UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 1-10110

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

(Exact name of Registrant as specified in its charter)

BANK BILBAO VIZCAYA ARGENTARIA, S.A.

(Translation of Registrant’s name into English)

Kingdom of Spain

(Jurisdiction of incorporation or organization)

Plaza de San Nicolás, 4

48005 Bilbao

Spain

(Address of principal executive offices)

Eduardo Ávila Zaragoza

Paseo de la Castellana, 81

28046 Madrid

Spain

Telephone number +34 91 537 7000

Fax number +34 91 537 6766

(Name, Telephone, E-mail and /or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of Each Class	Name of Each Exchange on which Registered
American Depositary Shares, each representing the right to receive one ordinary share, par value €0.49 per share	New York Stock Exchange
Ordinary shares, par value €0.49 per share	New York Stock Exchange*
Guarantee of Non-Cumulative Guaranteed Preferred Securities, Series C, liquidation preference $1,000 each, of BBVA International Preferred, S.A. Unipersonal	New York Stock Exchange**
Guarantee of Guaranteed Fixed Rate Senior Notes due 2014 of BBVA U.S. Senior, S.A. Unipersonal	New York Stock Exchange***
Guarantee of Guaranteed Floating Rate Senior Notes due 2014 of BBVA U.S. Senior, S.A. Unipersonal	New York Stock Exchange****

* The ordinary shares are not listed for trading, but are listed only in connection with the registration of the American Depositary Shares, pursuant to requirements of the New York Stock Exchange.

** The guarantee is not listed for trading, but is listed only in connection with the registration of the corresponding Non-Cumulative Guaranteed Preferred Securities of BBVA International Preferred, S.A. Unipersonal (a wholly-owned subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.).

*** The guarantee is not listed for trading, but is listed only in connection with the registration of the corresponding Guaranteed Fixed Rate Senior Notes of BBVA U.S. Senior, S.A. Unipersonal (a wholly-owned subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.).

**** The guarantee is not listed for trading, but is listed only in connection with the registration of the corresponding Guaranteed Floating Rate Senior Notes of BBVA U.S. Senior, S.A. Unipersonal (a wholly-owned subsidiary of Banco Bilbao Vizcaya Argentaria, S.A.).

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

The number of outstanding shares of each class of stock of the Registrant as of December 31, 2011, was:

Ordinary shares, par value €0.49 per share—4,903,207,003

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

    Yes   x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

    Yes   ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

    Yes   x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

    Yes   ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨ International Financial Reporting Standards as Issued by the International Accounting Standards Board   x Other   ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes  ¨     No  x

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		3
A.	Directors and Senior Management
B.	Advisers
C.	Auditors
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		3
ITEM 3.	KEY INFORMATION		3
A.	Selected Consolidated Financial Data		3
B.	Capitalization and Indebtedness		8
C.	Reasons for the Offer and Use of Proceeds		8
D.	Risk Factors		8
ITEM 4.	INFORMATION ON THE COMPANY		21
A.	History and Development of the Company		21
B.	Business Overview		23
C.	Organizational Structure		44
D.	Property, Plants and Equipment		44
E.	Selected Statistical Information		45
F.	Competition		64
ITEM 4A.	UNRESOLVED STAFF COMMENTS		66
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		66
A.	Operating Results		74
B.	Liquidity and Capital Resources		107
C.	Research and Development, Patents and Licenses, etc.		110
D.	Trend Information		110
E.	Off-Balance Sheet Arrangements		113
F.	Tabular Disclosure of Contractual Obligations		113
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		114
A.	Directors and Senior Management		114
B.	Compensation		122
C.	Board Practices		128
D.	Employees		133
E.	Share Ownership		137

		PAGE
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		137
A.	Major Shareholders		137
B.	Related Party Transactions		138
C.	Interests of Experts and Counsel		139
ITEM 8.	FINANCIAL INFORMATION		139
A.	Consolidated Statements and Other Financial Information		139
B.	Significant Changes		141
ITEM 9.	THE OFFER AND LISTING		141
A.	Offer and Listing Details		141
B.	Plan of Distribution		148
C.	Markets		148
D.	Selling Shareholders		148
E.	Dilution		148
F.	Expenses of the Issue		148
ITEM 10.	ADDITIONAL INFORMATION		148
A.	Share Capital		148
B.	Memorandum and Articles of Association		149
C.	Material Contracts		152
D.	Exchange Controls		153
E.	Taxation		154
F.	Dividends and Paying Agents		161
G.	Statement by Experts		161
H.	Documents on Display		161
I.	Subsidiary Information		161
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		162
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		188
A.	Debt Securities		188
B.	Warrants and Rights		188
C.	Other Securities		188
D.	American Depositary Shares		188
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		190
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		190
ITEM 15.	CONTROLS AND PROCEDURES		190

		PAGE
ITEM 16.	[RESERVED]		192
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		192
ITEM 16B.	CODE OF ETHICS		193
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		193
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		194
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		194
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		195
ITEM 16G.	CORPORATE GOVERNANCE		195
PART III
ITEM 17.	FINANCIAL STATEMENTS		197
ITEM 18.	FINANCIAL STATEMENTS		197
ITEM 19.	EXHIBITS		198

CERTAIN TERMS AND CONVENTIONS

The terms below are used as follows throughout this report:

• “BBVA”, “Bank”, the “Company”, the “Group” or the “BBVA Group” means Banco Bilbao Vizcaya Argentaria, S.A. and its consolidated subsidiaries unless otherwise indicated or the context otherwise requires.

• “BBVA Bancomer” means Bancomer S.A. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

• “BBVA Compass” means Compass Bancshares, Inc. and its consolidated subsidiaries, unless otherwise indicated or the context otherwise requires.

• “Consolidated Financial Statements” means our audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 prepared in accordance with the International Financial Reporting Standards adopted by the European Union (“EU-IFRS”) required to be applied under the Bank of Spain’s Circular 4/2004 and in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).

• “Latin America” refers to Mexico and the countries in which we operate in South America and Central America.

First person personal pronouns used in this report, such as “we”, “us”, or “our”, mean BBVA.

In this report, “$”, “U.S. dollars”, and “dollars” refer to United States Dollars and “€” and “euro” refer to Euro.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include words such as “believe”, “expect”, “estimate”, “project”, “anticipate”, “should”, “intend”, “probability”, “risk”, “VaR”, “target”, “goal”, “objective” and similar expressions or variations on such expressions. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. The accompanying information in this Annual Report, including, without limitation, the information under the items listed below, identifies important factors that could cause such differences:

• “Item 3. Key Information—Risk Factors”;

• “Item 4. Information on the Company”;

• “Item 5. Operating and Financial Review and Prospects”; and

• “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

Other important factors that could cause actual results to differ materially from those in forward-looking statements include, among others:

• general political, economic and business conditions in Spain, the European Union (“EU”), Latin America, the United States and other regions, countries or territories in which we operate;

• changes in applicable laws and regulations, including increased capital requirements;

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• the monetary, interest rate and other policies of central banks in Spain, the EU, the United States, Mexico and elsewhere;

• changes or volatility in interest rates, foreign exchange rates (including the euro to U.S. dollar exchange rate), asset prices, equity markets, commodity prices, inflation or deflation;

• ongoing market adjustments in the real estate sectors in Spain, Mexico and the United States;

• the effects of competition in the markets in which we operate, which may be influenced by regulation or deregulation;

• changes in consumer spending and savings habits, including changes in government policies which may influence investment decisions;

• our ability to hedge certain risks economically;

• our success in managing the risks involved in the foregoing, which depends, among other things, on our ability to anticipate events that cannot be captured by the statistical models we use; and

• force majeure and other events beyond our control.

Readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the result of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof, including, without limitation, changes in our business or acquisition strategy or planned capital expenditures, or to reflect the occurrence of unanticipated events.

PRESENTATION OF FINANCIAL INFORMATION

Accounting Principles

Under Regulation (EC) no. 1606/2002 of the European Parliament and of the Council of July 19, 2002, all companies governed by the law of an EU Member State and whose securities are admitted to trading on a regulated market of any Member State must prepare their consolidated financial statements for the years beginning on or after January 1, 2005 in conformity with EU-IFRS. The Bank of Spain issued Circular 4/2004 of December 22, 2004 on Public and Confidential Financial Reporting Rules and Formats (as amended or supplemented from time to time, “Circular 4/2004”), which requires Spanish credit institutions to adapt their accounting system to the principles derived from the adoption by the European Union of EU-IFRS. The financial statements included in our annual report on Form 20-F for the year ended December 31, 2010 (the “2010 Form 20-F”) included financial statements for the three years then-ended prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. It also included a reconciliation of certain financial information to U.S. GAAP.

