Company: BBVXF
Filing Date: 2025-02-27
Form Type: F-4/A
Source: 0001193125-25-037317
Chunk: 434

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-02-27
Form: F-4/A
Chunk 434
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 other hand, country risk. The Group includes forward-looking information when calculating expected losses and determining whether there has been a significant increase in credit risk, using scenario forecasting models to this end. The agreed amortisation schedule for each transaction is used. Subsequently, these expected credit losses are updated by applying the effective interest rate of the instrument (if its contractual interest rate is fixed) or the contractual effective interest rate ruling on the date of the update (if the interest rate is variable). The amount of effective guarantees received is also taken into account. The following sections describe the different methodologies applied by the Group to determine impairment loss allowances: Individual allowance estimates The Group monitors credit risk on an individual basis for all risks deemed to be significant. To estimate the individual allowance for credit risk, an individual estimate is made for all individually significant borrowers classified as stage 3 and for certain borrowers classified as stage 2. Individual estimates are also made for transactions identified as having negligible risk classified as stage 3. The Group has developed a methodology to estimate these allowances, calculating the difference between the gross carrying amount of the transaction and the present value of the estimated cash flows it expects to receive, discounted using the effective interest rate. To this end, effective guarantees received are taken into account (see the section entitled “Guarantees” of this note). Three methods are established to calculate the recoverable amount of assets assessed individually:

| – | Discounted cash flow method (going concern): debtors who are estimated to be able to generate future cash flows                                                                                                                                   
 through their own business activity, thereby allowing them to fully or partially repay the debt owed through the company’s activity and economic/financial structure. This involves estimating the cash flows obtained by the borrower during the 
 course of their business activity.                                                                                                                                                                                                                |

| – | Collateral recovery method (gone concern): debtors who are not able to generate cash flows during the course of their                                                                    
 own business activities and who are forced to liquidate assets in order to fulfil their payment obligations. This involves estimating cash flows based on the enforcement of guarantees. |

| – | Combined method: debtors who are estimated to be able to generate future cash flows and also have non-core assets. These cash flows can be supplemented with potential sales of non-core assets, insofar as they are not required for the performance of their activity and, 
 consequently, for the generation of the aforesaid future cash flows.                                                                                                                                                                                                         |

Collective allowance estimates Exposures that are not assessed using individual allowance estimates are subject to collective