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financial statements 2015

APPENDIX X Information on data derived from the special accounting registry

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Information required pursuant to Circular 5/2011 of the Bank of Spain is indicated as follows.

a) Mortgage market policies and procedures

The Bank has express policies and procedures in place regarding its activities in the mortgage market, which provide for full compliance with applicable regulations.

The mortgage origination policy is based in principles focused on assessing the adequate ratio between the amount of the loan, and the payments, and the income of the applicant. Applicants must in all cases prove sufficient repayment ability (present and future) to meet their repayment obligations, for both the mortgage debt and for other debts detected in the financial system, and even those from an estimate of their current expenses deduced from socio-demographic information. Therefore, the applicant’s repayment ability is a key aspect within the credit decision-making tools and retail risk acceptance manuals, and has a high weighting in the final decision.

During the mortgage risk transaction analysis process, documentation supporting the applicant’s income (payroll, etc.) is required, and the applicant’s position in the financial system is checked through automated database queries (internal and external). This information is used for calculation purposes in order to determine the level of indebtedness/compliance with the remainder of the system. This documentation is kept in the transaction’s file.

In addition, the mortgage origination policy assesses the adequate ratio between the amount of the loan and the appraisal value of the mortgaged asset. If an appropriate level is not exceeded, additional collateral is required to reinforce the transaction’s hedging. The policy also establishes that the property to be mortgaged be appraised by an independent appraisal company as established by Circular 3/2010. BBVA selects those companies whose reputation, standing in the market and independence ensure that their appraisals adapt to the market reality in each region. Each appraisal is reviewed and checked before the loan is granted by BBVA staff and, in those cases where the loan is finally granted, it is kept in the transaction’s file.

As for issues related to the mortgage market, the Group’s Finance Division annually defines the wholesale finance issue strategy, and more specifically mortgage bond issues, such as mortgage covered bonds or mortgage securitization. The Assets and Liabilities Committee (“ALCO”) tracks the budget monthly. The volume and type of assets in these transactions is determined in accordance with the wholesale finance plan, the trend of the Bank’s “Loans and receivables” outstanding balances and market conditions.

The Board of Directors of the Bank authorizes each of the issues of Mortgage Transfer Certificate and/or Mortgage Participation issued by BBVA to securitize loans and mortgage loans, as well as the establishment of a Base Prospectus for the issue of fixed-income securities through which the mortgage-covered bonds are implemented, based on the agreements for the issue of fixed-income securities approved by the Annual General Meeting.

As established in article 24 of Royal Decree 716/2009, the volume of outstanding mortgage-covered bonds issued by a bank may not exceed 80% of a calculation base determined by adding the outstanding principal of all the loans and mortgage loans in the bank’s portfolio that are eligible and are not covered by the issue of Mortgage Bonds, Mortgage Participations or Mortgage Transfer Certificates. For these purposes, in accordance with the aforementioned Royal Decree 716/2009, in order to be eligible, loans and mortgage loans must: (i) be secured by a first mortgage on the freehold; (ii) the loan’s amount may not exceed 80% of the appraisal value for home mortgages, and 60% for other mortgage lending; (iii) be established on assets exclusively and wholly owned by the mortgagor; (iv) have been appraised by an independent appraisal company unrelated to the Group and authorized by the Bank of Spain; and (v) the mortgaged property must be covered at least by a current damage insurance policy.

The Bank has set up a series of controls for mortgage covered bonds, which regularly control the total volume of issued mortgage covered bonds issued and the remaining eligible collateral, to avoid exceeding the maximum limit set by Royal Decree 716/2009, and outlined in the preceding paragraph. In the case of securitizations, the preliminary portfolio of loans and mortgage loans to be securitized is checked by the Bank’s external auditor as required by the Spanish Securities and Exchange Commission. There is also a series of filters through which some mortgage loans and credits are excluded in accordance with legal, commercial and risk concentration criteria.

b) Quantitative information on activities in the mortgage market

The quantitative information on activities in the mortgage market required by Bank of Spain Circular 5/2011 is shown below.

b.1) Assets operation

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Mortgage loans.
Eligibility for the purpose of the mortgage market.

