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information of prudential relevance 2013

4.4. Information on the standardized approach

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4.4.1. Identification of external rating agencies

The external credit assessment institutions (ECAIs) appointed by the Group to determine the risk weightings applicable to its exposures are the following: Standard&Poor’s, Moody’s, Fitch and DBRS.

The exposures for which the ratings of each ECAI are used are those corresponding to the wholesale portfolios, basically involving “Central Governments and Central Banks” in developed countries, and “Financial Institutions”.

In those cases in which a counterparty has ratings by different ECAIs, the Group follows the procedure laid down in Rule Twenty-one of the Solvency Circular, which specifies the order of priority to be used in the assignment of ratings. When two different credit ratings made by designated ECAIs are available for a rated exposure, the higher risk weighting will be applied. However, when there are more than two credit ratings for the same rated exposure, use is to be made of the two credit ratings that provide the lowest risk weightings. If the two lowest risk weightings coincide, then that weighting will be applied; if they do not coincide, the higher of the two will be applied.

4.4.2. Assignment of the credit ratings of public share issues

The number of cases and the amount of these assignments is not relevant for the Group in terms of admission and management of issuer credit risk.

4.4.3. Exposure values before and after the application of credit risk mitigation techniques

The following table presents the amounts for net exposure, prior to the application of credit risk mitigation techniques, for different risk weightings and for the different exposure categories that correspond to the standardized method, excluding securitization positions.

Table 24. Exposure values before the application of credit risk mitigation techniques
2013

(Millions of euros)


Exposure net of allowances for losses

Risk weighting
Category of exposure 0% 20% 35% 50% 75% 100% 150% Total
Central governments and central banks 72,104 714 – 4,882 1 15,801 – 93,502
Regional governments and local authorities 855 6,387 – 1,330 1 622 – 9,195
Public-sector institutions and other public entities 1,180 1,495 0 114 3 1,694 – 4,486
Multilateral development banks 34 0 – 16 0 – – 50
International organizations 8 – – – 0 – – 8
Institutions (2) 593 15,641 – 2,881 3 1,570 3 20,690
SMEs – 3,574 – 694 – 88,189 42 92,499
Retail – – 854 – 59,452 22 – 60,328
Collateralized with real-estate property – – 43,681 6,231 – 1,889 – 51,801
Default status – – – 1,684 – 5,656 3,334 10,674
High risk – – – – 11 513 594 1,118
Guaranteed bonds – 911 – – – – – 911
Short Term to Institutions and Corporates – 542 – 7 114 – 1 663
Collective Investment Institutions – – – – 0 816 – 816
Other exposures 9,247 441 – 1 163 12,249 11 22,112
TOTAL (1) 84,020 29,705 44,535 17,839 59,749 129,019 3,985 368,852
(1) It does not include securitization positions. (2) Exposure with 0% weighting corresponds to institution exposure with central counterparty.

2012

(Millions of euros)


Exposure net of allowances for losses

Risk weighting
Category of exposure 0% 20% 35% 50% 75% 100% 150% Total
Central governments and central banks 90,803 197 - 3,625 – 13,560 – 108,185
Regional governments and local authorities 774 6,789 69 1,480 – 248 – 9,361
Public-sector institutions and other public entities 961 544 – 118 – 1,471 – 3,095
Multilateral development banks – 117 – 13 – 56 – 187
International organizations 34 – – – – – – 34
Institutions (2) – 15,011 125 1,324 – 2,381 3 18,843
SMEs – 3,306 – 2,504 – 90,369 355 96,533
Retail – – 34 – 55,555 – – 55,589
Collateralized with real-estate property – – 43,707 5,515 – 4,803 – 54,024
Default status 4 – – 906 – 5,833 2,166 8,908
High risk – – – 2 – 186 1,335 1,523
Guaranteed bonds – 503 – – – – – 503
Short Term to Institutions and Corporates – 637 – – – 19 – 656
Collective Investment Institutions – – – – – 53 – 53
Other exposures 8,602 407 – – 121 13,929 15 23,074
TOTAL (1) 101,178 27,511 43,935 15,487 55,676 132,908 3,874 380,568
(1) It does not include securitization positions. (2) Exposure with 0% weighting corresponds to institution exposure with central counterparty.

