4 ASSET MANAGEMENT SL,
ROMERO FORMOSO, FATIMA
XESCONTA ASESORÍA DE EMPRESAS SL,
HERMANOS SANCHEZ JIMENEZ ASESORES C.B.
JUAN LORENZO SL,
FERRADAS PEREZ, TOMAS JOAQUIN
MALGOSA MORERA, JOAQUIN
FISCATEL CONSULTORES Y ASESORES,SCP,
CESARI MORA, ANNA
SUAREZ PREGO, HECTOR
RAMOS PURAS CONSULTORES SL,
AGENTES TRIBUTARIOS Y FROS SL,
LOZANO MARTIN, MATIAS
CHILCO GESTION SL,
DIEZ AMORETTI S.L.
GARCIA PRIETO, JOSE LUIS
CREACIONES CARLINA S.L.
MORERA CELDRAN, JULIO MARCO
ASESORIA LABORAL JAVIER CASTRO S.L.
GUERRERO ARPI, MARTIN
DIZ MORON, JORGE
CASTEJON DE LA ENCINA, GONZALO
DIAZ GARCIA FUENTES, MIGUEL
ASESORES FINANCIEROS R.V. SABIO S.L.
FUENTE VILLARAN, ALVARO
CALVO FERNANDEZ, JULIAN
BEATRIZ ARROYO AVILA S.L.
GAROZ DURO, ANA
CACERES SANCHEZ, GONZALO
MEDIERO MUÑOYERRO, JESUS
SANTOS MAYORDOMO, RUBEN
FERNANDEZ RODRIGUEZ, ALEJANDRO
LANAU ALTEMIR, RAMON ANGEL
SANTOS HERRERA, MERCEDES
BARRERA VAZQUEZ, JAVIER
TETIAROA GESTION Y CONSULTING 2011, S.L.
ASFIPA, S.L.,
Glossary
Additional Tier 1 Capital
Includes: Preferred stock and convertible perpetual securities and deductions.
Adjusted acquisition cost
The acquisition cost of the securities less accumulated amortizations, plus interest accrued, but not net of
any other valuation adjustments.
Amortized cost
The amortized cost of a financial asset or financial liability is the amount at which the financial asset or
financial liability is measured at initial recognition minus the principal repayments, plus or minus, the
cumulative amortization using the effective interest rate method of any difference between the initial amount
and the maturity amount and, for financial assets, adjusted for any loss allowance.
Associates
Companies in which the Group has a significant influence, without having control. Significant influence is
deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.
Baseline macroeconomic
scenarios
IFRS 9 requires that an entity must evaluate a range of possible outcomes when estimating provisions and
measuring expected credit losses, through macroeconomic scenarios. The baseline macroeconomic
scenario presents the situation of the particular economic cycle.
Basic earnings per share
Calculated by dividing “Profit attributable to Parent Company” corresponding to ordinary shareholders of the
entity by the weighted average number of shares outstanding throughout the year (i.e., excluding the
average number of treasury shares held over the year).
Basis risk
Risk arising from hedging exposure to one interest rate with exposure to a rate that reprices under slightly
different conditions.
Business combination
A business combination is a transaction, or any other event, through which a single entity obtains the control
of one or more businesses.
Business Model
The assessment as to how an asset shall be classified is made on the basis of both the business model for
managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI
Criterion). Financial assets are classified on the basis of its business model for managing the financial
assets. The Group’s business models shall be determined at a level that reflects how groups of financial
assets are managed together to achieve a particular business objective and generate cash flows.
Cash flow hedges
Those that hedge the exposure to variability in cash flows attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast transaction and could affect profit or loss.
Commissions
Income and expenses relating to commissions and similar fees are recognized in the income statement
using criteria that vary according to their nature. The most significant income and expense items in this
connection are:
profit or loss, which are recognized when collected.
which are recognized over the life of these transactions or services.
Consolidation method
Method used for the consolidation of the accounts of the Group’s subsidiaries. The assets and liabilities of
the Group entities are incorporated line-by-line on the consolidate balance sheets, after conciliation and the
elimination in full of intragroup balances, including amounts payable and receivable.
Group entity income statement income and expense headings are similarly combined line by line into the
consolidated income statement, having made the following consolidation eliminations:
a) income and expenses in respect of intragroup transactions are eliminated in full.
b) profits and losses resulting from intragroup transactions are similarly eliminated. The carrying amount
of the parent's investment and the parent's share of equity in each subsidiary are eliminated.
Contingencies
Current obligations of the entity arising as a result of past events whose existence depends on the
occurrence or non-occurrence of one or more future events independent of the will of the entity.
Contingent
commitments
Possible obligations of the entity that arise from past events and whose existence depends on the
occurrence or non-occurrence of one or more future events independent of the entity’s will and that could
lead to the recognition of financial assets.
Control
An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. An investor
controls an investee if and only if the investor has all the following:
current ability to direct the relevant activities, i.e. the activities that significantly affect the investee’s returns.
investee when the investor’s returns from its involvement have the potential to vary as a result of the
investee’s performance. The investor’s returns can be only positive, only negative or both positive and
negative.
over the investee and exposure or rights to variable returns from its involvement with the investee, but also
has the ability to use its power to affect the investor’s returns from its involvement with the investee.
Correlation risk
Correlation risk is related to derivatives whose final value depends on the performance of more than one
underlying asset (primarily, stock baskets) and indicates the existing variability in the correlations between
each pair of assets.
Credit Valuation
Adjustment (CVA)
An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative
counterparties.
Current service cost
Current service cost is the increase in the present value of a defined benefit obligation resulting from
employee service in the current period.
Current tax assets
Taxes recoverable over the next twelve months.
Current tax liabilities
Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve
months.
Debit Valuation Adjustment
(DVA)
An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the
entity’s own credit risk.
Debt certificates
Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer,
including debt securities issued for trading among an open group of investors, that accrue interest, implied
or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form
of securities or book-entries, irrespective of the issuer.
Default
An asset will be considered as defaulted whenever it is more than 90 days past due.
Deferred tax assets
Taxes recoverable in future years, including loss carry forwards or tax credits for deductions and tax rebates
pending application.
Deferred tax liabilities
Income taxes payable in subsequent years.
Defined benefit plans
Post-employment obligation under which the entity, directly or indirectly via the plan, retains the contractual
or implicit obligation to pay remuneration directly to employees when required or to pay additional amounts
if the insurer, or other entity required to pay, does not cover all the benefits relating to the services rendered
by the employees when insurance policies do not cover all of the corresponding post-employees benefits.
Defined contribution plans
Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement
benefits are determined by contributions to a fund together with investment earnings thereon. The
employer's obligations in respect of its employees current and prior years' employment service are
discharged by contributions to the fund.
Deposits from central
banks
Deposits of all classes, including loans and money market operations, received from the Bank of Spain and
other central banks.
Deposits from credit
institutions
Deposits of all classes, including loans and money market operations received, from credit entities.
Deposits from customers
Redeemable cash balances received by the entity, with the exception of debt certificates, money market
operations through counterparties and subordinated liabilities, which are not received from either central
banks or credit entities. This category also includes cash deposits and consignments received that can be
readily withdrawn.
Derivatives
The fair value in favor (assets) or again (liabilities) of the entity of derivatives not designated as accounting
hedges.
Derivatives - Hedging
derivatives
Derivatives designated as hedging instruments in an accounting hedge. The fair value or future cash flows
of those derivatives is expected to offset the differences in the fair value or cash flows of the items hedged.
Diluted earnings per share
Calculated by using a method similar to that used to calculate basic earnings per share; the weighted
average number of shares outstanding, and the profit attributable to the parent company corresponding to
ordinary shareholders of the entity, if appropriate, is adjusted to take into account the potential dilutive effect
of certain financial instruments that could generate the issue of new Bank shares (share option commitments
with employees, warrants on parent company shares, convertible debt instruments, etc.).
Dividends and retributions
Dividend income collected announced during the year, corresponding to profits generated by investees after
the acquisition of the stake.
Domestic activity
Domestic balances are those of BBVA´s Group entities domiciled in Spain, which reflect BBVA´s domestic
activities, being the allocation of assets and liabilities based on the domicile of the Group entity at which the
relevant asset or liability is accounted for.
Early retirements
Employees that no longer render their services to the entity but which, without being legally retired, remain
entitled to make economic claims on the entity until they formally retire.
Economic capital
Methods or practices that allow banks to consistently assess risk and attribute capital to cover the economic
effects of risk-taking activities.
Effective interest rate (EIR)
Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the
expected life of the instrument based on its contractual period as well as its anticipated amortization, but
without taking the future losses of credit risk into consideration.
Employee expenses
All compensation accrued during the year in respect of personnel on the payroll, under permanent or
temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the current
costs of servicing pension plans, own share based compensation schemes and capitalized personnel
expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect of employee
illness are deducted from personnel expenses.
Equity
The residual interest in an entity's assets after deducting its liabilities. It includes owner or venturer
contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities,
and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, non-
controlling interests.
Equity instruments
An equity instrument that evidences a residual interest in the assets of an entity, that is after deducting all
of its liabilities.
Equity instruments issued
other than capital
Includes equity instruments that are financial instruments other than “Capital” and “Equity component of
compound financial instruments”.
Equity Method
Is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for
the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss
includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its
share of the investee’s other comprehensive income.
Exchange/translation
differences
Exchange differences (P&L): Includes the earnings obtained in currency trading and the differences arising
on translating monetary items denominated in foreign currency to the functional currency. Exchange
differences (valuation adjustments): those recorded due to the translation of the financial statements in
foreign currency to the functional currency of the Group and others recorded against equity.
Expected Credit Loss
(ECL)
Expected credit losses are a probability-weighted estimate of credit losses over the expected life of the
financial instrument. Hence, credit losses are the present value of expected cash shortfalls. The
measurement and estimate of these expected credit losses should reflect:
1. An unbiased and probability-weighted amount.
2. The time value of money by discounting this amount to the reporting date using a rate that approximates
the EIR of the asset, and
3. Reasonable and supportable information that is available without undue cost or effort.
The expected credit losses must be measured as the difference between the asset’s gross carrying amount
and the present value of estimated future cash flows discounted at the financial asset’s original effective
interest rate or an approximation thereof (forward looking).
Exposure at default
EAD is the amount of risk exposure at the date of default by the counterparty.
Fair value
The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Fair value hedges
Derivatives that hedge the exposure to changes in the fair value of assets and liabilities or firm commitments
that have not be recognized, or of an identified portion of said assets, liabilities or firm commitments,
attributable to a specific risk, provided it could affect the income statement.
Financial Assets at
Amortized Cost
Financial assets that do not meet the definition of financial assets designated at fair value through profit or
loss and arise from the financial entities' ordinary activities to capture funds, regardless of their
instrumentation or maturity.
Financial Assets at fair
value through other
comprehensive income
Financial instruments with determined or determinable cash flows and in which the entire payment made by
the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category
includes both the investments from the typical lending activity as well as debts contracted by the purchasers
of goods, or users of services, that form part of the entity’s business. It also includes all finance lease
arrangements in which the subsidiaries act as lessors.
Financial guarantees
Contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
when a specified debtor fails to make payment when due in accordance with the original or modified terms
of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits,
technical or financial guarantees, insurance contracts or credit derivatives.
Financial guarantees given
Transactions through which the entity guarantees commitments assumed by third parties in respect of
financial guarantees granted or other types of contracts.
Financial instrument
A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial liability
or equity instrument of another entity.
Financial liabilities at
amortized cost
Financial liabilities that do not meet the definition of financial liabilities designated at fair value through profit
or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their
instrumentation or maturity.
Foreign activity
International balances are those of BBVA´s Group entities domiciled outside of Spain, which reflect our
foreign activities, being the allocation of assets and liabilities based on the domicile of the Group entity at
which the relevant asset or liability is accounted for.
Goodwill
Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of
future economic benefits from assets that are not able to be individually identified and separately
recognized.
Hedges of net investments
in foreign operations
Foreign currency hedge of a net investment in a foreign operation.
Held for trading (assets
and liabilities)
Financial assets and liabilities acquired or incurred primarily for the purpose of profiting from variations in
their prices in the short term.
This category also includes financial derivatives not qualifying for hedge accounting, and in the case of
borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under
repurchase agreements or received on loan (“short positions”).
Impaired financial assets
An asset is credit-impaired according to IFRS 9 if one or more events have
occurred and they have a detrimental impact on the estimated future cash flows
of the asset.
Evidence that a financial asset is credit-impaired includes
observable data about the following events:
a)
significant financial difficulty of the issuer or the borrower,
b)
a breach of contract (e.g. a default or past due event),
c)
a lender having granted a concession to the borrower – for economic or
contractual reasons relating to the borrower’s financial difficulty –
that the lender would not otherwise consider,
d)
it becoming probable that the borrower will enter bankruptcy or other
financial reorganization,
e)
the disappearance of an active market for that financial asset because
of financial difficulties, or
f)
the purchase or origination of a financial asset at a deep discount that
reflects the incurred credit losses.
Income from equity
instruments
Dividends and income on equity instruments collected or announced during the year corresponding to profits
generated by investees after the ownership interest is acquired. Income is recognized gross, i.e., without
deducting any withholdings made, if any.
Insurance contracts linked
to pensions
The fair value of insurance contracts written to cover pension commitments.
Inventories
Assets, other than financial instruments, under production, construction or development, held for sale during
the normal course of business, or to be consumed in the production process or during the rendering of
services. Inventories include land and other properties held for sale at the real estate development business.
Investment properties
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by
the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own use
or sale in the ordinary course of business.
Joint arrangement
An arrangement of which two or more parties have joint control.
Joint control
The contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require the unanimous consent of the parties sharing control.
Joint operation
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets
of the arrangement and obligations for the liabilities. A joint venturer shall recognize the following for its
participation in a joint operation:
A joint venturer shall account for the assets, liabilities, income and expenses related to its participation in a
joint operation in accordance with IFRS applicable to the assets, liabilities, income and expenses specific
question.
Joint venture
A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the arrangement. A joint venturer shall recognize its interest in a joint venture as an investment
and shall account for that investment using the equity method in accordance with IAS 28 Investments in
Associates and Joint Ventures.
Leases
A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of
payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially
equivalent to the combination of principal and interest payments under a loan agreement.
a) A lease is classified as a finance lease when it substantially transfers all the risks and rewards incidental
to ownership of the asset forming the subject-matter of the contract.
b) A lease will be classified as operating lease when it is not a financial lease.
Lease liability
Lease that represents the lessee’s obligation to make lease payments during the lease term.
Liabilities included in
disposal groups classified
as held for sale
The balance of liabilities directly associated with assets classified as non-current assets held for sale,
including those recognized under liabilities in the entity's balance sheet at the balance sheet date
corresponding to discontinued operations.
Liabilities under insurance
contracts
The technical reserves of direct insurance and inward reinsurance recorded by the entities to cover claims
arising from insurance contracts in force at period-end.
Loans and advances to
customers
Loans and receivables, irrespective of their type, granted to third parties that are not credit entities.
Loss given default (LGD)
It is the estimate of the loss arising in the event of default. It depends mainly on the characteristics of the
counterparty, and the valuation of the guarantees or collateral associated with the asset.
Mortgage-covered bonds
Financial asset or security created from mortgage loans and backed by the guarantee of the mortgage loan
portfolio of the entity.
Non performing financial
guarantees given
The balance of non performing risks, whether for reasons of default by customers or for other reasons, for
financial guarantees given. This figure is shown gross: in other words, it is not adjusted for value corrections
(loan loss reserves) made.
Non Performing Loans
(NPL)
The balance of non performing risks, whether for reasons of default by customers or for other reasons, for
exposures on balance loans to customers. This figure is shown gross: in other words, it is not adjusted for
value corrections (loan loss reserves) made.
Non-controlling interests
The net amount of the profit or loss and net assets of a subsidiary attributable to associates outside the
group (that is, the amount that is not owned, directly or indirectly, by the parent), including that amount in
the corresponding part of the earnings for the period.
Non-current assets and
disposal groups held for
sale
A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale
transaction, rather than through continuing use, and which meets the following requirements:
procedures are required for the sale of the asset.
Non-monetary assets
Assets and liabilities that do not provide any right to receive or deliver a determined or determinable amount
of monetary units, such as tangible and intangible assets, goodwill and ordinary shares subordinate to all
other classes of capital instruments.
Non-trading financial
assets mandatorily at fair
value through
Profit or loss
The financial assets registered under this heading are assigned to a business model whose objective is
achieved by obtaining contractual cash flows and / or selling financial assets but which the contractual cash
flows have not complied with the SPPI test conditions.
Option risk
Risks arising from options, including embedded options.
Other financial
assets/liabilities at fair
value through profit or loss
Instruments designated by the entity from the inception at fair value with changes in profit or loss.
An entity may only designate a financial instrument at fair value through profit or loss, if doing so more
relevant information is obtained, because:
"accounting mismatch") that would otherwise arise from measuring assets or liabilities or recognizing the
gains and losses on them on different bases. It might be acceptable to designate only some of a number of
similar financial assets or financial liabilities if doing so a significant reduction (and possibly a greater
reduction than other allowable designations) in the inconsistency is achieved.
fair value basis, in accordance with a documented risk management or investment strategy, and information
about the group is provided internally on that basis to the entity´s key management personnel.
These are financial assets managed jointly with “Liabilities under insurance and reinsurance contracts”
measured at fair value, in combination with derivatives written with a view to significantly mitigating exposure
to changes in these contracts' fair value, or in combination with financial liabilities and derivatives designed
to significantly reduce global exposure to interest rate risk.
These headings include customer loans and deposits effected via so-called unit-linked life insurance
contracts, in which the policyholder assumes the investment risk.
Other Reserves
This heading is broken down as follows:
i) Reserves or accumulated losses of investments in subsidiaries, joint ventures and associate: include the
accumulated amount of income and expenses generated by the aforementioned investments through profit
or loss in past years.
ii) Other: includes reserves different from those separately disclosed in other items and may include legal
reserve and statutory reserve.
Other retributions to
employees long term
Includes the amount of compensation plans to employees long term.
Own/treasury shares
The amount of own equity instruments held by the entity.
Past service cost
It is the change in the present value of the defined benefit obligation for employee service in prior periods,
resulting in the current period from the introduction of, or changes to, post-employment benefits or other
long-term employee benefits.
Post-employment benefits
Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on or
after termination of service.
Probability of default (PD)
It is the probability of the counterparty failing to meet its principal and/or interest payment obligations. The
PD is associated with the rating/scoring of each counterparty/transaction.
Property, plant and
equipment/tangible assets
Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired
under finance leases.
Provisions
Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past
events, certain in terms of nature but uncertain in terms of amount and/or cancellation date.
Provisions for contingent
liabilities and commitments
Provisions recorded to cover exposures arising as a result of transactions through which the entity
guarantees commitments assumed by third parties in respect of financial guarantees granted or other types
of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may arise
upon recognition of financial assets.
Provisions for pensions
and similar obligation
Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis-à-
vis beneficiaries of early retirement and analogous schemes.
Provisions or (-) reversal of
provisions
Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the
exception of provisions for pensions and contributions to pension funds which constitute current or interest
expense.
Refinanced Operation
An operation which is totally or partially brought up to date with its payments as a result of a refinancing
operation made by the entity itself or by another company in its group.
Refinancing Operation
An operation which, irrespective of the holder or guarantees involved, is granted or used for financial or
legal reasons related to current or foreseeable financial difficulties that the holder(s) may have in settling
one or more operations granted by the entity itself or by other companies in its group to the holder(s) or to
another company or companies of its group, or through which such operations are totally or partially brought
up to date with their payments, in order to enable the holders of the settled or refinanced operations to pay
off their loans (principal and interest) because they are unable, or are expected to be unable, to meet the
conditions in a timely and appropriate manner.
Renegotiated Operation
An operation whose financial conditions are modified when the borrower is not experiencing financial
difficulties, and is not expected to experience them in the future, i.e. the conditions are modified for reasons
other than restructuring.
Repricing risk
Risks related to the timing mismatch in the maturity and repricing of assets and liabilities and off-balance
sheet short and long-term positions.
Restructured Operation
An operation whose financial conditions are modified for economic or legal reasons related to the holder's
(or holders') current or foreseeable financial difficulties, in order to enable payment of the loan (principal and
interest), because the holder is unable, or is expected to be unable, to meet those conditions in a timely and
appropriate manner, even if such modification is provided for in the contract. In any event, the following are
considered restructured operations: operations in which a haircut is made or assets are received in order to
reduce the loan, or in which their conditions are modified in order to extend their maturity, change the
amortization table in order to reduce the amount of the installments in the short term or reduce their
frequency, or to establish or extend the grace period for the principal, the interest or both; except when it
can be proved that the conditions are modified for reasons other than the financial difficulties of the holders
and, are similar to those applied on the market on the modification date for operations granted to customers
with a similar risk profile.
Retained earnings
Accumulated net profits or losses recognized in the income statement in prior years and retained in equity
upon distribution.
Right of use asset
Asset that represents the lessee’s right to use an underlying asset during the lease term.
Securitization fund
A fund that is configured as a separate equity and administered by a management company. An entity that
would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by
said assets.
Share premium
The amount paid in by owners for issued equity at a premium to the shares' nominal value.
Shareholders' funds
Contributions by stockholders, accumulated earnings recognized in the income statement and the
equity components of compound financial instruments.
Short positions
Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase
agreements or received on loan.
Significant increase in
credit risk
In order to determine whether there has been a significant increase in credit risk for lifetime expected losses
recognition, the Group has develop a two-prong approach:
a)
Quantitative criterion
: based on comparing the current expected
probability of default over the life of the transaction with the original
adjusted expected probability of default. The thresholds used for
considering a significant increase in risk take into account special
cases according to geographic areas and portfolios.
b)
increase are included in the Group's systems through rating/scoring
systems or macroeconomic scenarios, so quantitative analysis covers the
majority of circumstances. The Group will use additional qualitative
criteria when it considers it necessary to include circumstances that
are not reflected in the rating/score systems or macroeconomic scenarios
used.
Significant influence
Is the power to participate in the financial and operating policy decisions of the investee but is not control or
joint control of those policies. If an entity holds, directly or indirectly (i.e. through subsidiaries), 20 per cent
or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it
can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly
(i.e. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the
entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial
or majority ownership by another investor does not necessarily preclude an entity from having significant
influence.
The existence of significant influence by an entity is usually evidenced in one or more of the following ways:
other distributions;
Solely Payments of
Principle and
Interest (SPPI)
The assessment as to how an asset shall be classified is made on the basis of both the business model for
managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI
Criterion). To determine whether a financial asset shall be classified as measured at amortized cost or
FVOCI, a
Group assesses (apart from the business model) whether the cash flows from the financial asset represent,
on specified dates, solely payments of principal and interest on the principal amount outstanding (SPPI).
Stages
IFRS 9 classifies financial instruments into three categories, which depend on
the evolution of their credit risk from the moment of initial recognition. The
first category includes the transactions when they are initially recognized -
without significant increase in credit risk
operations for which a significant increase in credit risk has been identified
since its initial recognition -
significant increase in credit risk
and the third one, the impaired operations
Impaired
The transfer logic is defined in a symmetrical way, whenever the condition that
triggered a transfer to Stage 2 is no longer met, the exposure will be transferred to
Stage 1. In the case of forbearances transferred to stage 2, as long as the loan is flagged as forbearance it
will keep its status as Stage 2. However, when the loan is not flagged as forbearance it will be transferred
back to Stage 1.
Statements of cash flows
The indirect method has been used for the preparation of the statement of cash flows. This method starts
from the entity’s profit and adjusts its amount for the effects of transactions of a non-cash nature, any
deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense
associated with cash flows classified as investment or finance. As well as cash, short-term, highly liquid
investments subject to a low risk of changes in value, such as cash and deposits in central banks, are
classified as cash and equivalents.
When preparing these financial statements the following definitions have been used:
· Cash flows: Inflows and outflows of cash and equivalents.
· Operating activities: The typical activities of credit institutions and other activities that cannot be classified
as investment or financing activities.
· Investing activities: The acquisition, sale or other disposal of long-term assets and other investments not
included in cash and cash equivalents or in operating activities.
· Financing activities: Activities that result in changes in the size and composition of the Group’s equity
and of liabilities that do not form part of operating activities.
Statements of changes in
equity
The statements of changes in equity reflect all the movements generated in each year in each of the
headings of the equity, including those from transactions undertaken with shareholders when they act as
such, and those due to changes in accounting criteria or corrections of errors, if any.
The applicable regulations establish that certain categories of assets and liabilities are recognized at their
fair value with a charge to equity. These charges, known as “Valuation adjustments” (see Note 31), are
included in the Group’s total equity net of tax effect, which has been recognized as deferred tax assets or
liabilities, as appropriate.
statements of recognized
income and expenses
The statement of recognized income and expenses reflect the income and expenses generated in each
fiscal year, distinguishing between those recognized in the profit and loss accounts and the “Other
recognized income and expenses”; which are recorded directly in the equity.
The “Other recognized income and expenses” includes the variations that have occurred in the period in
“accumulated other comprehensive income”, detailed by concepts.
The sum of the variations recorded in the “accumulated other comprehensive income” caption of the equity
and the profit for the year represents the “Total income and expenses”.
Structured credit products
Special financial instrument backed by other instruments building a subordination structure.
Structured Entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant
factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only
and the relevant activities are directed by means of contractual arrangements. A structured entity often has
some or all of the following features or attributes:
development activities, provide a source of capital or funding to an entity or provide investment opportunities
for investors y passing on risks and rewards associated with the assets of the structured entity to investors.
support.
of credit or other risks (tranches).
Subordinated liabilities
Financing received, regardless of its instrumentation, which ranks after the common creditors in the event
of a liquidation.
Subsidiaries
Companies over which the Group exercises control. An entity is presumed to have control over another
when it possesses the right to oversee its financial and operational policies, through a legal, statutory or
contractual procedure, in order to obtain benefits from its economic activities. Control is presumed to exist
when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity's voting
power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an
entity's voting rights does not constitute control of it. Control also exists when the parent owns half or less
of the voting power of an entity when there is:
power to appoint or remove the majority of the members of the board of directors or equivalent governing
body and control of the entity is by that board or body;
body and control of the entity is by that board or body.
Tangible book value
Tangible Book Value represents the tangible equity's value for the shareholders as it does not include the
intangible assets and the minority interests (non-controlling interests).
It is calculated by discounting
intangible assets, that is, goodwill and the rest of consolidated intangibles recorded under the public balance
sheet (goodwill and intangible assets of companies accounted for by the equity method or companies
classified as non-current assets for sale are not subtracted).It is also shown as ex-dividends.
Tax liabilities
All tax related liabilities except for provisions for taxes.
Territorial bonds
Financial assets or fixed asset security issued with the guarantee of portfolio loans of the public sector of
the issuing entity.
Tier 1 Capital
Mainly includes: Common stock, parent company reserves, reserves in companies, non-controlling
interests, deductions and others and attributed net income.
Tier 2 Capital
Mainly includes: Subordinated, preferred shares and non- controlling interest.
Unit-link
This is life insurance in which the policyholder assumes the risk. In these policies, the funds for the technical
insurance provisions are invested in the name of and on behalf of the policyholder in shares of Collective
Investment Institutions and other financial assets chosen by the policyholder, who bears the investment risk.
Write- off
When the recovery of any recognized amount is considered to be remote, this amount is removed from the
balance sheet, without prejudice to any actions taken by the entities in order to collect the amount until their
rights extinguish in full through expiry, forgiveness or for other reasons.
Value at Risk (VaR)
Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk
metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time
horizon and given confidence level
VaR figures are estimated following two methodologies:
preceding last two years. This is currently the official methodology for measuring market risks vis-à-vis limits
compliance of the risk.
b)
VaR with smoothing, which weighs more recent market information more heavily. This is a metric
which supplements the previous one.
c)
VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR
without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when the
markets show less volatile trends, while it will tend to be lower when they present upturns in uncertainty.
Yield curve risk
Risks arising from changes in the slope and the shape of the yield curve.
1
Contents
About BBVA
2
Non-financial information report
3
4
10
19
28
31
43
54
78
89
Balance sheet, business activity and earnings
94
Risk management
95
Subsequent events
110
Annual Corporate Governance Report
111
This Management Report includes information on BBVA’s performance in 2020, the definition of the strategy and the activity more related
to it and to the stakeholders, in the sections of the chapter Non-financial information report; the financial performance in the Balance sheet,
business activity and earnings; and all risk management information in its corresponding chapter.
2
About BBVA
Banco Bilbao Vizcaya Argentaria, S.A. (the “Bank” or “BBVA”) is a private-law entity governed by the rules and regulations
applicable to banks operating in Spain.
BBVA S.A is a
bank
vision focused on the customer client a customer-centric global financial services group with a significant presence in the
traditional banking business of retail banking, asset management and wholesale banking.
Its
purpose
best solutions and helping them make the best financial decisions by offering an easy and convenient experience. The entity
is based on strong values: customer comes first, we think big and we are one team.
The Bank has a solid position in Spain and, for its development activity, has representative offices in more than 15 countries.
Organizational Chart
(1)
Turkey.
(2)
(3)
3
Non-financial information report
Pursuant to Law 11/2018 of December 28, modifying the Commercial Code, the revised text of the Capital Companies Law
approved by Royal Legislative Decree 1/2010 of July 2, and Law 22/2015 of July 20 on Accounts Auditing, regarding non-
financial information and diversity (hereinafter, Law 11/2018), BBVA presents a non-financial information report that
includes, but is not limited to: the information needed to understand the performance, results, and position of the Bank, and
the impact of its activity on environmental, social, respect for human rights, and the fight against corruption and bribery
matters, as well as employee matters.
In this context, BBVA prepares the
Non-financial information report
to the Financial Statements for the 2020 fiscal year as covered in the article 49.6 of the Commercial code introduced by Law
11/2018.
Reporting of the non-financial key performance indicators (KPI) included in this consolidated non-financial information report
is performed using the GRI (Global Reporting Initiative) guide as an international reporting framework in its exhaustive
option.
In addition, for the preparation of the non-financial information contained in this Management Report, the Bank has
considered the Communication from the Commission of July 5, 2017 on Guidelines on non-financial reporting (methodology
for reporting non-financial information, 2017/C 215/01).
In relation to the COVID-19 pandemic, specific sections have been included throughout, which describe how the outbreak
of the pandemic has affected the development of BBVA Group's activities. In addition, in compliance with the
recommendations issued by the European Securities and Markets Authorities (ESMA) throughout 2020, specific disclosures
have been included in relation to this issue throughout this report.
The information included in the non-financial information report is verified by KPMG Auditores, S.L., in its capacity as
independent provider of verification services, in accordance with the new wording given by Law 11/2018 to article 49 of the
Commercial Code.
4
Environment
Macro and industry environment and trends
The
Global economy
an unprecedented fall in GDP in the first half of 2020. Supported by strong fiscal and monetary policy measures, as well as
greater control over the spread of the virus, global growth rebounded more than expected in the third quarter, before slowing
down in the fourth, when the number of infections rose again in many regions, mainly in the United States and Europe. As
for 2021, the unfavorable evolution of the pandemic is expected to adversely affect activity in the short term, while new fiscal
and monetary stimuli, as well as the administering of coronavirus vaccines, are expected to support recovery from mid-year
onwards.
Following the massive fiscal and monetary stimuli to support economic activity and reduce financial tensions, government
debt has increased across the board and interest rates have been cut, and are now at historical low levels. Additional
countercyclical measures may be required. Similarly, a significant reduction in current stimuli is not expected, at least until
the recovery takes hold.
Tensions in the financial markets have moderated rapidly since the end of March 2020, following the decisive actions taken
by the main central banks and the fiscal packages announced in many countries. In recent months, the markets have shown
relative stability and, at certain times, risk-taking movements. Likewise, progress related to the development of COVID-19
vaccines and prospects for economic recovery should pave the way for financial volatility to persist at relatively low levels in
general going forward.
BBVA Research estimates that global GDP contracted by around 2.6% in 2020 and will expand by around 5.3% in 2021
and 4.1% in 2022. Activity will recover gradually and heterogeneously among countries. Various epidemiological, financial
and geopolitical factors are also contributing to the persistent exceptionally high uncertainty.
GLOBAL GDP GROWTH AND INFLATION (REAL PERCENTAGE GROWTH)
2020
2021
GDP
Inflation
GDP
Inflation
World
(2.6)
3.4
5.3
3.3
Eurozone
(7.3)
0.3
4.1
0.8
Spain
(11.0)
(0.3)
5.5
0.7
The United States
(3.6)
1.3
3.6
2.6
Mexico
(9.1)
3.4
3.2
3.3
South America
(1)
(6.8)
8.8
4.7
10.4
Turkey
1.0
14.6
5.0
10.5
China
2.2
2.5
7.5
1.7
Source: BBVA Research estimates.
(1)
With regard to the
banking system
, in an environment in which much of the economic activity has been at a stand still for
several months, the services provided have played an essential role, basically for two reasons: firstly, the banks have
ensured the proper functioning of collections and payments for households and companies, thereby contributing to the
maintenance of economic activity; secondly, the granting of new lending or the renewal of existing lending has reduced the
impact of the economic slowdown on household and business income. The support provided by the banks over the months
of lockdown and public guarantees have been essential in softening the impact of the crisis on companies' liquidity and
solvency, meaning that banking has become its main source of funding for most companies.
In terms of
profitability
, European and Spanish banking have deteriorated, primarily because many entities recorded high
provisions for impairment on financial assets in the first two quarters of 2020 as a result of the worsening macroeconomic
environment following the pandemic outbreak. Pre-pandemic profitability levels remained far from the levels prior to the
previous financial crisis. This is in addition to the accumulation of capital since the previous crisis and the very low interest
rate environment that we have been experiencing for several years. Nevertheless, the banks are facing this situation from
a healthy position and with solvency that has been constantly increasing since the 2008 crisis, with reinforced capital and
liquidity buffers and, therefore, with a greater lending capacity.
5
In
Spain
, In terms of
growth
, according to BBVA Research estimates, Spanish GDP could contract 11.0% in 2020 and grow
by 5.5% in 2021. With regard to 2020, performance in the third quarter was somewhat better than expected in terms of
activity, but Spain's GDP was close to stagnation in the fourth quarter. BBVA Research predicts that accelerated economic
activity in the second half of this year will lead to 7% GDP growth in 2022, assuming that both private consumption and
investment (public and private) benefit from the mass vaccination campaign, from expansionary fiscal policy and from
favorable financing conditions. Mass vaccinations will result in reduced health uncertainty, eased restrictions on the mobility
of workers and families, and will allow businesses in the service sector to open. These factors will be key to boosting
consumption and reducing savings accumulated during the crisis period. The funds associated with NGEU will have an
increasing impact over time, especially on investment, which will also contribute to economic acceleration. Estimates of the
impact that these funds will have on the economy continue to point to a significant effect in 2021 and the next two years (1.5
percentage points on average per year).
As regards the
banking system
, according to the latest Bank of Spain data available, the total volume of lending to the
private sector recovered slightly in October 2020 (up +2.4% year-on-year) as a result of the growth of new business lending
transactions since April, within the framework of the public guarantee programs launched by the government to combat
COVID-19. For their part, asset quality indicators have continued to improve (the NPL ratio was 4.57% in October 2020).
Profitability entered negative ground in the first nine months of 2020 due to the increase in provisions resulting from the
coronavirus crisis and, more importantly, the extraordinary negative results recorded in the first half of the year associated
with the deterioration of goodwill in some entities. In addition, the low interest rate environment has kept profitability under
pressure. Spanish institutions maintain comfortable levels of capital adequacy and liquidity.
Regulatory environment
Banking after COVID-19
The regulatory environment of the financial industry during 2020 has been marked by the
COVID-19
changes that have occurred in the lives of companies, consumers, workers and, ultimately, in society as a whole. Throughout
this financial year, the rapid reaction of supervisors and regulators has been particularly notable, as they did not wait for the
situation to deteriorate before adopting strong response measures, allowing them to relax some existing regulatory
requirements and implement regulatory changes and measures to adapt to the challenges posed by this pandemic and the
challenges it could pose in the coming months, since, unlike during the previous crisis, banks were in a solid position in
terms of solvency and liquidity this time around.
This section analyzes the regulatory milestones set due to COVID-19 (regulatory flexibility, payment deferrals, restriction of
dividend distribution and use of capital buffers), as well as other measures taken for trends prior to its emergence, such as
those aimed at improving the situation in the markets (with projects such as the Capital Markets Union and reference indices
reforms), the challenge of financial sustainability with the fulfillment of Environmental, Social and Governance (ESG) criteria
and the transformation toward an increasingly digital business model where regulation must aid innovation and change
processes and systems so that banks can compete in the new ecosystem of financial service providers that are highly
efficient, technologically advanced and subject to less-demanding regulation.
Regulatory response to COVID-19 (payment-deferrals, dividends, NPL buffers)
The economic consequences of the health crisis caused by the COVID-19 outbreak have been met by an
agile, forceful
response
banks play as finance providers in extraordinary situations such as the one experienced, which entails strong liquidity stress.
The set of measures taken by the global, European and Spanish regulatory authorities during 2020 to reduce pressure on
banks in the midst of the global pandemic has enabled institutions to channel their efforts and resources more efficiently
and swiftly in order to contribute to a rapid economic recovery.
At the
international standards. The Basel Committee on Banking Supervision (BCBS) announced a delay in implementing the
Basel III package (until 2023) and the International Accounting Standards Board (IASB) issued a guide on the application of
IFRS 9 in the context of the COVID-19 crisis.
These measures have been aimed at maintaining the
provision and extension of credit
However, this extension necessarily requires proper recognition of potential impairments. In this regard, both prudential and
accounting authorities have made it clear that the flexibility that has been included in the rules should be used so as to avoid
automatisms in the reclassification of exposures. This has been particularly relevant in cases where payments have been
made on certain loans.
6
Among the measures announced by
European agencies
, the most significant have been those related to the possibility of
using prudential buffers, for both capital and liquidity. In this regard, the European Commission, the European Banking
Authority (hereinafter, EBA) and the ECB have had to adjust their initial work plans to allow financial institutions to devote
more resources to stimulating the real economy.
The ECB stated that entities could operate under capital and liquidity buffers, and called on banks to apply restrictions on
dividend distribution and share buybacks until September 30, 2021, as well as to exercise caution when paying variable
remuneration. For its part, the EBA updated its work program for 2020 to reflect all the changes that the COVID-19 pandemic
has had on its activities. The EBA therefore only engaged in new consultations that were considered critical, postponed the
publication of the final technical standards based on their degree of completion and the time frame envisaged for their
implementation, and suspended the data collections normally used for ad-hoc
analyses. The EBA also provided operational
relief to financial institutions by postponing the 2020 stress test
and recommending that authorities make use of the
regulatory flexibility. It has also published guidelines on the handling of public and private payment deferrals and other
national measures. Additionally, the EBA has published guidelines regarding the treatment of public and private payment
deferrals, which have been extended until March 31, 2021, as well as its reporting and other national measures for the banks
to continue to grant loans at the same time as recognizing any solvency issue, ensuring by the latter, that problematic loans
are adequately reflected in the banks’ accounts.
The European Commission published in December 2020 its Action Plan about non-performing loans (NPLs) in which it
highlights the need to act rapidly and not incurring the same situation lived during the last crisis to guarantee the protection
of clients and especially vulnerable debtors. This action plan is based on four points: i) Development of secondary markets
for the impaired assets; ii) network of bad banks (AMCs); iii) Frameworks for insolvency, restructuring and debt recovery;
and iv) NPLs management via a crisis management framework and governmental support programs.
In terms of
regulations
banking sector
, the main changes to the prudential framework of the Capital
Requirements Regulation (known as "CRR Quick Fix") intended to mitigate the effects of the pandemic and ensure the flow
of credit have been as follows: i) extension of the transitional agreement to mitigate the effect of IFRS 9 on capital; ii)
modification of the prudential
backstop of provisions for loans with public guarantees, bringing it in line with the beneficial
treatment received by other guaranteed exposures; iii) anticipation of support factors for SMEs and infrastructure, which
allow the risk weighting of these exposures to be reduced; (iv) early implementation of the EBA decision on
software
deduction; and (v) prudential filtering for sovereign bond exposures so as to reduce the effects of potential volatility in these
instruments on entities capital.
As regards the regulation of the
bank resolution
SRB), in response to the pandemic, the deadlines for banks to report the creation of the minimum required eligible liabilities
(MREL) required by European standards have been extended. The body, however, has decided not to extend the deadline
for banks to make their annual contribution to the future Single Resolution Fund and has encouraged the early adoption of
the Resolution Directive and Regulation (known as BRRD2/SRMR2 respectively). The European Commission published a
consultation paper on the roadmap for the crisis management framework and its intention to carry out an impact
assessment
on the potential modification of the crisis management framework and the deposit guarantee fund framework
(BRRD/SRMR/DGSD) for a legislative initiative in 2021.
On a purely
national level
, within the temporary framework of state aid from the European Commission, the Spanish
authorities approved a mortgage payment deferral and a credit facility with a €100,000m public guarantee. The Bank of
Spain, in line with international and European authorities, also issued several statements recommending not to pay
dividends, in addition to statements on the flexibility of the accounting regulation regarding provisions.
Lastly, operational measures have also been adopted, mainly related to reporting
and information disclosure requirements,
which aim to relieve entities from part of the operational burden resulting from regulatory and supervisory processes, thus
allowing them to focus on their main activity, the granting of loans.
Financial markets: Capital Markets Union, securitization and reference indices.
1. Capital Markets Union
The European Commission published an ambitious new Action Plan to boost the EU's
Capital Markets Union
CMU), proposing 16 specific measures to make real progress toward completing the CMU in the coming years. The EU's
main priority in 2020 has been to ensure that Europe can recover from the unprecedented economic crisis caused by COVID-
19 and, in this sense, it is considered that the CMU can act as a lever to boost private finance as an essential factor in this
recovery, to boost the transition toward a sustainable economy, to put the capital markets at the service of people and to
project the global competitiveness of the EU economy by strengthening the international role of the euro. The Action Plan
has three key objectives: i) to ensure that the EU's economic recovery is green, digital, inclusive and solid by making finance
more accessible to European businesses, particularly to SMEs; ii) to make the EU an even safer place for individuals to
save and invest in the long term; and iii) to integrate national capital markets into a genuine single EU-wide capital market.
As part of this plan, the European Commission has proposed the
, which contains
specific adjustments to the Prospectus Regulation, MiFID II and securitization rules. The Commission has proposed creating
an "EU Recovery Prospectus," a kind of shortened prospectus, for companies that already have a track record in the public
market. It is also introducing some specific modifications to MiFID II requirements in order to reduce some of the
7
administrative burdens that investors have faced in their business-to-business relations. At the same time, it also proposes
to readjust requirements to ensure that there is a high level of transparency with respect to the customer, while
simultaneously guaranteeing the highest standards of protection and acceptable compliance costs for European companies.
Lastly, specific modifications to the securitization rules have been proposed to amend the Securitization Regulation and the
Capital Requirements Regulation in order to enhance the securitization market as a balance sheet management tool for risk
reduction and NPL management as a result of COVID-19. Its final version will not be available until the beginning of 2021.
2. Reference indices reform
Throughout 2020, the public and private sectors continued to work in coordination on the
reform of the financial market
interest reference indices
financial sector entities in all jurisdictions to continue their efforts to make wider use of risk-free rates in order to reduce
dependence on IBORs (such as LIBOR, EURIBOR and TIBOR), and in particular to eliminate the remaining dependence
on the London Interbank Offering Rate (LIBOR), which could disappear by the end of 2021, by publishing a roadmap setting
out a timetable of actions for financial and non-financial entities to ensure an orderly transition.
In
Europe
, the Commission proposed amending EU rules on financial reference indices in July. The purpose of the
amendments is to create a framework that allows for the application, at the request of the European Commission, of a legal
substitute rate when a systemically important reference index such as LIBOR or others ceases to be published or becomes
unrepresentative. This will reduce legal uncertainty surrounding existing contracts that do not contain adequate replacement
indices and will avoid risks to financial stability.
The
United Kingdom
has also presented a legislative proposal that seeks to reduce the risk of litigation linked to potential
disputes in contracts linked to LIBOR that cannot be renegotiated before the LIBOR's date of disappearance or
unrepresentativeness in order to change the rate or include suitable substitutes. Among other issues, the regulatory proposal
allows the Financial Conduct Authority (FCA) to urge a change in the methodology of an index ("synthetic
benchmark") and
prohibit its use by supervised entities in the United Kingdom except for certain types of contracts, which have yet to be
specified ("tough
legacy").
Lastly, various policy proposals have been made in the
United States,
some of which are limited to New York State and
some of which are nationwide, but, thus far, none have been as successful as hoped.
Greater coordination between the various legislators would be very conducive to ensuring an orderly transition.
3. Anti-Money Laundering (AML)
There is a strong global consensus on the need to improve policies on
anti-money laundering and anti-terrorist financing
.
To this end, the European Commission initiated consultation on an action plan for a comprehensive EU policy on the
Prevention of Money Laundering and Terrorist Financing (PMLTF). The plan aims to implement an improved, robust and
efficient regulatory framework that is adapted to innovation and ensures harmonized supervision, in all member states.
Legislative proposals are expected for 2021.
Sustainable finance: Toward integration in regulation and prudential supervision
Throughout 2020, progress has continued to be made so that the ESG criteria reach the
entities' policies
and risk departments specifically, so that these criteria fully integrate into their actions and corporate culture. The pandemic
appears to have been an accelerator in this area as well.
At the global level, the FSB published its assessment of financial authorities' experience in including physical and transitional
weather risks as part of their financial stability monitoring. The Task
Force on Climate-related Financial Disclosures
(hereinafter, TCFD), created by the FSB, has published a consultation paper with the objective of gathering feedback on
climate-related forward-looking
metrics that are useful for decision-making in the financial sector. The TCFD has also
published important documents on sustainability: its third progress report in which it highlights the growth of disclosures in
companies linked to the TCFD Recommendations; a guide on the analysis of climate-related scenarios and on the integration
of climate-related risks in existing risk management processes; and a guide on the analysis of climate-related scenarios for
non-financial companies.
8
The EU continues to integrate sustainability into the financial system and continues to make progress in developing
regulations
which is expected to be published in early 2021. It has also consulted on a possible initiative on sustainable corporate
governance principles. For their part, the Commission, Council and Parliament agreed on the taxonomy of sustainable
activities with a common classification system applicable from the end of 2021 for adaptation and mitigation objectives. The
European supervisory authorities (ESAs) published a consultation paper with a set of disclosure standards on ESG
information. The survey is part of EBA's work to develop a draft Technical Implementation Standard (TIS) on the disclosure
of prudential information regarding ESG risks. It will also be used to monitor the short-term expectations specified in the
EBA Action Plan on Sustainable Finance. The EBA has also published for consultation the document on management and
monitoring of ESG risks, which covers a wide range of topics (definition of ESG risks and factors, quantitative and qualitative
indicators). Lastly, the ECB published its final guidelines on its supervisory expectations regarding climate change and
environmental risks at the end of the year.
Regulation in the field of digital transformation of the financial sector
The regulatory environment in the framework of
digital transformation
has also been significantly influenced by the COVID-
19 health crisis, which has helped to establish the pre-existing trends in the economy's digitalization. The lessons learned
during this crisis about the benefits of digitalization have fueled the authorities' work during this year, whereby they have
updated their priorities and defined new action plans to maximize the benefits of digitalization for the economy. In the
European Union, this has resulted in the publication of new strategies and initiatives, both throughout the economy as a
whole and specifically for the financial sector.
In February, the
European Commission
strategy is based on two main pillars: strengthening the use of data, and developing and regulating artificial intelligence
(hereinafter AI). As regards the first pillar, the
data strategy
, the European Commission announced a series of measures
and new regulations, to be adopted between 2020 and 2021, aimed at facilitating the reuse of data, with a focus on public
and business data. Among these measures, the Data Governance Regulations published in November will regulate the so-
called "data spaces," aimed at facilitating the aggregation of data from certain sectors and the development of frameworks
for data sharing. Furthermore, although the strategy is not especially focused on personal data, it contemplates that the right
to data portability established in the General Data Protection Regulations could be improved in another new regulatory
initiative (Data
Act), to be published in 2021. These initiatives can certainly contribute to increasing the European Union's
competitiveness, allowing European citizens and companies to extract more value from their data.
In the
White Paper on Artificial Intelligence
—the second pillar of the digital strategy— the European Commission
proposed measures to encourage research and investment in AI, and raised the possibility of introducing new regulation for
certain applications of this technology in sectors designated as high risk, such as health or transport. The European
Commission is expected to publish its proposal to regulate AI in the first quarter of 2021. In Spain, on December 2, 2020,
the Government published the National Strategy of Artificial Intelligence aligned with the European initiatives.
In their effort to ensure a digital, competitive European economy, the authorities have also worked on revising the
competition rules
on December 15, the European Commission published a new legal proposal which aims to establish new obligations for
large digital platforms, as part of a new regulation of digital services. The modernization of competition policy has also been
a priority in the United States in 2020, as shown by the report published by Congress in October discussing the state of
competition in digital markets and proposing options for updating competition policy.
The
work plans
year. In September, the European Commission published its new strategy for digital finance, which outlines the roadmap
until 2024. In addition to pursuing a regulatory framework that encourages innovation, the strategy seeks to eliminate barriers
to the digital single market by implementing, among other things, a new cross-border framework for digital identity.
Furthermore, largely motivated by the emergence of new financial service providers (FinTechs
and
BigTechs), the strategy
proposes a review of the financial sector's regulatory and supervisory framework to ensure compliance with the "same
activity, same risk, same regulation" principle.
In line with the growing importance of data in the digital world, another key objective of this new strategy is to move toward
a more
data-driven
Authorities, will study how to facilitate the use of AI in the financial sector and the possibility of extending the data-sharing
principles of
open banking regulations such as the Payment Services Directive (PSD2) to other financial services and
products. We still have to wait until 2022 to find out the authorities' proposals on the latter point; i.e. once the new rules to
promote data sharing in the digital economy have been developed (within the framework of the aforementioned data
strategy).
Alongside this strategy for digital finance, the European Commission proposed a new Regulation on
Resilience
management and proposes the creation of a direct monitoring framework for critical third parties (e.g. cloud computing
service providers).
The year 2020 has also been very significant for the
payments
BBVA, announced the beginning of the implementation phase of the European Payments Initiative (EPI). The objective of
9
this initiative—to create a comprehensive pan-European payment solution enabling instant payments—is shared by
European authorities. This is demonstrated by the European Commission's new retail payments strategy, published in
September, which, among other things, aims to promote pan-European payment solutions and immediate payments in the
"new normal." The intention to revise the aforementioned PSD2 at the end of next year has also been announced as part of
this strategy. At the global level, following the G20 mandate, the Committee on Payments and Market Infrastructures (CPMI)
and the FSB published a roadmap in 2020 setting out actions to be implemented in the coming years to improve cross-
border payments.
Another area that attracted a lot of attention from international bodies and European regulators during 2020 was that of
cryptoassets
. At the global level, the FSB published a report in October with high-level recommendations for the regulation
and supervision
of global stablecoin schemes. The Financial Action Task Force (FATF) also worked throughout 2020 to
strengthen its standards to address the money laundering risks of this type of activity.
At the European level, the Commission published several legislative proposals on this matter in September, including the
proposal for regulation to govern the cryptoasset markets (known as MiCA). This proposal includes rules to regulate the
issuance of previously unregulated cryptoassets (including
stablecoins) and related service providers, such as the custody
or exchange of cryptoassets. For its part, the ECB published a report and a consultation paper in October on the possible
issuance of a "digital euro," an official digital currency, at the retail level, which would complement cash. The Eurosystem
has not made a decision on its issuance, but wants to be prepared to do so in the future, if necessary.
The year 2020 has also been a year of much regulatory action on the digital plane in all countries. In
Spain
, the most notable
development has been the approval of legislation in November to create a regulatory
sandbox for the financial sector. In
Turkey
, a new payment rule came into force in January, which introduced a new
open banking framework, similar to the
one introduced by the aforementioned PSD2 in Europe. Turkish authorities worked throughout 2020 to develop the exact
rules for implementing this framework. Meanwhile,
Mexico's
regulations derived from the Fintech Act throughout the year.
10
Strategy and business model
BBVA’s strategy and business model comprises the totality of the Group, including BBVA,S.A.
Introduction
In 2019, BBVA conducted a strategic review process to continue its transformation and adapt itself to the major trends that
were reshaping the world and the financial services industry. In 2020, BBVA made progress in the development of its
strategy, based on its
Purpose
, the six
, and its
Values
, all of which are fundamental pillars of the
Organization's overall strategy.
The COVID-19 crisis validates our strategic vision
During 2020 an unprecedented sanitary crisis has been suffered, with major economic and social implications. This unique
situation
has accelerated some relevant trends some of which are expected to remain, as outlined below:
●
More challenging macroeconomic environment
with a strong GDP contraction in 2020 whose recovery is still
uncertain. This tougher context will impact directly on the banking sector with lower expected loan growths, lower
interest rates for longer and higher Cost of Risk.
●
Acceleration of client digitization.
Social distancing has led to a massive use of e-commerce and other remote
services (tele-health, e-learning, etc.). This acceleration has also been perceived in the banking sector with higher
usage of online and remote assistance channels.
●
Higher concern for sustainability, both in the climate and social field
. Social component has gained
momentum due to the social urgency derived from the economic crisis while climate action remains a key topic for
all stakeholders.
●
Acceleration of innovation
. The pandemic has made evident the vulnerability of economies to external shocks.
In order to look for a greater resilience, governments, public institutions and the private sector, see the recuperation
plans as an opportunity to advance faster in terms of innovations (such as the investment in 5G, AI, data, etc.)
11
This rapid advance of previous trends
:
Good progress in a challenging year
The emergence of the
COVID-19
outbreak being classified as a global pandemic by the World Health Organization from March 11, 2020. The pandemic has
and continues to adversely affect the
global economy
the Group operates, driving many of these countries into an economic recession.
After following the latest news about the virus at the beginning of 2020, the Bank's Corporate Continuity Committee decided
on March 9 to create a global
war room
, a crisis management team with a global overview of what was happening at each
moment, and with the operational capacity to make swift decisions, in order to meet two of the Bank's fundamental and
priority objectives: first of all,
to preserve the health of all employees and customers,
and
secondly
and service continuity.
reporting to the Group's management and governance bodies, have facilitated the rapid and effective adoption of the
measures required at any given time.
This swift decision-making, combined with digital and remote management capabilities, has allowed the BBVA Group to
continue providing its services in all of the geographical areas in which it operates throughout the pandemic, and to provide
its customers with the necessary support to meet their financing needs and alleviate their burden through various initiatives
such as payment deferrals or making payments more flexible. All this has been accompanied by continuous monitoring and
management of the main impacts of the crisis on the Bank's business and risks, such as the financial impacts on the income
statement, capital or liquidity.
In this context, BBVA's strategy regarding the relationship model and digital capabilities has been reaffirmed and has proven
to be an asset in this environment, allowing it to be closer to customers when they have needed it most.
2020 was an extraordinary year that required a rapid and efficient response. Despite this tough environment and thanks to
the agility of the Organization, BBVA
six strategic priorities
.
12
1. Improving our clients’ financial health
BBVA aspires to be the
trusted financial partner
and management of their finances in order to help them achieve their vital and business goals.
In this sense, during 2020, BBVA continued enhancing its
differentiated value proposition
global solutions, launching initiatives to be present in its clients’ day to day transactionality and evolving its digital offer to
enterprise clients, taking advantage of its international presence.
For more information, see the chapters "The customer comes first" and "Contribution to society" included in this report.
2. Helping our clients transition towards a sustainable future
BBVA is aware of the remarkable role of banks in the
transition toward a more sustainable and
inclusive future
, through
its financing operations and advisory services. For this reason, BBVA is committed to align its activity to the Paris Agreement,
and it wants to use its role to help its clients transition toward a more sustainable future, inspiring itself in the Sustainable
Development Goals selected.
For BBVA those
Sustainable Development Goals (SDGs)
impact by harnessing the multiplier effect of banking.
In this regard, BBVA is implementing this strategic priority through two ways:
●
Climate Action
: mobilizing the appropriate resources to manage the challenge of climate change tackling those
SDGs involved, i.e Affordable and clean energy (SDG 7), Responsible consumption and production (SDG 12) and
Climate action (SGD 13).
●
Inclusive Growth
: mobilizing the investments needed to build inclusive infrastructures and support inclusive
economic development. In this case, the SDGs that BBVA wants to foster are: Decent work and economic growth
(SDG 8) and Industry, innovation and infrastructure (SDG 9).
For more information, see the chapter “Sustainability at BBVA” included in this report.
3. Reaching more clients
BBVA looks to grow by being where the client is. It aims to accelerate the profitable growth, supporting itself on its own and
third party channels with a special focus on digital and most profitable segments.
In this sense, during 2020, and despite the tough environment,
BBVA has been able to increase strongly its clients in
all its footprint
(+3.6% with respect to 2019). This growth has been boosted by the digital channels. The number of
customers acquired through these channels has increased in 56% with respect to 2019.
BBVA not only has carried out successful strategies to gain clients but also has
set the grounds for future growth
in the
coming years. On the one hand, it has
strengthened its open market capabilities in its own channels
(e.g. biometric
own verification technology improvement, E2E digital onboarding channel optimization, etc.). On the other hand, it has
reinforced the acquisition of customers with attractive partnerships with third parties.
For more information, see the chapter “The customer comes first” that follows.
4. Driving operational excellence
BBVA wants to provide the best
focus in the solid management of risks and the optimum capital allocation.
In this regard, BBVA is focusing on a simpler, more
scalable and productive model
digital
capabilities
efficient and productive operational model with simple and automated processes on account of new technology and data
analytics.
This operational excellence has to be performed with a
robust risk management
, taking into account both financial and
non-financial risks. In this regard, BBVA is working on enhancing its global platforms to improve its Retail and SMEs risk
management. Additionally, the
optimum capital allocation
For more information see the chapters “The customer comes first”, “Technology and innovation”, “The best and most
engaged team”, “Ethical behavior” and “Contribution to society” and “Risk management” included in this report.
13
5. The best and most engaged team
The
team
continues to be a strategic priority for the Group. Our business is a people business
(“we are people serving
people”)
values
are at the core of our organization.
In 2020, the
employee engagement
(measured through Gallup’s survey grand mean) has improved in BBVA Group from
4.11% to 4.25% and the
internal reputation
BBVA is inspiring a high -performing team with a common purpose and shared values, fostering
diversity
leadership
professional development model
create and capture opportunities and leading the transformation by developing core capabilities and
reskilling
the teams.
BBVA is also creating the conditions for a
flexible and sustainable work environment
.
For more information, see the chapter “The best and most engaged team”.
6. Data and Technology
Data and Technology are two accelerators to achieve our strategy.
Data
developing a global platform, training the teams in data analytics capabilities and building robust governance processes to
improve data quality. Data also allows to create more business value as it helps to enhance other strategic priorities (e.g. in
Financial Health, supporting to develop personal finance management tools).
With regards to
, BBVA’s focus continues to be on the reliability and resilience of the platform, which allows to
be more productive and efficient and to deliver more quality and functionalities to customers globally, and on its security and
privacy model (i.e. cybersecurity, business processes, fraud and data security).
For more information see the section “Customer security” within the chapter “Customer comes first” and the chapter
"Technology and innovation".
14
Values
BBVA’s values and behaviors are the action guidelines which guide the Entity in its day-to-day when making decisions, and
help it accomplish its purpose and strategic priorities. They are the hallmark of everyone working in the Bank and they define
the DNA of the company. The values inspire the form of leadership and boost the commitment at BBVA:
●
Customer comes first
o
We are empathetic:
to better understand their needs.
o
We have integrity:
customer interests' first.
o
We meet their needs:
overcoming any difficulties we encounter.
●
We think big
o
We are ambitious:
o
We break the mold:
new ideas which enables us to learn.
o
We amaze our customers:
unique experiences and solutions which exceed their expectations.
●
We are one team
o
I
am committed:
delivering them, working with passion and enthusiasm.
o
I trust others:
areas and hierarchical barriers.
o
I am BBVA:
achieve them and make our Purpose a reality.
The values are reflected in the main levers for the Bank’s transformation and in the Talent & Culture processes: from the
selection of new talent to the roles allocation procedures, people development, training and inducement for goals attainment.
One of the main actions to promote the living of the Values at BBVA is the Values Day, a global event in the cultural
transformation of BBVA that aims to approach the values of the Entity to all the Group employees, creating conversation
spaces about them. In 2020, the Bank has held the third Values Day edition, which, due to the COVID-19 context, has been
100% digital. Despite the distance, the employees have remained more united than ever thanks to the Values, and that has
been the motto this year: “United by our values”.
15
In addition, at the beginning of 2020, one of the Group priorities was launched: a new leadership program called “We lead
together”, which is linked with the purpose and the values of BBVA, and which seeks to make all the employees leaders and
that this leadership is exercised with integrity. This new model aims to boost three skills: entrepreneurship, empowerment
and accountability, which are incorporated into the intrinsic skills catalogue, and become part of the professional
development model. A leader at BBVA is, above all, somebody that lives the values of the Bank with integrity and honesty,
who has an entrepreneurial spirit and who seeks new ways of doing things, who empowers the teams and assumes the
responsibility of his decisions and its results.
Another priority for the Bank is the commitment of all employees. BBVA’s goal is to improve the commitment because, the
greater it is, the higher is the satisfaction of employees at their workplace and company, and better is the answer to the
customer’s needings. Annually, BBVA carries out the Employee Engagement Survey, managed by Gallup. In 2020, 94.2%
of the employees have participated in the survey, 4.4 percentage points more than in 2019 (89.8%). The most relevant
aspect is the significant improvement of the Grand Mean, the strategic KPI which measures the progress made in the
strategic priority “The best and most engaged team”, and which is obtained by the average of the twelve main questions of
the survey. Thus, this last year a value of 4.25 out of 5 was reached, which represents an improvement compared to last
year (4.11 points). In the same way, the BBVA employee engagement index, which is calculated by dividing the percentage
of engaged employees by that of actively unengaged employees, improved in 2020 to 10.17 (6.63 in 2019).
16
Materiality
In 2020, BBVA updated its materiality analysis with the intention of prioritizing the most relevant issues for both its key
stakeholders (customers, employees, shareholders and society) and its business. The materiality matrix is one of the
sources that feeds the Group's strategic planning and determines the priority issues to report on.
This analysis includes the perspective of the stakeholders of the main countries where the Group operates: Spain, Mexico,
the United States, Turkey, Argentina, Colombia and Peru.
The materiality
1.
Identification of the material issues in 2020
. Based on the material issues of 2019, the different tools for listening
to the stakeholders managed by the Bank were reviewed, as well as the most recent trend studies and this list was
updated. As the main novelty, the management of COVID-19 appears as a new issue.
2.
Prioritization of issues according to their importance for stakeholders
. BBVA carried out a series of interviews
and ad-hoc surveys in the countries covered by the study in order to learn the priorities of various stakeholders.
Datamaran was used as a data analysis tool for other stakeholders in all countries except in Turkey, where local
Turkish sources were used. Together, the sources that made it possible to complete the analysis of the
stakeholders, global trends and key issues in the sector are:
3.
Prioritization of issues according to their impact on BBVA’s business strategy.
An assessment was made
on how each issue impacts the six strategic priorities. The most relevant issues for BBVA are those that help to
achieve its strategy as well as possible.
17
The result of this analysis is contained in the Group's
materiality matrix
.
18
Therefore, the most relevant issues have been:
●
Climate change: opportunities and risks:
Stakeholders have climate change among their main concerns and
they hope that BBVA will contribute to an ordered transition towards a low-emission economy, which will make it
possible to stop it. This requires an adequate management of risks and opportunities.
●
Solvency and financial results
: The stakeholders expect BBVA to be a robust and solvent bank, thus contributing
to the stability of the system. They also expect BBVA to be a bank with good results over time. That is, they demand
a sustainable business model in the current context characterized by the continuous development of disruptive
technologies and the consolidation of Big Tech as competitors. A more competitive environment, with more
opportunities and also with more risks.
●
Easy, fast and do it yourself (DIY):
digitalization at the service of customers and the business. Thus, it will be more agile and simpler for customers to
operate with the Bank any time and from anywhere (mobile banking, fully digital contracting processes, etc.). In
addition, new technologies will allow BBVA for greater operational efficiency, generating value for shareholders.
●
Financial health and personalized advice to customers
: The stakeholders expect the Bank to get to know its
customers and, where appropriate, propose personalized solutions and recommendations to better manage their
financial health and achieve their vital objectives, all of this proactively.
The information regarding the performance of the relevant matters by the Bank in 2020 is reflected in the different chapters
of this report.
19
Customer comes first
Response to COVID-19
In order to provide service to its customers in response to the crisis generated by
COVID-19
, and given that financial services
are legally considered an essential service in Spain, the branch network remained operational with a dynamic management
of the network considering the evolution of the pandemic and activity. In addition, the use of digital channels and remote
managers was encouraged. BBVA also launched
support initiatives
customers, whether they be companies, SMEs, the self-employed workers or individuals, and which include, among others:
support for SMEs, the self-employed workers and companies through credit lines guaranteed by the Spanish
Instituto de
Crédito Oficial
and up to 6 months in consumer finance) and moratorium of 3 months for citizens on social rental housing under the Social
Housing Fund;
Solutions for customers
In recent years, BBVA has focused on offering the
best customer experience
, distinguished by its simplicity, transparency
and speed, and increasing the empowerment of customers and offering them a personalized advice.
In order to continue improving customer solutions, the Bank’s value proposition evolved throughout the year 2020 around
seven axes on which global programs developed, related to both
retail and corporate projects:
●
Growth in customers through own and third-party channels.
●
Growth in revenue with a focus on profitable segments.
●
Value proposition, differentiation through customer advice.
●
Operational efficiency.
●
Data-focused capabilities and enablers.
●
New business models.
●
A Global Entity.
These solutions can be divided into two large groups: Those that allow the customer to access the services in a more
convenient and simple way
(Do It Yourself, DIY) and those that provide customers with
personalized advice
, offering
them products or information specific to their current situation. These last two items are particularly important in the new
strategy related to the commitment to
improve customers' financial health
.
Solutions for 2020 customers include the following:
●
In
individual banking
, the “
GLOMO”
DIY mobile banking platform stands out. This solution is being continuously
enhanced by features such as “
Valora
auto
” for advice on the purchase and sale of second-hand cars in Spain,
where it has developed various journeys and digital advisory tools to help improve the financial health of its
customers, such as warnings and advice for certain events such as a duplicate receipt or investing possibilities.
With the aim of enhancing security,
financing, loyalty
and offering value added features, BBVA has transformed its
value proposal into cards, as it is the case with the launch of a new family of pioneering cards in Spain, “Aqua”,
where the personal account number (PAN) and expiration date are not printed on the card, and the card verification
value (CVV) is dynamic, preventing possible fraudulent use of these data.
Furthermore, high digital capacities have been implemented and the sustainability panel has been introduced,
which focuses on offering customer guidance on the concept of sustainability and on how to reduce their impact on
the emission of greenhouse gases in their business activity.
●
As part of its commitment to promoting the
use of technology
has developed “Blue”, the virtual assistant that uses various artificial intelligence tools to help users both to perform
tasks within the BBVA app and to obtain detailed and personalized information about their accounts.
20
●
In the
SME and retailer
customers to interact with the Bank in the most convenient way for their nee ds. A significant example of these
developments are the new
digital signature
branches.
With regard to SMEs and self-employed workers
, relationship and management models are being reinforced in
order to be able to manage them according to their needs across the different channels. This meant that the Bank
was awarded second place as
"
SME Global Bank of the Year
"
Finance
Forum (International
Finance
Corporation - World Bank, IFC-WB). Progress has also been made in the remote customer management model
with, for example, the creation of the transactional SMEs managerial figure.
●
As part of its commitment to
sustainability guidance
, BBVA has also added a new feature to the OneView financial
aggregator that allows companies to know the volume of emissions they emit into the atmosphere through their
activity.
The development of
new business models
highlighting:
●
The launch, together with an insurance company and a representative organization of the official vehicle dealers
association, of the NIW platform in Spain, a website for buying and selling used cars that integrates with BBVA
Automik's digital solution for car financing.
●
Agreements with third parties which have enabled BBVA to reach more users, such as the agreement with a
Chinese international online shop in Spain which enables Chinese tourists to pay at Spanish retailers using, the
world's leading payment platform.
BBVA's
customer solutions
also contribute positively to increasing digital sales and improving the main customer satisfaction indicators, such as the Net
Promoter Score (NPS), shown in the following section, and the drop-out ratio.
BBVA therefore occupies the first positions in the NPS, which is reflected in the retention data, which shows a positive
evolution in the levels of customer drop-outs (retail customers
and SMEs), and a greater commitment from digital customers,
whose drop-out rate is lower than that of non-digital customers.
Likewise, the data of the Bank’s total
active customers
respect to 2019.
Net Promoter Score
The internationally recognized Net Promoter Score (NPS) methodology, measures customers’ willingness to recommend a
company and therefore, the level of satisfaction of BBVA’s customers with its different products, channels and services. This
index is based on a survey that measures on a scale of zero to ten whether a bank’s customers are promoters (a score of
nine or ten), passives (a score of seven or eight) or detractors (a score of zero to six) when asked if they would recommend
their bank, a specific channel or a specific customer journey to a friend or family member. This information is vital for checking
for alignment between customer needs and expectations and implemented initiatives, establishing plans that eliminate
detected gaps and providing the best experiences.
The consolidation and application of this methodology over the last ten years provides a common language both internally
and with customers that facilitates everyone’s involvement and the integration of the voice of customers in everything the
Bank does, from the beginning. This has led to a steady increase in customers’ level of trust, as they recognize BBVA to be
one of the most secure and recommendable banking institutions in every country where it operates.
As of December 31, 2020, BBVA has remained the leader in the
retail NPS
Meanwhile, in the
commercial NPS
21
Transparent, Clear and Responsible Communication: a lever to improve financial health
Transparency, clearness and responsibility (hereinafter,
TCR
) are three principles which BBVA systematically integrates
into the design and implementation of the main solutions, deliverables and experiences for customers in order to help them
make the best decisions for themselves and thus take care of their financial health.
