Company: BBVXF
Filing Date: 2025-08-12
Form Type: DRS
Source: 0000950123-25-007520
Chunk: 632

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-08-12
Form: DRS
Chunk 632
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).

4.4.2. Credit risk

Credit risk refers to the risk of losses being incurred as a result of borrowers’ failure to fulfil their payment obligations, or of
losses in value taking place due simply to the deterioration of borrower quality.

4.4.2.1 Credit risk management framework

Credit risk exposures are
rigorously managed and monitored through regular assessments of borrowers’ solvency and their ability to honour their payment obligations undertaken with the Group, adjusting the exposure limits established for each counterparty to levels that
are deemed to be acceptable. It is also normal practice to mitigate credit risk exposures by requiring borrowers to provide collateral or other guarantees to the Bank.

The Board of Directors grants powers and discretions to the Delegated Credit Committee to allow the latter to confer different approval powers to
different decision-making levels. The implementation of authority thresholds in credit approval systems ensures that the conferral of approval powers established at each level is linked to the expected loss calculated for each transaction, also
considering the total amount of the total risk exposure with an economic group and the amount of each transaction.

To optimise the business
opportunities provided by each customer and guarantee an appropriate level of security, responsibility for accepting and monitoring risks is shared between the account manager and the risk analyst who, by maintaining effective communication, are
able to obtain a comprehensive (360°) and forward-looking insight into each customer’s individual circumstances and needs.

The
account manager monitors the business aspect through direct contact with customers and by handling their day-to-day banking activity, while the risk analyst takes a more
system-based approach making use of his/her specialised knowledge.

The implementation of advanced risk management methodologies also benefits the
process as it ensures that proactive measures can be taken once a risk has been identified. Of vital importance in this process are tools such as credit rating systems for companies and credit scoring systems for natural persons, as well as early
warning indicators for monitoring risk. These are integrated into a single tool that provides a comprehensive and forward-looking vision of customers.

The analysis of indicators and early warnings, in addition to credit rating reviews, allow an integrated and continuous measurement to be made of the
level of risk taken. The establishment of efficient procedures to manage performing loans also benefits the management of past-due loans as it enables a proactive policy to be devised based on a timely
identification of any cases with propensity to default.

Risk monitoring is carried out for all exposures in order to identify potentially
problematic situations and prevent credit impairment. In general