Millions of Euros

December
2015
December
2014
Nominal value of outstanding loans and mortgage loans (A) 98,555 104,217
Minus: Nominal value of all outstanding loans and mortgage loans that form part of the portfolio, but have been mobilized through mortgage bond holdings or mortgage transfer certificates. (B) (25,650) (24,390)
Nominal value of outstanding loans and mortgage loans, excluding securitized loans (A)-(B) 72,905 79,827
Of which:


Loans and mortgage loans which would be eligible if the calculation limits set forth in Article 12 of Spanish Royal Decree 716/2009 were not applied. (C) 40,373 42,920
Minus: Loans and mortgage loans which would be eligible but, according to the criteria set forth in Article 12 of Spanish Royal Decree 716/2009, cannot be used to collateralize any issuance of mortgage bonds. (D) (2,213) (2,738)
Eligible loans and mortgage loans that, according to the criteria set forth in Article 12 of Spanish Royal Decree 716/2009, can be used as collateral for the issuance of mortgage bonds (C)-(D) 38,160 40,182
Issuance limit: 80% of eligible loans and mortgage loans that can be used as collateral (E) 30,528 32,145
Issued mortgage-covered bonds (F) 28,362 29,958
Outstanding mortgage-covered
25,220 27,210
Capacity to issue mortgage-covered bonds (*) (E)-(F) 2,166 2,187
Memorandum items:


Percentage of overcollateralization across the portfolio
257% 266%
Percentage of overcollateralization across the eligible used portfolio
135% 134%
Nominal value of available sums (committed and unused) from all loans and mortgage loans.
1,999 1,900
Of which:


Potentially eligible
1,361 1,322
Ineligible
638 578
Nominal value of all loans and mortgage loans that are not eligible, as they do not meet the thresholds set in Article 5.1 of Spanish Royal Decree 716/2009, but do meet the rest of the eligibility requirements indicated in Article 4 of the Royal Decree.
25,350 30,810
Nominal value of the replacement assets subject to the issue of mortgage-covered bonds.
- -
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Mortgage loans.
Eligibility for the purpose of the mortgage market.

Millions of Euros

December
2015
December
2014
Total loans (1) 98,555 104,217
Issued mortgage participations (2) - 3
Of which: recognized on the balance sheet


Issued mortgage transfer certificates (3) 25,650 24,387
Of which: recognized on the balance sheet
25,612 24,345
Mortgage loans as collateral of mortgages bonds (4)

Loans supporting the issuance of mortgage-covered bonds 1-2-3-4 72,905 79,827
Non elegible loans
32,532 36,907
Comply requirements to be elegible except the limit provided for under the article 5.1 of the Spanish Royal Decree 716/2009
25,350 30,810
Rest
7,182 6,097
Elegible loans
40,373 42,920
That can not be used as collateral for issuances
2,213 2,738
That can be used as collateral for issuances
38,160 40,182
Loans used to collateralize mortgage bonds
- -
Loans used to collateralize mortgage-covered bonds
38,160 40,182
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Millions of Euros
December 2015 December 2014
Mortgage loans. Classification of the nominal values according to different characteristics Total mortgage loans Elegibles (*) Elegibles that can be used as collateral for issuances (**) Total mortgage loans Elegibles (*) Elegibles that can be used as collateral for issuances (**)
TOTAL 72,905 40,373 38,160 79,827 42,920 40,182
By source of the operations





Originated by the bank 64,852 34,629 32,477 69,794 35,600 32,945
Subrogated by other institutions 554 459 457 928 703 698
Rest 7,499 5,285 5,226 9,105 6,617 6,539
By Currency





In euros 72,331 40,013 37,811 79,462 42,920 40,182
In foreign currency 574 360 349 365 - -
By payment situation





Normal payment 56,192 34,987 34,330 59,012 35,268 34,509
Other situations 16,713 5,386 3,830 20,815 7,652 5,673
By residual maturity





Up to 10 years 18,457 11,536 10,402 18,434 10,733 9,377
10 to 20 years 24,926 17,896 17,317 24,768 17,939 17,276
20 to 30 years 18,399 8,379 7,963 23,027 10,619 10,030
Over 30 years 11,123 2,562 2,478 13,598 3,629 3,499
By Interest Rate





Fixed rate 3,169 944 759 3,211 863 687
Floating rate 69,736 39,429 37,401 76,616 42,057 39,495
Mixed rate - - - - - -
By Target of Operations





For business activity 20,741 7,690 5,912 22,483 7,232 5,065
From wich: public housing 8,623 2,072 768 10,421 2,519 875
For households 52,164 32,683 32,248 57,344 35,688 35,117
By type of guarantee