We have concluded that differences between EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and IFRS-IASB are not material for the three years ended December 31, 2011. Accordingly, the Consolidated Financial Statements included in this Annual Report have been prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and in compliance with IFRS-IASB. As a result, this Annual Report does not include a reconciliation of certain financial information to U.S. GAAP.

In order to present financial information for all periods on a basis consistent with IFRS-IASB, we have restated under IFRS-IASB the financial information as of and for the years ended December 31, 2008 and 2007 previously reported in our respective annual reports for certain prior years, which had

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been prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. See “Item 3. Key Information—Selected Consolidated Financial Data—Restatement” for a reconciliation to amounts previously reported.

Statistical and Financial Information

The following principles should be noted in reviewing the statistical and financial information contained herein:

• Average balances, when used, are based on the beginning and the month-end balances during each year. We do not believe that such monthly averages present trends that are materially different from those that would be presented by daily averages.

• The book value of BBVA’s ordinary shares held by its consolidated subsidiaries has been deducted from equity.

• Unless otherwise stated, any reference to loans refers to both loans and leases.

• Interest income figures include interest income on non-accruing loans to the extent that cash payments have been received in the period in which they are due.

• Financial information with respect to subsidiaries may not reflect consolidation adjustments.

• Certain numerical information in this Annual Report may not sum due to rounding. In addition, information regarding period-to-period changes is based on numbers which have not been rounded.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3. KEY INFORMATION

A. Selected Consolidated Financial Data

The historical financial information set forth below for the years ended December 31, 2011, 2010 and 2009 has been selected from, and should be read together with, the Consolidated Financial Statements included herein. For information concerning the preparation and presentation of the financial information contained herein, see “Presentation of Financial Information”. In order to present financial information for all periods on a basis consistent with IFRS-IASB, we have restated under IFRS-IASB the financial information as of and for the years ended December 31, 2008 and 2007 previously reported in our respective annual reports for certain prior years, which had been prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. This restatement relates exclusively to the amounts of impairment losses on financial assets (net). See “—Restatement” below for a reconciliation to amounts previously reported. The audited financial statements for the years ended December 31, 2008 and 2007 are not included in this document but they can be found, on an unrestated and non-comparable basis, in the respective annual reports for certain prior years previously filed by us.

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	For Year Ended December 31,
	2011			2010			2009			2008(*)			2007(*)
	(In Millions of Euros, Except per Share/ADS Data (In Euros))
Consolidated statement of income data
Interest and similar income		24,188			21,134			23,775			30,404			26,176
Interest and similar expenses		(11,028	)		(7,814	)		(9,893	)		(18,718	)		(16,548	)
Net interest income		13,160			13,320			13,882			11,686			9,628
Dividend income		562			529			443			447			348
Share of profit or loss of entities accounted for using the equity method		600			335			120			293			241
Fee and commission income		5,618			5,382			5,305			5,539			5,603
Fee and commission expenses		(1,058	)		(845	)		(875	)		(1,012	)		(1,043	)
Net gains(losses) on financial assets and liabilities		1,114			1,441			892			1,328			1,545
Net exchange differences		365			453			652			231			411
Other operating income		4,247			3,543			3,400			3,559			3,589
Other operating expenses		(4,042	)		(3,248	)		(3,153	)		(3,093	)		(3,051	)
Gross income		20,566			20,910			20,666			18,978			17,271
Administration costs		(9,104	)		(8,207	)		(7,662	)		(7,756	)		(7,253	)
Depreciation and amortization		(847	)		(761	)		(697	)		(699	)		(577	)
Provisions (net)		(510	)		(482	)		(458	)		(1,431	)		(235	)
Impairment losses on financial assets (net)		(4,226	)		(4,718	)		(5,473	)		(4,098	)		(2,814	)
Net operating income		5,879			6,742			6,376			4,994			6,392
Impairment losses on other assets (net)		(1,885	)		(489	)		(1,618	)		(45	)		(13	)
Gains (losses) on derecognized assets not classified as non-current asset held for sale		46			41			20			72			13
Negative goodwill		—			1			99			—			—
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(270	)		127			859			748			1,191
Income before tax		3,770			6,422			5,736			5,769			7,583
Income tax		(285	)		(1,427	)		(1,141	)		(1,194	)		(1,806	)
Income from continuing transactions		3,485			4,995			4,595			4,575			5,777
Income from discontinued transactions (net)		—			—			—			—			—
Net income		3,485			4,995			4,595			4,575			5,777
Net income attributed to parent company		3,004			4,606			4,210			4,210			5,488
Net income attributed to non-controlling interests		481			389			385			365			289
Per share/ADS(1) data
Net operating income(2)		1.27			1.79			1.71			1.35			1.79
Numbers of shares outstanding (at period end)(3)		4,903,207,003			4,490,908,285			3,747,969,121			3,747,969,121			3,747,969,121
Income attributed to parent company(4)		0.64			1.14			1.07			1.06			1.44
Dividends declared		0.200			0.270			0.420			0.501			0.733

(*) Restated to comply with IFRS-IASB. See “—Restatement” below for a reconciliation to amounts previously reported.

(1) Each American Depositary Share (“ADS”) represents the right to receive one ordinary share.

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(2) Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period excluding the weighted average number of treasury shares during the period (4,635 million, 3,762 million, 3,719 million, 3,706 million and 3,594 million shares in 2011, 2010, 2009, 2008 and 2007, respectively).

(3) As of the date of this annual report, April 26, 2012, the number of shares outstanding was 5,061,082,378, as a result of the voluntary conversion of BBVA’s mandatory convertible subordinated bonds issued in December 2011, which resulted in the issuance of 157,875,375 new ordinary shares, each with a nominal value of €0.49. See Note 59 to the Consolidated Financial Statements.

(4) Calculated on the basis of the weighted average number of BBVA’s ordinary shares outstanding during the relevant period including the average number of estimated shares to be converted and, for comparative purposes, a correction factor to account for the capital increases carried out in November 2010, April 2011 and October 2011, and excluding the weighted average number of treasury shares during the period (4,769 million, 4,097 million, 3,965 million, 3,963 million and 3,823 million shares in 2011, 2010, 2009, 2008 and 2007, respectively). With respect to the years ended December 31, 2011, 2010 and 2009, see Note 5 to the Consolidated Financial Statements.

	As of and for Year Ended December 31,
	2011			2010			2009			2008(*)			2007(*)
	(In Millions of Euros, Except Percentages)
Consolidated balance sheet data
Total assets		597,688			552,738			535,065			542,650			502,536
Common stock		2,403			2,201			1,837			1,837			1,837
Loans and receivables (net)		381,076			364,707			346,117			369,494			338,922
Customer deposits		282,173			275,789			254,183			255,236			219,610
Debt certificates and subordinated liabilities		97,349			102,599			117,817			121,144			117,909
Non-controlling interest		1,893			1,556			1,463			1,049			880
Total equity		40,058			37,475			30,763			26,705			28,753
Consolidated ratios
Profitability ratios:
Net interest margin(1)		2.3	%		2.4	%		2.6	%		2.3	%		2.1	%
Return on average total assets(2)		0.6	%		0.9	%		0.8	%		0.9	%		1.2	%
Return on average equity(3)		8.0	%		15.8	%		16.0	%		15.5	%		22.3	%
Credit quality data
Loan loss reserve		9,470			9,473			8,805			7,505			5,987
Loan loss reserve as a percentage of total loans and receivables (net)		2.5	%		2.6	%		2.5	%		2.0	%		1.8	%
Non-performing asset ratio (NPA ratio)(4)		4.0	%		4.1	%		4.3	%		2.3	%		1.0	%
Substandard loans and advances to customers		15,647			15,361			15,197			8,437			3,358
Substandard contingent liabilities to customers(5)		219			324			405			131			49
		15,866			15,685			15,602			8,568			3,408
Loans and advances to customers		361,310			348,253			332,162			342,682			320,310
Contingent liabilities to customers		39,398			35,816			32,614			35,952			36,859
		400,709			384,069			364,776			378,635			357,169

(*) Restated to comply with IFRS-IASB. See “—Restatement” below for a reconciliation to amounts previously reported.

(1) Represents net interest income as a percentage of average total assets.

(2) Represents net income as a percentage of average total assets.

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(3) Represents net income attributed to parent company as a percentage of average equity.

(4) Represents the sum of substandard loans and advances to customers and substandard contingent liabilities to customers divided by the sum of loans and advances to customers and contingent liabilities to customers.

(5) We include contingent liabilities in the calculation of our non-performing asset ratio (NPA ratio). We believe that substandard contingent liabilities should be included in the calculation of our NPA ratio where we have reason to know, as of the reporting date, that they are impaired. The credit risk associated with contingent liabilities (consisting mainly of financial guarantees provided to third-parties on behalf of our customers) is evaluated and provisioned according to the probability of default of our customers’ obligations. If substandard contingent liabilities were not included in the calculation of our NPA ratio, such ratio would generally be higher for the periods covered, amounting to approximately 4.3%, 4.4%, 4.6%, 2.5% and 1.0% as of December 31, 2011, 2010, 2009, 2008 and 2007, respectively.