The objective pursued is, as well as helping customers make good life decisions, to maintain and increase their confidence
in the Bank and increase their recommendation rates.
Three work lines
●
conceptualization and design of these solutions, especially in massive impact digital solutions for retail customers.
●
contracts, sales scripts. responses to claim letters, communication regarding COVID-19, etc.).
●
new course about financial health has been launched for all the employees of the Bank.
In 2020, greater efforts have also been concentrated on one of the principles of Clearness (accessibility) and mechanisms
are being generated so that global solutions are accessible.
The project is coordinated by
a global team
working together with the TCR local owner.
Indicators
BBVA uses an indicator to measure its performance in TCR, the
Net
TCR
Score
same methodology of the NPS and allows measuring the degree to which customers perceive BBVA as a transparent and
clear bank, compared to its peers.
As of December 31, 2020, BBVA maintained its leading position in Spain
1
.
1
22
Customer security and protection
BBVA’s Corporate Security area, in line with the strategic priorities of “Driving operational excellence” and “Data and
technology”, is responsible for guaranteeing an adequate information security management, establishing security policies,
procedures and controls regarding the security of the Bank’s global infrastructures, digital channels and payment methods
with a holistic and threat intelligence-led approach.
BBVA places data at the center of its security strategy alongside three other pillars: business processes, human behavior
and technology and it is approached on its double aspect as the digital representation of financial assets (cybercrime for
financial gain) and as the bearer of personal identifiable information (focus on privacy). The approach that BBVA is following
covers both all the new developments as well as legacy systems and protection follows a prioritization system where key
data assets are identified and protection plans are put into place. This, together with the renewed focus on Identity and
Access Management and on managing risks on the Bank´s third parties forms a comprehensive strategy around data
security, privacy and protection.
Strategy
BBVA's security Strategy resides on 3 fundamental pillars: cybersecurity, data security and security in business processes
and fraud. A program has been designed for each of these three pillars, with the aim to reduce the risks identified in the
developed taxonomy. These programs, that consider security industry best practices established by internationally accepted
security standards, are periodically reviewed to evaluate the progress and the effective impact on the Bank risks.
During 2020, within the framework of the implementation of the security strategy,
security measures
to ensure an adequate protection of BBVA’s information and assets that support business processes have been reinforced.
The implementation of these measures, necessary to mitigate the security risks the Bank is exposed to, has been performed
with a global perspective and an integral approach, considering not only the technological approach but also the people,
processes and security governance approach.
Regarding the reinforcement of the security measures, the following could be highlighted: Measures established with the
aim to ensure end-to-end protection of business processes, considering logical and physical security, privacy and fraud
management: measures established to ensure compliance of the “security and privacy by design principles”; and to improve
client access control and authentication services related to online services, from a security and user experience perspective,
using the mobile device as the main element, in line with BBVA´s digital transformation strategy.
Some of the main
initiatives
●
Aqua card launch, the first card without printed card number (PAN), with dynamic CVV, reinforcing security, since
not having these data prevents possible fraudulent use of them.
●
Implementation of Strong Customer Authentication in e-commerce, requiring two of the three possible
authentication mechanisms. Implementation of the “Where is my card?” functionality, that allows the customer to
have an overview of all e-commerce or platforms where they have registered their bank cards.
●
Implementation of new behavior biometrics and malware protection for digital clients to reinforce analytical and
fraud detection capabilities in mobile channels.
●
Enhancement of the section with security advice and recommendations in BBVA`s application to make clients
aware of the main risks they are exposed to, so that they can prevent or act against possible threats.
Additionally, BBVA has continued performing the training and awareness initiatives related to security and privacy,
performing training actions and awareness campaigns for BBVA’s employees, clients and society in general.
Among the main campaigns and awareness initiatives performed and recommendations included in BBVA´s application,
online channels and social networks, the following could be highlighted: Secure password management, phishing and other
technical attacks detection, detection of scams, security in online purchases and protection of personal information.
Other lines of action also include the adequate training of BBVA’s Board members in the area of security and incident
management, as well as the periodic performance of global and local simulation exercises in order to raise the level of
training and awareness of the Board of Directors and certain key personnel and ensure an immediate and effective response
in case of a security incident.
23
Governance
BBVA has established a security governance model, with the aim to guarantee the effective implementation of the defined
security strategy.
One of the main bodies that constitute this governance model is the Information Security Steering Committee, responsible
for the approval and monitoring of the information security strategy execution and the effective implementation of the different
programs designed for each of the three pillars that compose this strategy. This Committee meets each two months in order
to guarantee an adequate security management, analyze the possible new risks to which the Entity is exposed as a result
of the digital transformation, and to adopt the necessary measures for its management.
In addition, each of the areas which compose the Corporate Security area has Committees and work groups responsible for
the management of the different spheres related to information security (transactions security, security associated with
technology, physic security, security in business processes, security related to staff, etc.) The most relevant issues are those
that are afterwards submitted to the Information Security Steering Committee.
On the other hand, the governance model is composed by the Committees responsible for the information protection and
fraud management, where both the Corporate Security area and the rest of the concerned areas of the Entity participate.
Lastly there is the Technology and Cybersecurity Commission, composed by the Chairman of BBVA and members of the
Executive Committee, which is responsible for the oversight of the technological strategy and cybersecurity strategy and
allows the Board of Directors to be informed of the main technological risks to which the Entity is exposed, as well as current
cybersecurity and technology trends and any relevant security event that can affect the Bank.
Cybesecurity
In the actual context, it is vital to ensure effective protection for BBVA's assets and customers' data.
During 2020, the Bank has detected an increase in the number of attacks, accentuated by the presence of organized crime
groups specialized in the banking sector and working in a multi-country environment.
Furthermore, COVID-19 pandemic has been used by cybercriminals to increase the scope of social engineering attacks
through e-mail, SMS, instant messaging systems and social networks. It has also contributed to the emergence of new risks
and challenges for companies, like the ones related to security in remote working and the increase on the attack surface.
The Global Computer Emergency Response Team (CERT) is BBVA’s first line of detection and response to cyberattacks
aimed at global users and the Bank’s infrastructure, combining information on cyber threats from our Threat Intelligence
unit. The Global CERT, which is based in Madrid, operates 24 hours 7 days under a scheme of managed security services,
with operation lines dedicated to fraud and cybersecurity.
As cyberattacks evolve and become more sophisticated, the Bank has strengthened its prevention and monitoring efforts.
Therefore,
system
monitoring
capabilities have been reinforced, with particular attention to the critical assets that support
business processes in order to prevent threats from materializing and, if necessary, to immediately identify and respond to
any security incident that may occur. Incident prevention, detection and response capabilities have also been strengthened
through the use of integrated information sources, improved analytical capabilities and automated platforms.
Measures implemented have improved information security management from a predictive and proactive approach, based
on the use of digital intelligence and advanced analytical capabilities. The main objective of these measures is to ensure an
immediate and effective response to any security incident that can occur, the reduction of the possible negative impact and,
if necessary, the report in a timely manner to the corresponding supervisory or regulatory authorities.
BBVA routinely reviews, reinforces and tests its security processes and procedures through simulation exercises in the
areas of physical security and digital security. Specialized teams periodically perform security technical tests in order to
detect and correct possible security vulnerabilities. These tests include technical tests of technological platforms as well as
malicious users simulated attacks performed by the “red team”. The outcome of such exercises is a fundamental part of a
feedback process designed to improve the Bank’s cybersecurity strategies.
24
Data Protection
The main initiatives performed in this area are related to the adoption of measures to ensure that all BBVA´s information
assets are properly protected, limiting their use to the processes related and controlling access to them, considering the
security guidelines established by the Entity. All the initiatives are performed guaranteeing compliance of the security and
privacy regulatory requirements applicable, especially those related to personal data protection.
All activities related to the data protection program are reviewed by the Data Protection Committee, where all relevant
stakeholders of the organization are represented.
For more information about personal data protection, see the section “Data protection” within the chapter “Ethical Behavior”.
Security in business processes and fraud
Cybersecurity efforts are frequently undertaken in close coordination with our fraud prevention efforts and there are
considerable interactions and synergies between the relevant teams. As part of the efforts to monitor fraud evolution and to
actively support the deployment of adequate anti-fraud policies and measures, a Corporate Fraud Committee has been
created, that oversees the evolution of all external and internal fraud types. Its functions include: (i) actively monitoring fraud
risks and mitigation plans; (ii) evaluating the impact thereof on the Bank’s business and customers; (iii) monitoring relevant
fraud facts, events and trends; (iv) monitoring accrued fraud cases and losses; (v) carrying out internal and external
benchmarking; and (vi) monitoring relevant fraud incidents in the financial industry.
BBVA has cybersecurity and fraud insurance, subject to certain loss limits, deductions and exclusions.
Business Continuity
To conclude, during 2020 the Business Continuity continued to be reinforced from a holistic perspective, paying special
attention to the Bank’s resilience.
In this way, the evolution from a model mainly oriented to guarantee the continuous provision of products and services in
situations with high impact and low probability to a model where the organization has the ability to absorb and adapt to
situations with an operative impact due to disruptions of different nature (such as pandemics, cyber incidents, natural
disasters or technological failures) is consolidated. This transition has implied an intense activity of the Business Resilience
Office that, in conjunction with the BBVA Crisis Management Committees and Continuity Committees have had a relevant
role in the management of the crisis caused by the COVID-19 pandemic.
The Business Resilience Office provides coherence to the whole BBVA’s Continuity Management System, and allows to
keep the different management levels coordinated (both the operational, which affect Business Continuity critical processes,
and the non-operational) and managed in an integrated and organized manner. BBVA has documented procedures for the
management of crisis situations, which detail, among other issues, the crisis qualification and scaling procedures, the
responsibilities assignment, the governance model and the general answer procedures to these kind of situations.
For more information about issues related to technology and technological innovations, see chapter “Technology and
innovation”.
25
Customer care
Complaints and claims
BBVA has a claims management model based on two key aspects: the agile resolution of claims and, most importantly, the
analysis and eradication of the causes’ origin. This model is part of the BBVA’s overall customer experience strategy, having
a very significant impact on improving the different customer journeys and positively transforming the customer experience.
In 2020 the Bank’s claims units worked to reduce attention times and improve clarity of the responses but above all in the
proactively identification of potential new problems that could arise as consequence of the global pandemic of COVID-19
and thus, prevent them from becoming a cause of large claims. BBVA seeks to find a quick solution to problems with the
aim of generating customer relief through a simple and agile experience and with a clear and personalized response.
In short, the management of complaints and claims at BBVA is an opportunity to strengthen customers’ confidence in the
Bank.
The
volume of claims for every 10,000 active
figure, basically as a result of the improvements implemented in the claims management process. The
average claim
resolution time
provisions that have been established as a result of the pandemic. Those provisions, such as lockdowns, had a significant
impact on the working methods, and the Bank had to technically adapt itself to this new context.
Customer Care Service and Customer Ombudsman in Spain
In 2020, the
activities
stipulations of Article 17 of the Ministerial Order (OM) ECO/734/2004, dated March 11, of the Ministry of Economy, regarding
customer care and consumer ombudsman departments of financial institutions, and in compliance with the competencies
and procedures outlined in BBVA’s Regulation for Customer Protection in Spain, approved on July 23, 2004 by the Bank’s
Board of Directors, and subsequent modifications, the last one on October 2,f 2019 with regard to regulation of the activities
and competencies,
complaints and claims
Based on the above regulations, the
Customer Care Service
and claims regarding products and services marketed and contracted in Spanish territory by BBVA Group entities.
On the other hand, and in accordance with the aforementioned regulation, the
Customer Ombudsman
and resolves, in the first instance, all complaints and claims submitted by the participants and beneficiaries of the pension
plans. It also resolves those related to insurance and other financial products that BBVA Customer Care Service considers
appropriate to escalate, based on the amount or particular complexity, as established under article 4 of the Customer
Protection Regulation. And in the second instance, the Customer Ombudsman is made aware of and resolves the complaints
and claims that the customers decide to submit for their consideration after their claim or complaint has been dismissed by
the Customer Care Service.
26
Activity report on the Customer Care Service in Spain
The Customer Care Service works to detect recurring, systemic or potential problems in the Entity, in compliance with
European
claims
merely managing claims, but rather, it works to prevent them and in cooperation with other BBVA departments.
During 2020, as a consequence of the COVID-19 crisis, the Customer Service has worked from the beginning to implement
the necessary measures for the continuity of the service and to limit its impact. The objective has been and is to ensure that
the service is provided as normally as possible and complying with the legal deadlines in responding to claims.
Since the beginning of the crisis, the Customer Service has been actively participating in the different analysis groups of the
new types of claims arising as a result of the COVID-19 measures.
in 2020 training on bank transparency, investor protection, and risk operations (for the prevention of money laundering and
terrorist financing).
Claims
of customers admitted to BBVA’s Customer Care Service in Spain amounted to 99,250 cases in 2020, 92,489 of
which were resolved by the Customer Care Service itself and concluded in the same year, which represents 93% of the
total. As of December 31, 2020 6,761 were pending analysis. On the other hand, 13,252 claims were not admitted for
processing as they did not meet the requirements set out in OM ECO/734.
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE BY COMPLAINT TYPE (BBVA, S.A. PERCENTAGE)
Type
2020
2019
Resources
39
36
Assets products
27
25
Collection and other services
4
5
Financial counselling and quality service
5
5
Credit cards
17
17
Securities and equity portfolios
1
1
Other
7
11
Total
100
100
COMPLAINTS HANDLED BY THE CUSTOMER CARE SERVICE ACCORDING TO RESOLUTION (BBVA, S.A. NUMBER)
2020
2019
In favor of the person submiting the complaint
44,066
37,384
Partially in favor of the person submitting the complaint
12,421
11,177
In favor of the BBVA Group
36,002
31,676
Total
92,489
80,237
27
Activity report of the Customer Ombudsman in Spain
One more year, the Customer Ombudsman, along with the BBVA Group, once more achieved the objective of unifying
criteria and favoring customer protection and security, making progress in compliance with transparency and customer
protection regulations. In order to efficiently translate their observations and criteria on the matters submitted for their
consideration, the Ombudsman promoted several meetings with the Group’s areas and units: Insurance, Pension Plan
Management, Business, Legal Services, etc.
In 2020, 3,849
claims
admitted to processing due to a failure to comply with the requirements of OM ECO/734/2004 and 340 were pending as of
December 31, 2020.
COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE BY COMPLAINT TYPE (BBVA, S.A. NUMBER)
Type
2020
2019
Insurance and welfare products
3
-
Assets operations
1,810
794
Investment services
262
173
Liabilities operations
350
515
Other banking products (credit card, ATMs, etc.)
862
707
Collection and payment services
249
140
Other
311
193
Total
3,849
2,522
The
categorization
Department of the Bank of Spain, in its requests for information.
COMPLAINTS HANDLED BY THE CUSTOMER OMBUDSMAN OFFICE ACCORDING TO RESOLUTION (BBVA, S.A. NUMBER)
2020
2019
Formal resolution
-
-
Estimate (in whole or in part)
1,788
1,362
Dismissed
1,790
1,023
Processing suspended
-
-
Total
3,578
2,385
48.7% of customers who brought claims before the Customer Ombudsman during the course of the year obtained some
type of satisfaction, total or partial, by resolution of the Customer Ombudsman Office in 2020. Customers who are not
satisfied with the Customer Ombudsman’s response can go to the official
supervisory
bodies
CNMV and General Directorate of Insurance and Pension Funds). 239 claims were filed by customers to supervisory bodies
in 2020.
The Bank continues making progress in the implementation of the different recommendations and suggestions of the
Customer Ombudsman with regard to adapting products to the customer profiles and the need for transparent, clear and
responsible information throughout the year. In 2020, these recommendations and suggestions focused on raising the level
of
transparency
and
clarity
available to them for each product, and in compliance with the orders and instructions thereof, so that the following is
guaranteed:
●
●
●
In addition, and with the advance in the digitalization of the products offered to customers together with the increasing
complexity thereof, special sensitivity is required with certain groups that, due to their profile, age or personal situation,
present a certain degree of vulnerability.
28
Technology and innovation
Response to COVID-19
The profound change brought about by the spread of COVID-19 has impacted two fundamental aspects for BBVA: how
customers interact with the Bank and the way in which employees work.
With respect to
, the COVID-19 crisis, the forced lockdowns established by
governments, and the fear for social interaction, have considerably accelerated the tendency towards the use of remote
channels by customers, which had already begun before the crisis.
If before the crisis the weight of remote channels processing was 50%, during the peak of the crisis it reached 67%.This
increase in the use of remote channels could easily be absorbed thanks to the hybrid cloud strategy, which provides the
Bank with a more elasticity than traditional systems, without any proportional impact in costs.
Regarding
within a ten days term in March, 2020, BBVA moved its employees from a presence-
based work modality towards a remote one, except from those critic positions that could not be developed remotely and a
part of the branches’ employees that had to remain at their workplace in accordance with the indications of the regulators of
the different countries.
On average, more than 95% of the headquarters employees and approximately 30% of the branches employees have been
working remotely. This change entailed that remote connections were multiplied by five in less than two weeks and
videoconferences were multiplied by eight. The transition was carried out successfully, guaranteeing that employees were
100% operational without any term of inactivity thanks to the working in the cloud possibilities.
In addition, the change has accelerated an increasing and structural tendency of remote working, making possible to reduce
the necessary space in the offices.
Technological purpose
BBVA aspires to be the most trusted bank to give financial advice to all of its customers. To achieve this goal, technology
plays a key role, making available to the business areas the necessary capacities to meet this challenge and offering
customers reliable and secure solutions. Thus, technology allows to offer reliable and secure solutions to all customers,
from the most digitized to the most traditional.
BBVA’s transformation focuses on incorporating new technological capabilities and making them available to customers
while operating in the most efficient and reliable way possible. BBVA's strategic priorities underpin this transformation
process:
●
o
automate processes.
o
guaranteeing the highest quality standards.
●
o
Academy or Tech University, is a key element in this process.
●
o
and the most adjusted service to their needs in a timely manner.
o
BBVA's technology area is also actively collaborating to drive the Bank's other strategic priorities: “Improving the clients'
financial health”, “Helping the clients transition towards a sustainable future” and “Reaching more clients”, while helping to
ensure the successful portfolio performance of other areas by providing the necessary skills and resources. In this regard,
BBVA is creating digital factories that are key to enabling the incorporation of technology in the rest of the areas.
29
Operational excellence
The Engineering & Organization area helps to transform the way of working at BBVA, through projects of transformation of
processes, operations and culture. Since 2017, initiatives that are reporting solid improvements are being carried out
throughout the Group, including BBVA Spain to reduce the operating load in the business areas. The objective is to achieve
the automation of
end-to-end processes as from 2020. Additionally, the area led the agile transformation in the Bank, which
has enabled it to be more
productive while reducing the time to market
in development of solutions.
Reliability and productivity
One of the main results of BBVA’s digital transformation is to improve the reliability of the services provided to customers
and to increase the productivity of both day-to-day operations and the ability to create new products. For this, the technology
with which the Bank works is transformed in terms of:
●
Processing
o
BBVA's strategy is based on the use of a hybrid cloud (with in-house
and public cloud processing).
o
These parts are already available, being used globally, and have been optimized to ensure that they can
continue to operate reliably during their lifetime and with decreasing unit costs.
●
Software
development
: global and multilocal functionalities have been developed and the level of automation of
the technological stack continues to increase.
In addition, the creation of a network of strategic alliances that contributes to the progress of the transformation
continues to be promoted from the Engineering & Organization area. In this sense, an ecosystem of strategic
agreements with some of the reference companies in their respective fields has been established, ensuring the
adoption of innovative technologies, the digitalization of the business, the speed of action and global deployment
of solutions. In recent years, alliances have been established with industry leaders, who have helped to operate
and optimize BBVA's current technology globally, and with start-up companies that, due to their potential, aimed at
becoming market leaders in specific capacities.
The best and most engaged team
BBVA is building the skills of its team with the aim of leading the transformation within the financial industry and keeping up
with the relentless pace of technological progress. Notable talent development initiatives include:
●
Ninja Academy
: a
learning community that seeks to foster a culture of continuous learning and help technical
profiles keep up with the latest technological trends within the market.
●
Tech University
: an
internal university offering programs in different formats, levels and featuring specialized
content that allow technical employees to jump
technological gap from legacy technologies to new ones. It
includes several learning itineraries to cover BBVA's various strategic needs.
For more information regarding the Bank’s cultural transformation and the employees skills, see chapter “The best and most
engaged team” below.
30
Data and technology
New technological stack within the cloud paradigms
Due to the increasing use of digital channels by customers and, consequently, the exponential increase in the number of
interactions with them, BBVA has evolved , and continues to evolve its information technology (IT) model towards a more
homogeneous, global and scalable one, that
drives cloud technology.
Use of the new platform has increased significantly throughout 2020 in all five countries where it is deployed. As a result,
BBVA is now launching developments in new, more global and reusable technologies to increase productivity. This new
technology stack shares the cloud attributes of flexibility and stability that are demanded by the digital world, while ensuring
strict compliance with regulatory requirements.
The new technology platform makes cutting-edge technologies available globally for immediate use and incorporation into
both global and local projects.
Cybersecurity
In the current context of increased threats associated with cybersecurity, BBVA focused on protecting both, the information
systems of the business areas and data.
In this sense, traditional capabilities that focus on the protection of the perimeter and information systems, have been
maintained and advanced threat intelligence and
adaptive cybersecurity capabilities have been introduced to protect the
human factor (employees, customers and other stakeholders), which are considered the weakest links in any cyberdefense
system and implement security system with a holistic approach that covers the entire life cycle of business processes.
Furthermore, defense, resilience and recovery strategies to protect data have been put in place in three key areas: data
representing financial assets, data relating to Bank processes and the lists containing the identities and personal information
of customers and employees.
For more information on cybersecurity, see section "Security and customer protection" within the chapter “Customer comes
first”.
31
The best and most engaged team
Response to COVID-19
The
COVID-19
management,
recommendations from health authorities have been followed, including taking an early stance on promoting
remote working. For that purpose, platforms have been provided, carrying out a risk assessment of this type of work and
developing existing applications to adapt them to the needs generated. The priority in BBVA's
return plan
health of employees, customers and society in general. The return plan is being carried out following five principles in mind:
1) cautiousness; 2) gradual return; 3) work shift; 4) strict hygiene and safety measures; and 5) creation of early identification
protocols. The crisis is being managed in a dynamic way; adapting the procedures to the current situation, based on the
latest data available regarding the evolution of the pandemic, the business and the level of customer service, in addition to
the guidelines set by local authorities.
This pandemic is accelerating many of the trends that the Bank had anticipated in the future of working life:
●
Elements such as social responsibility, purpose, resilience and commitment become more relevant in this
environment of uncertainty and remote work, which reinforces the importance of organizations becoming
increasingly "more human".
●
Ways of working based on attendance and hierarchies have become obsolete and, therefore, the transformation
toward a more agile world which began a few years ago and toward leadership models based on employee
empowerment and trust have become even more important in this context.
●
Lastly, in a severely damaged economic environment, having the best talent is the key to companies' success, and
even survival being highly important to be able to attract, retain and develop the best talent.
In order to guarantee adequate conditions in terms of labor health and safety, measures have been developed to respond
to the pandemic generated by COVID-19. Likewise, specific departments have been created to control the actions carried
out due to the pandemic. For more information, see the section “Labor health and safety”.
People management
The team remains a strategic priority (
“The best and most engaged team”
) and BBVA therefore continues promoting the
commitment and performance of the employees to achieve its purpose, accompanying its transformation strategy with
various different initiatives in matters related to staff, such as:
●
The creation of a
professional development
is more transversal, transparent and effective, in such a way that each employee can play the role that best suits
their profile in order to contribute the greatest value to the Organization in a committed manner and with a focus on
their training and professional growth.
●
The strengthening of the
agile
organization
working based on customer feedback, and are focused on delivering the solutions that best meet current and future
customer needs.
●
The reinforcement of new
knowledge and skills
are key to the new phase in which the Group finds itself (data specialists, customer experience, sustainability, etc.).
●
The strengthening of a corporate culture of collaboration and entrepreneurship, which revolves around a set of
values
traits that differentiate it from other entities.
All this makes BBVA a purpose-driven
organization, that is, a company that defines its position in order to improve the world
and that encourages its employees to feel proud in their workplace, guiding them in the practice of the Bank's values and
behaviors in order to achieve its purpose.
As of December 31, 2020, the BBVA had 24,490 employees located in more than 15 countries, 50.8% of whom were women
and 49.2% were men. The average age of the staff was 45.3 years. The average length of service in the Organization was
19.3 years, with a turnover of 0.5% during the year.
32
Professional development
The professional development model was consolidated and rolled out in 2018, a process that culminated with the global
launch of a new people assessment system. All Bank employees were invited to participate in this system in a 360º review.
The assessments resulting from this process are the basis for building the BBVA
talent map
, on which the BBVA employees
differentiated management policies rests.
The above, together with the identification and assessment of the existing roles in the Bank, makes it possible to get to know
the professional possibilities of the employees even better, as well as to establish individual development plans, which
promote functional mobility and professional growth.
During 2020 BBVA has completed its professional development model, which empowers employees to own and drive their
own career. Among the various initiatives launched, two innovative solutions, based on technology and data and inspired
by the best digital
players, are particularly notable: in October 2020, Open
Mentoring was launched globally, a new mentoring
format based on affinity algorithms between mentor and
mentee, large scale and geared toward developing future
capabilities; and Opportunity was launched during the last quarter of the year, representing a milestone in BBVA's value
proposal to employees, as it begins to treat employees the same way it treats its customers, becoming their professional
advisor, generating
insights based on data and technology. These are pioneering solutions based on cutting-edge
technologies (Big
Data, Artificial Intelligence, Machine
Learning, etc.) and developed internally, which is a competitive
advantage.
Recruitment and development
In 2020, 156 professionals joined the Bank as part of a strategy to attract, recruit and incorporate profiles with the new skills
required by BBVA as part of its transformation process.
The world, especially the sector in which BBVA operates, is becoming increasingly more global and is constantly changing.
The Bank's strategy is based on building a unique value proposition, through a common brand, in line with a global and
digital company. In order to prepare the Organization and being able to compete in this environment, it is necessary to have
key talent aligned with this strategy.
In the present context, where industries are undergoing major transformations, the financial industry must provide younger
generations with everything necessary to build the talent that the market demands in professional terms. In the current
context whereby industries are undergoing major transformations, the financial industry must provide younger generations
with the necessary elements to build the talent that the market demands in professional terms. During 2020, the Entity has
participated in several forums where it has shared its vision of how the banking sector has transformed and the types of new
job opportunities it offers for its future.
RECRUITMENT OF EMPLOYEES BY GENDER (BBVA, S.A. NUMBER)
2020
2019
Total
Male
Female
Total
Male
Female
Total
1,205
431
774
2,060
813
1,247
Of which new hires are
(1)
:
156
97
59
456
297
159
(1)
Training
Training featured major strengths in 2020 that have enabled the Bank to develop training activities intensively, despite the
circumstances resulting from the COVID-19 context.
The solid training model, BBVA Campus, the gamified learning experiences launched in previous years such as Ninja, Space
Career or B-Token, and the culture of continuous learning, which is deeply embedded in BBVA, has enabled to accelerate
the transformation of the BBVA professionals, incorporating the new capabilities required to continue promoting the Group
strategic priorities.
For years, online
training has been the priority training channel within the Group, which has come to represent a 78% of the
whole activity during 2020.The non-realization of face-to-face training throughout the majority of 2020 has not meant any
inconvenience, but rather quite the opposite, thanks to the assessment that employees have made of this training. The
interest for training has significantly increased, resulting in a growth in training resources that have been completed by the
employees of BBVA throughout 2020.
The culture of continuous learning, which is part of the BBVA professionals' DNA, and the strength of having a tool for
universal access to all the courses offered by BBVA, has meant that the BBVA's training in 2020 has provided a major
competitive advantage.
33
During the past few months, professionals have focused on both the training required for the business and on the new
strategic capabilities needed to carry out the transformation that BBVA is undergoing. Subjects such as
data, agile,
tech,
sustainability,
design, digital
sales & marketing or cybersecurity have registered 16,831 participations by employees who
have been able to broaden their knowledge in these areas and enhance their skills. In 2020, BBVA launched a sustainability
training compulsory for all the teams, and which includes basic contents about this subject. During 2020, BBVA also
launched a course of financial health for all employees of the Bank.
BBVA Campus, as an open and decentralized model, has incorporated resources and innovative methodologies to its
training programs, which have facilitated the practical application of what has been learned, allowing professionals to share
their expertise with other colleagues.
certifications or official external certifications, professionals have been able to accredit specialized knowledge in the main
business matters.
BASIC TRAINING DATA (BBVA, S.A.)
2020
2019
Total investment in training (millions of euros)
14.3
18.9
Investment in training per employee (euros)
(1)
572
758
Employees who received training (%)
92
96
Satisfaction with the training (rating out of 10)
9.4
8.8
Amounts received from FORCEM for training in Spain (millions of euros)
1.2
3.2
(1)
TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA, S.A. 2020)
Number of employees with training
Training hours
Total
Male
Female
Total
Male
Female
Management team
(1)
938
704
234
20,868
15,541
5,327
Middle controls
1,957
1,207
750
42,604
26,486
16,118
Specialists
5,337
2,798
2,539
131,875
69,341
62,535
Sales force
12,605
5,436
7,169
587,027
246,212
340,815
Base positions
2,227
1,124
1,103
48,989
21,739
27,251
Total
23,064
11,269
11,795
831,364
379,319
452,045
(1)
TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA, S.A. 2019)
Number of employees with training
Training hours
Total
Male
Female
Total
Male
Female
Management team
(1)
927
699
228
44,200
34,173
10,027
Middle controls
1,906
1,199
707
85,884
52,911
32,973
Specialists
5,272
2,748
2,524
282,636
156,001
126,635
Sales force
12,922
5,675
7,247
1,270,383
542,676
727,707
Base positions
2,659
1,355
1,304
54,910
23,359
31,551
Total
23,686
11,676
12,010
1,738,014
809,120
928,893
(1)
Diversity and inclusion
At BBVA, diversity and inclusion are firmly aligned with the purpose and are consistent with its values. BBVA is committed
to diversity in its workforce as one of the key elements in attracting and retaining the best talent and offering the best possible
service to its customers
.
In terms of
gender
diversity
, women represent 24.7% of senior management and 33.1% of management positions, 33.4%
of technology and engineering positions and 53.9% of business and profit generation positions.
Several
initiatives
●
Setting gender diversity targets at the area and country level
: a target has been established for each area in
relation to the percentage of women to be promoted to higher responsibility categories in the next five years, with
34
a quarterly follow-up. This goal will be supported by a specific diversity plan developed, which must ensure that
these objectives are met.
●
Working even more actively to incorporate more women into talent recruitment processes:
equity and neutrality in the recruitment and professional growth processes, the capacity to identify the women in
BBVA with the greatest potential has been improved through the new "Talent Map" tool and through greater
proactiveness on the part of talent managers when it comes to offering these employees new professional
challenges. As part of this effort, the "Rooney
Rule" has been extended to more levels of the organization, the
gender component has been introduced in succession plans and training and
mentoring plans have been
enhanced.
●
Continuing to work for a flexible working environment
the same extent as women, so that this does not represent a professional obstacle for women. The "Work Better,
Enjoy Life" initiative launched at the end of 2019 with the aim of achieving a more flexible and productive target-
based work environment with a reduced presence in the workplace, has continued to grow in 2020 with a major
focus on diversity. Among other initiatives, campaigns have been carried out to encourage men to make full use of
their paternity leave.
Furthermore, in order to ensure a
diverse and inclusive working environment
, BBVA is working on various initiatives to
support the LGBTI (lesbian,
gay, bisexual, transgender and intersex people) community through the ERG (Employee
Resource Group) Be Yourself
campaign, which is driven by the employees themselves. Among the initiatives launched this
year are include the joining of REDI (
Red Empresarial por la Diversidad e Inclusión en España
, the Corporate Network for
Diversity and LGBTI inclusion in Spain, the commitment to the United Nations
"Standards of Conduct for Business on
Tackling Discrimination against LGBTIQ+ people" and the adjustment of the Bank’s diversity policies.
Efforts to promote diversity and equal opportunities between men and women were not only limited to BBVA collaborators
but work was also done in order to improve the inequality between girls and young women through support for prestigious
organizations in the societies in which BBVA operates.
In 2020, BBVA signed a global collaboration agreement with
Inspiring Girls to promote equality by putting girls and young
women in contact with female mentors in various areas. The objectives of the agreement also include helping
Inspiring Girls
to grow in the countries in which BBVA operates.
Other initiatives aimed at reducing the technological gender gap between men and women have also been supported, such
as
Technovation,
Girlsgonna or
Node Girls.
BBVA's efforts to promote diversity have earned it for the third consecutive year a place in the
Bloomberg Gender-Equality
Index, a
ranking of the 100 global companies in terms of gender diversity. BBVA is also a signatory of the Diversity Charter
at European level
and of the United Nations Women's Empowerment Principles. Likewise, the UN selected one of BBVA's
initiatives, "Work Better,
Enjoy Life," to make a
business case in this regard and include it on its website relating to best
practices on diversity and inclusion within the Women's
Empowerment Principles (WEP) program.
Regarding the question in the Employee Engagement Survey, managed by Gallup, which says "BBVA always values
diversity", a score of 4.52 out of 5 was obtained in 2020, exceeding 2019 results (4.41).
Throughout 2020, three global events were held for BBVA employees related to diversity and inclusion: International
Women's Day in March, International LGBTI Pride Day in June, and "Diversity
Days" in the first week of December, whereby
the progress made in this area by the various different geographical areas was shared and various
online conferences and
workshops were held so that employees could increase their knowledge of the subject. Some of these workshops were held
by members of the ERGs (employee resource groups - groups of employees working for greater diversity).
This year, BBVA also published a manual, entitled "Normalizing differences'', with the aim of providing all members of the
Bank with basic knowledge of the LGBTI community. This manual defines concepts such as "heteronormativity”, explains
the differences between sex, identity, orientation and gender expression, and offers a series of recommendations on how
to handle the diversity that exists within the trans community itself.
In
Spain
, BBVA presented to the Ministry of Equality in 2020 the 8th Maintenance Annual Report of the Seal of Distinction
for Equality in the Company awarded by the Ministry of Equality to companies that are committed to equality between women
and men. Negotiations also commenced with employee representatives on a new Equality Plan with the aim of bolstering
BBVA's commitment to equality, diversity and the promotion of co-responsibility and adapting it to current applicable
regulations. The Family-friendly Company certificate was also renewed, awarded to BBVA by the
for being a proactive company in terms of its policies on equality of treatment and reconciliation of work, family and personal
life, and was included in the Variable D2019 report that lists the 30 companies in Spain with best practices on diversity and
inclusion.
In addition, the Talent & Culture management team was trained in inclusive job offers, reaching an agreement for the
implementation of the
Rooney Rule
; and a volunteer work agreement was signed with the Inspiring Girls Foundation so
that, during the 2019-2020 school year, more than 80 women from BBVA were able to act as role models for school-age
girls and demonstrate that the fact of being a woman is not a limitation for holding leadership positions in areas related to
Science, Te chnology, Engineering and Mathematics (STEM subjects).
35
BBVA was also chosen as one of the 15 pioneering Spanish companies in LGBT diversity management by the FELGTB
(
Federación Española de lesbianas, gays, trans y bisexuales
Bisexuals).
Lastly, the Bank has protocols for the
prevention of
. Specifically, the Bank and signatory trade union
representatives expressly state their rejection of any conduct of a sexual nature or with a sexual connotation that has the
purpose or effect of violating a person's dignity, particularly when an intimidating, degrading or offensive environment is
created, and they undertake to apply this agreement as a means of preventing, detecting, correcting and punishing this type
of conduct within the company.
EMPLOYEES BY COUNTRIES AND GENDER (BBVA, S.A.)
2020
2019
Number of
employees
Male
Female
Number of
employees
Male
Female
Spain
23,971
11,714
12,257
24,921
12,256
12,665
The United States
161
100
61
166
104
62
France
68
44
24
71
45
26
United Kingdom
118
85
33
120
86
34
Italy
49
27
22
49
26
23
Germany
42
26
16
43
25
18
Belgium
22
13
9
23
14
9
Portugal
367
184
183
373
189
184
Hong Kong
80
46
34
85
46
39
China
28
8
20
26
8
18
Japan
3
2
1
3
2
1
Singapore
10
3
7
9
2
7
United Arab Emirates
2
1
1
2
1
1
Russia
1
1
-
3
2
1
India
2
1
1
2
1
1
Indonesia
2
1
1
2
1
1
South Korea
2
1
1
2
1
1
Taiwan
11
4
7
11
4
7
Cuba
1
1
-
1
1
-
Total
24,940
12,262
12,678
25,912
12,814
13,098
EMPLOYEES AVERAGE AGE AND DISTRIBUTION BY AGE STAGES (BBVA, S.A. YEARS AND PERCENTAGE)
2020
2019
Average age
<25
25-45
>45
Average age
<25
25-45
>45
Total
45.3
0.3
52.6
47.2
44.7
0.7
43.9
55.4
EMPLOYEES DISTRIBUTION BY PROFESSIONAL CATEGORY AND GENDER (BBVA, S.A. PERCENTAGE)
2020
2019
Total
Male
Female
Total
Male
Female
Management team (1)
4.3
75.3
24.7
4.3
76.4
23.6
Middle controls
8.9
62.9
37.1
8.3
62.7
37.3
Specialists
24.2
52.1
47.9
23.0
51.6
48.4
Sales force
52.8
43.4
56.6
52.8
44.2
55.8
Base positions
9.9
49.3
50.7
11.6
49.8
50.2
Total
100.0
49.2
50.8
100.0
49.5
50.5
(1)
36
EMPLOYEE DISTRIBUTION BY TYPE OF CONTRACT AND GENDER (BBVA , S.A. PERCENTAGE)
2019
2018
Total
Male
Female
Total
Male
Female
Permanent employee. Full-time
97.2
50.3
49.7
96.2
50.7
49.3
Permanenet employee. Part-time
2.0
4.8
95.2
2.1
4.2
95.8
Temporary employee
0.8
28.1
71.9
1.7
34.4
65.6
Total
100.0
49.2
50.8
100.0
49.5
50.5
EMPLOYEE DISTRIBUTION BY TYPE OF CONTRACT AND AGE STAGES (BBVA , S.A. PERCENTAGE)
2020
2019
Total
<25
25-45
>45
Total
<25
25-45
>45
Permanent employee. Full-time
97.2
0.2
51.8
48.0
96.2
0.4
54.5
45.0
Permanent employee. Part-time
2.0
-
79.2
20.8
2.1
-
81.9
18.1
Temporary employee
0.8
8.1
81.9
10.0
1.7
15.4
73.9
10.7
Total
100.0
0.3
52.6
47.2
100.0
0.7
55.5
43.9
EMPLOYEE DISTRIBUTION BY PROFESSIONAL CATEGORY AND TYPE OF CONTRACT (BBVA GROUP. PERCENTAGE)
2020
2019
Permanent
employee Full-time
Permanent
employee Part-
time
Temporary
employee
Permanent
employee Full-time
Permanent
employee Part-
time
Temporary
employee
Management team
(1)
99.6
0.4
-
99.5
0.5
-
Middle controls
98.7
1.2
0.1
98.6
1.4
-
Specialists
98.1
1.8
0.1
97.0
2.6
0.4
Sales force
96.9
2.3
0.8
96.1
2.2
1.8
Base positions
93.8
2.3
3.9
91.9
2.1
6.1
BBVA average
97.2
2.0
0.8
96.2
2.1
1.7
(1)
In 2020, the annual average of full-time permanent contract, part-time permanent contract and temporary contract was
97.2%, 2.0% and 0.8%, respectively.
DISCHARGE OF EMPLOYEES BY DISCHARGE TYPE AND GENDER (BBVA S.A. NUMBER)
2020
2019
Total
Male
Female
Total
Male
Female
Retirement and early retirement
744
463
281
594
410
184
Voluntary redundancies
58
28
30
108
45
63
Resignations
124
72
52
209
124
85
Dismissals
64
35
29
49
38
11
Others
(1)
1,226
404
822
1,624
540
1,084
Total
2,216
1,002
1,214
2,584
1,157
1,427
(1)
DISMISSALS BY PROFESSIONAL CATEGORY AND AGE STAGES (BBVA. S.A. NUMBER)
2020
2019
Total
<25
25-45
>45
Total
<25
25-45
>45
Management team
(1)
13
-
2
11
14
-
1
13
Middle controls
9
-
6
3
1
-
-
1
Specialists
27
-
19
8
6
-
2
4
Sales force
12
-
5
7
23
-
15
8
Base positions
3
-
-
3
5
-
2
3
Total
64
-
32
32
49
-
20
29
(1)
The management team includes the highest range of the Bank´s management.
37
Different capabilities
BBVA is committed to the
integration
employment is a fundamental pillar in the promotion of equal opportunities for all people. Accordingly, BBVA has alliances
with the leading Spanish organizations in the disability sector with the aim of promoting accessibility, fostering labor
integration and increasing knowledge and awareness of the needs and potential of disabled people.
Likewise, ERGs have been created for different capabilities. A campaign has also been conducted to raise awareness of
the additional problems that people with hearing difficulties are experiencing due to the use of masks.
In
Spain
, BBVA continued its in-branch internship program for people with intellectual disabilities, in which 31 young people
participated in 2020, and 3,636 have participated since 2015.
As of December 31, 2020, BBVA had 152 people with different capabilities on the Bank’s workforce. Additionally, progress
is being made in the accessibility of the branches, while the corporate headquarters of BBVA in Madrid are accessible.
Working environment
Work organization
As part of the transformation of work practices at the Bank, in 2019 the “Work Better. Enjoy Life”
global
plan was launched
in 2019,
which
was established to reflect a culture based on high performance, productivity, team empowerment and balance
between professional and personal life, i.e. work-life balance.
Throughout 2020, BBVA has continued to work on these principles, adapting to the "new normal" resulting from the lockdown
imposed as a result of COVID-19 and the fact that the vast majority of BBVA staff had to work from home for a prolonged
period of time.
In order to ensure compliance with policies on work-life balance and to keep colleagues properly informed and engaged
during this unprecedented situation, the "BBVA at Home" website was launched.
This website, which has been created in both Spanish and English, has been one of the main channels of communication
with and between BBVA employees.
●
Emotional well-being
: a section on the site that offers more than 20 self-help videos starring psychologists Silvia
Álava and Marta Romo, experts in emotional management.
●
#Yomeformoencasa
: BBVA's training initiative (meaning #ITrainAtHome) for its employees, with dozens of
courses, webinars and personalized content for each country.
●
Virtual events
News" with Mario Tascón; Dr. Jordi Vila clears up
doubts regarding COVID-19; a talk about childhood sleep with Dr. Gonzalo Pin and four talks from BBVA Open
Talks University
with experts in education and entrepreneurship.
●
#ShareYourTalent
:
●
One team stories
: inspirational stories in which BBVA employees shared how they have overcome lockdown and
all the good things that have come out of this difficult period.
●
Travel without leaving home:
●
Art & Culture
: a page dedicated to discovering the best works in the BBVA collection, with full weekly updates.
●
Families
: a section proposing more than 120 activities for the whole family.
BBVA has also signed an
agreement with leading trade union representatives in September 2019 on working time
registration and the right to digital disconnection, being the first financial institution to sign a collective agreement under
these terms. The agreement was reached within the framework of the legal obligation established for companies in Royal
Decree-Law 8/2019, of March 8, on urgent measures for social protection and the fight against precariousness in the
workplace, and with the aim of moving toward an organizational culture of work based on efficiency and results, as opposed
to attendance and staying at work beyond established working hours.
38
In order to fulfill this agreement, an ad-hoc tool was created, "Register your working day," an application where every
employee registers their
working hours on a daily basis, by entering the time they start and finish
work. In order to increase
the knowledge of what it means to register the working day and how to use the tool, all employees have an
online training
course on this subject. For BBVA, the creation of this tool represents a means of promoting, strengthening and taking a
further step toward cultural change and changes to work practices.
With regard to the right to
digital disconnection
, the agreement with trade union representation also recognizes this right
to workers as a fundamental element in achieving better organization of working time in order to respect private and family
life, to improve the balance between personal, family and working life and to contribute to the optimization of workers'
occupational health
. This right takes the form of specific measures, such as:
●
Avoid communications between 7 pm and 8 am the next day, nor during weekends and holidays.
●
From Monday to Thursday, avoiding meetings that end after 7 pm, or after 3 pm on Fridays and the day before a
public holiday.
Freedom of association and representation
In accordance with the different regulations in force, the working conditions and the rights of the employees, such as freedom
of association and union representation, are included in the rules, collective conventions and agreements signed, in their
case, with the corresponding representations of the workers. Dialog and negotiation are part of how to address any dispute
or conflict within the Bank, for which there are specific procedures for consultation with trade union representatives across
different countries, including the issues concerning labor health and safety.
In Spain, the banking sector collective agreement is applied to the entire workforce (except for members of senior
management and top-level positions), complemented by the company collective agreements which build upon and improve
the provisions of sector agreement, and which are entered into on behalf of workers. Employee representatives are elected
every four years by personal, free, direct and secret ballot, and are informed of the relevant changes that may occur in the
organization of work in the Entity, under the terms provided in accordance with the legislation in force.
Health and labor safety
BBVA considers the promotion of health and safety as one of its basic principles and fundamental goals, which is addressed
through the continuous improvement of working conditions.
In this regard, the Bank’s work risk
prevention
model is legally regulated and employees have the right to consult on and
participate in these areas, which they exercise and develop through trade union representation on the different existing
committees, where consultations are presented and matters relating to health and safety in the workplace are dealt with,
monitoring any and all activity related to prevention.
OCCUPATIONAL HEALTH MAIN DATA (BBVA SPAIN. NUMBER)
2020
2019
Number of technical preventive actions
10,740
2,706
Number of preventive actions to improve working conditions
11,054
3,306
Employees represented in health and safety committees (%)
100
100
Number of withdrawn
8,424
7,635
Total number of abseentism hours
(1)
2,556,743
2,209,512
Number of accidents with medical withdrawn
50
188
Abseentism rate (%)
3.88
2,9
(1)
Total withdrawn hours by medical leave or accident during the year.
(2
)
The Bank has a preventive policy applicable to 100% of its staff, which is carried out primarily by the Occupational Risk
Prevention Service. This service has two lines of action: a) the
technical-preventive
activities, the carrying out of evaluations of occupational risks, which are periodically updated, the preparation of action plans
to eliminate/minimize the risks detected, the monitoring of the implementation of action plans, and implementation of
emergency and evacuation plans, training in health and safety, and coordination of preventive activities; and b)
occupational medicine
, which involves carrying out staff medical examinations , providing protection for particularly
sensitive employees and equipping workplaces with appropriate ergonomic equipment, as well as carrying out preventive
activities and campaigns to maintain and improve workers' health and contributing to the development of a culture of
prevention and the promotion of healthy habits.
Nevertheless, this year, the actions undertaken to face the pandemic caused by the COVID-19 must be emphasized,
including the role of the Prevention Service.
39
Since the beginning, measures concerning the work organization and commuting were established, as well as guidelines
and protocols for the employees of BBVA, following the instructions of the corresponding authorities, such as, for example,
in Spain, the Ministry of Health, the European Center for Disease Prevention and Control (ECDC) and the World Health
Organization (WHO).
●
Signage about hygienic procedures, methacrylate screens, facial screens, disinfection kits for branches'
employees, and Individual Protection Equipments and face masks for employees at certain work centers such as
the CPD (by its acronym in Spanish, Centro de Protección de Datos – Data Protection Center).
●
Supply of masks and hand-sanitizing gels, as well as gloves in customer service branches.
●
Social distancing between workplaces and separation tapes in branches to ensure the 2 meters security distance.
●
Specific cleaning procedures of work places.
In the same vein, the vulnerability of employees regarding pathologies has been assessed, carrying out an exhaustive study
of vulnerable people within the Organization, recommending them remote working and establishing the “Special
Coronavirus” permit for those employees whose position could not be developed remotely.
The information, procedures, protocols and guidelines were available to all employees in a specific COVID-19 site within the
Labor Health portal, which was also shared with the rest of the countries where BBVA Group is present.
In a second phase, when the virus detection tests were available, population studies were carried out, as well as a testing
strategy, analyzing cases and contacts among the employees of BBVA, which is leveraged in three main principles:
●
Preserving employees and their families, as well as customers' health.
●
Carrying out studies and testing employees in case of symptoms compatible with COVID-19, carrying them out
both in case of positive cases and close contacts, going beyond the instructions of the sanitary authorities.
●
Data-based studies: The tests results have been essential in the implementation of return plans and the
management of possible resurgences of the disease, facilitating the decision making based on data.
Thanks to these initiatives, work centers are safer, thus taking care of the health of employees. In all cases, the health status
of the affected employees has been monitored, both those who were in their homes, as well as those hospitalized, with the
families of these employees being monitored.
No cases of occupational disease were registered in Spain in the last year. The number of worked-related accidents was
97, of which 50entailed medical leave and 47 did not, indicating a very low degree, under the sector. Thus, the Bank's
severity index is 0.07 (0.04 men and 0.09 women) in 2020, while the frequency index is 1.22 (0.70 men and 1.72 women).
Volunteer work
In the
Corporate Social Responsibility Policy, BBVA expresses its will to reinforce its corporate culture of social and
environmental commitment, facilitating the conditions for its employees to carry out volunteer work actions that generate
social impact.
Corporate volunteer work activities empower the development of employees, channeling their spirit of solidarity, allowing
them to make a contribution of their time and knowledge in order to help the people who need it most. This results in an
improvement of self-esteem, increasing the sense of pride in belonging to the company, and, consequently, in the attraction
and retention of talent. Volunteer work generates a positive impact in society, and as recognized by the 2030 Agenda, they
are an efficient tool to achieve the SDG.
COVID-19 has accentuated the vulnerability situations and the inequality among people, making the volunteers’ work more
important than ever. In order to grant both the Bank’s volunteers and beneficiaries’ security, on-site activities have been
reduced, and have been substituted, when possible, by remote volunteering activities.
More than 1,673 employees participated in about 45 volunteer work activities organized by the Bank, focusing on the
following lines of action: financial education, training in new technologies, training for employment, the environment and
sustainability, and community investment.
Remuneration
BBVA has a remuneration policy designed within the framework of the specific regulations applicable to credit institutions,
and geared toward the recurring generation of value for the Bank, within the Group framework, seeking also the alignment
of the interests of its employees and shareholders, with prudent risk management. This policy is adapted at all times to what
is established under applicable legal standards, and incorporates the standards and principles of national and international
best practices.
40
This policy is part of the elements designed by the Board of Directors as part of the BBVA corporate governance system to
ensure proper management of the BBVA, and meets the following requirements:
●
It is compatible and promotes prudent and effective risk management, not offering incentives to assume risks that
exceed the level allowed by the Bank,
●
it is compatible with BBVA’s business strategy, objectives, values and long-term interests, and includes measures
intended to avoid conflicts of interest,
●
it clearly distinguishes the criteria for the establishment of fixed remuneration and variable remuneration;
●
it promotes equal treatment for all staff, not discriminating due to gender or other personal reasons; and
●
it pursues that remuneration is not based exclusively or primarily on quantitative criteria and takes into account
adequate qualitative criteria that reflect compliance with the applicable standards.
The remuneration model applicable in general to the entire staff of the Bank, within the Group framework, contains two
different elements:
●
A fixed remuneration, which takes into account the level of responsibility, the functions performed, and the career
path of each employee, as well as the principles of internal equity and the value of the function in the market, being
a relevant part of the total compensation. The grant and the amount of the fixed remuneration are based on
objective predetermined and non-discretionary criteria.
●
Variable remuneration constituted by those payments or benefits additional to the fixed remuneration, whether
monetary or not, that are based on variable parameters. This remuneration must be linked, in general, to the
achievement of previously specified objectives, and will take current and future risks into account.
AVERAGE REMUNERATION
(1)
(2)
, AGE STAGES AND GENDER (BBVA, S.A. EUROS)
2020
2019
< 25 years
25-45 years
> 45 years
< 25 years
25-45 years
> 45 years
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
Male
Female
Management
team
(3)(4)
-
-
117,028
98,911
122,57
1
112,63
3
-
-
118,186
99,647
122,21
4
114,253
Middle controls
(3)
-
-
72,350
65,424
76,116
70,283
-
-
73,356
67,079
78,417
71,286
Specialists
40,042
36,393
44,723
42,117
52,032
48,548
39,916
37,910
44,969
42,411
52,370
49,085
Base positions
25,661
25,503
34,470
34,743
46,579
43,573
24,062
24,031
33,982
34,606
46,817
43,829
(1)
(2)
The professional categories reflected in this table differ from those included in the rest of the chapter. The category Sales force is included in each of the remaining categories
presented in this table.
(3)
(4)
This group does not include the Top Management.
AVERAGE REMUNERATION BY PROFESSIONAL CATEGORY AND GENDER
(1)(
EUROS)
2020
2019
Male
Female
Male
Female
Management team
(2)
117,091
105,851
116,821
105,974
Middle controls
67,403
62,692
67,722
62,723
Specialists
47,133
43,899
47,149
43,942
Base positions
42,547
38,919
42,168
38,493
(1)
The professional categories reflected in this table differ from those included in the rest of the chapter. The category Sales force is included in each of the remaining categories
presented in this table.
(2)
It excludes the Top Management.
The differences observed in the average remunerations of certain professional categories arise from factors such as the
length of service and they are not representative of the wage gap. This is due to the fact that only four professional categories
are being used, and in each of them very diverse positions with very different remunerations are included. Therefore, the
average remuneration of each category is affected by issues such as the different distribution between men and women in
the most valued positions, or the higher proportion of women in countries where the average remuneration is lower.
The remuneration of the members of the Board is set out in Note 49 of the Annual Report corresponding to the Bank’s
Financial Statements, on an individual basis and by remuneration category. As of 2020, for senior management members,
the average total remuneration was €1,562 thousand for men and €1,156 thousand for women.
Wage gap
41
Group’s Remuneration Policy promotes equal opportunities for men and women, and does not set or encourage wage
differentiation. The remuneration model is designed to promote responsibility and career development, while ensuring
internal fairness and external competitiveness.
The equal pay ratio is calculated as the difference in the average total remuneration between women and men of the same
professional category, expressed as a percentage of the average remuneration of men, as reflected in the table above
(Remuneration by professional category and gender) on average remuneration by professional categories and gender). This
ratio does not take into account the concept of a position of equal value in the Group.
BBVA's remuneration policy defines certain positions, on which compensation pivots. Each of these positions has a single
theoretical price determined based on different factors, such as the level of responsibility, complexity of the function, impact
on results, etc. In the same way, each position has a defined unique value linked to the achievement of the objectives.
The concept of a position of equal value is reflected in the calculation of the wage gap that compares the total remuneration
received by men and women who occupy positions of equal value in the Group.
For each of the aforementioned positions, the median of the total remuneration received by all the men and women who
occupy said positions is calculated. The wage gap for the position is calculated as the percentage resulting from dividing the
difference between the median salaries of men minus the median salaries of women by the median salaries of men. The
Group's salary gap is calculated as the weighted average of the gaps obtained in each of the positions.
The total remuneration considered includes the fixed remuneration and the target bonus linked to objectives. Items such as
allowances, social benefits, etc. are not included, the amount of which is very unrepresentative within the total remuneration
of employees, and whose award criteria and amounts are clearly defined, not discriminating between men and women.
As of December 31, 2020 and 2019 the wage gap by homogeneous professional categories is 4.2% figure that remains
stable with respect to the previous year
2
.
In order to balance professional opportunities between men and women, BBVA is continuing to launch various initiatives to
continue making progress toward gender equality such as: make women's talent visible, eliminate biases in key processes
and match the playing field (see more detail in the “Diversity and Inclusion” section). These initiatives are contributing to the
increase of women occupying positions of greater responsibility.
Additional information about remuneration
Total annual compensation ratio
The
total annual compensation ratio
the total annual compensation (fixed remuneration plus accrued variable remuneration and contributions to pensions) of the
highest paid person and the median total annual compensation (fixed compensation plus accrued variable compensation
plus pension contributions) of all employees taking full-time annualized compensation, excluding the best-paid person.
In 2020, the total annual compensation ratio was 80.9, reducing from 137.6 ratio as of December 31, 2019, as a result of
the resignation of the best-paid person to the variable compensation corresponding to the 2020 financial year.
Percentage increase in total annual compensation ratio
The
percentage increase in total annual compensation ratio
is calculated as the ratio between the increase in total
annual compensation (fixed compensation plus accrued variable compensation and contributions to pensions) of the best
paid person and the percentage increase in the median total annual compensation (fixed compensation plus accrued
variable compensation and pension contributions) of all employees taking full-time annualized compensation, excluding the
best paid person.
In BBVA, S.A. in Spain, for the financial year 2020, the total annual compensation of the highest paid person experienced a
fall 10.3 times greater than the fall in the median total annual compensation of the rest of employees, due to the resignation
of the best paid person to the variable remuneration corresponding to this financial year. For 2019, this ratio does not apply
due to a change in the position occupied by the best paid person.
Ratio of standard entry level wage by gender compared to local minimum wage
The
wage ratio of the standard initial category
does not distinguish by gender. BBVA's entry wage is 1.4 times higher than the local legal minimum wage (1.5 times in
2019) both for men and women.
2
extreme values and better represents the real situation of the Group.
42
Pensions and other benefits
BBVA has social welfare systems, differentiated according to the geographical areas and coverage it offers to different
groups of employees, not establishing differences due to gender or personal of any other kind, In general, the social welfare
system is a defined contribution system for the retirement provision. The Bank’s Pension Policy is compatible with the
Company’s business strategy, objectives and long-term interests.
Contributions to the social welfare systems of the employees of the Bank will be carried out within the framework of the labor
regulations, and of the individual or collective agreements of application in each entity, sector or geography. Calculation
criteria on which benefits are based (commitments for retirement, death and disability) reflect fixed annual amounts, with no
temporary fluctuations derived from variable components or individual results being present.
With regard to other benefits, the Bank, has a package of employee benefits within its specific remuneration scheme, not
establishing differences due to gender or personal of any other kind.
In 2020, the Bank in Spain made a payment of €27.2m in savings contributions to pension plans and life and accident
insurance premiums, of which €15.2m corresponded to contributions to men and €12.0m to those of women. This payment
accounts for more than 95% of Spain’s pension expenditure, excluding unique systems. On average, the contribution
received by each employee is €1,076 for the year (€1,224 for men and €932 for women).
43
Ethical behavior
Compliance system
The Bank’s
compliance system
all its activities and businesses in strict compliance with current legislation at all times and in accordance with strict standards
of ethical behavior. To achieve this, the cornerstones of the BBVA compliance system are the Code of Conduct, which is
available on the BBVA corporate website (www.bbva.com), the internal control model and the Compliance function.
The
Code of Conduct
conduct adheres to the internal values of the Bank. To this end, it establishes the duty of respect for applicable laws and
regulations for all its members in an integral and transparent manner, with the prudence and professionalism that correspond
to the social impact of the financial activity and to the trust that shareholders and customers have placed in BBVA.
BBVA's
internal control model
, built in accordance with the guidelines and recommendations of regulators and supervisors
and the best international practices, structured on three lines of defense, is intended to identify, prevent and correct the
situations of risk inherent to the performances of its activity in the areas and locations in which BBVA operates. For more
information on the three-line-of defense model, see Note 1.7 to the accompanying Financial Statements.
In accordance with the provisions of the BBVA Code of Conduct, Compliance is a global unit integrated within the
second
line of defense
and objectivity, measures to ensure that BBVA acts with integrity, particularly in areas such as the prevention of money
laundering, conduct with customers, conduct in the securities market, the prevention of corruption and other aspects of
corporate conduct.
The Compliance function has a Statute, approved by the Board of Directors, and subject to a prior analysis by the Risks and
Compliance Committee which details the main elements established by BBVA for managing the aforementioned issues as
well as the basic elements that comprise the Compliance System and Function. The Compliance Statute has evolved in
2020 to a better alignment with regulatory and supervisory developments and expectations related to the function.
Mission and scope of action
The tasks of the Compliance function include:
●
promoting a culture of integrity and compliance within BBVA, as well as the knowledge by its members of the
external and internal rules and regulations applicable to the above matters, through the development of internal
regulation, advisory, dissemination, training and awareness programs, fostering the proactive management of
compliance and conduct risk; and
●
defining and promoting the implementation and total ascription of the Bank to the risk management frameworks
and measures related to these issues.
In order to perform its functions adequately, Compliance maintains a configuration and systems of internal organization in
accordance with the principles of internal governance established under the European guidelines for this matter and in its
configuration, and development of the activity is attached to the principles established by the Bank for International
Settlements (BIS), as well as the reference regulations applicable to Compliance and Conduct Issues.
In order to reinforce these aspects and, specifically, the independence of the control areas, BBVA has the Regulation &
Internal Control area, which reports to the Board of Directors through the Risks and Compliance Committee and in which
the Compliance unit is integrated. Its activity is periodically supervised by the Risks and Compliance Committee.
Organization, internal government and management model
The Compliance function is handled globally at BBVA, and is composed of a corporate unit, with a transversal scope for the
entire Group that is directed by a global manager and by local units which, sharing the mission entrusted to them, perform
their duties in the countries where BBVA carries out its activities that are directed by local managers of the function.
The function carried out by the various Compliance officers relies on a set of departments specialized in different activities,
which, in turn, have their own designated officers. Thus, among others, the function is addressed by individuals responsible
for each discipline related to Compliance and Conduct Issues, for the definition and articulation of the strategy and the
management model of the function, or for execution and continuous improvement of the area´s internal operational
processes.
The main functions of the Compliance units include:
●
Carrying out a compliance and conduct risk assessment inherent to the Group’s activity.
44
●
Promoting or developing internal regulations on its matters, as well as the establishment of systems, technological
tools and adequate resources.
●
Advising the Organization on Compliance and Conduct matters to manage the risk derived from them.
●
The monitoring and verification of compliance with internal regulations that allow the measurement of the
management of Compliance and Conduct risk and its adequate contrast.
●
Management of whistleblowing channels in the different jurisdictions.
●
Periodically report information related to Compliance and Conduct issues at the different levels of the Organization.
●
Representing the function before regulatory bodies and supervisors in matters of compliance.
The structure of the Compliance units across different countries has continued to evolve throughout 2020 to obtain a better
alignment with these foundations.
The scope and complexity of the activities, as well as the international presence of BBVA, give rise to a wide variety of
regulatory requirements and expectations of the supervisory bodies that must be met in relation to risk management
associated with Compliance and Conduct Issues. This makes it necessary to have internal mechanisms that establish
transversal management programs for this risk in a homogeneous and integral manner.
For this purpose, Compliance has a
global model
preventive approach, has evolved over time to reinforce the elements and pillars on which it is based and to anticipate the
developments and initiatives that may arise in this area.
This model starts from periodic cycles of identification and assessment of compliance risk, upon which its management
strategy is based. This results in the review and updating of the multi-year strategy and its corresponding annual action
lines, both of which are aimed at strengthening the applicable mitigation and control measures, as well as improving the
model itself. These lines are incorporated into the annual Compliance plan, the content of which is reported to the Risks and
Compliance Committee.
The basic
pillars
●
A suitable organizational structure with a clear assignment of roles and responsibilities throughout the Bank.
●
A set of policies and procedures that clearly define positions and requirements to be applied.
●
Mitigation processes and controls applied to enforce these policies and procedures.
●
A technology infrastructure focused on monitoring and geared toward ensuring the previous objective.
●
Communication and training systems and programs implemented to raise employee awareness of the applicable
requirements.
●
Indicators that allow for the supervision of global model implementation.
●
Independent periodic review of effective model implementation.
Throughout 2020, work continued on strengthening the documentation and management of this model by reviewing and
updating the global typologies of Compliance and Conduct risks both at a general level and across the various different
geographical areas. The framework for conduct and compliance indicators also continues to be strengthened in order to
improve the early detection of this type of risk.
The effectiveness of the model and compliance risk management is continuously subject to various different and extensive
annual verification processes, including the
testing activity carried out by the Compliance units, BBVA's internal audit
activities, the reviews carried out by prestigious auditing firms and the regular or specific inspection processes conducted
by the supervisory bodies in each of the geographies.
On the other hand, in recent years, one of the most relevant axes of application of the compliance model focuses on digital
transformation of BBVA. For this reason, in 2020, the Compliance unit continued to maintain governance, supervision and
advisory mechanisms for the activities of the areas that promote and develop business initiatives and digital projects in the
Group.
Anti-money laundering and financing of terrorism
Anti-money laundering and the financing of terrorism (hereinafter AML) is an indispensable requirement in preserving
corporate integrity and one of its main assets: the trust of the people and institutions with which it works on a daily basis
(mainly customers, employees, shareholders and suppliers) in the different jurisdictions where it operates. BBVA´s
commitment to improving the various social environments in which it operates is also a constant in the objectives it peruses.
In addition, the Bank is exposed to the
risk of breaching
international organizations to operate with certain jurisdictions and individuals or legal entities, which could entail sanctions
and significant economic fines.
45
As a result of the above, BBVA applies the compliance model described above for AML
risk management
. This model
takes into account the regulations of the jurisdictions in which BBVA is present, the best practices of the international financial
industry regarding this matter, and recommendations issued by international bodies, such as the Financial Action Task Force
(FATF).
This management model is constantly evolving. Thus, the risk analysis that are carried out annually allow BBVA to tighten
controls and to establish, where appropriate, additional mitigating measures to enhance it. In 2020, the regulated entities of
the Bank carried out this AML risk assessment exercise under the supervision of the corporate AML area.
The BBVA Code of Conduct, in sections 4.1 and 4.2, establishes the basic guidelines for action in this area. In line with
these guidelines, BBVA has established a series of corporate procedures that are applied in each geographical area,
including the Corporate Procedure of Action for the Establishment of Business Relations with Politically Exposed Persons
(PEPs), the Corporate Procedure of Action for the Prevention of Money Laundering and the Financing of Terrorist Activities
in the Provision of Cross-Border Correspondent Services, or the Standard that establishes the Operational Restrictions with
Countries, Jurisdictions and Entities designated by National or International Organizations. All applicable standards are
available for consultation by employees.
BBVA has a
monitoring tool
(machine
learning, artificial intelligence, etc.), in order to reinforce both the capabilities of the Group's various comprising
entities to detect suspicious activity, as well as the efficiency of said processes.
In terms of
training
needs identified, establishes training actions such as face-to-face or
e-learning courses, videos, brochures, etc. for both
new hires and employees. Likewise, the content of each training action is adapted to the target group, including general
concepts derived from the regulation of applicable AML standards, both internal and external, as well as specific issues that
affect the functions performed by the target group of the training.
The AML risk management model is subject to a continuous
independent review
. This review is complemented by internal
and external audits carried out by local supervisory bodies, both in Spain as well as in other jurisdictions. In accordance with
Spanish regulations, an external expert performs an annual review of Bank. In 2020, this external expert concluded that
BBVA does indeed have an AML model to monitor the risk of being used as a vehicle for money laundering or terrorist
financing and that said model meets the regulatory requirements in this regard. In turn, the internal control body, which
BBVA maintains at the holding level, meets periodically and oversees the implementation and effectiveness of the AML risk
management model within the Bank.
It is important to mention BBVA´s
collaboration
in this field: Attendance at the meetings of the Executive Committee Financial Crime Strategy Group of the AML & Financial
Crime Committee and the Financial Sanctions Expert Group of the European Banking Federation, member of the
task forces
on KYC/RBA (Know Your Customer/Risk-based Approach) and Information Sharing of the European Banking Federation,
member of the AML Working Group of the IIF, participation in initiatives and forums aimed at increasing and improving the
exchange of information for AML purposes, such as the Europol Financial Intelligence Public Private Partnership (EFIPPP),
as well as contributions to public consultations issued by national and international bodies (European Commission, GAFI-
FATF, European Supervisory Authorities, among others) and the IIF Machine Learning Governance Survey.
Conduct with customers
BBVA's Code of Conduct places its customers at the center of its activities, with the aim of establishing lasting relationships
based on mutual confidence t and the contribution of value. Thus, BBVA aspires to be the trusted partner of its customers
in management and control of their finances on a day-to-day basis, based on personalized advice. The objective is to
improve the financial health of its customers, as a factor of differentiation of the Bank.
To achieve this objective, BBVA has product governance policies and procedures that establish the principles to be observed
when evaluating the characteristics and risks of products and services, as well as when defining their distribution conditions
and their monitoring, so that based on the knowledge of the customer, their interests are taken into account at all times and
they are offered products and services in accordance with their financial needs and compliance with applicable regulations
on customer protection is ensured. BBVA has also implemented processes geared toward the prevention, or, when this has
not been possible, the management of potential conflicts of interest that may arise in the marketing of its products.
In 2020, the new regulatory requirements on customer protection resulting from the health crisis caused by COVID-19, and
aimed, in particular, at protecting customers in a vulnerable situation as a result of the crisis, have become one of the main
focuses of the Compliance units. During the course of the pandemic, the Compliance Function monitored these regulatory
developments and their proper implementation. In this regard, it identified 104 new regulations, corresponding to 12
countries and at a supranational level to the EU, which incorporated new requirements related, for example, to loan
extensions or moratoriums, the granting of loans with public guarantees, facilities associated with banking transactions and
payment channels, exemption from fees, or redemption of pension funds and funds or other savings products.
At the same time, progress continued throughout 2020 on a global customer
compliance model, which aims to improve the
homogeneity of the framework of conduct standards which must be respected in customer relationships, in line with the
principles of the Code of Conduct. The deployment of the model contributes to a better customer experience at BBVA, and
46
continues to be in line with increasingly standardized regulations on customer protection at a global level and best practice
standards in commercial relations with customers. Throughout the year, BBVA focused on reviewing the frameworks for
mitigating and controlling risks relating to conduct with customers, singularly addressing the issues of transparency in
information for customers, as well as strengthening indicators related to such risks, paying special attention to customer
complaints and preventing and identifying poor sales practices.
Other measures geared toward customer protection during 2020 included:
●
Continuous analysis of the characteristics, risks and costs of BBVA's new products, services and activities from a
customer perspective through a number of different Operational Risk Admission and Product Governance
Committees,
●
Continuous collaboration with wholesale and retail product and business development units, focusing on digital
banking initiatives, with the aim of including the customers´ point of view and investor protection in its projects from
the outset.
