General information requirements

Corporate name and scope of application

Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter the "Bank" or "BBVA") is a private law entity subject to the rules and regulations of the banking entities operating in Spain and carries out its activity through branches and agencies throughout the country and abroad.

The bylaws and other public information are available for consultation at the Bank's registered office (Plaza San Nicolás, 4, Bilbao) and on its website (www.bbva.com).

Solvency regulations are applicable at a consolidated level for the whole Group.

Differences between the consolidable group for the purposes of solvency regulations and accounting criteria

The Group's Consolidated Financial Statements are presented in accordance with the International Financial Reporting Standards adopted by the European Union (hereinafter referred to as 'IFRS-EU') applicable as of December 31, 2021, considering the Bank of Spain Circular 4/2017, and its successive modifications and the other provisions of the financial reporting framework which are applicable and the marking and format requirements established by Regulation EU 2019/815 of the European Commission.

On the basis of accounting criteria, companies are considered to form part of a consolidated group when the parent entity holds or can hold, directly or indirectly, control of them. An institution is understood to control a subsidiary when it is exposed, or is entitled to, variable returns as a result of its involvement in the subsidiary and has the capacity to influence those returns through the power it exercises over the subsidiary. For control to exist, the following aspects must be fulfilled:

• a) Power: An investor has power over a subsidiary when it has current rights that provide it with the capacity to direct its relevant activities, i.e. those that significantly affect the returns of the subsidiary.
• b) Returns: An investor is exposed, or is entitled to variable returns, as a result of its involvement in the subsidiary when the returns obtained by the investor for such involvement may vary based on the economic performance of the subsidiary. Investor returns can be positive only, negative only, or positive and negative at the same time.
• c) Relationship between power and returns: An investor has control over a subsidiary when it not only has power over the subsidiary and is exposed, or is entitled to, variable returns for its involvement in the subsidiary, but it also has the capacity to use its power to influence the returns it obtains due to its involvement in the subsidiary.

Therefore, in drawing up the Group’s Consolidated Financial Statements, all dependent companies and consolidating structured entities have been consolidated by applying the full consolidation method.

Associated companies, as well as joint ventures (those over which joint control arrangements are in place), are valued using the equity method.

The list of all the companies forming part of the Group is included in the appendices to the Group’s Consolidated Financial Statements.

For the purposes of solvency regulations, the following subsidiaries form part of the consolidated group, as defined in Article 18 of the CRR:

• Credit institutions
• Investment firms
• Financial Institutions

A financial institution is a company, separate from other institutions (credit institution or investment firm), whose main activity may consist of acquiring holdings or performing one or more of the following activities:

• Loans, including in particular consumer finance, credit agreements relating to immovable property, recourse and non-recourse factoring, and financing of commercial transactions (including forfaiting)
• Financial leasing
• Payment services
• Issuing and managing other payment channels (e.g. traveler's checks and bank checks)
• Granting of guarantees and commitments
• Trading on their own account or on behalf of customers on any of the following instruments:

• - Money market instruments (checks, bills, certificates of deposit etc.)
• - Foreign currency
• - Financial futures and options
• - Foreign-exchange or interest-rate instruments
• - Marketable securities

• Participating in the issuance of securities and the provision of corresponding services
• Advising companies with regard to capital structure, industrial strategy and related matters, as well as advice and services for mergers and acquisitions of companies
• Brokerage in the interbank markets
• Managing or advising on equity management
• Custody and administration of marketable securities
• Issuance of electronic money

This definition includes financial holding companies, mixed financial holding companies, payment institutions and asset management firms, but excludes pure industrial holding companies, insurance companies, insurance holding companies and mixed insurance holding companies.

• Auxiliary services companies: A company whose main activity is holding or management of property, management of computing services or any other similar activity of an auxiliary nature with regard to the main activity of one or more institutions (credit institution or investment firm).

Therefore, for the purposes of calculating solvency requirements, and hence, the drawing up of this Prudential Relevance Report, the scope of consolidating entities is different from the scope defined for the purposes of drawing up the Group’s Consolidated Financial Statements.

The effect of the difference between the two regulations is mainly due to:

• Withdrawals of the balance contributed by entities (mainly insurance companies regulated by the Solvency II regulatory framework) that in the Group's Consolidated Annual Accounts are consolidated through the full consolidation method, while for solvency purposes they are consolidated through the application of the equity method.
• Entries of the balance contributed by entities, mainly financial entities, which consolidate by applying the equity method at the accounting level, but for solvency purposes, they are integrated proportionally.

The list of entities that have a different method of consolidation in the public and regulatory balance sheets is included in table LI3 in Annex I.

Significant transactions in the Group in 2021

Voluntary takeover bid for the entire share capital of Türkiye Garanti Bankası A.Ş. (Garanti)

On November 15, 2021, BBVA announced the voluntary takeover bid for the 2,106,300,000 shares not controlled by BBVA, which represent 50.15% of Garanti's total share capital. BBVA submitted a request for authorization of the voluntary takeover bid to the Capital Markets Board of Turkey (CMB) on November 18, 2021.