Restatement

In order to present financial information for all periods on a basis consistent with IFRS-IASB, we have restated under IFRS-IASB the financial information as of and for the years ended December 31, 2008 and 2007 previously reported in our respective annual reports for certain prior years, which had been prepared in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004. The table below shows the revisions made to our impairment losses on financial assets (net) for the years ended December 31, 2008 and 2007, respectively, which have been restated in accordance with our internal risk models. Previously reported impairment losses on financial assets (net) were calculated under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, which required the use of “peer group” information in the calculation of allowances for incurred but not reported loss. Our internal risk models calculate the best estimate of the expected value of the loan portfolio taking into consideration our experience, the profiles of debtors and the macroeconomic conditions at the end of the reported period, in compliance with IFRS-IASB.

	For Year Ended December 31,
	2008									2007
	IFRS-IASB			EU-IFRS(*)			Differences			IFRS-IASB			EU-IFRS(*)			Differences
	(In Millions of Euros, Except Percentages)
Consolidated statement of income data
Impairment losses on financial assets (net)		(4,098	)		(2,941	)		1,157			(2,814	)		(1,903	)		911
Income before tax		5,769			6,926			1,157			7,583			8,494			911
Income tax		(1,194	)		(1,541	)		(347	)		(1,806	)		(2,079	)		(273	)
Income from continuing transactions		4,575			5,385			810			5,777			6,415			638
Net income		4,575			5,385			810			5,777			6,415			638
Net income attributed to the parent company		4,210			5,020			810			5,488			6,126			638
Consolidated balance sheet data
Loans and receivables (net)		369,494			369,494			—			338,922			337,765			(1,157	)
Total equity		26,705			26,705			—			28,753			27,943			(810	)
Consolidated ratios
Net interest margin(1)		2.3	%		2.3	%		—			2.1	%		2.1	%		—
Return on average total assets(2)		0.9	%		1.0	%		0.2 p.p.			1.2	%		1.4	%		0.2 p.p.
Return on average equity(3)		15.5	%		21.5	%		6.0 p.p.			22.3	%		34.2	%		11.9 p.p.

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	For Year Ended December 31,
	2008								2007
	IFRS-IASB			EU-IFRS(*)			Differences		IFRS-IASB			EU-IFRS(*)			Differences
	(In Millions of Euros, Except Percentages)
Credit quality data
Loan loss reserve		7,505			7,505			—		5,987			7,144			1,157
Loan loss reserve as a percentage of total loans and receivables (net)		2.0	%		2.0	%		—		1.8	%		2.1	%		0.4 p.p.
Non-performing asset ratio (NPA ratio)(4)		2.3	%		2.3	%		—		1.0	%		1.0	%		—
Substandard loans and advances to customers		8,437			8,437			—		3,358			3,358			—
Substandard contingent liabilities to customers		131			131			—		49			49			—
		8,568			8,568			—		3,408			3,408			—
Loans and advances to customers		342,682			342,682			—		320,310			320,310			—
Contingent liabilities to customers		35,952			35,952			—		36,859			36,859			—
		378,635			378,635			—		357,169			357,169			—

(*) EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004.

(1) Represents net interest income as a percentage of average total assets.

(2) Represents net income as a percentage of average total assets.

(3) Represents net income attributed to parent company as a percentage of average equity.

(4) Represents the sum of substandard loans and advances to customers and substandard contingent liabilities to customers divided by the sum of loans and advances to customers and contingent liabilities to customers.

Exchange Rates

Spain’s currency is the euro. Unless otherwise indicated, the amounts that have been converted to euro in this Annual Report have been done so at the corresponding exchange rate published by the European Central Bank (“ECB”) on December 31 of the relevant year.

For convenience in the analysis of the information, the following tables describe, for the periods and dates indicated, information concerning the noon buying rate for euro, expressed in dollars per €1.00. The term “noon buying rate” refers to the rate of exchange for euros, expressed in U.S. dollars per euro, in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes.

Year ended December 31	Average(1)
2007		1.3797
2008		1.4695
2009		1.3955
2010		1.3216
2011		1.4002
2012 (through April 20, 2012)		1.3237

(1) Calculated by using the average of the exchange rates on the last day of each month during the period.

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Month ended	High		Low
October 31, 2011		1.4172		1.3281
November 30, 2011		1.3803		1.3244
December 31, 2011		1.3487		1.2926
January 31, 2012		1.3192		1.2682
February 29, 2012		1.3463		1.3087
March 31, 2012		1.3336		1.3025
April 30, 2012 (through April 20, 2012)		1.3337		1.3064

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on April 20, 2012, was $1.3212.

As of December 31, 2011, approximately 39% of our assets and approximately 37% of our liabilities were denominated in currencies other than euro. See Note 2.2.16 to our Consolidated Financial Statements.

For a discussion of our foreign currency exposure, please see “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Market Risk Management—Market Risk in Non-Trading Activities in 2011—Structural Exchange Rate Risk”.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Risks Relating to Us and Our Business

We are subject to substantial regulation, and regulatory and governmental oversight. Adverse regulatory developments or changes in government policy could have a material adverse effect on our business, results of operations and financial condition.

The financial services industry is among the most highly regulated industries in the world. Our operations are subject to ongoing regulation and associated regulatory risks, including the effects of changes in laws, regulations, policies and interpretations, in Spain, the European Union, the United States and the other markets where we operate. This is particularly the case in the current market environment, which is witnessing increased levels of government and regulatory intervention in the banking sector which we expect to continue for the foreseeable future. The regulations which most significantly affect us include regulations relating to capital requirements, which are discussed in detail below.

In addition, we are subject to substantial regulation relating to other matters such as liquidity. We cannot predict if increased liquidity standards, if implemented, could require us to maintain a greater proportion of our assets in highly-liquid but lower-yielding financial instruments, which would negatively affect our net interest margin.

We are also subject to other regulations, such as those related to anti-money laundering, privacy protection and transparency and fairness in customer relations.

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Adverse regulatory developments or changes in government policy relating to any of the foregoing or other matters could have a material adverse effect on our business, results of operations and financial condition. Furthermore, regulatory fragmentation, with some countries implementing new and more stringent standards or regulation, could adversely affect our ability to compete with financial institutions based in other jurisdictions which do not need to comply with such new standards or regulation.

Capital requirements

Increasingly onerous capital requirements constitute one of our main regulatory concerns. See “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Capital Requirements.”

As a Spanish financial institution, we are subject to the Bank of Spain Circular 3/2008 (“Circular 3/2008”), of May 22, on the calculation and control of minimum capital requirements, as amended by Bank of Spain Circular 4/2011 (“Circular 4/2011”), which implements Capital Requirement Directive III (“CRD III”).

Moreover, we will be subject to the new Basel III capital standards, which will be phased in from January 1, 2013 until January 1, 2019. Despite the Basel III framework setting minimum transnational levels of regulatory capital and a measured phase-in, many national authorities have started a race to the top for capital by gold-plating both requirements and the associated interpretation calendars. In particular, while the European transposition of these standards will be done through the CRD IV throughout 2012, the Spanish Government anticipated Basel III with the Royal Decree-Law 2/2011, of February 18 (“RD-L 2/2011”), as part of a wider plan of the Spanish Government for the strengthening of the financial sector by imposing stricter capital requirements. This lack of uniformity may lead to an uneven playing field and to competition distortions. Moreover, regulatory fragmentation, with some countries bringing forward the application of Basel III requirements or increasing such requirements, could adversely affect a bank with global operations such as BBVA and could undermine our profitability. As of December 31, 2011, our “principal capital” ratio, as calculated in accordance with RD-L 2/2011, was 9.7%, compared with the minimum required ratio of 8%.

In addition, following an evaluation of the capital levels of 71 financial institutions throughout Europe (including BBVA) based on data available as of September 30, 2011, the European Banking Authority (“EBA”) issued a recommendation pursuant to which, on an exceptional and temporary basis, financial institutions based in the EU should reach a new minimum Core Tier 1 ratio (9%) by June 30, 2012. This recommendation is temporary in nature and seeks to restore market confidence in the European financial system. Accordingly, the EBA has announced its intention to lift this recommendation once confidence in the European financial markets is restored. Based on September 30, 2011 data, the BBVA Group would need to increase its capital base by €6,329 million in order to reach this recommended minimum Core Tier 1 ratio by June 30, 2012. On January 20, 2012, the BBVA Group submitted to the Bank of Spain an action plan setting forth the steps that the group intends to take in order to reach the recommended minimum Core Tier 1 ratio by June 30, 2012. This plan has been examined by the Bank of Spain jointly with the EBA. On March 7, 2012, Bank of Spain approved this plan.