●
Enhancement of the training processes required by the MiFID II regulations and the Law regulating real estate loan
contracts in Spain.
●
Training on identifying, managing and logging situations of potential conflict of interest during the provision of
services to customers.
●
Promoting communication activities for commercial networks, both through direct communications on products or
services, as well as through specific training actions.
●
Follow-up of new customer protection requirements arising from the new regulation with regard to ESG factors.
●
Adaptation of the Advertising Communication Policy to the Bank of Spain Circular on advertising.
Conduct on securities markets
The BBVA Code of Conduct includes the basic principles for action aimed at preserving the integrity of the markets, setting
the standards to be followed aimed at preventing market abuse, and guaranteeing transparency and free competition in the
professional activity carried out on the market by the BBVA collective.
These basic principles are specifically developed in the Policy on Conduct in the Field of Securities Markets ("the Policy"),
which applies to all the individuals who form a part of BBVA. Specifically, this policy establishes the minimum standards that
are to be respected with the activity carried out in the securities markets in terms of privileged information, market
manipulation and conflicts of interest. The Policy is supplemented in each jurisdiction by a rule or
Internal Code of Conduct
(ICC) aimed at the target group with the greatest exposure in the markets. The ICC develops the contents established in the
Policy, adjusting them, where appropriate, to local legal requirements.
GESRIC tool, which is in continuous development. The degree of adhesion to the new ICC approached 100% of the
individuals in question.
With respect to the
market abuse prevention
, the reinforcement of the programme continued, implementing and extending
the tools for detecting operations suspected of market abuse continued, in order to improve the analysis capabilities. As part
of this reinforcement, the communications control framework of the market areas was reinforced through the implementation
of new communications analysis tools which provide support in the analysis of suspicious transactions.
These measures enable the further improvement of the process of detecting suspicious transactions, leading to the
communication of possible market abuse practices to the corresponding authority.
The training program on market abuse was also reinforced in 2020 through the launch of a global course on insider
information and market manipulation, which will complement the various training activities held by the Bank on market
conduct.
Likewise, training for employees operating in derivatives with customers affected by the US Dodd-Frank Act under the
license of
Swap Dealer). This training will be mandatory from January 31, 2021, and will be provided by the competent
supervisory authority (“National
Futures Association”).
In relation to the Unites States regulation known as
the "Volcker Rule," BBVA has adapted its compliance program to the
new simplified version of the
rule ("Volcker 2.0"), which continues to maintain the highest international standards. In 2020,
annual training on the
Volcker Rule.
Likewise, the Policy for Discretionary Treasury Stock Trading has also been updated with the aim of adapting it to the new
control model of the Group and reinforcing the transparency of this activity. Following this update, the guidelines followed
by BBVA for its discretionary treasury stock trading have been published on the Bank's investor and shareholder website. A
communication containing relevant information concerning this operation is also published quarterly to strengthen the market
transparency of this activity.
47
Personal data protection
BBVA has a set of Personal Data Protection Principles that establish the guidelines for compliance in the matter of personal
data. They are applicable in the areas of compliance control, training, incident management and personal data processing
(transparency, data quality, etc.). These guidelines mean that BBVA has, in accordance with its legislation, data privacy
policies or notices explaining how the Bank collects, process and protect the personal data of their customers, suppliers and
employees, as well as of any other persons who provide their personal data.
BBVA, S.A. makes the policy it follows regarding personal data protection available to its customers through its website, at
www.bbvapoliticadeprotecciondedatospersonales.com. This includes information on:
●
Who is responsible for processing personal data;
●
The legitimate basis (or bases) that allows BBVA to process the personal data collected;
●
The purposes for which said personal data is to be used;
●
The data retention period;
●
Whether the data will be transferred;
●
The mechanisms in place so that the user can escalate data privacy issues, such as how to contact the Data
Protection Officer;
●
How to exercise rights of access, rectification, deletion, opposition, limitation of processing, transferability and the
right not to be the subject of automated individual decisions
.
The BBVA Code of Conduct establishes that data protection breaches may lead to the application of disciplinary sanctions
in accordance with labor legislation.
The Data Protection Office
(hereinafter DPO) has continued to strengthen its monitoring and control processes throughout
2020. This is mainly achieved through reinforcing protocols and
testing processes and activities that have an impact on
personal data protection, as well as following up on and resolving the recommendations arising from internal audits
conducted to assess all activity in this field.
At the same time, the current exceptional situation created by the COVID-19 pandemic has posed a great challenge in terms
of personal data protection. The adaptation of the protocols implemented within the BBVA Group to combat infections and
safeguard the health of employees and customers has required a greater focus on the accelerated and urgent adaptation
of data protection requirements to this new reality.
Furthermore, in order to improve the integration of the scope and duties of the DPO in the Group's Control Model, in the last
quarter of 2020, BBVA made the decision to incorporate these duties into the Compliance unit while maintaining all the
competencies of the DPO, in accordance with data protection legislation.
Other conduct standards
One of the main mechanisms for managing the Compliance and Conduct risk in the Group is the Whistleblowing Channel,
where the members of BBVA as well as other third parties not belonging to BBVA can communicate confidentially and, if
they wish, by anonymous signature those behaviors that are separated from the Code or that violate the applicable
legislation, including complaints related to human rights. The Compliance Function aims to ensure that complaints are
handled diligently and promptly, guaranteeing the confidentiality of the investigation processes and the absence of retaliation
or any other adverse consequence of good faith communications. The Code of Conduct, is available 24 hours a day, 365
days a year.
BBVA has 14
whistleblower channels
email and most of them also by telephone. BBVA has a corporate whistleblowing channel to which all employees in the
jurisdictions where the Group is present have direct access. In 2020, 1,417 complaints were received in the Group, whose
main aspects reported relate to the categories of conduct with colleagues (49.8%), and conduct with the company (34.1%).
Approximately 42% of reports processed during the year ended with disciplinary action being taken.
Among the work carried out in
2020 by the Compliance area, ongoing advice on the application of the Code of Conduct is
particularly noteworthy. Specifically, the Group formally received 547 individual consultations, written and telephone queries,
such as the resolution of possible conflicts of interest, the management of personal assets, or the development of other
professional activities. Over the year 2020, BBVA continued with the work of communication and dissemination of the new
Code of Conduct, as well as the training on its contents, which has been carried out by a total of 115,334 employees.
Another key element in the management of Conduct risk is the BBVA’s
General Anti-Corruption
Policy
BBVA S.A. Board of Directors in September 2018), which develops the principles and guidelines contained, primarily, in
Section 4.3 of the 2015 Code of Conduct and conforms to the spirit of national and international standards on the subject,
taking into consideration the recommendations of international organizations for the prevention of corruption and those
established by the International Organization for Standardization (ISO). In May 2020 this Policy was reviewed and its update
approved by the BBVA S.A. Board of Directors and communicated again to all employees and member of the Group´s main
48
governing bodies. The general guidelines of the General Anti-Corruption Policy are available to both business partners and
other third parties on the BBVA’s shareholder and Investors website.
Additionally, BBVA has an internal regulatory body that complements the General Anti-Corruption Policy in the matter that
regulates.
Among the most prominent
policies
are the following:
●
General Policy on Conflicts of Interest,
●
General Policy on Anti-Corruption,
●
Policy on the Prevention and Management of conflicts of interest at BBVA (customer area),
●
General Procurement Principles,
●
Policy on Events and the Acceptance of gifts related to major sporting events,
●
Corporate Travel Policy, and
●
Corporate Event Management Policy.
Likewise, regarding to
other internal developments
, the following stand out:
●
Management model for corporate and travel expenses for personnel,
●
Management model for Expenses and Investment,
●
Code of Ethics for the Recruitment of Personnel,
●
Code of Ethics for Suppliers,
●
Rules relating to the Acquisition of Goods and Services,
●
Rules relating to Gifts for employees from persons/entities outside the Bank,
●
Rules for delivery of gifts and organization of promotional events,
●
Rules for authorizing the hiring of consultancy services,
●
Rules on dealing with individuals of public importance in matters of finance and guarantees,
●
Rules for delegating credit risk,
●
Corporate rules for managing donations and contributions to non-profit organizations,
●
Corporate rules for managing commercial sponsorships,
●
Requirements for establishing and maintaining business relations with politically exposed persons (PEP),
●
Manual for management of donations in the
Responsible Business department,
●
Procedural manual (treatment and registration of communications in the whistleblower channel),
●
Corporate rules for managing the outsourcing life cycle,
●
Disciplinary regime (internal procedural rules).
The BBVA anti -corruption framework is not only composed of the aforementioned regulatory body, but also, in compliance
with the crime prevention model, has a program that includes the following elements: i) a risk map, iii) a specific government
model iii)a set of mitigation measures aimed at reducing these risks, iv) action procedures face emergent risk situations, v)
training and communication programs and plans, vi) indicators aimed at understanding the situation of risks and their
mitigation and control framework, vii) a whistleblower channel and viii) a disciplinary regime,.
Also, it should be noted that BBVA takes into account the corruption risk present in the main jurisdictions in which it operates,
based on the valuation published by the most relevant international organizations in this area.
In relation to general training program, during 2020, training to the Top Management and employees of BBVA on the General
Anti-Corruption Policy was globally boosted, through different initiatives mainly based on practice case studies, highlighting
the launch of a corporate online course.
What's more, the framework for preventing conflicts of interest was reinforced in July 2020 complementing the existing
internal regulation through the issuance of a new general policy, which reinforces the principles and main measures that all
BBVA members, must assume and follow in order to identify, prevent and manage conflicts of interest. The policy has been
established in the context of the principles under which the BBVA operates, which include integrity, prudent risk
management, transparency, the achievement of long-term sustainable business and compliance with applicable legislation.
It also addresses several different aspects, such as specific measures that help prevent the emergence of conflicts, general
guidelines for action should they emerge, or governance and monitoring mechanisms at various different levels of the
organization.
Regarding antitrust, BBVA's
competition policy
represents a step forward in the development of conduct standards in this regard. The policy elaborates on Principle 3.14
49
of the BBVA Code of Conduct on free competition and covers the most sensitive risk areas identified by national and
international bodies, horizontal agreements with competitors, vertical agreements with non-competing companies, as well
as possible abusive practices. Various training activities were conducted in this regard during 2020.
Crime prevention model
Since the introduction in Spain of the criminal liability regime of legal persons, BBVA has been developing a criminal risk
management model, based on the general internal control model, with the aim of specifying measures directly aimed at
preventing the commission of crimes through a government structure suitable for this purpose. The
criminal prevention
model
application.
The prevention system is aimed at (i) identifying the activities carried out in BBVA that represent a risk of incurring criminal
liability of the legal entity, (ii) identifying the elements of control, prevention and mitigation of said risks and (iii) developing
a specific risk management program for each type of crime likely to attract responsibility for BBVA. In this sense, for each
of the identified criminal risks a specialized control area (“assurance providers”) is designated which, as part of the criminal
risk management program and for each of the identified criminal types, draws up a map of risks and a series of mitigation
measures and action plans.
The purpose of the governance structure is the supervision and control of the model, the identification of the responsible
units and the periodic information to the BBVA governing bodies of the results of the monitoring of the system and of the
incidents or possible relevant non-compliances.
This model, periodically subject to independent review processes, is configured as a dynamic process in continuous
evolution, so that the experience in its application, the modifications in the activity and in the structure of the Entity and, in
particular in its model of control, as well as the legal, economic, social and technological developments that occur, are taken
into account in a way that contributes to their adaptation and improvement..
In this context, from 2017 onward, BBVA has been awarded the AENOR certificate, which accredits that its criminal
compliance management system complies with the UNE 19601:2017 standard.
Commitment to human rights
BBVA is committed to compliance with all applicable laws and to respect for internationally recognized human rights. This
commitment applies to all of the relationships that BBVA establishes with its customers, suppliers, employees and with the
communities in which it conducts its business and activities.
Since 2007, BBVA has had a commitment to human rights, which was updated in 2020, that seeks to ensure respect for the
dignity of all people and their inherent rights.
The commitment is part of the Group's Corporate Social Responsibility Policy and is aligned with BBVA's Code of Conduct.
This commitment takes the UN Guiding Principles on Business and Human Rights as a reference. Its purpose is to guide
the Group in its strategic vision and its operative, as well as in the relationship with its stakeholders.
BBVA's commitment to human rights is also reflected in other milestones, such as the publication in 2005 of the first defense
sector standard or the publication of sector standards in the energy, mining, agriculture and infrastructure sectors in 2018,
and its subsequent update in 2019, which has been substituted by the Environmental and Social Framework in 2020.
BBVA was also the first Spanish entity to adhere to the Equator Principles in 2004 and the United Nations Principles for
Responsible Investment (PRI) in 2008, and has been a signatory to the United Nations Global Compact (UNGC) since 2002,
all of which are international alliances in favor of human rights.
50
Under this perspective, BBVA decided to identify the social and labor risks that derive from its activity in order to manage
their potential impacts through processes designed specifically for this purpose (for example, due diligence processes in
project finance under the Equator Principles) or through existing processes that encompass the human rights perspective
(such as the supplier evaluation process).
At the same time, the methodology for evaluating the risk to BBVA's reputation discussed in the "Reputational Risk" section
within the chapter “Risk management”, is an essential companion to this management, since assessing reputational risk
highlights that issues related to human rights have the potential to affect the Bank's reputation.
In order to comply with the UN Guiding Principles on Business and Human Rights, and under the responsibility to prevent,
mitigate and repair potential
human rights impacts
, a due diligence process was carried out in 2017. The procedure used
to identify and assess these risks or impacts was based on the framework of the above Principles and helped to enhance
risk detection and assessment from a human rights perspective. This due diligence process is scheduled to take place again
in 2021.
As a result of the process, the potential impacts of the operations on human rights were identified and mechanisms were
designed within the Entity to prevent and mitigate said impacts, making the adequate channels and procedures available to
the affected party in order to ensure that, in case of any violation, the appropriate mechanisms remain in place to ensure all
necessary repairs. During this process, certain key issues were identified that could potentially serve as levers to improve
the management system within the Bank. These issues are grouped into four areas that serve as the basis and foundation
of the Bank’s
2018-2020 Human Rights Action Plan
, which is public and is updated every year.
Policy and structure
The updating of the commitment to human rights was recommended during the due diligence process conducted in 2017,
and it was renewed in 2018. For this update, the Guiding Principles of Business and Human Rights guidelines, backed on
June 16, 2011 by the United Nations Human Rights Council, and the results of the global due diligence process itself, were
taken as a reference.
This commitment is articulated around the stakeholders with which BBVA is related: employees, customers, suppliers and
society; and it includes the three pillars on which the aforementioned Guiding Principles are based, which are:
●
States’ duty to protect,
●
The responsibility of companies to respect human rights,
●
And the joint duty to implement mechanisms that ensure the repair of possible human rights abuses.
All the individuals employed in the Bank are responsible for making this commitment a reality on a day-to-day basis. Each
area and employee has the duty to be familiar with all matters that pertain to them that may imply a violation of human rights,
and to implement the due diligence measures to avoid this. However, BBVA has a structured governance model following
the internal control model, composed of three lines of defense:
●
The first line of defense consists of the Group's units directly responsible for managing these risks.
●
The second line of defense is composed by the specialist unit of each risk, with the support of the Responsible
business department, which is, as well, responsible for designing and coordinating the implementation of this
commitment and its development.
●
The third line of defense is the
Internal Audit area.
51
Training and cultural transformation
With regard to the due diligence process, it is advisable to integrate the human rights perspective into:
●
The internal and external communication plan,
●
The plan on diversity and work-life balance, and
●
A general and specialized training plan for employees.
Respect for the equality of people and their diversity is reflected in the
corporate culture
guiding principle for interactions with
employees
, especially in the recruitment, development and remuneration processes,
which ensure non-discrimination on the basis of gender, race or religion, and, as such, is included in the BBVA Code of
Conduct.
Thus, this Code, among other matters, covers how to handle discrimination, harassment or intimidation in labor relations,
objectivity in recruitment, hiring and promotion that avoids discrimination or conflicts of interest, among other issues, as well
as health and safety in the workplace, whereby employees must communicate any situation they become aware of that
poses a risk to their health or safety at work.
Furthermore, BBVA's commitment to human rights assumes the commitment to apply, for example, the content of the
fundamental conventions of the International Labor Organization
(ILO)
, such as those relating to the elimination of all forms
of forced labor; the effective abolition of child labor (minimum age and worst forms of child labor); and the elimination of
discrimination in employment and occupation, among other commitments.
In 2020, this section was enhanced through the launch of a global training
site on sustainability that includes specific content
on human rights training.
Process improvement
As a result of the aforementioned process, the importance of enhancing the supplier evaluation process, as well as the
functioning and scope of the repair mechanisms, became evident.
From a
supplier
commitment to human rights by integrating the human rights prism into the supplier evaluation process.
In 2020, the General Procurement Principles (which replace the previous Responsible Procurement Policy) were published,
demonstrating the commitment to responsible business by raising awareness of sustainability and social responsibility
among personnel, suppliers and other stakeholders involved in BBVA’s procurement process, as a key element in ensuring
compliance with applicable legal requirements in the areas of human, labor and environmental rights.
BBVA works to establish
repair mechanisms
services with others. As such, BBVA is open to managing any issue raised by any of its stakeholders regarding its lending
activity and in relation to performance in the field of human rights through two channels: The Bank's official listening
channels, aimed at customers, and external channels. An example of an external channel is the national contact points of
the Organization for Economic Cooperation and Development (hereinafter OECD), the objective of which is to admit and
resolve claims related to losses of the OECD Guidelines for Multinational Enterprises.
With regard to employees, suppliers and society in general, the BBVA Code of Conduct expressly mentions the commitment
to human rights and provides a
whistleblower channel
Business and strategy alignment
The analysis performed recommended the inclusion of human rights criteria in the Bank’s strategic projects, such as the
due diligence process in the acquisition of companies or the social and environmental framework.
Furthermore, as signatories to the
Equator Principles
, BBVA complies with the requirement to conduct a due diligence
analysis of potential human rights impacts in
project finance operations. When identifying potential risks, the operation must
include an effective form of management of these risks, as well as operational mechanisms to support claims management.
Also within the framework of the Equator Principles, BBVA actively promotes the inclusion of Free Prior
and Informed
Consent (FPIC), not only in emerging countries, but also in projects in countries where a robust legislative system is
presupposed, which guarantees the protection of the environment and the social rights of its inhabitants.
BBVA is also a signatory of the
United Nations Global Compact Principles
, maintaining ongoing
dialog
experiences with other signatory entities (companies, SMEs, third sector entities, educational institutions and professional
associations). Along the same lines, BBVA encourages dialog with NGOs concerning its fiscal responsibility, and participates
in various meetings with investors and stakeholders in which it follows up on issues related to human rights.
52
BBVA participates in various different work groups related to human rights and is in constant dialog with its stakeholders. At
a sectoral level, BBVA has formed part of the Thun Group since 2012. The Thun
Group is a group of global banks that works
to understand how to better apply the United Nations Guiding Principles on Business and Human Rights in the practices
and policies of financial institutions, and across various banking businesses.
The
Principles of Responsible Banking
as one of the promoters and founders of the initiative. Under the auspice of the United Nations, these Principles are put forth
with the aim of providing a sustainable financing framework and supporting the sector in a manner that shows its contribution
to society. In this regard, the implementation guidelines expressly mention the suitability of integrating the Guiding Principles
of Business and Human Rights into the implementation of the six principles, which are: i) Alignment, ii) Impact and goal
setting, iii) Customers, iv) Stakeholders, v) Governance and culture, and vi) Transparency and accountability. Lastly, in
addition to these initiatives, and taking into account the importance of the Spanish mortgage market, BBVA generated a
social housing policy in 2012.
Spanish Social Housing Policy
In line with the above, and taking into account the importance of the Spanish mortgage market, BBVA has a Social Housing
Policy that goes beyond what is legally established and emphasizes the commitment to human rights and the SDGs, mainly
in terms of SDG 1 "No Poverty" and SDG 10 "Reduced Inequalities."
At present, more than 750.000 families live in BBVA-financed housing in Spain.
BBVA's Social Housing Policy aims to offer solutions tailored to customers who have mortgages and are struggling to meet
their repayments. BBVA pursues every re-financing option available in accordance with the customers' ability to pay, in order
to allow them to keep their homes and agreeing to make payment in kind in case their financial situation prevents them from
paying.
In addition, any situation can be referred for review by the Committee for the Protection of Mortgage Debtors, which analyzes
cases in which the customers or their families face the risk of exclusion without legal protection, while providing individual
solutions in accordance with each family's specific circumstances.
In February 2012, BBVA decided to voluntarily adhere to the Code of Best Practices approved by the Spanish government,
the objective of which is to seek the viable restructuring of the mortgage debt of holders of loan or credit contracts secured
by a real estate mortgage on their main residence who are experiencing extraordinary difficulties in meeting their
repayments, because they are at the "exclusion threshold." In 2019, on the occasion of the entry into force of Law 5/2019,
which regulates real estate loan contracts, BBVA ratified its adherence to the Code of Best Practices under the terms of this
new law, which broadens the potential beneficiaries of these measures.
In 2018, BBVA transferred its real estate business to Cerberus Capital Management, adapting its Social Housing Policy to
this new situation while remaining steadfast on its objective. Since the financial crisis began in 2008 and through to
December 2020, of those contributed to the Social Housing Fund, the BBVA Group made almost 7,000 homes available in
Spain for social renting, the social rentals granted to customers in what had been their home and homes ceded to the
Government of Catalonia and Cáritas Barcelona.
Currently, BBVA has signed collaboration agreements with public entities for more than 1,000 social housing properties.
BBVA has also established internal mechanisms that allow it to implement a real social housing policy that pays special
attention to particularly vulnerable families who are BBVA mortgage customers and are at risk of social exclusion:
●
Re-financing agreements in force: More than 85,000refinancing agreements in force as of December 31, 2020,
which have helped families since the crisis first began.
●
Payments in kind: More than 29,600 payments in kind have been carried out since the crisis began through to
December 2020.
●
Mortgage Debtor Protection Committee: More than 2,200 situations analyzed to respond to mortgage debtors or
their families.
Since the socio-economic crisis caused by COVID-19 began, BBVA has been aware of the importance of supporting citizens
in facing its consequences. On March 17, 2020, Royal Decree Law 8/2020 was published with urgent and extraordinary
measures to address the socio-economic impact of COVID-19. This outlines the conditions for requesting a payment deferral
on home mortgage loan payments. Customers with a mortgage at BBVA who met the conditions of vulnerability due to
COVID-19 were able to take advantage of this payment deferral. BBVA, together with other financial institutions, has also
voluntarily established a payment deferral of up to twelve months.
With regard to social housing tenants, the financial institutions that are members of the Social Housing Fund, including
BBVA, took the initiative on March 23 to grant a deferment of up to three months in social rentals to those tenants who were
in a vulnerable situation due to COVID-19, in anticipation of the regulations on support for tenants approved by the
government in Royal Decree Law 11/2020 published on April 1.
53
Both the legal measures indicated and all their subsequent modifications affecting mortgage debtors or social housing
tenants were adapted and implemented as quickly as possible, with the aim of helping to mitigate the economic impact of
the pandemic on the most vulnerable groups.
54
Sustainability at BBVA
BBVA, a bank committed to sustainability
BBVA is a bank guided by one purpose: "Bringing the age of opportunity to everyone." A purpose that seeks to have a
positive impact on the lives of individuals, businesses and society as a whole. BBVA's firm and long-term commitment to
sustainability is perhaps one of the clearest ways of achieving this purpose, and as it has already been mentioned, “helping
our clients transition towards a sustainable future is one of the six Bank’s strategic priorities, which is implemented through
two ways: climate action and inclusive growth.
This commitment to sustainability has a long background. BBVA joined the UN Global Compact in 2002 and to the Equator
Principles in 2004.
Its drive for sustainable finance began in 2007, when it took part in the first issue of a green bond placed by the European
Investment Bank (hereinafter, EIB), and when in 2008 its employee pension plan manager was the first to adhere to the
Principles for Responsible Investing in the market. Since then, the Bank has been promoting sustainable solutions, ensuring
their direct impact and integrating environmental and social risk into the management process.
In 2018, BBVA unveiled its
2025 Pledge
challenges arising from the Paris Agreement on Climate Change. This commitment is based on three lines of action:
1.
To finance
. Originating new funding to combat climate change and support the SDGs by channeling €100,000m
into green activities, sustainable infrastructure, agribusiness, entrepreneurship and financial inclusion between
2018 and 2025.
2.
To manage
. Minimizing the environmental and social risks associated with the Bank's activity and their potential
direct and indirect negative impacts, as well as progressively aligning its business with the Paris Agreement. The
Bank has set itself the target of ensuring that 100% of the energy supplied to the Bank is renewable by 2030.
3.
To Engage
. Engaging all stakeholders to collectively promote the financial sector's contribution to sustainable
development.
In 2019, the Bank carried out a process of strategic reflection to continue deepening its transformation and adapt to the
major trends that are changing the world and the financial industry. As a result, faced with two of the main trends identified,
such as the
fight against climate change and the growing relevance of social inclusion
, BBVA incorporated
sustainability as one of its six strategic priorities: helping our clients in the transition towards a sustainable future.
During 2020, it has continued to advance in the development of this priority,
integrating sustainability transversa lly in
management
and internal processes and also in the relationship with clients and other stakeholders, highlighting milestones
such as the approval of the General Sustainability Policy, the creation of the Global Sustainability Office (hereinafter the
GSO) or the publication of the Group's first TCFD report.
Governance model
BBVA’s corporate governance
BBVA’s
corporate governance bodies
change as one of its priorities, approving its basic elements and regularly monitoring its implementation across the Group.
This task is carried out by the Board of Directors, BBVA’s highest representation, administration, management and
surveillance body, with the assistance of its specialized committees.
The Executive Committee and the Risk and Compliance Committee specifically play the most active role in assisting the
Board on sustainability and climate change issues, as detailed below.
BBVA’s Board of Directors has long considered the progress and main impacts of sustainable development and the fight
against climate change as important matters, and these have become even more important issues to monitor in recent
years.
The Board of Directors approved the Group’s Corporate Social Responsibility policy in 2020, subsequently amending it to
adapt to any new developments over the years. This policy reflects the Group’s commitment to draw up and implement a
climate change and sustainable development strategy for the achievement of the SDGs, in line with the Paris Climate
Agreement, among other considerations.
To this end, the Board fostered the Group’s commitment to sustainability with the “2025 Pledge” described in this chapter.
Its progress and development have been regularly monitored by the Board of Directors, at least on an annual basis, and by
its Executive Committee, at least on a biannual basis.
55
In 2019, BBVA’s Board of Directors led the strategic reflection process carried out within the Group, which identified the
need to make sustainability one of the pillars of its strategy for the coming years.
This strategic reflection performed in 2019 had a special implication of the corporate governance bodies, in particular the
Board and the Executive Committee who directly participated in the drafting and approval of the Group’s new strategic plan
(discussed in several meetings throughout the year). A process to monitor the plan’s implementation and execution was
defined with measures including holding specific meetings focused on strategy or the establishment of KPIs to implement
the strategic plan.
An essential element of this strategic approach determined by the Board is the integration of sustainability and the fight
against climate change into the Group’s business and functions and which will be managed by establishing objectives to
facilitate their implementation, oversight and monitoring of progress.
In addition, in 2020, the Board, with the prior analysis of the Executive Committee, approved the Group’s Sustainability
Policy, which defines and sets out the general principles and the main management and control objectives and guidelines
to be followed by the Group on sustainable development.
Likewise, the GSO, responsible unit for promoting and coordinating sustainability initiatives within the Group,
given that it is
the responsibility of all Group areas to incorporate sustainability on a cross-cutting basis, was created in 2020, and is relying
on the support of the most senior executive managers of the various Bank's areas at a global and local level.
The Board of Directors will oversee the policy’s implementation directly or through the Executive Committee, on the basis
of periodic or ad-hoc reports received by the GSO, the Head of Corporate & Investment Banking (who is responsible for this
policy at the senior management level), the Bank’s areas that will incorporate sustainability into their day-to-day businesses
and operations and, where appropriate, the Heads of BBVA’s control functions.
At least once a year, or in the event of any event requiring changes to this Policy, the Global Sustainability Office will revise
and submit to the Bank’s corporate governance bodies any updates and modifications deemed necessary or appropriate at
any time.
The above approach allows the corporate governance bodies to define the basic lines of action for the Group as regards
the management of opportunities and risks arising from sustainability in their businesses. It also allows the execution to be
overseen by the executive areas in all spheres of the entity’s operations.
In addition to the above and in order to achieve the best performance of its duties in this matter, the Board considered it
necessary to strengthen its own knowledge and experience in sustainability, by onboarding people with extensive knowledge
and experience and by a continuous training program to include sustainability-related subjects (such as sustainable finance
or main trends that are being developed in the market on this matter).
Transversal integration of sustainability into the executive sphere
BBVA incorporates sustainability as part of its daily activities and everything it does, encompassing not only relations with
customers but also internal processes.
In this sense, the definition and execution of the sustainability strategy has a transversal nature, being the responsibility of
all areas of the Bank to incorporate it progressively into their strategic agenda and their work dynamics.
Taki ng into account the two main focal points of action in relation to sustainability, the Bank has set itself some specific
targets (hereinafter the "Sustainability targets"), which at the time of this report are as follows:
1.
To promote the development of sustainable solutions
: Identifying opportunities, developing sustainable
products and offering advice to individual customers and companies.
2.
To integrate sustainability risk into its processes
: Making climate change risks, whether physical or transitory,
part of the Bank’s management processes.
3.
To build a single agenda with stakeholders
: Fostering transparency in commitments and performance, reducing
the direct impact and promoting active involvement with all stakeholders to drive sustainability within the financial
sector.
4.
To develop new competencies in the sphere of sustainability
: Leveraging the Bank’s capabilities in the field of
data and technology to drive the development of the sustainability strategy across the Organization, and promoting
as well the training on this subject among all employees.
These goals are materialized in different lines of work entrusted to various different areas, and a supervisor has been
appointed for each area.
In this context, the GSO has held regular meetings with these managers to review the various different lines of work, with
the aim of accelerating their implementation and ensuring proper alignment between the Banks’s various different units.
Finally, a network of experts has been established, comprising sustainability specialists from different areas of the Bank
(Client Solutions, Corporate & Investment Banking, Global Risk Management, Communication & Responsible Business)
56
and coordinated by the GSO. These experts are responsible for building knowledge in the field of sustainability at the Bank.
This knowledge is then used to provide customer guidance, support areas in developing new value propositions in the
sphere of sustainability, make climate risks part of risk management, and draw up a public agenda and set of sustainability
standards.
Implementing the strategy
As described in the chapter “Strategy and business model”, helping the clients transition toward a sustainable future is one
of the strategic priorities of BBVA.
To achieve this, BBVA has prioritized those SDGs in which the Group can generate a greater positive impact by harnessing
the multiplier effect of banking, implementing this strategy through the two lines of action: climate action and inclusive growth.
57
Climate action
Ensure access to affordable, reliable, sustainable and modern energy for all
For more information regarding BBVA’s performance in its contribution to SDG 7, see section “Helping
our clients transition toward a sustainable future” “Management of environmental direct impacts”
within this chapter.
Ensure sustainable consumption and production
For more information regarding BBVA’s performance in its contribution to SDG 12, see section
“Management of environmental impacts” within this chapter, and chapter “Contribution to society”.
Take urgent action to combat climate change and impacts
For more information regarding BBVA’s performance in its contribution to SDG 13, see sections
“Helping our clients transition towards a sustainable future” and “Environmental impacts and risks”
within this chapter.
Inclusive growth
Promote inclusive and sustainable growth, employment and decent work for all
For more information regarding BBVA’s performance in its contribution to SDG 8, see the chapters,
“The best and most engaged team” and “Contribution to society”, and the section “Helping our clients
transition towards a sustainable future” within this chapter.
Build resilient infrastructure, promote sustainable industrialization and foster
innovation
For more information regarding BBVA’s performance in its contribution to SDG 9, see section
“Helping our clients transition towards a sustainable future”, and chapter “Contribution to society”.
58
Considering the aforementioned focal points, and in order to further develop this strategic priority, four major goals are set,
which are materialized into different workstreams:
Objectives
Workstreams
01
To encourage sustainable business growth
Currently, this objective consist of
●
●
●
customers
●
Communications and marketing
●
02
To integrate sustainability risk in the processes
Currently, this objective consist of
2 workstreams:
●
●
03
To establish a unique sustainability agenda with
stakeholders
Currently, this objective consist of 3 workstreams:
●
●
●
04
To develop the necessary sustainability capabilities
Currently, this objective consist of
●
●
Helping our clients transition toward a sustainable future
Specifically, the solutions promoted by BBVA, including those developed by BBVA,S.A., focused on identifying opportunities
arising from climate change and developing sustainable products, as well as creating value propositions and offering advice
to individual and corporate customers that can be highlighted are:
Sustainable solutions for corporate and institutional customers as well as businesses
The issuance of green and social bonds is part of the climate change and sustainable development strategy of BBVA, with
which the Bank was to align its activities with the SDG and the Paris Agreement. In the
sustainable bond
issued in May 2020 the first COVID-19 social bond by a European financial institution for the amount of €1,000m and issued
the first AT1 green bond in the sector, also for the amount of €1,000m, in June 2020. For its part, the Bank published the
first
follow-up report
transport and water and waste management projects, which helped reduce its carbon footprint by nearly 724,006 tons of
CO
2
and generate 2,300 GW/hour of renewable electricity, and have contributed to manage sustainably more than 290,000
tons of waste and treat nearly 7 million m
3
Throughout 2020, BBVA has spearheaded 43
green, social and sustainable bond
States, Latin America and Europe, with a volume of more than €21,760m and a disintermediated volume of €4,180m. This
activity has solidified BBVA's position as the most active Spanish institution in the disintermediation of this type of asset for
the fifth consecutive year. The participation in the inaugural operations carried out in Europe in the automotive, energy and
telecommunications sectors stands out; and in the United States in the energy sector. During 2020, BBVA has actively
worked in the advice and placement of social COVID-19 bonds (whose funds are aimed at mitigating the negative effects of
the pandemic). Thus, BBVA has led to the disintermediation of the ICO social bond and the €52m health social bond of the
Community of Madrid. On the other hand, and also in Spain, BBVA has supported the €700m inaugural issuance of the
green bond of the Community of Madrid, which has been the first green bond issuance of a public administration in Spain.
Lastly, BBVA continues to support the development of the green bond market in other regions, such as Mexico or Argentina.
In Mexico it has led two sustainable issuances of the
Fondo Especial de Financiamientos Agropecuarios
Fund for Agricultural Financing): a green bond that it placed in June and a social gender bond that it placed in October,
which is a major milestone as it has been the first bond with a focus on gender equality to be issued in the country. BBVA
has also led the inaugural bond of a real estate investment trust issued in Mexico. The resources from this bond will be used
for financial inclusion and to provide access to financing for women in the agricultural sector. In Argentina, BBVA has led
the first green bond of an entity mainly dedicated to the distribution of materials for construction and the exploration and
production of oil and gas, amounting to USD 50m, which has been aimed at wind energy projects.
59
In the sphere of
sustainable corporate lending,
the Bank participated in 68 fundings linked to environmental and social
indicators (KPI-linked)
and linked to the customer's ESG
rating (ESG-linked), amounting €4,893m, including pioneering
operations in the pharmaceutical and steel sector. Furthermore, BBVA has been also a pioneer in closing the first sustainable
financing with the backing of the ICO. As such, BBVA has consolidated its position as the leading institution as a sustainable
coordinator/structuralist in syndicated and bilateral operations for the fourth consecutive year. Outside Spain, BBVA has
spearheaded several landmark operations, including the first sustainable financing in Colombia, and one of the main
syndicated loans in Germany and two in Italy. Avenues were also opened in Argentina through closing the first social
operation in the country. BBVA continues to work with its customers to develop new and demanding formats to link its long-
term commitment to sustainability and to the objectives set by the European taxonomy and the Paris Agreement respectively.
Furthermore, BBVA remained active in the
financing of sustainable projects
operations which has involved BBVA mobilizing more than €1,184m of sustainable financing in three main areas:
●
Financing of renewable projects
, in which BBVA has consolidated its position as one of the world's leading banks,
having closed a total operations, including the financing to one of the first offshore wind farms in the world, and that
shows the support of BBVA to new sustainable technologies, and the funding of the biggest wind energy
project contracted under a Power Purchase
Agreement (hereinafter PPA) in Spain.
●
Social projects
: BBVA has continued its activity in the health sector. It has also been particularly active in financing
telecommunications projects, given the key role they play from a societal perspective as facilitators in accessing
new technologies, digitalization
and their contribution to economic development. BBVA has participated as a
leading bank in the financing of 8 operations in this sector, focused on the field of health and the deployment of
optical fiber networks.
●
Sustainable infrastructure projects
, where BBVA is a pioneer both in operations related to sustainable transport
and in buildings that reduce the environmental impact.
Additionally, BBVA has mobilized €4,895m of
corporate financing to customers that take part in green classified
sectors
, in accordance with the Green Bond Principles (renewable energies, waste management, sustainable transport and
energetic efficiency), or in social sectors, in accordance with the Social Bond Principles (health, education, social assistance
and social housing).
Likewise, BBVA took part in 27 operations, which means a €762m mobilization in
fixed-purpose loans certified
accredited independent third party, where the purpose of the funding has positive environmental and social impacts.
Likewise, under its
sustainable transactional banking
Furthermore, new products (such as confirming lines and deposits) have been launched under this framework, which
includes a new approach to certifying products as linked to sustainability. The market for financial products linked to
sustainability is relatively new and it is growing rapidly, thereby allowing companies and sectors searching for ways to start
or expand their sustainable trajectory to gain access to sustainable financing. Products linked to sustainability are intended
to facilitate and support economic activity and growth in both environmental and social spheres. This new approach allows
BBVA to actively support its customers in the transformation toward more sustainable business models.
Sustainable solutions for retail customers
BBVA wants to support its retail
customers in adopting more sustainable habits that help them to reduce their emissions. It
wants to do so proactively, by investing in data-based tools and solutions that help customers to control their consumption
and emissions. To this end, it is working on making a wide range of products available to customers, both for investment
and financing, to help them in this transition, adapting to the situation in each of the regions in which it operates.
In
Spain
, following the expansion of the catalog of sustainable solutions available in 2019,
financing lines for businesses
are already being offered for purchasing hybrid and electric vehicles, installing renewable energies and improving energy
efficiency in buildings.
As such, a specific funding line was launched for SMEs for the renewal of their vehicle fleet with electric or hybrid plug-in
models. Furthermore, with regard to housing, a line of loans to property developers was launched, specifically aimed at
developments with high energy certifications, which includes the innovative possibility that retail customers who purchase
these homes will be able to benefit from an interest rate subsidy on their mortgage.
At the individual level, the aim is also to promote low emission mobility through granting loans for electric cars and providing
insurance relating to this type of vehicle.
Likewise, a green offering has been launched for mortgages for homes with energy rating A. On the investment side, BBVA
has a range of sustainable funds, such as the conservative multi-asset fund BBVA Futuro Sostenible ISR (BBVA SRI
Sustainable Future), BBVA Bonos sostenibles ISR (BBVA sustainable SRI Bonds) and the international equity fund BBVA
Bolsa Desarrollo Sostenible (BBVA Sustainable Development Fund). The Bank launched its first individual pension plan
managed with SRI criteria, the BBVA
Plan Sostenible Moderado
In other geographical areas, BBVA’s offering in
Turkey
includes green mortgages, marketed within the framework of an
agreement with the IFC, and lines of credit for electric and hybrid vehicles on the financing side. It also offers its customers
60
the possibility of investing in a pension plan formed by shares of listed companies "BIST
Sustainability Index" as a result of
their awareness of global warming and social inclusion.
In
Peru,
BBVA is also committed to increase its mortgage offering for homes with good energy ratings. It currently offers
"Mi
vivienda verde"
project that includes sustainability criteria in its design and construction. A line of sustainable financing for electric and hybrid
cars was launched in 2020.
In
Mexico
, advances in equipment leasing linked to sustainability are notable, whereby an agreement was also signed with
the IFC to promote this product in 2019. It also offers individuals products for financing low-emission cars and insurance for
such vehicles.
In 2020, BBVA Mexico has joined the C Solar program, an initiative coordinated by the Secretariat of Energy, with the aim
of fostering the energy transition of SMEs in the country through NAFIN-secured financing to generate photovoltaic solar
energy. Agreements have also been reached with the main distributors of solar panels to finance the installation of this type
of energy in private homes, and BBVA is participating in the Cofinavit mortgage program with the aim of granting mortgages
to homes that include energy efficiency improvements.
In the
United States
, financing lines for purchasing hybrid and electric vehicles are being offered to individuals and work is
underway to launch a green offering for homes with sustainable certifications before the end of the year.
Along the same lines a line of financing has been launched aimed at SMEs, the purpose of which is to improve energy
efficiency in buildings or the acquisition of properties with good energy ratings. In the last quarter of 2020, a line of financing
aimed at this segment for purchasing electric and hybrid vehicles has been launched.
In
Argentina
, in addition to offering consumer loans aimed at improving energy efficiency in homes, BBVA focused on
promoting electric mobility by offering different products for financing cars, bicycles and electric scooters.
Lastly,
Colombia
has provided a boost to sustainability by launching both a line of financing for electric and hybrid cars and
a certified sustainable home mortgage with differentiated rates and conditions in the last quarter of 2020. Insurance for this
type of car and home is also included in its product portfolio.
As far as the circular economy is concerned, BBVA is committed to ensure that all of its cards are made from recycled
material. The first of these has been launched in Spain, using 76% recycled plastic for the young-customer segment, while
work is underway to extend this to the rest of the cards in Spain and rest of areas geographical areas.
ESG Advisory
Furthermore, to complete the sustainable portfolio, the
customers in their transition toward a sustainable future. This involves data-driven assessments and guidance to assist
customers in undertaking commitments, each from a different starting point, to align with the Paris Agreement and make
progress in terms of the United Nations' 2030 Sustainable Agenda. BBVA offers value-added information on regulation, best
practices and the challenges and opportunities faced in their sectors on their journey toward sustainability. It also provides
an overview of the whole range of sustainable products and services that can be offered from CIB, both in terms of debt and
equity. Efforts are being focused on specific sectors such as
oil & gas, utilities, automotive
and infrastructure along with
cross-cutting issues such as energy efficiency.
Financial inclusion and entrepreneurship
BBVA believes that greater financial inclusion has a positive impact on the well-being and sustained economic growth of
countries. The fight against financial exclusion is therefore consistent with its ethical and social commitment, as well as with
its medium- and long-term business objectives. At the close of 2020, BBVA has mobilized €2,148m within the financial
inclusion and entrepreneurship sector.
Sustainable financing: mobilization metric
Banks play a crucial role in the fight against climate change and in achieving the SDGs, thanks to their unique ability to
mobilize capital through investment, loans, issuances and advisory services. The concept of mobilization is a more inclusive
approach than pure financing, in that it includes sustainable value propositions beyond traditional bank financing activity.
BBVA relies on the activities envisioned in the
Green Bond Principles and the Social
Bond Principles (voluntary guidelines
that set the emissions transparency requirements and promote integrity in the development of the green and social loans
market) and the Sustainability-Linked Bond Principles of the International
Capital Markets Association as a benchmark for
meeting its objectives under its 2025 Pledge, under which three types of sustainable financing are defined:
●
Green financing for transitioning toward a low-carbon economy:
o
Certified specific-purpose green loans: Loans where the financed activity or purpose have a positive
environmental impact and that have been certified by an accredited independent third party.
61
o
Loans linked to green indicators: Where the price of the loan is linked to the customer achieving an
improvement in certain predetermined environmental performance indicators.
o
Corporate financing for customers that undertake a
percentage
of their activities in green sectors
according to the Green
Bond Principles: renewable energy, waste and water management, clean
transportation, and energy efficiency.
o
Green financing of projects related to any of the aforementioned categories.
o
Brokered green bonds: Bonds issued by companies that use the proceeds to finance projects with a
positive environmental impact and in which the Bank acts as
book runner.
o
Green financing for retail customers related to any of the categories of the Green
Bond Principles:
renewable energy, waste and water management, clean transportation and energy efficiency.
o
Green insurance: Insurance policies for electric and hybrid vehicles.
●
Social infrastructure and sustainable agribusiness:
o
Certified specific-purpose social loans: Loans where the financed activity or purpose have a positive
environmental impact and that have been certified by an accredited independent third party.
o
Loans linked to social indicators: Where the price of the loan is linked to the customer achieving an
improvement in certain pre-established social performance indicators.
o
Corporate financing for customers who undertake a percentage of their activities in sectors classed as
social sectors according to the Social
Bond Principles: health, education, community support and social
housing.
o
Financing of infrastructure projects with a special social impact.
o
Brokered social bonds: Bonds issued by companies that use the proceeds to finance projects with a
positive social impact and in which the Bank acts as
book runner.
o
Social financing for retail customers whose activities fall within any of the categories set out in the Social
Bond
Principles: health, education, community support and social housing.
●
Financial inclusion and entrepreneurship:
Loans to low-income communities, vulnerable micro-entrepreneurs
and female entrepreneurs, in addition to financing for new digital models and impact investments.
●
Other sustainable mobilization:
o
Loans linked to the ESG rating: Loans where the price of the loan is linked to the customer's overall
sustainability performance, taking the
rating awarded by an independent sustainability analysis agency as
a reference point.
o
Loans linked to sustainable indicators, in which the price is linked to the customer achieving an
improvement in certain pre-established environmental and social performance indicators.
o
Loans where the price is linked both to the customer’s overall sustainability performance, taking the rating
awarded by an independent sustainability analysis agency as a reference point, and to the improvement
in certain pre-established environmental and social indicators.
o
Sustainable structured deposits, where the proceeds are used to maintain BBVA's sustainable portfolio of
bonds, shares and loans of companies that meet certain eligibility criteria (belonging to certain
sustainability indices or overall sustainability performance).
o
Brokered sustainable bonds: Bonds issued by companies that use the proceeds to finance projects with
a positive environmental and social impact and in which the Bank acts as
book runner.
o
Socially responsible investment captured through vehicles with these features and characteristics
marketed by BBVA.
Since the launch of
2025 Pledge
, whereby BBVA Group plans to mobilize €100,000m between 2018 and 2025 (with 70%
earmarked for green financing), the Group has effectively mobilized a total of €50,155m in sustainable activities up to 2020,
€20,306 of which correspond to 2020 mobilization
,
and
which include the activities performed by BBVA, S.A.
Environmental impacts and risk management
The financial sector and climate change
The fight against climate change
consequences to which all actors in our environment (governments, regulators, businesses, consumers and society in
general) must adapt.
Climate change and the transition toward a low-carbon economy have significant implications on the value chains of most
production sectors, and may require significant investments in many industries. However, technological progress in the fields
of energy efficiency, renewable energies, efficient mobility and the circular economy will continue to generate new
opportunities for all.
On the other hand, customers, markets and society as a whole not only expect large companies to create value, but to also
make a positive contribution to society. In particular, that the economic development to which they contribute with their
activity is inclusive.
62
BBVA is aware of the key role that banking plays in this transition toward a more sustainable world through its financial
activity, has adhered to the Principles for Responsible Banking promoted by the UN, the Katowice Commitment and the
Collective Commitment to Climate Action and is keen to play a central role, as demanded by society, and to help its
customers in their transition toward this sustainable future.
As a financial institution, BBVA has an
impact
resources and its relationship with stakeholders; and indirectly (and most importantly) through its credit activity and the
projects it finances.
There are two type of risks that impact the business:
●
Transition risk
: which are those risks pertaining to the transition to a low-carbon economy, and which arise from
changes in legislation, the market, consumers, etc., to mitigate and address the requirements of climate change.
●
Physical risk:
which arise from climate change and can originate from increased frequency and severity of extreme
weather events or long-term weather changes, and which may imply physical damage to companies’ assets,
disruptions in supply chains or increase in the expenses needed to face such risks.
Integrating climate change into risk planning
Climate-change related risks (transition and physical risks) are considered an additional factor impacting those risk
categories already identified and defined in the BBVA Group. These are managed through the risk management frameworks
of the Group (credit, market, liquidity and operational, and other non-financial risks).
As a result, the integration of climate-change related risks into the risk management framework of the BBVA Group is based
on their incorporation into the governance and processes currently in place, taking into account regulation and supervisory
trends.
3
Risk management in the BBVA Group is based on two large blocks described below: risk planning and day-to-day risk
management.
Risk Assessment
This section provides, firstly, a self-assessment of how the different climate-change related risk factors impact on the main
types of risk currently existing (credit, market, liquidity...), secondly, an analysis of the sectors that are most sensitive to this
risk (under the so-called “internal risk taxonomy”) and, finally, the methodology used to assess the climate vulnerability of
the different geographies where the BBVA Group operates. These last two aspects are integrated into the management
through processes such as admission frameworks or the establishment of risk limits.
As part of its General Risk Management and Control Model, the Group develops periodic risk identification and assessment
processes to, among other things, identify material risks that could have a negative impact on its risk profile and to manage
3
in May 2020. It explains how it expects credit institutions to safely and prudently manage climate-related and environmental risks and
disclose such risks transparently under the current prudential framework.
63
those risks actively and proactively. These processes cover all types of risks faced by the Group in its daily activity, including
those risks that are more difficult to quantify.
Through the Risk Assessment process, which is updated at least once a year, a
global assessment
by type of risk and
business area is carried out to identify both the strengths and main vulnerabilities of the BBVA Group, with a forward-looking
view. The matrix of events of the assessment carried out in 2020 is included below (see Chart 04). Risk Assessment
exercises are used to set the risk appetite. The events are ordered according to their severity, which is estimated on the
basis of the likelihood allocated to each event and their estimated impact on the BBVA Group. The 2020 Risk Assessment
has deepened the analysis, incorporating a first qualitative assessment of the climate change factor materiality for those
risks where it could be relevant.
The following risk events have been identified throughout the 2020 financial year:
The analysis carried out distinguishes between the impacts that physical and transition risks have at different time horizons
(short, medium and long term) on the main types of risks (financial and nonfinancial). The main risks are focused, first on
credit portfolios, especially the wholesale portfolio and, secondly, the retail mortgage and auto portfolios. The most relevant
risks, in a first phase, are transition risks, affecting fossil fuels from a triple point of view: regulation, technological change
and market factors. Market portfolios are hardly affected given the low volume in relative terms of the trading portfolio, its
daily management and the high diversification of the portfolios .In terms of liquidity risk, the high quality of the liquidity buffer
leads to an immaterial risk of a decline in the volume of liquid assets resulting from central bank restrictions on the eligibility
of certain securities due to environmental reasons; the risk of loss of value of available collateral as a result of potential
negative impacts on the market price of securities is also considered immaterial. The risk of physical climate events is
considered low in terms of outflows of client resources or instability of wholesale resources (companies).
Risk assessment
Tranisition risks
Physical risks
ST
MT
LT
ST
MT
LT
Wholesale credit
Retail credit
Liquidity and funding
Markets
Operational
Insurance
Note. Temporary horizons definition
ST:
MP:
LP:
Low risk
Moderate-low risk
Moderate-high risk
High risk
Not applicable
BBVA, within the scope of preparing and defining its industry frameworks governing the credit admission process, has
developed an
in order to classify industries according to their sensitivity to transition
risk. In addition, metrics are identified at the client level to assess their vulnerability and to integrate this aspect into risk and
client support decisions.
64
The estimation of the transition risk-sensitivity level is based on the qualitative analysis of the amount of exposure to
regulatory, technological and market changes caused by decarbonization that may have a financial impact on the companies
of the industry and on the estimation of the time horizon impact of these effects. Thus, industries are categorized according
to their level of sensitivity to transition risk: high, moderate or low sensitivity.
The industries identified as most sensitive to transition risk are energy or fossil fuel generation sectors (energy, utilities,
coal mining), emission-intensive basic industries (steel, cement) and activities that are final users of energy through their
products or services (vehicles manufacturers, air and sea transportation).
As a result of this exercise, with data at 31 December 2020, 17.1% of the exposure measured by EAD of the wholesale
portfolio (equivalent to 9.1% of the Group’s portfolio) has been identified as corresponding to sectors defined as “transition
risk sensitive”, with an intermediate, high or very high level of exposure to this risk. This calculation was made on a portfolio
of €223,620m (of the Group’s total EAD of €422,494m), corresponding to the EAD of the wholesale lending portfolio.
65
The percentage of exposure measured by EAD of the sectors sensitive to the transition risk of the wholesale portfolio are
as follows:
Internal development. It includes the percentage of exposure (exposure at default) of activities internally defined as “transition risk sensitive” over the EAD of the wholesale portfolio at
December 31, 2020 (Paraguay, Uruguay Venezuela and Chile not included). The “transition risk sensitive” portfolio includes activities that generate energy or fossil fuels (energy, utilities
- excluding renewable generation and water and waste treatment -, coal mining), basic industries with emission-intensive processes (steel, cement) and final activities users of the energy
through their products or services (vehicles manufacturers, air and sea transportation), with an intermediate, high or very high level of sensitivity to this risk.
In addition,
climate and environmental risk impact has been incorporated into country risk analysis
an additional input for establishing risk policies affecting exposures to private or sovereign administrations of all the countries
with which the bank has some type of risk (+100 countries) .
To this end, a Climate Vulnerability Index (hereinafter, the CVI) has been created for more than 190 countries, which
captures the physical risk and, to a lesser extent, the transition risk of each country, based on international indicators (e.g.,
Global Adaptation Index of the University of Notre Dame, ND-GAIN, and the Energy Transition Index, ETI, produced by the
World Economic Forum). Subsidiarily, vulnerability indices issued by other international organizations and by the three rating
agencies are also taken into account.
The methodology establishes 5 climate vulnerability levels, which are a comparative classification, as all countries have a
certain level of vulnerability given the global nature of this phenomenon. The CVI has been integrated into risk management
by including a specific section in country risk reports, so it is a factor that is taken into account when establishing risk limits
(particularly in the most vulnerable countries). It is also taken into account in setting country ratings and outlooks.
In 2020 a methodology has also been launched to determine climate vulnerability at the sub-national level (regions,
provinces, cities). To this end, indicators developed by internationally renowned institutions such as the Andean
Development Corporation (CAF), the EU or BBVA Research.
Work has also been done to incorporate transition risk to a
greater extent in the CVI.
Risk appetite Framework (RAF)
The
Risk Appetite Framework
levels that BBVA is willing to assume to achieve its targets, considering the business’ organic evolution. The Framework
has a general statement that sets out the general principles of the risk strategy and the target risk profile. The current
statement includes the commitment to sustainable development as one of the elements defining BBVA’s business model.
This statement is complemented and detailed with an appetite quantification through metrics and thresholds that provide
clear and concise guidance on the defined maximum risk profile. For the climate change risk, a new category has been
included in 2021, called “High Transition Risk”, which measures the EAD in relation to capital of activities internally defined
as “transition risk sensitive” with a “high” or “very high” intensity, in accordance with BBVA’s taxonomy. With respect to this
metric, the Board of Directors has approved thresholds at a Group and business area level, which set the maximum appetite
to climate change risk.
66
Scenario analysis
Scenario analysis
enables the assessment of the risk factors’ impact on the metrics defined in the Risk Appetite Framework.
In this regard, and within climate change and environmental risk management, alternative scenarios are being defined,
based on those laid out by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). The
objective is to try to capture the uncertainty around the different types of transition (ordered, disordered) towards a low
carbon economy and/or the effects derived from the physical risk of potential climate events in certain geographies. BBVA
uses the Sustainable Development Scenario (SDS) and the Stated Policies Scenario (SPS) of the International Energy
Agency, to analyze how regulatory, technological or demand changes in those sectors particularly sensitive to transition
risk, may affect the Bank’s portfolio. This analysis allows BBVA to include in the industry frameworks information on the
possible behavior of the sector, and to determine which clients may be better prepared in environmental terms to face the
coming years.
Integrating climate change into risk decision-making
Once climate risk is incorporated into the Risk Appetite Framework and the business strategy, it also must be included in
the day-to-day risk management, which is a part of the risk decision making that supports the Bank’s clients.
For that purpose, the integration of this risk into existing management frameworks and processes is required, including the
adaptation of policies, procedures, tools, risk limits and risk controls in a consistent manner. In a first phase, adaptation is
focused on the integration of this risk in the industry frameworks, a basic tool in the definition of our risk appetite in wholesale
credit portfolios, and in the Mortgage and Auto Operating Frameworks in retail credit.
Wholesale banking
The need to decarbonize the economy, as a consequence of climate change, requires a reallocation of resources between
more emission intensive activities and those less affected. This dynamic between sectors can be further accelerated in those
industries where transition risk brings the time horizon impact closer, or where regulatory measures or technological
developments set the implementation schedule.
In wholesale banking, the prevailing analysis dimension is the sectoral, detailing sub-sectors or specific activities, combined
with the geographic consideration, especially in regulated sectors.
The combination of these two factors results in the i
ntegration of climate factors into credit risk management processes
through the wholesale credit industry frameworks
In 2020, sustainability factors have been incorporated as one of the dimensions of the analysis in the Operating Frameworks
of Vehicles, Energy, Utilities, Steel and Cement. All these sectors are included in the taxonomy as transition risk-sensitive.
In these frameworks, the impact of decarbonization on the sectors is analyzed based on long-term scenarios aligned with
the objectives of the Paris Agreement. To this end, the sectoral impact of factors such as energy demand, investment or
technological transformation (change of the generation mix in Energy / Utilities, or electrification in the case of vehicles) is
analyzed. The industry frameworks take into account the transition strategies developed by the Bank’s main client in each
sector. Based on the analysis, individual risk policies have been reviewed with some of the main groups of these industries.
The following chart shows an anonymized example of sustainability strategies analysis of the main clients in BBVA’s auto
manufacturer portfolio.
Automotive industry framework: sustainability strategies analysis of companies in the sector
Client 1
Client 2
Client 3
Client 4
Client 5
Client 6
Client 7
Client 8
Client 9
Client 10
Client 11
Client 12
Client 13
EU emissions
compliance risk
Current proportion of
AFV production
Medium-term
proportion of AFV
production
R&D efforts
Strategy in batteries
and autonomous
driving
Sustainability/
transformation
Legend: Lighter green represents a better assessment of each sustainability factor
Together with the integration into the Industry Frameworks, the systematic integration of sustainability factors into the client
analysis processes for credit origination purposes has begun in 2020, thus allowing their incorporation in credit decision
making.
Retail banking
67
Climate change risk affects retail portfolios through two dimensions. Firstly, for its role as a financing facilitator to address
the investments required for climate change mitigation and adaptation, generating business opportunities in the financial
sector. Second, through the financial risks that climate change and its mitigation pose to their balance sheet.
In retail banking the predominant focus of analysis is the type of risk and the affected portfolio, together with the geographical
dimension.
●
Transition risk:
auto portfolio
2
due to the CO
2
emissions of real estate/households that are pledged as collateral, and the SME portfolio depending
on the concentration in activities more exposed to CO
2
emissions.
●
The key to treating, measuring and managing
physical risk
location of the properties
. The location of the
collateral in areas with the greatest environmental impact related to natural disasters such as hurricanes or floods
among many, make up the block known as “location matters”.
Transition risk treatment in the retail portfolio
Within the financing activity, the main target is to i
dentify and support customers who contribute to the decarbonization
process.
2
emissions are vehicles
and mortgages, which account for more than 59% of the total retail portfolio, which in terms of exposure corresponds to
around €118,529m according to data as of 31 December 2020.
As in the wholesale area, in the case of retail, risk appetite is developed through the annual development of Operating
Frameworks, which explain and integrate the risk criteria under which the retail portfolios must be originated and managed
in the BBVA Group. In 2020, climate change and environmental risk has been incorporated into the Operating Frameworks
for the vehicles and mortgage portfolios.
●
Vehicles portfolio:
Incorporating the “fuel type” indicator as an analysis dimension allows a monthly monitoring of
the origination, in the Group’s main vehicles portfolios.
●
Mortgages portfolio:
In this portfolio, a detailed analysis with regard to the energy efficiency of housing financed
by BBVA is being carried out, with a focus on Spain in 2020, due to its relevance.
The main purpose of the analysis is to verify the existing relationship between the energy efficiency of housing
(buildings) financed by BBVA, and the clients’ behavior in terms of default (PD/probability of default). Thus, the aim
is to identify whether, ceteris paribus, housing with greater energy efficiency has a lower probability of default than
housing with less energy efficiency.
In addition, the analysis includes a study of the relationship between the collateral value and the coverage variation
in relation to the energy efficiency of housing, and consequently, how this affects the LGD (loss given default) /
Severity of the mortgage loan. In addition, BBVA actively participates in the working group of the Energy Efficiency
Financial Institution Group (EEFIG). This group consists of more than 40 institutions at a European level and one
of its targets is to deepen risk assessment through the quantitative relationship between the energy efficiency
ratings of properties and the associated probability of default and the valuation of the underlying assets. All this
with the aim of issuing the relevant recommendations at European level that guarantee homogeneity in the analysis
between participating countries and the former institutions.
to support green products. A commercial plan has been defined for the creation of green products for the main geographies
and segments of both individual customers and SMEs, with the defined operational and advertising channels.
Physical risk treatment in the retail portfolio
Regarding physical risk, the risks derived from the location of properties in the zones of hurricanes, floods or eruptions is
one of the risks that must be assessed and incorporated in credit processes, in particular during collateral valuation in
transactions with collaterals.
The Bank’s portfolio with the greatest exposure to this type of risk is the mortgage portfolio, which accounts for 53% of the
total retail portfolio, Throughout 2021, work will be done to identify the location of the buildings financed by BBVA, in order
to create a heat map, identifying the areas most exposed to adverse weather events (e.g. houses on coasts impacted by
flooding). The analysis of the need to adjust the collateral value, and therefore the severity of the mortgage loans, in such
areas, will allow us to give an adequate and prudent treatment in terms of credit risk management.
PACTA Methodology used to evaluate loan portfolios and their alignment with the Paris
Agreement
As part of the climate change strategy, BBVA has committed to aligning its loan portfolio with scenarios compatible
with the global warming objectives established in the Paris Agreement.
with other European banks, of the Katowice commitment. In conjunction with these banks, and with the support of the think
tank 2 Degree Investing Initiative (2DII), a methodology called PACTA (Paris Agreement Capital Transition Assessment)
has been adapted to the banking sector.
68
The methodology focuses on the most polluting sectors and, within them, on the phase of the production chain whose
reduction may have the greatest impact on the global reduction of emissions. The sectors under analysis are oil and gas,
coal mining, electricity generation, automobiles, maritime transport, cement and iron and steel.
The methodology analyzes the assets of the different clients and the characteristics of these assets in terms of their climatic
performance. Through a process of aggregation of these assets by companies, the methodology is able to link these assets
with financial products and establish a relationship between the financial instrument and the degree of alignment in a climate
change scenario.
Indirect environmental and social impacts management
BBVA addresses environmental and social risks from the perspective of impact prevention and mitigation. To do this, it uses
tools such as the Environmental and Social Framework or the Equator Principles that have an environmental and social
focus, and which are described below. Managing the impacts that customers generate on the environment is part of the
2025 Pledge. To manage them, BBVA has implemented a series of initiatives and tools.
Environmental and Social Framework
In 2020, the
Environmental and Social Framework
for the due diligence in the field of mining, agribusiness, energy,
infrastructure and defense
in 2018) and the Rules of Conduct in Defense (in force since 2012).
In line with the previous regulation, this Framework provides a decision-making guideline with regard to transactions and
customers that operate in these five sectors (mining, agribusiness, energy, infrastructure and defense); as they are
considered to have a bigger social and environmental impact.
In order to ensure the effective implementation of this Framework, BBVA receives advice from an independent external
expert. This Framework is public and available for consultation in the shareholders and investors web of BBVA. With the aid
of this independent external advice, BBVA carries out a reinforced due diligence to its customers and transactions, in order
to mitigate the risks associated with these sectors and contribute to the compliance with the General Sustainability and
Social Corporate Responsibility Policies.
For the Framework review, new market trends in this area, the expectations of stakeholders and the strengthening of the
implementation procedures have been taken into account.
One of the more important changes within the 2020 review is the restriction to the applying of exceptions in the field of
mining and energy for countries with high energetic dependence only to already existing or under construction projects and
customers.
Additionally, the reduction from 35% to 25% of the threshold applied to the exclusion of customers with high coal exposure,
which applies both to the extractive activity and the energy generation.
Likewise, the prohibition concerning tar sands has been extended to any activity using this kind of fuel which does not have
a diversification strategy and where this activity represents more than 10% of total production.
Finally, new prohibited
activities have been added in projects such as deep sea mining, Artic oil and gas transportation (which complements the
existing one on Artic oil and gas exploration and production), as well as large dams that are not built under the World
Commission on Dams (WDC).
Equator Principles
Energy, transport and social service infrastructures, which drive economic development and create jobs, can have an impact
on the environment and society. BBVA’s commitment is to manage the financing of these projects to reduce and avoid
negative impacts and enhance their economic, social and environmental value.
All decisions to finance projects are based on the criterion of principle-based profitability. This implies meeting stakeholder
expectations and the social demand for adaptation to climate change and respect for human rights.
In line with this commitment, since 2004 BBVA has adhered to the Equator Principles (EP), which include a series of
standards for managing environmental and social risk in project financing. The EPs were developed on the basis of the
International Finance Corporation’s (IFC) Policy and Performance Standards on Social and Environmental Sustainability
and the World Bank’s General Guidelines on Environment, Health and Safety. These principles have set the benchmark for
responsible finance.
The analysis of the projects consists of subjecting each operation to an environmental and social due diligence process.
The first step is the allocation of a category (A, B or C), which reflects the project’s level of risk. Reviewing the documentation
provided by the customer and independent advisers is a way to assess compliance with the requirements established in the
EPs, according to the project category. Financing agreements include the customer’s environmental and social obligations.
The application of the EPs at BBVA is integrated into the internal processes for structuring, acceptance and monitoring of
operations, and is subject to regular checks by the Internal Audit area.
69
BBVA has strengthened due diligence procedures associated with financing projects whose development affects indigenous
communities. Where this is the case, free, prior and informed consent is required from these communities, regardless of the
geographic location of the project.
In 2020 the fourth version of the Principles has come into force. This update, after an extensive public consultation period,
incorporates new and more demanding requirements in the review of projects in relation to human rights and climate change.
BBVA has actively participated in the updating process and its contribution in recent years has been recognized with a new
mandate in the Steering Committee of the Association of the Principles of Ecuador.
Management of direct environmental impacts
BBVA has a clear commitment to both society and the environment. In 2020, this commitment has been bolstered through
the creation of the GSO and its various workstreams. One of these is the Direct Impact Workstream, which is transversal
across all geographies and focuses on reducing the direct environmental impacts of BBVA's activity.
Global Eco-Efficiency Plan
The "Global Eco-efficiency Plan" is included in the line of work to reduce direct impacts. The first plan was launched during
the 2008–2012 period, and the plan for the 2016–2020 period was completed in 2020.
The
Global Eco-Efficiency Plan
are framed within BBVA's climate change strategy, "2025 Pledge," which on the one hand includes a 68% reduction in
Scope 1 and 2 CO
2
reaching 100% in 2030. In line with the latter objective, BBVA has been a member since 2018 of the RE100 initiative, through
which the world’s most influential companies undertake to make their energy 100% renewable by 2050.
To ensure continuation, the objectives and targets for the next Global Eco-Efficiency Plan 2021-2025 have already been
set. The new Global Eco-Efficiency Plan will address the objective already set out in the 2025 Pledge and will also include
other new objectives aimed at reducing and neutralizing the environmental footprint. As in previous plans, regular monitoring
will be carried out to ensure proper performance across its entire scope.
In addition to the objectives of "2025 Pledge," at the UN Conference on Climate Change (Conference of Parties, COP25)
held in Madrid in 2019, BBVA announced the incorporation of a domestic price for CO
2
with the goal of
becoming carbon neutral
environmental impacts it is unable to reduce.
70
VECTOR
STRATEGIC GUIDELINES
GLOBAL TARGET
ENVIRONMENTAL MANAGEMENT AND SUSTAINABLE
CONSTRUCTION
% occupants in certified buildings
49%
ENERGY AND CLIMATE CHANGE
Consumption per occupant (kWh/occup)
-6%
% of energy from renewable sources
100%
C0
2
eq emissions per occupant
(tCO
2
eq/occp)
-6%
WATER
Consumption per occupant (m
3
/occup)
0%
% occupants in buildings with alternative
water sources
18%
PAPER AND WASTE
Paper consumption per occupant (kg/occup)
0%
% occupants in buildings with separate
waste collection
49%
EXTENSION OF THE COMMITMENT
Awareness campaigns for employees and
suppliers
The lines of actions of the Global Eco-efficiency Plan are:
1.
BBVA has implemented an Environmental Management System in some of its buildings based on the ISO
14.001:2015 Standard, which is certified every year by an independent entity. This certification is used to control
and evaluate environmental performance in the operations of some of its buildings. 18 buildings have this
certification in Spain.
Furthermore, 3 buildings also have an Energy Management System that has been certified by an independent third
party and complies with the ISO 50.001:2018 standard.
For its part, 5 buildings of the Bank have been awarded the prestigious LEED certification for sustainable
construction, including the Bank's main headquarters in Spain.
2.
As part of BBVA's pledge to reduce its environmental footprint, the reduction of its energy consumption, and
therefore associated impacts, has been set as a priority. To this end, it is essential that emissions are properly
monitored, so that the reduction target set for 2025 can be met.
BBVA's total emissions consist of:
●
Scope 1 greenhouse gas emissions, including direct emissions from stationary combustion plants installed
in buildings and branches under the operational control of BBVA;
●
Scope 2 greenhouse gas emissions, including indirect emissions related to electricity production,
purchased and consumed by buildings and branches under BBVA's operational control;
●
Scope 3 greenhouse gas emissions, including indirect emissions not covered under Scope 2. At BBVA,
this scope covers emissions from business travel.
Both Scope 1 and 2 emissions and Scope 3 emissions are calculated according to the GHG Protocol standard
established by the World Resources Institute (WRI)
and the World Business Council for
Sustainable Development
(WBCSD).
