For the purposes of calculating its minimum capital requirements, the Group follows Rule Eight of the Solvency Circular, for defining the elements comprising its Basic Capital, Additional Capital and, if applicable, auxiliary capital, considering their corresponding deductions as defined in Rule Nine. The spread of the various component elements of capital and the deductions between basic capital, additional capital and auxiliary capital, together with compliance with the limits stipulated both on some of the elements (preferred securities, subordinated, etc.) and also on the different kinds of funds, are all in keeping with the provisions in Rule Eleven.
In line with what is stipulated in the Solvency Circular, basic capital essentially comprises:
- Common equity: This is the Bank’s share capital.
- Share premium.
- Retained profits and undisclosed reserves: These are understood to be those produced and charged to profits when their balance is in credit and those amounts which, without being included on the income statement, must be booked in the “other reserves” account, in keeping with the provisions contained in the Accounting Circular. In application of Rules Eighteen and Fifty-one of the aforementioned Accounting Circular, exchange rate differences will also be classified as reserves. Likewise, valuation adjustments in the coverage of net investments in businesses abroad and the balance of the equity account which contains remuneration accrued on capital instruments will also be included in reserves.
- Minority interests: The holdings representing minority interests, and corresponding to those ordinary shares in the companies belonging to the consolidated group that are fully paid up, excluding the part which is included in revaluation reserves and in valuation adjustments. Earnings net of dividends attributable to these shareholders are also included hereunder. In any event, the fraction over and above 10% of the Group’s total basic capital would not be considered eligible basic capital.
- Net income for the year, referring to the perimeter of credit institutions and deducting the foreseeable amount corresponding to dividend payments.
- Preference shares mentioned in Article 7.1 of Spanish Law 13/1985 and issued pursuant to its Additional Second Provision, independently of whether or not they are recorded as a financial liability, and mandatory convertible debt instruments, including those issued under the Temporary Third Provision of Royal Decree-Law 2/2011, of February 18, provided they comply with the requirements of the aforementioned Additional Second Provision for eligibility of preference shares and provisions 6 and 8 of Circular 4/2011 of November 30.
Capital is, moreover, adjusted mainly through the following deductions:
- Intangible assets and goodwill.
- Shares or other securities booked as own funds that are held by any of the Group’s consolidated institutions, together with those held by non-consolidated institutions belonging to the economic group, although in this case up to the limit stipulated in Solvency Circular, Rule Nine, section 1, letter c).
- Finance for third parties with the aim of acquiring shares or other securities eligible as bank capital of the financer or of other institutions in its consolidable group.
- The outstanding debit balance of each of the total equity accounts that reflect valuation adjustments in available-for-sale financial assets and exchange-rate variations.
- The valuation adjustments corresponding to defined-benefit plans.
- There are other deductions which are split equally; 50% to basic capital and 50% to additional capital:
a. Holdings in financial institutions that may be consolidated by virtue of their activity, but which are not part of the Group, when the holding exceeds 10% of the subsidiary’s capital.
b. The bank capital requirements for insurance companies when the direct or indirect holding amounts to 20% or more of the capital of these companies.
c. Shortfall of provisions, if any, for the expected loss in positions calculated according to the model based on internal ratings, as well as the amount of securitizations that receive a risk weighting of 1.250%, as indicated by Rule Nine of the Circular.
Total eligible capital also includes additional capital, which is largely made up of the following elements:
- Subordinated debt received by the Group, understood as that which, for credit seniority purposes, comes behind all the common creditors. The issues, moreover, have to fulfill a number of conditions which are laid out in Rule Eight of the Solvency Circular. In keeping with Rule Eleven of the aforementioned Circular, this item should not account for more than 50% of basic capital.
- Preference securities issued by subsidiary companies which exceed the limits stipulated in Rule Eleven for the purpose of their inclusion as basic capital, provided they fulfill the requirements listed in Rule Eight, section 5.
- The Solvency Circular has opted for including as eligible 45% the gross amounts of net capital gains on capital instruments that are booked as valuation adjustments on financial assets available for sale, instead of the option of including them net of tax. When these valuation adjustments give rise to capital losses, these are deducted from basic capital.
