6. Risk management

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The BBVA Group’s system of risk exposure and risk exposure is described in Note 7 “Risk management” of the accompanying consolidated financial statements.

Risk exposure with the developer and real-estate sector in Spain

Credit exposure in the developer sector in Spain as of December 31, 2011 amounted to €14,158 million, a significant decrease of €2,450 million (-15%) on the €16,608 million as of December 31, 2010. Its composition improved, with a greater proportion of completed buildings (mainly homes) and a fall in the number of buildings under construction and unsecured transactions.

As of December 31, 2011 and 2010, the value of the guarantees covering developer risk, based on up-to-date appraisals, is €19,288 million and €25,327 million respectively, an average LTV of 73% and 65%, which easily covers the portfolio value. In addition, there are provisions in Businesses in Spain covering 29% of NPL and substandard assets and 64% of the amount to be provisioned (the value in excess of the guarantees after applying the regulatory criteria that came into force with Bank of Spain Circular 3/2010).

BBVA also maintains a total of €7,013 million in real estate assets in Spain at gross book value, arising from finance to development companies and real estate agencies. These buildings have an average coverage ratio of 33%.

Appendix XI of the Financial Statements includes detailed quantitative and qualitative information on finance to the real-estate sector (developers and construction) and house purchase in Spain.