Moreover, through Royal Decree-Law 2/2012, of February 3 (“RD-L 2/2012”), the Spanish Government has recently increased coverage requirements for certain real estate assets. Among other requirements, certain provisions for problematic credit assets and asset foreclosures need to be supplemented with an additional capital buffer of €1.2 billion by December 31, 2012. Based on December 31, 2011 data, we satisfied this requirement as of such date.

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There can be no assurance that the implementation of these new standards will not adversely affect our ability to pay dividends, or require us to issue additional securities that qualify as regulatory capital, to liquidate assets, to curtail business or to take any other actions, any of which may have adverse effects on our business, financial condition and results of operations. Furthermore, increased capital requirements may negatively affect our return on equity and other financial performance indicators.

Regulatory reforms initiated in the United States

Our operations may also be affected by other recent regulatory reforms in response to the financial crisis, including measures such as those concerning systemic financial institutions and the enactment in the United States in July 2010 of the Dodd-Frank Act. See “Item 4. Information on the Company—Business Overview—The United States—U.S. Regulation—Dodd-Frank Act.” Among other changes, beginning five years after enactment of the Dodd-Frank Act, the Federal Reserve Board will apply minimum capital requirements to U.S. intermediate bank holding company subsidiaries of non-U.S. banks. Although there remains uncertainty as to how regulatory implementation of this law will occur, various elements of the new law may cause changes that impact the profitability of our business activities and require that we change certain of our business practices, and could expose us to additional costs (including increased compliance costs). These changes may also cause us to invest significant management attention and resources to make any necessary changes.

Current economic conditions may make it more difficult for us to continue funding our business on favorable terms or at all.

Historically, one of our principal sources of funds has been savings and demand deposits. Time deposits represented 27%, 29% and 33% of our total funding as of December 31, 2011, 2010 and 2009, respectively. Large-denomination time deposits may, under some circumstances, such as during periods of significant interest rate-based competition for these types of deposits, be a less stable source of deposits than savings and demand deposits. Moreover, since we rely heavily on short-term deposits for our funding, we cannot assure you that, in the event of a sudden or unexpected withdrawal of deposits or shortage of funds in the banking systems or money markets in which we operate, we will be able to maintain our current levels of funding without incurring higher funding costs or having to liquidate certain of our assets. In addition, if public sources of liquidity, such as the ECB extraordinary measures adopted in response to the financial crisis since 2008, are removed from the market, we cannot assure you that we will be able to continue funding our business or, if so, maintain our current levels of funding without incurring higher funding costs or having to liquidate certain of our assets.

We face increasing competition in our business lines.

The markets in which we operate are highly competitive. Financial sector reforms in the markets in which we operate have increased competition among both local and foreign financial institutions, and we believe that this trend will continue. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which we must now compete, some of which have recently received public capital.

We also face competition from non-bank competitors, such as:

• department stores (for some credit products);

• automotive finance corporations;

• leasing companies;

• factoring companies;

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• mutual funds;

• pension funds;

• insurance companies; and

• public debt (as a result of the high yields which are being currently offered as a consequence of the sovereign debt crisis).

We cannot assure you that this competition will not adversely affect our business, financial condition, cash flows and results of operations.

Our business is particularly vulnerable to volatility in interest rates.

Our results of operations are substantially dependent upon the level of our net interest income, which is the difference between interest income from interest-earning assets and interest expense on interest-bearing liabilities. Interest rates are highly sensitive to many factors beyond our control, including deregulation of the financial sectors in the markets in which we operate, monetary policies pursued by the EU and national governments, domestic and international economic and political conditions and other factors. In Spain, competition distortions in the term deposits market have intensified, and this situation is expected to continue due to the liquidity needs of certain financial institutions, which are offering high interest rates to attract additional deposits, despite the fact that these institutions will have to increase their contribution to the Deposit Guarantee Fund for this kind of highly remunerated deposits.

Changes in market interest rates could affect the spread between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities and thereby negatively affect our results of operations. For example, an increase in interest rates could cause our interest expense on deposits to increase more significantly and quickly than our interest income from loans, resulting in a reduction in our net interest income.

Since approximately 69% of our loan portfolio as of December 31, 2011 consisted of variable interest rate loans maturing in more than one year, our business is particularly vulnerable to volatility in interest rates.

We have a substantial amount of commitments with personnel considered wholly unfunded due to the absence of qualifying plan assets.

Our commitments with personnel which are considered to be wholly unfunded are recognized under the heading “Provisions—Funds for Pensions and Similar Obligations” in the accompanying consolidated balance sheets. These amounts include “Post-employment benefits”, “Early Retirements” and “Post-employment welfare benefits”, which amounted to €2,429 million, €2,904 million and €244 million, respectively, as of December 31, 2011, €2,497 million, €3,106 million and €377 million, respectively, as of December 31, 2010 and, €2,536 million, €3,309 million and €401 million, respectively, as of December 31, 2009. These amounts are considered wholly unfunded due to the absence of qualifying plan assets.

We face liquidity risk in connection with our ability to make payments on these unfunded amounts which we seek to mitigate, with respect to “Post-employment benefits”, by maintaining insurance contracts which were contracted with insurance companies owned by the Group. The insurance companies have recorded in their balance sheets specific assets (fixed interest deposit and bonds) assigned to the funding of these commitments. The insurance companies also manage derivatives (primarily swaps) to mitigate the interest rate risk in connection with the payments of these commitments. We seek to mitigate liquidity risk with respect to “Early Retirements” and “Post-employment welfare

11

benefits” through oversight by the Assets and Liabilities Committee (“ALCO”) of the Group. The Group’s ALCO manages a specific asset portfolio to mitigate the liquidity risk regarding the payments of these commitments. These assets are government and cover bonds (AAA/AA rated) which are issued at fixed interest rates with maturities matching the aforementioned commitments. The Group’s ALCO also manages derivatives (primarily swaps) to mitigate the interest rate risk in connection with the payments of these commitments. Should we fail to adequately manage liquidity risk and interest rate risk either as described above or otherwise, it could have a material adverse effect on our business, financial condition, cash flows and results of operations.

Risks Relating to Spain and Europe

The deterioration of economic conditions in Spain and the European Union could have a material adverse effect on the financial system as a whole and, therefore, on our business, results of operations and financial condition.

We are a Spanish banking company and conduct substantial business activities in Spain. Like other banks operating in Spain and Europe, our performance and liquidity may be affected by economic conditions affecting Spain and other EU member states.

The evolution of the global economy is heavily dependent on the resolution of the European debt crisis, which outlook has worsened over the last few months of 2011. Four main factors lie behind this trend:

• First, lower than expected economic growth mainly, but not only, in developed economies. Economic activity in Europe is on a clear decelerating path. Certain countries in Europe, including Spain, have relatively large sovereign debt or fiscal deficits, or both, which has led to tensions in the international debt capital markets and interbank lending market and euro exchange rate volatility during 2011.

• Second, the sovereign debt crisis in Europe has intensified and turned more systemic. The Portuguese and Irish rescue programs and the uncertainty over the Greek rescue program have spread doubts about other peripheral economies such as Spain and Italy. Successive European summits since October 2011 and the ECB’s intervention served to gain time, but further progress focused on the completion of the new EU fiscal treaty and strengthening the liquidity firewall and reforms in the periphery are still required.

• Third, the connection between EU sovereign concerns and concerns for the health of the European financial system has intensified, and financial tensions in Europe have reached levels, in many respects, higher than those present after the collapse of Lehman Brothers in October 2008. Financial stress in Europe has increased the cost of financing of governments and financial institutions which, in some cases, have lost access to international funding.

• Finally, growing risk aversion has increased financial market volatility significantly, spilling over to most risky assets and emerging economies for the first time since 2009.

Although some progress has been made since October 2011, we believe a definitive resolution to the European economic crisis requires more decisive action on three fronts. First, concerns surrounding Greece’s solvency must continue to be resolved in an orderly fashion and as quickly as possible, such as pursuant to the recently completed debt exchange with private sector bondholders. In February 2012, the Eurogroup meeting agreed on a second bail-out for Greece amounting to €130 billion, but considerable uncertainties remain concerning the implementation of the bail-out package. At the same time, the mechanisms created to prevent contagion in countries that are solvent but faced with liquidity problems, must be increased and made more flexible to become more effective. Second, structural reforms that stimulate growth must be introduced, including reforms to make financial institutions stronger without triggering sudden deleveraging and restricting credit. And third, the governance agreements approved recently in the Eurozone must begin working so they can provide a clear roadmap to fiscal union, strengthen monetary union, prevent future crises and enhance the credibility of European institutions and countries.

