Company: BBVXF
Filing Date: 2025-08-12
Form Type: DRS
Source: 0000950123-25-007520
Chunk: 349

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-08-12
Form: DRS
Chunk 349
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 accounting purposes. Their main characteristics are that they
have no defined maturity, they can be redeemed by the issuer in certain circumstances, the associated coupon payments are discretionary, and they can be converted into a variable number of ordinary shares newly issued by the Bank where the latter or
its consolidated group have a CET1 ratio below 5.125%.

Taking the foregoing into account, these securities are compound financial instruments that
simultaneously present attributes of financial liabilities (i.e. there are conversion scenarios in which the issuer must deliver a variable number of its equity instruments to cancel the issuance) and of equity (i.e. discretionary coupon payments).
The Institution estimates that the fair value of the liability component of the compound financial instrument as at the date of origination corresponds to the payment that would need to be made if an instantaneous conversion event were to occur, so
the amount allocated to that component is the entire carrying amount of the issued instrument, which is classified under the heading “Financial liabilities at amortised cost – Debt securities issued” on the consolidated balance sheet.
Furthermore, given that the Institution has the discretion to decide to pay the coupons associated with these instruments, those coupons are considered equity distributions and they are recognised under the “Other reserves” heading of the
balance sheet on each payment date, reducing the Institution’s equity.

Hybrid financial instruments

Hybrid financial instruments are those that combine a non-derivative host contract and a financial derivative,
known as an ‘embedded derivative’, which cannot be transferred separately, nor does it have a different counterparty, and which results in some of the cash flows of the hybrid instrument varying in a similar way to the cash flows that
would exist if the derivative were considered separately.

Generally, where the host contract of a hybrid financial instrument is a financial
asset, the embedded derivative is not separated and the measurement rules are applied to the hybrid financial instrument as a whole.

Where the
host contract of a hybrid financial instrument is a financial liability, the embedded derivatives of that contract are accounted for separately if the economic characteristics and risks of the embedded derivative are not closely related to those of
the host contract, if a separate financial instrument with the same terms as the embedded derivative would meet the definition of a derivative instrument, and if the hybrid contract is not fully measured at fair value through profit or loss.

Most of the hybrid financial liabilities issued by the Group are instruments whose payments of principal and/ or interest are indexed to specific
equity instruments (generally, shares of listed companies), to a basket of shares,