Company: BBVXF
Filing Date: 2025-03-21
Form Type: 6-K
Source: 0000842180-25-000016
Chunk: 46

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-03-21
Form: 6-K
Chunk 46
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 Bank Recovery and Resolution Directive (BRRD), whose update (BRRD2) published in 2019 and effective as of December 2020, established January 1, 2024 as the deadline to comply with this requirement. Additionally, it established another requirement on subordinated instruments, which came into force on January 1, 2022.

BBVA, as an MPE 7 , has sub-consolidated requirements, based on its resolution group 8 .

In line with other prudential ratios, non-compliance with any of the MREL requirements might entail additional supervision and control measures, as well as the prohibition of distribution of dividends, coupons of AT1 instruments and variable remuneration.

In order to achieve the basis of own funds and eligible liabilities that make up the numerator of the ratio, resolution institutions have at their disposal their total capital, to which are added other eligible debt instruments (hereinafter Tier 3) for loss absorption and recapitalisation (bail-in). These instruments are classified according to their seniority in the event of a resolution event into subordinated and senior. This is why the BRRD establishes two separate requirements (subordination and MREL).

In the event that the entity incurs losses, and once Tier 1 and Tier 2 capital has been exhausted, the hierarchy of Tier 3 instruments available to BBVA is as follows:

1. Senior non-preferred debt.

2. Senior preferred debt.

3. Eligible subordinated liabilities not recognised as own funds; includes the decline 9 of T2 issuances and subordinated debt.

In short, MREL compliant liabilities must be eligible to absorb losses, and their seniority will depend on the nature of the instrument and its classification within the above hierarchy.

In the case of the denominator, institutions will use the total RWA and the leverage ratio exposure measure of their resolution group, under the same provisions as in the calculation of their capital and leverage ratios, respectively.

On March 27, 2024 the Group made public that it had received a communication from the Bank of Spain regarding its new MREL requirement, established by the Single Resolution Board (“SRB”). According to this communication, BBVA must maintain, as from March 27, 2024, an MREL in RWA of 22.79% 10 , not taking into account the current 11 combined buffer requirement (CBR) of 3.65%. In addition, BBVA must keep, also as from March 27