12

The situation in Portugal is particularly challenging. The first review led by the troika and released in mid-August 2011 showed its satisfaction with the performance of the Portuguese economy, but highlighted rising concerns on Portugal’s ability to meet its targets for 2012. This led to a sequence of announcements of additional saving measures to cover the impact of (i) the recognition of deficit and debt misreporting in the region of Madeira and (ii) a worse than expected cyclical behavior. Economic activity in Portugal contracted in 2011 (though less than anticipated) as stagnation in the second quarter of 2011 was followed by contraction in the second half of the year. The economy is set to remain in a deep recession in 2012, with a rebound predicted in 2013. The main drivers behind this outlook can be found in the strong fiscal adjustment to be undertaken in 2012 and in the difficult market and financial conditions that have led most of the economic indicators into negative territory. Confidence continues fading at all levels, reflected in weakening industrial and service sectors, as well as in decreasing investment. Consumption has taken a downturn, with no rebound on the horizon. As a result, Portuguese GDP is expected to fall by around 2.7% in 2012. As of December 31, 2011, our gross exposure to Portuguese customers amounted to €7.8 billion (around 1% of our total assets and 2% of the Group’s outstanding loans).

Economic conditions remain uncertain in Spain, Portugal and the European Union and may deteriorate in the future, which could adversely affect the cost and availability of funding for Spanish and European banks, including BBVA, adversely affecting our loan portfolio or otherwise adversely affect our business, financial condition and results of operations.

Since our loan portfolio is highly concentrated in Spain, adverse changes affecting the Spanish economy could have a material adverse effect on our financial condition.

We have historically developed our lending business in Spain, which continues to be our main place of business. As of December 31, 2011, business activity in Spain accounted for 55% of our loan portfolio. See “Item 4. Information on the Company—Selected Statistical Information—ASSETS—Loans and Advances to Customers—Loans by Geographic Area.”

After rapid economic growth until 2007, Spanish gross domestic product (“GDP”) grew by 0.9% in 2008, contracted by 3.7% and 0.1% in 2009 and in 2010, respectively, and grew by 0.7% in 2011. Our Economic Research Department (“BBVA Research”) estimates that the Spanish economy will show a negative growth rate in 2012. Forecasts point towards a 1.3% contraction of GDP in 2012 and a slow recovery in 2013. As a result of this contraction, it is expected that economic conditions and unemployment in Spain will continue to deteriorate in 2012.

In addition, GDP forecasts for the Spanish economy could be further revised downwards if measures adopted in response to the economic crisis are not as effective as expected or if public deficit figures force the government to implement additional restrictive measures. In addition to the tightening of fiscal policies in order to correct its economic imbalances, Spain has seen confidence erode, export growth fall, expectations of further fiscal adjustment in 2012 because of the failure to meet 2011 budget targets, weaker activity and, above all, a deterioration in employment in 2011.

The effects of the financial crisis have been particularly pronounced in Spain given Spain’s heightened need for foreign financing as reflected by its high current account and public deficits. Real or perceived difficulties in making the payments associated with these deficits can further damage Spain’s economic situation and increase the costs of financing its public deficit. The aforementioned may be exacerbated by the following:

• The Spanish economy is particularly sensitive to economic conditions in the rest of the Euro area, the primary market for Spanish goods and services exports.

13

• The domestic demand in 2011 was heavily impacted by fiscal policy both directly, through the progressive contraction on public sector demand (as a result, among other reasons, of tighter fiscal targets), and indirectly, through the impact of these reforms on the consumption and investment decisions of private agents.

• Although the new labor market reform is intended to slow the amount of jobs destroyed in 2012, unemployment is expected to remain above 20% during 2012 and 2013.

• In 2012, the continued deterioration of the labor market may trigger a decline in the wage component of a household’s gross disposable income. Furthermore, the increase of fiscal pressures due to the country’s effort to meet the public deficit targets set for 2012 will reduce the non-wage component of disposable income, despite the possible increase in the volume of unemployment benefits. Higher personal income taxes will also have a negative effect. Households’ nominal disposable income has remained constant in 2011 and is expected to fall by 1.5% in 2012.

• Net financial wealth is not expected to recover until 2013 as a result of the real estate sector adjustments and we expect these adjustments to continue for the coming years.

• Investment in residential real estate contracted by approximately 4.8% in 2011 and a further 6.5% contraction is expected in 2012. In addition, demand for real estate decreased in 2011, primarily as a result of the high unemployment rates and the rise in the personal income tax.

Our loan portfolio in Spain has been adversely affected by the deterioration of the Spanish economy in 2011, 2010 and 2009. In particular, a portion of our loan portfolio consists of residential mortgages and consumer loans to low- and lower middle-income customers and commercial loans to medium- and small-sized companies. As of December 31, 2011, loans to low- and lower middle-income customers and medium- and small-sized companies amounted to approximately 14% and 6%, respectively, of our total loans and receivables to customers in Spain. These groups may be more affected by periods of slowdown in economic activity and, consequently, we may experience higher levels of past due amounts with respect to such groups, which could result in higher levels of allowance for loan losses. Our total substandard loans to customers in Spain amounted to €11,043 million, €10,954 million and €10,973 million as of December 31, 2011, 2010 and 2009, respectively, principally due to the deterioration in the macroeconomic environment. Our total substandard loans to customers in Spain as a percentage of total loans and receivables to customers in Spain were 5.5%, 5.2% and 5.4% as of December 31, 2011, 2010 and 2009, respectively. Our loan loss reserves to customers in Spain as a percentage of substandard loans to customers is Spain as of December 31, 2011, 2010 and 2009 were 43%, 45% and 44%, respectively.

Given the concentration of our loan portfolio in Spain, any adverse changes affecting the Spanish economy are likely to have a significant adverse impact on our loan portfolio and, as a result, on our financial condition, results of operations and cash flows.

Exposure to the Spanish real estate market makes us vulnerable to developments in this market.

In the years prior to 2008, economic growth, strong labor markets and low interest rates in Spain caused an increase in the demand for housing, which resulted in an increase in demand for mortgage loans. This increased demand and the widespread availability of mortgage loans affected housing prices, which rose significantly. After this buoyant period, demand began to adjust in mid-2006. Since the last quarter of 2008, the supply of new homes has been adjusting sharply downward in the residential market in Spain, but a significant excess of unsold homes still exists in the market. Residential real estate mortgages to individuals represented 21.9%, and 23.1% of our domestic loan portfolio as of December 31, 2011 and 2010, respectively.

14

We expect housing demand to remain weak and housing transactions to continue decreasing in 2012, even though some measures adopted on December 30, 2011, such as the renewal of government tax breaks for home purchases and super-reduced value added tax rate applicable to real estate transactions should positively influence the demand. Loans for the development of real estate and housing construction in Spain amounted €14,158 million as of December 31, 2011, and represented 7% of our gross domestic lending as of December 31, 2011, which is below the average in the Spanish financial sector according to the Bank of Spain. Our non-performing real estate loans represented 26.4% of our real estate portfolio as of such date.

Highly-indebted households and corporations could endanger our asset quality and future revenues.

Spanish households and businesses have reached, in recent years, a high level of indebtedness, which represents increased risk for the Spanish banking system. In addition, the high proportion of loans referenced to variable interest rates (approximately 69% of our loan portfolio as of December 31, 2011) makes debt service on such loans more vulnerable to changes in interest rates than in the past. Highly indebted households and businesses are less likely to be able to service debt obligations as a result of adverse economic events, which could have an adverse effect on our loan portfolio and, as a result, on our financial condition and results of operations. Moreover, the increase in households’ and businesses’ indebtedness also limits their ability to incur additional debt, decreasing the number of new products we may otherwise be able to sell them and limiting our ability to attract new customers in Spain satisfying our credit standards, which could have an adverse effect on our ability to achieve our growth plans.

Risks Relating to Latin America

Events in Mexico could adversely affect our operations.

We are substantially dependant on our Mexican operations, with approximately €1,741 million, €1,707 million and €1,357 million of the net income attributed to parent company in 2011, 2010 and 2009, respectively, being generated in Mexico (58%, 37% and 32% of our net income attributed to parent company in 2011, 2010 and 2009, respectively). We face several types of risks in Mexico which could adversely affect our banking operations in Mexico or the Group as a whole. Given the internationalization of the financial crisis, the Mexican economy has felt the effects of the global financial crisis and the adjustment process that was underway. This process has intensified since the end of the first quarter of 2011, as a result of the European sovereign crisis. In addition, there are downward risks in Mexico due to a possible lower demand from the U.S., where growth perspectives for 2012 are clearly downward. While analysts’ consensus points to 2012 seeing Mexican GDP growth of around 3.1% (3.3% according to BBVA Research), it is possible that in a more unfavorable environment for the global economy, and particularly in Europe or the United States or otherwise, growth in Mexico will be negative in 2012.