Levers for footprint reduction
●
Implementing
energy saving measures
consumption is controlled by establishing baselines.
●
Promoting
renewable energy
certificates (RECs, iRECs, GdO). As such, 100% of the energy consumed in Spain and Portugal is of
renewable origin. Furthermore,
71
●
BBVA is also committed to
self-generate
photovoltaic and solar thermal panels.
●
Offsetting residual carbon emissions that have not been reduced by the above. In order to achieve the
goal to become a Carbon Neutral company in 2020, BBVA is finalizing all the necessary formalities to
offset
the remaining footprint which it was unable to reduce during the financial year, through purchasing
carbon credits of various projects within the Voluntary Carbon Market. All these projects will be certified
under the Verified Carbon Standard (VCS) of Verra and the Gold
Standard.
3.
Water, which is one of the resources that has a major impact, is another priority indicator for BBVA. In order to
reduce this impact, the headquarters and other buildings in Spain are equipped with gray water recycling systems
and rainwater recirculation for irrigation.
4.
Waste generation is becoming a major global problem. BBVA has spent many years working to reduce this impact
as much as possible through sustainable construction standards or through implementing ISO 14001-certified
Environmental Management Systems. In order to ensure the proper separation and subsequent recycling of waste,
facilities feature clearly differentiated and signposted areas in order to minimize the amount of waste that ends up
in landfills.
5.
One of the ways in which BBVA can instill its concern about its environmental impact is by raising awareness
among employees and providing training to them.
for
sustainability training, (“The Camp”), which will enable employees to become specialized to various different levels
in this area, one of which is related to direct impacts.
Some of these training itineraries are already mandatory
throughout the Bank in order to ensure that employees at least have a basic knowledge so that they can apply it in
their day-to-day work.
Likewise, as in previous years, BBVA joined the "Earth Hour" initiative in 2020, during which we turned off the lights
in 34 buildings in 22 cities in Spain and Portugal, to support the fight against climate change
.
MAIN INDICATORS OF THE GLOBAL ECO-EFFICIENCY PLAN (BBVA SPAIN)
2020
(3)
2019
(4)
2020
Goal (%)
KPI (%)
Reference
value
KPI
(%)
Reference
value
People working in the certified buildings (%)
(1)
49
52
52
Electricity usage per person (MWh)
-6
-28
5.04
MWh/ocup
-20
5.54
MWh/ocup
Energy coming from renewable sources (%)
100
100
100
Co2 emissions per person (T)
(2)
-6
-82
0.12
TCO
2
/ocup
-13
0.6
TCO
2
/ocup
Water consumption per person (m
3
)
0
-52
5.67
m
3
/ocup
-31
8.19
m
3
/ocup
People working in buildings with alternative sources of water supply (%)
18
22
23
Paper consumption per person (T)
0
-46
0.04
T/ocup
-15
0.06
T/ocup
People working in buildings with separate waste collection certificate (%)
49
51
52
Note: These indicators are calculated on the basis of employees and external staff. Base year; 2015.
(1)
(2)
It includes scope 1, scope 2 market-based and scope 3 business trips. The business trips thresholds for the calculation of the footprint have been modified in 2020 in order to adapt
them to DEFRA indications.
(3)
(4)
Environmental performance in 2020
The year 2020 has been an exceptional year in terms of direct impacts management, BBVA has taken all the necessary
measures so that, since the beginning of the crisis resulting from the COVID-19 both its buildings and branches have been
safe places that protect the health and safety of its employees and customers, all while ensuring business continuity.
72
Among the measures adopted in the field of direct impact management, and in line with the recommendations of the World
Health Organization (WHO) and the corresponding health authorities of each country, the implementation of a hybrid remote
work model that enforced the maximum distances and capacity permitted was particularly notable.
These measures have had a positive impact on BBVA's environmental footprint:
●
Reduction of employees commuting to their workplace;
●
Reduction of business travels not only due to restrictions but also due to a change in employees' habits with the
increased use of corporate video conferencing platforms;
●
Reduction of waste generation at facilities; and
●
Reductions in all consumption as a result of concentrated use of space and efficient capacity.
Regardless of the impact that the COVID-19 crisis may have on environmental indicators, the Bank’s environmental footprint
shows very positive data compared to the previous year, with reductions of 82% in CO2 emissions (according to the market-
based method), 28% in electricity consumption, 52% in water consumption, and 46% in paper (all per person). The
percentage of renewable energy consumption has reached 100%, which far exceeds BBVA's target for this year, and the
percentage of people working in buildings with environmental certification reached 52%. All of the above means that 2020
will close the current Global Eco-Efficiency Plan having achieved its objectives in all indicators.
ENVIRONMENTAL FOOTPRINT (BBVA, S.A.)
2020
(7)
2019
(8)
Consumption
Public water supply (cubic meters)
202,652
309,854
Paper (tons)
1,402
2,342
Energy (Megawatt hour)
(1)
191,589
224,902
CO2 emissions
Scope 1 emissions (tons CO
2
e)
(2)
2,188
2,905
Scope 2 emissions (tons CO
2
e) market-based method
(3)
-
-
Scope 2 emissions (tons CO2e) location-based method
(4)
46,945
60,894
Scope 3 emissions (tons CO2e)
(5)
2,270
26,950
Business trips
(5)
2,270
19,650
Employees commuting
(6)
-
7,300
Waste
Hazardous waste (tons)
7
135
Non-hazardous waste (tons)
915
782
(1)
It includes the consumption of electricity and fossil fuels (diesel oil, natural gas and LP gas), except fuels consumed in fleets.
(2)
Fifth Assessment Report and the IEA were used as sources to convert these to CO2e.
(3)
IEA.
(4)
(5)
employees to the workplace have been modified in order to adapt them to DEFRA indications.
(6) Emissions from employees commuting have not been calculated in 2020 as more than 3/4 of the year the employees have been working remotely.
(7)
(8)
These data have been updated with respect to those reported in previous reports due to post-2019 adjustments.
Given the business activities in which the BBVA engages, the Bank has no environmental liabilities, expenses, assets,
provisions or contingencies that are significant in relation to its equity, financial position and earnings. As such, as of
December 31, 2020, the accompanying consolidated Annual Accounts do not include any item that warrants inclusion in the
environmental information document provided for in Order JUS/318/2018, of March 21, approving a new template for filing
the consolidated annual accounts at the Companies Register for those entities obligated to disclose such information.
73
Engagement with global initiatives
Beyond its key role in the drive toward sustainable financing, BBVA promotes a new way of making banking more
responsible. As part of the 2025 Pledge, BBVA has actively participated in numerous initiatives and always in close
collaboration with all stakeholders such as the industry itself, regulators and supervisors, investors and civil society
organizations. These initiatives focus on the following five priority areas:
1.
Universal reference frameworks
: BBVA was one of 28 founding banks in the Principles for Responsible Banking
promoted by the United Nations Environment Programme Finance Initiative, UNEP FI. This is the reference
framework for corporate responsibility in the banking sector, which has already been signed by more than 190
entities worldwide, which is approximately 40% (by asset volume) of the banking system. BBVA also participates
in global initiatives such as the United Nations Global Compact, Principles for Responsible Investment, and the
Thun
Group, which describes how the "United Nations Guiding Principles on Business and Human Rights"
("UNGPs") should be applied in the banking sector.
2.
Alignment with the Paris Agreement
: BBVA signed the Katowice commitment in 2018 together with other major
international banks in order to develop a methodology to help align lending activity with the Paris Agreement. This
commitment has inspired the Collective Commitment to Climate Action launched by 31 international financial
institutions, including BBVA, under the UNEP FI Principles for Responsible Banking at the United Nations climate
summit in New York in September 2019. BBVA has also joined the
Science Based Target Initiative and
participates in the
Alliance CEO Climate Leaders of the World Economic Forum (WEF) as well as in other
initiatives focused on environmental issues or the fight against climate change, such as the
Carbon Disclosure
Project (CDP) and RE100.
3.
Market standards
: BBVA has been very active in promoting the
Green Bond Principles, Social
Bonds Principles,
Green Loan Principles
and other similar standards developed by the industry itself and which have allowed the
creation of an orderly and growing market for sustainable financial instruments.
4.
Transparency
: in September 2017, BBVA committed to the TCFD recommendations of the FSB and has been
reporting on its objectives, plans and performance in line with its utmost commitment to transparency. BBVA
published its first TCFD report in November 2020.
5.
Financial regulation
: BBVA has been involved in consultation processes and various activities with regulatory
and supervisory bodies to promote sustainable finance regulation. The Group's participation in the UNEP FI and
European Banking Federation working group for defining recommendations so that banks may use the new
taxonomy being developed in Europe is also notable.
BBVA co-chairs the UNEP FI management committee and represents European banks in this forum. BBVA also holds the
presidency of the working group of sustainable finance at the European Banking Federation and is a member of the Equator
Principles management committee.
For years, BBVA has been actively involved in various supranational initiatives and seeks to continue leading the
international agenda in tackling climate change. Among others, BBVA has signed its commitment to the following initiatives:
74
Likewise, in 2020 BBVA has joined and supported the following collective initiatives and declarations:
1.
COP26 Returns/TCFD Implied Temperature Rise Project
,
the task force created by TCFD to assess the benefits
and challenges of disclosing information on the “implied temperature rise” (ITR) of investment portfolios and its
alignment with the Paris Agreement objective.
2.
Task Force on Scaling Voluntary Carbon Markets
,
the private sector-led initiative working to scale up a voluntary
carbon market that is effective, efficient and functional in helping to meet the objectives of the Paris Climate
Agreement. The more than 50 participants in the Working Group represent the financial sector, market service
providers, and buyers and providers of carbon offsets.
3.
The Great Reset,
promoted by the World Economic Forum (WEF) in which the pandemic is visualized as an
exceptional but narrow window of opportunity to reflect, reimagine and reset the world.
4.
Letter to promote renewable energy in European recovery
, promoted by the Corporate European Platform for
Renewable Energy Sourcing (Re-Source),
and
signed by 43 of the 12 largest banks in the world, with BBVA being
the only Spanish bank to join.
5.
Next
Generation EU,
immense challenge arising from the context created by COVID-19 into an opportunity, not only by supporting
recovery but also by investing in the future. The European Green Deal and digitization will boost jobs and growth,
societal resilience and environmental health.
6.
Manifest for sustainable economic recovery in Spain,
promoted by the Spanish Green Growth Group (
Grupo
Español para el Crecimiento Verde,
GECV,) to support recovery toward a more sustainable and robust economy
and demand that alliances be established between political parties, businesses, trade unions, media, NGOs and
civil society to support and implement a sustainable stimulus package, based on the best scientific knowledge and
best practices.
7.
GECV statement to face the crisis of the COVID-19 pandemic,
promoted by the GECV and in which it is stated
that "The economic stimuli launched to combat the coronavirus crisis must be embedded within and align with
actions to address the pressing challenges of climate action and sustainability."
8.
European manifesto: "Green Recovery Alliance. Reboot and re-boost our economies for a sustainable
future,"
led by the President of the European Parliament's committee on the Environment. The alliance has 270
members, including MEPs from 17 EU countries, European ministers, NGOs and business and trade union
associations. Furthermore, 50 presidents or CEOs of large European multinationals have signed this declaration,
as has the Spanish Banking Association.
In addition to these new 2020 initiatives, BBVA has been supporting collective initiatives and declarations for more than 20
years:
75
Progress in the first year since the signing of the Principles for Responsible Banking
BBVA was one of the 28 founding banks around the world that, since April 2018, worked on the development of the Principles
for Responsible Banking. In 2019, these principles were officially signed, and BBVA subscribed to these principles together
with 131 other global financial institutions. This initiative, which is coordinated by UNEP FI (the United Nations Environment
Programme Finance Initiative), aims to respond to the growing demand from different stakeholders for a comprehensive
framework that covers all aspects of sustainable banking. More than 190 banks are currently adhering to these Principles.
BBVA therefore believes that these Principles will help reaffirm its purpose, enhance its contribution to both the United
Nations SDGs and the commitments derived from the Paris Climate Agreements, and align its business strategy with said
commitments. In 2020, BBVA has reported its progress and achievements in each of the 6 principles to UNEP FI; this is the
first year we have implemented the Principles for Responsible Banking. For more information on the progress and
developments reported, see the chapter named "UNEP FI Principles for Responsible Banking Reporting Index" in this report.
Progress in the second year since the signing of the Katowice Commitment
Together with other financial institutions, since 2018, BBVA has adhered to the Katowice Commitment, an initiative that aims
to develop an impact assessment methodology to adapt the loan portfolio to the commitments of the Paris Agreement.
In an open letter addressed to world leaders and heads of state gathered at the 24th UN Climate Change Conference
(COP24) in Katowice, Poland, these banks committed to finance and design the financial services needed to support
customers as they transition toward a low-carbon economy.
In September 2020, BBVA, together with other financial institutions, published a joint methodology to align its credit portfolios
with the objectives of the Paris Agreement on climate change. The group, known as the "Katowice banks," has presented
this report, which offers a solid and precise methodology to reconfigure their portfolios in order to finance a society with
fewer carbon emissions.
One of the characteristics of the methodology is that it involves creating specific indicators for each sector. Each bank has
committed to setting its own targets for these indicators and monitoring them. BBVA will use the following metrics to measure
the alignment in the more sensible sectors within the Katowice group framework.
76
Progress in the first year since the signing of Collective Commitment to Climate Action
Within the Principles for Responsible Banking,
signed at the United Nation General Assembly in New York on
September 22, 2019
, this initiative was born with the aim of aligning the member institutions' portfolios "to reflect and finance
the low-carbon economy necessary to limit global warming to below 2 degrees, striving to limit it to 1.5 degrees."
To this end, BBVA and 38 international banks, taking the Katowice Commitment as a starting point, share objectives to
"facilitate the economic transition necessary to achieve climate neutrality." They also commit to work together and support
each other "to develop the capabilities of each bank and the methodologies required to measure climate impact and
alignment with local and global climate objectives."
In order to accelerate the transition toward sustainable technologies, business models, and societies, the Collective
Commitment to Climate Action requested that the entities that signed this declaration publish and implement, within twelve
months, the set of measures that they will use together with their customers to support and accelerate the transition to low-
carbon technologies. A maximum period of three years has also been given to set and publish specific objectives, based on
scenarios for portfolio alignment.
Along these lines, BBVA reported the measures implemented to support customers and accelerate the transition toward
low-carbon technologies to UNEP FI in 2020:
●
Exclusion policies:
"Management of Indirect Environmental Impacts" section of this chapter.
●
Strategy for growing the customer base in selected sectors:
under the 2025 Pledge" table in the "Sustainable financing: mobilization metrics" section in this chapter.
●
Objectives and portfolio alignment:
sensitive" sectors
and the joint methodology of the Katowice banks.
Consultation processes
BBVA plays an active role in collaborating with the various regulatory bodies, supervisors and international organizations by
participating in initiatives, forums, consultation processes, etc., focused on transitioning toward a low-carbon economy.
Sustainability indices
Sustainability
ratings measure companies' ESG performance and determine their position in sustainability indices. As such,
the permanence and position in these stock indices depend on companies' ability to demonstrate steady progress on
sustainability issues, and also influence the eligibility of said companies in investment portfolios.
BBVA participates annually in the main sustainability analyses conducted by
non-financial rating agencies. Based on the
evaluations obtained through these analyses, companies are chosen to be part of the sustainability indices. Some of the
most popular indices are the Dow
Jones Sustainability Index (DJSI), FTSE4Good or MSCI ESG.
Sustainability analyses measure companies' performance in environmental, social and corporate governance matters,
based on the different methodologies developed by these agencies.
In 2020, BBVA
was ranked first among European banks in the DJSI
, which measures the performance of the largest
companies by market capitalization in economic, environmental and social matters. Globally, the Group ranked second,
achieving the highest score (100 points) in the areas of financial inclusion, environmental reporting, social reporting,
corporate citizenship and philanthropy, occupational health and safety, tax strategy and policy influence. BBVA therefore
achieved an overall score of 87 points, 5 points more than in 2019.
BBVA has been included, for the fourth consecutive year in the
Bloomberg Gender Equality Index
, improving its score
from 72.32% to 77.29%, which means the recognition of its commitment to create confident work environments, where all
employees' professional development and equal opportunities are granted, regardless of their gender.
BBVA is a member of the following sustainability indices
4
:
4
sponsorship or promotion of BBVA by MSCI or any of its subsidiaries. The MSCI indices are the exclusive property of MSCI. MSCI and
the MSCI indices and logos are trademarks or service marks of MSCI or its subsidiaries.
77
DJSI World (2
nd
member(1st of Europe banking)
MSCI ESG Leaders Indexes member. (Rating
AAA)
FTSE4Good Index Series
member
(Score 4.4/5)
Euronext Vigeo Eurozone 120
and Europe 120 indixes
member
Ethibel Sustainability Excellence
Europe and Ethibel
Sustainability Excellence Global
indexes member
Bloomberg Gender-
Equality member (Score
77.29/100)
Score A-
In addition
, the Bank has joined the
Nasdaq
Sustainable Bond Network
. It is the only Spanish entity on this platform,
which brings together the world's various issuers of sustainable debt and provides a clear reference framework for socially
responsible investment.
Responsible banking
Thus, BBVA is committed to responsible banking and the creation of long-term value for all stakeholders is reflected in the
Bank's various policies and, in particular, in the Corporate Social Responsibility Policy for managing the responsibility of
BBVA's impact on people and society.
This Policy has been updated by the Board of Directors in 2020 in order to update it both to the evolution of its stakeholders’
expectations and the Bank's strategy.
The Bank follows the next general principles of action in matters of corporate social responsibility (which are added to the
general principles that the Bank applies in its different management policies):
●
Geared toward generating a positive impact on society;
●
Respect for people’s dignity and inherent rights;
●
Community investment; and
●
Involvement as an agent of social change.
78
Contribution to society
Community investment
In 2020, BBVA allocated
€29.6m
288,281
In 2020, BBVA increased the investment, mainly due to the additional provisions to mitigate the COVID-19 consequences,
also resulting in a beneficiaries increase. Although a fall of beneficiaries related to presence activities was observed due to
cancels, the number of beneficiaries related to the health and social rose, to which the Response to COVID-19 Plan was
addressed.
Through this contribution to the society, BBVA acts as a driver of opportunities for people, seeks to generate a positive
impact on their lives and delivers on its Purpose of “Bringing the age of opportunity to everyone”, particularly to vulnerable
people.
In accordance with the Corporate Social Responsibility Policy, approved by the Board of Directors in 2020 and available for
consultation on the BBVA shareholders and investors website, the Bank implements its commitment to society through
supporting the development of society.
During the year, inside the contribution to society by BBVA, it is remarkable the launch and execution of the BBVA Group
Social Response Plan to fight against the COVID-19 effects. Likewise, BBVA continued to boost in 2020 the main lines of
action established by the Investment in Social Programs Plan, still in force:
financial education
,
social entrepreneurship
and the
knowledge
,
education
culture
. In 2020, BBVA worked as well on a new plan development, which will be
published during the first quarter of 2021 and to which BBVA expects to gain social impact achievement, specifying details
in its Community Pledge 2025.
COMMUNITY INVESTMENT BY FOCUS OF
ACTIONS.
2020
BENEFICIARIES OF COMMUNITY
INVESTMENT BY FOCUS OF ACTIONS.
"BBVA's Social Response to COVID" Plan
Faced with an unprecedented global crisis, with immediate effects in the field of health and social wellbeing, BBVA
implemented a Social Response Plan in March 2020 to alleviate the most serious consequences of COVID-19: overrun
health services, shortage of medical supplies, worsening of the vulnerability of large segments of the population, among
others.
This “Social Response to COVID” Plan covers the following countries: Argentina, Colombia, Spain, the United States,
Mexico, Paraguay, Peru, Portugal, Turkey and Uruguay.
Through this Plan, which benefited 3.5 million people in 2020, 9,180 in Spain, BBVA donated €35.7m (€4.5m of which in
Spain) for three lines of SDG-linked action:
79
●
Providing support to public health services to prevent their collapse and contributing to ensure the healthcare of
individuals affected by purchasing medical equipment and supplies, to which 80% of the committed amount was
allocated. This line of action has a direct impact into the SDG 3 “Ensure healthy lives and promote well-being for
all at all ages”. In 2020, 839,773 people benefited from the medical supplies donated to hospitals. Below is
the breakdown of the items purchased and distributed to hospitals around the world:
●
Providing support to vulnerable groups through contributions to social organizations aimed to cover the needs of
those most affected by the pandemic: food, basic necessities, psychosocial support and assistance, and training.
Of the committed amount, 12% was allocated to collaborations with 472 non-profit entities, whose work has
benefited 2.6 million people.
This line of action has a direct impact into the SDG 10 “Reduced inequalities”.
●
Support for the research on COVID-19 and its consequences, to which 8% of the committed amount was allocated.
This line of action has a direct impact into the SDG 9 “Promote the Industry, Innovation and Infrastructure”. In this
line, it is remarkable the support to 20 scientific research projects by the BBVA Foundation which benefited 226
people directly, but not including the indirect impact of their research.
Furthermore, BBVA employees and customers donated €11.2m (€1.2m in Spain), which were also allocated to the three
lines of action outlined above.
80
Financial education
BBVA has developed since 2008 a Financial Education Global Plan to improve the people's financial health through the
training on financial skills and competences, by both face to face and digital channels. This plan is based on three lines of
action:
1.
Financial education for society:
society. BBVA develops its own programs in collaboration with third related parties, with the aim of both improving
the knowledge of financial concepts and promoting a change in behavior in financial decision-making, enabling the
improvement of people´s financial health. In 2020, a total of 6,149 people, including children and young adults and
SMEs, benefited from the financial education initiatives. This year, the Bank began to gradually reduce its initiatives
for children as schools come to train on this field, establishing a major focus on the financial health of the vulnerable
groups. This change meant a 99% decrease on the number of beneficiaries.
2.
Financial education in customer solutions:
experience. In order to facilitate informed decision-making and improve their financial well-being, financial
education content was integrated into some customer solutions in 2020.
3.
Financial education promotion and content dissemination:
creation of financial education, which are posted on the transactional webs of the Bank and which are accessible
for both customers and not customers, and contents on the corporate web through podcast and social media. The
Center for Education and Financial Capabilities continued to provide support and promotion to the research and
celebrating events to share knowledge. 8.5m people accessed the digital contents of financial education through
some BBVA’s channels and the Center for Education and Financial Capabilities.
In 2020, €482,910 were spent on financial education. The BBVA’s commitment to financial education is long-term, with
€170m invested and 9.7 million people benefited from different programs since 2008.
The programs and initiatives of financial education have a direct impact into SDG 4 “Quality education” and SDG 10
“Reduced inequalities”
Entrepreneurship
Through entrepreneurship initiatives, BBVA wants to support vulnerable entrepreneurs and those who generate a positive
social impact with their companies. In 2020, BBVA allocated €124,557 to entrepreneurship initiatives that benefited 910
people.
Among the global initiatives relating to entrepreneurship, BBVA Momentum highlights, which is a mentoring program for
social entrepreneurships to generate impact. This program includes training, strategic mentoring, network and funding.
The programs and initiatives of entrepreneurship have a direct impact into SDG 8 “Productive employment and decent work”.
Knowledge, education and culture
BBVA promotes knowledge, education and culture to boost the sustainable development of the societies and the creation
of opportunities for people. In 2020, BBVA invested €17.8m which benefited 147,442 people.
BBVA contributes to the dissemination of knowledge through BBVA Research and BBVA Open MInd. In 2020, BBVA
Research made 718 publications available to shareholders, investors and the general public, including economic studies,
reports and analysis, and have been viewed by 525,080 people.
The
education
to education, educational quality and the development of 21st century key skills as sources of opportunity, benefiting 84,686
people in 2020.
On the other hand, with the educational project “Aprendemos juntos”, BBVA aims to lead and promote conversation on
education in the 21st century, taking into account the fact that education provides a great opportunity to improve people's
lives. The project was launched in January 2018 with a transformative mission that aims to create opportunities in homes
and the educational community. In three years, the project is followed by 4.5 million people on social media, with more than
1,258 million views of its inspiring content, and 69,435 teachers and parents being trained through online courses.
The promotion of cultural creation is an axis for knowledge generation. The Group focuses its support on classical music,
especially in contemporary music, plastic arts, videoart and digital art, literature and theatre.
The programs and initiatives in financial education have a direct impact into the SDG 4 “Quality Education”, SDG 9 “Industry,
Innovation and Infrastructure” and SDG 11 “Sustainable Cities and Communities”.
81
Other contributions
BBVA's
community support
"Work environment" section in the chapter on "Questions relating to personnel"), support for foundations and non-profit
organizations and the promotion of corporate responsibility by participating in various different working groups (more
information in the section on "Involvement in global initiatives" in the chapter on "Sustainable finance").
In terms of
contributions to foundations and non-profit organizations,
€8.9m. In 2020, BBVA made:
●
●
82
Fiscal transparency
Fiscal strategy
BBVA's guiding principles on fiscal matters
The principles that guide BBVA's fiscal action are not detached from its responsible and sustainable way of understanding
finance and banking. In the tax area, in addition to providing legitimate added value to investors, BBVA's actions must also
address other stakeholders and must align with the values and commitments that it has undertaken with society in order to
bring the age of opportunities to everyone.
As such, the principles that guide its action are:
●
Integrity
: in the fiscal sphere, integrity is defined as the observance of the letter and spirit of the law and the
maintenance of a cooperative and good faith relationship with the various Tax Administrations.
●
Prudence
: in the fiscal context, BBVA always assesses the implications of its decisions beforehand, including,
among other assessments, the impact that its activity may have in the geographical areas in which we operate.
●
Transparency
: in the tax area, BBVA provides information on its activity and its approach to taxation to customers
and other stakeholders in a clear and accurate manner.
BBVA’s fiscal strategy
The corporate principles described above served as a basis for the articulation of BBVA's Fiscal Strategy in 2015, which
was approved by the Board of Directors that same year, and made public on its website (www.bbva.com).
1. The commitment to pay any applicable taxes in all countries in which it operates.
2. The alignment of its taxation with the effective performance of economic activities and value generation. The
presence in tax havens is only possible as a consequence of the effective performance of economic activities.
3. The application of reasonable interpretations of tax rules and of the provisions of agreements to avoid double
taxation.
4. The establishment of a transfer pricing policy for all transactions between related parties related entities, governed
by the principles of free competition, value creation and assumption of risk and benefits.
5. Addressing the fiscal challenges that the digital economy poses by incorporating an online presence into its value-
added assessments.
6. The payment of taxes as an important part of the contribution to the economies of the jurisdictions in which it
operates.
7. The promotion of a reciprocal cooperative relationship with the various tax administrations, based on the principles
of transparency, mutual trust, good faith and loyalty.
8. The promotion of transparent, clear and responsible reporting of its main tax figures, informing stakeholders of the
payment of taxes.
9. When preparing any financial product, it takes into account the tax implications for the customers and provides
them with the relevant information required to meet their tax obligations.
10. The development of the Strategy and its principles, through the Fiscal department, in order to establish the internal
control mechanisms and rules necessary to comply with the prevailing tax code, the Strategy and its principles.
The main characteristics of the BBVA Group's fiscal Strategy are:
●
BEPS compliance
.
This is inspired by the results of the “Base Erosion and Profit Shifting” (BEPS) Project reports promoted by the G20
and the OECD, which aim to align value generation with appropriate taxation where said value is generated. They
also reflect the commitment to comply with and respect both the letter and the spirit of tax regulation in the
jurisdictions in which the Group operates, in accordance with Chapter XI of the OECD Guidelines for Multinational
Enterprises.
●
Geared toward compliance with SDGs.
11, 2019, on taxation, private investment and the United Nations' Sustainable Development Goals. For BBVA,
paying taxes is key to achieving these objectives; in particular, it is clearly associated with the first goal (no poverty);
the eighth (decent work and economic growth); the tenth (reduced inequalities); and the seventeenth (partnerships
for the goals), although BBVA's commitment extends to all of the goals. In this sense, for BBVA, it is not only a
question of contributing with the necessary resources in accordance with current legislation so that the tax
authorities may exercise their policies aimed at complying with the SDGs, but it has also adopted a proactive
83
attitude of cooperating with these authorities and have incorporated responsibility in the field of taxation as an
essential element of its activities.
●
Committed to protecting human rights
.
BBVA is concerned with the promotion, protection and assurance of an effective exercise of human rights including
in the area of taxation, and we have fully embraced the Guiding Principles on Business and Human Rights. Taxation
is linked to human rights insofar as, through the redistributive action of States, it makes it possible to provide
economically disadvantaged persons with the means to effectively exercise their rights. BBVA is committed to
paying taxes, and ensures that these taxes are paid in the jurisdictions in which they are collected, aligning its
contribution with the effective performance of its economic activity. The Group also collaborates with the tax
administrations of the jurisdictions in which it operates.
The Bank maintains transparent, clear and truthful communication on tax matters with various NGOs that are equally
committed to human rights, while internally, it participates in auditing activities for implementing the Guiding Principles
developed by the BBVA Group's Responsible Business area, and monitors the performance of the plans it has launched in
this sphere.
In BBVA, the Board of Directors is responsible for approving its fiscal Strategy. Although the Strategy is intended to be
permanent, and updated when necessary to better express the Group's fiscal orientation and commitments.
The Strategy is universal and affects all of BBVA's business units and employees, regardless of the region in which they
are located. It is developed through a body of fiscal policies that are reviewed annually both internally and by an
independent third party to ensure that they reflect best market practices and are fully aligned with the Group's strategy.
This strategy reproduces the Group-wide strategy with the adaptations required by United Kingdom regulations, and is
also subject to third party review and verification.
out their professional activity in such a way that BBVA adequately complies with its tax obligations, and in such a way that
avoids any practices that involve illicit tax evasion or harm to the public treasury. The implementation of the Code is
monitored by the Group's Compliance area, which has its own whistleblowing channel.
Tax Policy section of the shareholders and investors website. As a financial entity, BBVA also complies, through the
corresponding areas, with reporting obligations to tax authorities arising from the Foreign Account Tax Compliance Act
(FATCA), the Common Reporting Standard (CRS), the United States Qualified Intermediary (QI), and the country-by-country
report.
Fiscal risk management and control
BBVA has set up a Fiscal Control Framework that complies with requirements on tax risk management and control
introduced for listed companies by Law 31/2014 amending the Capital Companies Act to improve Corporate Governance.
The BBVA's Fiscal Control Framework is based on its Fiscal Strategy and is applicable to all the jurisdictions in which BBVA
operates and to all the Group's various different areas and businesses. This allows the BBVA to carry out an integrated
management of its fiscal positions and risks in a manner consistent and in conjunction with other risks.
The BBVA's Fiscal Control model is configured around three fundamental lines of action.
1. Specific plans are carried out annually to identify, mitigate and control fiscal risk within the BBVA. The Head of the
Group's Tax Department periodically informs the Audit Committee of the most relevant tax information.
2. Controls for fiscal risk management are subject to the annual cycle of review of internal control areas in order to
evaluate their suitability and effectiveness.
3. The Group's Internal Audit area conducts periodic tax compliance reviews.
A series of specific tax risk indicators have also been developed, which are integrated into the Group's general risk
management and control model, to help establish and manage the Group's risk profile in tax matters.
●
●
●
●
84
On the other hand, the Bank has fully anonymous whistleblowing channels for reporting potential breaches of both its Code
of Conduct and its Fiscal Strategy.
Finally, the BBVA Group Control Framework is subject to annual review by a third independent firm.
Cooperation with tax administrations
As advocated by the Fiscal Strategy, BBVA maintains a cooperative relationship with the tax administrations of the countries
in which operates based on the principles of transparency, mutual trust, good faith and loyalty.
In particular, and with regard to Spanish, it adheres to the Large Corporations Forum, BBVA is subject to the Code of Best
Tax Practices (
Código de Buenas Prácticas Tributarias
, CBPT) adopted by the Forum on July 20, 2010. The Group has
once again voluntarily submitted the Annual Fiscal Transparency Report for Companies Adhering to the Code of Best Tax
Practices and its Corporate Income Tax declaration for the previous year, which included its performance and proposals to
strengthen best practices on fiscal transparency, adopted in a plenary session of the Spanish Large Corporations Forum on
December 20, 2016, or companies adhering to the Code.
In the aforementioned Transparency Report, the most significant criteria used to prepare the Corporate Income Tax
Declaration are voluntarily explained to the Central Delegation of Major Contributors, and meetings are subsequently held
with the tax authorities in order to further elaborate on any details that may be required. All of the above is before
corresponding inspectorate actions commence.
BBVA also adopted the Code of Practice on Taxation for Banks, a United Kingdom initiative that provides for the approach
expected from financial institutions in terms of governance, tax planning and engagement with the British tax authorities, in
order to promote the adoption of best practices in this area, which is published on the HMRC website.
BBVA is also a financial institution that collaborates in the collection processes of the regions that so request.
Finally, in order to obtain legal certainty and ensure that its understanding of tax code is in line with the spirit of the law,
BBVA consults the tax authorities on any aspects that are controversial or raise doubts, when deemed necessary.
Participation in technical-fiscal discussion forums
BBVA participates, among other organizations, in the Spanish Banking Association's Tax Committee, and collaborates with
this association in the finance working groups of the European Banking Federation. BBVA also participates in the main fiscal
committees of the banking and trade associations of the jurisdictions in which it operates. The sector's positions are
coordinated through all these organizations.
organizations and those maintained by BBVA.
Dialogue with other stakeholders on fiscal matters
BBVA is aware of how important taxes are for the progress and sustainability of the societies in which it operates, which is
why it maintains mutually constructive dialog with various NGOs, universities, think tanks and other tax-related forums, in
relation to the Group's fiscal contribution. As a result of this dialog, BBVA has incorporated new transparency standards
made public in the Total Tax Contribution Report, and has been recognized as a transparent financial entity by the Fundación
Compromiso y Transparencia (Commitment and Transparency Foundation) and has promoted initiatives that allow its
extension to other multinationals such as the European Business Tax Forum.
Total tax contribution
BBVA is committed to provide
transparency
Bank has been doing since 2011, it voluntarily breaks down the total tax contribution in countries in which it has a significant
presence.
BBVA’s
total
tax
contribution
payments of corporate taxes, VAT, local taxes and fees, income tax withholdings, Social Security payments, and payments
made during the year arising from tax litigation in relation to the aforementioned taxes.
GLOBAL TAX CONTRIBUTION (BBVA ESPAÑA. MILLIONS OF EUROS)
2020
2019
Own taxes
146
814
Third-party taxes
1,176
1,196
Total tax contribution
1,322
2,030
Offshore financial centers
85
Resulting from the express policy on activities in entities permanently registered in offshore financial centers, the Bank
closed in 2018 its branch in the Cayman Islands and therefore the Bank does not have activity in any off-shore financial
center.
Other tax information by countries
TAX INFORMATION BY COUNTRIES (BBVA, S.A. MILLIONS OF EUROS)
2020
2019
CIT payment
cash basis
CIT expense
PBT
(1)
Subsidies
CIT payment
cash basis
CIT expense
PBT
(1)
Subsidies
Spain
(2 )(3)(4)
(701)
(36)
(2,448)
-
(18)
(69)
1,948
-
Of which:
Spanish Tax Group
Dividends
-
-
568
-
-
-
773
-
Foreign
Subsidiaries
Dividends
-
11
673
-
-
32
2,390
-
Impairment of
Garanti
-
-
(288)
-
-
-
(543)
-
Impairment of BBVA
USA
-
-
(2,408)
-
-
-
(279)
-
France
13
3
14
-
17
11
39
-
United Kingdom
5
3
40
-
2
3
47
-
Belgium
-
-
4
-
-
-
2
-
Portugal
4
14
40
-
4
10
43
-
Italy
8
20
65
-
3
9
26
-
The United States
20
17
70
-
36
8
51
-
Japan
-
-
-
-
-
-
1
-
Singapur
1
2
11
-
1
1
8
-
Germany
26
8
23
-
20
(11)
9
-
Hong-Kong
8
5
31
-
-
5
38
-
Taiwan
-
-
1
-
-
(1)
(2)
-
China
-
-
2
-
-
-
(2)
-
Poland
-
-
-
-
-
-
(0)
-
Switwerland
10
-
-
-
12
-
-
-
Chile
2
-
-
-
3
-
-
-
Colombia
3
-
-
-
3
-
-
-
Paraguay
-
-
-
-
4
-
-
-
Peru
3
-
-
-
5
-
-
-
Total
(598)
36
(2,147)
-
92
(34)
2,208
-
(1)
PBT: Profit before tax.
(2)
(3)
The methodology for calculating advance payments of the annual tax return provided for in Corporate Income Tax legislation, which may lead to differences between the advance
payments made in the current year and the refund of those advance payments made in previous years resulting once the annual corporate income tax return has been submitted. As
a result of these differences, there has been a net cash refund.
(4)
line "Profit (loss) after tax from discontinued operations".
In 2020, the BBVA Group has not received any significant public aid allocated to the financial sector intended for the
promotion of banking activity, as mentioned in Appendix XIII -Annual Banking Report of the Consolidated Financial
Statements.
86
Suppliers
BBVA understands that integrating ethical, social and environmental factors into its supply chain is part of its responsibility.
Thus, in 2020, the Bank within the framework of the Group consolidated the transformation of the purchasing function, which
is based on the three basic
pillars
●
Service
, maximizing the quality and experience of the internal customer, who is accompanied throughout the
process.
●
Risk
, limiting the Bank’s operational risk in supplier contracts, thus ensuring compliance with regulations and
processes.
●
Efficiency
, contributing to the Bank’s efficiency through the proactive management of costs and suppliers.
ESSENTIAL DATA ABOUT SUPPLIERS (BBVA SPAIN)
2020
2019
Number of suppliers
(1)
1,138
1,429
Volume provided by suppliers (millions of euros)
(1)
2,169
2,401
Average payment period to suppliers (days)
49
51
Suppliers satisfaction index
(3)
n.a
81
Number of approved suppliers
1,238
1,675
n.a. = not applicable.
(1)
(2)
than €100.000. It is calculated by the difference between the average of promoters, who have answered 9 and 10 up to 10 to the question if they would recommend working with the
Procurement area, and the average of detractors, whose answers to the same question have gone from 1 to 6.
As part of the procurement process, BBVA strives to correctly manage the real and potential impacts that an entity such as
BBVA may cause, through a series of
mechanisms
and
rules
: a responsible purchasing policy, a standardization process
and the Corporate Rules for the Acquisition of Goods and Contracting of Services. These
impacts
caused by bad labor practices carried out in supplier companies, a result of the absence of freedom of association, human
rights, and can have either a positive or negative impact on society.
Both the supplier evaluation process and the Corporate Rules for the Acquisition of Goods have undergone significant
updates throughout 2020, evolving toward a more complete evaluation of supplier risk and greater control over the entire
procurement process.
Through the implementation of the Supplier Code of Ethics in the purchasing unit, minimum standards of behavior in terms
of ethical, social and environmental conduct were established which suppliers are expected to follow when providing
products and services. In addition to the ethical supplier code, BBVA maintains a responsible procurement policy.
General Procurement Principles
The General Procurement Principles, included in the Procurement Rules for goods and services, include the former
Responsible Purchasing Policy, establishes, among other aspects, that it is necessary to ensure compliance with all
applicable legal requirements throughout the provisioning process regarding
human, labor, association and
environmental rights
preventing corruption. In the same way, it is ensured that the selection of suppliers remains in compliance with existing
internal regulations at all times and, in particular, with the values of the BBVA's Code of Conduct, based on respect for
legality, commitment to integrity, competition, objectivity, transparency, value creation, segregation of duties, and
confidentiality.
The following are included among the clauses contained in the specifications and in the contractual model:
●
Compliance with current legislation, in particular, with the obligations imposed on it by its personnel, Social
Security or alternative provision systems, hiring of foreign workers, the Public Treasury, public records, among
others.
●
Compliance with current legislation on the social integration of individuals with disabilities.
●
Clauses that ensure that non-discrimination policies are established for reasons of gender, as well as measures
to reconcile work and family life.
●
Equality clause.
●
Compliance with all labor, occupational health, and safety legislation.
●
Anti-corruption declaration.
●
Adherence to the United Nations Global Compact.
87
The General Procurement Principles also establish, within the principle of commitment to Responsible Business, the
commitment to raise awareness of social responsibility among personnel and other stakeholders involved in the Bank's
procurement process.
Supply chain
BBVA operates a technological platform, the Global Procurement System (GPS), which supports all phases of the Bank’s
procurement process
, from budgeting to invoice registration, including electronic invoicing.
Additionally, within the GPS, BBVA also has an electronic catalog procurement tool
(SRM), which can be accessed via
the Intranet and is designed to issue decentralized procurement requests, i.e., directly from the user area.
BBVA has a
supplier portal
It is a collaborative environment
targeted at companies and self-employed workers who work or are interested in working with the Entity, allowing them to
electronically interact with the Bank throughout the supply cycle.
The supplier portal consists of two environments: a public
one, accessible from the web (www.suppliers.bbva.com), which provides general information on the procurement process
and on the relevant aspects of their purchasing model; and a private one, which allows suppliers to operate online, from
tendering (electronic auctions) and approval to payment (electronic invoicing).
In addition to the portal, there is also a supplier directory, an internal tool that can be accessed via the Intranet, allowing
users to consult contact data and general information about the Bank’s suppliers.
Supplier management
BBVA conducts a
supplier evaluation process
aspects that are reviewed for a supplier: financial, legal, labor, anti-corruption and money laundering situation, reputation,
technological risks, concentration and country risks, and customer protection, with the aim of understanding their basic
technical capabilities and their legal responsibilities (labor or environmental regulations, etc.). This allows them to promote
their civic responsibilities and confirm that they share the same values as the Bank in terms of social responsibility. Suppliers
must comply with the following points during this process:
●
Compliance with the social and environmental principles of the UN.
●
Adoption of internal measures to guarantee diversity and equal opportunities in the management of human
resources.
●
Adoption of measures to promote occupational health and safety and the prevention of workplace accidents and
incidents.
●
Support for the freedom of affiliation and collective bargaining of its workers in all the countries in which it operates.
●
Possession of a code of conduct or policy to avoid forced labor, child labor and other violations of human rights,
both within the company itself as well as in its subcontractors.
●
Possession of a code of conduct or policy designed to avoid corruption and bribery.
●
Participation or collaboration in activities related to culture, scientific knowledge, sports, the environment or
disadvantaged sectors, either through direct actions or by means of donations, in collaboration with other
organizations or institutions.
●
Hiring of persons with disabilities.
●
Existence of a corporate responsibility policy within the company.
In terms of
local
A local supplier,
in this context, is one whose tax identification matches the country of the company receiving the goods or services.
On the other hand, the turnover of
special employment centers
was €2.4m for the year.
The hiring of CEEs favors inclusion and diversity.
In 2020, the Internal Audit area conducted audits of suppliers on the procurement processes of supply of goods and services
from different areas and on the services provided by certain suppliers, mostly outsourcing. These are risk-based audits, and
reviews are carried out according to a defined internal methodology.
Average period payment to suppliers
The average period payment to suppliers during the year 2020 is 49 days, below the maximum legal limit of 60 days
established by Law 15/2010 of July 5, for which measures are put into place combating late payment in commercial
transactions. The calculation of the average period for payment was made as established in the Act.
Other non-financial risks
88
Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt).
Such investigation includes the provision of services by Cenyt to the Bank. On 29th July, 2019, the Bank was named as an
official suspect (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 – Piece No. 9,
Central Investigating Court No. 6 of the National High Court) for alleged facts which could be constitutive of bribery,
revelation of secrets and corruption. On February 3, 2020, the Bank was notified by the Central Investigating Court No. 6 of
the National High Court of the order lifting the secrecy of the proceedings. Certain current and former officers and employees
of the Group, as well as former directors have also been named as official suspects in connection with this
investigation. The Bank has been and continues to proactively collaborate with the Spanish judicial authorities, including
sharing with the courts the relevant information obtained in the internal investigation hired by the entity in 2019 to contribute
to the clarification of the facts. As of the date of the approval of this management report, no formal accusation against the
Bank has been made.
This criminal judicial proceeding is at the pre-trial phase. Therefore, it is not possible at this time to predict the scope or
duration of such proceeding or any related proceeding or its or their possible outcomes or implications for the
Group, including any fines, damages or harm to the Group’s reputation caused thereby.
Notwithstanding what is provided in the previous paragraph and in the section "Risk factors", during 2020 a number of
criminal proceedings have been initiated against BBVA, S.A. for various alleged offenses. Notwithstanding the above, up to
the date of issuance of this Management Report, BBVA, S.A. has not been convicted by a final judgment of criminal
responsibility.
89
Contents index of the Law 11/2018
Non-financial information report. Contents Index of the Law 11/2018
Page / Section Management
report BBVA 2019
GRI reporting
criteria
Page(s)
General information
Business model
Brief description of the group’s business model
Strategy and business model
GRI 102-2
GRI 102-7
2,10-13
Geographical presence
BBVA in brief
GRI 102-3
GRI 102-4
GRI 102-6
2
Objectives and strategies of the organization
Strategy and business model
GRI 102-14
10-13
Main factors and trends that may affect your future
evolution
Environment
Strategy and business model
GRI 102-15
4-9,11
General
Reporting framework
Non-financial information
GRI 102-54
3
Principle of materiality
Strategy and business model/
Materiality
GRI 102-46
GRI 102-47
16-18
Management approach
Description of the applicable policies
Customer comes first/
Customer
security and protection
The best and most engaged
team/
People management,
Professional development, Work
environment, Remuneration,
Volunteer work
Ethical behavior
Sustainability at BBVA
Contribution to society
GRI 103-2
61-67
The results of these policies
Customer comes first/
Customer
security and protection
The best and most engaged
team/
People management,
Professional development, Work
environment, Remuneration,
Volunteer work
Ethical behavior
Sustainability at BBVA
Contribution to society
GRI 103-2
61-67
The main risks related to these issues involving the
activities of the group
Environment
Customer comes first/
Customer
security and protection
The best and most engaged team/
Health and labor safety
Sustainability at BBVA
/
Environmental impact and risk
management
Contribution to society
/Suppliers
GRI 102-15
61-67
Environmental questions
Environmental management
Detailed information on the current and foreseeable
effects of the company's activities on the
environment and, where appropriate, health and
safety
Sustainability at
BBVA
/Environmental impact and
risk management
GRI 102-15
69-72
Environmental assessment or certification
procedures
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 103-2
71-72
Resources dedicated to the prevention of
environmental risks
Sustainability at BBVA/
Sustainable
funding: mobilization metric
GRI 103-2
60-61
Application of the precautionary principle
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 102-11
61-62
Amount of provisions and guarantees for
environmental risks
Sustainability at BBVA/
Sustainable
funding: mobilization metric
GRI 103-2
60-61
Contamination
Measures to prevent, reduce or repair emissions
that seriously affect the environment; taking into
account any form of activity-specific air pollution,
including noise and light pollution
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 103-2
61-67
Circular economy and waste
prevention and management
Prevention, recycling, reuse, other forms of
recovery and types of waste disposal
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 103-2
GRI 306-2 en lo
que respecta a
reutilización y
reciclaje
69-72
Actions to combat food waste
BBVA Group considers this
indicator not to be material
GRI 103-2
Non
material
Sustainable use of resources
Water consumption and water supply according to
local constraints
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 303-5 (2018)
with respect to
total water
consumption
70-72
90
Use of raw materials and measures taken to
improve the efficiency of their utilization
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 301-1 with
respect to the
weight of
renewable
material used
70-72
Energy use, direct and indirect
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 302-1
GRI 302-3
70-72
Measures taken to improve energy efficiency
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 103-2
GRI 302-4
70-72
Use of renewable energies
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 302-1 with
respect to
renewable
energies
consumption
70-71
Climate change
Greenhouse gas emissions generated as a result of
the company's activities, including the use of the
goods and services it produces
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 305-1
GRI 305-2
GRI 305-3
GRI 305-4
72
Measures taken to adapt to the consequences of
climate change
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 103-2
GRI 201-2
61-72
Reduction goals established voluntarily in the
medium and long term to reduce greenhouse gas
emissions and measures implemented for that
purpose
Sustainability at
BBVA/
Environmental impact and
risk management
GRI 305-5
70-71
Protection of biodiversity
Measures taken to protect or restore biodiversity
Sustainability at BBVA
/Helping our
clients transition towards a
sustainable future
Sustainability at
BBVA/
Environmental impact and
risk management/Equator
Principles
The BBVA offices are in urban
settings, which
therefore have no impact on
protected natural areas or
biodiversity.
GRI 304-3
Non
material
Impacts caused by activities or operations in
protected areas
Sustainability at BBVA
/Helping our
clients transition towards a
sustainable future
Sustainability at
BBVA
/Environmental impact and
risk management/Equator
Principles
The BBVA offices are in urban
settings, which
therefore have no impact on
protected natural areas or
biodiversity.
GRI 304-1
GRI 304-2
Non
material
Social and personnel questions
Employees
Total number and distribution of employees
according to country, gender, age, country and
professional classification
The best and most engaged
team/
People management,
Professional development
GRI 102-8
GRI 405-1
35-36
Total number and distribution of work contract
modalities
The best and most engaged
team/
People management,
Professional development
GRI 102-8
36
Annual average of work contract modalities
(permanent, temporary and part-time) by sex, age,
and professional classification
The best and most engaged
team/
People management,
Professional development
GRI 102-8
36
Number of dismissals by sex, age, and professional
classification
The best and most engaged team
/
Work environment
GRI 103-2
GRI 401-1 with
respect to staff
turn-over by age
group, sex and
professional
category
37
The average remunerations and their evolution
disaggregated by sex, age, and professional
classification or equal value
The best and most engaged
team/
Remuneration
GRI 103-2
GRI 405-2 with
respect to
women's
remuneration
compared to men
40
The average remuneration of directors and
executives, including variable remuneration,
allowances, compensation, payment to long-term
forecast savings and any other perception broken
down by gender
The best and most engaged
team/
Remuneration
GRI 103-2
GRI 405-2 with
respect to women
remuneration
compared to
men's by
professional
category
40
91
Salary gap
The best and most engaged
team/
Remuneration
GRI 103-2
GRI 405-2 with
respect to women
remuneration
compared to
men's by
professional
category
41
Implementation of employment termination policies
The best and most engaged team/
Work environment /Organization of
work
GRI 103-2
37-38
Employees with disabilities
The best and most engaged team/
Professional development /
Different capabilities
GRI 405-1
37
Work organization
Work schedule organization
The best and most engaged
team/
Work environment/Work
organization
GRI 103-2
37-38
Number of hours of absenteeism
The best and most engaged team/
Work environment/Health and
labor safety
GRI 403-9
39
Measures designed to facilitate access to mediation
resources and encourage the responsible use of
these by both parents
The best and most engaged
team/W
ork environment/Diversity
and inclusion
GRI 103-2
37-38
Health and safety
Work health and safety conditions
The best and most engaged
team/
Work environment/Health
and labor safety
GRI 103-2
GRI 403-1
GRI 403-2
GRI 403-3
GRI 403-7 (2018)
38-39
Work accidents, in particular their frequency and
severity, disaggregated by gender
The best and most engaged
team/
Work environment/Health
and labor safety
GRI 403-9 (2018)
with respect to
labor accident
injuries
38-39
Occupational diseases, disaggregated by gender
The best and most engaged
team/
Work environment/Health
and labor safety
GRI 403-10
(2018) with
respect to
recordable labor
diseases
38-39
Social relationships
Organization of social dialog, including procedures
to inform and consult staff and negotiate with them
The best and most engaged
team/
Work environment /Freedom
of association and representation
GRI 103-2
38
Percentage of employees covered by collective
agreement by country
The best and most engaged
team/
Work environment /Freedom
of association and representation
GRI 102-41
38
The balance of collective agreements, particularly
in the field of health and safety at work
The best and most engaged
team/
Work environment/Health
and labor safety
GRI 403-4 ( 2018)
38-39
Training
Policies implemented for training activities
The best and most engaged team/
Professional development/Training
GRI 103-2
GRI 404-2
32-33
The total amount of training hours by professional
category
The best and most engaged
team/
Professional
development/Training
GRI 404-1
32-33
Universal accessibility for
people with disabilities
Integration and universal accessibility of people
with disabilities
The best and most engaged
team/
Professional development
/Different capabilities
GRI 103-2
37
Equality
Measures taken to promote equal treatment and
opportunities between women and men
The best and most engaged
team/
Professional
development/Diversity and
inclusion
GRI 103-2
33-35, 40-
41
Equality plans (Section III of Organic Law 3/2007,
of March 22, for effective equality of women and
men)
The best and most engaged team/
Professional development/Diversity
and inclusion
GRI 103-2
33-35
Measures adopted to promote employment,
protocols against sexual and sex-based
harassment.
The best and most engaged team/
Professional development/Diversity
and inclusion
GRI 103-2
33-35
Policy against any type of discrimination and,
where appropriate, diversity management
The best and most engaged
team/
Professional
development/Diversity and
inclusion
GRI 103-2
33-35
Information about the respect for human rights
92
Human rights
Application of due diligence procedures in the field
of human rights; prevention of the risks of violation
of human rights and, where appropriate, measures
to mitigate, manage, and repair possible abuses
committed
Ethical behavior/
Commitment to
human rights
GRI 102-16
GRI 102-17
GRI 412-1
GRI 412-2
GRI 412-3
49-53
Claims regarding cases of human rights violations
BBVA has not identified any
significant complaints and impacts
with respect to human rights in its
workplaces.
GRI 103-2
GRI 406-1
Promotion and compliance with the provisions
contained in the
related fundamental Conventions of the
International Labor Organization with respect for
freedom of association and the right to
collective bargaining; the elimination of
discrimination in employment and occupation; the
elimination of forced or compulsory labor; and the
effective abolition of child labor
The best and most engaged
team/
Freedom of association and
representation
Ethical behavior/
Commitment to
human rights
GRI 103-2
GRI 407-1
GRI 408-1
GRI 409-1
49-53
Information about anti-bribery and anti-corruption measures
Corruption and bribery
Measures adopted to prevent corruption and
bribery
Ethical behavior/
Compliance
system
GRI 103-2
GRI 102-16
GRI 102-17
GRI 205-2
GRI 205-3
43-49
Measures adopted to fight against anti.money
laundering
Ethical behavior/
Compliance
system
GRI 103-2
GRI 102-16
GRI 102-17
GRI 205-2
GRI 205-3
44-45
Contributions to foundations and non-profit-making
bodies
Contribution to society/
Community
investment
GRI 102-13
GRI 201-1 with
respect to
community
investment
81
Information about the society
Commitment by the company to
sustainable development
Impact of the company’s activities on employment
and local development
Contribution to society
GRI 103-2
GRI 203-2 with
respect to
significant indirect
economic impacts
GRI 204-1
78-81
The impact of company activity on local populations
and on the territory
Contribution to society
GRI 413-1
GRI 413-2
78-81
The relationships maintained with representatives
of the local communities and the modalities of
dialog with these
Strategy and business
model/
Materiality
The best and most engaged
team
/Freedom of association and
representation
Sustainability at BBVA
/
Helping our
clients transition towards a
sustainable future
Contribution to society
GRI 102-43
GRI 413-1
16-18,38,
49-53, 78-
81
Actions of association or sponsorship
Ethical behavior/
Compliance
system
Contribution to society
GRI 103-2
GRI 201-1 with
respect to
investments in the
community
80-83
Subcontractors and suppliers
The inclusion of social, gender equality and
environmental issues in the purchasing policy
Contribution to society/
Suppliers
GRI 103-2
89-90
Consideration of social and environmental
responsibility in relations with suppliers and
subcontractors
Contribution to society/
Suppliers
GRI 102-9
GRI 308-1
GRI 414-1
89-90
93
Supervision systems and audits, and their results
Contribution to society/
Suppliers
GRI 102-9
GRI 308-1
GRI 308-2
GRI 414-2
89-90
Consumers
Customer health and safety measures
Customer comes first/
Solutions for
customers ,Customer security and
protection
Ethical behavior/
Commitment to
human rights
GRI 103-2
GRI 416-1
19, 22-24,
52-53
Claims systems, complaints received and their
resolution
Customer comes first/
Customer
care
GRI 103-2
GRI 418-1
25-27
Tax information
Benefits obtained by country
Contribution to society/
Fiscal
transparency
GRI 201-1
GRI 207-4 (2019)
with respect to tax
on corporate profit
payed and tax on
corporate profit
84-85
Taxes on paid benefits
Contribution to society/
Fiscal
transparency
GRI 201-1
GRI 207-4 (2019)
with respect to tax
on corporate profit
payed and tax on
corporate profit
accrued on profit
or loss
84-85
Public subsidies received
Contribution to society/
Fiscal
transparency
GRI 201-4
84-85
94
Balance sheet, business activity and earnings
The financial information included in this Management report has been prepared from the individual accounting and
management records of Banco Bilbao Vizcaya Argentaria, S.A. and with the criteria established by the Bank of Spain Circular
4/2017, on Public and Confidential Financial Reporting Rules and Formats for Financial Statements, and its subsequent
amendments.
A continuación se indican las principales magnitudes del balance y la cuenta de pérdidas y ganancias del Banco en relación
con su actividad principal
The key figures in the Bank’s balance sheet and income statement are as follow:
As of December 31, 2020, the Bank’s total assets showed increased significantly to €445,354 million compared to €407,632
million as of December 2019, mainly due to an increase in “Cash, cash balances at central banks and other demand
deposits” (€44,107 million as of December 31, 2020 vs. €18,419 million as of the same date of the prior year) and “Financial
assets at fair value through other comprehensive income” (€37,528 million at the end of 2020 compared to €24,905 million),
as the “Financial Assets at Amortized Cost” remained stable amounting to €225,914 million, vs. €225,369 million in the
previous year. On the other hand, the balance of Customer deposits increased strongly amounting to €217,360 million
(€191,461 million as of December 31, 2019), partly due to the trend for greater saving. In addition, the Deposits from central
banks at amortized cost expanded reaching €37,903 million as of December 31, 2020 (amounting to €24,390 million as of
December 31, 2019) mainly as the result of BBVA taking part in the TLTRO III liquidity windows due to its favorable cost
and maturity conditions.
Net interest income has increased slightly during the fiscal year from €3,385 million at December 31, 2019 to €3,514 million
at December 31, 2020. Gross income in fiscal year 2020 stands at €6,637 million, compared to the €7,877 million obtained
in 2019. For yet another year, administrative expenses decreased from €3,881 million in fiscal year 2019 to €3,553 million
in 2020, mainly as a result of cost containment plans, supported due to lower discretionary spending due to the pandemic.
The impairment on financial assets was €1,057 million higher than the previous year, mainly due to the negative impact
registered especially in the first quarter of 2020, of the deterioration in the macroeconomic scenario due to COVID-19, which
incorporates credit provisions for the most affected sectors. As a result, in financial year 2020, the Bank obtained an after-
tax profit from continuing activities of € 213 million (compared to € 2,086 million in 2019). However, and as a result of the
announcement of the sale of BBVA's subsidiary in the United States (excluding the wholesale business that BBVA currently
carries out through its New York branch), the balances of the headings "Dividend income" and " Impairment or reversal of
impairment of investments in subsidiaries, joint ventures or associates ”, net of their corresponding tax effects, corresponding
to companies for sale have been reclassified under the heading“ Earnings (losses) after taxes from activities interrupted ”of
the accompanying profit and loss account, causing a negative result for the year 2020 of -2,182 million euros compared to
a positive result of €2,241 million in 2019.
95
Risk management
General risk management and control model
The BBVA Group has a general risk management and control model (hereinafter, the “Model”) that is appropriate for its
business model, its organization, the countries where it operates and its corporate governance system. This model allows
the Group to carry out its activity within the risk management and control strategy and policy defined by the corporate bodies
of BBVA and to adapt itself to a changing economic and regulatory environment, facing this management at a global level
and aligned to the circumstances at all times.The Model, for which the Group’s Chief Risk Officer (CRO) is responsible and
that must be updated or reviewed at least annually, is fully applied in the Group and it comprises the following basic elements:
●
●
●
●
The Group promotes the development of a risk culture that ensures a consistent application of the Model in the Group, and
that guarantees that the risks function is understood and internalized at all levels of the organization.
Governance and Organization
The risk governance model in the BBVA Group is characterized by a special involvement of its corporate bodies, both in
setting the risk strategy and in monitoring and supervising its implementation on an ongoing basis.
Thus, and as explained below, the corporate bodies are responsible for approving the risk strategy and the general policies
for the different types of risks. Global Risk Management (GRM) & Regulation and Internal Control (including, among other
areas, Non-Financial Risks) are the functions responsible for its implementation and development, with the appropriate
reporting to corporate bodies.
Responsibility for day-to-day management of risks falls on business and corporate areas, the activities of which adhere to
the general policies, regulation, infrastructures and controls that, based on the framework set by corporate bodies, are
defined by Global Risk Management and Regulation & Internal Control in their corresponding areas of responsibility.
To carry out this work adequately, the financial risks function in the BBVA Group (GRM) has been set up as a single, global
function independent from commercial areas.
The head of the risks function at an executive level, the Group’s Chief Risk Officer (or CRO), is appointed by the Board of
Directors as a member of its senior management, and reports directly on the development of the corresponding functions to
the corporate bodies. The Chief Risk Officer, for the best fulfillment of the functions, is supported by a structure consisting
of cross-cutting risk units in the corporate area and specific risk units in the Group's geographical and/or business areas.
In addition, and with regard to internal control and non-financial risks, the Group has a Regulation & Internal Control area
independent from the rest of units and whose head (Head of Regulation & Internal Control) is also appointed by the Board
of Directors of BBVA and reports directly to corporate bodies on the performance of its functions. This area is responsible
for proposing and implementing non-financial risks policies and the Internal Control Model of the Group and it is composed
by, among other, the Non-Financial Risks, Regulatory Compliance and Risk Internal Control units.
The Risk Internal Control unit, within the Regulation & Internal Control area and, therefore, independent from the financial
risks function (GRM), acts as a control unit for the activities carried out by GRM. In this regard, and without prejudice to the
functions performed in this regard by the Internal Audit area, Risk Internal Control checks that the regulatory framework,
processes and established measures are sufficient and appropriate for each type of financial risk. It also monitors its
implementation and operation, and confirms that those decisions taken by GRM are taken independently from the business
lines and, in particular, that there’s an adequate segregation of functions between units.
Governance and organizational structure are basic pillars for ensuring an effective risk management and control. This
section summarizes the roles and responsibilities of the corporate bodies in the risks area, of the Group's Chief Risk Officer
and, in general, of the risks function, its interrelation and the group of committees, in addition to the Risk Internal Control
unit.
Corporate Bodies of BBVA
According to the corporate governance system of BBVA, the Board of Directors of the Bank has certain reserved powers
concerning management, through the implementation of the corresponding most relevant decisions, and concerning
supervision and control, through the monitoring and supervision of implemented decisions and management of the Bank.
96
In addition, and to ensure an adequate performance of the management and supervisory functions of the Board of Directors,
the corporate governance system comprises different committees supporting the Board of Directors with regard to matters
falling within their competence, and according to the specific charters of each committee. For this purpose, a coordinated
work scheme between these corporate bodies has been established.
In terms of risks, the Board of Directors has reserved those powers referred to determining the risk control and management
policy and the supervision and control of its implementation.
In addition, and for an adequate performance of its duties, the Board of Directors is assisted by the Risk and Compliance
Committee (“CRC”), on the issues detailed below, and by the Executive Committee (“CDP”), which is focused on the
strategy, finance and business functions of the Group, for the purposes of which it monitors the risks of the Group.
The involvement of the corporate bodies of BBVA in the control and management of the risks of the Group is detailed below:
●
The Board of Directors is responsible for establishing the risk strategy of the Group and, in this role, it determines
the risks management and control policy, through the following documents:
o
the Group, that is, the general principles governing the risk strategy of the Group and its target profile;
and, on the other hand, and based on the above mentioned risk appetite statement, a set of quantitative
metrics (core metrics, and their corresponding statements, and by type of risk metrics), reflecting the risk
profile of the Group;
o
exposed. They contain the basic lines for a consistent management and control of risks throughout the
Group, and consistent with the Risk Appetite Framework and the Model; and
o
All of the above in coordination with the rest of prospective-strategic decisions of the Bank, which includes the
Strategic Plan, the Annual Budget, the Capital Plan and the Liquidity & Funding Plan, in addition to the rest of
management objectives, whose approval is a responsibility of the Board of Directors.
In addition to defining the risk strategy, the Board of Directors, in the performance of its risks monitoring,
management and control tasks, also monitors the evolution of the risks of the Group and of each main business
and/or geographical area, ensuring compliance with the Risk Appetite Framework of the Group; and also
supervising the internal information and control systems.
For the development of all these functions, the Board of Directors is supported by the CRC and the CDP, which
are responsible for the functions detailed below.
●
The CRC is, according to its own charter, composed of non-executive directors and its main purpose is to assist
the Board of Directors on the establishment and monitoring of the risk control and management policy of the Group.
For this purpose, it assists the Board of Directors in a variety of risk control and monitoring areas, in addition to its
analysis functions, based on the strategic pillars established by the Board of Directors and the CDP, the proposals
on the risk management, control and strategy of the Group, which are particularly specified in the Risk Appetite
Framework and in this Model. After the analysis, the Risk Appetite Framework and Model proposal is submitted to
the Board of Directors for consideration and, where appropriate, approval purposes.
In addition, the CRC proposes, in a manner consistent with the Risk Appetite Framework of the Group approved
by the Board of Directors, the management and control policies of the different risks of the Group, and supervises
the internal control and information systems.
With regard to the monitoring of the evolution of the risks of the Group and their degree of compliance with the Risk
Appetite Framework and defined general policies, and without prejudice to the monitoring task carried out by the
Board of Directors and the CDP, the CRC carries out monitoring and control tasks with greater frequency and
receives information with a sufficient granularity to achieve an adequate performance of its duties.
The CRC also analyzes all measures planned to mitigate the impact of all identified risks, should they materialize,
which must be implemented by the CDP or the Board of Directors, as the case may be.
The CRC also monitors the procedures, tools and measurement indicators of those risks established at a Group
level in order to have a comprehensive view of the risks of BBVA and its Group, and monitors compliance with the
regulation and supervisory requirements in terms of risks.
The CRC is also responsible for analyzing those project-related risks that are considered strategic for the Group or
corporate transactions that are going to be submitted to the Board of Directors of the CDP, within its scope of
competence.
97
In addition, it contributes to the setting of the remuneration policy, checking that it is compatible with an appropriate
and efficient management of risks and that it does not provide incentives to take risks breaching the level tolerated
by the Bank.
Lastly, the CRC ensures the promotion of the risk culture in the Group.
In 2020, the CRC has held 23 meetings.
●
In order to have a complete and comprehensive view of the progress of the businesses of the Group and its
business units, the CDP monitors the evolution of the risk profile and the core metrics defined by the Board of
Directors, being aware of any potential deviation or breach of the metrics of the Risk Appetite Framework and
implementing, when applicable, the appropriate measures, as explained in the Model.
In addition, the CDP is responsible for proposing the basis for developing the Risk Appetite Framework, which will
be established in coordination with the rest of prospective/strategic decisions of the Bank and the rest of
management objectives.
Lastly, the CDP is the committee supporting the Board of Directors in decisions related to business risk and
reputational risk, according to the dispositions set out in its own charter.
Chief Risk Officer of the Group
The Group’s Chief Risk Officer (CRO) is responsible for the management of all the financial risks of the Group with the
necessary independence, authority, rank, experience, knowledge and resources. The CRO is appointed by the Board of
Directors of BBVA and has direct access to its corporate bodies (Board of Directors, CDP and CRC), with the corresponding
regular reporting on the risk situation in the Group.
The GRM area has a responsibility as the unit transversal to all the businesses of the BBVA Group. This responsibility is
part of the structure of the BBVA Group, which is formed by subsidiaries based in different jurisdictions, which have
autonomy and must comply with their local regulation, but always according to the risk management and control scheme
designed by BBVA as the parent company of the BBVA Group.
The Chief Risk Officer of the BBVA Group is responsible for ensuring that those risks of the BBVA Group within the scope
are managed according to the established model, assuming, among other, the following responsibilities:
●
bodies the risk strategy of the BBVA Group, which includes the Risk Appetite statement of the BBVA Group, core
(and their respective statements) and by type of risk metrics, and the Model.
●
bodies the general policies for each type of risk within its scope of responsibility and, as part these, to establish the
required specific regulation.
●
approval, or approving if within its competence, the risk limits for the geographies, business areas and/or legal
entities, which shall be consistent with the defined Risk Appetite Framework; it is also responsible for the
monitoring, supervision and control of risk limits within its scope of responsibility.
●
functions.
●
its scope of responsibility.
●
management of those risks and, where necessary, with the implementation of the required mitigation measures.
●
of responsibility that could compromise the solvency of the BBVA Group.
●
systems and, in general, the provision of models, tools, systems and resources to implement the risk strategy
defined by the corporate bodies.
●
it operates, strengthening the cross-cutting model of the risks function.
For decision-making purposes, the Chief Risk Officer of the Group has a governance structure for the function that
culminates in a support forum, the Global Risk Management Committee (GRMC). This committee is the main executive
committee for those risks within its competence, and its main purpose is the development of the strategies, policies,
regulation and infrastructure required for identifying, assessing, measuring and managing those material risks within its
scope of responsibility faced by the Group. This committee is composed by the Chief Risk Officer, who chairs the meetings,
and the heads of the GRM corporate disciplines of the Risk Management Group, the four most relevant geographical risk
areas, CIB, South America and Risk Internal Control. The purpose of the GRMC is to propose and challenge, among other
98
issues, the internal regulatory framework of GRM and the infrastructures required to identify, assess, measure and manage
the risks faced by the Group in carrying out its businesses and to approve risk limits.
The GRMC carries out its functions assisted by various support committees which include:
●
wholesale credit risk admission.
●
admission of wholesale credit risk of certain customer segments of the BBVA Group.
●
risk proposals concerning clients on Watch List and clients classified as NPL or written-off of certain customer
segments of the BBVA Group, as well the sanction of proposals regarding entries, exits and changes of Watch List,
entries and exits in non-performing unlikely to pay and turns to written off, as well as the approval of other proposals
that must be seen in this Committee according to the established thresholds and criteria.
