26
RISK AND ECONOMIC CAPITAL MANAGEMENT 3Q09
Risk management
Market risk is concentrated in the different
geographical areas where the bank operates. The
percentage in Europe and United States rose slightly, to
60% of total average exposure in the third quarter. The
banks in South America reduced their relative share of
exposure by seven percentage points to 16%.
The Group’s trading portfolio bears different types of
market risk. At 30-Sept-09 the biggest exposure was to
interest-rate risk and lending-spread risk. However,
these accounted for a smaller percentage than in the
previous quarter. The relative weight of exchange-rate
risk was halved. Equity and volatility risks, meanwhile,
increased their relative weight.
Market risk by risk factors
(Third Quarter 2009. Million euros)
Risk
Interest + credit spread
Exchange rate
Equity
Vega and correlation
Diversification effect
TOTAL
AVERAGE
MAXIMUM
MINIMUM
Economic capital
Attributable ERC consumption (economic risk capital)
reached €21,906m at the end of September, up 1.1%
against June 2009.
30-09-09
27.2
2.7
3.0
16.8
(23.7)
,
26.1
23.9
28.3
18.2
BBVA Group economic risk capital.
Distribution by risk type
(Data in attributable terms, 30-09-09)
Other 8.1%
10% South America
Operational
14% The United States
8.4% 14% Mexico
Holdings
7.6%
Structural
(balance
sheet) 9.0%
Market 3.9%
Most of this figure (63.0%) reflects credit risk from
lending originated through the Group’s own networks
from its customer base. This credit risk has increased
slightly over the quarter, due to new estimations of
parameters, restated to include the impact of increased
numbers of loans entering into arrears from the
loan-books, reflecting the deterioration of the economy
as a whole.
Operational risk (8.4%) also showed a slight increase
due to the effect of updating the data bases of
operational events in the back-book.
Market risk (3.9%) is the smallest part of total
exposure, because of the nature of BBVA’s business and
its policies, which scarcely involve any proprietary
trading. Meanwhile, holding risk (7.6%) mainly reflects
the portfolio of Holdings in Industrial & Financial
Companies and the Group’s stake in CITIC. The
structural balance-sheet risk (9.0%) originates from the
management of structural risk in interest and exchange
rates, both stemming from the Group’s activity in the
various countries where it operates. The ERC for risks
related to market variables (market risks, holding risks
and structural balance-sheet risks) went down by 6.2%
over the third quarter.
Lending
63.0%
15%
47%
Wholesale Banking &
Asset Management
Spain and Portugal
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