As of December 31, 2011, 2010 and 2009, our mortgage loan portfolio delinquency rates in Mexico were 4.1%, 3.3% and 4.4%, respectively, and our consumer loan portfolio delinquency rates were 2.5%, 2.9% and 4.0%, respectively. If there is a an increase in unemployment rates, which could arise if there is a more pronounced or prolonged slowdown in Europe or the United States, it is likely that such rates will further increase.

15

In addition, any tightening of the monetary policy, including to address upward inflationary pressures, could make it more difficult for customers of our mortgage and consumer loan products in Mexico to service their debts, which could have a material adverse effect on the business, financial condition, cash flows and results of operations of our Mexican subsidiary or the Group as a whole. Furthermore, price regulation, and competition could squeeze the profitability of our Mexican subsidiary. If this were to occur, the market share of our Mexican subsidiary could decrease given its risk management standards. The depreciation of the Mexican peso could also adversely affect the contribution of our Mexican subsidiary to the BBVA Group. Finally, political instability or social unrest could weigh on the economic outlook, which could increase economic uncertainty and capital outflows. Additionally, if the approval of certain structural reforms is delayed, this could make it more difficult to reach potential growth rates in the Mexican economy.

Any of these risks or other adverse developments in laws, regulations, public policies or otherwise in Mexico may adversely affect the business, financial condition, operating results and cash flows of our Mexican subsidiary or the Group as a whole.

Our Latin American subsidiaries’ growth, asset quality and profitability may be affected by volatile macroeconomic conditions, including significant inflation and government default on public debt, in the Latin American countries where they operate.

The Latin American countries in which we operate have experienced significant economic volatility in recent decades, characterized by recessions, foreign exchange crises and significant inflation. This volatility has resulted in fluctuations in the levels of deposits and in the relative economic strength of various segments of the economies to which we lend. Negative and fluctuating economic conditions, such as a changing interest rate environment, also affect our profitability by causing lending margins to decrease and leading to decreased demand for higher-margin products and services. In addition, significant inflation can negatively affect our results of operations as was the case in the year ended December 31, 2009, when as a result of the characterization of Venezuela as a hyperinflationary economy, we recorded a €90 million decrease in our net income attributed to parent company.

In addition, as a result of the more challenging global environment and the danger of recession in developed countries, the monetary authorities of certain Latin American countries are holding back the withdrawal of monetary stimuli longer than expected. Possible overheating is leaving economies more vulnerable to an adverse external shock because the growing gap between domestic demand and GDP is making them more dependent on the maintenance of high terms of trade. Inflation has been higher than expected, particularly in Chile and Peru. This has limited consumer purchasing power despite major increases in employment and wages.

Negative and fluctuating economic conditions in some Latin American countries could result in government defaults on public debt. This could affect us in two ways: directly, through portfolio losses, and indirectly, through instabilities that a default in public debt could cause to the banking system as a whole, particularly since commercial banks’ exposure to government debt is generally high in several Latin American countries in which we operate.

While we seek to mitigate these risks through what we believe to be conservative risk policies, no assurance can be given that our Latin American subsidiaries’ growth, asset quality and profitability will not be further affected by volatile macroeconomic conditions in the Latin American countries in which we operate.

16

Latin American economies can be directly and negatively affected by adverse developments in other countries.

Financial and securities markets in Latin American countries in which we operate are, to varying degrees, influenced by economic and market conditions in other countries in Latin America and beyond. Negative developments in the economy or securities markets in one country, particularly in the U.S. or in Europe under current circumstances, may have a negative impact on other emerging market economies. These developments may adversely affect the business, financial condition, operating results and cash flows of our subsidiaries in Latin America. These economies are also vulnerable to conditions in global financial markets and especially to commodities price fluctuations and these vulnerabilities usually reflect adversely in financial market conditions through exchange rate fluctuations, interest rate volatility and deposits volatility. For example, at the beginning of the financial crisis these economies were hit by a simultaneous drop in commodity export prices, a collapse in demand for non-commodity exports and a sudden halting of foreign bank loans. Even though most of these countries withstood the triple shock rather well, with limited damage to their financial sectors, we have seen non-performing loan ratios rise as well as contraction in bank deposits and loans. As a global economic recovery remains fragile, there are risks of a relapse. If the global financial crisis continues and, in particular, if the effects on the Chinese and U.S. economies intensify the business, financial condition, operating results and cash flows of our subsidiaries in Latin America are likely to be materially adversely affected.

We are exposed to foreign exchange and, in some instances, political risks as well as other risks in the Latin American countries in which we operate, which could cause an adverse impact on our business, financial condition, results of operations.

We operate commercial banks and insurance and private pension companies in various Latin American countries and our overall success as a global business depends, in part, upon our ability to succeed in differing economic, social and political conditions. We are confronted with different legal and regulatory requirements in many of the jurisdictions in which we operate. These include, but are not limited to, different tax regimes and laws relating to the repatriation of funds or nationalization or expropriation of assets. Our international operations may also expose us to risks and challenges which our local competitors may not be required to face, such as exchange rate risk, difficulty in managing a local entity from abroad, and political risk which may be particular to foreign investors. In addition, there has been an increase in global risk aversion at the start of the last quarter of 2011, as reflected by the pressure on certain currencies and higher levels of perceived uncertainty. This has been particularly the case with Argentina, where the depreciation of the Brazilian real increased pressure on the Argentinean peso, leading to liquidity problems and controls in the foreign-exchange market.

Our presence in Latin American markets also requires us to respond to rapid changes in market conditions in these countries. We cannot assure you that we will continue to succeed in developing and implementing policies and strategies that are effective in each country in which we operate or that any of the foregoing factors will not have a material adverse effect on our business, financial condition and results of operations.

Regulatory changes in Latin America that are beyond our control may have a material effect on our business, financial condition, results of operations and cash flows.

A number of banking regulations designed to maintain the safety and soundness of banks and limit their exposure to risk are applicable in certain Latin American countries in which we operate. Local regulations differ in a number of material respects from equivalent regulations in Spain and the United States.

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Changes in regulations that are beyond our control may have a material effect on our business and operations, particularly in Venezuela and Argentina. In addition, since some of the banking laws and regulations have been recently adopted, the manner in which those laws and related regulations are applied to the operations of financial institutions is still evolving. No assurance can be given that laws or regulations will be enforced or interpreted in a manner that will not have a material adverse effect on our business, financial condition, results of operations and cash flows.

Private pension management companies are heavily regulated and are exposed to major risks concerning changes in those regulations in areas such as reserve requirements, fees and competitive conditions.

Risks Relating to the United States

Our continued expansion in the United States increases our exposure to the U.S. market.

Our expansion in the United States makes us more vulnerable to developments in this market, particularly the real estate market. During the summer of 2007, the difficulties experienced by the subprime mortgage market triggered a real estate and financial crisis, which has had significant effects on the real economy and which has resulted in significant volatility and uncertainty in markets and economies around the world. As we have acquired entities or assets in the United States, particularly BBVA Compass and certain deposits and liabilities of Guaranty Bank (“Guaranty”), our exposure to the U.S. market has increased. The recent economic growth estimates for the U.S., showing that economic recovery is slower than expected, and growing regulatory pressure in the U.S. financial sector resulted in a write down of goodwill related to our acquisition of BBVA Compass in the aggregate amount of €1,444 million as of December 31, 2011. See Note 20 to our Consolidated Financial Statements. Similar or worsening economic conditions in the United States could have a material adverse effect on the business, financial condition, results of operations and cash flows of our subsidiary BBVA Compass, or the Group as a whole, and could require us to provide BBVA Compass with additional capital.

Risks Relating to Other Countries

Our strategic growth in Asia exposes us to increased regulatory, economic and geopolitical risk relating to emerging markets in the region, particularly in China.

Pursuant to certain transactions completed in the past few years (see Note 17 to our Consolidated Financial Statements), we increased our ownership interest in members of the CITIC Group, a Chinese banking group, by increasing our stake in CITIC International Financial Holdings Ltd (“CIFH”) to 29.7% and China National Citic Bank (“CNCB”) to 10.07% as of December 31, 2010. CIFH is a banking entity headquartered in Hong Kong and CNCB is a banking entity headquartered in China

As a result of our expansion into Asia, we are exposed to increased risks relating to emerging markets in the region, particularly in China. The Chinese government has exercised, and continues to exercise, significant influence over the Chinese economy. Chinese governmental actions, including changes in laws or regulations or in the interpretation of existing laws or regulations, concerning the economy and state-owned enterprises, or otherwise affecting our activity, could have a significant effect on Chinese private sector entities in general, and on CIFH or CNCB in particular. Chinese authorities have implemented a series of monetary tightening and macro prudential policies to slow credit growth and to contain rises in real estate prices. These could undermine profitability in the banking sector generally and CIFH’s and CNCB’s respective profitability in particular. Our business in China may also be affected by the increased credit quality risks resulting from the recent increase in local government debt and financial stresses in smaller companies as their access to various forms of non-bank credit is tightened.

