Company: BBVXF
Filing Date: 2025-08-12
Form Type: DRS
Source: 0000950123-25-007520
Chunk: 671

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-08-12
Form: DRS
Chunk 671
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 of non-performing exposures).

4.4.3.3. Structural foreign exchange risk

Structural
foreign exchange risk occurs when changes in market exchange rates between different currencies generate losses on permanent investments in foreign branches and subsidiaries with functional currencies other than the euro.

The purpose of managing structural foreign exchange risk is to minimise the impact on the value of the Institution’s portfolio/equity in the event
of any adverse movements in currency markets. The foregoing takes into account the potential impacts on the capital (CET1) ratio and on the net interest margin, subject to the risk appetite defined in the RAS. Furthermore, the levels set for the
established risk metrics must be complied with at all times.

Foreign exchange risk is monitored regularly and reports are sent to supervisory
bodies on existing risk levels and on compliance with the limits set forth by the Board of Directors. The main monitoring metric is currency exposure, which measures the maximum potential loss that the open structural position could produce over a 1-month time horizon, with a 99% confidence level and in stressed market conditions.

Compliance with, and the
effectiveness of, the Group’s targets and policies are monitored and reported on a monthly basis to the Board Risk Committee.

The Bank’s
Financial Division, through the ALCO, designs and executes strategies to hedge structural FX positions in order to achieve its objectives in relation to the management of structural foreign exchange risk.

The most prominent permanent investments in non-local currencies are held in US dollars, pounds sterling and
Mexican pesos.

The Group has been following a hedging policy for its equity that seeks to minimise the sensitivity of capital ratios to adverse
movements in these currencies against the euro. To that end, the evolution of foreign business is monitored, as are the political and macroeconomic variables that could have a significant impact on exchange rates.

As regards permanent investments in US dollars, the overall position in this currency has gone from 1,278 million as at 31 December 2022 to
1,413 million as at 31 December 2023. In relation to this position, as at 31 December 2023, a buffer of 34% of total investment is maintained.

In terms of permanent investments in Mexican pesos, the capital buffer has gone from 9,253 million Mexican pesos as at 31 December 2022 (of a
total exposure of 15,261 million Mexican pesos) to 8,553 million Mexican pesos as at 31 December 2023 (of a total