Company: BBVXF
Filing Date: 2025-09-09
Form Type: 424B3
Source: 0001193125-25-198517
Chunk: 784

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-09-09
Form: 424B3
Chunk 784
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 Group and to ensure it remains within the established risk appetite. Interest rate instruments additional to the natural hedges of balance sheet items are used as mitigation techniques, such as fixed-income bond portfolios or hedging derivatives that enable metrics to be placed at levels in keeping with the Institution’s risk appetite. In addition, proposals can be put forward to redefine the interest rate characteristics of commercial products or the launch of new products. Derivatives, mainly interest rate swaps (IRS), which qualify as hedges for accounting purposes, are arranged in financial markets to be used as risk hedging instruments. Two separate types of macro-hedges are used:

| – | Cash flow macro-hedges of interest rate risk, the purpose of which is to reduce the volatility of the net interest 
 margin due to changes in interest rates over one-year time horizon.                                                |

| – | Fair value macro-hedges of interest rate risk, the purpose of which is to maintain the economic value of the hedged 
 items, consisting of fixed-rate assets and liabilities.                                                             |

For each type of macro-hedge, there is a framework document that includes the hedging strategy, defining it in terms of management and accounting and establishing its governance. In Banco Sabadell, as part of the continuous improvement process, structural interest rate risk management and monitoring activities are implemented and regularly updated, aligning the Institution with best market practices and current regulations. In particular, throughout 2022 work has continued on the review and continuous improvement of the systems and behavioural models in accordance with the guidelines established by the EBA. Among other things, it is worth noting the calibration of the main behavioural modelling assumptions for demand deposits based on the different interest rate scenarios and their ongoing monitoring to ensure the suitability of those assumptions. Further progress has also been made with the definition, from a Group perspective, of the methodological and modelling criteria and principles relating to customers’ behavioural options to enable greater standardisation and coordination with the different BSMUs, and stress testing procedures have also been reinforced. A-651

In 2022, the Bank’s loan book shifted towards a higher proportion of fixed-rate transactions
(mainly mortgages and business loans), while on the liabilities side demand deposit balances increased. In addition, other balance sheet variations in 2022 included: the increase of the fixed-income portfolio on the asset side and the early TLTRO
III repayment of 10 billion euros, with the total outstanding amount now standing at 22 billion euros. The repayment conditions were changed in November 2022. This all translated