Secured by completed assets/buildings 66,807 39,203 37,461 72,770 41,565 39,471
Residential use 56,563 34,269 33,066 63,083 37,547 36,038
From wich: public housing 5,607 3,354 3,104 6,253 3,845 3,536
Commercial 9,645 4,574 4,046 9,687 4,018 3,433
Other 599 360 349 - - -
Secured by assets/buildings under construction 2,125 367 277 2,350 380 262
Residential use 1,642 235 158 1,888 261 163
From wich: public housing 84 5 4 100 7 3
Commercial 483 132 119 462 119 99
Other - - - - - -
Secured by land 3,973 803 422 4,707 975 449
Urban 1,590 334 105 2,021 442 135
Non-urban 2,383 469 317 2,686 533 314
(*) Not taking into account the thresholds established by Article 12 of Spanish Royal Decree 716/2009 (**) Taking into account the thresholds established by Article 12 of Spanish Royal Decree 716/2009 Excel Download Excel

Millones de Euros
Loan to Value (Last available appraisal risk)
2015
Nominal value of the total mortgage loans
Less than or equal to 40% Over 40% but less than or equal to 60% Over 60% but less than or equal to 80% Over 80% Total
Home mortgages 9,364 12,730 12,690 - 34,784
Other mortgages 2,657 2,932

5,589
Total 12,021 15,662 12,690 - 40,373
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Millones de Euros
Loan to Value (Last available appraisal risk)
2014
Nominal value of the total mortgage loans
Less than or equal to 40% Over 40% but less than or equal to 60% Over 60% but less than or equal to 80% Over 80% Total
Home mortgages 9,518 13,848 14,617
37,983
Other mortgages 2,454 2,483

4,937
Total 11,972 16,331 14,617 - 42,920
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Elegible and non elegible mortgage loans.
Changes of the nominal values in the period
Millions of Euros
December 2015 December 2014
Elegibles (*) Non elegible Elegibles (*) Non elegible
Balance at the begining 42,920 36,907 58,742 28,669
Retirements 5,772 9,218 17,832 5,901
Held-to-maturity cancellations 4,175 2,487 5,055 3,231
Anticipated cancellations 1,236 2,268 335 603
Subrogations to other institutions 23 20 7 3
Rest 338 4,443 12,435 2,064
Additions 3,225 4,843 2,010 14,139
Originated by the bank 2,529 3,794 1,819 3,382
Subrogations to other institutions 14 12 5 3
Rest 682 1,037 186 10,754
Balance at the end 40,373 32,532 42,920 36,907
(*) Not taking into account the thresholds established by Article 12 of Spanish Royal Decree 716/2009 Excel Download Excel

Millions of Euros
Mortgage loans supporting the issuance of mortgage-covered bonds
Nominal value.
2015 2014
Potentially eligible 1,361 1,322
Ineligible 638 578
Total 1,999 1,900

b.2) Liabilities operations

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Issued Mortgage Bonds Millions of Euros
December 2015 December 2014
Nominal value Average residual maturity Nominal value Average residual maturity
Mortgage bonds -
-
Mortgage-covered bonds 28,362
29,958
Of which:Non recognized as liabilities on balance 3,142
2,748
De las que: En circulación 25,220
27,210
Debt securities issued through public offer 21,523
22,620
Residual maturity up to 1 year 4,500
3,598
Residual maturity over 1 year and less than 2 years 6,772
4,500
Residual maturity over 2 years and less than 3 years -
6,772
Residual maturity over 3 years and less than 5 years 2,051
-
Residual maturity over 5 years and less than 10 years 8,000
5,550
Residual maturity over 10 years 200
2,200
Debt securities issued without public offer 2,765
2,272
Residual maturity up to 1 year -
-
Residual maturity over 1 year and less than 2 years 150
-
Residual maturity over 2 years and less than 3 years -
150
Residual maturity over 3 years and less than 5 years -
-
Residual maturity over 5 years and less than 10 years 2,500
2,000
Residual maturity over 10 years 115
122
Deposits 4,074
5,066
Residual maturity up to 1 year 1,064
993
Residual maturity over 1 year and less than 2 years 460
1,064
Residual maturity over 2 years and less than 3 years 639
460
Residual maturity over 3 years and less than 5 years 422
815
Residual maturity over 5 years and less than 10 years 849
843
Residual maturity over 10 years 640
891
Mortgage participations - - - -
Issued through public offer - - - -
Issued without public offer - - - -
Mortgage transfer certificates 25,612 293 24,345 289
Issued through public offer 25,612 293 24,345 289
Issued without public offer - - - -

Given the characteristics of the type of covered bonds issued by the Bank, there is no substituting collateral related to these issues.

The Bank does not hold any derivative financial instruments relating to mortgage bond issues, as defined in the aforementioned Royal Decree..


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