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In addition, while we believe long term prospects in both China and Hong Kong are positive, particularly for the consumer finance market, near term risks are present from the impact of a slowdown in global growth, which could result in tighter financing conditions and could pose risks to credit quality. China’s GDP growth has moderated following efforts to avert overheating and steer the economy towards a soft landing. While domestic demand and production remain strong, there is an increased probability of a hard landing as a result of the uncertainties concerning the global environment, exacerbated by a rise in domestic financial fragilities.

Any of these developments could have a material adverse effect on our investments in China and Hong Kong or the business, financial condition, results of operations and cash flows of the Group.

Since Garanti operates primarily in Turkey, economic and other developments in Turkey may have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our investment in Garanti.

In 2011, we acquired a 25.01% interest in Türkiye Garanti Bankasi A.Ş. (“Garanti”). Most of Garanti’s operations are conducted, and most of its customers are located, in Turkey. Accordingly, Garanti’s ability to recover on loans, its liquidity and financial condition and its results of operations are substantially dependent upon the political, economic, financial and geopolitical conditions prevailing in or that otherwise affect Turkey. If the Turkish economy is adversely affected by, among other factors, a reduction in the level of economic activity, continuing inflationary pressures, devaluation or depreciation of the Turkish Lira, a natural disaster or an increase in domestic interest rates, then a greater portion of Garanti’s customers may not be able to repay loans when due or meet their other debt service requirements to Garanti, which would increase Garanti’s past due loan portfolio and could materially reduce its net income and capital levels. After growing by approximately 8.5% in 2011, the Turkish economy is expected to grow by 1.9% in 2012. In addition, inflation is expected to further increase by 9.1% in 2012. Moreover, the current account deficit has widened during 2011, raising concerns about Turkey’s vulnerability to a sudden stop of capital flows.

Furthermore, political uncertainty or instability within Turkey and in some of its neighboring countries has historically been one of the potential risks associated with investments in Turkish companies. Despite Turkey’s increased political and economic stability in recent years and the implementation of institutional reforms to conform to international standards, Turkey is an emerging market and it is subject to greater risks than more developed markets. Financial turmoil in any emerging market could negatively affect other emerging markets, including Turkey, or the global economy in general. Moreover, financial turmoil in emerging markets tends to adversely affect stock prices and debt securities prices of other emerging markets as investors move their money to more stable and developed markets, and may reduce liquidity to companies located in the affected markets. An increase in the perceived risks associated with investing in emerging economies in general, or Turkey in particular, could dampen capital flows to Turkey and adversely affect the Turkish economy. In addition, a further deterioration in the EU accession process may negatively affect Turkey. Any of these risks could have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our investment in Garanti.

Foreign exchange, political and other risks relating to Turkey could cause an adverse effect on Garanti’s business, financial condition and results of operations and the value of our investment in Garanti.

As a result of the consummation of the Garanti acquisition, we will be exposed to foreign exchange, political and other risks relating to Turkey. For example, currency restrictions and other restraints on transfer of funds may be imposed by the Turkish government, Turkish government regulation or administrative polices may change unexpectedly or otherwise negatively affect Garanti,

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the Turkish government may increase its participation in the economy, including through expropriations or nationalizations of assets, or the Turkish government may impose burdensome taxes or tariffs. The occurrence of any or all of the above risks could have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our investment in Garanti.

In addition, a significant majority of Garanti’s total securities portfolio is invested in securities issued by the Turkish government. In addition to any direct losses that Garanti might incur, a default, or the perception of increased risk of default, by the Turkish government in making payments on its securities or the possible downgrade in Turkey’s credit rating would likely have a significant negative impact on the value of the government securities held in Garanti’s securities portfolio and the Turkish banking system generally and make such government securities difficult to sell, and may have a material adverse effect on Garanti’s business, financial condition and results of operations and the value of our investment in Garanti.

We have entered into a shareholders’ agreement with Doğuş Holding A.Ş. in connection with the Garanti acquisition.

We have entered into a shareholders’ agreement with Doğuş Holding A.Ş. (“Doğuş”) in connection with the Garanti acquisition. Pursuant to the shareholders’ agreement, we and Doğuş have agreed to manage Garanti through the appointment of board members and senior management. Doğuş is one of the largest Turkish conglomerates and has business interests in the financial services, construction, tourism and automotive sectors. Any financial reversal, negative publicity or other adverse circumstance relating to Doğuş could adversely affect Garanti or BBVA. Furthermore, we must successfully cooperate with Doğuş in order to manage Garanti and grow its business. It is possible that we and Doğuş will be unable to agree on the management or operational strategies to be followed by Garanti, which could adversely affect Garanti’s business, financial condition and results of operations and the value of our investment and lead to our failure to achieve the expected benefits from the Garanti acquisition.

Other Risks

Our financial statements and periodic disclosure under securities laws may not give you the same information as financial statements prepared under U.S. accounting rules and periodic disclosures provided by domestic U.S. issuers.

Publicly available information about public companies in Spain is generally less detailed and not as frequently updated as the information that is regularly published by or about listed companies in the United States. In addition, although we are subject to the periodic reporting requirements of the United States Securities Exchange Act of 1934 (the “Exchange Act”), the periodic disclosure required of foreign private issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. Finally, we maintain our financial accounts and records and prepare our financial statements in conformity EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and in compliance with IFRS-IASB, which differs in certain respects from U.S. GAAP, the financial reporting standard to which many investors in the United States may be more accustomed.

The Public Company Accounting Oversight Board (PCAOB) is currently unable to conduct inspections of our independent registered public accounting firm’s audits and quality controls.

Our independent registered public accounting firm, Deloitte, S.L., is registered with the PCAOB.

Deloitte, S.L. is required by U.S. law to undergo regular PCAOB inspections to assess its compliance with U.S. law and professional standards in connection with its audits of financial

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statements filed with the SEC. However, because our auditor is located in Spain, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Spanish authorities, our auditor is currently not undergoing such PCAOB inspections.

Inspections of other firms that the PCAOB has conducted outside Spain have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in Spain prevents the PCAOB from evaluating our auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

Accordingly, although our Consolidated Financial Statements were audited in accordance with the standards set forth by the PCAOB, the inability of the PCAOB to conduct inspections of auditors in Spain makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared with auditors outside of Spain that are subject to PCAOB inspections.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

BBVA’s predecessor bank, BBV, was incorporated as a limited liability company (a “sociedad anónima” or S.A.) under the Spanish Corporations Law on October 1, 1988. BBVA was formed following the merger of Argentaria into BBV, which was approved by the shareholders of each entity on December 18, 1999 and registered on January 28, 2000. It conducts its business under the commercial name “BBVA”. BBVA is registered with the Commercial Registry of Vizcaya (Spain). It has its registered office at Plaza de San Nicolás 4, Bilbao, Spain, 48005, and operates out of Paseo de la Castellana, 81, 28046, Madrid, Spain telephone number +34-91-374-6201. BBVA’s agent in the U.S. for U.S. federal securities law purposes is Sandy Salgado (1345 Avenue of Americas, 45th Floor New York, NY 10105, telephone number +1-212-728-1614). BBVA is incorporated for an unlimited term.

Capital Expenditures

Our principal investments are financial: subsidiaries and affiliates. The main capital expenditures from 2009 to the date of this Annual Report were the following:

2012

Acquisition of Unnim. On March 7, 2012, the Management Commission of the Fund for Orderly Bank Restructuring (Fondo de Restructuración Ordenada Bancaria or “FROB”) accepted BBVA’s offer to acquire Unnim Banc, S.A. (“Unnim”). The FROB, the Deposit Guarantee Fund of Credit Institutions (Fondo de Garantía de Depósitos or “FGD”) and BBVA have entered into a purchase agreement, by virtue of which BBVA will acquire 100% of the shares of Unnim for a purchase price of €1.

In addition, BBVA, the FDG, the FROB and Unnim have signed a “Protocol of Financial Measures” for the restructuring of Unnim, which regulates the Asset Protection Scheme through which the FGD will be responsible for 80% of the losses undergone by a predetermined asset portfolio of Unnim, calculated once the existing provisions on the related assets are applied, for a period of 10 years following the transaction.

The closing of the purchase agreement and the “Protocol of Financial Measures” is subject to obtaining the relevant administrative authorizations and approvals, including the approval of the Bank of Spain, the Finance Secretary of State, the European Commission and the relevant competition authorities. Unnim’s assets as of December 31, 2011 were €29 billion and it reported losses of €469 million for the year ended December 31, 2011.