The consideration offered by BBVA to each of the shareholders of Garanti is 12.20 Turkish Lira in cash for each share. The maximum aggregate amount of consideration payable by BBVA is 25,697 million Turkish Lira (equivalent to approximately €1,690 million using an exchange rate of 15.23 Turkish Lira per Euro as of December 31, 2021) assuming all Garanti’s shareholders sell their shares. BBVA will pay the consideration with its current shareholders’ funds.

BBVA reserves the right to reduce or otherwise modify the Voluntary Takeover Bid Price by an amount equal to the gross amount of the distribution per share, if the Company declares or distributes dividends, reserves or any other kind of distribution to its shareholders at any time from the announcement date (15 November 2021) until the day of completion of the Voluntary Takeover Bid. BBVA may cancel the Voluntary Takeover Bid at any time before the commencement of the voluntary takeover bid period.

The acquisition by BBVA of more than 50% of Garanti’s total share capital is subject to the prior approval of several authorities, both in Turkey and in other jurisdictions. BBVA will disclose to the market when all relevant authorisations are obtained. BBVA has received confirmation from the CMB that it will not formally approve the Voluntary Takeover Bid application until the CMB receives confirmation from BBVA that all relevant approvals required by BBVA have been duly obtained. Only after approval by the CMB of the Voluntary Takeover Bid application will the voluntary takeover bid period begin.

The estimated impact will depend on the percentage of shares that are tendered. As of December 31, 2021, BBVA estimated a maximum impact of minus 32 basis points in the Common Equity Tier 1 fully loaded ratio, and approximately 2% accretion to its book value per share (all the above assuming that all Garanti shareholders accept the offer).

On the contrary, in 2021 the BBVA Group underwent two significant divestment operations.

Sale of BBVA’s U.S. subsidiary to PNC Financial Service Group

On June 1, 2021, after obtaining all the required authorizations, BBVA completed the sale to The PNC Financial Services Group, Inc. of 100% of the capital stock of its subsidiary BBVA USA Bancshares, Inc., which in turn owns all the capital stock of the bank, BBVA USA.

The consideration received in cash by BBVA, as consequence of the referred sale, amounts to approximately $11.5 billion (price provided in the agreement minus the agreed closing price adjustments), equivalent to approximately €9.6 billion (calculated with an exchange rate of 1.2 EUR /USD).

The accounting of both the results generated by BBVA USA Bancshares since the announcement of the transaction and of its closing, have had an aggregate positive impact on BBVA Group's Common Equity Tier 1 (fully loaded) ratio of approximately 294 basis points which includes the capital generation contributed by the subsidiary to the Group until the closing of the operation (June 1, 2021) and a profit net of taxes of €582 million. In this way, BBVA Group has been reflecting the results that BBVA USA Bancshares, Inc. has been generating, as well as the positive impact, mainly, of these results on the Common Equity Tier 1 ratio (fully loaded) of BBVA Group. The calculation of the impact on Common Equity Tier 1 has been made taking into consideration the amount of the transaction in euros and the financial statements of BBVA Group as of June 2021.

BBVA Group continues developing its institutional and wholesale business in the US through its broker dealer BBVA Securities Inc and its branch in New York. BBVA also maintains its investment activity in the fintech sector through its participation in Propel Venture Partners US Fund I, L.P.

Sale of the BBVA Group’s stake In Paraguay

On January 22, 2021, once the mandatory authorizations were obtained, BBVA completed the sale of its direct and indirect shareholding of 100% of the capital stock of Banco Bilbao Vizcaya Argentaria Paraguay, S.A. (“BBVA Paraguay”) to Banco GNB Paraguay, S.A., a subsidiary of the Gilinski Group. This transaction was originally agreed in 2019. The total amount received by BBVA amounted to approximately $250 million (approximately €210 million). The transaction generated a capital loss net of taxes of approximately €9 million. This transaction had a positive impact on the Common Equity Tier 1 (fully loaded) of the BBVA Group of approximately 6 basis points, which is reflected in the capital base of BBVA Group in the fiscal year 2021.

Reconciliation of the public balance sheet from the accounting perimeter to the regulatory perimeter

The following table contains an exercise of transparency to show the reconciliation process between the accounting values reported in the public balance sheet (attached to the Group’s Consolidated Financial Statements) and the accounting values used in this report (regulatory perimeter), revealing the main differences between both scopes.

EU CC2 - Reconciliation of regulatory capital to balance sheet (Million euros)

The main differences between the public balance sheet and the regulatory balance sheet are due to withdrawals of the balance generated by insurance, real estate and financial entities that are consolidated through the application of the equity method for the amount of €-22,530 million; and balance entries generated by entities that are consolidated using the proportional integration method for an amount of €+1,156 million.

For more details, see section 2 of the report.