Company: BBVXF
Filing Date: 2025-08-12
Form Type: DRS
Source: 0000950123-25-007520
Chunk: 434

Company: BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
Filing Date: 2025-08-12
Form: DRS
Chunk 434
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 and Exchange Commission and all information herein remains strictly confidential.

| In addition, recurring back-testing exercises are carried out at least once a year, and the models are adjusted in the event any significant deviations are detected. The models are also reviewed                                                    
 regularly in order to incorporate the most recent information available and to ensure that they perform adequately and that they are suitably representative when applied to the current portfolio for the calculation of impairment loss allowances. |

Segmentation of models Specific models exist depending on the segment or product of the customer (portfolio) and each one uses explanatory variables that uniformly catalogue all of the portfolio’s exposures. The purpose of the segmentation of models is to optimise the capture of customers’ default risk profile based on a set of common risk drivers. Therefore, the exposures of these segments can be considered to reflect a uniform collective treatment. The models for companies calculate PD at the borrower level and are fundamentally segmented according to the size of the company (annual turnover). The PD models for natural persons, including the self-employed, follow a segmentation that centres primarily on the lending product. Models broken down by product are available: mortgage and consumer loans, taking into account the purpose of the transaction (individual or business), credit cards and lines of credit. PDs are estimated at the contract level, meaning that a single borrower can have different PDs depending on the lending product being quantified. The models for Significant Increase in Credit Risk (SICR) carry out calculations at the contract level, in order to consider the characteristics specific to each transaction at the time of origination and at the present time. Where LGD is concerned, contracts with similar risk characteristics are grouped together for collective assessment, using the following segmentation hierarchy:

| – | By type of borrower: companies, developers and natural persons. |

| – | By type of guarantee: mortgage, unsecured, monetary/financial, and guarantors. |

| – | By type of product: credit cards, overdrafts, leases, credits and loans. |

Different LGDs are estimated for each segment, which are representative of the borrowers, of the 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