The leverage ratio is a regulatory measure (not risk-based) complementing capital designed to collateral the soundness and financial strength of institutions in terms of indebtedness.
This ratio is defined as the quotient of eligible Tier 1 capital and exposure. The drivers that determine the amount of this ratio are described below in greater detail.
- Tier 1 capital: section 2.2 of this document presents details of the eligible capital, which has been calculated based on the criteria defined in the CRR.
The amount of eligible Tier 1 capital amounts to €41,938 million.
- Exposure: as set out in article 429 of the CRR, the exposure measurement generally follows the book value subject to the following considerations:
- On-balance-sheet exposures other than derivatives are included net of provisions and accounting valuation adjustments.
- The measurement of the Bank's total exposure is made up of the sum of the following items:
a) On-balance-sheet positions (excluding derivatives and repos, which are considered later): the book balance of assets corresponding to the financial statements is included, excluding the aforementioned headings.
b) Adjustments for differences in the scope of consolidation: the balance resulting from the difference between the accounting balance sheet and the regulatory balance sheet is included.
c) Exposures in derivatives: the exposure referred to the EAD used in the measurement of capital use for counterparty risk is included, which includes both the exposure (net of offsets and collaterals) and the adjustment for future potential risk (add-on).
d) Securities financing transactions (SFT): the EAD adjusted for collateral value and other haircuts is included, as established in article 220 of the CRR.
e) Off-balance-sheet items: these correspond to risks and contingent liabilities and commitments associated with collaterals, which are mainly available. A minimum floor of 10% is applied to the conversion factors (CCF), in line with article 429, section 10 a) of the CRR.
f) Tier 1 deductions: all those amounts of assets that have been deducted in the determination of the eligible Tier 1 capital are deducted, in order not to duplicate exposures. The main deductions are intangible assets, loss carry forwards and other deductions defined in article 36 of the CRR and indicated in section 2.2 of this report.
g) Investments in banking, financial, insurance and commercial institutions that are outside the prudential consolidation scope: as set out in article 429, section 4, the sum of the exposure values (on and off-balance-sheet) of all the exposures of the financial sector institution in which a significant investment is held must be considered. This involves considering the ratio within the exposure, mainly the balance comprising the companies BBVA Seguros y Reaseguros and Pensiones Bancomer.
The table below shows a breakdown of all the elements that make up the leverage ratio.
To obtain the exposure, the book balances reported in the Group's Report are taken, including all the additional adjustments described earlier, to arrive at the exposure to be considered in the estimation of the leverage ratio:
TABLE 66: Elements comprising the leverage ratio
(Millions of euros)
| Ref | Items | Phased - In | Fully - Loaded |
|---|---|---|---|
| a) | Accounting assets | 631,942 | 631.942 |
|
|
Derivatives (-) | -46,780 | -46.780 |
|
|
Securities financing transactions Assets (-) | -17,639 | -17.639 |
|
|
Net accounting assets | 567,523 | 567.523 |
|
b) |
Dif. Accounting vs Prudential Perimeter1) |
1,745 |
1.745 |
|
c) |
EAD Derivatives |
26,222 |
26.222 |
|
d) |
EAD securities financing transactions (Assets)2) |
9,854 |
9.854 |
|
e) |
Contingent Liabilities and Commitments |
147,423 |
147.423 |
|
|
CCF adjustment (%) | 37% | 37% |
|
|
Contingent Liabilities and Commitments adjusted for CCF | 54,402 | 54.402 |
|
f) |
Tier 1 deductions |
-9,431 |
-10.667 |
|
g) |
Exposure to financial institutions and insurance companies |
20,991 |
20.991 |
| Exposure (a+b+c+d+f+g) | 671.307 | 670,071 | |
| Tier 1 | 41.832 | 39,037 | |
| Leverage Ratio | 6.23% | 5.83% | |
As can be seen, the Group maintains a phased leverage ratio of 6.23% and a fully-loaded ratio of 5.83%, well above the minimum level required.