●
risk, equities and real estate not for own use and by business area and at group level established in the Asset
Allocation limits planning exercise, which aims to achieve an optimal combination and composition of portfolios
under the restrictions imposed by the Risk Appetite Framework (“RAF”), which allows maximizing the risk-adjusted
return on regulatory and economic capital when appropriate. Additionally, it takes into account the concentration
and credit quality objectives of the portfolio, as well as the prospects and strategic needs of the Bank.
●
development, implementation, use, validation and monitoring of the models required to achieve an appropriate
management of the Model Risk in the BBVA Group.
●
monitoring of trading desk risk in all the Global Markets business units, as well as coordinating and approving
GMRU key decisions activity, and developing and proposing to GRMC the corporate regulation of the unit.
●
the retail credit risk management that impact or potentially do in the practices, processes and corporate metrics
established in the Policies, Rules and Operating Frameworks.
●
policies, procedures, and infrastructure necessary to identify, assess, measure and manage the material risks
facing the bank in the operation of businesses linked to BBVA Asset Management.
●
model and the monitoring of the insurance companies of the BBVA Group by developing and coordinating the
strategies, policies, procedures and infrastructure necessary to identify, evaluate, measure, monitor and manage
the material risks faced by insurance companies.
●
which Global Markets is present.
Additionally, the Corporate Committee for Admission of Operational Risk and Product Governance (CCAROyGP) aims to
ensure the adequate evaluation of initiatives with significant operational risk (new business, product, outsourcing, process
transformation, new systems, etc.) from the perspective of operational risk and approval of the proposed control
environment.
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Risk units of the corporate area and the business/geographical areas
The risks function is comprised of risk units from the corporate area, which carry out cross-cutting functions, and of risk units
of the geographical/business areas.
●
elements required to define the proposal for the Group's Risk Appetite Framework, the general policies, regulation
and global infrastructures within the operating framework approved by corporate bodies; they ensure their
application and report directly or through the Group’s Chief Risk Officer (CRO) to the corporate bodies of BBVA.
With regard to non-financial risks and reputational risk, which are entrusted to the Regulation & Internal Control
and Communications & Responsible Business areas respectively, the corporate units of GRM will coordinate, with
the corresponding corporate units of those areas, the development of the elements that should be integrated into
the Appetite Framework of the Group.
●
geographical and/or business areas the Risk Appetite Framework proposal applicable in each geography and/or
business area, independently and always according to the Group's Risk Appetite Framework. In addition, they
ensure the application of general policies and rules with the necessary adaptations, when applicable, to local
requirements, providing the appropriate infrastructures for risk management and control purposes, within the global
risk infrastructure framework defined by the corporate areas, and reporting to the corresponding corporate bodies
and senior management, as applicable. With regard to Non-financial risks, which are integrated in the Regulation
& Internal Control area, the local risk units will coordinate, with the unit responsible for these risks, the development
of the elements that should be integrated into the local Risk Appetite Framework.
Thus, the local risk units work with the risk units of the corporate area with the aim of adapting themselves to the risk strategy
at Group level and pooling all the information required to monitor the evolution of their risks.
As previously mentioned, the risks function has a decision-making process supported by a structure of committees, and also
a top-level committee, the GRMC, whose composition and functions are described in section “Corporate Bodies of BBVA”.
Each geographical and/or business area has its own risk management committee(s), with objectives and contents similar to
those of the corporate area. These committees perform their duties consistently and in line with general risk policies and
corporate rules, and its decisions are reflected in the corresponding minutes.
Under this organizational scheme, the risks function ensures the integration and application throughout the Group of the risk
strategy, the regulatory framework, the infrastructures and standardized risk controls. It also benefits from the knowledge
and proximity to customers in each geographical and/or business area, and conveys the corporate risk culture to the Group's
different levels. Moreover, this organization enables the risks function to conduct and report to the corporate bodies an
integrated monitoring and control of the risks of the entire Group.
Chief Risk Officers of geographical and/or business areas
The risks function is cross-cutting, i.e. it is present in all of the Group's geographical and/or business areas through specific
risk units. Each of these units is headed by a Chief Risk Officer for the geographical and/or business area who, within the
relevant scope of responsibility, carries out risk management and control functions and is responsible for applying the Model,
the general policies and corporate rules approved at Group level in a consistent manner, adapting them if necessary to local
requirements and with the subsequent reporting to local corporate bodies.
The Chief Risk Officers of the geographical and/or business areas have functional reporting to the Group's Chief Risk Officer
and hierarchical reporting to the head of their geographical and/or business area. This dual reporting system aims to ensure
the independence of the local risks function from the operating functions and enable its alignment with the Group's general
policies and goals related to risks.
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Risk Internal Control
The Group has a specific Risk Internal Control unit, within the Regulation & Internal Control area, that, among other tasks,
independently challenges and control the regulation and governance structure in terms of financial risks and its
implementation and deployment in GRM, in addition to the challenge of the development and implementation of financial
risks control and management processes. In addition, it is also responsible for validating the risk models.
For this purpose, it has 3 subunits: RIC-Processes, Risks Technical Secretariat and Risk Internal Validation.
●
reviewing that the functioning of financial risks management and control processes is appropriate and in line with
the corresponding regulation, identifying potential opportunities for improvement and contributing to the design of
the action plans to be implemented by the responsible units. In addition, it is the Risk Control Specialist (RCS) in
the Group's Internal Control Model and, therefore, establishes the frameworks for mitigating and controlling the
risks for which it is responsible.
●
criteria and processes through which the GRM’s regulatory framework is developed, processed, reported and
disclosed to the countries; and for the coordination, monitoring and assessment of its consistency and
completeness. In addition, it coordinates the definition and structure of GRM top-level Committees, and monitors
their proper functioning, in order to ensure that all risk decisions are taken through an adequate governance and
structure, ensuring their traceability. It also provides to the CRC the technical support required in terms of financial
risks for a better performance of its functions.
●
relevant models used to manage and control the risks faced by the Group, as an independent third party from those
developing or using the models in order to ensure its accuracy, robustness and stability. This review process is not
restricted to the approval process, or to the introduction of changes in the models, but it is a plan to make a regular
assessment of those models, with the subsequent issue of recommendations and actions to mitigate identified
weaknesses.
The Head of Risk Internal Control of the Group is responsible for the function and reports about his activities and work plans
to the Head of Regulation & Internal Control and to the CRC, with the corresponding support in the issues required, and, in
particular, challenging that GRM’s reports submitted to the Committee are aligned with the criteria established at the time.
In addition, the risk internal control function is global and transversal, it includes all types of financial risks and has specific
units in all geographical and/or business areas, with functional reporting to the Head of Risk Internal Control of the Group.
The Risk Internal Control function must ensure compliance with the general risks strategy defined by the Board of Directors,
with adequate proportionality and continuity. In order to comply with the control activity within its scope. Risk Internal Control
is member of GRM’s top-level committees (sometimes even assuming the Secretariat role), independently challenging the
decisions that may be taken and, specifically, the decisions related to the definition and application of internal risk regulation.
Furthermore, the control activity is developed within a homogeneous methodological framework at a Group level, covering
the entire life cycle of financial risks management and carried out under a critical and analytical approach.
The Risk Internal Control team reports the results of its control function to the corresponding heads and teams, promoting
the implementation of corrective measures and submitting these assessments and the resolution commitments in a
transparent manner to the established levels.
Lastly, and notwithstanding the control responsibility that GRM teams have in the first instance, Risk Internal Control teams
promote a control culture in GRM, conveying the importance of having robust processes.
Risk Appetite Framework
Elements and development
The Group's Risk Appetite Framework approved by the corporate bodies determines the risks and the risk level that the
Group is willing to assume to achieve its business objectives considering the organic evolution of business. They are
expressed in terms of solvency, liquidity and funding and profitability and income recurrence, which are reviewed periodically
and in case of material changes in the business strategy or relevant corporate transactions.
The Risk Appetite Framework is expressed through the following elements:
●
The BBVA Group develops a multichannel and responsible universal banking business model, based on values,
committed to sustainable development and centered on our customers’ needs, focusing on operational excellence
and the preservation of adequate security and business continuity.
BBVA intends to achieve these goals while maintaining a moderate risk profile, so the risk model established aims
at ensuring a robust financial position, facilitating its commitment with sustainability and obtaining a sound risk-
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adjusted profitability throughout the cycle, as the best way to face adverse environments without jeopardizing its
strategies.
Risk Management at BBVA is based on prudent management, an integral view of all risks, a portfolio diversification
by geography, asset class and client segment and keeping a long -term relationship with the client, accompanying
him in the transition to a sustainable future, to guarantee profitable growth and generation of recurring value.
●
principles of risk management in terms of solvency, liquidity and funding and profitability and income recurrence.
Moreover, the core metrics reflect, in quantitative terms, the principles and the target risk profile set out in the Risk
Appetite statement. Each core metric has three thresholds ranging from usual management of the businesses to
higher levels of impairment:
o
o
o
associated with regulatory requirements.
●
statements are established that set out the general management principles for that risk and a number of metrics
are determined, whose observance enables compliance with the core metrics and the Group's Risk Appetite
statement. These metrics have a maximum risk appetite threshold.
In addition to this Framework, there is a level of management limits that is defined and managed by the areas responsible
for the management of each type of risk in the development of the structure of metrics by type of risk, in order to ensure that
the early management of risks complies with that structure and, in general, with the established Risk Appetite Framework.
Each significant geographical area (e.g those representing more than 1% of the assets or operating income of the BBVA
Group) has its own Risk Appetite framework, consisting of its local Risk Appetite statement, core metrics and statements,
metrics and statements by type of risk, which must be consistent with those set at the Group level, but adapted to their own
reality. These are approved by the corresponding corporate bodies of each entity. This Appetite Framework is deployed
through a structure of limits consistent with the above.
The corporate risks area works with the various geographical and/or business areas to define their Risk Appetite Framework,
so that it is coordinated with, and integrated into, the Group's Risk Appetite Framework, making sure that its profile is in line
with the one defined. Moreover, and for the purposes of monitoring at local level, the Chief Risks Officer of the geographical
and/or business area regularly reports on the evolution of the metrics of the Local Risk Appetite Framework to the corporate
bodies, as well as to the relevant top-level local committees, following a scheme similar to that of the Group, in accordance
with its own corporate governance systems.
Within the issuing process of the Risk Appetite Framework, Risk Internal Control carries out, within the scope of the GRM
area (the GRMC), the effective challenge of the Framework proposal prior to its escalation to corporate bodies, which is also
documented, and it is extended to the approval of the management limits under which it is developed, also supervising its
adequate approval and extension to the different entities of the Group.
Monitoring of the Risk Appetite Framework and management of breaches
So that corporate bodies can develop the risk functions of the Group, the heads of risks at an executive level will regularly
report (or more frequently in the case of the CRC, within its scope of responsibility) on the evolution of the metrics of the
Risk Appetite Framework of the Group, with the sufficient granularity and detail, in order to check the degree of compliance
of the risks strategy set out in the Risk Appetite Framework of the Group approved by the Board of Directors.
If, through the monitoring of the metrics and supervision of the Risk Appetite Framework by the executive areas, a relevant
deviation or breach of the maximum appetite levels of the metrics is identified, that situation must be reported and, where
applicable, the corresponding corrective measures must be submitted to the CRC.
After the relevant review by the CRC, the deviation must be reported to the CDP –as part of its role in the monitoring of the
evolution of the risk profile of the Group– and to the Board of Directors, which will be responsible, when applicable, for
implementing the corresponding executive measures, including the modification of any metric of the Risk Appetite
Framework. For this purpose, the CRC will submit to the corresponding corporate bodies all the information received and
the proposals prepared by the executive areas, together with its own analysis.
Notwithstanding the foregoing, once the information has been analyzed and the proposal of corrective measures has been
reviewed by the CRC, the CDP may adopt, on grounds of urgency and under the terms established by law, measures
corresponding the Board of Directors, but always reporting those measures to the Board of Directors in the first meeting
held after the implementation for ratification purposes.
In any case, an appropriate monitoring process will be established –with a greater information frequency and granularity, if
required– regarding the evolution of the breached or deviated metric, and the implementation of the corrective measures,
until it has been completely redressed, with the corresponding reporting to corporate bodies, in accordance with its risks
monitoring, supervision and control functions.
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Integration of the Risk Appetite Framework into the management
The transfer of the Risk Appetite Framework to ordinary management is underpinned by three basic elements:
1.
policies within its scope of action, and develops the additional internal regulation required for the development of
those policies and the operating frameworks on the basis of which risk decisions must be adopted within the Group.
The approval of the general policies for all types of risks is a responsibility of the corporate bodies of BBVA, while
the rest of regulation is defined at an executive level according to the framework of competences applicable at any
given time. The Risks units of the geographical and/or business areas comply with this regulation and performing,
where necessary, the relevant adaptation to local requirements, in order to have a decision-making process that is
appropriate at local level and aligned with the Group's policies.
2.
cascade process established to set limits adjusted to the target risk profile. The Risks units of the corporate area
and of the geographical and/or business areas are responsible for ensuring the alignment of this process with the
Group's Risk Appetite Framework in terms of solvency, liquidity and funding and profitability and income recurrence.
3.
type.
Assessment, monitoring and reporting
Assessment, monitoring and reporting is a cross-cutting function at Group level. This function ensures that the model has a
dynamic and proactive vision to enable compliance with the Risk Appetite Framework approved by the Board of Directors,
even in adverse scenarios.
This process is integrated in the activity of the Risk units, both of the corporate area and in the geographical and/or business
units, together with the units specialized in non-financial risks and reputational risk within the Regulation & Internal Control
and Communications & Responsible Business areas respectively, in order to generate a comprehensive and single view of
the risk profile of the Group.
This process is developed through the following phases:
●
and/or business areas in relation to the defined risk thresholds.
●
Framework based on different scenarios, including stress testing scenarios.
●
enable a dynamic management of the situation, even before it takes place.
●
among others, to anticipate their future development.
●
with the frequency and completeness appropriate to the nature, significance and complexity of the reported risks.
The principle of transparency governs all the risk information reporting process.
Infrastructure
For the implementation of the Model, the Group has the resources required for an effective management and supervision of
risks and for achieving its goals. In this regard, the Group's risks function:
●
resources will evolve over time based on the specific needs of the GRM and Regulation & Internal Control areas,
always with a high analytical and quantitative capacity as the main feature in the profile of those resources.
Likewise, the corresponding units of the geographical and/or business areas ensure they have sufficient means
from the resources, structures and tools perspective in order to achieve a risk management process aligned with
the corporate model.
●
profiles, and the assessment of the capital required to take those risks.
●
and measure the variables and specific data of the risk function; support risk management according to this Model;
and provide an environment for storing and using the data required for risk management purposes and reporting
to supervisory bodies.
●
internal regulation.
Within the risk functions, both the profiles and the infrastructure and data shall have a global and consistent approach.
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The human resources among the countries must be equivalent, ensuring a consistent operation of the risk function within
the Group. However, they will be distinguished from those of the corporate area, as the latter will be more focused on the
conceptualization of appetite frameworks, operating frameworks, the definition of the regulatory framework and the
development of models, among other tasks.
As in the case of the human resources, technological platforms must be global, thus enabling the implementation of the Risk
Appetite Framework and the standardized management of the risk life cycle among all countries.
The corporate area is responsible for deciding on the platforms and for defining the knowledge and roles of the human
resources. It is also responsible for defining risk data governance.
The foregoing is reported to the corporate bodies of BBVA so they can ensure that the Group has the appropriate means,
systems, structures and resources.
Operational Risk
BBVA defines operational risk (“OR”) as any risk that could result in losses caused by human error; inadequate or flawed
internal processes; undue conduct with respect to customers, markets or the institution; failures, interruptions or flaws in
systems or communications; theft, loss or wrong use of information, as well as deterioration of its quality, internal or external
fraud, including in any case those derived from cyberattacks; theft or harm to assets or persons, legal risks; risks derived
from staff management and labor health; and defective service provided by suppliers.
Operational risk management is oriented towards the identification of the root causes to avoid their occurrence and mitigate
possible consequences. This is carried out through the establishment of mitigation plans, monitoring and the development
of control frameworks aimed at minimizing resulting economic and reputational losses and their impact on the recurrent
generation of results, and contributing the increase the quality, safety and availability of the provided service. Operational
risk management is integrated into the global risk management structure of the BBVA Group.
This section addresses general aspects of operational risk management as the main component of non-financial risks.
However, sections devoted to conduct and compliance risk and to cybersecurity risk management are also included in the
non-financial information report.
Operational Risk Management Principles
The BBVA Group is committed to preferably applying advanced operational risk management models, regardless of the
capital calculation regulatory model applicable at the time. Operational risk management at the BBVA Group shall:
●
●
as well as the decisions or positioning of BBVA's corporate bodies.
●
modification of products, activities, processes or systems, as well as decisions regarding the outsourcing or hiring
of services, and establish mechanisms to assess and mitigate risk to a reasonable extent prior to implementation,
as well as review the same on a regular basis.
●
the Group is exposed, in order to adopt appropriate mitigation measures in each case, once the identified risk and
the cost of mitigation (cost/benefit analysis) have been considered, while safeguarding the Group's solvency at all
times.
●
the effectiveness of mitigation and control environments, fostering proactive risk management.
●
provided that the cost/benefit analysis so recommends. To this end, procedures must be in place to evaluate
operational events and mechanisms and to record the operational losses that may be caused by the same.
●
and support, where appropriate, the implementation of measures as required to prevent them from occurring at the
Group.
●
their exceptional nature may not be included in the loss database; or if they are, feature with impacts that are not
very representative for the purpose of valuing possible mitigation measures.
●
and bodies involved in operational risk management are clearly defined.
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●
consideration credit or market events that may have an operational origin.
Operational risk control and management model
The operational risk management cycle at BBVA is similar to the one implemented for the rest of risks. Its elements are:
Operational risk management parameters
Operational risk forms part of the risk appetite framework of the Group and includes three types of metrics and limits:
●
diversification effects and the additional estimation of potential and emerging risks through stress scenarios
designed for the main types of risks. The economic capital is regularly calculated for the main banks of the Group
and simulation capabilities are available to anticipate the impact of changes on the risk profile or new potential
events.
●
business area and type of risk.
●
operational risk is being implemented throughout the Group. These metrics make it possible to intensify the
anticipatory management of risk and objectify the appetite to different sources.
Operational risk admission
The main purposes of the operational risk admission phase are the following:
●
modification of existing, products, activities, processes or systems, as well as purchasing decisions (e.g.
outsourcing).
●
have been taken in each case, including risk assurance where deemed appropriate.
The Corporate Non-Financial Risk Management Policy sets out the specific operational risk admission framework through
different committees, at a corporate and Business Area level, that follow a delegation structure based on the risk level of
proposed initiatives.
Operational risk monitoring
The purpose of this phase is to check that the target operational risk profile of the Group is within the authorized limits.
Operational risk monitoring considers 2 scopes:
●
the limits and that defined controls are effective.
●
evaluation in order to generate and maintain an updated map of the relevant operational risks in each Area, and
evaluate the adequacy of the monitoring and mitigation environment for said risks. This promotes the
implementation of action plans to redirect the weaknesses detected.
This process is supported by a corporate Governance, Risk & Compliance tool that monitors OR at a local level and its
aggregation at a corporate level.
In addition, and in line with the best practices and recommendations provided by the BIS, BBVA has procedures to collect
the operational losses occurred in the different entities of the Group and in other financial groups, with the appropriate level
of detail to carry out an effective analysis that provides useful information for management purposes and to contrast the
consistency of the Group's operational risk map. To that end, a corporate tool of the Group is used.
The Group ensures continuous monitoring by each Area of the due functioning and effectiveness of the control environment,
taking into consideration management indicators established for the Area, any events and losses that have occurred, as
well as the results of actions taken by the second line of defense, the internal audit unit, supervisors or external auditors.
Operational risk mitigation
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The Group promotes the proactive mitigation of the financial risks to which it is exposed and which are identified in the
monitoring activities.
In order to rollout common monitoring and anticipated mitigation practices throughout the Group, several cross-sectional
plans are being promoted related to focuses from events, lived by the Group or by the industry, self-assessments and
recommendations from auditors and supervisors in different geographies, thereby analyzing the best practices and fostering
comprehensive action plans to strengthen and standardize the control environment.
Insurance of Operational Risk
Insurance is one of the possible options for managing the operational risk to which the Group is exposed, and mainly has
two potential purposes:
●
mitigated by other means.
●
The Group has a general framework that regulates this area, and allows systematizing risk assurance decisions, aligning
insurance coverage with the risks to which the Group is exposed and reinforcing governance in the decision-making process
of arranging insurance policies.
Operational Risk Control Model
BBVA Group's operational risk governance model is based on two components:
●
most advanced operational risk internal control standards.
●
of the different business and support areas.
Corporate Assurance establishes a structure of committees, both local and corporate, to provide senior management with
a comprehensive and homogeneous vision of the main non-financial risks and significant situations of the control
environment. The aim is to support rapid decision-making with foresight, for the mitigation or assumption of the main risks.
Each geography has a Corporate Assurance Committee chaired by the Country Manager and whose main functions are:
●
the risk appetite.
●
they materialize.
●
Committee itself
●
responsibilities and the rest of the organization in this area
At the holding company level there is a Global Corporate Assurance Committee, chaired by the Group's Chief Executive
Officer. Its main functions are similar to those already described but applicable to the most important issues that are
escalated from the geographies and the holding company areas.
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The business and support areas have an Internal Control and Operational Risk Committee, the purpose of which is to ensure
the due implementation of the operational risk management model within its scope of action and drive active management
of such risk, taking mitigation decisions when control weaknesses are identified and monitoring the same.
Additionally, the Non-Financial Risk unit periodically reports the status of the management of non-financial risks in the Group
to the Board's Risk and Compliance Committee.
Reputational risk
Reputational risk assessment
Since 2016, BBVA disposes of a reputational risk assessment methodology. Through this methodology, the Bank defines
and reviews regularly a map in which it prioritizes the reputational risks which have to be faced and the set of action plans
to mitigate them. The prioritization is done based on two variables: the impact on the perception of the stakeholders and the
strength of BBVA facing the risk.
This exercise is performed annually in all geographical areas where the Group is operating and the business areas CIB and
AM EMEA. As a result of the assessment carried out in 2019, 24 mitigation action plans have been conducted during 2020.
The guide for the Annual Reputational Risk Assessment of the stock was updated by the end of 2019 and was implemented
in all Banks of BBVA Group during 2020. Likewise, it is planned to elaborate in 2020 a guide for the Annual Reputational
Risk Assessment in the process of the Admission of Non-financial Risks.
Identification of the Reputational Risk
The Responsible Business teams collaborate, together with the rest of the members of BBVA’s second defense line, in the
different Committees of Admission of the Operational Risk, both at Group and local level. Those Committees are responsible
for the initial identification of potential reputational risks, and, where appropriate, an assessment of the foreseeable impact
on BBVA’s reputation.
Reporting of the Reputational Risk
The results of the annual assessment of the Reputational Risk are reported in every geographical area at the appropriate
governance level and, at Group level, reported to the Global Corporate Assurance Committee and, since 2020, to the
Executive Committee.
Risk factors
As mentioned earlier, BBVA has processes in place for identifying risks and analyzing scenarios that enable the Group to
manage risks in a dynamic and proactive way.
The risk identification processes are forward looking to ensure the identification of emerging risks and take into account the
concerns of both the business areas, which are close to the reality of the different geographical areas, and the corporate
areas and senior management.
Risks are captured and measured consistently using the methodologies deemed appropriate in each case. Their
measurement includes the design and application of scenario analyses and stress testing and considers the controls to
which the risks are subjected.
As part of this process, a forward projection of the risk appetite framework variables in stress scenarios is conducted in order
to identify possible deviations from the established thresholds. If any such deviations are detected, appropriate measures
are taken to keep the variables within the target risk profile.
To this extent, there are a number of emerging risks that could affect the Group´s business trends. These risks are described
in the following main sections:
Risk related to new coronavirus (COVID-19) pandemic
The COVID-19 pandemic is adversely affecting the world economy and economic activity and conditions in the countries in
which the Group operates, leading many of them to economic recession in 2020 and relatively moderate activity growth in
2021, so that probably only from 2022 will the GDP levels observed before the crisis recover. Among other challenges, these
countries are experiencing widespread increases in unemployment levels and falls in production, while public debt has
increased significantly due to support and spending measures implemented by government authorities. In addition, there is
an increase in defaults on debts by both companies and individuals, volatility in financial markets, including exchange rates,
and falls in the value of assets and investments, all of which have had a negative impact on the Group's in the year 2020
and is expected to continue to affect in the future.
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Furthermore, the Group may be affected by the measures adopted by regulatory authorities in the banking sector, including
but not limited to, the recent reductions in reference interest rates, the relaxation of prudential requirements, the suspension
of dividend payments, the adoption of payment deferrals measures for bank clients (such as those included in Royal Decree
Law 11/2020 in Spain, as well as in the CECA-AEB agreement to which BBVA has adhered and which, among other things,
allows loan debtors to extend maturities and defer interest payments) and facilities to grant credit through a line of guarantees
or public guarantees, especially to companies and the self-employed individuals, as well as any changes in the financial
asset purchase programs.
Since the outbreak of COVID-19 pandemic, the Group has experienced a decline in its activity. For example, the granting
of new loans to individuals has significantly decreased since the beginning of mobility restriction measures approved in
certain countries in which the Group operates. In addition, the Group faces several risks, such as a greater risk of impairment
of the value of its assets (including financial instruments valued at fair value, which may undergo significant fluctuations)
and of the securities held for liquidity reasons, a possible significant increase in non-performing loans and a negative impact
on the cost of the Group's financing and its access to financing (especially in an environment where credit ratings are
affected).
Furthermore, in several of the countries in which the Group operates, including Spain, the Group has temporarily closed a
significant number of its offices and reduced opening hours to the public, and the teams that provide central services have
been working remotely. Although these measures have been gradually reversed due to the continued expansion of the
COVID-19 pandemic, it is unclear how long it will take until normal operations can fully resume. On the other hand, the
pandemic could adversely affect the business and operations of third parties that provide critical services to the Group and,
in particular, the higher demand and / or lower availability of certain resources could in some cases make it more difficult to
maintain the service levels. In addition, the generalization of remote work has increased the risks related to cybersecurity,
as the use of non-corporate networks has increased.
As a result of the above, the COVID-19 pandemic has had an adverse effect on the Group's results and capital base. During
the first half of the year the main accumulated impacts were:
●
macroeconomic environment, which has had a negative impact of €2,009 million in the Group (including the initial
adverse effect of the payment deferral) and provisions for credit risk and contingent commitments for €95 million,
(see Notes 7.2, 46 and 47 of the accompanying Consolidated Financial Stemens); and
●
macroeconomic scenario in the United States, which has had a net negative impact of €2,084 million on the Group's
attributed profit in this period (although this impact does not affect the tangible book value, nor the solvency or the
liquidity of the Group) (see Notes 18.1 and 49 of the accompanying Consolidated Financial Statements).
From June 30, 2020 on, and as a consequence of the general deterioration of the global macroeconomic scenario, its
specific effects cannot be isolated, affecting all of the Group's consolidated Financial Statements.
Macroeconomic and geopolitical risks
The Global economy is being severely affected by the COVID-19 pandemic. Supply, demand and financial factors caused
an unprecedented fall in GDP in the first half of 2020. Supported by strong fiscal and monetary policy measures, as well as
greater control over the spread of the virus, global growth rebounded more than expected in the third quarter, before slowing
down in the fourth, when the number of infections rose again in many regions, mainly in the United States and Europe. As
for 2021, the unfavorable evolution of the pandemic is expected to adversely affect activity in the short term, while new fiscal
and monetary stimuli, as well as the administering of coronavirus vaccines, are expected to support recovery from mid-year
onwards.
Following the massive fiscal and monetary stimuli to support economic activity and reduce financial tensions, government
debt has increased across the board and interest rates have been cut, and are now at historical low levels. Additional
countercyclical measures may be required. Similarly, a significant reduction in current stimuli is not expected, at least until
the recovery takes hold.
Tensions in the financial markets have moderated rapidly since the end of March 2020, following the decisive actions taken
by the main central banks and the fiscal packages announced in many countries. In recent months, the markets have shown
relative stability and, at certain times, risk-taking movements. Likewise, prog ress related to the development of COVID-19
vaccines and prospects for economic recovery should pave the way for financial volatility to persist at relatively low levels in
general going forward.
BBVA Research estimates that global GDP contracted by around 2.6% in 2020 and will expand by around 5.3% in 2021
and 4.1% in 2022. Activity will recover gradually and heterogeneously among countries. Various epidemiological, financial
and geopolitical factors are also contributing to the persistent exceptionally high uncertainty.
With regard to the banking system, in an environment in which much of the economic activity has been at a stand still for
several months, the services provided have played an essential role, basically for two reasons: firstly, the banks have
ensured the proper functioning of collections and payments for households and companies, thereby contributing to the
maintenance of economic activity; secondly, the granting of new lending or the renewal of existing lending has reduced the
impact of the economic slowdown on household and business income. The support provided by the banks over the months
108
of lockdown and public guarantees have been essential in softening the impact of the crisis on companies' liquidity and
solvency, meaning that banking has become its main source of funding for most companies.
In terms of profitability, European and Spanish banking have deteriorated, primarily because many entities recorded high
provisions for impairment on financial assets in the first two quarters of 2020 as a result of the worsening macroeconomic
environment following the pandemic outbreak. Pre-pandemic profitability levels remained far from the levels prior to the
previous financial crisis. This is in addition to the accumulation of capital since the previous crisis and the very low interest
rate environment that we have been experiencing for several years. Nevertheless, the banks are facing this situation from
a healthy position and with solvency that has been constantly increasing since the 2008 crisis, with reinforced capital and
liquidity buffers and, therefore, with a greater lending capacity.
The BBVA Group has a General Risk Management and Control Model appropriate to its business model, its organization,
the countries in which it operates and its corporate governance system, which allows it to carry out its activity within the
framework of the risk management and control strategy and policy defined by the corporate bodies. This model deals with
management in global form adapting itself to the circumstances of each moment. This Model is applied integrally in the
Group.
of these associated risks, establishing different global initiatives that define the risk management strategy during the crisis,
with common action protocols that should be implemented and adapted, when needed, to local needs.
The BBVA Group global risk unit - Global Risk Management (hereinafter, “GRM”) - has increased the frequency and intensity
of the evaluation of potential impacts on the different groups and clients, in order to prevent their future evolution, and carried
out appropriate adjustments and reclassifications, reinforcing its processes, governance and teams in Holding and countries
to act in a coordinated manner, focusing priority on crisis management.
Over the past year, it has been found that the pandemic has a global impact , affecting to a greater extent the sectors in
which there is a high level of human interaction (transport, especially air transport, leisure, especially hotel establishments,
as well as industries and activities dependent on them), regardless of the regional area in question. For this reason, the
Bank's risk management has clearly been intensified by sectorial vectors over other conditioning factors such as geographic.
Regulatory and reputational risks
Financial institutions are exposed to a complex and ever-changing regulatory environment defined by governments and
regulators. This can affect their ability to grow and the capacity of certain businesses to develop, and result in stricter liquidity
and capital requirements with lower profitability ratios. The Group constantly monitors changes in the regulatory framework
that allow for anticipation and adaptation to them in a timely manner, adopt industry practices and more efficient and rigorous
criteria in its implementation.
The financial sector is under ever closer scrutiny by regulators, governments and society itself. In the course of activities,
situations which might cause relevant reputational damage to the entity could raise and might affect the regular course of
business. The attitudes and behaviors of the Group and its members are governed by the principles of integrity, honesty,
long-term vision and industry practices through, inter alia, internal control Model, the Code of Conduct, tax strategy and
Responsible Business Strategy of the Group.
For more information regarding the model of work risk prevention, the compliance system, the management of the tax risk
as well as social and environmental risks, see sections “ Work environment“, “Ethical behavior“, “Fiscal transparency“
“Sustainable Finance”, respectively, within the Non-financial statement.
Business, operational and legal risks
New technologies and forms of customer relationships: Developments in the digital world and in information technologies
pose significant challenges for financial institutions, entailing threats (new competitors, disintermediation, etc.) but also
opportunities (new framework of relations with customers, greater ability to adapt to their needs, new products and
distribution channels, etc.). Digital transformation is a priority for the Group as it aims to lead digital banking of the future as
one of its objectives.
Technological risks and security breaches: The Group is exposed to new threats such as cyber-attacks, theft of internal and
customer databases, fraud in payment systems, etc. that require major investments in security from both the technological
and human point of view. The Group gives great importance to the active operational and technological risk management
and control.
The financial sector faces an environment of increasing regulatory and litigious pressure, and thus, the various Group entities
are usually party to individual or collective judicial proceedings (including class actions) resulting from their activity and
operations, as well as arbitration proceedings. The Group is also party to other government procedures and investigations,
such as those carried out by the antitrust authorities in certain countries which, among other things, have in the past and
could in the future result into sanctions, as well as lead to claims by customers and others. In addition, the regulatory
framework, in the jurisdictions in which the Group operates, is evolving towards a supervisory approach more focused on
109
the opening of sanctioning proceedings while some regulators are focusing their attention on consumer protection and
behavioral risk.
In Spain and in other jurisdictions where the Group operates, legal and regulatory actions and proceedings against financial
institutions, prompted in part by certain judgments in favor of consumers handed down by national and supranational courts,
have increased significantly in recent years and this trend could continue in the future. The legal and regulatory actions and
proceedings faced by other financial institutions in relation to these and other matters, especially if such actions or
proceedings result in favorable resolutions for the consumer, could also adversely affect the Group.
All of the above may result in a significant increase in operating and compliance costs or even a reduction of revenues, and
it is possible that an adverse outcome in any proceedings (depending on the amount thereof, the penalties imposed or the
procedural or management costs for the Group) could damage the Group's reputation, generate a knock-on effect or
otherwise adversely affect the Group.
It is difficult to predict the outcome of legal and regulatory actions and proceedings, both those to which the Group is
currently exposed and those that may arise in the future, including actions and proceedings relating to former Group
subsidiaries or in respect of which the Group may have indemnification obligations, but such outcome could be significantly
adverse to the Group. In addition, a decision in any matter, whether against the Group or against another credit entity facing
similar claims as those faced by the Group, could give rise to other claims against the Group. In addition, these actions and
proceedings attract resources from the Group and may occupy a great deal of attention on part of the Group's management
and employees.
As of December 31, 2020, the Group had €612 million in provisions for the proceedings it is facing (included in the line
"Provisions for litigation and pending tax cases" in the consolidated balance sheet) (see Note 25), of which €574 million
correspond to legal contingencies and €38 million to tax related matters. However, the uncertainty arising from these
proceedings (including those for which no provisions have been made, either because it is not possible to estimate them or
for other reasons) makes it impossible to guarantee that the possible losses arising from these proceedings will not exceed,
where applicable, the amounts that the Group currently has provisioned and, therefore, could affect the Group's consolidated
results in a given period.
As a result of the above, legal and regulatory actions and proceedings currently faced by the Group or to which it may
become subject in the future or otherwise affected by, individually or in the aggregate, if resolved in whole or in part adversely
to the Group ́s interests, could have a material adverse effect on the Group’s business, financial condition and results of
operations.
As mentioned in the section “Other non -financial risks” of the Non-financial information report of this Management report,
Central Investigating Court No. 6 of the National High Court is investigating the activities of Centro Exclusivo de Negocios y
Transacciones, S.L. (Cenyt) in the Preliminary Proceeding No. 96/2017. Piece No. 9 of this proceeding includes the provision
of services to the Bank. It is not possible at this time to predict the scope or duration of such proceeding or any related
proceeding or its or their possible outcomes or implications for the Group, including any fines, damages or harm to the
Group’s reputation caused thereby. Capital, treasury stocks, solvency and capital ratios
Capital and treasury stock
Information about common stock and transactions with treasury stock is detailed in Notes 23 and 26 of the accompanying
Financial Statements.
Capital ratios
BBVA's solvency and capital ratios required by the regulation in force in 2020 are outlined in Note 28 of the accompanying
Financial Statements.
110
Subsequent events
On January 22, 2021, BBVA communicated that the sale of its direct and indirect shareholding stake of 100% share capital
in BBVA Paraguay to Banco GNB Paraguay, S.A., after obtaining all required authorizations, had been completed for an
amount of approximately USD 250 million (approximately €210 million).
On January 29, 2021 it was announced that it was foreseen to submit for the consideration of the corresponding BBVA
governing bodies a cash distribution of €0.059 gross per share as shareholders’ distributions in relation to the results in
2020, subject to the prior obtention of the corresponding authorizations, all in accordance with the provisions of the
recommendation of the European Central Bank of 15 December 2020, number ECB/2020/62, on dividend payments during
the COVID-19 pandemic (see Note 3 of the accompanying Financial Statements)
From January 1, 2021 to the date of preparation of these Financial Statements, no other subsequent events not mentioned
above in these financial statements have taken place that could significantly affect the Bank’s earnings or its equity position.
111
Annual Corporate Governance Report
In accordance with the provisions established by Article 540 of the Spanish Corporate Act, the BBVA Group prepared the
Annual Corporate Governance Report for 2020 (which is an integral part of the Management Report for that year) following
the contents set down in Order ECC/461/2013, dated March 20, and in Circular 5/2013, dated June 12, of Comisión Nacional
del Mercado de Valores (CNMV), in the wording provided by Circular 1/2020, dated October 6, of CNMV. It includes a
section detailing the degree to which the Bank is compliant with the recommendations of the Good Governance Code of
listed companies in Spain. In addition, all the information required by Article 539 of the Spanish Corporate Act can be
accessed on BBVA’s website
www.bbva.com
.
112
ANNUAL CORPORATE GOVERNANCE REPORT
OF LISTED COMPANIES
ISSUER IDENTIFICATION
YEAR-END DATE:
31/12/2020
Company Name:
BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Registered Office:
Plaza de San Nicolás, 4, 48005 Bilbao (Bizkaia)
113
ANNUAL CORPORATE GOVERNANCE REPORT
OF LISTED COMPANIES
A. OWNERSHIP STRUCTURE
A.1 Fill in the following table on the company's share capital:
Date of last
modification
Share capital
(EUR)
Number of shares
Number of
voting rights
24/04/2017
3,267,264,424.20
6,667,886,580
6,667,886,580
Indicate if there are different share classes with different rights associated with them:
No
A.2 Detail the direct and indirect holders of significant shareholdings in the company at financial year-end,
excluding directors:
Name or
corporate name
of the
shareholder
% of voting rights attached
to shares
% of voting rights
through financial
instruments
Total % of voting rights
Direct
Indirect
Direct
Indirect
Blackrock, Inc.
5.48%
0.44%
5.92%
Norges Bank
3.24%
0.13%
3.37%
Details of indirect participation:
Name or corporate name
of indirect shareholder
Name or corporate name
of direct shareholder
% of voting rights
attached to shares
% of voting rights
through financial
instruments
Total % of
voting rights
Indicate the most significant changes in the shareholder structure during the financial year:
State Street Bank and Trust Co., The Bank of New York Mellon S.A.N.V. and Chase Nominees Ltd., as
international custodian/depositary banks, hold, as of 31 December 2020, 10.94%, 1.31% and 8.36% of
BBVA's share capital, respectively. Of said positions held by the custodian banks, BBVA is not aware
of any individual shareholders with direct or indirect holdings greater than or equal to 3% of the BBVA
share capital.
Communication of significant shareholdings to the Spanish National Securities Market Commission
(CNMV): On 18 April 2019, Blackrock, Inc. informed the CNMV that it had an indirect holding of 5.917%
of BBVA's share capital, through the company Blackrock, Inc.
Communication of significant shareholdings to the CNMV: On 11 May 2020, Norges Bank informed the
CNMV that it had a direct holding of 3.366% of BBVA's share capital.
A.3 Fill in the following tables with the members of the company's board of directors with voting rights on
company shares:
114
Name or corporate name
of the director
% of voting rights
attached to shares
% of voting rights
through financial
instruments
Total % of
voting right
% of voting rights that
can be transferred
through financial
instruments
Direct
Indirect
Direct
Indirect
Direct
Indirect
Carlos Torres Vila
0.01
0.00
0.00
0.00
0.01
0.00
0.00
Onur Genç
0.01
0.00
0.00
0.00
0.01
0.00
0.00
José Miguel
Andrés Torrecillas
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Jaime Félix
Caruana Lacorte
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Raúl Catarino
Galamba de Oliveira
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Belén Garijo López
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Sunir Kumar Kapoor
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Lourdes Máiz Carro
0.00
0.00
0.00
0.00
0.00
0.00
0.00
José Maldonado
Ramos
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Ana Cristina
Peralta Moreno
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Juan Pi Llorens
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Ana Leonor
Revenga Shanklin
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Susana
Rodríguez Vidarte
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Carlos Vicente
Salazar Lomelín
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Jan Paul Marie
Francis Verplancke
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Total % of voting rights held by the board of directors
0.02%
115
Details of indirect participation:
Name or corporate
name
of the director
Name or
corporate
name of direct
shareholder
% of voting
rights
attached to
shares
% of voting
rights through
financial
instruments
Total %
of voting
rights
% of voting rights that can be
transferred through financial
instruments
A.4 Where applicable, indicate any family, commercial, contractual or corporate relationships between
holders of significant shareholdings, insofar as the company is aware of them, unless they are of little
relevance or due to ordinary trading or exchange activities, except those described in Section A.6:
Name of related person
or company
Type of relationship
Brief description
A.5 Where applicable, indicate any commercial, contractual or corporate relationships between holders
of significant shareholdings and the company and/or its group, unless they are of little relevance or
due to ordinary trading or exchange activities:
Name of related person
or company
Type of relationship
Brief description
A.6 Describe the relationships, unless insignificant for the two parties, that exist between significant
shareholders or shareholders represented on the board and directors, or their representatives in the
case of directors that are legal persons.
Explain, as the case may be, how the significant shareholders are represented. Specifically, state
those directors appointed to represent significant shareholders, those whose appointment was
proposed by significant shareholders or who were linked to significant shareholders and/or their group
companies, and specify the nature of the relationships. In particular, indicate, where applicable, the
existence, identity and position of board members—or their representatives— of the listed company
who are members—or representatives of members—of the management body of companies that hold
significant shareholdings in the listed company or of companies of said significant shareholders'
groups.
Name or corporate name of
linked director or
representative
Name or corporate name of
linked holder
of significant shareholdings
Name of the company of the
significant shareholder's
group
Description of
relationship/position
Remarks
A.7 Indicate whether the company has been informed of any shareholder agreements that may affect it,
as set out under Articles 530 and 531 of the Corporate Enterprises Act. Where applicable, briefly
describe them and list the shareholders bound by such agreement:
No
116
Indicate whether the company is aware of the existence of concerted actions by its shareholders. If
so, describe them briefly:
No
If there has been any amendment or breaking-off of said pacts or agreements or concerted actions in
the financial year, indicate this expressly:
A.8 Indicate whether any legal or natural person exercises or may exercise control over the company
pursuant to Article 5 of the Securities Exchange Act. If so, identify them:
No
At financial year-end:
Number of direct shares
Number of indirect shares (*)
Total % of share capital
592,832
13,760,000
0.22%
(*) Through:
Name or corporate name of direct holder of shareholding
Number of direct shares
Corporación General Financiera, S.A.
13,760,000
Total:
13,760,000
Give details of any significant changes that have occurred during the financial year:
Explain the significant changes
In 2020, five communications regarding treasury shares were sent to the CNMV, as the acquisitions had exceeded the 1%
threshold. The communications were as follows:
●
Communication date: 21/01/2020. A total of 2,834,633 direct shares and 13,930,924 indirect shares,
representing a total of 0.251% of the share capital.
●
Communication date: 01/04/2020. A total of 3,332,105 direct shares and 4,165,426 indirect shares, representing
a total of 0.112% of the share capital.
●
Communication date: 12/06/2020. A total of 2,173,039 direct shares and 3,563,872 indirect shares, representing
a total of 0.086% of the share capital.
●
Communication date: 07/09/2020. A total of 1,333,849 direct shares and 15,542,111 indirect shares,
representing a total of 0.253% of the share capital.
●
Communication date: 09/12/2020. A total of 1,268,461 direct shares and 15,844,930 indirect shares,
representing a total of 0.257% of the share capital.
A.10 Describe the conditions and term of the current mandate of the general meeting for the board of
directors to issue, buy back and transfer treasury shares.
●
The BBVA General Meeting held on 17 March 2017, under item three of the agenda, passed
a resolution to delegate to the Board the power to increase share capital for a period of five
years up to a maximum amount corresponding to 50% of BBVA's share capital on the date of
such authorisation. This can be done on one or several occasions, to the amount that the
Board resolves, by issuing new shares of any kind allowed by law, with or without an issue
premium, the counter-value of said shares comprising cash considerations. The authorisation
117
includes the setting out of the terms and conditions of the share capital increase in any respect
not provided for in the resolution, and delegation to the Board of a power to wholly or partly
exclude pre-emptive subscription rights in relation to any share capital increase carried out by
virtue of the resolution when so demanded by the corporate interest and in compliance with
the applicable legal requirements. However, this power was limited insofar as the nominal
amount of the capital increases resolved upon or actually carried out with an exclusion of the
pre-emptive subscription right by virtue of this delegation or resolved upon or executed to
accommodate the conversion of ordinarily convertible issues that are also carried out with an
exclusion of the pre-emptive subscription right in the exercise of the delegated power to issue
convertible securities granted by the General Meeting itself, under item five of the agenda,
may not exceed the maximum nominal amount, taken as a whole, of 20% of BBVA's share
capital at the time of delegation. This limit does not apply to issues of contingently convertible
securities.
To date, BBVA has not adopted any resolution using this delegated power.
●
The BBVA General Meeting of 17 March 2017, under the fifth item on the agenda, delegated
to the Board the power to issue securities that are convertible into newly issued BBVA shares,
on one or more occasions within a maximum term of five years, up to a total combined
maximum amount of EUR 8,000,000,000 or its equivalent in another currency; the Board may
likewise resolve upon, set and determ ine the terms and conditions of the issues carried out,
determine the basis and mode of conversion, and resolve upon, set and determine the
conversion ratio, which may be fixed or variable. Moreover, the General Meeting resolved to
delegate to the Board the power to totally or partially exclude pre-emptive subscription rights
over any issue of convertible securities that may be made under the agreement, when the
corporate interest so requires, in compliance with any applicable legal requirements. However,
this power was limited in so far as the normal amount of the capital increases resolved upon
or actually carried out to accommodate the conversion of ordinarily convertible issues
executed using this delegated power with an exclusion of the pre-emptive subscription right,
and those resolved upon or executed also with an exclusion of the pre-emptive subscription
right in the exercise of the delegated power to increase share capital granted by the same
Meeting, under item four of the Agenda, may not exceed the maximum nominal amount, taken
as a whole, of 20% of BBVA's share capital at the time of delegation. This limit does not apply
to issues of contingently convertible securities.
Through the aforementioned delegation, BBVA has made six issuances of contingently
convertible perpetual securities (Additional Tier 1 capital instruments), without pre-emptive
subscription rights, namely two issuances in the 2017 financial year in the amounts of EUR
500 million and USD 1 billion; one in the 2018 financial year in the amount of EUR 1 billion;
two in the 2019 financial year in the amounts of EUR 1 billion and USD 1 billion; and one in
2020 in the amount of EUR 1 billion.
●
Under the third item of the agenda of the BBVA General Meeting held on 16 March 2018, it
was resolved to grant BBVA the authority, whether directly or through any of its subsidiaries,
and for a period of no more than five years, at any time and on as many occasions as it deems
necessary, to derivatively acquire BBVA shares by any means permitted by law, including
charging the acquisition to the profits for the financial year and/or to freely available reserves,
as well as to later divest the acquired shares by any means permitted by law. The derivative
acquisition of shares is to be carried out, in all cases, in accordance with the applicable legal
conditions or by the competent authorities and, in particular, with the following conditions: (i)
the nominal value of the treasury stock acquired, whether directly or indirectly, by means of
this authorisation, when added to that already held by BBVA and its subsidiaries, may not
exceed 10% of the subscribed share capital of BBVA or, where appropriate, the maximum
amount permitted under the applicable legislation; and (ii) the acquisition price per share may
not be lower than the nominal value of the share, and must be under 10% higher than the
share price or any other price associated with the shares at the time that they are acquired.
The aforementioned General Meeting also expressly authorised that the shares acquired by
BBVA or any of its subsidiaries may, through this authorisation, be partially or totally set aside
for workers or directors of BBVA or its subsidiaries, either directly or as a result of them
exercising any option rights that they may hold.
118
A.11 Estimated floating capital:
%
Estimated floating capital
90.48%
Remarks
This estimated floating BBVA capital has been calculated by deducting, from the share capital, the capital held by the
direct and indirect holders of significant shares (Section A.2), the members of the Board of Directors (Section A.3) and
the capital held in treasury shares (Section A.9), all as of 31 December 2020, in accordance with the instructions for
completing the Annual Corporate Governance Report
A.12 Indicate whether there is any restriction (statutory, legislative or of any other kind) on the
transferability of securities and/or any restriction on voting rights. In particular, report the
existence of any restrictions that might hinder the takeover of the company through the purchase
of its shares on the market, as well as any authorisation or prior communication regimes that are
applicable to the purchase or transfer of the company's financial instruments in accordance with
sector legislation.
Yes
Description of the restrictions
Regarding the exercise of the right to vote, there are no legal or statutory restrictions on this. Thus, in accordance with
Article 31 of the Bylaws, each voting share will confer the right to one vote on the holder, whether present or represented
at the General Shareholders' Meeting, regardless of its disbursement.
There are also no statutory restrictions on the acquisition or transfer of shares in the company's share capital.
As for the legal restrictions on the acquisition or transfer of holdings in the company's share capital, Spanish Act 10/2014,
of 26 June, on the regulation, supervision and solvency of credit institutions (the LOSS) establishes that the direct or
indirect acquisition of a significant holding (as defined in Article 16 of that Act) in a credit institution is subject to
assessment by the Bank of Spain as set out in Articles 16 et seq. of that Act. Additionally, Article 25 of Royal Decree
84/2015, implementing the LOSS, establishes that the Bank of Spain shall evaluate proposals for acquisitions of
significant shares and submit a proposal to the European Central Bank regarding whether to oppose this acquisition or
not. This same article establishes the criteria that should be considered during said evaluation and the applicable
timelines.
A.13 Indicate whether the general meeting has agreed to adopt measures to neutralise a public
takeover bid, pursuant to Act 6/2007.
No
If so, explain the measures approved and the terms under which the restrictions would be
rendered effective:
Explain the measures approved and the terms under which such limitations would cease to apply
119
A.14 Indicate whether the company has issued securities that are not traded on a regulated market in
the EU.
Yes
Where applicable, indicate the different share classes, and the rights and obligations that each
share class confers.
Indicate the different share classes
All the shares in BBVA's share capital have the same class and series, and confer the same political and economic
rights. There are no different voting rights for any shareholder. There are no shares that do not represent capital.
The Bank's shares are admitted to trade on the stock exchanges in Madrid, Barcelona, Bilbao and Valencia, through
the Spanish Stock Exchange Interconnection System (Continuous Market), as well as on the stock exchanges in London
and Mexico. BBVA's American Depositary shares (ADS) are traded on the New York stock exchange.
B. GENERAL SHAREHOLDERS' MEETING
B.1 Indicate, giving details where applicable, whether there are any deviations from the minimum
standards established under the Corporate Enterprises Act (CEA) with respect to the quorum for
holding the general meeting.
Yes
% required for quorum if different
to that set out in Art. 193 of the CEA
for general circumstances
% required for quorum if different
to that set out in Art. 194 of the CEA
for special circumstances
Quorum on
first call
0.00%
66.66%
Quorum on
second call
0.00%
60.00%
Description of the differences
Article 194 of the Corporate Enterprises Act establishes that in order for a general meeting (whether ordinary or
extraordinary) to validly resolve to increase or reduce capital or make any other amendment to the bylaws, bond issuance,
the suppression or limitation of pre-emptive subscription rights over new shares, or the transformation, merger or spin-off of
the company or global assignment of assets and liabilities or the offshoring of domicile, the shareholders present and
represented on first calling must own at least 50% of the subscribed capital with voting rights.
On second calling, 25% of said capital will be sufficient.
Notwithstanding the foregoing, Article 25 of the BBVA Bylaws requires a super quorum of two thirds of the subscribed capital
with voting rights on first calling, and 60% of the subscribed capital on second calling, for the valid adoption of resolutions
on the following matters: change of the corporate purpose; the transformation, total spin-off or winding up of the Company;
and the modification of the statutory article defining this super quorum.
B.2 Indicate, giving details where applicable, whether there are any deviations from the minimum
requirements established under the Corporate Enterprises Act (CEA) for the adoption of corporate
resolutions:
No
B.3 Indicate the rules applicable to amendments to the company bylaws. In particular, report the
majorities established to amend the bylaws, and the rules, if any, to safeguard shareholders' rights
when amending the bylaws.
Article 30 of the BBVA Company Bylaws establishes that the General Shareholders' Meeting is
empowered to amend the Company Bylaws and to confirm or rectify the manner in which they are
interpreted by the Board of Directors.
To such end, the rules established under Articles 285 et seq. of the Corporate Enterprises Act shall
apply.
The above paragraph notwithstanding, Article 25 of the BBVA Bylaws establishes that in order to
validly adopt resolutions regarding any change to the corporate purpose, transformation, total spin-off
or winding up of the Company and amendment of the second paragraph of said Article 25, two thirds
120
of the subscribed capital with voting rights must attend the General Meeting on first calling, and 60%
of said capital on second calling.
As regards the procedure for amending the Bylaws, Article 4.2 c) of Spanish Act 10/2014, of 26 June,
on the regulation, supervision and solvency of credit institutions (the LOSS), establishes that the Bank
of Spain shall be responsible for authorising the amendments to the bylaws of credit institutions as set
out by applicable regulations.
Further to the above, Article 10 of Royal Decree 84/2015, of 13 February, implementing the LOSS,
stipulates that the Bank of Spain shall make a decision within two months following receipt of the
request for amendment of the Bylaws and that said request must be accompanied by certified minutes
recording the agreement, a report substantiating the proposal drawn up by the board of directors and
draft new bylaws, identifying the cited amendments.
Notwithstanding the foregoing, the aforementioned Article 10 establishes that no prior authorisation
from the Bank of Spain is required, though the latter must be notified for the purposes of entry in the
Registro de Entidades de Crédito
following purposes:
●
Change of the registered office within the national territory.
●
Share capital increase.
●
Verbatim incorporation into the bylaws of legal or regulatory precepts of a mandatory or
prohibitive nature, or for the purpose of complying with legal or administrative decisions.
●
Those amendments for which the Bank of Spain, in response to a prior enquiry made by the
affected bank, deems that authorisation is not required due to their little relevance.
This communication must be made within 15 working days following the adoption of the statute
amendment resolution.
Finally, as a significant entity, BBVA is under the direct supervision of the European Central Bank
(ECB) in cooperation with the Bank of Spain under the Single Supervisory Mechanism, so the
authorisation of the Bank of Spain mentioned above will be submitted to the ECB, prior to its resolution
by the Bank of Spain.
B.4 Indicate the data on attendance at general meetings held during the financial year to which this
report refers and the previous two financial years:
Attendance data
Date of general meeting
% physically
present
% present
by proxy
% distance voting
Total
Electronic
vote
Other
13/03/2020
0.06%
47.76%
4.34%
14.67%
66.83%
Of which is
floating capital:
0.04%
38.48%
4.34%
14.67%
57.53%
15/03/2019
1.77%
38.95%
0.92%
22.79%
64.43%
Of which is
floating capital:
1.75%
33.03%
0.92%
22.79%
58.49%
16/03/2018
1.71%
40.47%
0.23%
22.13%
64.54%
Of which is
floating capital:
1.62%
34.53%
0.23%
22.13%
58.51%
B.5 Indicate whether there were any items on the agenda that were not approved by shareholders for
any reason, for all general meetings that took place in the financial year.
No
B.6 Indicate if there is any statutory restriction that sets out a minimum number of shares required to
attend the general meeting or vote remotely:
Yes
121
Number of shares required to attend the general meeting
500
Number of shares required to vote remotely
1
Remarks
Article 23 of the BBVA Bylaws establishes that holders of 500 shares or more may attend ordinary and extraordinary General
Shareholders' Meetings, provided that their shares are registered at least five days prior to such a meeting, in the
corresponding accounting record, in accordance with the Securities Exchange Act and other applicable provisions.
Holders of fewer shares may group together until they have at least that number, and name a representative.
However, there is no minimum number of shares required to vote remotely. Pursuant to the provisions of Article 8 of BBVA's
Regulations of the General Shareholders' Meeting, shareholders may vote by proxy, by post, electronically or by any other
means of remote communication, provided that the voter’s identity is duly guaranteed. In terms of the constitution of the
General Shareholders' Meeting, shareholders who vote remotely will be counted as present.
B.7 Indicate whether it has been established that certain decisions, other than those set out by law,
involving an acquisition, disposal, the allocation of essential assets to another company or a similar
corporate transaction, must be submitted to the general shareholders' meeting for approval.
No
B.8 Indicate the address and means of access, on the company website, to information on corporate
governance and other information on the general meetings that must be made available to
shareholders on the Company's website.
Information relating to corporate governance and the Company's general meetings can be accessed
via the Banco Bilbao Vizcaya Argentaria, S.A. company website, www.bbva.com, in the Shareholders
and Investors – Corporate Governance and Remuneration Policy section
(
https://shareholdersandinvestors.bbva.com/corporate-governance-and-remuneration -policy/
).
C.1 Board of Directors
C.1.1 Maximum and minimum number of directors established in the bylaws and the number set by
the general meeting:
Maximum number of directors
15
Minimum number of directors
5
Number of directors set by the general meeting
15
Remarks
In accordance with the provisions of Article 34, Paragraph 2 of the Bylaws, the General Shareholders'
Meeting, held on 13 March 2020, resolved to set the total number of directors on the BBVA Board of
Directors at 15.
122
C.1.2 Fill in the following table on the board members:
Name or
corporate name
of the director
Representative
Directorship
type
Position on
the board
Date of first
appointment
Date of most
recent
appointment
Election
procedure
Carlos
Torres Vila
-
Executive
Chairman
04/05/2015
15/03/2019
Resolution of the
General
Shareholders'
Meeting
Onur
Genç
-
Executive
Chief
Executive
Officer
20/12/2018
15/03/2019
Resolution of the
General
Shareholders'
Meeting
José Miguel
Andrés
Torrecillas
-
Deputy Chair
13/03/2015
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Jaime Félix
Caruana
Lacorte
-
Independent
Director
16/03/2018
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Raúl Catarino
Galamba de
Oliveira
-
Independent
Director
13/03/2020
13/03/2020
Resolution of the
General
Shareholders'
Meeting
Belén Garijo
López
-
Independent
Director
16/03/2012
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Sunir Kumar
Kapoor
-
Independent
Director
11/03/2016
15/03/2019
Resolution of the
General
Shareholders'
Meeting
Lourdes Máiz
Carro
-
Independent
Director
14/03/2014
13/03/2020
Resolution of the
General
Shareholders'
Meeting
José
Maldonado
Ramos
-
Other external
Director
28/01/2000
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Ana Cristina
Peralta Moreno
-
Independent
Director
16/03/2018
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Juan Pi Llorens
-
Independent
Lead Director
27/07/2011
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Ana Leonor
Revenga
Shanklin
-
Independent
Director
13/03/2020
13/03/2020
Resolution of the
General
Shareholders'
Meeting
Susana
Rodríguez
Vidarte
-
Other external
Director
28/05/2002
13/03/2020
Resolution of the
General
Shareholders'
Meeting
Carlos Vicente
Salazar Lomelín
-
Other external
Director
13/03/2020
13/03/2020
Resolution of the
General
Shareholders'
Meeting
Jan Paul Marie
Francis
Verplancke
-
Independent
Director
16/03/2018
16/03/2018
Resolution of the
General
Shareholders'
Meeting
Total number of directors
15
Indicate any appointment terminations, as a result of resignation or by resolution of the general
meeting, that have occurred on the board of directors during the reporting period:
123
C.1.3 Fill in the following tables on the board members and their directorship type:
EXECUTIVE DIRECTORS
Name or
corporate name
of the director
Position within
the company's
organisation
structure
Profile
Carlos
Torres Vila
Chairman
Chairman of the BBVA Board of Directors.
He was Chief Executive Officer of BBVA from May 2015 to December 2018,
Head of Digital Banking from 2014 to 2015 and Head of Strategy and Corporate
Development from 2008 to 2014.
In addition, he previously held positions of responsibility in other companies,
with his roles as Chief Financial Officer, Corporate Director of Strategy and
member of the Executive Committee of Endesa being of particular note, as well
as partner at McKinsey & Company.
He completed his studies in Electrical Engineering (BSc) at the Massachusetts
Institute of Technology (MIT), where he also received a degree in Business
Administration. He holds a master's degree in Management (MSc) from the MIT
Sloan School of Management and also a Law degree from the National
Distance Education University (UNED).
Onur
Genç
Chief Executive
Officer
Chief Executive Officer of BBVA.
He served as Chairman and CEO of BBVA Compass and as BBVA Country
Manager in the U.S. from 2017 to December 2018, and served as Deputy CEO
and Executive Vice President of retail and private banking at Garanti BBVA
between 2012 and 2017.
He has also held positions of responsibility in different McKinsey & Company
offices, having also been a Senior Partner and Manager of its Turkish office.
He holds a degree in Electrical Engineering (BSc) from the University of
Boğaziçi in Turkey and a master's degree in Business Administration
(MSIA/MBA) from Carnegie Mellon University in the USA.
Total number of executive directors
2
% of all directors
13%
EXTERNAL PROPRIETARY DIRECTORS
Name or corporate name
of the director
Name or corporate name of the significant
shareholder whom they represent or who has
proposed their appointment
Profile
Total number of proprietary directors
% of all directors
124
EXTERNAL INDEPENDENT DIRECTORS
Name or corporate
name of the director
Profile
José Miguel
Andrés Torrecillas
Deputy Chairman of the BBVA Board of Directors.
His developed his professional career at Ernst & Young, where he has been General
Managing Partner of Audit and Advisory Services and Chairman of Ernst & Young Spain
until 2014. He is a member of the Board of Directors of Zardoya Otis, S.A.
He has been a member of various organisations such as the ROAC (
Registro Oficial de
Auditores de Cuentas
Registro de Economistas
Auditores
Junta Directiva del Instituto Español
Analistas Financieros
Fundación Empresa y Sociedad
Instituto de
Censores Jurados de Cuentas de España
Consejo Asesor del Instituto de Auditores Internos
Internal Auditors) and the Institute of Chartered Accountants in England & Wales (ICAEW).
He holds a degree in Economic and Business Sciences from the Complutense University of
Madrid and has studied at post-graduate level in Management Programs from IESE,
Harvard and IMD.
Jaime Félix
Caruana Lacorte
He has been General Manager of the Bank of International Settlements (BIS), Director of
the Monetary and Capital Markets Department and Financial Counsellor and General
Manager of the International Monetary Fund (IMF), Chairman of the Basel Committee on
Banking Supervision, Governor of the Bank of Spain and member of the Governing Council
of the ECB, among other positions. He is a member of the Group of Thirty (G-30) and
Trustee of the Spanish Aspen Institute Foundation.
He holds a degree in Telecommunications Engineering from the
Escuela Técnica Superior
de Ingenieros de Telecomunicación
Universidad Politécnica de Madrid
is a Commercial Technician and State Economist.
Raúl Catarino
Galamba de Oliveira
He is the Chairman (independent) of the Board of Directors of CTT - Correios de Portugal,
S.A. and a non-executive director of José de Mello Saúde and José de Mello Capital.
His career has been linked to McKinsey & Company, where he was appointed Partner in
1995 and Senior Partner in 2000, and where he was Managing Partner for Spain and
Portugal (2005–2011), Managing Partner for Global Risk Practice (2013–2016), Member of
the Global Shareholders' Council (2005–2011), Member of the Global Partner Nomination
and Evaluation Committees (2001–2017), Member of the Remuneration Committee (2005–
2013) and Chairman of the Global Learning Board (2006–2011).
He holds a BSc in Mechanical Engineering and an MSc in Systems Engineering from the
Instituto Superior Técnico
Economics, also in Portugal.
Belén Garijo López
She is Vice Chair of the Executive Board and Deputy CEO of the Merck Group since 2020,
and on 1 May 2021 she will be Chair of the Executive Board and CEO of the Merck Group.
She is also a member of the Board of Directors of L'Oréal and Chair of the International
Senior Executive Committee (ISEC) of Pharmaceutical Research and Manufacturers of
America.
She has held various positions of responsibility at Abbot Laboratories (1989–1996), Rhône-
Poulenc (1996–1999), Aventis Pharma (1999–2004), Sanofi Aventis (2004–2011) and
Merck (since 2011).
She is a graduate in Medicine from the University of Alcalá de Henares in Madrid and a
specialist in Clinical Pharmacology at
Hospital de la Paz
, Autonomous University of Madrid.
She also holds a master's degree in Business and Management from the Ashridge
Management School (UK).
125
Sunir Kumar Kapoor
He is involved in a range of technology companies in Silicon Valley and Europe, and is an
Operating Partner at Atlantic Bridge Capital, an independent director at Stratio and an
mCloud consultant.
He has been Manager of Business Enterprise EMEA for Microsoft Europe and Director of
Worldwide Business Strategy for the Microsoft Corporation. Among other roles, she was
previously the Executive Vice President and Chief Marketing Officer (CMO) of Cassatt
Corporation and Chair and CEO of UBmatrix Incorporated.
He holds a Bachelor's in Physics from the University of Birmingham and a Master's in
Computer Systems from Cranfield Institute of Technology.
Lourdes Máiz Carro
She was Secretary of the Board of Directors and Director of Legal Services at Iberia,
Líneas
Aéreas de España
including Renfe, GIF (
Gerencia de Infraestructuras Ferroviarias
Administrator, now ADIF), the ICO (
Instituto de Crédito Oficial
Aldeasa and Banco Hipotecario.
She worked in Research, giving classes in Metaphysics and Theory of Knowledge at the
Complutense University of Madrid for five years. She became State Attorney and held
various positions of responsibility in Public Administration, including General Director of
Administrative Organisation, Job Positions and I.T. (Ministry of Public Administrations),
General Director of the
Sociedad Estatal de Participaciones Patrimoniales
Ministry of Economy and Finance and Technical General Secretariat of the Ministry of
Agriculture, Fisheries and Food.
She holds degrees in Law and Philosophy and Education Sciences as well as a Ph.D. in
Philosophy.
Ana Cristina
Peralta Moreno
She is an independent director at Grenergy Renovables and an independent director at
Inmobiliaria Colonial, SOCIMI, S.A.
She was previously Chief Risk Officer and a member of the Bankinter Management
Committee, and Chief Risk Officer and member of the Banco Pastor Management
Committee. She has also held various positions at a number of financial organisations,
notably serving as an independent director at Deutsche Bank SAE, independent director at
Banco Etcheverría, independent director at Grupo Lar Holding Residencial, S.A.U., and
Senior Advisor at Oliver Wyman Financial Services.
She is a graduate in Economic and Business Sciences from Complutense University of
Madrid. She also has a master's degree in Economic-Financial Management from the
Centro de Estudios Financieros
Harvard Business School and PADE (
Programa de Alta Dirección de Empresas
management programme) at IESE.
Juan Pi Llorens
Lead Director of BBVA.
He is currently non-executive Chair of Ecolumber, S.A., non-executive director at Oesia
Networks, S.L. and Tecnobit, S.L.U. (Grupo Oesía).
He has had a professional career at IBM holding various senior positions at a national and
international level, including Vice President of Sales at IBM Europe, Vice President of
Technology & Systems at IBM Europe and Vice President of the Financial Services Sector
in the Growth Markets Units (GMU) in China. He was also Executive Chairman of IBM Spain.
He holds a degree in Industrial Engineering from the
Universidad Politécnica de Barcelona
and completed the PDG (
Programa en Dirección General
programme) at IESE.
Ana Leonor
Revenga Shanklin
Senior Fellow at the Brookings Institution, Associate Professor at the Walsh School of
Foreign Service at Georgetown University and Chair of the Board of Trustees at the ISEAK
Foundation.
Her career has been linked mainly to the World Bank, where, after holding several technical
and management positions in East Asia and the Pacific, Europe and Central Asia, Latin
America and the Caribbean, she has held several leadership positions, including Senior
Director of Global Poverty & Equity (2014–2016) and Deputy Chief Economist (2016–
2017).
She holds a BA in Economics and Mathematics, magna cum laude, from Wellesley College
(USA), an MA and PhD in Economics from Harvard University (USA), and a Certificate in
Human Rights from the Faculty of Law at the University of Geneva (Switzerland).
126
Jan Paul Marie
Francis Verplancke
His roles have included Chief Information Officer (CIO) and Group Head of Technology and
Banking Operations at Standard Chartered Bank, Vice President of Technology and Chief
Information Officer (CIO) for EMEA at Dell, as well as Vice President and Chief of
Architecture and Vice President of Information of the Youth Category at Levi Strauss. He is
currently an advisor to the internal advisory board at Abdul Latif Jameel.
He holds a bachelor's degree in Science, specialising in Computer Science, from the
Programming Centre of the North Atlantic Treaty Organization (NATO) in Belgium.
Total number of independent directors
10
% of all directors
67%
Indicate whether any director considered an independent director is receiving from the company or
from its group any amount or benefit under any item that is not the remuneration for their directorship,
or maintains or has maintained over the last financial year a business relationship with the company
or any company in its group, whether in their own name or as a significant shareholder, director or
senior manager of an entity that maintains or has maintained such a relationship.
Where applicable, include a reasoned statement from the board with the reasons why it deems that
this director can perform their duties as an independent director.
Name or corporate name
of the director
Description of the relationship
Reasoned statement
OTHER EXTERNAL DIRECTORS
Identify all other external directors and explain why these cannot be considered proprietary or
independent directors, and detail their relationships with the company, its executives or shareholders:
Name or corporate
name of the director
Reasons
Company, executive
or shareholder to
which related
Profile
José
Maldonado Ramos
He has been a director for a
continuous period of more
than 12 years.
