8. Liquidity and finance prospects

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Liquidity and finance management of the BBVA Group’s balance sheet helps to fund the recurrent growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of finance. A core principle in the BBVA Group’s liquidity and finance management is the financial independence of its banking subsidiaries. This aims to ensure that the cost of liquidity is correctly reflected in price formation and that there is sustainable growth in the lending business.

2011 is characterized by high levels of volatility in the medium and long-term financial markets due to the increase in sovereign risk caused by the solvency crisis in Greece, the economic instability in Ireland and Portugal, and the uncertainty surrounding the economic outlook in Italy and Spain.

Against this background, the European Central Bank, at the meeting held on December 8 2011, decided to take exceptional measures in order to increase the liquidity of the European financial system, including two 36-month liquidity auctions, the reduction of the reserve requirement ratio from 2% to 1%, and a broader range of eligible collateral that may be discounted.

The BBVA Group’s anticipation policy for managing its liquidity, its retail business model and the smaller size of its assets confers a comparative advantage in relation to comparable European banks. The BBVA Group operates with absolute normality in the capital markets, with significant issues in both the senior debt and covered bond markets for a total amount in excess of €12,000 million, which easily cover the wholesale maturities faced by the Bank in 2011.

Moreover, the continued positive proportion of retail deposits in the structure of the balance sheet in all its geographical areas, continues to enable the Group to improve its liquidity position, while improving its financing structure.

The sound liquidity position of the BBVA Group features:

  • Complete access to wholesale markets.
  • Strong retail franchise in Spain.
  • Prudent liquidity management policy, resorting to the European Central Bank for long-term financing for an amount equivalent to its wholesale maturities for 2012.
  • The broad range of immediately available collateral.

All this allows the BBVA Group to face maturities in 2012 with complete peace of mind. The current and potential sources of liquidity held by the BBVA Group easily exceed expected drainage, and enable it to consolidate its sound liquidity position over the coming years.

The following is a breakdown of maturities of wholesale issues by the nature of the issues:

Maturity of wholesale issues Millions of Euros
2012 2013 2014 After 2014 Total
Senior debt 6,176 5,272 2,641 4,331 18,421
Mortgage-covered bonds 2,300 6,898 6,807 19,607 35,612
Public covered bonds 1,157 2,391 1,727 1,210 6,485
Regulatory equity instruments (*) 3,432 1,460 1,000 3,314 9,207
Other long term financial instruments 82 135 4 804 1,024
Total 13,147 16,156 12,179 29,267 70,749
(*) Regulatory equity instruments are classified in this table for terms according to their contractual maturity

In addition, within the framework of the policy implemented in recent years to strengthen its net worth position, the BBVA Group will at all times adopt the decisions it deems advisable to maintain a high degree of capital solvency. In particular, the Annual General Meetings held on March 11, 2011 and March 14, 2008, authorized a comprehensive program of capital increases and convertible bond and debt security issues. They are specified in Note 27 of the accompanying consolidated Financial Statements.