Company: BBVXF
Filing Date: 2025-02-27
Form Type: F-4/A
Source: 0001193125-25-037317
Chunk: 436

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-02-27
Form: F-4/A
Chunk 436
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 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). 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). PDs are estimated at the contract level, meaning that a single borrower can have different PDs depending on the lending product being quantified. The models for significant increase in credit risk (SICR) carry out calculations at the contract level, in order to consider the characteristics specific to each transaction at the time of origination and at the present time. Where LGD is concerned, contracts with similar risk characteristics are grouped together for collective assessment, using the following segmentation hierarchy:

| – | By type of borrower: companies, developers and natural persons. |

| – | By type of guarantee: mortgage, unsecured, monetary/financial, and guarantors. |

| – | By type of product: credit cards, overdrafts, leases, credits and loans. |

Different LGDs are estimated for each segment, which are representative of the borrowers, of the recovery processes and of the recoverability assigned to each one based on the Institution’s past experience. Risk drivers The risk drivers or explanatory variables of models are the shared credit risk characteristics. In other words, they are common elements that can be used to rate borrowers in a homogeneous way within a portfolio and which explain the credit risk rating assigned to each exposure. Risk drivers are identified by means of a rigorous process that combines historical data analysis, explanatory power and expert judgment, as well as knowledge about the risk/business. The main risk drivers are presented hereafter, grouped together by type of model (PD, SICR and LGD). A-268

PD models use credit ratings or credit scores as input data (internal ratings-based (IRB) models used
for both risk management and capital calculations). They incorporate additional information to give a more faithful reflection of the risk at a given moment in time
(point-in-time). For companies, the early warnings tool known as HAT and the credit rating are used. For individuals, the credit score is used. A description of these
tools can be found earlier in this same note