Company: BBVXF
Filing Date: 2025-09-05
Form Type: F-4/A
Source: 0001193125-25-196513
Chunk: 535

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-09-05
Form: F-4/A
Chunk 535
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 recovery processes and of the recoverability assigned to each one based on the Institution’s past experience. Risk drivers The risk drivers or explanatory variables of models are the shared credit risk characteristics. In other words, they are common elements that can be used to rate borrowers in a homogeneous way within a portfolio and which explain the credit risk rating assigned to each exposure. Risk drivers are identified by means of a rigorous process that combines historical data analysis, explanatory power and expert judgment, as well as knowledge about the risk/business. The main risk drivers are presented hereafter, grouped together by type of model (PD, SICR and LGD). A-357

PD models use credit ratings or credit scores as input data (internal ratings-based (IRB) models used
for both risk management and capital calculations). They incorporate additional information to give a more faithful reflection of the risk at a given moment in time
(point-in-time). For companies, the early warnings tool known as HAT and the credit rating are used. For individuals, the credit score is used. A description of these
tools can be found earlier in this same note.

In both cases, other recent risk events (refinancing, exit from default status, non-payments, lending restrictions) also explain the probability of default.

The explanatory factors mainly used
by SICR models are the PD upon approval and the current residual lifetime PD (i.e. for the residual life of the transaction).

LGD models use
additional risk drivers that enable a more in-depth segmentation to take place. More specifically, for mortgage guarantees, the LTV (Loan to Value) is used, or the order of priority in the event the mortgage
guarantee is enforced. Similarly, the amount of debt and the type of product are also factors taken into account.

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Summary of criteria for classification and allowances

The classification of credit risk and the measurement of allowances are determined based on whether or not there has been a significant increase in
credit risk since origination, or on whether or not any default events have occurred:

Guarantees

Effective guarantees are collateral and personal guarantees proven by the Group to be a valid means of mitigating credit risk.

Under no circumstances will guarantees whose effectiveness substantially depends on the credit quality of the debtor or, where applicable, of the
economic group of which the debtor forms part, be accepted as effective guarantees.

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Based on the foregoing, the following types of guarantees can be considered to be effective guarantees:

| – | Real estate guarantees