Banco Bilbao Vizcaya
Argentaria, S.A.
Over the course of his professional
career, he has held the positions of
Secretary of the Board of Directors at
a number of companies, most notably
as Corporate General Secretary of
Argentaria, before taking up the
position of Corporate Secretary of
BBVA. He took early retirement as a
Bank executive in December 2009.
He holds a Law degree from
Complutense University of Madrid. In
1978, he became State Attorney
Susana
Rodríguez Vidarte
She has been a director for a
continuous period of more
than 12 years.
Banco Bilbao Vizcaya
Argentaria, S.A.
She has been Professor of Strategy at
the Faculty of Economics and
Business Administration at the
University of Deusto and a non-
practising member of the Institute of
Accounting and Accounts Auditing.
She was Dean of the Faculty of
Economics and Business
Administration at the University of
Deusto, Director of the Postgraduate
Area and Director of the
Instituto
Internacional de Dirección de
Empresas
She holds a PhD in Economic and
Business Administration from the
University of Deusto.
127
Carlos Vicente
Salazar Lomelín
Applying a criterion of
prudence in the interpretation
of the applicable law, Mr
Salazar Lomelín has been
assigned the status of
external director to Banco
Bilbao Vizcaya Argentaria,
S.A., in view of his
membership of the
management bodies of
companies related to BBVA
Mexico for more than 15
years.
Grupo Financiero
BBVA Bancomer, S.A.
de C.V.
Non-executive director of Grupo
Financiero BBVA Bancomer, S.A. de
C.V.; non-executive director of
BBVA Bancomer, S.A., Institución
de Banca Múltiple, Grupo Financiero
BBVA Bancomer; non-executive
director of Seguros BBVA
Bancomer, S.A. de C.V., Grupo
Financiero BBVA Bancomer; non-
executive director of Pensiones
BBVA Bancomer, S.A. de C.V.,
Grupo Financiero BBVA Bancomer;
and non-executive director of BBVA
Bancomer Seguros Salud, S.A. de
C.V., Grupo Financiero BBVA
Bancomer.
He is also the Chairman of Mexico's
Business Coordinating Council
(since 2019) and an independent
director at Sukarne (since 2017) and
Alsea (since 2019).
His career has been linked mainly to
Grupo Fomento Económico
Mexicano S.A.B. de C.V. (Femsa),
where he was General Manager of
Cervecería Cuauhtémoc-
Moctezuma and then Chief
Executive Officer of Femsa (2014–
2017).
He holds a degree in Economics and
has completed postgraduate studies
in Business Administration at
Instituto Tecnológico y de Estudios
Superiores
Institute of Technology and Higher
Education).
Total number of other external directors
3
% of all directors
20%
Indicate any changes that may have occurred during the period in the directorship type of each
director:
Name or corporate name
of the director
Date of change
Previous type
Current type
128
C.1.4 Fill in the following table with information regarding the number of female directors over the
last four financial years and their directorship types:
Number of female directors
% of all directors
of each type
Financial
year
2020
Financial
year
2019
Financial
year
2018
Financial
year
2017
Financial
year
2020
Financial
year
2019
Financial
year
2018
Financial
year
2017
Executive
0
0
0
0
0.00%
0.00%
0.00%
0.00%
Proprietary
0
0
0
0
0.00%
0.00%
0.00%
0.00%
Independent
4
3
3
2
40%
37.5%
37.5%
33.33%
Other external
1
1
1
1
33.33%
25%
25%
25%
Total:
5
4
4
3
33.33%
26.67%
26.67%
23.08%
C.1.5 Indicate whether the company has diversity policies for the company's board of directors with
regard to issues such as age, gender, disabilities, or professional training and experience. In
accordance with the definition given in the Spanish Account Auditing Act, small and medium-
sized companies will have to report, at a minimum, the policy that they have agreed in regard
to gender diversity.
Yes
If yes, please outline these diversity policies, their objectives, their measures, the way in which
they have been applied and the results thereof in this financial year. Any specific measures
adopted by the board of directors and the appointments committee to attain a balanced and
diverse representation of directors must also be indicated.
If the company does have a diversity policy, explain the reason for this.
Outline of the policies, their objectives, their measures, the way in which they have been
applied and the results thereof
The Bank has a Policy on the selection, suitability and diversity of the BBVA Board of Directors (the
Selection Policy), the current text of which was revised and approved at the end of 2020 by the Board
of Directors, at the proposal of the Appointments and Corporate Governance Committee, in both
cases, in accordance with their respective regulatory powers, taking into account the
recommendations included in the Good Governance Code of Listed Companies of the CNMV and
local and international best practices and recommendations.
This Selection Policy sets out the principles and criteria governing the process for the selection,
appointment and renewal of the members of the BBVA Board of Directors, as well as the legal
requirements that directors must meet, including suitability requirements. The Policy also provides for
elements and objectives concerning the composition of the corporate bodies, including diversity, which
will be attended to ensure that the corporate bodies properly exercise their functions and to guarantee
their effective functioning. All the foregoing in the Bank's best corporate interest.
In this sense, with regard to diversity, the Selection Policy states that the BBVA Board of Directors will
promote diversity in the composition of the Bank's corporate bodies by encouraging the inclusion of
people with different profiles, qualities, knowledge, training and experience.
To ensure that the corporate bodies have an adequate and balanced composition, the refreshment
and selection processes will encourage diversity of their members, based on the needs of the Bank
at all times.
In particular, they will strive to ensure that the Board of Directors has a balanced representation of
men and women. To this end, the Appointments and Corporate Governance Committee has set a
target for representation of the lesser-represented gender, namely to endeavour that female directors
should represent at least 40% of the Board of Directors by the end of the 2022 financial year and
beyond, not dropping below 30% prior to this.
Additionally, the composition of the Board of Directors shall seek to feature an adequate balance
between the different types of director, for non-executive directors to represent an ample majority over
129
executive directors and for the number of independent directors to account for at least 50% of the total
seats.
The corporate bodies shall also seek to combine individuals who have experience and knowledge of
the Group, its businesses and the financial sector in general, with others who have training, skills,
knowledge and experience in other areas and sectors relevant to the Bank.
In any case, BBVA's corporate bodies may take any other diversity factor into consideration that is
relevant at any given moment to accommodate the composition of the corporate bodies to the needs
of the Bank, including criteria such as gender diversity, academic profile, professional experience,
knowledge, disability, origin or age, thus being able to achieve an adequate balance aimed at ensuring
that the corporate bodies can properly and effectively exercise their functions.
In line with the foregoing, the composition of the BBVA Board of Directors brings together directors
with broad experience and knowledge of the financial and banking sector with other directors who
have experience and knowledge in the other areas of interest to the Bank and its Group, such as audit,
risk management, sustainability, corporate governance, the legal and academic field, multinational
enterprise, public institutions and digital business and technology, both at the national and
international level.
Together with this diversity of profiles and expertise, the Board has members with broad experience
on the Board of Directors, which gives them in-depth knowledge of the Bank and its businesses at
both the national and international level. It also ensures that the process of ongoing refreshment of
the corporate bodies, which entails the inclusion of new profiles with lesser knowledge of the Group,
is carried out without affecting the proper functioning of the Board.
Thus, the Board, as a whole, has suitable balance in its composition and suitable knowledge of the
Bank and Group's environment, activities, strategies and risks, which contributes to bettering its
functioning.
In addition, as a result of the Board refreshment process that has taken place in recent years, in 2020:
(i) the appropriate balance between the different types of director has been strengthened and the
majority of non-executive directors on the Board has increased (to 86.67%);
(ii) the majority of independent directors has been increased (to 66.67%); and
(iii) the target for female representation established in the Selection Policy applicable to 2020, i.e. for
30% of directors to be female by 2020, has been achieved (specifically, women represent 33.33% of
the Board).
Therefore, at the end of the 2020 financial year, the Board of Directors meets the aforementioned
diversity targets relating to the composition of the Board of Directors, as provided for in the Selection
Policy, which are also in line with applicable regulations.
C.1.6 Explain any measures that have been agreed by the Appointments Committee to ensure that
the selection procedures are free from implicit biases that could hinder the selection of female
directors, and to ensure that the company includes and makes a conscious effort to find
potential female candidates who match the professional profile, in order to achieve a balanced
representation of men and women. Also indicate whether these measures include
encouraging the company to have a significant number of female senior managers:
Explanation of the measures
As stated in Section C.1.5, the Board of Directors has a Selection Policy that establishes that, with
respect to the selection processes for new Bank directors, as part of the process of progressive and
systematic refreshment of the corporate bodies, the Appointments and Corporate Governance
Committee will ensure that they promote diversity and that, in general, they are not impaired by implicit
biases that may lead to any form of discrimination.
Furthermore, the Committee will ensure that these selection processes facilitate the selection of a
sufficient number of female directors so as to guarantee a balanced representation of women and
men, endeavouring to ensure that women with the relevant professional profile are included amongst
potential candidates.
To this end, the Appointments and Corporate Governance Committee has set a target for
representation of the lesser-represented gender, namely to endeavour that female directors represent
at least 40% of the Board by the end of the 2022 financial year and beyond, not dropping below 30%
prior to this.
130
In light of the foregoing, BBVA has developed director selection processes in recent years, through
which it has ensured compliance with the above principles, as they applied at any given time. In
particular, the presence of women on the Board has been increasing. At the end of the year, one third
of all Board members and 40% of independent directors were female.
As of the date of this report, BBVA has five women on its Board and they are members of five of the
Committees. Furthermore, the majority of the members of the Audit Committee and the
Remunerations Committee are women, including the Chair of the Remunerations Committee.
This means it is meeting the target established in the Selection Policy, which is aligned with the
provisions of the CNMV Good Governance Code, for at least 30% of directors to be female in 2020.
Furthermore, in accordance with the provisions of Article 540 of the Spanish Corporate Enterprises
Act, which stipulates that a brief description of the diversity policy, with regard to members of
management, must be provided, BBVA has a selection and appointment policy for members of Senior
Management that has been approved by the Board.
Said policy is designed to ensure that individuals in Senior Management positions at BBVA have the
capacity to properly exercise the responsibilities conferred upon them. Thus, members of BBVA
Senior Management must have top-level academic and technical qualifications, professional skills—
underpinned by their professional careers to date—applicable to the responsibilities associated with
the role to be fulfilled, a recognised honourable business and professional reputation, and commitment
to BBVA's values.
Pursuant to the provisions of this policy, for the assessment of internal talent, performance is assessed
in terms of the achievement of objectives, potential to assume greater responsibilities in the future,
and individuals' professional capabilities and skills. These assessments may be supported by means
of review sessions during which members of Senior Management analyse the profiles of certain
employees and share their opinions on the achievements and strengths of each individual.
Moreover, for the selection of external candidates for senior management positions, references and
top-level executive search firms are used. The Talent & Culture area ensures that external candidates
possess top-level academic and technical qualifications, that their professional careers to date
adequately encompass the responsibilities associated with the roles to be fulfilled, that they have
recognised business and professional reputations, and that, during their careers at other
organisations, they have demonstrated a high level of alignment with BBVA's values. The candidates
identified through the company's external selection process are considered alongside internal
candidates, in order to select the individual that best fits the role to be fulfilled.
Moreover, in accordance with the Regulations of the Board, the functions of this body include
appointing members of Senior Management based on a report from the Appointments and Corporate
Governance Committee. Prior to the proposal and appointment, the Bank follows a selection process
for members of Senior Management which is governed by the principles and criteria outlined in the
selection and appointment policy for members of Senior Management. This process involves
analysing the functions and candidate profiles, confirming the suitability of the selected candidate,
submitting the proposal for the consideration of the Appointments and Corporate Governance
Committee, which drafts a preliminary report for the Board, and, finally, submitting the proposal to the
Board for approval, which must be supported by a favourable preliminary report from the Appointments
and Corporate Governance Committee.
Appointment of senior managers will be made on the proposal of the Group Executive Chairman for
those who report thereto, and of the proposal of the Chief Executive Officer (
Consejero Delegado
), for
those who report instead thereto, prior information to the Group Executive Chairman. The Board of
Directors will be responsible for the appointment and dismissal of the head of the Internal Audit area,
based on a proposal from the Audit Committee, and the Head of Regulation & Internal Control, on a
proposal from the Risk and Compliance Committee, as well as the determination of their objectives
and assessment of their performance, on a proposal from the corresponding committee.
Following the implementation of this policy, the number of women in Senior Management has
increased, and 27% of senior managers were women at the end of the financial year.
When, despite the measures taken, there are few or no female directors or senior managers, explain
the reasons:
Explanation of the reasons
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C.1.7 Explain the conclusions of the appointments committee regarding the verification of
compliance with the policy aimed at promoting an appropriate composition of the board of
directors.
As part of the annual performance assessment of the Board carried out for 2020, the Appointments
and Corporate Governance Committee, in accordance with its Regulations, has analysed the
structure, size and composition of the corporate bodies, taking into account that these must remain
balanced and adapted to their needs at all times, and that the Board as a whole must have the right
knowledge, skills and experience to understand the business, activities and main risks of BBVA and
its Group, thereby also ensuring that it has the effective capacity to carry out its functions in the Bank's
best corporate interest.
This analysis is carried out in the context of the Board's ongoing and systematic refreshment of the
corporate bodies, whereby people with different profiles and experiences are introduced at appropriate
intervals, thus increasing diversity and ensuring adequate rotation of the Board members, thereby
guaranteeing a balanced representation of directors with a range of experience.
The analysis also takes into account the forecasts and objectives regarding the structure, size and
composition of the Board as set out in applicable legislation, the Regulations of the corporate bodies
and the Selection Policy, as well as the end of the statutory terms each director, where appropriate in
each year.
The Committee also takes into account the functioning and performance of the corporate bodies in
recent years. In 2020, it took into account, in particular, how they have operated during the COVID-19
crisis, during which the directors have shown a great deal of dedication to the Bank as well as
demonstrating flexibility and an ability to adapt to the current circumstances, and during which their
knowledge of the landscape and the Group itself has not only enabled the corporate bodies to
adequately carry out their functions, it has also contributed to the Group being able to tackle the crisis
from a position of strength.
Furthermore, the Committee takes into account the areas and subjects that are of particular relevance
to the performance of the corporate bodies' functions, in particular the Group's current and future
activities, business and strategy.
Among the information used by the Committee to carry out its work, of particular note is the skills and
diversity matrix of the Board of Directors, which is developed to help to identify the Board's skills,
characteristics and experience, as well as those areas that needed to be improved in the future. The
matrix also includes areas, sectors and matters related to banking and finance, as well as others that
are of particular relevance to the Group's strategy and activities.
The matrix includes areas such as banking and financial services; accounting and auditing; risk
management; innovation and information technology; macroeconomic strategy and environment;
human resources and compensation; institutions, legal and regulations; and corporate governance
and sustainability.
The matrix includes directors' professional experience and career paths in different areas such as, for
example, business, boards of directors, public administration and academia, both nationally and
internationally. It also indicates the Board's ratio of men to women.
Regarding the above, the Committee has been able to verify that the Board brings together directors
with broad experience and knowledge of the financial and banking sector with other directors who
have experience in each of the other areas analysed, and that its directors have a diverse range of
career paths, both nationally and internationally.
The Board's diversity of skills, knowledge and experience has been reinforced by the thorough
refreshment process with regard to the corporate bodies, which has seen the introduction of seven
new directors in the past three years, which in turn has bolstered said skills, knowledge and experience
on the Board in areas of particular relevance to the Bank's strategy, business and activities.
In this regard, the Board currently comprises directors with diverse experience on the Board,
combining newly appointed members with others who have experience in the corporate bodies, and
who have significant knowledge of the Group the operational dynamics and working culture of the
corporate bodies; facilitating the progressive renewal process of the corporate bodies, which involves
132
appointing new members with lesser knowledge of the Bank, without affecting the proper functioning
of the corporate bodies.
Continued in section H.
C.1.8 Where applicable, explain why proprietary directors have been appointed at the behest of
shareholders whose holding is less than 3% of the capital:
Name or corporate name of the shareholder
Justification
Indicate whether formal petitions for a seat on the board have been denied if such request
has come from shareholders whose holding is equal to or greater than that of others at whose
behest proprietary directors were appointed. Where applicable, explain why these petitions
were not granted:
No
C.1.9 Where applicable, indicate the powers and faculties delegated by the board of directors to
directors or to board committees:
Name or corporate name of the
director or committee
Brief description
Carlos Torres Vila
He holds the widest-ranging representative and management powers in line
with his duties as Chairman of the Company.
Onur Genç
He holds the widest-ranging representative and management powers in line
with his duties as Chief Executive Officer of the Company.
Executive Committee
Pursuant to Article 30 of BBVA's Regulations of the Board of Directors and
Article 1.2 of the Regulations of the Executive Committee, the Executive
Committee will be made aware of matters delegated to it by the Board of
Directors, in accordance with the law, the Bylaws, the Regulations of the
Board or the Regulations of the Executive Committee.
C.1.10 Where applicable, identify any members of the board who hold positions as directors,
representatives of directors or executives in other companies that belong to the same group
as the listed company:
Name or corporate
name of the director
Corporate name
of the group's entity
Position
Does the director
have executive
duties?
Carlos Torres Vila
BBVA Bancomer, S.A. Institución de
Banca Múltiple, Grupo Financiero
BBVA Bancomer
Director
No
Carlos Torres Vila
Grupo Financiero BBVA Bancomer,
S.A. de C.V.
Director
No
Onur Genç
BBVA USA Bancshares, Inc.
Director
No
Onur Genç
BBVA Bancomer, S.A. Institución de
Banca Múltiple, Grupo Financiero
BBVA Bancomer
Director
No
Onur Genç
Grupo Financiero BBVA Bancomer,
S.A. de C.V.
Director
No
Carlos Vicente
Salazar Lomelín
Grupo Financiero BBVA Bancomer,
S.A. de C.V.
Director
No
Carlos Vicente
Salazar Lomelín
BBVA Bancomer, S.A., Institución de
Banca Múltiple, Grupo Financiero
BBVA Bancomer
Director
No
133
Carlos Vicente
Salazar Lomelín
Seguros BBVA Bancomer, S.A. de
C.V. Grupo Financiero BBVA
Bancomer
Director
No
Carlos Vicente
Salazar Lomelín
Pensiones BBVA Bancomer, S.A. de
C.V. Grupo Financiero BBVA
Bancomer
Director
No
Carlos Vicente
Salazar Lomelín
BBVA Bancomer Seguros Salud, S.A.
de C.V. Grupo Financiero BBVA
Bancomer
Director
No
C.1.11 Where applicable, provide details of any company directors (or representatives of corporate
directors) who also serve as directors (or representatives of corporate directors) on the
boards of other entities that are listed on regulated markets and do not form part of the
company group, of which the company has been informed:
Name or corporate name
of the director
Corporate name of the listed entity
Position
José Miguel Andrés Torrecillas
Zardoya Otis, S.A.
Director
Raúl Catarino Galamba de Oliveira
CTT- Correios de Portugal, S.A.
Chairman
Belén Garijo López
L’Oréal Société Anonyme
Director
Ana Cristina Peralta Moreno
Grenergy Renovables, S.A.
Director
Ana Cristina Peralta Moreno
Inmobiliaria Colonial, SOCIMI S.A.
Director
Juan Pi Llorens
Ecolumber, S,A.
Chairman
Carlos Vicente Salazar Lomelín
Alsea, S.A.B. de C.V.
Director
C.1.12 Indicate and, where applicable, explain whether the company has any agreed rules on the
maximum number of company boards on which its directors may sit, detailing, where
applicable, where such rules have been set out:
Yes
Explanation of the rules and where they are set out
Article 11 of the Regulations of the Board of Directors establishes that, in the performance of their
duties, directors will be subject to the rules on limitations and incompatibilities established under the
current applicable regulations, and in particular, to the provisions of Act 10/2014 on the regulation,
supervision and solvency of credit institutions (the LOSS).
In this regard, Article 26 of the LOSS stipulates that the directors of credit institutions may not
simultaneously hold more positions than those provided for in the following combinations: (i) one
executive position and two non-executive positions; or (ii) four non-executive positions. Executive
positions are understood to be those that undertake management duties irrespective of the legal bond
attributed by those duties. In this respect, the following will count as a single position: 1) executive or
non-executive positions held within the same group; 2) executive or non-executive positions held
within (i) entities that form part of the same institutional protection scheme or (ii) trading companies in
which the entity holds a significant shareholding. Positions held in non-profit organisations or entities
or companies pursuing non-commercial purposes will not count when determining the maximum
number of positions. Nevertheless, the Bank of Spain may authorise members of the Board of
Directors to hold an additional non-executive position if it deems that this would not interfere with the
proper performance of the director's activities in the credit institution.
In addition, pursuant to the provisions of Article 11 of BBVA's Regulations of the Board of Directors,
directors may not:
●
Provide professional services to companies that compete with the Bank or any of the
companies within its Group, or agree to be an employee, manager or director of such
134
companies, unless they have received express prior authorisation from the Board of Directors
or from the General Shareholders' Meeting, as appropriate, or unless these activities were
conducted before the director joined the Bank, they posed no effective competition and the
Bank had been informed of such at that time.
●
Have direct or indirect shareholdings in businesses or enterprises in which the Bank or
companies within its Group hold an interest, unless such shareholding was held prior to joining
the Board of Directors or prior to the Group's acquisition of its holding in such businesses or
enterprises, or unless such companies are listed on national or international securities
markets, or unless authorised to do so by the Board of Directors.
●
Hold political positions or perform any other activities that might have public significance or
affect the Company's image in any way, unless authorised to do so by the Bank's Board of
Directors.
C.1.13 Indicate the amounts of the following items relating to the total remuneration of the board
of directors:
Remuneration of the board of directors accrued during the financial year
(thousands of euro)
14,828
Amount of entitlements accrued by current directors in regard to pensions
(thousands of euro)
23,057
Amount of entitlements accrued by former directors in regard to pensions
(thousands of euro)
73,157
Remarks
The remuneration included in the first item of this section includes the fixed remuneration received by all directors
in 2020, as well as, in the case of executive directors, the amount corresponding to the payment of the Deferred
Portion of the Annual Variable Remuneration for the 2017 financial year to vest in 2021, in cash and in shares,
together with its corresponding update. The amounts of the Deferred Portion of the Annual Variable Remuneration
for 2017 have been determined in 2021, following the result of the Multi-Year Performance Indicators to which
said remuneration was subject, and will be paid in the first quarter of 2021, providing that the conditions to that
effect are met.
To calculate the amount in Euros of the Deferred Portion of 2017 Annual Variable Remuneration of the Chief
Executive Officer, associated to his previous role as President & CEO de BBVA Compass (currently BBVA USA),
the closing exchange rate for January 2021 has been used (USD/EUR 1.2136).
It is noted that executive directors have not accrued any Annual Variable Remuneration for the 2020 financial
year, since they have voluntarily waived it in view of the exceptional circumstances arising from the COVID-19
crisis.
135
C.1.14 Identify the members of senior management who are not also executive directors, and
indicate the total remuneration accrued by them throughout the financial year:
Name or corporate name
Position(s)
María Luisa Gómez Bravo
Global Head of Corporate
& Investment Banking
Jorge Sáenz-Azcúnaga Carranza
Country Monitoring
Pello Xabier Belausteguigoitia Mateache
Country Manager Spain
Eduardo Osuna Osuna
Country Manager Mexico
David Puente Vicente
Global Head of Client Solutions
Jaime Sáenz de Tejada Pulido
Global Head of Finance
Rafael Salinas Martínez de Lecea
Global Head of Global Risk Management
José Luis Elechiguerra Joven
Global Head of Engineering & Organization
Carlos Casas Moreno
Global Head of Talent & Culture
Ricardo Martín Manjón
Global Head of Data
Victoria del Castillo Marchese
Global Head of Strategy & M&A
María Jesús Arribas de Paz
Global Head of Legal
Domingo Armengol Calvo
General Secretary
Ana Fernández Manrique
Global Head of Regulation
and Internal Control
Joaquín Manuel Gortari Díez
Global Head of Internal Audit
Number of women in senior management
4
Percentage out of all senior management members
26.67%
Total remuneration of senior management
(thousands of euro)
16,241
Remarks
C.1.15 Indicate whether there have been any amendments to the regulations of the board during
the financial year:
No
C.1.16 Indicate the procedures for the selection, appointment, re-appointment and removal of
directors. Provide details of the competent bodies, the procedures to be followed and the
criteria to be used in each procedure.
Selection, appointment and re-appointment procedure:
The General Meeting is responsible for appointing and re-appointing members of the Board of
Directors, though the Board has the authority to co-opt members if a seat falls vacant, in accordance
with the regulations, the Bylaws, the Regulations of the Board and the Selection Policy described in
Sections C.1.5 and C.1.6.
The persons proposed to be appointed or re-appointed as members of the Board of Directors must
meet the requirements set out in current legislation, in the specific regulations applicable to credit
institutions, in the Bylaws, in the Regulations of the Board and in the Selection Policy.
136
Proposals for appointment or re-appointment of directors submitted by the Board of Directors to the
General Meeting, as well as appointments made directly to fill vacancies under its co-opting authority,
will be approved at the proposal of the Appointments and Corporate Governance Committee for
independent directors and subject to a report from this Committee for all other directors.
Furthermore, proposals for appointment and re-appointment submitted to the General Meeting must
be accompanied by an explanatory report from the Board of Directors assessing the skills, experience
and merits of the proposed candidate. Proposals for the appointment or re-appointment of non-
independent directors must also be accompanied by a report from the Appointments and Corporate
Governance Committee.
To this end, said Committee will assess the balance of knowledge, skills and experience on the Board
of Directors, as well as the conditions that the candidates must meet to cover vacancies (applicable
legal and suitability requirements, inter alia), evaluating the time commitment considered necessary
so that they can carry out their duties, according to the needs of the corporate bodies.
Thus, the Appointments and Corporate Governance Committee will develop renewal and selection
processes for directors as part of the process of progressive and systematic refreshment of the
corporate bodies, with a view to ensuring that the structure and composition of the Board remains
balanced and in line with the needs of the Bank at all times, having directors with different profiles,
knowledge, training, experience and qualities.
Within these processes, the Committee will ensure that diversity is promoted and that, in general,
there are no implicit biases that may lead to any form of discrimination.
It shall also ensure that these processes facilitate the selection of a sufficient number of female
directors to guarantee a balanced representation of men and women, with the aim that female
directors represent at least 40% of the Board by the end of the 2022 financial year and beyond, with
the figure not dropping below 30% prior to this, while endeavouring to ensure that women who match
the professional profile sought are included amongst potential candidates.
Additionally, the aim is for the composition of the Board of Directors to feature an appropriate balance
between the different types of director, for non-executive directors to represent an ample majority over
executive directors and for the number of independent directors to account for at least 50% of the total
seats.
The corporate bodies will also be assessed to ensure that they have a mix of individuals who have
experience and knowledge of the Bank, the Group, its businesses and the financial sector in genera l,
as well as others who have training, skills, knowledge and experience in other areas and sectors
relevant to the Bank.
In any case, BBVA's corporate bodies may take any other relevant diversity factor into consideration
to adapt the composition of the corporate bodies to the needs of the Bank, taking into account criteria
such as gender diversity, academic profile, professional experience, knowledge, disability, origin or
age, thus being able to achieve an adequate balance.
In the performance of its functions, the Appointments and Corporate Governance Committee may
employ external services to select potential candidates, when it deems this necessary or appropriate.
Duration of mandate and termination:
The directors will hold their position for the term set out in the company Bylaws (three years, after
which they may be reappointed one or more times for an additional three- year term) or, if they have
been co-opted, until the first General Shareholders' Meeting has been held. They will leave their
positions when the term for which they were appointed expires, unless they are re-appointed.
Directors must also inform the Board of Directors of any circumstances affecting them that could harm
the company's standing and reputation, and any circumstances that may have an impact on their
suitability for their role. Directors must offer their resignation to the Board and accept the Board's
decision regarding their continuity in office. Should the Board decide against their continuity, they are
required to tender their resignation, in the circumstances listed in section C.1.19 below.
In any event, directors will resign from their posts upon reaching 75 years of age and must submit
their resignation at the first meeting of the Bank's Board of Directors held after the General
Shareholders' Meeting approving the accounts for the financial year in which they reach said age.
C.1.17 Explain the extent to which the annual evaluation of the board has led to significant changes
in its internal organisation and in the procedures applicable to its activities:
137
Description of the amendments
Article 17 of the Regulations of the Board of Directors states that the Board will assess the quality and
efficiency of the operation of the Board of Directors, based on the report submitted to it by the
Appointments and Corporate Governance Committee. This procedure was followed in the 2020
financial year, and certain measures (indicated below) were undertake n and consolidated, as part of
the ongoing process of developing and adapting BBVA's Corporate Governance System to the needs
of the corporate bodies, to the environment in which it carries out its activities and to regulatory
requirements and best practices.
Accordingly, the BBVA Board of Directors has carried out their self -assessment process for the 2020
financial year, having carried out an analysis of its Corporate Governance System, which took into
consideration, as a starting point, the self-assessment process for the 2019 financial year.
Within the evaluation process for the 2020 financial year, the following is highlighted:
●
the renewal of the composition of the Board of Directors, with the appointment of three new
directors and the re-appointment of two directors, and of the composition of the Board
Committees, in the terms set out in this Report;
●
the consolidation of measures to improve governance structures implemented in the 2019
financial year, together with the development and implementation, in 2020, of measures to
strengthen and improve efficiency in certain aspects of the organisation and functioning of the
corporate bodies, in particular concerning meeting dynamics and the information model;
●
Reinforcement in terms of the distribution of functions among the corporate bodies and the
handling of issues of particular relevance to the Group;
●
The approval of internal regulation to standardise and unify the methodology for the creation,
approval, application and supervision of the Group's internal rules, and the approval and
updating of general policies, through which the corporate bodies establish the general
principles, objectives and the main management and control guidelines that the BBVA Group
must observe within its various areas of activity; and
●
Finally, it was noted that the COVID-19 crisis, which has impacted the organisation at all levels,
meant that the corporate bodies: reinforced their monitoring of the impact of the crisis and
management of the Group's activities, business and results; strengthened the interaction
between the Board, its Committees and the executive team for the analysis of all relevant
information on the evolution of the crisis and its management by the Bank; directly and
continuously monitored and observed the management carried out by the executive team; and
considered the need to adapt the dynamics of their meetings, in terms of how they are held, the
number of meetings and the prioritisation of issues.
In all of this, the Bank's corporate bodies sought to keep BBVA's Corporate Governance System
adapted to the reality, circumstances and needs of the Bank and, consequently, to emphasise the
importance attributed to ensuring its solidity and resilience under all circumstances.
138
Describe the evaluation process and the areas evaluated by the board of directors (assisted, where
applicable, by an external consultant) to assess the operation and composition of the board, its
committees and any other area or aspect that was evaluated.
Description of the evaluation process and the areas evaluated
In accordance with Article 17 of the Regulations of the Board of Directors, the Board assesses the
quality and efficiency of its operation, as well as the performance of the functions of the Chairman of
the Board, based, in each case, on the report submitted to it by the Appointments and Corporate
Governance Committee. The Board of Directors also assesses the performance of the Chief Executive
Officer, based on the report by the Appointments and Corporate Governance Committee, which
includes the assessment performed by the Executive Committee. Finally, the Board of Directors also
assesses the operation of its committees, on the basis of the reports submitted to it by the latter.
The evaluation process carried out in relation to the 2020 financial year consisted of a thorough
analysis and evaluation of the quality and efficiency of the operation of the corporate bodies and the
performance of the Chairman and the Chief Executive Officer. This evaluation was carried out by the
Appointments and Corporate Governance Committee, taking into account several aspects, such the
Board's self-assessment for the 2019 financial year, the directors' view of the operation of the Board,
and the various reports issued, described below.
In line the foregoing, the Board of Directors evaluated: (i) the quality and efficiency of the operation of
the Board of Directors; (ii) the performance of the duties of the Chairman and the Chief Executive
Officer; and (iii) the operation of the Board Committees; as detailed below:
●
The Board of Directors analysed the quality and efficiency of its operation during the 2020
financial year, on the basis of the report by the Appointments and Corporate Governance
Committee on the quality and efficiency of the Board's operation and on its structure, size and
composition. This report contained a detailed analysis of the following: the structure, size and
composition of the Board of Directors, as per Sections C.1.5, C.1.6 and C.1.7; the organisation,
preparation and conducting of the meetings of the Board; the independence and suitability of
directors, and the degree of commitment the Bank requires of Board members (in particular,
the chair of each of the committees) to ensure the proper execution of the duties of director and
the proper operation of the corporate bodies. This analysis was performed on the basis of the
needs of the corporate bodies at any given time and taking into account the Selection Policy.
●
The assessment of the performance of the functions of the Chairman of the Board of Directors,
which was led by the Lead Director in accordance with Article 21 of the Regulations of the
Board, was carried out by the Board on the basis of the report by the Appointments and
Corporate Governance Committee (in accordance with Article 5 of the Regulations of the
Appointments and Corporate Governance Committee) which details the key elements of the
Chairman's performance for the 2020 financial year.
●
The assessment of the performance of the duties of the Chief Executive Officer was carried out
by the Board on the basis of the report by the Appointments and Corporate Governance
Committee, including the assessment carried out in this respect by the Executive Committee
(in accordance with Article 17 of the Regulations of the Board) which details the key elements
of the Chief Executive Officer's performance for the 2020 financial year.
In addition, the Board assessed the quality and efficiency of the functioning of each Committee on the
basis of the reports submitted by their respective Chairs, as described in Section H of this Report.
C.1.18 For those financial years in which an external consultant provided assistance for the
evaluation, provide details of any ongoing business relationships that the consultant or any
entity in their group maintains with this company or any company in this group.
The assessment carried out by the Board of Directors in the 2020 financial year regarding
its quality and operation, its Committees and the performance of the functions of the
Chairman of the Board and the Chief Executive Officer was carried out without the support
of an independent expert.
139
C.1.19 Indicate the circumstances under which directors are obliged to resign.
In addition to the circumstances established in applicable law, directors will cease to hold
office when the term for which they were appointed expires, unless they are re-appointed.
Accordingly, as set forth in Article 12 of the Regulations of the Board of Directors, directors
must offer their resignation to the Board of Directors and accept the Board's decision
regarding their continuity in office. Should the Board decide against their continuity, they are
required to tender their resignation, in the following circumstances:
●
If they find themselves in circumstances deemed incompatible or prohibited under
current legislation, in the Bylaws or in the Regulations of the Board of Directors.
●
When significant changes occur in their personal or professional situation that may
affect the status under which they were appointed as directors.
●
When they are in serious dereliction of their duties as director;
●
When, for reasons attributable to them, acting in their capacity as director, serious
damage has been done to the Company's equity, standing or reputation; or
●
When they are no longer suitable to hold the position of director at the Bank.
C.1.20 Are supermajorities, other than those provided for in law, required for any type of decision?:
No
Where applicable, describe the differences.
C.1.21 Explain whether there are specific requirements, other than those relating to directors, to be
appointed chairman of the board of directors.
No
C.1.22 Indicate whether the bylaws or regulations of the board establish an age limit for directors:
Yes
Age limit
Chairman
Chief Executive Officer
Director
Remarks
As stipulated in Article 4 of the BBVA Regulations of the Board of Directors, directors will resign from their positions,
in any event, upon reaching 75 years of age, and must submit their resignation at the first meeting of the Bank's
Board of Directors held after the General Shareholders' Meeting approving the accounts for the financial year in
which they reach said age.
C.1.23 Indicate whether the bylaws or regulations of the board of directors establish a limited
mandate or other stricter requirements for independent directors in addition to those
provided for in law:
No
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C.1.24 Indicate whether the bylaws or the regulations of the board of directors establish specific
rules for proxy voting within the board of directors for other directors, how this is carried out
and, in particular, the maximum number of proxies that a director may have and whether
there are any restrictions as to what categories may be appointed as a proxy, beyond the
limitations provided for in law. Where applicable, provide a brief description of these rules.
Article 5 of the BBVA Regulations of the Board of Directors establishes that directors are
required to attend meetings of the corporate bodies of which they form part, unless they
have a justifiable reason for not doing so. Directors will participate in the deliberations,
discussions and debates on matters submitted for their consideration and must personally
attend the meetings held.
However, as set forth in Article 26 of the Regulations of the Board of Directors, if it is not
possible for a director to attend a meeting of the Board of Directors, this director may
authorise another director to act as their proxy and cast votes on their behalf, by sending a
letter or email to the Company with the information needed by the proxy director to follow
the absent director's instructions. Applicable legislation states that non-executive directors
may only grant proxy to another non-executive director. The same applies to attendance at
meetings of Board Committees.
C.1.25 Indicate the number of meetings that the board of directors has held during the financial
year. Where applicable, indicate how many times the board has met without the chairman
in attendance. The chairman will be considered to have been in attendance if represented
by a proxy provided with specific instructions.
Number of board meetings
Number of board meetings without the chairman in attendance
Indicate how many meetings were held by the lead director with the other board members, without
any executive director in attendance or represented:
Number of meetings
63
Remarks
BBVA's Board of Directors has a Lead Director who performs the functions set forth in the applicable legislation, as well
as those stipulated by Article 21 of the Regulations of the Board of Directors.
In the performance of the functions assigned, during the financial year the Lead Director maintained ongoing contact, held
recurring meetings and had conversations with other directors of the Bank in order to seek their opinions on the corporate
governance and operation of the Bank's corporate bodies.
In addition, in accordance with Article 37 of the Regulations of the Board, the Lead Director held and coordinated various
meetings of non-executive directors, which took place following the meetings of the Board of Directors.
Furthermore, as of the date of this report, the Lead Director serves as Chair of the Risk and Compliance Committee and
as a member of the Appointments and Corporate Governance Committee, which are composed of non-executive directors
with a majority of independent directors. In addition, the Lead Director has held individual meetings with non-executive
directors within the framework of the Board's annual self-assessment process, in addition to those meetings described
above, in order to fully fulfil his duties.
Indicate how many meetings of the board committees were held during the financial year:
Number of meetings of the executive committee
30
Number of meetings of the audit committee
13
Number of meetings of the appointments and corporate governance committee
4
Number of meetings of the remunerations committee
4
Number of meetings of the risk and compliance committee
23
Number of meetings of the technology and cybersecurity committee
7
C.1.26 Indicate how many meetings were held by the board of directors during the financial year
and provide details on the attendance of its members:
141
Number of meetings attended by at least 80% of the directors
15
% of in-person attendance of the total number of votes cast during the financial year
99.11%
Number of meetings where all directors, or proxies granted with specific instructions,
attended in person
15
% of votes cast, with directors attending in person and with proxies granted with specific
instructions, of the total number of votes cast throughout the financial year
100%
Remarks
The Board of Directors holds ordinary meetings on a monthly basis, in accordance with the annual calendar of
ordinary meetings drawn up before the beginning of the financial year, and holds extraordinary meetings as often
as deemed necessary.
Furthermore, following the declaration of a state of alarm in Spain and due to the situation created by the
coronavirus and the measures taken in this respect by the authorities, Board meetings were held entirely remotely
in such a way that enabled the recognition of attendees and made it possible for attendees to interact and for
each of them to address the meeting in real time, maintaining the unity of the event, in accordance with the
applicable regulations and the Regulations of the Board.
C.1.27 Indicate whether the individual or consolidated annual financial statements that are
presented to the board for approval are certified beforehand:
No
Where appropriate, identify the person(s) who has/have certified the company's individual
and consolidated annual financial statements prior to board approval:
C.1.28 Explain the mechanisms, if any, established by the board of directors to ensure that the
annual financial statements presented by the board of directors to the general shareholders'
meeting are drawn up in accordance with accounting regulations.
Article 32 of the Regulations of the BBVA Board of Directors specifies that the main task of
the Audit Committee, which is composed exclusively of independent directors, is to assist the
Board of Directors in supervising the preparation of the financial statements and public
information, as well the relationship with the external auditor and the Internal Audit area.
In this regard, in accordance with Article 5 of the Regulations of the Audit Committee, it is the
responsibility of the Audit Committee to oversee the process of preparing and reporting
financial information and submit recommendations or proposals on safeguarding the integrity
thereof to the Board of Directors.
It is also the responsibility of the Audit Committee to analyse all financial information and any
related non-financial information contained in the annual financial statements of both the Bank
and its consolidated Group, prior to their submission to the Board of Directors and in enough
detail to guarantee their accuracy, reliability, sufficiency and clarity.
It is also the Committee's responsibility to review the correct application of accounting criteria,
as well as all relevant changes relating to the accounting principles used and the presentation
of the financial statements, including the accurate consolidation perimeter.
Similarly, in accordance with Article 5 of the Regulations of the Audit Committee, said
Committee is responsible for monitoring the effectiveness of the Company's internal control
and risk management systems in the preparation and reporting of financial information,
including tax-related risks.
In the performance of these functions, the Audit Committee maintains direct and ongoing
contact with the heads of the area in the Group responsible for Accounting functions through
monthly meetings, monitoring the evolution of the main figures on the Balance Sheet and the
Income Statement of the Bank and its Group each month; overseeing the accounting policies,
practices and principles and the valuation criteria followed by the Bank and the Group during
the process of preparing and submitting financial information; and analysing changes made
in relation to the main applicable accounting regulations, as well as the main impacts that their
incorporation has had on the financial information of the Bank and its Group. To this end, the
142
Committee had all of the information that it required, with the level of aggregation deemed
appropriate.
In addition, given that the external audit is one of the core elements in the chain of control
mechanisms established to ensure the quality and integrity of the financial information, in
accordance with the Regulations of the Audit Committee, it is the Committee's responsibility
to check, at appropriate intervals, that the external audit schedule of work is being conducted
under the agreed conditions, and that this satisfies the requirements of the competent
authorities and the corporate bodies.
Moreover, it will require the auditor to periodically—at least once a year—provide an
evaluation of the quality of the internal control procedures regarding the preparation and
reporting of the Group's financial information, discussing with the auditor any weaknesses in
the internal control system identified during the audit, without undermining its independence,
to then be able to submit recommendations or proposals to the Board of Directors, along with
the deadline for their follow-up.
The Committee will also be apprised of any infringements, situations requiring adjustments or
anomalies that may be detected during the external audit and are material in nature, i.e. those
that, in isolation or as a whole, could cause significant and substantive harm to the Group's
equity, earnings or reputation, and discernment of such matters will be at the discretion of the
Internal Audit area which, in the presence of doubt, must report these.
These matters are carefully considered by the Audit Committee, which maintains direct and
ongoing contact with the external auditors through monthly meetings not attended by the
Bank's executives. At these meetings, the auditors provide detailed information on their work
and the results thereof, which enables the Committee to continuously monitor said work and
the conclusions thereof, ensuring that it is performed under optimal conditions and without
interference from management.
C.1.29 Is the secretary of the board a director?
No
If the Secretary is not a director, complete the following table:
Name or corporate name of the secretary
Representative
Domingo Armengol Calvo
C.1.30 Indicate the specific mechanisms established by the company to preserve the independence
of the external auditors, and, if any, the mechanisms to preserve the independence of
financial analysts, investment banks and rating agencies, including how legal measures
have been implemented in practice.
As set forth in the Regulations of the Audit Committee, one of the Committee's functions,
described in Section C.2.1, is to ensure the independence of the auditor through a dual
approach:
●
Avoiding that the auditor's warnings, opinions or recommendations may be adversely
influenced. To this end, ensuring that compensation for the auditor's work does not
compromise either its quality or independence, in compliance with the auditing
legislation in force at any given moment.
●
Establishing incompatibility between the provision of audit and consulting services,
unless they are tasks required by supervisors or the provision of which by the auditor
is permitted by applicable legislation, and there are no alternatives on the market that
are equal in terms of content, quality or efficiency to those provided by the auditor, in
which case, conformity of the Committee will be required, and this decision may be
delegated in advance to its Chair. The auditor will be prohibited from providing
unauthorised services outside the scope of the audit, in compliance with the auditing
legislation in force at any given moment.
This matter is carefully considered by the Audit Committee, which holds meetings with the
auditor's representatives at each of the monthly meetings it has, without Bank executives in
143
attendance, to gain a detailed understanding of any issues that may hinder the audit process,
the progress and quality of the work carried out, and to confirm independence in the
performance of its work.
The Committee also continually oversees the engagement of additional services to ensure
compliance with the Regulations of the Audit Committee and with applicable legislation and
thus the independence of the auditor, in accordance with the Bank's internal procedure.
Moreover, in accordance with the provisions of Point f), Section 4 of Article 529
quaterdecies
of the Spanish Corporate Enterprises Act and Article 5 of the Regulations of the Audit
Committee, each year before the audit report is issued, the Committee must issue a report
expressing its opinion on whether or not the independence of the auditor has been
compromised. This report must, in all cases, contain a reasoned assessment of the provision
of each and every kind of additional service provided to the Group companies, considered
individually and collectively, except the legal audit and those relating to independence or the
regulations on audit activity. Each year, the auditor must issue a report confirming its
independence via-à-vis BBVA or entities linked to BBVA, either directly or indirectly, with
detailed and itemised information on any kind of additional services provided to these entities
by the external auditor, or by the individuals or entities linked to it, as set out in the
consolidated text of the Spanish Account Auditing Act.
In compliance with the legislation in force, the relevant auditor and Audit Committee reports
confirming the auditor's independence were issued in the 2020 financial year.
In addition, as BBVA's shares are listed on the New York Stock Exchange, it is subject to
compliance with the Sarbanes Oxley Act and its implementing regulations.
The Board of Directors also has a policy in place for communication and contacts with
shareholders and investors. The policy is governed by the principle of equal treatment for all
shareholders and investors, who are in the same position in terms of information, participation
and the exercise of their rights as shareholders and investors, inter alia.
Moreover, this policy contains the principles and channels established in relation to
shareholders and investors, which govern, where applicable, BBVA relations with other
stakeholders, such as financial analysts, Bank share management companies and
custodians, and proxy advisors, among others.
C.1.31 Indicate whether the Company has changed its external auditor during the financial year. If
so, identify the incoming and outgoing auditors:
No
If there were any disagreements with the outgoing auditor, explain these disagreements:
No
C.1.32 Indicate whether the auditing firm does any other work for the company and/or its group
other than the audit. If so, declare the amount of fees received for such work and the
percentage that the aforementioned amount represents of the total fees billed to the
company and/or its group for audit work:
Yes
Company
Group
companies
Total
Amount of non-audit work (thousands of euro)
0
362
362
Amount of non-audit work/total amount billed by
the auditing firm (%)
0,00%
2,22%
1,23%
C.1.33 Indicate whether the audit report on the annual financial statements for the previous financial
year contained qualifications. If so, indicate the reasons given by the chair of the audit
committee to the shareholders at the General Meeting to explain the content and scope of
such qualifications.
144
No
Explanation of the reasons and direct link to the document made available to the shareholders at the time
of the calling in relation to this matter
C.1.34 Indicate the number of consecutive financial years during which the current audit firm has
been auditing the annual financial statements for the company. Likewise, indicate the total
number of financial years audited by the current audit firm as a percentage of the total
number of years in which the annual financial statements have been audited:
Individual
Consolidated
Number of consecutive financial years
4
4
Number of financial years audited by the current audit firm/
Number of financial years the company or its group have been audited (%)
20%
20%
C.1.35 Indicate whether there is a procedure in place (and provide details, where applicable)
whereby directors are provided with the information they need with sufficient time to be able
to prepare for meetings of the management bodies:
Yes
Details of the procedure
As set forth in Article 5 of the Regulations of the Board of Directors, prior to the meetings, directors will
be provided with the information needed to form an opinion with respect to the matters within the remit
of the Bank's corporate bodies, and may ask for any additional information and advice required to
perform their duties. They may also ask the Board of Directors for external expert help for any matters
put to their consideration whose special complexity or importance so requires.
These rights will be exercised through the Chairman or Secretary of the Board of Directors, who will
attend to requests by providing the information directly or by establishing suitable arrangements within
the organisation for this purpose, unless a specific procedure has been established in the regulations
governing the Board of Directors' committees.
Furthermore, as set forth in Article 28 of the Regulations of the Board of Directors, the directors will be
provided with such information or clarifications as deemed necessary or appropriate with regards to
the matters to be discussed at the meeting, either before or after the meetings are held.
In addition, BBVA implements an information model that ensures that decisions are made on the basis
of complete, comprehensive, appropriate and consistent information, prepared in accordance with
common principles so that analyses carried out by the corporate bodies are based on the correct data,
thus allowing directors to perform their duties to the best of their ability.
Thus, the Bank's corporate bodies have a procedure in place for checking the information submitted
for consideration, coordinated by the Board's Secretariat with the departments responsible for the
information, in order to provide directors with complete, comprehensive, appropriate and consistent
information in sufficient time for the meetings of the Bank's various corporate bodies. Prior to such
meetings, information is made available to the Bank's corporate bodies via an online system, to which
all members of the Board have access.
C.1.36 Indicate and, where applicable, provide details of whether the company has set out rules
that require directors to report and, where applicable, resign in the event that they are
affected by circumstances that, whether or not related to their actions at the company itself,
could harm the company's standing and reputation:
Yes
Explanation of the rules
As set forth in Article 12 of the Regulations of the Board of Directors, directors must also inform the
Board of Directors of any circumstances that may affect them and harm the Company's standing and
reputation, and any circumstances that may have an impa ct on their suitability to perform their role.
Directors must offer their resignation to the Board of Directors and accept its decision regarding their
continuity in office. Should the Board decide against their continuing, they are required to tender their
145
resignation when, for reasons attributable to the directors in their status as such, serious damage has
been done to the Company's equity, standing or reputation or when they are no longer suitable to hold
the status of director at the Bank, among other circumstances referred to in Section C.1.19 of this
report.
C.1.37 Indicate, unless there have been special circumstances recorded in the minutes, whether
the board was informed or otherwise came to know of any situation concerning a director,
whether or not related to their role in the company itself, that could harm the company's
standing and reputation:
C.1.38 Detail any significant agreements reached by the Company that are coming into force, or
were amended or concluded as a result of a change in the control of the company stemming
from a public takeover bid, and its effects.
The Company has not reached any significant agreements that are coming into force, or were
amended or concluded as a result of a change in the control of the Company stemming from
a public takeover bid.
C.1.39 Identify on an individual basis, when referring to directors, and in aggregate form for all other
cases, and indicate in detail any agreements between the Company and its directors,
managers or employees that provide for severance pay (guarantee or golden parachute
clauses) for when such persons resign or are wrongfully dismissed or if the contractual
relationship comes to an end owing to a public takeover bid or other kinds of transactions.
Number of beneficiaries
66
Beneficiary type
Description of the agreement
66 managers and other
employees
The Bank has no commitments to provide severance pay to directors.
As at 31 December 2020, in accordance with the provisions of their contracts, 66
managers and employees are entitled to receive severance pay in the event of
departure on grounds other than their own will, retirement, disability or serious
dereliction of duties. Its amount will be calculated by factoring in the fixed elements
of the Bank employee's salary and length of service and will not, under any
circumstances, be paid in the event of lawful dismissal at the employer's decision
on grounds of the employee's serious dereliction of duties.
146
Indicate whether, in addition to the circumstances provided for by law, the corporate bodies of the
company or group must be notified of and/or approve these contracts. If so, specify the procedures,
the circumstances provided for and the nature of the bodies responsible for approval or notification:
Board of Directors
General meeting
Body that authorises the clauses
Yes
No
YES
NO
Is the general meeting informed of these clauses?
Remarks
The Board of Directors approves resolutions relating to the basic contractual conditions of members of Senior Management,
pursuant to the provisions of Article 17 of the Regulations of the Board, which are hereby notified to the General Shareholders'
Meeting through this Report and through the information contained in the Annual Financial Statements, but does not approve
the conditions applicable to other employees
.
C.2 Committees of the board of directors
C.2.1 Detail all of the committees of the board of directors, their members and the proportion of
executive, proprietary, independent and other external directors sitting thereon:
EXECUTIVE COMMITTEE
Name
Position
Category
Carlos Torres Vila
Chairman
Executive
Onur Genç
Member
Executive
José Miguel Andrés Torrecillas
Member
Independent
Jaime Félix Caruana Lacorte
Member
Independent
José Maldonado Ramos
Member
Other external
Susana Rodríguez Vidarte
Member
Other external
% of executive directors
33.33%
% of proprietary directors
0%
% of independent directors
33.33%
% of other external directors
33.33%
Explain the functions that have been delegated or assigned to this committee, other than those that
have already been described in Section C.1.9, and describe both the procedures and organisational
and operational rules of the committee. For each of these functions, indicate its most significant
actions during the financial year and how it has, in practice, exercised each of the functions attributed
to it, whether in law, in the bylaws or in other corporate resolutions.
Pursuant to Article 30 of BBVA's Regulations of the Board of Directors and Article 1.2 of its own
Regulations, the Executive Committee will be made aware of matters that the Board, as required by
law, the Bylaws, the Regulations of the Board or its own Regulations, resolves to delegate to it.
In particular, in accordance with the powers conferred on it by Article 5 of the Regulations of the
Executive Committee, the Committee performs the following functions:
●
Supporting the Board in its decision-making:
I. In relation to strategy: establishment of the bases on which proposals are prepared and
prior analysis of proposals submitted to the Board regarding the Strategic Plan or other
strategic decisions such as the Risk Appetite Framework (RAF); prior analysis of the
strategic and financial aspects of proposals submitted to the Board regarding corporate
147
transactions that fall within its decision-making remit; and decision-making or
implementation of the mandates which are expressly delegated to it by the Board in these
areas, once the decisions within its remit have been adopted.
II. In relation to budgets: prior analysis of budget proposals submitted to the Board;
decision-making within its remit with regard to the implementation of the budget approved
by the Board; and analysis of deviations from the approved budget.
III. In relation to finance: establishment of the bases on which proposals are prepared and
prior analysis of proposals submitted to the Board regarding the funding plan, the capital
and liquidity structure and the Bank's dividend policy; and decision-making on the
implementation of mandates conferred upon it by the Board in these areas.
IV. In relation to business risk: analysis of matters relating to business risk in the proposals
and plans submitted to the Board of Directors; and, in relation to reputational risk,
analysis, evaluation and management of matters relating thereto.
●
Prior reporting of policies submitted to the Board and approval of Company and Group general
policies: analysis, prior to their consideration by the Board, of the general Group and Company
policies that, in accordance with the law or internal regulations, must be approved by the Board,
except for policies relating to issues handled by other Board committees, which will be approved
or reported to the Board beforehand by the appropriate committee.
●
Oversight and control of the following matters: (i) Group activity and results; (ii) budgetary
monitoring; (iii) progress of the Strategic Plan, by analysing key performance indicators
established for this purpose; (iv) monitoring of the Group's funding and liquidity plan and capital
situation, as well as the activities of the Assets and Liabilities Committee; (v) monitoring of
changes in the risk profile and core metrics defined by the Board; (vi) share-price performance
and changes in shareholder composition; (vii) analysis of the markets in which the Group
operates; and (viii) progress of projects and investments agreed within its remit, as well as
those agreed by the Board within the strategic sphere.
●
Decision-making powers on the following matters: (i) investments and divestments between
EUR 50 million and EUR 400 million, unless they are of a strategic nature, in which case they
will be the Board's responsibility; (ii) plans and projects that are considered to be of importance
to the Group and that arise from its activities, and that are not within the remit of the Board; (iii)
decisions regarding the assumption of risks that exceed the limits set by the Board, which must
be reported to the Board at its first meeting thereafter for ratification; (iv) granting and revoking
of the Bank's powers; (v) proposals for the appointment and replacement of directors in the
Bank's subsidiaries or affiliates with more than EUR 50 million in equity; and (vi) compliance so
that executive directors may hold management positions in subsidiaries, in which the Bank
holds a direct or indirect controlling interest, or in the Group's affiliate companies.
The Regulations of the Executive Committee set out the operational principles of the Committee and
lay down the basic rules of its organisation and operation.
The Regulations of the Executive Committee specifically provide that the Committee will meet
whenever it is called to do so by its Chair, who is empowered to call the Committee and to set the
agenda, and also set out the procedure for calling ordinary and extraordinary meetings.
For the proper performance of its functions, the Committee will have available, where necessary,
the reports of the relevant Board committees on matters within their remits, and may request as a
matter of relevance the attendance of the chairs of those committees at its own meetings where
such reports are to be dealt with.
Other aspects of the organisation and operation of the Committee shall be subject to the Regulations
of the Committee itself. All other matters not provided for in the aforementioned Regulations will be
subject to the Regulations of the Board, insofar as they are applicable.
The most significant actions carried out by the Executive Committee in the 2020 financial year are
detailed in Section H of this Report.
AUDIT COMMITTEE
148
Name
Position
Jaime Félix Caruana Lacorte
Chairman
Independent
José Miguel Andrés Torrecillas
Member
Independent
Belén Garijo López
Member
Independent
Lourdes Máiz Carro
Member
Independent
Ana Cristina Peralta Moreno
Member
Independent
% of proprietary directors
0%
% of independent directors
100%
% of other external directors
0%
Explain the functions assigned to this committee, including, where appropriate, any that are in addition
to those provided for by law, and describe both the procedures and organisational and operational
rules of the committee. For each of these functions, indicate its most significant actions during the
financial year and how it has, in practice, exercised each of the functions attributed to it, whether in
law, in the bylaws or in other corporate resolutions.
The main task of the Audit Committee is to assist the Board of Directors in overseeing the preparation
of the financial statements and public information, and the relationship with the external auditor and
the Internal Audit area.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Audit Committee, and notwithstanding any other functions assigned to it by law, by the Bank's internal
regulations or by resolution of the Board the Audit Committee is entrusted with the following functions,
inter alia:
In relation to overseeing the financial statements and public information:
●
Oversee the process of preparing and reporting financial information and submit
recommendations or proposals to the Board for safeguarding the integrity thereof.
●
Analyse, prior to their submission to the Board and in enough detail to guarantee their accuracy,
reliability, sufficiency and clarity, the financial statements of the Bank and of its consolidated
Group contained in the annual, six-monthly and quarterly reports, as well as all other required
financial and related non-financial information.
●
Review the necessary consolidation perimeter, the correct application of accounting criteria,
and all the relevant changes relating to the accounting principles used and the presentation of
the financial statements.
●
Monitor the effectiveness of the Company's internal control as well as its risk management
systems, in terms of the process of preparing and reporting financial information, including tax-
related risks, and discuss with the auditor any significant weaknesses detected in the internal
control system during the audit, without undermining its independence.
In relation to the Internal Audit function:
●
Propose the selection, appointment, re-appointment and removal of the Head of the Internal
Audit function to the Board of Directors; monitor the independence, effectiveness and
functioning of the Internal Audit function; analyse and set objectives for the Head of the Internal
Audit function and conduct the performance assessment; ensure that the Internal Audit function
has the necessary material and human resources; and analyse and, where appropriate,
approve the annual work plan for the Internal Audit function.
●
Receive monthly information from the Head of the Internal Audit function regarding the activities
carried out by it, and regarding any incidents and obstacles that may arise, and verify that
149
Senior Management takes into account the conclusions and recommendations of the reports;
and also follow up on these plans.
●
Be aware of the audited units' degree of compliance with corrective measures previously
recommended by the Internal Audit area and inform the Board of those cases that may involve
a significant risk for the Group.
In relation to the external audit process:
●
Submit to the Board any proposals for the selection, appointment, re-appointment and
replacement of the external auditor, taking responsibility for the selection process in accordance
with applicable regulations, as well as for the engagement terms, and periodically obtain
information from the external auditor on the external audit plan and its execution, in addition to
preserving its independence in the performance of its functions.
●
Ensure the independence of the auditor: (i) by avoiding any possibility that the auditor's
warnings, opinions or recommendations may be adversely influenced, ensuring that
compensation for the auditor's work does not compromise either its quality or independence;
and (ii) by establishing incompatibility between the provision of audit and consulting services,
unless they are tasks required by supervisors or the provision of which by the auditor is
permitted by applicable legislation, and there are no alternatives on the market that are equal
in terms of content, quality or efficiency to those provided by the auditor, in which case,
agreement by the Committee will be required.
●
Establish appropriate relationships with the auditor in order to receive information regarding
any issues that may pose a threat to its independence and any other issues related to the
account audit process.
●
Where appropriate, authorise the provision of additional services by the auditor or associated
persons or entities, excluding prohibited services, as required by applicable regulations in each
case, under the terms provided for in auditing legislation.
●
Issue, on an annual basis and before the audit report is issued, a report expressing an opinion
on whether the auditor's independence has been compromised. This report must contain a
reasoned assessment of each of the additional services mentioned in the previous section,
considered individually and collectively, over and above the legal audit and in relation to the
independence requirements or to the rules governing the account auditing process.
●
Ensure that the auditor holds an annual meeting with the full Board of Directors to inform it of
the work undertaken and developments in the Com pany's risk and accounting situations.
The most significant actions carried out by the Audit Committee in the 2020 financial year, as well as
its organisational and operational rules, are detailed in Section H of this Report.
150
Identify the directors who are members of the audit committee and have been appointed on the basis
of their knowledge and experience of accounting or auditing, or both, and specify the date on which
the Chair of this committee was appointed to the post.
Names of the directors with experience
Jaime Félix Caruana Lacorte
José Miguel Andrés Torrecillas
Belén Garijo López
Lourdes Máiz Carro
Ana Cristina Peralta Moreno
Date of appointment of the chair to the post
29 April 2019
APPOINTMENTS AND CORPORATE GOVERNANCE COMMITTEE
Name
Position
José Miguel Andrés Torrecillas
Chairman
Independent
Belén Garijo López
Independent
José Maldonado Ramos
Member
Other external
Juan Pi Llorens
Member
Independent
Susana Rodríguez Vidarte
Member
Other external
% of proprietary directors
0%
% of independent directors
60%
% of other external directors
40%
Explain the functions assigned to this committee, including, where appropriate, any that are in addition
to those provided for by law, and describe both the procedures and organisational and operational
rules of the committee. For each of these functions, indicate its most significant actions during the
financial year and how it has, in practice, exercised each of the functions attributed to it, whether in
law, in the bylaws or in other corporate resolutions.
The main task of the Appointments and Corporate Governance Committee is to assist the Board of
Directors in matters relating to the selection and appointment of members of the Board of Directors;
the assessment of their performance; the drafting of succession plans; the Bank's Corporate
Governance System; and the oversight of the conduct of directors and any conflicts of interest that
may affect them.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Appointments and Corporate Governance Committee, and notwithstanding any other functions
assigned to it by law, by the Bank's internal regulations or by resolution of the Board of Directors, the
Appointments and Corporate Governance Committee is entrusted with the following functions:
1. Submit proposals to the Board of Directors for the appointment, re-appointment or removal
of independent directors and report on proposals for the appointment, re-appointment or
removal of the remaining directors.
To this end, the Committee will evaluate the balance of knowledge, skills and experience on
the Board of Directors, as well as the conditions that the candidates must meet to cover any
vacancies that arise, evaluating the time commitment considered necessary so that they can
adequately carry out their duties, according to the needs of the corporate bodies at any given
time.
The Committee will ensure that selection procedures are not implicitly biased in such a way
that involves any kind of discrimination or, in particular, hinders the selection of members of
the underrepresented gender, endeavouring to ensure that members of this gender who
match the professional profile sought are included amongst potential candidates.
When formulating its proposals for the appointment of directors, the Committee will take into
consideration, if it considers them to be suitable, any requests that may be made by any
151
member of the Board of Directors of potential candidates to fill the vacancies that have
arisen.
2. Propose to the Board of Directors the selec tion and diversity policies for members of the
Board.
3. Establish a target for representation of the underrepresented gender on the Board of
Directors and draw up guidelines on how to reach that target.
4. Analyse the structure, size and composition of the Board of Directors, at least once per year,
when assessing its operation.
5. Analyse the suitability of the members of the Board of Directors.
6. Review the status of each director each year, so that this may be reflected in the Annual
Corporate Governance Report.
7. Report on proposals for the appointment of Chairman and Secretary and, where appropriate,
Deputy Chair and Deputy Secretary, as well as the Chief Executive Officer.
8. Submit to the Board of Directors proposals for the appointment, removal or re-appointment
of the Lead Director.
9. Determine the procedure for assessing the performance of the Chairman of the Board of
Directors, the Chief Executive Officer, the Board of Directors as a whole and the Board
committees, and oversee its implementation.
10. Report on the operational quality and efficiency of the Board of Directors.
11. Report on the performance of the Chairman of the Board of Directors and of the Chief
Executive Officer, incorporating for the latter the assessment made in this regard by the
Executive Committee, for the purpose of periodic evaluation of both by the Board.
12. Study and arrange the succession of the Chairman of the Board of Directors, the Chief
Executive Officer and, where applicable, the Deputy Chair, in conjunction with the Lead
Director in the case of the Chairman, and, where appropriate, draft proposals to the Board
of Directors to ensure that the succession takes place in a planned and orderly manner.
13. Review the Board of Directors' policy on the selection and appointment of members of the
Group's Senior Management, and file recommendations with the Board when applicable.
14. Report on proposals for the appointment and removal of senior managers.
15. Regularly review and assess the Company's Corporate Governance System and, where
applicable, propose to the Board of Directors, for approval or submission at the General
Shareholders' Meeting, any amendments and updates that would facilitate its
implementation and continuous improvement.
16. Ensure compliance with the provisions applicable to directors contained in the Regulations
of the Board of Directors or in the applicable regulations, as well as with the rules relating to
conduct on the securities markets, and inform the Board of these if it deems it necessary.
17. Report, prior to any decisions that may be made by the Board of Directors, on all matters
within its remit as provided for by law, the Bylaws, the Regulations of the Board and the
Regulations of the Committee, and in particular on situations of conflict of interest of the
directors.
The organisational and operational rules and the most significant actions carried out by the
Appointments and Corporate Governance Committee in the 2020 financial year are detailed in Section
H of this Report.
152
REMUNERATIONS COMMITTEE
Name
Position
Belén Garijo López
Chair
Independent
Lourdes Máiz Carro
Member
Independent
Ana Cristina Peralta Moreno
Member
Independent
Carlos Vicente Salazar Lomelín
Member
Other external
Jan Paul Marie Francis Verplancke
Member
Independent
% of proprietary directors
0%
% of independent directors
80%
% of other external directors
20%
Explain the functions assigned to this committee, including, where appropriate, any that are in addition
to those provided for by law, and describe both the procedures and organisational and operational
rules of the committee. For each of these functions, indicate its most significant actions during the
financial year and how it has, in practice, exercised each of the functions attributed to it, whether in
law, in the bylaws or in other corporate resolutions.
The main task of the Remunerations Committee is to assist the Board of Directors in remuneration
matters within its remit and, in particular, those relating to the remuneration of directors, senior
managers and those employees whose professional activities have a significant impact on the risk
profile of the Group (hereinafter, the Identified Staff), ensuring that the established remuneration
policies are observed.
More specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Remunerations Committee, and notwithstanding any other functions assigned to it by law, by the
Bank's internal regulations or by resolution of the Board, the Remunerations Committee broadly
performs the following functions:
1. Propose to the Board of Directors, for submission to the General Meeting, the remuneration
policy for directors, and also submit its corresponding report, all in accordance with the terms
established by applicable regulations.
2. Determine the remuneration of non-executive directors, as provided for in the remuneration
policy for directors, and submit the corresponding proposals to the Board of Directors.
3. Determine the extent and amount of individual remunerations, rights and other economic
rewards, as well as other contractual conditions for executive directors, so that these can be
contractually agreed, in accordance with the remuneration policy for directors, and submit
the corresponding proposals to the Board.
4. Determine and propose to the Board the objectives and criteria for measuring the variable
remuneration of the executive directors, and evaluate their degree of achievement.
5. Analyse, where appropriate, the need to make ex-ante or ex-post adjustments to variable
remuneration, including the application of malus and clawback arrangements for variable
remuneration, and submit the corresponding proposals to the Board, prior reports from the
relevant committees in each case.
6. Annually submit the proposal of the annual report on the remuneration of the Bank's directors
to the Board of Directors, which will be submitted to the Annual General Shareholders'
Meeting, in accordance with the provisions of the applicable law.
7. Propose to the Board of Directors the remuneration policy for senior managers and rest of
Identified Staff. Likewise, oversee its implementation, including oversight of the process for
identifying such employees.
153
8. Propose to the Board of Directors, and oversee the implementation of, the remuneration
policy for the Group, which may include the policy for senior managers and other members
of the Identified Staff, stated in the previous paragraph.
9. Submit to the Board of Directors the proposed basic contractual conditions for senior
managers, including their remuneration and severance indemnity in the event of termination.
10. Directly oversee the remuneration of senior managers and, within the framework of the
remuneration model applicable to Senior Management at any given time, the objectives and
criteria for measuring variable remuneration of the heads of the Regulation & Internal Control
area and the Internal Audit area, submitting the corresponding proposals to the Board of
Directors, based on those submitted to it in turn by the Risk and Compliance Committee and
the Audit Committee, respectively.
11. Ensure compliance with the remuneration policies established by the Company and review
them periodically, proposing, where appropriate, any modifications that it deems necessary
to ensure, amongst other things, that they are adequate for the purposes of attracting and
retaining the best professionals, and that they contribute to the creation of long-term value
and adequate control and management of risks, and address the principle of equal pay. In
particular, the Committee shall ensure that the remuneration policies established by the
Company are subject to internal, central and independent review at least once a year.
12. Verify information on the remuneration of directors and senior managers contained in the
various corporate documents, including the annual report on the remuneration of directors.
13. Supervise the selection of external advisers, whose advice or support is required for the
performance of its functions in remuneration matters, ensuring that any conflicts of interest
do not impair the independence of the advice provided.
The organisational and operational rules and the most significant actions carried out by the
Remunerations Committee in the 2020 financial year are detailed in Section H of this Report.
RISK AND COMPLIANCE COMMITTEE
Name
Position
Juan Pi Llorens
Chairman
Independent
Jaime Félix Caruana Lacorte
Member
Independent
Raúl Catarino Galamba de Oliveira
Member
Independent
Ana Leonor Revenga Shanklin
Member
Independent
Susana Rodríguez Vidarte
Member
Other external
% of proprietary directors
0%
% of independent directors
80%
% of other external directors
20%
154
Explain the functions assigned to this committee and describe both the procedures and organisational
and operational rules of the committee. For each of these functions, indicate its most significant actions
during the financial year and how it has, in practice, exercised each of the functions attributed to it,
whether in law, in the bylaws or in other corporate resolutions.
