Company: BBVXF
Filing Date: 2025-09-05
Form Type: F-4/A
Source: 0001193125-25-196513
Chunk: 339

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-09-05
Form: F-4/A
Chunk 339
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 lifetime PD of a contract (or the PD from a given moment in time up to the maturity of the transaction), based on different characteristics:

| – | Systemic: macroeconomic characteristics shared by all exposures. |

| – | Cross-cutting: aspects that remain stable over time and which are shared by a group of transactions, such as the             
 shared effect of lending policies in effect at the time the transaction was approved, or the transaction’s approval channel. |

| – | Idiosyncratic: aspects specific to each transaction or borrower. |

With this specification, it is possible to measure the annualised residual lifetime PD of a transaction under the conditions that existed at the time the transaction was approved (or originated), or under the conditions existing at the time the provision is calculated. Therefore, the current annualised residual lifetime PD may fluctuate in relation to the PD at the time the transaction was approved, due to changes in the economic environment or in the idiosyncratic characteristics of the transaction or of the borrower. The Bank uses a statistical model that estimates significant increase in credit risk for borrowers and transactions subject to collective assessment models. The estimate is made using a logistic regression that considers, as explanatory variables, the ratio of the absolute increase between the annualised lifetime PD under the economic and idiosyncratic circumstances at the time the provision is calculated relative to the annualised residual lifetime PD under the circumstances that existed at the time the transaction was approved, along with other defining variables of the borrower or exposure. For this model, thresholds for the increase in annualised lifetime PD, which require classification in stage 2, have been calibrated using historical data with the aim of maximising efficient and early detection of arrears at 30 days, refinancings and stage 3, thereby maximising risk discrimination among borrowers and/or transactions classified as stage 1 and 2. The thresholds for significant increase in credit risk vary according to the portfolio, company size, product and level of PD upon approval, requiring higher relative increases if the PD upon approval is low. Exceptionally, those thresholds are not applicable at certain low levels of current PD where there is practically no indication of any significant increase in credit risk over a 6-monthhorizon (low credit risk exemption); those levels vary according to the portfolio/segment and have been calibrated using historical data. The current PD thresholds to identify the population exempt from significant increases in credit risk have been calibrated differently for each of the portfolios under the collective model perimeter, i.e. companies differentiated by size