- The surplus resulting between the allowances for losses on risks related to exposures calculated as per the IRB method on the losses they are expected to incur, for the part that is below 0.6% of the risk-weighted exposures calculated according to this method.
It will also include the book balances of generic allowances referring to securitized exposures which have been excluded from the risk-weighted exposures calculation under the IRB method, for the part not exceeding 0.6% of the risk-weighted exposures that would have corresponded to these securitized exposures, had they not been excluded. There is no treatment defined for the surplus of allowances over expected loss in portfolios assessed under the IRB approach above the 0.6% limit.
Furthermore, the book balance for generic allowances for losses reached in keeping with the Accounting Circular and which corresponds to those portfolios which are applied the standardized approach, for an amount up to 1.25% of the weighted risks that have been the basis for the coverage calculation, will also be considered eligible additional capital. Generic allowances for losses for those securitized assets that have been excluded from the risk-weighted exposures under the standardized approach are also eligible up to a limit of 1.25% of the weighted risks that would have corresponded to them, had they not been excluded. The surplus over the 1.25% limit is deducted from exposure.
- 50% of the deductions mentioned above when we discussed basic capital are assigned to additional capital.
The table below shows the Group’s issues of preference shares and subordinate debt:
Table 4. Issues of preference shares outstanding as of 31/Dec/2013
(Millions of euros)
| Issuer company and issue date | Currency | Issue date | Balance |
|---|---|---|---|
| BBVA S.A | EUR | Dec-07 | 14 |
|
|
USD | May-13 | 1,088 |
|
|
|
|
1,102 |
| BBVA International Ltd | EUR | Dec-02 | 7 |
|
|
|
|
7 |
| BBVA Capital Finance SAU | EUR | Dec-03 | 3 |
|
|
|
Jul-04 | 5 |
|
|
|
Dec-04 | 13 |
|
|
|
Dec-08 | 5 |
|
|
|
|
26 |
| BBVA International Preferred SAU | EUR | Sep-05 | 86 |
|
|
|
Sep-06 | 165 |
|
|
USD | Apr-07 | 435 |
|
|
GBP | Jul-07 | 37 |
|
|
EUR | Oct-09 | 645 |
|
|
GBP | Oct-09 | 301 |
|
|
|
|
1,669 |
| Phoenix Loan Holdings REIT Pfd (Class B) | USD | Nov-00 | 15 |
|
|
|
|
15 |
| Caixa Terrassa | EUR | Jun-01 | 0 |
|
|
|
Aug-05 | 34 |
|
|
|
|
34 |
| Caixa Sabadell | EUR | Sep-04 | 1 |
|
|
|
Jul-06 | 51 |
|
|
|
|
52 |
| Total |
|
|
2,905 |
Table 5. Issues of subordinated debt outstanding as of 31/Dec/2013
(Millions of euros)
| Issuer company | Currency | Issue date | Maturity date |
Eligible according to Bank of Spain |
Balance |
|---|---|---|---|---|---|
| Issues in euros |
|
|
|
|
|
| BBVA S.A | EUR | Jul-96 | 22/12/16 | YES | 11 |