The main task of the Risk and Compliance Committee is to assist the Board of Directors in the
determination and monitoring of the Group's risk control and management policy, including internal
risk control and non-financial risks, with the exception of those related to internal financial control,
which are the responsibility of the Audit Committee; those related to technological risk, which are the
responsibility of the Technology and Cybersecurity Committee; and those related to business and
reputational risk, which are the responsibility of the Executive Committee. It also assists the Board in
monitoring the Compliance function and implementing a risk and compliance culture in the Group.
More specifically, in accordance with Article 5 of the Regulations of the Risk and Compliance
Committee, and notwithstanding any other functions assigned to it by law, by the Bank's internal
regulations or by resolution of the Board, the Risk and Compliance Committee performs the following
functions:
1. Analyse, on the strategic bases established by the Board of Directors or the Executive
Committee, and submit proposals on the Group's strategy, control and risk management to
the Board, including the Group's risk appetite; and the level of acceptable risk in terms of the
risk profile and risk capital broken down between the Group's businesses and areas of
activity, on the basis of the strategic and financial approaches determined by the Board of
Directors and the Executive Committee.
2. Define, in a manner consistent with the Risk Appetite Framework established by the Board
of Directors, the control and management policies for the various risks faced by the Group
within its remit.
3. Supervise the effectiveness of the Regulation & Internal Control function (which include
Supervisors, Regulation and Compliance, Internal Risk Control and Non-Financial Risk), and
in particular will: (i) propose to the Board of Directors the appointment and removal of the
function; (ii) analyse and establish the objectives for the function, and carry out an evaluation
of their performance; (iii) ensure that function has the resources necessary for the effective
performance of its functions; (iv) analyse and/or approve the annual work plan for the
function, and monitor compliance with it.
4. Receive monthly information from the Head of Regulation & Internal Control regarding their
activities carried out, as well as regarding any incidents that may arise, and verify that the
Group's Senior Management takes into account the conclusions and recommendations of
their reports.
5. Monitor the evolution of the risks faced by the Group and their compatibility with established
strategies and policies, and with the Group's Risk Appetite Framework, and monitor risk-
measurement procedures, tools and indicators established to obtain a global view of the
risks faced by the Group; monitor compliance with prudential regulation and supervisory
requirements regarding risks; analyse the measures to mitigate the impact of identified risks,
should these materialise, to be adopted.
6. Analyse, within its remit, risks associated with strategic projects or those associated with
corporate transactions to be submitted to the Board of Directors or to the Executive
Committee and, where necessary, submit the corresponding report.
7. Analyse risk operations that will be submitted to the Board of Directors or Executive
Committee for consideration.
8. Examine whether the prices of the assets and liabilities offered to customers take into
account the Bank's business model and risk strategy and, if not, submit a plan to the Board
of Directors aimed at rectifying the situation.
155
9. Participate in the process of establishing the remuneration policy, checking that it is
compatible with an adequate and effective risk management strategy and that it does not
offer incentives to assume risks that exceed the level tolerated.
10. Check that the Group has means, systems, structures and resources that are consistent with
best practices to implement their risk management strategy, ensuring that the risk
management mechanisms are adequate in relation thereto.
11. Report, prior to any decisions that may be made by the Board of Directors, on all matters
within its remit as provided for by law or internal regulations.
12. Ensure compliance with applicable regulations on matters related to money laundering,
conduct on the securities markets, data protection and the scope of Group activities with
respect to competition, and ensure that any requests for action or information made by
official authorities on these matters are dealt with in due time and in an appropriate manner.
13. Obtain information on all violations of regulations and any significant events detected by the
areas reporting to it during its monitoring and control operations. The Committee shall also
be notified about significant issues relating to legal risks that may arise during the Group's
operations.
14. Examine draft codes of ethics and conduct and their modifications prepared by the
corresponding area of the Group, and give its opinion in advance of the proposals to be
made to the corporate bodies.
15. Have knowledge of the reports, submissions or communications from external supervisory
bodies, and confirm that the instructions, requirements and recommendations received from
the supervisory bodies are implemented in order to correct any irregularities, deficiencies or
inadequacies detected.
16. Ensure the promotion of the risk culture across the Group.
17. Supervise the Group's criminal risk prevention model.
18. Review and supervise the systems under which employees may report any irregularities in
terms of financial information or other matters.
The organisational and operational rules and the most significant actions carried out by the Risk and
Compliance Committee in the 2020 financial year are detailed in Section H of this Report.
TECHNOLOGY AND CYBERSECURITY COMMITTEE
Name
Position
Carlos Torres Vila
Chairman
Executive
Raúl Catarino Galamba de Oliveira
Member
Independent
Sunir Kumar Kapoor
Member
Independent
Juan Pi Llorens
Member
Independent
Jan Paul Marie Francis Verplancke
Member
Independent
% of executive directors
20%
% of proprietary directors
0%
% of independent directors
80%
% of other external directors
0%
Explain the functions assigned to this committee and describe both the procedures and organisational
and operational rules of the committee. For each of these functions, indicate its most significant actions
156
during the financial year and how it has, in practice, exercised each of the functions attributed to it,
whether in law, in the bylaws or in other corporate resolutions.
The main task of the Technology and Cybersecurity Committee is to assist the Board of Directors in
overseeing technological risk, in managing cybersecurity and in monitoring the Group's technological
strategy.
Specifically, in accordance with the powers assigned to it by Article 5 of the Regulations of the
Technology and Cybersecurity Committee, and notwithstanding any other functions assigned to it by
law, by the Bank's internal regulations or by resolution of the Board, the Tech nology and Cybersecurity
Committee performs the following functions, which fall into two categories:
●
Functions relating to monitoring technological risk and managing cybersecurity, such as:
-
Reviewing the Bank's main technological risks, including risks related to information security
and cybersecurity, as well as the procedures adopted by the executive area for monitoring
and controlling these exposures.
-
Reviewing the policies and systems for assessment, control and management of the Group's
technological infrastructures and risks, including the response and recovery plans in the
event of cyberattacks.
-
Being informed of business continuity plans regarding technology and technological
infrastructure matters.
-
Being informed, as appropriate, about: (i) compliance risks associated with information
technology; (ii) the procedures established for identifying, assessing, overseeing, managing
and mitigating these risks.
-
Being informed about any relevant events that may have occurred with regard to
cybersecurity, i.e. events that, either individually or as a whole, may cause significant impact
or harm to the Group's equity, results or reputation.
-
Being informed, as required, by the Head of the Technological Security area regarding the
activities it carries out, as well as any incidents that may arise.
●
Functions related to the Technology Strategy:
-
Being informed, as appropriate, of the technology strategy and trends that may affect the
Bank's strategic plans, including through monitoring general trends in the sector.
-
Being informed, as appropriate, of the metrics established by the Group for management
and control in the technological area, including the Group's developments and investments
in this area.
-
Being informed, as appropriate, of issues related to new technologies, applications,
information systems and best practices that may affect the Group's technological plans or
strategy.
-
Being informed, as appropriate, of the main policies, strategic projects and plans defined by
the Engineering Area.
-
Reporting to the Board of Directors and, where appropriate, to the Executive Committee, on
matters related to information technologies falling within its remit.
The organisational and operational rules and the most significant actions carried out by the
Technology and Cybersecurity Committee during the 2020 financial year are detailed in Section H of
this Report.
C.2.2 Fill in the following table with information on the number of female directors sitting on the
committees of the board of directors at the close of the last four financial years:
157
Number of female directors
Financial year 2020
Financial year 2019
Financial year 2018
Financial year 2017
Number
%
Number
%
Number
%
Number
%
Executive Committee
1
16.66%
1
16.66%
1
16.66%
1
16.66%
Audit Committee
3
60%
3
60%
3
60%
2
40%
Appointments and
Corporate Governance
Committee
2
40%
2
40%
3
60%
2
40%
Remunerations
Committee
3
60%
3
60%
3
60%
2
40%
Risk and Compliance
Committee
2
40%
1
20%
1
20%
1
20%
Technology and
Cybersecurity
Committee
-
-
-
-
-
-
-
-
C.2.3 Indicate, where applicable, if there are regulations for the board committees, where they can
be consulted and any amendments made to them during the financial year. Indicate whether
an annual report on the activities of each committee has been prepared voluntarily.
All the committees of the Board of Directors have their own regulations, approved by the Board
and available on the Bank's corporate website (www.bbva.com), under “Shareholders and
Investors”, “Corporate Governance and Remuneration Policy”, in the “Board Committees”
section. The regulations were not amended during the 2020 financial year.
In addition, within the framework of the annual performance process, all the committees of the
Board have prepared and submitted a report to the Board of Directors detailing the activity
carried out by each of them in the exercise of their functions during the 2020 financial year,
which are described in Sections C.1.17 and C.2.1 above.
D. RELATED -PARTY TRANSACTIONS AND INTRA-GROUP
TRANSACTIONS
D.1 Explain the procedure and competent bodies, if any, for approving related-party and intra-group
transactions.
Article 17.1.e) (iii) of the Regulations of the Board of Directors establishes that the Board is responsible
for approving, where applicable, transactions conducted by the Company or Group companies with
directors or with shareholders that, individually or together with others, hold a significant stake,
including shareholders represented in the Board of Directors of the Company or of other Group
companies or with individuals related to them, with the exceptions provided for by law.
Moreover, Article 8.6 of the Regulations of the Board of Directors establishes that approval of the
transactions conducted by the Company or by Group companies with directors, the approval of which
is the responsibility of the Board of Directors, will be granted subject to a prior report by the Audit
Committee, where appropriate. The only exceptions to this approval will be transactions that
simultaneously meet the three following specifications: (i) they are carried out under contracts with
standard terms and are applied en masse to a large number of customers; (ii) they are executed at
market rates or prices set in general by the party acting as supplier of the goods or services; and (iii)
they are worth less than 1% of the Company's annual revenues.
D.2 Detail transactions deemed to be significant given their amount or content carried out between the
company or its group companies and the company's significant shareholders:
158
Name or corporate
name of the
significant
shareholder
Name or corporate
name of the company
or group company
Nature of the
relationship
Type of transaction
Amount
(thousands
of euro)
D.3 Detail any transactions deemed to be significant for their amount or content carried out between the
company or its group companies and the directors or executives of the company:
Name or corporate
name of the directors
or executives
Name or corporate
name of the company
or group company
Relationship
Nature of the
transaction
Amount
(thousands
of euro)
Remarks
D.4 Detail the significant transactions in which the company has engaged with other companies
belonging to the same group, except those that are eliminated in the process of drawing up the
consolidated financial statements and that do not form part of the company's usual trade with respect
to its objects and conditions.
In any event, provide information on any intra-group transactions with companies established in
countries or territories considered tax havens:
Corporate name of the Group Company
Brief description of the transaction
Amount
(thousands
of euro)
BBVA GLOBAL FINANCE LTD.
Current account deposits
2,356
BBVA GLOBAL FINANCE LTD.
Term account deposits
5,542
BBVA GLOBAL FINANCE LTD.
Issue-linked subordinated liabilities
163,178
D.5 Detail any significant transactions between the company or its group companies and other related
parties, which have not been listed in the previous entries.
Corporate name of the related party
Brief description of the transaction
Amount
(thousands
of euro)
D.6 Detail the mechanisms established to detect, determine and resolve possible conflicts of interest
between the company and/or its group, and its directors, executives or significant shareholders.
Articles 7 and 8 of BBVA's Regulations of the Board of Directors regulate issues relating to possible
conflicts of interest, in summary, as follows:
Article 7: Directors must adopt necessary measures to avoid incurring in situations where their
interests, whether on their own account or for that of others, may enter into conflict with the corporate
interest and with their duties with respect to the Company, unless the Company has granted its
consent under the terms established in applicable legislation and in the Regulations of the Board of
Directors.
Likewise, they must refrain from participating in deliberations and votes on resolutions or decisions in
which they or a related party may have a direct or indirect conflict of interest, unless these decisions
relate to the appointment or removal of positions on the management body.
Directors must notify the Board of Directors of any situation of direct or indirect conflict that they or
parties related to them may have with respect to the Company's interests.
159
Article 8: The duty of avoiding situations of conflicts of interest referred to in Article 7 above obliges
the directors to refrain from, in particular:
●
Carrying out transactions with the Company, unless these relate to ordinary business,
performed under standard conditions for customers and of insignificant quantity. Such
transactions are deemed to be those whose information is not necessary to provide a true
picture of the Company's equity, financial situation and results.
●
Using the name of the Company or invoking their position as director to unduly influence the
performance of private transactions.
●
Making use of corporate assets, including the Company's confidential information, for private
ends.
●
Taking advantage of the Company's business opportunities.
●
Obtaining advantages or remuneration from third parties other than the Company and its Group,
associated with the performance of their role, unless they are mere tokens of courtesy.
●
Engaging in activities on their own account or on behalf of third parties that involve effective
actual or potential competition with the Company or that, in any other way, bring them into
permanent conflict with the Company's interests.
The above provisions will also apply should the beneficiary of the prohibited acts or activities described
in the previous sections be a related party to the director.
However, the Company may dispense with the aforementioned prohibitions in specific cases,
authorising a director or a related party to carry out a certain transaction with the Company, to use
certain corporate assets, to take advantage of a specific business opportunity or to obtain an
advantage or remuneration from a third party.
When the authorisation is intended to dispense with the prohibition against obtaining an advantage or
remuneration from third parties, or affects a transaction whose value is over 10% of the corporate
assets, it must necessarily be agreed by the General Shareholders' Meeting.
The obligation not to compete with the Company may only be dispensed with when no damage is
expected to the Company or when any damage that is expected is compensated by the benefits that
are foreseen from the dispensation. The dispensation will be conferred under an express and separate
resolution of the General Shareholders' Meeting.
In other cases, the authorisation may also be resolved by the Board of Directors, provided that the
independence of the members conferring it is guaranteed with respect to the director receiving the
dispensation. Moreover, it will be necessary to ensure that the authorised transaction will not do harm
to the corporate equity or, where applicable, that it is carried out under market conditions and that the
process is transparent.
Approval by the Board of Directors of the transactions of the Bank or companies within its Group with
directors will be granted, where appropriate, after receiving a report from the Audit Committee. The
only exceptions to this approval will be transactions that simultaneously meet the three following
specifications:
1) they are carried out under contracts with standard terms and are applied en masse to a large
number of customers;
2) they are executed at market rates or prices set in general by the party acting as supplier of the
goods or services; and
3) they are worth less than 1% of the Company's annual revenues.
Since BBVA is a credit institution, it is subject to the provisions of Spanish Act 10/2014 of 26 June, on
the regulation, supervision and solvency of credit institutions (the LOSS), whereby the directors and
general managers or similar may not obtain credits, bonds or guarantees from the Bank on whose board
or management they work, above the limit and under the terms established in Article 35 of Royal Decree
84/2015, implementing the LOSS, unless expressly authorised by the Bank of Spain.
160
Continued in Section H of this Report.
D.7 Indicate whether the company is controlled by another entity within the meaning of Article 42 of the
Spanish Commercial Code, whether listed or not, and has, directly or through its subsidiaries,
business relations with said entity or one of its subsidiaries (other than those of the listed company)
or engages in activities related to those of any one of them.
No
E. RISK CONTROL AND MANAGEMENT SYSTEMS
E.1 Explain the scope of the company's Risk Control and Management System, including risks of a tax-
related nature.
The BBVA Group has a general risk management and control model (hereinafter, the Model) adapted
to its business model, its organisation, the countries in which it operates and its Corporate Governance
System. This allows the BBVA Group to operate within the framework of the risk control and
management strategy and policy defined by the Bank's corporate bodies and to adapt to the changing
economic and regulatory environment, addressing risk management on a global level in a manner
adapted to the circumstances at any moment.
This Model, which is the responsibility of the Chief Risk Officer (CRO) and which must be updated or
reviewed at least annually, is applied comprehensively in the Group and is made up of the basic
elements set out below:
I. Governance and organisation
II. Risk Appetite Framework
III. Evaluation, monitoring and reporting
IV. Infrastructure
The Group promotes the development of a risk culture that ensures consistent application of the Model
within the Group, and that guarantees that the risk function is understood and internalised at all levels
of the organisation.
The Model applies to the management and control of all financial and non-financial risks of the Group,
including tax risks, without prejudice to the fact that, with regard to tax, in addition to the management
of this type of risk as a non-financial risk, BBVA has a tax risk management policy based on an
adequate control environment, a risk identification system and a process for the monitoring and
continuous improvement of the effectiveness of the established controls. This management model is
revised and assessed by an independent expert.
For more information on the basic elements of the Model, see "General risk management and control
model" in the "Risk management" chapter of the individual and consolidated Management Reports for
financial year 2020.
161
E.2 Identify the corporate bodies responsible for drawing up and enforcing the Risk Control and
Management System, including tax-related risks.
With regard to risks, the Board of Directors' responsibilities are those relating to establishing the policy
for controlling and managing risk and the oversight and control of its implementation.
In addition, and for a proper discharge of its functions, the Board of Directors is assisted by the Risk
and Compliance Committee in the matters specified below. It is also assisted by the Executive
Committee, which focuses on strategy, finance and business-related matters in an integrated manner,
in order to monitor the Group's risks.
In particular, the Board of Directors establishes the Group's risk strategy and, in the discharge of this
function, determines the risk control and management policy, which is set out in: the BBVA Group's
Risk Appetite Framework, which includes the Group's risk appetite statement, containing the general
principles of the Group's risk strategy and its target profile, as well as a set of quantitative metrics
(core metrics—with their respective statements—and metrics by type of risk) originating from said
statement that reflect the Group's risk profile; the management policy framework for the different types
of risk to which the Bank is or may be exposed, which contains the basic principles for managing and
controlling risks consistently throughout the Group and in accordance with the Model and the Risk
Appetite Framework; and the Model.
Furthermore, in parallel with the function of defining the risk strategy and within the scope of its risk
monitoring, supervision and control functions, the Board of Directors monitors the evolution of the
BBVA Group's risks as well as the risks of each of its main geographical and/or business areas,
ensuring their compliance with the BBVA Group's Risk Appetite Framework, and also overseeing
internal information and control systems.
At the executive level, the Group’s Chief Risk Officer (the Head of Global Risk Management) is
responsible for managing all of the Group's financial risks with the independence, authority, rank,
experience, knowledge and resources required. They are responsible for ensuring, within their scope
of functions, that the BBVA Group's risks are managed according to the established model.
For decision-making, the Group’s Chief Risk Officer has a governance structure for the role that
culminates in a support forum, the Global Risk Management Committee (GRMC), which is established
as the main executive-level committee on the risks within its remit. Its purpose is to develop the
strategies, policies, regulations and infrastructures needed to identify, assess, measure and manage
the material risks within its remit that the Group faces in its business activity.
In addition, the chief risk officers of the geographical and business areas report functionally to the
Group’s Chief Risk Officer and report operationally to the head of their geographical and/or business
area. This dual reporting system aims to ensure the independence of the local risk management
function from the operating functions, and enable its alignment with the Group's risk-related general
policies and goals.
With regard to non-financial risks and internal control, the Group has a Regulation & Internal Control
area that is independent from the other units. This area is under the responsibility of the Global Head
of Regulation & Internal Control, who is also appointed by the BBVA Board of Directors and reports
directly to the corporate bodies, providing updates on the performance of its functions. This area is
responsible for proposing and implementing policies related to non-financial risks and the Group's
internal control model. It also includes, amongst others, the Non-Financial Risk, Compliance and
Internal Risk Control units.
For more information on the bodies responsible for risk management and control at BBVA, see
"Governance and organisation" in the "General risk management and control model" section in the
"Risk management" chapter of the individual and consolidated Management Reports for financial year
2020.
As far as tax risk is concerned, the Tax function of the BBVA Group is responsible for establishing the
control mechanisms and internal rules necessary to ensure compliance with current tax regulations,
as well as proposing tax strategy to the Board of Directors for their consideration and approval, where
appropriate. In addition, the Audit Committee is responsible for overseeing the tax risks in the process
of preparing and presenting financial information, which is evidenced by the reports made by the Head
of the BBVA Group's Tax function to the Committee.
E.3 Indicate the primary risks, including tax-related risks and, where significant, risk derived from
corruption (the latter can be understood to be within the scope of Royal Decree Law 18/2017) that
could prevent business targets from being met.
162
BBVA has processes to identify risks and analyse scenarios, enabling dynamic and advance risk
management. These processes are forward-looking to ensure the identification of emerging risks, and
take into account the concerns of both the business and corporate areas, as well as those of Senior
Management.
Risks are identified and measured in a consistent manner and in line with approved methodologies.
Their measurement includes scenario analyses and stress testing, and considers the controls to which
the risks are subject.
In this regard, there are a number of emerging risks that could impact the Group's business
performance. These risks are organised into the following large blocks:
●
Macroeconomic and geopolitical risks
●
Regulatory and reputational risks
●
Business, legal and operational risks
For more information on these risks, see "Risk factors" in the "Risk management" chapter of the
individual and consolidated Management Reports for financial year 2020, and "Other non-financial
risks" chapter of the Non-Financial Information Statement, included in said Management Reports.
Likewise, amongst the possible crimes included in the criminal prevention model are those related to
corruption and bribery, since there are a number of risks that could manifest in a company with
characteristics such as those of BBVA. For more information, see "Other standards of conduct" and
“Criminal prevention model” in the "Compliance system" section, which is included in the "Ethical
behaviour" chapter of the Non-Financial Information Statement in the individual and consolidated
Management Reports for the 2020 financial year.
On the other hand, and not having the consideration of significant risk referred to in this section, the
Spanish judicial authorities are investigating the activities of the company
Centro Exclusivo de
Negocios y Transacciones, S.L.
In relation to this, on 29 July 2019, the Bank was served the notice from Central Magistrates Court
No. 6 of the Spanish High Court, citing the Bank as an investigated legal entity in the preliminary
proceedings 96/2017 — investigation p iece number 9 — for alleged events that could be constitutive
of bribery, revelation of secrets and corruption in business. On 3 February 2020, the Bank was notified
that the Central Magistrates Court No. 6 of the Spanish High Court lifted the secrecy of the
proceedings. Certain Group managers and employees, both current and former, as well as some
former directors, are also under investigation in relation to this case. The Bank has been and continues
to proactively cooperate with judicial authorities and has shared with them the relevant documentation
arising from the forensic investigation hired by the Bank in 2019 to help to clarify the events. As of the
date of this document, no indictment has been filed against BBVA for any crime.
The above-mentioned criminal proceedings are in the pre-trial phase. It is therefore impossible at this
time to predict their scope or duration, their possible outcome or the possible implications for the
Group, including potential fines and losses and damage to the Group's reputation.
Continued in Section H of this Report.
E.4 Identify whether the company has risk tolerance levels, including for tax-related risks.
The Group's Risk Appetite Framework, approved by the Board of Directors, determines the risks and
the associated risk levels that the Group is prepared to assume to achieve its objectives, considering
the organic development pattern of the business. These are expressed in terms of solvency, liquidity
and funding, and profitability and recurrence of revenue, which are reviewed not only periodically but
also if there are any substantial changes in the business strategy or relevant corporate transactions.
The Risk Appetite Framework is expressed through the following elements:
●
Risk Appetite Statement: This contains the general principles of the Group's risk strategy and
the target risk profile.
●
Statements and core metrics: Derived from the appetite statement, these statements set out
the general risk management principles in terms of solvency, liquidity and funding, profitability
and recurrence of revenue.
163
●
Statement and metrics by type of risk: The general principles for managing each risk are
established based on the core metrics and their thresholds for each type of risk. A series of
metrics are also determined, and adherence to these ensures compliance with the core metrics
and the Group's Risk Appetite Statement.
In addition to this Framework, there is a level of management limits that is defined and managed by
the areas responsible for managing each type of risk. This is to ensure that anticipatory risk
management respects this structure and, in general, the established Risk Appetite Framework.
Each significant geographical area has its own Risk Appetite Framework consisting of its local Risk
Appetite statement, core metrics and statements, statements and metrics by type of risk, which should
be consistent with those set at the Group level, but adapted to their reality and approved by the
corresponding corporate bodies of each entity. This Risk Appetite Framework has a limit structure in
line and consistent with the above.
The corporate Risk area works together with the various geographical and/or business areas to define
their Risk Appetite Framework, so that it is coordinated with and integrated into the Group's Risk
Appetite Framework, making sure that its profile is in line with the one defined. Also, for local
monitoring purposes, the Chief Risk Officer for the geographical and/or business area will periodically
report on the evolution of the local Risk Appetite Framework metrics to its corporate bodies, as well
as, where appropriate, to the appropriate local top-level committees, following a scheme similar to that
of the Group, in accordance with its own corporate governance systems.
For more information on the Risk Appetite Framework described above and on its monitoring and
management integration, see "Risk Appetite framework" in the "General Risk management and control
model" section within the "Risk management" chapter of the individual and consolidated Management
Reports for financial year 2020.
E.5 State what risks, including tax-related risks, have occurred during the financial year.
Risk is inherent to financial activity, and the occurrence of minor and major risks is therefore an
inseparable part of the Group's activities. BBVA therefore offers detailed information on the evolution
of risks which, by their nature, continuously affect the Group in carrying out its activity. This
information is provided in its annual financial statements (notes 7 and 19 on risk management and
tax risks, respectively, in the BBVA Group's Consolidated Annual Financial Statements; and notes
5 and 17, on the same subject matters, in BBVA's Individual Annual Financial Statements, both for
financial year 2020) and in the individual and consolidated Management Reports, both for financial
year 2020 (the "Risk management" chapter and "Other non-financial risks" chapter of the Non-
Financial Information Statement).
E.6 Explain the response and oversight plans for the primary risks faced by the company, including tax-
related risks, and the procedures followed by the company to ensure that the board of directors
responds to any new challenges.
The BBVA Group's internal control system for operational risks is based on the best practices
developed both in the COSO (Committee of Sponsoring Organizations of the Treadway Commission)
Enterprise Risk Management — Integrated Framework and in the Framework for Internal Control
Systems in Banking Organisations drawn up by the Basel Bank for International Settlements (BIS).
The control model has a system comprising three lines of defence:
●
The Group's business and support units constitute the first line of defence. They are responsible
for primary management of current and emerging risks, and implementing control procedures
for risk mitigation. They are also responsible for reporting to their business/support unit.
●
The second line of defence is comprised of specialised control units in different areas of risk:
Compliance, Legal, Finance, People, Physical security, Technological security, Information and
Data Security, Suppliers, Internal Risk Control and Processes. This line defines the control
frameworks in its specialist field, across the entire Entity, and provides training to areas exposed
to risk. It also checks the identification of current and emerging risks carried out by the different
business and support units, and assesses the adequacy and effectiveness of the control
environments implemented by them.
164
With regard to operational risk, the control activity of the first and second lines of defence is
coordinated by the Non-Financial Risks Unit, which is responsible for providing the units with a
common internal control methodology and global tools. This second line of defence is in place
in all geographical areas in which the Group is present and acts in accordance with
standardised practices that come from the corporate units in each of the fields.
The Group's Head of Non-Financial Risks is responsible for the function and, together with the
Chief Compliance Officer and the Head of Internal Risk Control, reports on its activity to the
Global Head of Regulation & Internal Control and to the Risk and Compliance Committee,
assisting the latter in any matters where requested.
●
The third line of defence is made up of the Internal Audit unit, for which the Group assumes the
guidelines of the Basel Committee on Banking Supervision and of the Institute of Internal
Auditors. Its function is to independently and objectively assess the first and second lines of
defence, evaluating the efficiency and effectiveness of internal control policies and systems,
risk management and the governance processes and policies established by the Group.
As part of the second line of defence, the Group has a specific Internal Risk Control unit, within
the area of Regulation & Internal Control, which, among other tasks, independently checks and
monitors regulations and governance structure, in terms of financial risks, and the application
and operation thereof in the area of Global Risk Management, as well as checking the
development and implementation of financial risk management and control processes. It is also
responsible for the validation of risk models.
The Group's Head of Internal Risk Control is responsible for the function and reports on its
activities and work plans to the Head of Regulation & Internal Control and to the Risk and
Compliance Committee, assisting the Committee in any matters where requested, and in
particular checking that the GRM reports presented to the Committee comply with the
established criteria at all times.
In addition, the Internal Risk Control function is global and transversal, covering all types of
financial risks and having specific units in all geographical and/or business areas, with
functional dependency on the Group's Head of Internal Risk Control.
As far as tax risk is concerned, the Tax Department, located within the Finance area, is
responsible for establishing the policies and controls necessary to ensure compliance at all
times with the current tax regulations and the tax strategy approved by the Board of Directors.
The Internal Financial Control Unit, as a second line of defence against financial, accounting
and tax risks, is responsible for assessing the quality of the design and effectiveness of the
control model operating in tax processes, as detailed in Section F of this document.
In order to meet the new challenges that arise, the BBVA Group has a governance system that
allows the Board of Directors to be informed of the real and potential risks that affect or may
affect the Group at any time. Thus, in addition to the work carried out by the Bank's different
areas of control (Risk, Regulation & Internal Control and Internal Audit), as well as other areas
of the Bank, such as the legal and finance areas, and the corresponding Board committees
(such as the Risk and Compliance Committee or the Audit Committee), there is also the
monitoring and supervision carried out by the Technology and Cybersecurity Committee. Its
work allows the Board of Directors to be informed of the main technological risks to which the
Group is exposed—including those relating to information security risks, information technology
compliance risks and cybersecurity risks—as well as of current technological trends and
strategies, business continuity plans in matters of technology and relevant cybersecurity events
affecting the Group or which might affect it in the future, among other functions.
F. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS
OVER FINANCIAL REPORTING (ICFR)
Describe the mechanisms comprising the risk management and control systems for financial reporting (ICFR)
in your entity.
F.1 The entity's control environment
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Give information on the key features of at least:
F.1.1. Which bodies and/or functions are responsible for: (i) the existence and maintenance of an
adequate and effective ICFR; (ii) its implementation and (iii) its supervision.
Pursuant to Article 17 of its Regulations, the Board of Directors approves the financial information that
BBVA is required to publish periodically as a listed company. The Board of Directors has an Audit
Committee whose main task, among others, is to assist the Board in monitoring the preparation of
financial statements and public information, as well as monitoring internal financial control.
In this regard, the Rules of Procedure of BBVA's Audit Committee establish that one of the
Committee's functions is to monitor the effectiveness of the Company's internal control and the risk
management systems in the process of drawing up and presenting financial information, including tax
risks, as well as discussing with the statutory auditor the significant weaknesses of the internal control
system detected during the audit.
The BBVA Group complies with the requirements imposed by the Sarbanes Oxley Act (SOX) for each
financial year's consolidated annual financial statements due to its status as a publicly traded company
listed with the United States Securities Exchange Commission (SEC). The main Group executives are
involved in the design, compliance and maintenance of an effective internal control model that
guarantees the quality and veracity of the financial information. The Finance area has been
responsible during 2020 for producing the consolidated annual financial statements and maintaining
the control model for financial information generation. Specifically, this function is performed by the
Financial Internal Control area, which is integrated within the Group's general internal control model,
which is briefly outlined below:
The BBVA Group works continuously to bolster its internal control model, which comprises two key
elements. The first is the control structure organised into three lines of defence, which is described in
Section E.6 above; and the second is a governance scheme called Corporate Assurance, which
establishes a framework for monitoring the internal control model and bringing the main aspects of the
Group's internal control to the attention of Senior Management.
Corporate Assurance establishes a committee structure, both at the local and corporate levels, that
provides Senior Management with a comprehensive and homogeneous view of the main non-financial
risks and relevant situations as regards the control environment. The aim is to facilitate fast and
proactive decision-making in relation to the mitigation or assumption of major risks. These committees
are formed by the main executives responsible for the business and support areas, as well as those
responsible for the second line of defence (RCS).
The effectiveness of this internal control system is assessed periodically for those risks that may affect
the correct compilation of the Group's financial statements. The assessment is coordinated by the
Internal Financial Control area and involves risk control specialists (RCS), as the second line of
defence, and risk control assurers (RCA) for the main processes, in both business areas and support
areas. The Group's Internal Audit area also performs its own assessment of the internal control system
with regard to the generation of financial information. In addition, the external auditor of the BBVA
Group issues an opinion every year on the effectiveness of internal control over financial reporting
based on criteria established by COSO (Committee of Sponsoring Organizations of the Treadway
Commission) and in accordance with PCAOB (the US Public Company Accounting Oversight Board)
standards. This opinion appears in Form 20-F, which is filed every year with the SEC.
The result of the annual internal assessment of the System of Internal Control over Financial
Reporting, conducted by Internal Audit and Internal Financial Control, is reported to the Audit
Committee by the heads of Internal Financial Control.
F.1.2 Whether, especially in the process of drawing up financial information, the following elements
exist:
●
Departments and/or mechanisms responsible for: (i) the design and review of the
organisational structure; (ii) the clear definition of lines of responsibility and authority, with
an adequate distribution of tasks and functions; and (iii) ensuring that sufficient procedures
exist for their correct dissemination within the entity.
Financial information is produced in the local Financial Management Units of the BBVA
Group banks in the different countries where it maintains a presence. The conso lidation
166
work is carried out in the Corporate Centre, in the Finance Department, which has overall
responsibility for the preparation and issuance of the Group's financial and regulatory
information.
BBVA's organisational structure clearly defines lines of action and responsibility for the
areas involved in the generation of financial information, both at the individual entity level
and consolidated Group level; provides the channels and circuits necessary for the proper
communication of the financial information; and provides a procedure for the dissemination
of the annual financial statements. The units responsible for drawing up these financial
statements have a suitable distribution of tasks and the necessary segregation of functions
to draw up these statements in an appropriate operational and control framework.
Additionally, there is an accountability model aimed at extending the culture of, and
commitment to, internal control. Those in charge of the design and operation of the
processes that have an impact on financial reporting certify that all the controls associated
with its operation under their responsibility are sufficient and have worked correctly.
●
Code of conduct, approval body, degree of dissemination and instruction, principles and
values included (indicating whether there are specific mentions of recording transactions
and drawing up financial information), body in charge of analysing non-compliance and
proposing corrective measures and sanctions.
BBVA has a Code of Conduct that is approved by the Board of Directors and reflects
BBVA's concrete commitments with regard to one of the principles of its Corporate Culture:
Integrity in the consideration and undertaking of its business. This Code likewise
establishes the corresponding whistleblowing channel regarding possible infringements of
the Code. It is the subject of training and refresher programmes that include key personnel
in the financial function.
Following the update to the Code in 2015, communication campaigns to share its new
content have been in place since 2016, making use of new formats and digital channels.
In addition, a training plan has been developed at a global level, reaching the entire
workforce of the Group.
The Code of Conduct can be accessed on the Bank's website (www.bbva.com) and on the
employees' website (Intranet). Additionally, Group members undertake personally and
individually to observe its principles and rules in an express declaration of awareness and
adhesion.
One of the functions of the Risk and Compliance Committee is to examine draft codes of
ethics and conduct and their respective modifications prepared by the corresponding area
of the Group, and give its opinion in advance of the proposals to be drafted to the corporate
bodies.
Additionally, BBVA has adopted a structure of Corporate Integrity Management
Committees (with individual powers at jurisdiction or Group entity levels, as applicable).
Their joint scope of action covers all the Group businesses and activities and their main
function is to ensure effective application of the Code of Conduct. There is also a Corporate
Integrity Management Committee, whose scope of responsibility extends throughout
BBVA. The main mission of this committee entails ensuring uniform application of the Code
in BBVA.
The Compliance Unit in turn independently and objectively promotes and supervises to
ensure that BBVA acts with integrity, particularly in areas such as money-laundering
prevention, conduct with customers, security market conduct, corruption prevention, and
other areas that could entail a reputational risk for BBVA. The unit's duties include fostering
the knowledge and application of the Code of Conduct, promoting the drafting and
distribution of its implementing standards, assisting in the resolution of any concern that
may arise regarding the interpretation of the Code, and managing the Whistleblowing
Channel.
●
Whistleblowing channel, which allows financial and accounting irregularities to be
communicated to the audit committee, as well as possible breaches of the code of conduct
167
and irregular activities in the organisation, reporting where applicable if this is confidential
in nature.
Preservation of the Corporate Integrity of BBVA transcends merely personal accountability
for individual actions, it calls for all employees to have zero tolerance for activities that do
not comply with the Code of Conduct or that could harm the reputation or good name of
BBVA. This attitude is reflected in everyone's commitment to whistle-blowing, by timely
communication, of situations that, even when unrelated to their activity or area of
responsibility, could be infringe regulations or contradict the values and guidelines of the
Code.
The Code of Conduct itself and contemplates a Whistleblowing Channel, whereby BBVA
employees, as well as other parties not part of BBVA, may communicate, in a confidential
manner and, if they wish, anonymously, any behaviours that may not comply with the Code
or that may infringe applicable regulation. Complaints are handled promptly and diligently,
guaranteeing the confidentiality of the investigations and the prohibition of retaliation or
adverse consequences in light of communications made in good faith.
Tele phone lines and email inboxes have been set up in each jurisdiction for these
communications. The Whistleblowing Channel is available 24 hours 365 days.
As described in the previous section, BBVA has adopted a structure of Corporate Integrity
Management Committees (with individual powers at jurisdiction or Group entity levels, as
applicable), whose joint scope of action covers all the Group businesses and activities and
whose functions and responsibilities (explained in greater detail in their corresponding
regulations) include:
- Driving and monitoring global initiatives to foster and promote a culture of ethics and
integrity among members of the Group.
- Ensuring the uniform application of the Code.
- Promoting and monitoring the functioning and effectiveness of the Whistleblowing
Channel.
- In cases where they are not already included among the members of the Committee,
informing Senior Management and/or the person responsible for preparing the
financial statements of any events and circumstances from which significant risks
might arise for BBVA.
Also, through the Compliance area, periodic reports are made to the Risk and Compliance
Committee, which, pursuant to its own Regulations, monitors and controls the proper
functioning of the Whistleblowing Channel.
●
Periodic training and refresher courses for employees involved in preparing and revising
financial information, and in ICFR assessment, covering at least accounting standards,
audit, internal control and risk management.
The Finance area has a specific programme of courses and seminars, run in both its
classroom and virtual campus, which complement the general training of all employees of
the BBVA Group, in line with their roles and responsibilities. Specific training and periodic
refresher courses are given on accounting and tax regulations, internal control and risk
management, particularly for teams in the areas involved in preparing and reviewing the
financial and tax-related information and in evaluating the internal control system, to help
them perform their functions correctly. These courses are taught by professionals from the
area and renowned external providers.
Additionally, the BBVA Group has a personal development plan for all employees, which
forms the basis of a personalised training programme to deal with the areas of knowledge
necessary to perform their functions.
F.2 Financial reporting risk assessment
Give information on at least:
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F.2.1. The key features of the risk identification process, including error and fraud risks, with respect
to:
●
Whether the process exists and is documented.
The ICFR was developed by the Group Management in accordance with international
standards set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), which establishes five components on which the effectiveness and
efficiency of internal control systems must be based:
- Establishing an adequate control environment for monitoring all these activities.
- Assessing the risks that may be incurred by an entity in drawing up its financial
information.
- Designing the necessary controls to mitigate the most critical risks.
- Establishing the adequate information circuits to detect and communicate the
system's weaknesses or inefficiencies.
- Monitoring such controls to ensure that they are operational and to guarantee their
effectiveness over time.
In order to identify the risks with a greater potential impact on the generation of financial
information, the processes through which such information is generated are analysed and
documented, and an analysis of the risks, errors or inaccuracies that may arise in each is
later conducted.
Based on the corporate internal control methodology, the risks are categorised by type,
including process errors and fraud, and their probability of occurrence and possible impact
are analysed.
The process of identifying risk in the preparation of Financial Statements, including risks
of error, falsehood or omission, is carried out by the first line of defence: those responsible
for each of the processes that contribute to the preparation of financial information and
those responsible for their control. This risk identification is performed taking into account
the theoretical risk model and the mitigation and control framework previously defined by
the specialists for each type of risk (within the second line of defence) which, in the case
of Finance, is the Internal Financial Control unit (tax and financial reporting risk specialist),
who, in addition, challenges the functioning and effectiveness of the controls implemented.
Whether the assessment of their controls is annual, quarterly or monthly is determined
based on the significance of the risks, this ensuring coverage of the risks considered critical
for the financial statements.
The assessment of the aforementioned risks and the design and effectiveness of their
controls begins with the understanding of and insight into the analysed operating process,
considering criteria of quantitative materiality, likelihood of occurrence and economic
impact, in addition to qualitative criteria associated with the type, complexity and nature of
the risks or of the business or process structure itself.
The system for identifying and assessing the risks of internal control over financial reporting
is dynamic. It evolves continuously, always reflecting the reality of the Group's business,
changes in operating processes, the regulations applicable at all times, the risks affecting
them and the controls that mitigate them.
All this is documented in a corporate management tool developed and managed by the
Non-Financial Risk area (STORM). This tool documents all the risks and controls, by
process, that are managed by the different risk specialists, including the Financial Internal
Control unit.
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●
Whether the process covers all of the objectives of financial reporting (existence and
occurrence; completeness; valuation; presentation, breakdown and comparability; and
rights and obligations), whether the information is updated and how frequently.
Each of the processes identified in the BBVA Group for drawing up financial information
aim to record all financial transactions, value the assets and liabilities in accordance with
applicable accounting regulations and provide a breakdown of the information in
accordance with regulatory requirements and market needs.
The financial information control model analyses each of the phases of the processes
mentioned above (from procedural governance, documentation, criteria setting, decision
making, information provision, application operation, monitoring generated information,
and reporting), in order to ensure that the risks identified in each process are adequately
covered by controls that operate efficiently. The control model is updated when changes
arise in the relevant processes or support tools for producing financial information.
●
The existence of a process for identifying the consolidation perimeter, taking into account
aspects including the possible existence of complex corporate structures, or instrumental
or special purpose vehicles.
The Finance area includes a department responsible for the Group's financial
consolidation, which carries out a monthly process of identification, analysis and updating
of the perimeter of the Group's consolidated companies.
In addition, the information from the consolidation department on new companies set up
by the Group's different units and the changes made to existing companies is compared
with the data analysed by a specific committee at corporate level, whose objective is to
analyse and document the changes in the composition of the corporate group and optimise
its corporate structure (Corporate Structure Committee — CSC).
In addition, the Finance area of the Bank, in controlling special purpose entities, makes a
periodic report to the Audit Committee on the structure of the Group of companies.
●
Whether the process takes into account the effects of other types of risks (operational,
technological, financial, legal, tax-related, reputational, environmental etc.) insofar as they
impact the financial statements.
The model of internal control over financial reporting applies to processes for directly
drawing up such financial information and to all operational or technical processes that
could have a relevant impact on the financial, accounting, tax-related or management
information.
As mentioned above, the Group has an internal control model coordinated by the
Regulation & Internal Control area, which uses a single methodology to assess all the
Group's non-financial risks (mainly operational, technological, financial, legal, tax-related,
reputational, third party and compliance). All the specialist risk areas and heads of control
use a common tool (STORM) to document the identification of the risks, the controls that
mitigate those risks and the assessment of their effectiveness.
There are control assurers in all the operational or support areas, and therefore any type
of risk that may affect the Group's operations is analysed under that methodology and is
included in the ICFR insofar as it may have an impact on the financial information.
●
Which of the entity's governing bodies supervises the process.
The process for identifying risks and assessing the design, effectiveness and suitability of
the controls for generating financial information is documented at least once a year, and is
overseen by the Internal Audit area.
Moreover, the Group's head of Internal Financial Control reports annually to the Audit
Committee on analysis work that has been carried out, on the conclusions of the
assessment of the control model relating to the generation of financial information, and on
the process for downstream certification of the effectiveness of the control model. This
process is undertaken by the financial officers of the main entities and holding control
specialists. This work follows the SOX methodology in compliance with the legal
170
requirements, under the regulation, on systems of internal control over financial reporting,
and is included in Form 20-F, submitted annually to the SEC, as indicated in Section F.1
above.
F.3 Control activities
F.3.1. Procedures for review and authorisation of financial information and the description of the
ICFR, to be published on the stock markets, indicating who is responsible for it, and the
documentation describing the activity flows and controls (including those concerning risk of
fraud) for the different types of transactions that may materially impact the financial
statements, including the procedure for closing the accounts and the specific review of the
relevant judgements, estimates, valuations and projections.
All of the processes relating to the generation of financial information are documented, as is the
corresponding control model, including potential risks associated with each process and the
controls put in place to mitigate them. As explained in Section F.2.1, the aforementioned risks
and controls are recorded in the corporate tool STORM, which also includes the result of the
assessment of the effectiveness of the controls and the degree of risk mitigation.
In particular, the main processes relating to the generation of financial information are found in
the Finance area, and they are: accounting, consolidation, financial reporting, financial planning
and monitoring, and financial and tax management. The analysis of these processes, their risks
and their controls is also supplemented by that of all other critical risks, in the processes of the
various business areas or other support areas, that may have a financial impact on the financial
statements.
In the aforementioned review procedures, special attention is paid, from a control point of view,
to the financial and tax-related information disseminated to the securities markets, including the
specific review of controls on relevant judgements, estimates and projections used in the
preparation of the above-mentioned information.
As noted in the annual financial statements themselves, it is occasionally necessary to make
estimates to determine the amount at which some assets, liabilities, income, expenses and
commitments should be recorded. These estimates are mainly related to:
●
The value corrections of certain financial assets.
●
The assumptions used to quantify certain provisions and in the actuarial calculation of
liabilities and commitments for post-employment and other obligations.
●
The useful life and impairment losses of tangible and intangible assets.
●
The appraisal of goodwill and assignments of the price paid in business combinations.
●
The fair value of certain unlisted assets and liabilities.
●
The recoverability of deferred tax assets.
These estimates are made based on the best information available on the financial statement
closing date and, together with the other relevant issues for the closing of the annual and six-
monthly financial statements, are analysed and authorised by a Technical Committee.
F.3.2. Internal control procedures and policies for information systems (among others, access
security, change control, their operation, operational continuity and segregation of functions)
that support the relevant processes in the entity with respect to drawing up and publishing
financial information.
The Group's current internal control model has expanded the catalogue of technological risks
managed as non-financial risks to three distinct categories:
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✔
assets (including technology) and individuals due to the damage and deterioration of such
assets.
✔
changes, IT system failures, risk from low IT availability and performance, IT system
integrity risk, application tampering fraud, and logical impersonation.
✔
destruction of data infrastructure, loss, theft or misuse of information and cyber attacks that
affect the privacy, confidentiality, availability and integrity of information.
The internal control models therefore include procedures and controls regarding the operation
of information and access security systems, the segregation of functions, and the development
and modification of computer applications used to generate financial information.
Both types of control are identified in the model of internal control over financial reporting and
are analysed and assessed periodically, in order to guarantee the integrity and reliability of the
information drawn up.
With all these mechanisms, the BBVA Group can confirm that adequate management of access
control is maintained, the correct and necessary steps are taken to put applications into
production as well as ensuring their subsequent support, the creation of backup copies, and
assurance of continuity in the processing and recording of operations.
In summary, the entire process of preparing and publishing financial information has established
and documented the procedures and control models for technology and IT systems necessary
to provide reasonable assurance of the correctness of the BBVA Group's public financial
information.
F.3.3. Internal control procedures and policies designed to supervise the management of activities
subcontracted to third parties and those aspects of evaluation, calculation and assessment
outsourced to independent experts which may materially impact the financial statements.
The internal control model sets out specific controls and procedures for the management of
subcontracted activities or those aspects of evaluation, calculation and assessment of assets
or liabilities outsourced to independent experts.
There is a specialist area of risk arising in third-party operations, a standard and a committee
for non-financial risk admission, which also analyses outsourcing operations and which
establishes and supervises the requirements to be fulfilled at the Group level for the activities
to be subcontracted.
There are procedural manuals for the outsourced financial processes that identify the
procedures to be followed and the controls to be applied by the service provider units and
outsourcing units. The controls established in the outsourced processes concerning the
generation of financial information are also tested by the Internal Financial Control area.
The valuations from independent experts used for matters relevant for generating financial
information are included within the standard circuit of review procedures executed by internal
control, internal auditing and external auditing.
F.4 Information and communication
Give information on the main features, if at least the following exist:
F.4.1. A specific function in charge of defining and maintaining accounting policies (accounting policy
department or area) and resolving queries or conflicts stemming from their interpretation,
ensuring fluent communication with those in charge of operations in the organisation, and an
up-to-date manual of accounting policies, communicated to the units through which the entity
operates.
The Finance area and in particular the Accounting & Regulatory Reporting area have robust
governance systems which include two Technical Committees: one for Accounting and one for
Capital. The purpose of these committees is to analyse, study and issue standards that may
172
affect the compilation of the Group's financial and regulatory information, to determine the
accounting and solvency criteria required to ensure that transactions are booked correctly, and
to calculate capital requirements within the framework of the applicable standards.
The Group also has an Accounting Policies Manual, which is updated and made available to all
Group units by means of the Intranet. This Manual is the tool that guarantees that all the
decisions related to accounting policies or specific accounting criteria to be applied in the Group
are supported and are standardised. This Manual is approved by the Technical Accounting
Committee and is continuously documented and updated for use and analysis by all the Group's
entities.
F.4.2. Mechanisms to capture and prepare financial reporting in standardised formats, for application
and use by all of the units of the entity or the group, that support the main financial statements
and the notes, and the detailed information on ICFR.
The BBVA Group's Finance area and the countries' financial management units are responsible
for the processes for preparing financial statements in accordance with the current accounting
and consolidation manuals. There is also a consolidation computer application that collects the
accounting information of the various companies within the Group and performs the
consolidation processes, including the standardisation of accounting criteria, aggregation of
balances and consolidation adjustments.
Control measures have also been implemented in each of the aforementioned processes, both
locally and at consolidated level, to ensure that all the data supplying the financial information
is collected in a comprehensive, exact and timely manner. There is also a single and
standardised financial reporting system that is applicable to and used by all the Group units and
supports the main financial statements and the explanatory notes. There are also control
measures and procedures to ensure that the information disclosed to the markets contains a
breakdown that is tailored to regulatory requirements and sufficient so as to enable investors
and other users of the financial information to underst and and interpret it.
F.5 Supervision of the system's operation
Give information on the key features of at least:
F.5.1. The ICFR supervision activities carried out by the audit committee and whether the entity has
an internal audit function with powers that include providing support to the audit committee in
its task of supervising the internal control system, including the ICFR. Likewise, information
will be given on the scope of the ICFR assessment carried out during the financial year and
of the procedure by which the person in charge of performing the assessment communicates
its results, whether the entity has an action plan listing the possible corrective measures, and
whether its impact on financial reporting has been considered.
The internal control units of the business areas and of the support areas conduct a preliminary
assessment of the internal control model, assess the risks identified in the processes, the
effectiveness of controls, and the degree of mitigation of the risks, as well as identifying possible
weaknesses and designing, implementing and monitoring the mitigation measures and action
plans.
The first assessment of the effectiveness of the risk controls for the financial information
preparation process is carried out by the RCA (Risk Control Assurer), who is responsible for
control in the first line of defence, and layer by the RCS (Risk Control Specialist — second line
of defence) who must challenge the design and operation of the controls in order to issue a
conclusion on the operation of the control model on the risks covered by his field of expertise.
BBVA also has an Internal Audit unit that supports the Audit Committee with regard to the
independent supervision of the internal financial information control system. The Internal Audit
function is entirely independent of the units that draw up the financial information.
All the weaknesses in controls, mitigation measures and specific action plans are documented
in the corporate tool STORM and submitted to the internal control and operational risk
committees of the areas, as well as to the local or global Corporate Assurance Committees,
based on the significance of the detected issues.
Both the weaknesses identified by the internal control units and those detected by the internal
or external auditor have an action plan in place to correct or mitigate risk.
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During the 2020 financial year, the areas responsible for Internal Control conducted a full
assessment of the system for internal control over financial reporting, and, to date, no material
or significant weakness having any impact on the preparation of financial information have been
revealed therein.
Additionally, in compliance with the SOX, the Group's Internal Control and Internal Auditing
areas annually assesses the effectiveness of the model of internal control over financial
reporting on a group of risks (within the perimeter of SOX companies) that could affect the
drawing up of financial statements at local and consolidated levels. This perimeter incorporates
risks and controls in Finance and other specialisms that are not directly financial (technology,
risks, operational processes, human resources, procurement, legal etc.). The results of this
assessment are reported annually to the Audit Committee.
174
F.5.2. Whether there is a discussion procedure via which the auditor (in line with the auditing
technical standards), the internal audit function and other experts can inform senior
management and the audit committee or the entity's directors of significant weaknesses in the
internal control encountered during the review processes for the annual financial statements
or any others within their remit. Also provide information on whether there is an action plan to
try to correct or mitigate the weaknesses observed.
As described in section (F.5.1) above, the Group has a procedure in place whereby the internal
auditor and the heads of Internal Financial Control report to the Audit Committee any significant
internal control weaknesses detected in the course of their work. Any significant or material
weaknesses, if present, will likewise be reported. Similarly, there is a procedure whereby the
external auditor reports to the Audit Committee the result of their work assessing the system for
internal control over financial information.
Since BBVA is listed with the SEC, the BBVA Group's external auditor annually issues its
opinion on the effectiveness of the internal control over financial reporting contained in the
Group's consolidated annual financial statements on 31 December each year, under PCAOB
(Public Company Accounting Oversight Board) standards, with a view to filing the financial
information with the SEC on Form 20-F. The latest report issued on the financial information for
the 2019 financial year is available at www.sec.gov and www.bbva.com.
All control weaknesses detected by the Internal Control, Internal Audit and External Audit areas
have an action plan for resolution and are reported to the Internal Control Committees of each
area, to the Corporate Assurance Committees (local or global, depending on the severity of the
weaknesses) and also to the Audit Committee.
The internal control oversight carried out by the Audit Committee, described in the Regulations
of the Audit Committee published on the Group website, www.bbva.com, includes the following
activities:
●
Analyse, prior to their submission to the Board of Directors and in enough detail to
guarantee their accuracy, reliability, sufficiency and clarity, the financial statements of the
Bank and of its consolidated Group contained in the annual, six-monthly and quarterly
reports, as well as in all other required financial information and related non-financial
information. For this purpose, the Committee will have the support it needs from the
Group's Senior Management, especially that of the area responsible for accounting
functions, and from the Company and Group auditor, as well as all the necessary
information made available to it with the level of aggregation deemed appropriate.
●
Review the necessary consolidation perimeter, the correct application of accounting
criteria, and all the relevant changes relating to the accounting principles used and the
presentation of the financial statements.
●
Monitor the effectiveness of the Company's internal control as well as its risk
management systems, in terms of the process of preparing and reporting financial
information, including tax-related risks, and discuss with the auditor any significant
weaknesses detected in the internal control system during the audit, without undermining
its independence. For such purposes, and where appropriate, the Committee may submit
recommendations or proposals to the Board of Directors, along with the deadline for their
follow-up.
●
Analyse and, where appropriate, approve the annual work plan for the Internal Audit area,
as well as any other occasional or specific plans to be implemented as a result of
regulatory changes or as required for organisation of the Group's business.
●
Be aware of the audited units' degree of compliance with corrective measures previously
recommended by the Internal Audit area and inform the Board of those cases that may
involve a significant risk for the Group.
The external auditor and the head of Internal Audit attend all regular meetings of the Audit
Committee to report on the matters dealt with within their respective remits.
F.6 Other relevant information
F.7 External auditor report
Report on:
175
F.7.1. Whether the ICFR information disclosed to the markets has been submitted by the external
auditor for review, in which case the entity must attach the corresponding report as an annex.
Otherwise, explain the reasons why it was not.
The information related to the BBVA Group's internal control over financial reporting described
in this report is reviewed by the external auditor, which issues its opinion on the control system
and on its effectiveness in relation to the accounts published at the close of each financial year.
On 28 February 2020, the BBVA Group, as a private foreign issuer in the United States, filed
the Annual Report (Form 20-F) for the financial year ending on 31 December 2019, which was
published on the SEC website on that same date.
In accordance with the requirements set out in Section 404 of the Sarbanes-Oxley Act of 2002
by the Securities and Exchange Commission (SEC), the aforementioned Annual Report (Form
20-F) included certification of the Group's executive principles with regard to the establishment,
maintenance and assessment of the Group's system of internal control over financial reporting.
The Form 20-F report also included the opinion of the external auditor regarding the
effectiveness of the Company's system of internal control over financial reporting at the close
of the 2019 financial year.
G. DEGREE OF COMPLIANCE WITH CORPORATE
GOVERNANCE RECOMMENDATIONS
Indicate the extent of the company's compliance with the recommendations of the Good Governance Code of
Listed Companies.
If any recommendations are not being followed or are only being followed in part, a detailed explanation of the
reasons for this should be given so that shareholders, investors and the market in general have sufficient
information to assess the actions of the company. General explanations will not be acceptable.
1.
The bylaws of listed companies should not place an upper limit on the votes that can be cast by a single
shareholder, or impose other obstacles to the takeover of the company by means of share purchases on the
market.
✔
COMPLIANT
2.
When the listed company is controlled, pursuant to the meaning established in Article 42 of the Commercial
Code, by another listed or non-listed entity, and has, directly or through its subsidiaries, business
relationships with that entity or any of its subsidiaries (other than those of the listed company) or carries
out activities related to the activities of any of them, this is reported publicly, with specific information about:
a)
The respective areas of activity and possible business relationships between, on the one hand, the
listed company or its subsidiaries and, on the other, the parent company or its subsidiaries.
b)
The mechanisms established to resolve any conflicts of interest that may arise.
NOT APPLICABLE
3.
During the annual general meeting the chairman of the board of directors should verbally inform
shareholders in sufficient detail of the most relevant aspects of the company's corporate governance,
supplementing the written information circulated in the annual corporate governance report. In particular:
a)
Changes that have occurred since the previous annual general meeting.
b)
The specific reasons for the company not following a given Corporate Governance Code
recommendation, and any alternative procedures followed in its stead.
✔
COMPLIANT
4.
The company should define and promote a policy for communication and contact with shareholders and
institutional investors within the framework of their involvement in the company, as well as with proxy
advisors, that complies in full with the rules on market abuse and gives equal treatment to shareholders who
are in the same position. The company should make said policy public through its website, including
information regarding the way in which it has been implemented and the parties involved or those
responsible its implementation.
Further, without prejudice to the legal obligations of disclosure of inside information and other regulated
information, the company should also have a general policy for the communication of economic -financial,
non-financial and corporate information through the channels it considers appropriate (media, social media
or other channels) that helps maximise the dissemination and quality of the information available to the
market, investors and other stakeholders.
176
✔
COMPLIANT
5.
The board of directors should not make a proposal to the general meeting for the delegation of powers to
issue shares or convertible securities without pre-emptive subscription rights for an amount exceeding 20%
of capital at the time of such delegation.
When a board of directors approves the issuance of shares or convertible securities without pre-emptive
subscription rights, the company should immediately post a report on its website explaining the exclusion
as envisaged in company legislation.
PARTIALLY COMPLIANT
The General Shareholders' Meeting on 17 March 2017 delegated to the Board of Directors a power to increase share
capital and issue convertible securities, along with the power to wholly or partially exclude pre-emptive subscription
rights in respect of capital increases and issues of convertible securities carried out using such delegated power.
The power to exclude pre-emptive subscription rights is limited, overall, to 20% of share capital as it stood at the time
of the delegation, except for the issuance of contingently convertible securities, the conversion of which is intended
to satisfy regulatory solvency requirements as to eligibility as capital instruments in accordance with applicable
regulations, because such instruments do not dilute the interests of shareholders.
6.
Listed companies drawing up the following reports on a voluntary or compulsory basis should publish them
on their website well in advance of the annual general shareholders’ meeting, even if their distribution is not
obligatory:
a)
Report on auditor independence.
b)
Reports on the operation of the audit committee and the nomination and remuneration committee.
c)
Audit committee report on related-party transactions.
✔
COMPLIANT
7.
The company should broadcast its general shareholders' meetings live on its website.
The company should have mechanisms that allow the delegation and exercise of votes by electronic means
and even, in the case of large-cap companies and, to the extent that it is proportionate, attendance and active
participation in the general shareholders’ meeting.
PARTIALLY COMPLIANT
The Company broadcasts, live on its website, its General Shareholders' Meetings; and has mechanisms that allow
for proxy voting and remote voting by its shareholders. It is also expected that, for the 2021 General Shareholders'
Meeting, mechanisms will be in place to allow remote attendance and active participation by shareholders.
8.
The audit committee should strive to ensure that the financial statements that the board of directors presents
to the general shareholders’ meeting are drawn up in accordance to accounting legislation. And in those
cases where the auditors includes any qualification in its report, the chairman of the audit committee should
give a clear explanation at the general meeting of their opinion regarding the scope and content, making a
summary of that opinion available to the shareholders at the time of the publication of the notice of the
meeting, along with the rest of proposals and reports of the board.
✔
COMPLIANT
9.
The company should disclose its conditions and procedures for admitting share ownership, the right to
attend the general shareholders' meeting and the exercise or delegation of voting rights, and display them
permanently on its website.
Such conditions and procedures should encourage shareholders to attend and exercise their rights and be
applied in a non-discriminatory manner.
✔
COMPLIANT
10.
When an accredited shareholder exercises the right to supplement the agenda or submit new proposals
prior to the general shareholders' meeting, the company should:
a)
Immediately circulate the supplementary items and new proposals.
b)
Disclose the model of attendance card or proxy appointment or remote voting form duly modified so
that new agenda items and alternative proposals can be voted on in the same terms as those
submitted by the board of directors.
c)
Put all these items or alternative proposals to the vote applying the same voting rules as for those
submitted by the board of directors, with particular regard to presumptions or deductions about the
direction of votes.
d)
After the general shareholders' meeting, disclose the breakdown of votes on such supplementary
items or alternative proposals.
NOT APPLICABLE
177
11.
In the event that a company plans to pay for attendance at the general shareholders' meeting, it should first
establish a general, long-term policy in this respect.
NOT APPLICABLE
12.
The board of directors should perform its duties with unity of purpose and independent judgement,
according the same treatment to all shareholders in the same position. It should be guided at all times by
the company’s best interest, understood as the creation of a profitable business that promotes its
sustainable success over time, while maximising its economic value.
In pursuing the corporate interest, it should not only abide by laws and regulations and conduct itself
according to principles of good faith, ethics and respect for commonly accepted customs and good
practices, but also strive to reconcile its own interests with the legitimate interests of its employees,
suppliers, clients and other stakeholders, as well as with the impact of its activities on the broader
community and the natural environment.
✔
COMPLIANT
13.
The board of directors should have an optimal size to promote its efficient functioning and maximise
participation. The recommended range is accordingly between five and fifteen members.
✔
COMPLIANT
14.
The board of directors should approve a policy aimed at promoting an appropriate composition of the board
of directors and that:
a)
Is concrete and verifiable;
b)
Ensures that appointment or re-election proposals are based on a prior analysis of the competences
required by the board; and
c)
Favours s diversity of knowledge, experience, age and gender. Therefore, measures that encourage
the company to have a significant number of female senior managers are considered to favour gender
diversity.
The results of the prior analysis of competences required by the board should be written up in the
nomination committee’s explanatory report, to be published when the general shareholders’ meeting is
convened that will ratify the appointment and re-election of each director.
The appointments committee should run an annual check on compliance with the policy and set out its
findings in the annual corporate governance report.
✔
COMPLIANT
15.
Proprietary and independent directors should constitute an ample majority on the board of directors, while
the number of executive directors should be the minimum practical bearing in mind the complexity of the
corporate group and the ownership interests they control.
Further, the number of female directors should account for at least 40% of the members of the board of
directors before the end of 2022 and thereafter, and not less than 30% previous to that.
✔
COMPLIANT
16.
The percentage of proprietary directors out of all non-executive directors should be no greater than the
proportion between the ownership stake of the shareholders they represent and the remainder of the
company's capital.
This criterion can be relaxed:
a)
In large cap companies where few or no equity stakes attain the legal threshold for significant
shareholdings.
b)
In companies with a plurality of shareholders represented on the board of directors but not otherwise
related.
✔
COMPLIANT
17.
Independent directors should be at least half of all board members.
However, when the company is not highly capitalised or is highly capitalised but has one or more
shareholders acting in concert and controlling more than 30% of the share capital, the minimum number of
independent directors should be at least one third of the total.
✔
COMPLIANT
18.
Companies should disclose the following director particulars on their websites and keep them regularly
updated:
a)
Background and professional experience.
178
b)
Directorships held in other companies, listed or otherwise, and other paid activities they engage in,
of whatever nature.
c)
Statement of the director class to which they belong, in the case of proprietary directors indicating
the shareholder they represent or have links with.
d)
Date of their first appointment as a board member and subsequent re-appointments.
e)
Shares held in the company, and any options on the same.
✔
COMPLIANT
19.
Following verification by the nomination committee, the annual corporate governance report should disclose
the reasons for the appointment of proprietary directors at the urging of shareholders controlling less than
3% of capital; and explain any rejection of a formal request for a board place from shareholders whose equity
stake is equal to or greater than that of others applying successfully for a proprietary directorship.
NOT APPLICABLE
20.
Proprietary directors should resign when the shareholders they represent dispose of their ownership
interest in its entirety. If such shareholders reduce their stakes, thereby losing some of their entitlement to
proprietary directors, the latter number should be reduced accordingly.
NOT APPLICABLE
21.
The board of directors should not propose the removal of independent directors before the expiry of their
tenure as mandated by the bylaws, except where they find just cause, based on a proposal from the
nomination committee. In particular, just cause will be presumed when directors take up new posts or
responsibilities that prevent them allocating sufficient time to the work of a board member, or are in breach
of their fiduciary duties or come under one of the disqualifying grounds for classification as independent
enumerated in the applicable legislation.
The removal of independent directors may also be proposed when a takeover bid, merger or similar
corporate transaction alters the company’s capital structure, provided the changes in board membership
ensue from the proportionality criterion set out in recommendation 16.
✔
COMPLIANT
22.
Companies should establish rules obliging directors to disclose any circumstance that might harm the
organisation’s name or reputation, related or not to their actions within the company, and tendering their
resignation as the case may be, and, in particular, to inform the board of any criminal charges brought
against them and the progress of any subsequent trial.
When the board is informed or becomes aware of any of the situations mentioned in the previous paragraph,
the board of directors should examine the case as soon as possible and, attending to the particular
circumstances, decide, based on a report from the nomination and remuneration committee, whether or not
to adopt any measures such as opening of an internal investigation, calling on the director to resign or
proposing his or her dismissal. The board should give a reasoned account of all such determinations in the
annual corporate governance report, unless there are special circumstances that justify otherwise, which
must be recorded in the minutes. This is without prejudice to the information that the company must
disclose, if appropriate, at the time it adopts the corresponding measures.
✔
COMPLIANT
23.
Directors should express their clear opposition when they feel a proposal submitted for the board’s approval
might damage the corporate interest. In particular, independents and other directors not subject to potential
conflicts of interest should strenuously challenge any decision that could harm the interests of shareholders
lacking board representation.
When the board makes material or reiterated decisions about which a director has expressed serious
reservations, then he or she must draw the pertinent conclusions. Directors resigning for such causes
should set out their reasons in the letter referred to in the next recommendation.
The terms of this recommendation also apply to the secretary of the board, even if he or she is not a director.
✔
COMPLIANT
24.
Directors who give up their position before their tenure expires, through resignation or resolution of the
general meeting, should state the reasons for this decision, or in the case of non-executive directors, their
opinion of the reasons for the general meeting resolution, in a letter to be sent to all members of the board.
This should all be reported in the annual corporate governance report, and if it is relevant for investors, the
company should publish an announcement of the departure as rapidly as possible, with sufficient reference
to the reasons or circumstances provided by the director.
✔
COMPLIANT
179
25.
The nomination committee should ensure that non-executive directors have sufficient time available to fulfil
their responsibilities effectively.
The board of directors’ regulations should lay down the maximum number of company boards on which
directors can serve.
✔
COMPLIANT
26.
The board should meet with the necessary frequency to properly perform its functions, eight times a year at
least, in accordance with a calendar and agendas set at the start of the year, to which each director may
propose the addition of initially unscheduled items.
✔
COMPLIANT
27.
Director absences should be kept to a strict minimum and quantified in the annual corporate governance
report. In the event of absence, directors should delegate their powers of representation with the appropriate
instructions.
✔
COMPLIANT
28.
When directors or the secretary express concerns about some proposal or, in the case of directors, about
the company’s performance, and such concerns are not resolved at the meeting, they should be recorded
in the minute book if the person expressing them so requests.
✔
COMPLIANT
29.
The company should provide suitable channels for directors to obtain the advice they need to carry out their
duties, extending if necessary to external assistance at the company’s expense.
✔
COMPLIANT
30.
Regardless of the knowledge directors must possess to carry out their duties, they should also be offered
refresher programmes when circumstances so advise.
✔
COMPLIANT
31.
The agendas of board meetings should clearly indicate on which points directors must arrive at a decision,
so they can study the matter beforehand or gather together the material they need.
For reasons of urgency, the chairman may wish to present decisions or resolutions for board approval that
were not on the meeting agenda. In such exceptional circumstances, their inclusion will require the express
prior consent, duly minuted, of the majority of directors present.
✔
COMPLIANT
32.
Directors should be regularly informed of movements in share ownership and of the views of major
shareholders, investors and rating agencies on the company and its group.
✔
COMPLIANT
33.
The chairman, as the person charged with the efficient functioning of the board of directors, in addition to
the functions assigned by law and the company’s bylaws, should prepare and submit to the board a schedule
of meeting dates and agendas; organise and coordinate regular evaluations of the board and, where
appropriate, the company’s chief executive officer; exercise leadership of the board and be accountable for
its proper functioning; ensure that sufficient time is given to the discussion of strategic issues, and approve
and review refresher courses for each director, when circumstances so advise.
✔
COMPLIANT
34.
When a lead independent director has been appointed, the bylaws or board of directors regulations should
grant him or her the following powers over and above those conferred by law: chair the board of directors
in the absence of the chairman or vice chairmen give voice to the concerns of non-executive directors;
maintain contacts with investors and shareholders to hear their views and develop a balanced
understanding of their concerns, especially those to do with the company’s corporate governance; and
coordinate the chairman’s succession plan.
