Company: BBVXF
Filing Date: 2025-09-05
Form Type: F-4/A
Source: 0001193125-25-196513
Chunk: 793

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-09-05
Form: F-4/A
Chunk 793
---
 model captures the effect of low interest rates on the stability of deposits, as well as the potential 
 migration to other deposits that earn more interest in different interest rate scenarios.                                                                                                                                                              |

| – | Modelling of non-performing lending items: a model has been defined that                                                                                                                                        
 allows the expected payment flows associated with non-performing positions (net of provisions, i.e. those expected to be recovered) to be included in pools of interest rate-sensitive items. To this end, both 
 existing balances and estimated recovery periods are included.                                                                                                                                                  |

The process for approving and updating IRRBB models is part of the corporate governance arrangements for models, whereby these models are reviewed and validated by a division that is always separate from the division that created them. This process is included in the corresponding model risk policy and establishes both the duties of the different areas involved in the models and the internal validation framework to be followed. As for the measurement systems and tools used, all sensitive transactions are identified and recorded taking into account their interest rate characteristics, the sources of information being the official ones of the Institution. These transactions are aggregated according to predefined criteria, so that calculations can be made faster without undermining the quality or reliability of the data. The entire data process is subject to the requirements of information governance and data quality, to ensure compliance with the best practices in relation to information governance and data quality. Additionally, a regular process is carried out to reconcile the information uploaded onto the measurement tool against accounting information. The calculation tool includes sensitive transactions and its parameters are also configured to reflect the result of the behavioural models described above, the volumes and prices of the new business, defined according to the Financial Plan, and the interest rate curves on which the aforesaid scenarios are built. Based on the balance sheet position and the market situation and outlooks, risk mitigation techniques are proposed and agreed upon to adjust this position to match the one desired by the Group and to ensure it remains within the established risk appetite. Interest rate instruments additional to the natural hedges of balance sheet items are used as mitigation techniques, such as fixed-income bond portfolios or hedging derivatives that enable metrics to be placed at levels in keeping with the Institution’s risk appetite. In addition, proposals can be put forward to redefine the interest rate characteristics of commercial products or the launch of new products. Derivatives, mainly interest rate swaps (IRS), which qualify as hedges for accounting purposes, are arranged in financial markets to be used as risk hedging instruments. Two separate types of macro-hedges are used