|
|
|
Oct-04 | 20/10/19 | YES | 630 |
|
|
|
Feb-07 | 16/02/22 | YES | 294 |
|
|
|
Mar-08 | 03/03/33 | YES | 125 |
|
|
|
Jul-08 | 04/07/23 | YES | 100 |
|
|
|
Several issues | Several | YES | 223 |
|
|
|
Several issues | Several | NO | 0 |
|
|
|
|
|
|
1,383 |
| BBVA Global Finance Ltd | EUR | Oct-95 | 16/10/15 | YES | 12 |
|
|
|
Oct-01 | 10/10/16 | YES | 4 |
|
|
|
Oct-01 | 15/10/16 | YES | 18 |
|
|
|
Nov-01 | 02/11/16 | YES | 21 |
|
|
|
Dec-01 | 20/12/16 | YES | 22 |
|
|
|
|
|
|
78 |
| BBVA Subordinated Capital Finance SAU | EUR | Oct-05 | 13/10/20 | YES | 16 |
|
|
|
Oct-05 | 20/10/17 | YES | 99 |
|
|
|
Apr-07 | 04/04/22 | YES | 68 |
|
|
|
May-08 | 19/05/23 | YES | 50 |
|
|
|
jul-08 | 22/07/18 | YES | 16 |
|
|
|
|
|
|
249 |
| Total issues in euros |
|
|
|
|
1,710 |
| Issues in foreign currency |
|
|
|
|
|
| BBVA Global Finance Ltd | USD | Dec-95 | 01/12/25 | YES | 141 |
|
|
|
|
|
|
141 |
| BBVA Subordinated Capital Finance SAU | GBP | Mar-07 | 11/03/18 | YES | 15 |
|
|
|
|
|
|
15 |
| BBVA Bancomer | MXN | May-07 | 17/05/22 | NO | 362 |
|
|
|
Apr-10 | 22/04/20 | NO | 724 |
|
|
|
Mar-11 | 10/03/21 | NO | 905 |
|
|
|
Sep-12 | 30/09/22 | NO | 1,086 |
|
|
|
Sep-06 | 18/09/14 | NO | 0 |
|
|
|
Dec-08 | 26/11/20 | NO | 158 |
|
|
|
Jun-09 | 07/06/19 | NO | 151 |
|
|
|
|
|
|
3,386 |
| Texas Regional Statutory Trust I | USD | Feb-04 | 17/03/34 | NO | 36 |
|
|
|
|
|
|
36 |
| Issuer company | Currency | Issue date | Maturity date |
Eligible according to Bank of Spain |
Balance |
|---|---|---|---|---|---|
| State National Capital Trust I | USD | Jul-03 | 30/09/33 | NO | 11 |
|
|
|
|
|
|
11 |
| State National Statutory Trust II | USD | Mar-04 | 17/03/34 | NO | 7 |
|
|
|
|
|
|
7 |
| BBVA Compass | USD | Mar-05 | 01/04/20 | NO | 165 |
|
|
|
Mar-06 | 01/04/26 | NO | 52 |
|
|
|
Sep-07 | 01/10/17 | NO | 152 |
|
|
|
|
|
|
369 |
| BBVA Colombia | COP | Sep-11 | 19/09/21 | NO | 40 |
|
|
|
Sep-11 | 19/09/26 | NO | 57 |
|
|
|
Sep-11 | 19/09/18 | NO | 29 |
|
|
|
Feb-13 | 19/02/23 | NO | 75 |
|
|
|
Feb-13 | 19/02/28 | NO | 62 |
|
|
|
|
|
|
263 |
| Banco Continental | USD | Dec-06 | 15/02/17 | NO | 13 |
|
|
|
Sep-07 | 24/09/17 | NO | 9 |
|
|
|
Feb-08 | 28/02/28 | NO | 15 |
|
|
|
Jun-08 | 15/06/18 | NO | 17 |
|
|
|
Nov-08 | 15/02/19 | NO | 15 |
|
|
PEN | May-07 | 07/05/22 | NO | 10 |
|
|
|
Jun-07 | 18/06/32 | NO | 14 |
|
|
|
Nov-07 | 19/11/32 | NO | 13 |
|
|
|
Jul-08 | 08/07/23 | NO | 12 |
|
|
|
Sep-08 | 09/09/23 | NO | 13 |
|
|
|
Dec-08 | 15/12/33 | NO | 8 |
|
|
USD | Dec-06 | 15/02/17 | NO | 15 |
|
|
|
Jun-08 | 08/10/28 | NO | 22 |
|
|
|
Nov-08 | 07/10/40 | NO | 145 |
|
|
|
|
|
|
320 |
| Total issues in foreign currency |
|
|
|
|
4,549 |
| Total issues (in euros and foreign currency) |
|
|
|
|
6,259 |
| Total balance eligible according to Bank of Spain |
|
|
|
|
1,866 |