✔
COMPLIANT
35.
The board secretary should strive to ensure that the board’s actions and decisions are informed by the
governance recommendations of the Good Governance Code of relevance to the company.
✔
COMPLIANT
36.
The board in full should conduct an annual evaluation, adopting, where necessary, an action plan to correct
weakness detected in:
a)
The quality and efficiency of the board's operation.
b)
The performance and membership of its committees.
c)
The diversity of board membership and competences.
180
d)
The performance of the chairman of the board of directors and the company's chief executive.
e)
The performance and contribution of individual directors, with particular attention to the chairmen of
board committees.
The evaluation of board committees should start from the reports they send the board of directors, while
that of the board itself should start from the report of the nomination committee.
Every three years, the board of directors should engage an external facilitator to aid in the evaluation
process.
Any business dealings that the facilitator or members of its corporate group maintain with the company or
members of its corporate group should be detailed in the annual corporate governance report.
The process followed and areas evaluated should be detailed in the annual corporate governance report.
✔
COMPLIANT
37.
When there is an executive committee, there should be at least two nonexecutive members, at least one of
whom should be independent; and its secretary should be the secretary of the board of directors.
✔
COMPLIANT
38.
The board should be kept fully informed of the business transacted and decisions made by the executive
committee. To this end, all board members should receive a copy of the committee’s minutes.
✔
COMPLIANT
39.
All members of the audit committee, particularly its chairman, should be appointed with regard to their
knowledge and experience in accounting, auditing and risk management matters, both financial and non-
financial.
✔
COMPLIANT
40.
Listed companies should have a unit in charge of the internal audit function, under the supervision of the
audit committee, to monitor the effectiveness of internal reporting and control systems. This unit should
report functionally to the board’s non-executive chairman or the chairman of the audit committee.
✔
COMPLIANT
41.
The head of the unit handling the internal audit function should present an annual work programme to the
audit committee, for approval by this committee or the board, inform it directly of any incidents or scope
limitations arising during its implementation, the results and monitoring of its recommendations, and submit
an activities report at the end of each year.
✔
COMPLIANT
42.
The audit committee should have the following functions over and above those legally assigned:
1.
With respect to internal control and reporting systems:
a)
Monitor and evaluate the preparation process and the integrity of the financial and non-financial
information, as well as the control and management systems for financial and non-financial risks
related to the company and, where appropriate, to the group – including operating, technological,
legal, social, environmental, political and reputational risks or those related to corruption – reviewing
compliance with regulatory requirements, the accurate demarcation of the consolidation perimeter,
and the correct application of accounting principles.
b)
Monitor the independence of the unit handling the internal audit function; propose the selection,
appointment and removal of the head of the internal audit service; propose the service’s budget;
approve or make a proposal for approval to the board of the priorities and annual work programme of
the internal audit unit, ensuring that it focuses primarily on the main risks the company is exposed to
(including reputational risk); receive regular report-backs on its activities; and verify that senior
management are acting on the findings and recommendations of its reports.
c)
Establish and supervise a mechanism that allows employees and other persons related to the
company, such as directors, shareholders, suppliers, contractors or subcontractors, to report
irregularities of potential significance, including financial and accounting irregularities, or those of
any other nature, related to the company, that they notice within the company or its group. This
mechanism must guarantee confidentiality and enable communications to be made anonymously,
respecting the rights of both the complainant and the accused party.
d)
In general, ensure that the internal control policies and systems established are applied effectively in
practice.
2.
With regard to the external auditor:
a)
Investigate the issues giving rise to the resignation of the external auditor, should this come about.
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b)
Ensure that the remuneration of the external auditor does not compromise its quality or
independence.
c)
Ensure that the company notifies any change of external auditor to the CNMV as a material event,
accompanied by a statement of any disagreements arising with the outgoing auditor and the reasons
for the same.
d)
Ensure that the external auditor has a yearly meeting with the board in full to inform it of the work
undertaken and developments in the company’s risk and accounting positions.
e)
Ensure that the company and the external auditor adhere to current regulations on the provision of
non-audit services, limits on the concentration of the auditor’s business and other requirements
concerning auditor independence.
PARTIALLY COMPLIANT
Certain functions contained in this recommendation, in particular in paragraph 1(a), on the monitoring of risk control
and management systems; paragraph 1(c), on the monitoring of a mechanism for the reporting of irregularities of
particular importance; and paragraph 1(d), on the monitoring of the implementation of internal control policies and
systems, are assigned, in accordance with the provisions of the Regulations of the Board of Directors, to the Risk
and Compliance Committee, composed exclusively of non-executive directors, most of them being independent
directors, as well as its Chairman.
Within the framework of BBVA's Corporate Governance System, this Committee assists the Board in determining
and monitoring the policy for control and management of all risks (financial and non-financial) of the Group, with the
exception of the functions that correspond to internal financial control, that are the responsibility of the Audit
Committee; those of technological risk, which correspond to the Technology and Cybersecurity Committee; and those
of business and reputational risk, which correspond to the Executive Committee. It also carries out monitoring of the
information and internal control systems, the Regulation & Internal Control function (which includes, among other
units, the Compliance Unit) and implementation within the Group of risk and compliance culture.
Notwithstanding the foregoing, the Audit Committee may, where appropriate, receive information on the above, within
the framework of its responsibilities and under the inter-committee coordination mechanism provided for in the
Regulations of the Board, for the best exercise of its functions.
43.
The audit committee should be empowered to meet with any company employee or manager, even ordering
their appearance without the presence of another senior officer.
✔
COMPLIANT
44.
The audit committee should be informed of any fundamental changes or corporate transactions the company
is planning, so the committee can analyse the operation and report to the board beforehand on its economic
conditions and accounting impact and, when applicable, the exchange ratio proposed.
✔
COMPLIANT
45.
Risk control and management policy should identify at least:
a)
The different types of financial and non-financial risk the company is exposed to (including
operational, technological, financial, legal, social, environmental, political and reputational risks, and
risks relating to corruption), with the inclusion under financial or economic risks of contingent
liabilities and other off-balance-sheet risks.
b)
A risk control and management model based on different levels, of which a specialised risk committee
will form part when sector regulations provide or the company deems it appropriate.
c)
The level of risk that the company considers acceptable.
d)
The measures in place to mitigate the impact of identified risk events should they occur.
e)
The internal control and reporting systems to be used to control and manage the above risks,
including contingent liabilities and off-balance sheet risks.
✔
COMPLIANT
46.
Companies should establish a risk control and management function in the charge of one of the company’s
internal department or units and under the direct supervision of the audit committee or some other dedicated
board committee. This function should be expressly charged with the following responsibilities:
a)
Ensure that risk control and management systems are functioning correctly and, specifically, that
major risks the company is exposed to are correctly identified, managed and quantified.
b)
Participate actively in the preparation of risk strategies and in key decisions about their management.
c)
Ensure that risk control and management systems are mitigating risks effectively in the frame of the
policy drawn up by the board of directors.
✔
COMPLIANT
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47.
Appointees to the nomination and remuneration committee – or of the nomination committee and
remuneration committee, if separately constituted – should have the right balance of knowledge, skills and
experience for the functions they are called on to discharge. The majority of their members should be
independent directors.
✔
COMPLIANT
48.
Large cap companies should operate separately constituted nomination and remuneration committees.
✔
COMPLIANT
49.
The nomination committee should consult with the company’s chairman and chief executive, especially on
matters relating to executive directors.
When there are vacancies on the board, any director may approach the nomination committee to propose
candidates that it might consider suitable.
✔
COMPLIANT
50.
The remuneration committee should operate independently and have the following functions in addition to
those assigned by law:
a)
Propose to the board the standard conditions of senior management contracts.
b)
Monitor compliance with the remuneration policy established by the company.
c)
Periodically review the remuneration policy for directors and senior officers, including share-based
remuneration systems and their application, and ensure that their individual compensation is
proportionate to the amounts paid to other directors and senior officers in the company.
d)
Ensure that conflicts of interest do not undermine the independence of any external advice the
committee engages.
e)
Verify the information on director and senior officers’ pay contained in corporate documents,
including the annual directors’ remuneration statement.
✔
COMPLIANT
51.
The remuneration committee should consult with the company’s chairman and chief executive, especially
on matters relating to executive directors and senior officers.
✔
COMPLIANT
52.
The rules of performance and membership of supervision and control committees should be set out in the
board of directors’ regulations and aligned with those governing legally mandatory board committees as
specified in the preceding sets of recommendations. They should include:
a)
Committees should be formed exclusively by non-executive directors, with a majority of
independents.
b)
They should be chaired by independent directors.
c)
The board should the members of such committees with regard to the knowledge, skills and
experience of its directors and each committee’s terms of reference; discuss their proposals and
reports; and provide report-backs on their activities and work at the first board plenary following each
committee meeting.
d)
They may engage external advice, when they feel it necessary for the discharge of their functions.
e)
Meeting proceedings should be minuted and a copy made available to all board members.
✔
COMPLIANT
53.
The task of supervising compliance with the policies and rules of the company in the environmental, social
and corporate governance areas, and internal rules of conduct, should be assigned to one board committee
or split between several, which could be the audit committee, the nomination committee, a committee
specialised in sustainability or corporate social responsibility, or a dedicated committee established by the
board under its powers of selforganisation. Such a committee should be made up solely of non-executive
directors, the majority being independent and specifically assigned the following minimum functions.
PARTIALLY COMPLIANT
The responsibility of supervising compliance with the Bank’s policies and rules in the area of environmental, social
and corporate governance, as well as internal codes of conduct, and other matters referred to in Recommendation
54, is shared between several Board Committees: namely, the Appointments and Corporate Governance Committee,
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the Audit Committee and the Risk and Compliance Committee, composed exclusively of non-executive directors;
and also the Executive Committee.
In particular, regarding environmental and social matters, the Executive Committee and the Risk and Compliance
Committee play a more active role in assisting the Board on such matters, each within the limits of their powers.
The Executive Committee, which is comprised of a majority non-executive directors, is established to support the
Board in the area of strategy and finance and oversees, on a recurrent basis, the integration of sustainability into the
Group's business processes and activity, in line with the strategic priorities set out by the Bank. This Committee also
oversees the implementation of the Bank’s Sustainability Policy, approved by the Board, as well as the
implementation of the Corporate Social Responsibility Policy, also approved by the Board.
In turn, the Risk and Compliance Committee, composed of a large majority of independent directors and without the
presence of executive directors, monitors and supervises the integration of sustainability into the Group's risk analysis
and management, from the perspectives of both risk planning and risk management. This Committee’s functions also
include to examine draft codes of ethics and conduct and their respective modifications, and matters related to money
laundering, conduct on the securities markets, data protection and the scope of Group activities with respect to
competition.
Finally, the Appointments and Corporate Governance Committee, composed of a majority of independent directors,
is responsible for regularly reviewing and assessing BBVA’s corporate governance system; and the Audit Committee,
composed exclusively of independent directors, is responsible for overseeing the process of preparing and reporting
financial and related non-financial information.
54.
The minimum functions referred to in the above recommendation are as follows:
a)
Monitor compliance with the company’s internal codes of conduct and corporate governance rules,
and ensure that the corporate culture is aligned with its purpose and values.
b)
Monitor the implementation of the general policy regarding the disclosure of economic-financial, non-
financial and corporate information, as well as communication with shareholders and investors, proxy
advisors and other stakeholders. Similarly, the way in which the entity communicates and relates with
small and medium-sized shareholders should be monitored.
c)
Periodically evaluate the effectiveness of the company’s corporate governance system and
environmental and social policy, to confirm that it is fulfilling its mission to promote the corporate
interest and catering, as appropriate, to the legitimate interests of remaining stakeholders.
d)
Ensure the company’s environmental and social practices are in accordance with the established
strategy and policy.
e)
Monitor and evaluate the company’s interaction with its stakeholder groups.
✔
COMPLIANT
55.
Environmental and social sustainability policies should identify and include at least:
a)
The principles, commitments, objectives and strategy regarding shareholders, employees, clients,
suppliers, social welfare issues, the environment, diversity, fiscal responsibility, respect for human
rights and the prevention of corruption and other illegal conducts.
b)
The methods or systems for monitoring compliance with policies, associated risks and their
management.
c)
The mechanisms for supervising non-financial risk, including that related to ethical aspects and
business conduct.
d)
Channels for stakeholder communication, participation and dialogue.
e)
Responsible communication practices that prevent the manipulation of information and protect the
company’s honour and integrity.
✔
COMPLIANT
56.
Director remuneration should be sufficient to attract individuals with the desired profile and compensate the
commitment, abilities and responsibility that the post demands, but not so high as to compromise the
independent judgement of non-executive directors.
✔
COMPLIANT
57.
Variable remuneration linked to the company and the director’s performance, the award of shares, options
or any other right to acquire shares or to be remunerated on the basis of share price movements, and
membership of long-term savings schemes such as pension plans, retirement schemes and other savings
schemes, should be confined to executive directors.
The company may consider the share-based remuneration of non-executive directors provided they retain
such shares until the end of their mandate. This condition, however, will not apply to shares that the director
must dispose of to defray costs related to their acquisition.
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✔
COMPLIANT
58.
In the case of variable awards, remuneration policies should include limits and technical safeguards to
ensure they reflect the professional performance of the beneficiaries and not simply the general progress of
the markets or the company’s sector, or circumstances of that kind.
And, in particular, variable remuneration items should meet the following conditions:
a)
Be subject to predetermined and measurable performance criteria that factor the risk assumed to
obtain a given outcome.
b)
Promote the long-term sustainability of the company and include nonfinancial criteria that are relevant
for the company’s long-term value creation, such as compliance with its internal rules and procedures
and its risk control and management policies.
c)
Be focused on achieving a balance between the delivery of short, medium and long-term objectives,
such that performance-related pay rewards ongoing achievement, maintained over sufficient time to
appreciate its contribution to long-term value creation. This will ensure that performance
measurement is not based solely on one-off, occasional or extraordinary events.
✔
COMPLIANT
59.
The payment of the variable components of remuneration is subject to sufficient verification that previously
established performance, or other, conditions have been effectively met. Entities should include in their
annual directors’ remuneration report the criteria relating to the time required and methods for such
verification, depending on the nature and characteristics of each variable component.
Additionally, entities should consider establishing a reduction clause (‘malus’) based on deferral for a
sufficient period of the payment of part of the variable components that implies total or partial loss of this
remuneration in the event that prior to the time of payment an event occurs that makes this advisable.
✔
COMPLIANT
60.
Remuneration linked to company earnings should bear in mind any qualifications stated in the external
auditor’s report that reduce their amount.
✔
COMPLIANT
61.
A major part of executive directors’ variable remuneration should be linked to the award of shares or
financial instruments whose value is linked to the share price.
✔
COMPLIANT
62.
Following the award of shares, options or financial instruments corresponding to the remuneration
schemes, executive directors should not be able to transfer their ownership or exercise them until a period
of at least three years has elapsed.
Except for the case in which the director maintains, at the time of the transfer or exercise, a net economic
exposure to the variation in the price of the shares for a market value equivalent to an amount of at least
twice his or her fixed annual remuneration through the ownership of shares, options or other financial
instruments.
The foregoing shall not apply to the shares that the director needs to dispose of to meet the costs related to
their acquisition or, upon favourable assessment of the nomination and remuneration committee to address
an extraordinary situation.
✔
COMPLIANT
63.
Contractual arrangements should include provisions that permit the company to reclaim variable
components of remuneration when payment was out of step with the director’s actual performance or based
on data subsequently found to be misstated.
✔
COMPLIANT
64.
Termination payments should not exceed a fixed amount equivalent to two years of the director’s total
annual remuneration and should not be paid until the company confirms that he or she has met the
predetermined performance criteria.
For the purposes of this recommendation, payments for contractual termination include any payments
whose accrual or payment obligation arises as a consequence of or on the occasion of the termination of
the contractual relationship that linked the director with the company, including previously unconsolidated
amounts for long-term savings schemes and the amounts paid under post-contractual non-compete
agreements.
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✔
COMPLIANT
H. OTHER POINTS OF INTEREST
1.
If there is any other aspect relevant to the corporate governance in the company or in the group entities that has
not been addressed in the rest of the sections of this report, but is necessary to include to provide more
comprehensive and well-grounded information on the corporate governance structure and practices in the Bank
or its group, give a brief description of them.
2.
This section may also include any other information, clarification or detail related to previous sections of the report
if it is relevant and not reiterative.
In particular, indicate whether the company is subject to corporate governance legislation from a country other
than Spain and, if so, include the mandatory information to be provided, if different from that required by this
report.
3.
The company may also indicate if it has voluntarily signed up to other international, industry-wide or any other
codes of ethical principles or best practices. Where applicable, identify the code in question and the date of
signing. In particular, indicate whether it has signed up to the Code of Good Tax Practices of 20 July 2010.
The data in this report refers to the financial year ending 31 December 2020, except in those cases when
another reference date is specifically stated.
Further to Section A.3, BBVA has a fixed remuneration system with deferred share delivery for its non-executive
directors, as approved by the General Meeting. This consists of the annual allocation to each non-executive
director of a number of BBVA “theoretical shares” equivalent to 20% of the total cash compensation received
by each non-executive director in the previous year. This will be delivered as appropriate, after their termination
as a director for any reason other than serious dereliction of duties. Details on the annual allocation made by
the Board and the accumulated theoretical shares can be found in Notes 54 and 49 on “Remuneration and other
benefits to the Board of Directors and to members of the Bank's Senior Management” within the notes to the
annual financial statements corresponding to BBVA's Consolidated and Individual Annual Accounts for the 2020
financial year, respectively, as well as in BBVA's Annual Report on the Remuneration of Directors.
The remuneration system for executive directors includes, among other elements, an annual variable
remuneration whose settlement and payment system includes a share portion and deferral periods. The details
of the shares that correspond to each executive director as part of this remuneration are also set out in Notes
54 and 49 on “Remuneration and other benefits to the Board of Directors and to members of the Bank's Senior
Management” of the notes to the annual financial statements for the BBVA Consolidated and Individual Annual
Accounts the 2020 financial year, respectively, and in BBVA's Annual Report on the Remuneration of Directors.
Further to Section A.9, relating to income from treasury-share trading, Rule 21 of Circular 4/2017 and IAS 32,
Paragraph 33, expressly prohibit the recognition, in the income statement, of gains or losses made through
transactions carried out with own capital instruments, including their issuance and redemption. Said profits and
losses are directly booked against the company's net equity. In the table of significant variations, the date of
entry of CNMV Model IV into the registries of that body. This model is related to communications with treasury
shares and contains the reason for such communication.
For the purpose of clarifying the information contained in Section C.1.2, it is indicated that Jaime Félix Caruana
Lacorte accepted his appointment on 4 June 2018; Ana Cristina Peralta Moreno accepted her appointment on
8 May 2018; Ana Leonor Revenga Shanklin and Carlos Vicente Salazar Lomelín accepted their appointments
on 1 April 2020, with the date of appointment by the corresponding General Meeting set out in Section C.1.2.
Further to section C.1.7, the Committee observed that independent directors contribute to the suitable
composition of both the Board of Directors and its committees and, in particular, those that assist the Board in
its supervision and control functions. These Committees must have a significant number of independent
directors, from among which the chairs of these committees must also be appointed.
Finally, the current composition of the Board complies with the provisions of the applicable legislation, the
Regulations of the corporate bodies and the objectives of the Selection Policy in this regard. In addition to the
foregoing paragraphs, it is worth noting that:
i. there is adequate balance between the different types of director;
186
ii. non-executive directors comprise 86.67% of the total directors (thus meeting the objective of there being
a majority of non-executive directors);
iii. independent directors make up two thirds of the Board (thus meeting the objective of having at least 50%
independent directors); and
iv. women currently represent one third of directors (thus meeting the specific target for 2020 of having at
least 30% female directors).
In light of the above, it is the view of the Committee that the Board of Directors as a whole has an adequate and
diverse composition, with extensive knowledge of the environment, strategy, activities, business and risks of
the Bank and its Group, and which is balanced and suited to current needs, thus helping the corporate bodies
to perform their functions in the Bank's best corporate interest.
Further to Section C.1.9, the various Board Committees with oversight and control functions also have certain
functions delegated by the Board of Directors, which are set forth in their corresponding regulations and are
available on the Bank's website.
Further to the information included in section C.1.13:
The amount included in the item "Remuneration of the Board of Directors accrued during the financial year"
corresponds, based on the instructions of this Report, with the amount declared as total remuneration accrued
according to Table C) "Summary of remunerations" of section 3.4 (Statistical appendix) of BBVA's Annual
Report on the Remuneration of Directors, which includes: the fixed and in-kind remuneration of the executive
and non-executive directors received during the 2020 financial year; the payment of the deferred portion of the
Annual Variable Remuneration for the 2017 financial year, in cash and monetised shares, together with its
corresponding update, payable in 2021 if the corresponding conditions are met; as well as the remuneration
paid as a result of the non-compete agreement to the former executive director Head of Global Economics &
Public Affairs, who ceased as director on 13 March 2020, and the consolidated amounts of rights to savings
system corresponding to this director. The consolidated amount of rights to savings system indicated in the
Annual Report of Remunerations for Directors corresponds to the total of the accumulated funds to meet the
retirement commitments made by the Bank to the former executive director Head of Global Economics & Public
Affairs, which, in accordance to BBVA Directors’ Remuneration Policy and the conditions established in his
contract, he will be entitled to receive, paid as a lump sum or in instalments, when he reaches the legally
established retirement age, without the Bank having to make any additional contributions since the termination.
The amount included in the item "Remuneration of the Board of Directors accrued during the financial year"
does not include the initial portion of the Annual Variable Remuneration of the executive directors for the 2020
financial year since it has not accrued due to the executive directors waiving its generation in light of the
exceptional circumstances arising from the COVID-19 crisis.
These concepts are detailed, individually for each director, in Notes 54 and 49 of the notes to the annual financial
statements corresponding to BBVA's Annual Consolidated and Individual Accounts for the 2020 financial year,
respectively.
For the purposes of calculating the cash value of the shares corresponding to the Deferred Portion of the 2017
Annual Variable Remuneration, to be paid in 2021, and bearing in mind that these shares had not yet been
delivered to their beneficiaries as of the date of this report, the average closing price of BBVA's share price for
the stock exchanges between 15 December 2020 and 15 January 2021 inclusive has been taken as a reference.
This price stood at EUR 4.12 per share. The price used to initially determine the number of shares of the deferred
part of the 2017 Annual Variable Remuneration in accordance with the policy applicable in that financial year
was the average closing price of BBVA's share for trading sessions between 15 December 2017 and 15 January
2018, which was EUR 7.254 per share.
With regard to the "Amount of entitlements accrued by current directors in regard to pensions" indicated in
section C.1.13 of this Report, during the 2020 financial year, the Bank made pension commitments to the
Chairman to cover the contingencies of retirement, disability and death in accordance with the provisions of the
Bylaws, the BBVA Directors’ Remuneration Policy and his contract entered into with the Bank. For the Chief
Executive Officer, the Bank has no pension commitments, although it does have commitments to cover the
contingencies for disability and death, in accordance with the BBVA Directors’ Remuneration Policy and the
contract entered into with the Bank.
187
The main characteristics of the pension system of the Chairman to cover the retirement contingency are detailed
in the BBVA Directors’ Remuneration Policy, and include, inter alia, the following: it is a defined contribution
system; no provision for receiving the retirement pension in advance; and 15% of the agreed contribution is
considered "discretionary pension benefits", in accordance with the requirements of the applicable regulations.
They are also included in Notes 54 and 49 of the Annual Report corresponding to the annual financial statements
for BBVA's Consolidated and Individual Annual Financial Statements for the 2020 financial year, respectively,
which include the amounts of the entitlements accrued by the Chairman as at 31 December 2020.
The balance of the item "Provisions — Funds for pensions and similar obligations" on the Group's consolidated
balance sheet at 31 December 2020 includes EUR 73 million as post-employment provision commitments
maintained with former members of the Board of Directors.
Further to the information included in section C.1.14:
The item "Total remuneration of Senior Management" includes the remuneration of the members of Senior
Management (15 m embers as at 31 December 2020, excluding the executive directors), which includes: the
annual and in-kind fixed remuneration received during the 2020 financial year; the payment of the Deferred
Portion of the Annual Variable Remuneration for the 2017 financial year, in cash and monetised shares, together
with its corresponding update, payable in 2021, if the corresponding conditions are met. The monetised shares
stood at the same value as that indicated in the case of the executive directors (i.e. EUR 4.12 per share; see
Section C.1.13). As in the case of the executive directors, this item does not include the Annual Variable
Remuneration for the 2020 financial year as it has not been accrued since the members of the Senior
Management waived its generation in light of the exceptional circumstances arising from the COVID-19 crisis.
The main characteristics of the pension systems for this group are, inter alia, the following: defined contributions;
no provision for receiving the retirement pension in advance; and 15% of the agreed contributions are
considered "discretionary pension benefits", in accordance with the requirements of the applicable regulations.
The above concepts are detailed in Notes 54 and 49 of the annual financial statements corresponding to BBVA's
Consolidated and Individual Annual Financial Statements for the 2020 financial year, respectively.
The balance of the item "Provisions — Funds for pensions and similar obligations" on the Group's consolidated
balance sheet at 31 December 2020 includes EUR 282 million as post-employment provision commitments
maintained with former members of the Bank's Senior Management.
In addition, it is indicated that, on 22 December 2020, José Luis Elechiguerra was appointed Head of
Engineering & Organization; as at the date of this report, his position as Senior Manager of Banco Bilbao
Vizcaya Argentaria, S.A. was pending registration in the Bank of Spain's Register of Senior Officers, in
accordance with the applicable regulations.
Further to Section C.1.17, set out below is the assessment carried out by the Board of Directors of its
committees' operation, based on reports submitted b y their respective Chairs:
●
The various committees have regularly reported to the Board of Directors on the activities carried out
and the resolutions adopted by each of the committees, as part of their functions. This has ensured that
all directors have a full understanding of the work being undertaken by the various Board committees,
and has reinforced coordination among the corporate bodies.
●
In addition to the above, at its meeting held on 25 November 2020, the Board received the report by the
Chairman on the Technology and Cybersecurity Committee's activity for the 2020 financial year in the
various areas within its remit, such as the technology and cybersecurity strategy, the plans, policies and
management of cybersecurity, or the monitoring and control of technological risks, among other matters.
●
At its meeting held on 22 December 2020, the Board received the report by the Chairman of the Risk
and Compliance Committee on its activities throughout the 2020 financial year. The report detailed the
tasks executed by the Committee in its ongoing monitoring and oversight of the risks faced by the Group
and the extent to which consistency is maintained with certain strategies and policies, as well as the
monitoring of regulation & internal control and compliance.
●
At its meeting held on 28 January 2021, the Board of Directors received the Chairman's report on the
activity carried out by the Executive Committee during the 2020 financial year. The report detailed,
among other activities, the Committee's work in support of the Board of Directors in decision-making in
the areas of strategy and finance, development or implementation of decisions taken by the Board in
the areas of strategy, budgets and finance, supervision and monitoring of activity and results, strategic-
forward information, as well as selected projects, transactions and Group policies.
188
●
At its meeting of 28 January 2021, the Board received the report by the Chair of the Audit Committee
on the activities of the Committee during the 2020 financial year. This included its role of overseeing
the preparation of financial statements and the application of accounting criteria, the sufficient, adequate
and effective operation of internal control systems in the preparation of financial data, and the planning,
progression and depth of external auditor tasks.
●
At its meeting held on 28 January 2021, the Committee received the report by the Chair of the
Appointments and Corporate Governance Committee on the activities undertaken by the Committee
throughout the 2020 financial year in terms of its assigned functions, including its tasks relating to the
appointment and re-appointment of directors, assessment of the Board of Directors, the Chairman of
the Board and Chief Executive Officer, the review of Policies within its remit, and the monitoring of
developments in the Corporate Governance System, among others.
●
Lastly, at its meeting held on 28 January 2021, the Board received the report by the Chair of the
Remunerations Committee on the activities undertaken by this Committee throughout the 2020 financial
year, reporting on, among other matters, the tasks performed by the Committee relating to the
preparation and implementation of the proposed resolutions submitted to the Board regarding
remuneration matters, particularly those relating to the remuneration of directors, Senior Management,
Identified Staff and the BBVA Group.
All of which has been taken into consideration by the Board of Directors during the assessment process carried
out in respect of the 2020 financial year described in the preceding paragraphs.
With regard to Section C.1.27, as BBVA shares are listed on the New York Stock Exchange, it is subject to the
supervision of the Securities and Exchange Commission (SEC) and, thus, to compliance with the Sarbanes
Oxley Act and its implementing regulations, and for this reason each year the Group Executive Chairman, the
Chief Executive Officer and the executive tasked with preparing the Accounts sign and submit the certifications
described in sections 302 and 906 of this Act, related to the content of the Annual Financial Statements. These
certificates are contained in the annual registration statement (Form 20-F) which the Company files with this
authority for the official record.
Further to Section C.2.1, the following is a brief indication of what the regulations establish with regard to the
composition and functions of each of the remaining Board Committees:
●
Executive Committee:
Committee establishes that the Board of Directors may, in accordance with the Bylaws and with the
favourable vote of two-thirds of its members, appoint an Executive Committee, composed of a minimum
of four directors appointed by the Board of Directors, ensuring that there is a majority of non-executive
directors over executive directors. The Chairman of the Board of Directors will be an ex-officio member
of the Committee. The Secretary of the Board of Directors will hold the same position on the Committee.
If absent, the Secretary will be replaced by the Deputy Secretary or the person appointed by the attendees
of the relevant meeting.
●
Audit Committee:
The Regulations of the Audit Committee establish that it shall consist of a minimum
of four directors, all of them independent directors. Committee members will be appointed by the Board
of Directors, seeking to ensure that they possess the necessary dedication, skills and experience to carry
out their roles. In any event, at least one member will be appointed taking into account their knowledge
and experience in accounting, auditing or both. As a whole, the Committee members will possess relevant
technical expertise in the financial sector. The Board will, from amongst its members, appoint the Chair
of this Committee, who must be replaced every four years and may be re-appointed one year after the
end of their term of office. When the Chair cannot be present, meetings will be chaired by the longest-
serving independent director on the Committee, and, where multiple directors have equal length of
service, by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the Deputy Secretary
of the Board of Directors, will act as Secretary for the Committee.
●
Appointments and Corporate Governance Committee:
The Regulations of the Appointments and
Corporate Governance Committee establish that it shall consist of a minimum of three directors, all of
them non-executive and most of them independent, as well as its Chairman. Committee members will be
appointed by the Board of Directors, seeking to ensure that they possess the necessary dedication, skills
and experience to carry out their roles. The Board of Directors will appoint the Chair of the Committee
189
from amongst its independent members. When the Chair cannot be present, meetings will be chaired by
the longest-serving independent director on the Committee, and, where multiple directors have equal
length of service, by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the Deputy
Secretary of the Board of Directors, will act as Secretary for the Committee.
●
Remunerations Committee:
The Regulations of the Remunerations Committee establishes that it must
be comprised of a minimum of three non-executive directors and the majority, including the Chair, must
be independent directors. Committee members will be appointed by the Board of Directors, seeking to
ensure that they possess the necessary dedication, skills and experience to carry out their roles. The
Board of Directors will appoint the Chair of the Committee from amongst its independent members. When
the Chair cannot be present, meetings will be chaired by the longest-serving independent director on the
Committee, and, where multiple directors have equal length of service, by the eldest. The Secretary of
the Board of Directors or, on behalf thereof, the Deputy Secretary of the Board of Directors, will act as
Secretary for the Committee.
●
Risk and Compliance Committee:
The Regulations of the Risk and Compliance Committee establishes
that it will consist of a minimum of three directors, appointed by the Board of Directors, who possess the
appropriate knowledge, skills and experience to understand and control the Bank's risk strategy. All the
members of the Committee must be non-executive directors, with its Chair and a majority of members
being independent directors. The Board will appoint the Chair of the Committee from amongst its
independent members. When the Chair cannot be present, meetings will be chaired by the longest-
serving independent director on the Committee, and, where multiple directors have equal length of
service, by the eldest. The Secretary of the Board of Directors or, on behalf thereof, the Deputy Secretary
of the Board of Directors, will act as Secretary for the Committee.
●
Technology and Cybersecurity Committee:
The Regulations of the Technology and Cybersecurity
Committee establish that the Committee shall consist of a minimum of three directors, most of whom shall
be non-executive directors. Committee members will be appointed by the Board of Directors, seeking to
ensure that they possess the necessary dedication, skills and experience to carry out their roles. The
Board will appoint the Chair of the Committee from amongst its members. When the Chair cannot be
present, meetings will be chaired by the longest-serving director on the Committee, and, where multiple
directors have equal length of service, by the eldest. The Secretary of the Board of Directors or, on behalf
thereof, the Deputy Secretary of the Board of Directors, will act as Secretary for the Committee.
Also, following the most important activities of the Board Committees and their organisational and operational
rules as set out in paragraph C.2.1:
●
Executive Committee:
financial year included the monitoring of the monthly evolution of the Group and its business areas' activity
and results, its crucial role in ensuring the integrity, coordination, consistency and coherence of the
Group's strategic and prospective processes, such as the Strategic Plan, the RAF, the ICAAP, the ILAAP,
the Budget and planning of capital, liquidity and funding, taking into account aspects common to all
processes, and driving the integration of the strategic bases established by the Board into all processes.
In addition, the Committee has played a key role in monitoring and controlling the measures implemented
in BBVA for the management of the health and economic crisis caused by COVID-19, with intensive
monitoring of the Bank's businesses and activities adapted to the needs of the Bank and the environment,
in a changing and uncertain context, and prioritising matters that required increased monitoring and
control as well as those with the greatest impact on BBVA, including the Bank's main management
measures, the impacts of the crisis on activity, results and organisation, the capital situation, liquidity and
solvency, and the development of risk management.
Furthermore, the Committee has ensured the coherence and alignment of RAF with the strategy
established by the Board of Directors and has reviewed and proposed the bases for the proposals upon
which RAF has been drafted, which were submitted to the Board by the Risk and Compliance Committee.
The Committee has also supported the Board in analysing and monitoring the drafting of the Budget, the
Capital Plan and the Liquidity and Funding Plan prior to submission to the Board.
The Committee also undertook work to oversee, monitor and control the Group's risk management. It
monitored the evolution of the risk profile and metrics; the most significant aspects relating to changes in
the macroeconomic environment and other factors that impacted the Group's management and activities
over the course of the financial year; as well as any developments in BBVA share prices.
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In addition, it has analysed progress in the corporate transaction processes, the competence to decide
on which rested with the Board, including their strategic and financial aspects, in advance of their
consideration by the Board, as well as other issues and projects relating to the development of the
Strategic Plan, like the Group's progress in terms of sustainability (including in environmental and social
matters), or the day-to-day management of business.
Finally, particularly noteworthy is the work carried out by the Committee on the prior reporting of policies
submitted to the Board, except for policies relating to issues handled by other Board committees; as well
as the Group's authorisation to appoint directors in subsidiaries or investee companies, and the granting
of the powers vested in the Group.
●
Audit Committee:
Committee are indicated in its Regulations, which lay down the basic rules of its organisation and
operation. In particular, the Audit Committee's Regulations stipulate that, inter alia, the Committee shall
meet whenever it is called by its Chair, who is empowered to convene the Committee and to set the
agenda for its meeting. The Regulations contain the procedure for the calling of ordinary and
extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to meetings,
in particular Accounting and Internal Auditing areas, and, at the request of the heads of these, those
persons within the Group who have knowledge of or responsibility for the matters covered by the agenda,
when their presence at the meeting is deemed appropriate. The Committee may also call on any other
Group employee or manager, and even arrange for them to appear without the presence of any other
manager, while ensuring that the presence of non-Committee members at its meetings is limited to those
cases where it is necessary and to the items of the agenda for which they are called.
The Committee may, through its Secretary, engage external advisory services for relevant issues when
it considers that these cannot be properly provided by experts or technical staff within the Group on
grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee will be subject to the Regulations of
the Committee. All matters not provided for in the aforementioned Regulations will adhere to the
Regulations of the Board of Directors, insofar as they are applicable.
In terms of the most significant actions carried out by the Audit Committee during the 2020 financial year,
in the performance of the functions established to it by law, it has analysed the following matters,
submitting the corresponding reports and proposals to the Board for approval, where appropriate.
In relation to overseeing the financial statements and public information, it analysed and oversaw the
process of preparing and presenting financial and non-financial information related to the Bank as well
as its consolidated Group from the annual, half-yearly and quarterly reports, in order to determine its
accuracy, reliability, adequacy and clarity, prior to its submission to the Board.
These financial information supervision functions were performed through a continuous process
throughout the year, in which it has monitored the monthly development of the balance sheet and income
statement, the quarterly and semi-annual financial reports, the closing results of each period and the
preparation process for the corresponding financial information, paying special attention to the accounting
criteria applied and any changes therein, as well as accounting regulations and the changes in the
Group's scope of consolidation.
In addition, following the health crisis caused by COVID -19, the Committee has continuously monitored
and analysed the impacts that would affect the business, balance sheet and income statement of the
Bank and its Group from an accounting perspective. Particularly noteworthy are the analysis and
monitoring performed on (i) the extraordinary update made to the macroeconomic information required
for the calculation of expected losses due to credit risk in application of the accounting standard IFRS 9;
(ii) the results corresponding to the impairment test carried out on the goodwill recorded in the Group's
accounts, in compliance with International Accounting Standard (IAS) 36, and the methodology used for
this assessment; (iii) the scope and impact of the moratorium measures agreed upon, whether by public
initiative or initiative of the Group itself; (iv) the extraordinary provisions applied as a result of the COVID-
19 crisis; and (v) changes made to policies or the accounting criteria applied, among others.
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Hence, prior to their drafting and/or approval by the Board, the Committee oversaw the preparation of the
individual and consolidated annual financial statements for the financial year, the half-yearly and quarterly
financial statements, as well as other relevant financial information, including the CNMV Universal
Registration Document, US SEC Form 20-F of the Securities and Exchange Commission (SEC), and the
Prudential Relevance Report, among others, submitting to the Board the corresponding reports and/or
opinions of the Committee on the financial information of the Bank and its Group.
In addition, within the financial information monitoring process, the Committee oversaw the sufficiency,
suitability and effective functioning of the internal control systems established for the preparation of
financial information, including tax-related systems, as well as learning from the internal reports and the
reports by the executive areas of the Bank and the external auditor on the effectiveness of the internal
financial control, submitting to the Board the Committee's reports on the sufficiency of the internal control
systems established by the Group for the generation of financial information.
Similarly, at the same time as overseeing the main financial information of the Bank and its Group, the
Committee analysed the Group's main tax figures, monitoring, inter alia, the real tax rate, total tax risk,
the tax position on capital, as well as the main criteria used, the main decisions adopted and the impact
on the financial information.
With regards to activities related to the external audit, the Committee has maintained appropriate
relationships with the heads of the external auditor, during each of the monthly meetings it has held, in
order to ascertain the planning, stage and progress of the Annual Plan established for performing its work
in connection with the audit of the Bank and Group annual financial statements, of the interim financial
statements, and of other financial information subject to review during the account auditing.
It also received and analysed the opinion reports and communications required by account auditing
legislation, from the external auditor, among which: the work carried out on the Group's financial
information, other regulatory work of the External Auditor, such as the supplementary report to the Bank's
Annual Financial Statements, as well as confirmations of its independence with regard to the Bank and
other companies within its group.
Similarly, in relation to the independence of the external auditor, the Committee has ensured that internal
procedures are implemented to safeguard against situations that may give rise to independence conflicts.
It has also opposed declarations made by the external auditor concerning confirmation of its
independence with regard to BBVA and its Group, and issued the corresponding reports in accordance
with applicable legislation.
In addition, the Committee has analysed the proposal for External Auditor's fees for the 2020 financial
year, prior to it being submitted to the Board for consideration, as well as the quality of the work carried
out by the external auditor during the financial year. It agreed to submit to the Board of Directors the
proposal for the re-appointment of KPMG Auditors S.L. as auditor of the Bank and its Group for the 2021
financial year, which is submitted for approval by the next 2021 General Meeting.
With regards to Internal Audit tasks, the Committee has ensured that the Internal Audit area has the
necessary material and human resources for effective performance of its functions, overseeing the
efficiency and operation of the role as well as its independenc e from other areas of the Bank for such
purpose.
As such, the Committee analysed and approved the Annual Internal Audit Plan for the 2020 financial
year, overseeing its development and regularly monitoring the activity and reports issued by the area
during its monthly meetings. It was also notified of the result of its most relevant work, weaknesses and
opportunities for improvement identified, and the recommendations made by the Internal Audit as a result
of its review work.
The Committee has also been made aware of the adjustments made to the Annual Internal Audit Plan for
the financial year, resulting from the contingency situation caused by COVID-19. It has analysed the
extraordinary measures taken in the area to ensure the continuity of its activity in all geographies, changes
made to the working methodology, the re-planning of work and the design of new alternative work based
on the risk analysis review, which had the prior agreement of the Committee.
Similarly, the Committee has analysed the proposed update to the regulations of the Group's Internal
Audit Function Charter, evaluating the main envisaged changes to its regulations and content, having
192
expressed its agreement with the proposed amendments prior to the Charter's submission to the Board
of Directors for consideration.
With regard to the Strategic Plan established by the Internal Audit Area for the 2020–2024 period, the
Committee was informed of and monitored its progress during the financial year, analysing the
development of all projects established for each of the strategic priorities defined, as well as the degree
of implementation of the improvements identified following the review process of the Internal Audit
function by an independent external expert.
The Committee also reviewed the changes to the structure of the Group of companies over the financial
year, as well as the Group's governance for the control, oversight and management of its corporate
structure.
Similarly, the Committee has been informed of major corporate operations planned by the Group,
monitoring the economic conditions and the main accounting impacts foreseen in the Group's financial
statements, and issuing, prior to the decisions that the Board should take, the Committee's report on the
operation.
The Committee also analysed, prior to submission for consideration by the Board, the Bank's general
policy for the disclosure of economic-financial, non-financial and corporate information, drawn up in
accordance with the new recommendation set out in June 2020 by the CNMV's new Good Governance
Code of Listed Companies.
Lastly, during the Bank's General Shareholders' Meeting held in 2020, the Committee informed
shareholders of the main issues related to the matters within its remit, including overseeing the process
of preparing Bank and Group financial information, which had been provided to shareholders for their
approval, the result of the account auditing and of the function that it had carried out in this matter, as
well as the main issues related to the matters described in this section and other issues that were handled
by the Committee.
●
Appointments and Corporate Governance Committee:
Corporate Governance Committee set out the operational principles of the Committee and lay down the
basic rules of its organisation and operation. The Regulations of the Appointments and Corporate
Governance Committee specifically provide that the Committee will meet whenever it is called to do so
by its Chair, who is empowered to call the Committee and to set the agenda for its meetings, and set out
the procedure for calling ordinary and extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to meetings,
as well as, at the request thereof, those persons within the Group who have knowledge of or responsibility
for the matters covered by the agenda, when their presence at the meeting is deemed appropriate. The
Committee may also call on any other Group employee or manager, and even arrange for them to appear
without the presence of any other manager, while ensuring that the presence of non-Committee members
at its meetings is limited to those cases where it is necessary and to the items of the agenda for which
they are called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee shall be subject to the Regulations of
the Committee. All other matters not provided for in the aforementioned Regulations will be subject to the
Regulations of the Board of Directors, insofar as they are applicable.
With respect to the Appointments and Corporate Governance Committee's most significant actions in
2020, in performing the functions assigned to it, of particular note were: the Committee's continuous
analysis of the structure, size and composition of the Board of Directors, ensuring that they are suitable
for the corporate bodies to best perform their functions; and the analysis of the directors' compliance with
the independence and suitability criteria and the absence of any conflicts of interest for the performance
of their duties, among other matters.
Taking this analysis into account, and the process of ongoing refreshment of the Board described above
and the director selection processes led by the Committee, the Committee carried out the corresponding
193
proposals and reports on the appointment and re-appointment of directors to the Board, for subsequent
submission to the Company's General Meeting in 2020.
The committee also carried out an analysis of the assessment of the operation of the Board and the
performance of the functions of the Chairman of the Board and the Chief Executive Officer, submitting
the corresponding reports for consideration by the Board.
In addition, in 2020 the Committee reviewed and proposed an update to the Selection Policy, including,
among many other matters, the new target for representation of the underrepresented gender, as
indicated above.
Furthermore, following Committee's assumption of new functions relating to the Bank's Corporate
Governance System in 2019, it worked intensively on this matter in 2020, and in this regard, has
monitored and supervised the progress made in the Bank's Corporate Governance System during the
financial year, reviewed the draft annual corporate governance report for 2019 and the amendments to
certain recommendations of the CNMV Good Governance Code. It has also received information on the
result of the Corporate Governance Roadshow, where meetings were held with the Bank's main
institutional investors and proxy advisors over the last months of 2020.
In light of the foregoing, the Committee analysed and reviewed the proposed new Corporate Governance
General Policy for the BBVA Group, which sets out the general principles, objectives and main
characteristics of corporate governance for the Group and its internal organisation, including the
relationship model between BBVA and the entities comprising its Group; issuing its favourable opinion
prior to submission to the Board for approval.
The Committee verified that the circumstances set out in the BBVA Directors’ Remuneration Policy for
the application of malus and clawback clauses elated to the conduct of executive directors, had not
occurred, for the purpose of payment of the variable remuneration accrued in previous years.
Finally, the Committee analysed the appointment and dismissal of senior managers that were proposed
during the 2020 financial year, in view of the selection and appointment policy of the members of the
Senior Management; The Committee reviewed and verified the suitability of the proposed new senior
managers, submitting their corresponding reports to the Board.
●
Remunerations Committee:
The Regulations of the Remunerations Committee set out the operational
principles of the Committee and lay down the basic rules of its organisation and functioning. The
Regulations of the Remunerations Committee specifically provide, amongst other things, that the
Remunerations Committee will meet whenever it is called to do so by its Chair, who is empowered to call
the Committee and to set the agenda for its meetings, and set out the procedure for calling ordinary and
extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to meetings,
as well as, at the request thereof, those persons within the Group who have knowledge of or responsibility
for the matters covered by the agenda, when their presence at the meeting is deemed appropriate. The
Committee may also call any other Group employee or manager, and even arrange for them to appear
without the presence of any other manager. It will, however, seek to ensure that the presence of persons
outside the Committee during its meetings be limited to those cases where it is necessary and to the
items on the agenda for which they had been called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee shall be subject to the Regulations of
the Committee. All other matters not provided for in the aforementioned Regulations will be subject to the
Regulations of the Board of Directors, insofar as they are applicable.
With regard to the most important activities carried out by the Remunerations Committee during the 2020
financial year, the activity of the Committee has been focused on performing the functions assigned to it
by Article 5 of its Regulations, as well as the development of the framework established in the BBVA
Directors Remuneration Policy, approved by the General Meeting held in March 2019, and in the BBVA
194
Group Remuneration Policy, approved by the Board of Directors in November 2017, which is generally
applicable to all BBVA staff and which includes the Remuneration Policy for the Identified Staff. These
policies focus on the recurring generation of value for the Group, and also seek to align the interests of
its employees and shareholders with prudent risk management.
Therefore, the Remunerations Committee carried out the actions detailed below during the 2020 financial
year to perform its functions and implement the aforementioned remuneration policies, submitting the
corresponding proposals to the Board of Directors for approval, where appropriate.
However, as detailed below, the activities of the Remunerations Committee in the 2020 financial year
have been affected by the crisis caused by the COVID-19 pandemic, as has the activity of the other
corporate bodies of the Bank.
During the first few months of the 2020 financial year, the Committee carried out its usual activity in the
area of remuneration. Thus, the Committee submitted necessary proposals to the Board for determining
the amount of the Annual Variable Remuneration of executive directors for the 2019 financial year, as
well as the scales of achievement for the multi-year performance indicators that would apply to the
Deferred Portion of 2019 Annual Variable Remuneration and the TSR (Total Shareholder Return)
indicator reference group; determining the amount of the Deferred Portion of the Annual Variable Rate
for the 2016 financial year, which was to be paid to executive directors in 2020, and the updated amount;
and determining the annual and multi- year performance indicators, and their corresponding weightings,
used for the calculation of the Annual Variable Remuneration of executive directors for the 2020 financial
year.
The Remunerations Committee was informed of the remuneration conditions for directors as established
in 2019, in accordance with the BBVA Directors’ Remuneration Policy, and resolved not to submit a
proposal to the Board for their amendment.
With regard to those matters relating to Senior Management, the Committee established, for its proposal
to the Board and in line with the basic contractual framework for Senior Management, the basic
contractual conditions applicable to members of the Bank's Senior Management who were appointed by
the Board on 19 December 2019, effective from 1 January 2020; as well as the salary review of certain
senior managers, also within said contractual framework. Similarly, the Committee reviewed the Annual
Variable Remuneration of members of Senior Management for the 2019 financial year, as well as the
Deferred Portion of the 2016 Annual Variable Remuneration for Senior Managers who receive such
remuneration, both to be paid in 2020.
Similarly, the Committee determined the 2019 Annual Variable Remuneration for the heads of Regulation
& Internal Control and Internal Audits (under the direct authority of the Board) , for its proposal to the
Board, on the basis of the approach taken by the Risk and Compliance and Audit Committees,
respectively, in relation to the assessment of their objectives.
Regarding matters relating to the Identified Staff, which includes Senior Management, the Committee
established that the scales of achievement for the multi-year indicators for the deferred 2019 Annual
Variable Remuneration, as well as the TSR indicator reference group, were the same as those set for the
executive directors. The Committee also established that the multi-year indicators for the 2020 Annual
Variable Remuneration determined for the executive directors were also applicable to the Identified Staff.
Also in 2020, as in every year, the Committee submitted to the Board, for its approval and subsequent
submission to a vote at the General Meeting: The Annual Report on the Remuneration of Directors for
the 2019 financial year, which was finally approved with 92.46% of the votes; and the resolution to
increase the maximum variable remuneration level of up to 200% of the fixed component applicable to a
specific number of members of the Identified Staff, which was approved with 97.23% of the votes.
In March 2020, after the General Meeting, the health crisis caused by COVID-19 began, which largely
determined the activity of the Remunerations Committee for the remainder of the financial year. In
particular, at this time, in view of the exceptional circumstances arising from the COVID-19 crisis and as
a gesture of responsibility and commitment toward customers, shareholders, employees and society in
general, 330 members of the Identified Staff, including the executive directors and members of the Senior
Management, waived generation of the Annual Variable Remuneration for the 2020 financial year.
195
In this context, the Remunerations Committee analysed the waiver of the Annual Variable Remuneration
for the 2020 financial year by the executive directors and the consequences thereof in terms of resolutions
previously adopted by the corporate bodies of the Bank for the generation of the same, which were mostly
ineffective.
Likewise, the Remunerations Committee analysed the minimum thresholds for Attributable Profit and
Capital Ratio established by the executive area for determining the 2020 Annual Variable Remuneration,
if applicable, both for those members of the Identified Staff who had not fully waived said Annual Variable
Remuneration as well as for the rest of the Group's staff, all of which the Board was informed of.
With regard to the function of the Committee in ensuring compliance with the remuneration policies
established by the Company, the Remunerations Committee carried out a review of the implementation,
in the 2019 financial year, of the approved remuneration policies (the Directors’ Remuneration Policy and
the BBVA Group's Remuneration Policy, which includes the Remuneration Policy for the Identified Staff),
based on the annual Internal Audit Area Report. In addition, the Committee has been informed of the
development and outcome of identifying the BBVA Group Identified Staff in 2020.
During 2020 the Committee has also verified the information about the remuneration of directors and
senior managers contained in the Financial Statements and in the Annual Report on the Remuneration
of Directors for the 2019 financial year.
●
Risk and Compliance Committee:
The Regulations of the Risk and Compliance Committee set out the
operational principles of the Committee and lay down the basic rules of its organisation and operation. In
particular, the Risk and Compliance Committee's Regulations stipulate, inter alia, that the Committee
shall meet whenever it is called by its Chair, who is empowered to call the Committee and to set the
agenda for its meeting. The Regulations contain the procedure for the calling of ordinary and
extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to meetings,
including the Regulation & Internal Control area and the Risks area, and, at the request of the heads of
these, those persons within the Group who have knowledge of or responsibility for the matters covered
by the agenda, when their presence at the meeting is deemed appropriate. The Committee may also call
on any other Bank employee or manager, and even arrange for them to appear without the presence of
any other manager, while ensuring that the presence of non-Committee members at its meetings is limited
to those cases where it is necessary and to the items of the agenda for which they have been called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee shall be subject to the Regulations of
the Committee. All other matters not provided for in the aforementioned Regulations will be subject to the
Regulations of the Board of Directors, insofar as they are applicable.
With regard to the most important activities carried out by the Risk and Compliance Committee during
the 2020 financial year, the Committee analysed in several of its meetings and submitted a proposal for
the BBVA Group's Risk Appetite Framework for the 2021 financial year (on the basis of the approach
taken by the Executive Committee), as well as an update to the BBVA Group's General Risk Management
and Control Model. These were submitted to the Board of Directors for its consideration and, where
appropriate, its approval.
During the 2020 financial year, the Committee reviewed reports on the internal capital adequacy
assessment process (ICAAP) and the internal liquidity adequacy assessment process (ILAAP), as well
as regulatorily required adequacy proposals for capital and liquidity. This review was carried out to
monitor the development of stress scenarios and verify their alignment with the approved Risk Appetite
Framework, with assistance from the Risk, Finance and Regulation & Internal Control areas, amongst
others. This made it possible to ensure that these reports and proposals faithfully reflected the Group's
situation in the areas analysed prior to them being submitted for consideration by the Executive
Committee and the Board of Directors.
196
The Risk and Compliance Committee has participated in the annual review and updating of the Group's
general risk management and control policies, both financial and non-financial, ensuring they are
consistent with the Group's General Risk Management and Control Model.
The Risk and Compliance Committee also confirmed that the model is adequate and that the Group has
structural risk-management areas both at corporate level and in each geographical and/or business area.
They added that these function correctly and provide the Committee with the information required to
understand the Group's risk exposure at all times, thus enabling the Committee to fulfil its monitoring,
supervision and control functions.
The Risk and Compliance Committee has monitored the effectiveness of the Regulation & Internal Control
area, involving itself in matters related to the Head of the area and ensuring that the area has the
resources necessary to carry out its functions.
The Risk and Compliance Committee has received monthly information from the Head of Regulation &
Internal Control regarding the activity carried out by each of the units that comprise that area, with a focus
on the work carried out to tackle the impact of the pandemic. In addition, the Committee has received
periodic reports directly from the heads of Compliance, Non-Financial Risks and Internal Risk Control, all
of which fall under the Regulation & Internal Control area.
Throughout the 2020 financial year, the Risk and Compliance Committee monitored the evolution of the
different risks to which the Group is exposed—both financial (e.g. credit risk, structural risks, market risk,
insurance risk) and non-financial (mainly operational risks)—as part of the BBVA Group's General Risk
Management and Control Model and in accordance with the Risk Appetite Framework approved by the
Board of Directors.
The Risk and Compliance Committee therefore received and analysed information from the Risk and
Regulation & Internal Control areas suitably frequently, and had the support of the Group's Chief Risk
Officer, the Head of Regulation & Internal Control, those in charge of each type of risk in the corporate
field and the risk directors of the Group's main geographical and/or business areas, and spoke directly
with each one to discuss this topic.
All of this afforded the Risk and Compliance Committee direct knowledge of the Group's risks, both
globally and locally, allowing it to perform its function of monitoring the evolution of the Group's risks,
regardless of the type of risk, the geographical or business area in which it originates, and even the sector
or portfolio to which it belongs.
In the performance of this function, the Risk and Co mpliance Committee also regularly monitored the
compliance of the metrics established for the 2020 financial year, with the necessary frequency and level
of detail to ensure adequate monitoring of said indicators. To further enhance its monitoring of the Risk
Appetite Framework, the Committee received information about key internal and external variables that
do not directly form part of the Risk Appetite Framework but affect its compliance. All of this prior to its
follow-up by the other corporate bodies with risk functions.
In particular, and since the outbreak of the COVID-19 pandemic, the Committee has been continuously
monitoring those risks most affected by the pandemic, with a focus on the behaviour of those credit
portfolios which has been subject to legal or sectoral moratoria, as well as new lending operations granted
with public guarantees.
In addition, the credit committees of Global Risk Management (GRM) informed the Risk and Compliance
Committee periodically of the main credit risk operations in their respective areas of competency, as well
as the Group's most significant cases of credit exposure. Each month, the Risk and Compliance
Committee was also provided with information about the qualitative risk operations authorised by the
committees of Global Risk Management.
The Risk and Compliance Committee has analysed, in advance, the financial and non-financial risks of
corporate operations submitted for consideration by the Board of Directors.
In 2020, the Committee received recurring information on the evolution of metrics and analysis in terms
of profitability and capital, which evaluate the alignment of the resulting pricing in the financing and credit
activity against the risk strategy and risk transfer in the Group.
197
Additionally, the Committee monitored the profitability of portfolios and businesses and the performance
of the profitability indicators incorporated into the Bank's Risk Appetite Framework. All of this enabled the
Committee to confirm that the prices of the assets and liabilities offered to customers were aligned with
the Bank's business model and risk strategy.
The Committee was involved in establishing the multi- year performance indicators for the 2020 Annual
Variable Remuneration, as well as the scales of achievement for the multi-year performance indicators
for the 2019 Annual Variable Remuneration, analysing their alignment with appropriate, effective and
prudent risk management, prior to their submission to the Board by the Remunerations Committee.
The Committee was informed of the Risk area's structure, resources and incentive scheme as well as its
means, systems and tools (including those in development stage), having verified that the Group has
adequate resources in relation to its strategy.
The Risk and Compliance Committee participated in the review of the Group's Recovery Plan with a view
to assessing its alignment with the Risk Appetite Framework approved by the Group and analysing the
risk scenarios used, with the help of the Risk and Finance areas, inter alia, before being submitted to the
Executive Committee and subsequently the Board of Directors for consideration.
Regarding the functions of the Committee in relation to compliance, it should be noted first and foremost
that during the 2020 financial year, the Committee analysed each of the policies prepared by the executive
areas in this regard (e.g. conflicts of interest, anti-corruption), issuing its favourable opinion prior to their
submission to the board to be approved or updated. Before being approved by the Board of Directors,
the Committee also examined the new Charter of the Compliance Function, which was updated in 2020
to ensure its alignment with new regulations, supervisory expectations and the BBVA Group's
organisational structure.
The Committee also regularly monitored information received by the Compliance Unit over the course of
the financial year regarding the Group's compliance with applicable internal and external regulations. The
Committee examined the findings of the independent review processes carried out both internally within
the Group and externally by the competent authorities, as well as the degree of progress in implementing
planned measures within the various areas of activity (e.g. conduct, prevention of money laundering and
terrorist financing, data protection). It also specifically monitored the activity of the Compliance Unit in
relation to the MiFID regulations and bank transparency.
Moreover, the Committee was informed, as often as appropriate, of the findings of external audits and
any other reviews carried out by external experts on compliance-related matters, including existing
internal control measures concerning the prevention of money laundering and terrorist financing.
Similarly, the Committee also monitored the main legal risks deriving from litigation to which the Group is
exposed. Furthermore, regarding compliance with applicable internal regulations, the Committee was
informed by the heads of the relevant executive areas of any pertinent compliance-related issues
concerning the implementation of internal regulation (e.g. general policies, procedures) approved by the
Group.
Regarding BBVA's Crime Prevention and Criminal Risk Management Model, the Committee was
informed of its development over the course of the financial year and the main lines of work involved in
relation to the model's various elements.
The Committee was also informed by the head of the Compliance Unit—the unit responsible for promoting
and ensuring, in an independent and objective manner, that BBVA acts with integrity, particularly in areas
such as anti-money laundering, conduct with clients, security market conduct, anti-corruption and other
aspects of corporate conduct—of the functioning of the whistleblowing channel, as well as of the
noteworthy aspects of the area.
Finally, the Committee analysed the degree of implementation of the Compliance Unit's Annual Plan for
the 2019 financial year. It also examined the Annual Plan set out for 2020, as well as monitoring its
progress in terms of implementation, which was impacted by the crisis and extraordinary activity carried
out following the outbreak of the pandemic.
Regarding communications and recommendations from supervisors, the Committee was made aware of
the major communications and inspections carried out by the Group's supervisory bodies, whether
198
national or foreign, being informed, where appropriate, of the recommendations, weaknesses or areas of
improvement identified, as well as the action plans and other measures established by the relevant
executive areas in order to overcome them in time.
Finally, during the 2020 financial year, the Risk and Compliance Committee verified the progress and
effectiveness of the various actions and initiatives drawn up by the Risk and Regulation & Internal Control
areas to strengthen the risk and compliance culture in the Group, so as to enable employees to perform
their duties in a secure environment, and to encourage the mitigation of risks, both financial and non-
financial, to which their activities are exposed.
●
Technology and Cybersecurity Committee:
The Regulations of the Technology and Cybersecurity
Committee set out the operational principles of the Committee and lay down the basic rules of its
organisation and operation. In particular, the Technology and Cybersecurity Committee's Regulations
stipulate, inter alia, that the Committee shall meet whenever it is convened by its Chair, who is empowered
to call the Committee and set the agenda of its meetings. The Regulations contain the procedure for the
calling of ordinary and extraordinary meetings.
Executives responsible for the areas that manage matters within their remits may be called to meetings,
as well as, at the request thereof, those persons within the Group who have knowledge of or responsibility
for the matters covered by the agenda, when their presence at the meeting is deemed appropriate. The
Committee may also call on any other Bank employee or manager, and even arrange for them to appear
without the presence of any other manager, while ensuring that the presence of non-Committee members
at its meetings is limited to those cases where it is necessary and to the items of the agenda for which
they have been called.
The Committee may also, through its Secretary, engage external advisory services for relevant issues
when it considers that these cannot be properly provided by experts or technical staff within the Group
on grounds of specialisation or independence.
Other aspects of the organisation and operation of the Committee shall be subject to the Regulations of
the Committee. All other matters not provided for in the aforementioned Regulations will be subject to the
Regulations of the Board of Directors, insofar as they are applicable.
With regard to the most relevant actions carried out by the Technology and Cybersecurity Committee
during the 2020 financial year, the Committee has received information on the Group's technology
strategy from the heads of the Engineering and Organization Area, regarding the main strategic projects
and plans defined by that Area, with a focus on those related to resilience, cloud infrastructure, banking
functionalities and the development of engineering solutions for the areas and the data platform.
Additionally, the input of external advisers was made available to the Committee in order to strengthen
the Committee's independence in the performance of this function.
Within the context of these plans and projects, the Committee has been informed of technological trends
and of other issues pertaining to new technologies, applications, IT systems and best practices that affect
or may affect the Group's technology strategy or plans.
The Committee has received recurring updates on the metrics established by the Group for management
and control in the technological field.
In relation to the Committee's functions in the area of technological risk supervision and cybersecurity
management for the Group, firstly, since the beginning of the crisis caused by COVID-19, the Committee
was informed about (a) the management of business continuity from an operational point of view; (b) the
move to remote working by the vast majority of staff; and (c) the strengthening of the Group's operational
capabilities and other cybersecurity and fraud management measures during the pandemic.
Also, the Committee received information about the updated framework of technological risks to which
the Group is exposed, as well as the measures for identifying, managing, monitoring and mitigating such
risks.
In particular, the Committee has been provided with further detail on identification, management,
monitoring and mitigation of IT-related risks faced by the Group as a result of services that are contracted
to suppliers; along with the main risks associated with the use of shadow IT elements.
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Additionally, the Committee has been informed of how the Bank complies with the EBA's ICT guidelines
in relation to IT and security risk management.
The Committee was also informed of progress made in relation to the business continuity strategy and
lessons learnt as a result of the pandemic.
The Committee has reviewed the main programmes in the field of cybersecurity and was informed about
progress made, the implementation of artificial intelligence solutions, the evolution of the established
metrics and future plans.
Finally, at each of its meetings, the Committee also received information on the main cybersecurity-
related events at industry level and on those that are relevant to the BBVA Group. This information was
provided by the head of the Corporate Security unit, who explained how the Group is prepared to deal
with attacks of a similar nature, as well as how it has dealt with attacks and, where applicable, mitigated
their consequences for the Group.
With respect to Section D (Related-party and Intragroup Transactions), see Notes 53 and 48 within the BBVA
Consolidated and Individual Annual Financial Statements for the 2020 financial year, respectively. Section D.4
details the transactions conducted by Banco Bilbao Vizcaya Argentaria, S.A. at the close of the financial year,
with the company issuing securities on international markets, carried out as part of ordinary trading related to
the management of outstanding issuances, guaranteed by BBVA. Moreover, with respect to Section D.4, please
refer to the section entitled 'Offshore financial centres' in the BBVA Consolidated Management Report for the
2020 financial year.
Furthermore, with respect to Section D.6, all members of the Board of Directors and BBVA Senior Management
are subject to the provisions of the BBVA Code of Conduct, the Group's General Policy on Conflicts of Interest
and the Internal Standards of Conduct in the Securities Markets, which establish principles and guidelines to
identify, prevent and manage potential conflicts of interest. In particular, the Internal Standards of Conduct in
the Securities Markets establishes that all persons subject to them must notify the head of their area or the
Compliance unit of situations that could potentially and under specific circumstances may entail conflicts of
interest that might compromise their impartiality, before they engage in any transaction or conclude any
business in the securities market in which such may arise.
To complement Section E.3 of this report, and in relation to Preliminary Proceeding No. 96/2017 – Piece No. 9-
regarding the provision of services by
Centro Exclusivo de Negocios y Transacciones, S.L.
since 2019 this issue was reported on a recurrent basis to the Bank's corporate bodies, namely to the Board of
Directors and also to its committees that have functions in relation to this matter (the Audit Committee and the
Risk and Compliance Committee). These bodies have driven and overseen internal investigation procedures,
ensuring that the Bank fully cooperates with the judicial authorities and develops a policy of transparency.
In addition to the above, the Bank's management bodies have continued to adopt various measures to
strengthen the Bank's internal monitoring systems, outlined in the Compliance System section of the Non-
Financial Information Statement included in the Individual and Consolidated Management Reports for the 2020
financial year, which include this Annual Corporate Governance Report. These measures include the approval
of new policies and other internal developments, improvements in internal control processes and the
strengthening of the crime prevention model.
It is also worth noting that relevant documentation obtained from the forensic investigation hired in 2019 to help
to clarify the events does not indicate any implication by any of the current members of the Board of Directors
nor the Executive Chairman of the Bank, and it has not been proven that the Bank has committed any criminal
activity. BBVA sustains that no criminal responsibility for the Entity is derived from the investigated events.
It must also be stressed that, to date, the case has not impacted the development of the Bank's business, nor
has it negatively impacted the Bank's reputation indices, which are subject to recurrent monitoring by both the
executive team and by its management bodies.
BBVA has created a specific area on its corporate web page with information on issues related to the Cenyt
case (https://www.bbva.com/en/specials/the -cenyt-case/).
To supplement Recommendation 64 included in Section G, it is expressly noted that, in accordance with BBVA
Directors’ Remuneration Policy, approved by the 2019 General Shareholders’ Meeting, the Bank has no
commitments to pay severance indemnity to executive directors.
200
As detailed in said Remuneration Policy, the contractual framework defined for executive directors establishes
a post-contract non-compete agreement for a two-year period after they cease as BBVA executive directors,
provided that said leave is not due to retirement, disability or serious breach of duties. As compensation for this
agreement, executive directors will receive remuneration of an amount equivalent to one annual fixed
remuneration per year of duration, which shall be paid monthly over the course of the two-year duration of the
non-compete agreement.
As described in Section C.1.3 above, the Bank has undertaken welfare commitments to cover retirement,
disability and death contingencies with the Group Executive Chairman, which conditions are described in the
BBVA Directors’ Remuneration Policy. With regard to the pension commitment, this is established as a defined-
contribution scheme, according to which the annual contributions to be made to cover retirement are set in
advance. Pursuant to this commitment, the Group Executive Chairman is entitled to a retirement benefit when
he reaches the legally established retirement age, which amount shall result from the sum of the contributions
made by the Bank and their corresponding yields up to said date, provided that his leave is not due to serious
breach of his duties. The system do not provide for the possibility of receiving the retirement pension in advance.
Regarding adherence to codes of ethics or good practice, the BBVA Board of Directors approved in 2011 the
Bank's adhesion to the
Código de Buenas Prácticas Tributarias
Large Corporations Forum according to the wording proposed by the Spanish Tax Agency (AEAT). The Group
meets the obligations assumed as a result of this adherence and, during the 2020 financial year, voluntarily
prepared and submitted to the Spanish Tax Agency the Annual Fiscal Transparency Report for companies
adhering to this Code. In this vein, the BBVA Group has adhered since 2013 to the Code of Practice on Taxation
for Banks promoted by British tax authorities, and has met its obligations in this regard.
Furthermore, BBVA is committed to implementing the provisions of the Universal Declaration of Human Rights
and is a member of all major international initiatives for sustainable development, such as the Principles of
United Nations Global Compact, the Equator Principles, the United Nations Principles for Responsible
Investment, the United Nations Environment Programme Financial Initiative, the Green Bond Principles, the
Social Bond Principles, the Green Loan Principles, the Thun Group of Banks on Human Rights, the Carbon
Disclosure Project (CDP), the RE100 initiatives, the Science Based Targets,
Grupo Español para el Crecimiento
Verde
Leaders, as well as others conventions and treaties of international organisations such as the Organization for
Economic Co-operation and Development and the International Labour Organization. Also noteworthy is the
fact that in 2019 BBVA signed, as a founding signatory, the Principles for Responsible Banking and joined the
Collective Commitment to Climate Action as part of this year's UN Climate Action Summit. Moreover, BBVA is
firmly committed to the United Nations Sustainable Development Goals (SDGs) and the Paris Agreem ent on
Climate Change, and, since 2017, the Bank has been part of the pilot group of banks committed to implementing
the recommendations regarding financing and climate change published in July by the Financial Stability Board
of the G20.
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This Annual Corporate Governance Report was approved by the company's Board of Directors during its
meeting on 8 February 2021.
List whether any directors voted against or abstained from voting on the approval of this report.
No