The main variations of exposures for the standardized and advanced measurement approaches are shown in sections 4.4.3 and 4.5.2 of this document.

As shown in the above tables, the exposure to Central Governments (exposures weighted at 0%) and Other Public Sector Institutions decreased throughout 2013 due the reduction in repo operations and the general deleveraging of the balance sheet.

In the case of wholesale exposures, most of the increase in exposure is due to increased activity of the Mexico subsidiaries in this segment (exposures weighted at 75%).

Exposure to default has increased due basically to the inclusion of refinanced exposures in the non-performing category, as indicated in Note 7.1.6 to the Group’s Annual Consolidated Financial Statements as of December 31, 2013. This would explain the increase in exposures with weightings greater than or equal to 150%. As a result, exposure in the “collateralized with real estate property” segment decreases (exposures weighted at 35%).

There follows a presentation of exposure amounts after the application of credit risk mitigation techniques, for different risk weightings and for the different exposure categories that correspond to the standardized method, excluding securitization positions.

Table 25. Exposure values after the application of credit risk mitigation techniques
2013

(Millions of euros)


Fully adjusted value of the exposure (1)

Risk weighting
Category of exposure 0% 20% 35% 50% 75% 100% 150% Total
Central governments and central banks 70,222 2,136 – 4,882 1 15,801 – 93,042
Regional governments and local authorities 875 4,024 – 1,330 1 618 – 6,847
Public-sector institutions and other public entities 1,638 1,570 0 128 3 1,490 – 4,829
Multilateral development banks 34 0 – 16 0 – – 50
International organizations 8 – – – 0 – – 8
Institutions (3) 593 15,462 – 2,882 96 1,298 3 20,334
SMEs – 3,574 – 571 – 82,673 33 86,852
Retail – – 851 – 56,475 20 – 57,346
Collateralized with real-estate property – – 42,850 6,178 – 1,437 – 50,465
Default status – – – 1,253 – 5,351 2,125 8,728
High risk – – – – 11 338 581 930
Guaranteed bonds – 911 – – – – – 911
Short-term to institutions and corporates – 542 – 6 – 114 1 663
Collective Investment Institutions – – – – 0 261 – 261
Other exposures 14,579 839 52 1 165 11,964 11 27,612
TOTAL (2) 87,949 29,058 43,753 17,247 56,753 121,364 2,755 358,879
(1) It is defined as the value of the exposure net of provisions, following the application of risk mitigation techniques. (2) It does not include securitization positions. (3) Exposure with 0% weighting corresponds to institution exposure with central counterparty.

2012

(Millions of euros)


Fully adjusted value of the exposure (1)

Risk weighting
Category of exposure 0% 20% 35% 50% 75% 100% 150% Total
Central governments and central banks 83,767 203 – 3,625 – 13,650 – 101,155
Regional governments and local authorities 784 4,457 69 1,480 – 240 – 7,030
Public-sector institutions and other public entities 1,395 1,617 – 118 – 1,225 – 4,355
Multilateral development banks 13 117 – 13 – 56 – 200
International organizations 34 – – – – – – 34
Institutions (3) – 15,071 125 1,333 – 2,205 3 18,736
SMEs – 3,336 – 2,264 – 84,466 350 90,417
Retail – – 34 – 52,620 – – 52,653
Collateralized with real-estate property – – 42,553 5,484 – 3,172 – 51,209
Default status 4 – – 857 – 5,089 2,119 8,069
High risk – – – 2 – 134 1,228 1,364
Guaranteed bonds – 503 – – – – – 503
Short-term to institutions and corporates – 626 – – – 19 – 645
Collective Investment Institutions – – – – – 52 – 52
Other exposures 13,800 840 400 140 121 12,522 15 27,838
TOTAL (2) 99,797 26,772 43,181 15,316 52,740 122,740 3,715 364,261
(1) It is defined as the value of the exposure net of provisions, following the application of risk mitigation techniques. (2) It does not include securitization positions. (3) Exposure with 0% weighting corresponds to institution exposure with central counterparty.

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