Company: BBVXF
Filing Date: 2025-09-05
Form Type: F-4/A
Source: 0001193125-25-196513
Chunk: 694

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-09-05
Form: F-4/A
Chunk 694
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 and of the credit risk captured in the individual assessments carried out using these thresholds. Collective assessment For borrowers who have been classed below the significant borrower threshold and who, in addition, have not been classified as stages 2 or 3 by the automatic classification algorithm, the Group has defined a process to identify transactions that show a significant increase in credit risk compared to when the transaction was approved, and which could give rise to greater losses than those incurred on other similar transactions classified as stage 1. For transactions of borrowers that are assessed collectively, the Group has a statistical model that allows it to determine the Probability of Default (PD) term structure and, therefore, the residual 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, the Group is able 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. In March 2022, the Group introduced a new statistical model that estimates significant increase in credit risk for borrowers and transactions subject to collective assessment models. The model generates an estimate using a logistic regression taking the annualised lifetime PD under the economic and idiosyncratic circumstances at the time the provision is calculated, and comparing it against the annualised residual lifetime PD under the circumstances that existed at the time the transaction was approved, considering the difference between PDs in both relative and absolute terms. For this model, thresholds for the increase in annualised lifetime PD, indicating stage 2 classification, have been calibrated using historical data with the aim of maximising efficient and early detection of arrears at 30 days, refinancings and defaults, thereby maximising risk discrimination among borrowers and/or transactions classified as stage 1 and 2. A