Company: BBVXF
Filing Date: 2025-02-27
Form Type: F-4/A
Source: 0001193125-25-037317
Chunk: 521

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-02-27
Form: F-4/A
Chunk 521
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edges 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 2023 work has continued on the review and continuous improvement of the systems and behavioural models in accordance with the new guidelines established by the EBA. Among other things, some of the improvements worth noting are the update of the key behavioural modelling assumptions for demand deposits, prepayment of the loan portfolio and early termination of term deposits, taking sufficiently large time series data to capture periods of both rising and falling interest rate stress, obtaining different results based on the different interest rate scenarios modelled, and their recurrent monitoring to ensure the appropriateness of those assumptions. In 2023, the Bank’s loan book has continued to trend towards a higher proportion of fixed rate transactions (mainly mortgages and business loans), while on the liabilities side, balances of interest-bearing demand deposits and term deposits have increased in contrast with a reduced balance of non-interestbearing demand deposits, all while keeping costs at low levels relative to the upward trend of interest rates over the year. In addition, other balance sheet variations in 2023 included: the increase of the fixed-income portfolio on the asset side, which acts as a balance sheet management and coverage lever; the maturity of 17 billion euros of TLTRO III, leaving a total of 5 billion euros to mature in 2024 on the liabilities side. With regard to interest rates, in 2023 benchmark rates increased in all currencies as inflation remained at high levels, affecting the euro in particular, with the 12-monthEuribor, for example, standing above 4% in the month of September and falling back to 3.51% as at the end of 2023. The marginal deposit rate of the European Central Bank (ECB) ended the year at 4% (increase of 200 basis points over the year), while