Company: BBVXF
Filing Date: 2025-02-27
Form Type: F-4/A
Source: 0001193125-25-037317
Chunk: 607

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-02-27
Form: F-4/A
Chunk 607
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 advanced economies, the Group does not use internal models. These exposures are considered to have negligible risk given that, based on the      
 information available as at the date of signing off the consolidated annual financial statements, and considering past experience with these risks, the impairment allowance that these exposures are estimated to require is not significant as long as 
 they are not reclassified into stage 3.                                                                                                                                                                                                                  |

| – | In order to collectively assess impairment, internal models estimate a different PD and LGD for each contract. To                                                                                                                                         
 this end, various types of historical information are used that allow the risk to be individually classified for each exposure (ratings, non-payments, vintage, exposure, collateral, characteristics of the                                              
 borrower or contract). Available historical information representative of the Institution and past losses (defaults) is therefore taken into account. It is worth highlighting that the estimation obtained from the models is adjusted to account for    
 the existing economic climate and the forecasts in the scenarios considered, the latter being representative of expected credit losses. The estimates of impairment loss allowance models are directly integrated in some activities related to risk      
 management and the input data that they use (e.g. credit ratings and credit scores) are those used for approving risks, monitoring risks, for pricing purposes and in capital calculations. In addition, recurring back-testing exercises are carried out 
 at least once a year, and the models are adjusted in the event any significant deviations are detected. The models are also reviewed regularly in order to incorporate the most recent information available and to ensure that they perform adequately   
 and that they are suitably representative when applied to the current portfolio for the calculation of impairment loss allowances.                                                                                                                        |

Segmentation of models Specific models exist depending on the segment or product of the customer (portfolio) and each one uses explanatory variables that uniformly catalogue all of the portfolio’s exposures. The purpose of the segmentation of models is to optimise the capture of customers’ default risk profile based on a set of common risk drivers. Therefore, the exposures of these segments can be considered to reflect a uniform collective treatment. The models for companies calculate PD at the borrower level and are fundamentally segmented according to the size of the company (annual turnover) and its activity (real estate development, holding, or other). A-494

The PD models for natural persons, including the self-employed, follow a segmentation that centres primarily on the lending product. Different models exist for different products: mortgage loans, consumer loans, credit cards and lines of credit, considering the recipient of the transaction (individual or company).