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2011

Acquisition of a capital holding in the Turkish bank Garanti. On March 22, 2011, through the execution of the agreements signed in November 2010 with the Doğuş group and having obtained the corresponding authorizations, BBVA completed the acquisition of a 24.89% holding of the share capital of Türkiye Garanti Bankasi A.Ş. (“Garanti”). Subsequently, an additional 0.12% holding was acquired through the stock exchanges, increasing the BBVA Group’s total holding in the share capital of Garanti to 25.01% as of December 31, 2011. The total amount spent on these acquisitions totaled $5,876 million (approximately €4,408 million).

The agreements with the Doğuş group include an arrangement for the joint management of the bank and the appointment of some of the members of its Board of Directors by the BBVA Group. BBVA also has a perpetual option to purchase an additional 1% of Garanti, which will become exercisable on March 22, 2016. Considering its current shareholding structure, if the BBVA Group were to exercise this option, it would have effective control of Garanti.

As of December 31, 2011, the goodwill recorded in connection with these acquisitions amounted to €1,262 million (see Note 20.1 to our Consolidated Financial Statements), although this amount is provisional since IFRS 3 grants a period of one year to make a definitive determination. BBVA financed part of this acquisition with funds from the capital increase carried out on November 29, 2010.

Taking into account the aforementioned joint management agreements, this 25.01% holding in Garanti is consolidated in the BBVA Group using the proportionate consolidation method, and its contribution to the BBVA Group as of December 31, 2011, after applying the corresponding standardization and consolidation adjustments, represented 3.06% of the Group’s total assets (€18,309 million) and 2.66% of its total liabilities (€14,850 million) at that date.

The contribution from Garanti to the main items on the consolidated balance sheet as of December 31, 2011, after applying the corresponding standardization and consolidation adjustments, was €4,937 million to various portfolios of financial assets, €11,160 million to “Loans and receivables” and €14,187 million to “Financial liabilities at amortized cost.”

The contribution of Garanti to the BBVA Group’s consolidated income statement from the date of its acquisition to December 31, 2011, after making the corresponding standardization and consolidation adjustments, was €428 million to “Net interest income”, €580 million to “Gross income”, and €193 million to “Net income”. This represents a total of 6.43% of the Group’s consolidated net income in 2011.

If this business combination had been performed at the start of 2011, it is estimated that after the corresponding standardization and consolidation adjustments, Garanti would have contributed €266 million to Group’s consolidated net income for 2011.

Purchase of Credit Uruguay Banco. On January 18, 2011, after obtaining the corresponding authorizations, the purchase of Credit Uruguay Banco was completed for approximately €78 million, generating goodwill for an insignificant amount.

Capital increase in CNCB. BBVA participated in the capital increase carried out by China National Citic Bank (“CNCB”) in 2011, in order to maintain its stake in CNCB (15%), with a payment of €425 million.

2010

On April 1, 2010, after obtaining the corresponding authorizations, the purchase of an additional 4.93% of CNCB’s capital was finalized for €1,197 million. As of December 31, 2010, BBVA had a 29.68% holding in CIFH and a 15% holding in CNCB.

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2009

On August 21, 2009, through our subsidiary BBVA Compass, we acquired certain assets and liabilities of Guaranty from the U.S. Federal Deposit Insurance Corporation (the “FDIC”) through a public auction for qualified investors. BBVA Compass acquired assets, mostly loans, for $11,441 million (approximately €8,016 million) and assumed liabilities, mostly customer deposits, for $12,854 million (approximately €9,006 million). These acquired assets and liabilities represented 1.5% and 1.8% of our total assets and liabilities on the acquisition date.

In addition, the purchase included a loss-sharing agreement with the FDIC under which the latter undertook to assume 80% of the losses on up to the first $2,285 million of the loans purchased by us and up to 95% of the losses, if any, on the loans exceeding this amount. This commitment has a maximum term of either five or ten years, depending on the portfolios.

Capital Divestitures

Our principal divestitures are financial, in subsidiaries and in affiliates. The main capital divestitures from 2009 to the date of this Annual Report were the following:

2011

During 2011, BBVA sold its participation in certain non-strategic associates and also concluded the liquidation and merger of several issuers, financial services and real estate affiliates. Additional information on these transactions is included in Appendix V to the Consolidated Financial Statements.

2010

During 2010, we sold our participations in certain non-strategic associates and also we have concluded the liquidation and merger of several issuers, financial services and real estate affiliates.

2009

During 2009, we sold our participations in certain non-strategic associates (including our 22.9% stake in Air Miles España, S.A.) which gave rise to no significant gains.

As a part of the reorganization process in the United States and Mexico, we concluded the liquidation and merger of several affiliates of BBVA Compass and of BBVA Bancomer.

B. Business Overview

BBVA is a highly diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. We also have investments in some of Spain’s leading companies.

Business Areas

For fiscal year 2011, we changed the management of our business areas mainly due to the integration of Garanti into the BBVA Group and a new management focus on geographical business areas, instead of a mix of geographical and business activities areas. We believe that, since the beginning of the financial crisis, the importance of the geographical location of businesses in order to make a proper assessment of risks and a better estimate of future growth possibilities has become more evident.

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We currently manage our business areas to focus on five geographical areas: Spain, Mexico, South America, the United States and Eurasia. The changes made in 2011 with respect to the criteria followed in 2010 to reflect the current composition of our business areas are summarized below:

• In 2011, the integration of Garanti into BBVA resulted in the creation of a new geographical business area, Eurasia, which includes our investment in Garanti, our Asian operations, including our stake in China National Citic Bank (“CNCB”), and our European business outside of Spain.

• The operations of Spain and Portugal were disaggregated. The new Spain business segment excludes the Portuguese business (which is now included in Eurasia) mainly to separate activities in Spain and outside Spain, and includes the global activities related to wholesale banking and asset management, which in 2010 we reported under our former Wholesale Banking and Asset Management (“WB&AM”) business area.

The business areas of Mexico, the U.S. and South America did not change in 2011.

As a result of the above, in 2011 the Group’s businesses have been restructured into the following business areas, which are further broken down into business units, as described below:

• Spain

• Eurasia

• Mexico

• United States

• South America

In addition to these business areas, we continue to have a separate “Corporate Activities” area. This area handles our general management functions, which mainly consist of structural positions for interest rates associated with the euro balance sheet and exchange rates, together with liquidity management and shareholders’ funds. This area also books the costs from central units that have a strictly corporate function and makes allocations to corporate and miscellaneous provisions, such as early retirement and others of a corporate nature. It also includes the Industrial and Financial Holdings Unit and the Group’s Spanish real estate business.

The financial information for our business areas for 2010 and 2009 presented in this Annual Report has been prepared on a uniform basis, consistent with our organizational structure in 2011.

The breakdown of the BBVA Group’s total assets by business segments as of December 31, 2011, 2010 and 2009 is as follows:

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Spain		309,912		297,642		294,843
Eurasia		53,398		45,975		48,402
Mexico		74,283		75,152		62,855
South America		63,444		51,671		44,378
United States		55,413		57,575		77,676
Subtotal Assets by Business areas		556,450		528,015		528,154
Corporate Activities		41,238		24,723		6,911
Total Assets BBVA Group		597,688		552,738		535,065

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The following table sets forth information relating the net income attributed to parent company by each of our business areas for the years ended December 31, 2011, 2010 and 2009.

	Net Income/(Loss) Attributed to Parent Company									% of Net Income/(Loss) Attributed to Parent Company
	For Year Ended December 31,
	2011(*)			2010			2009			2011(*)			2010		2009
	(In Millions of Euros)									(in Percentage)
Spain		1,363			2,255			2,801			30.9			39.7		62.8
Eurasia		1,027			588			473			23.3			10.4		10.6
Mexico		1,741			1,707			1,357			39.4			30.1		30.4
South America		1,007			889			780			22.8			15.7		17.5
United States		(722	)		239			(950	)		(16.3	)		4.2		(21.3	)
Subtotal Business Areas		4,417			5,678			4,461			100.0			100.0		100.0
Corporate Activities		(1,413	)		(1,072	)		(251	)
Income attributed to the BBVA Group		3,004			4,606			4,210

(*) Income/(Loss) attributed to parent company by each business area for the year ended December 31, 2011 has been affected by the goodwill impairment in the U.S. and the acquisition of Garanti, which have affected, respectively, the contribution of the United States and Eurasia business segments.

The following table sets forth information relating to the income of each business segment for the years ended December 31, 2011, 2010 and 2009:

			Business Areas
	BBVA Group		Spain		Eurasia		Mexico		South America		United States			Corporate Activities
	(In Millions of Euros)
2011
Net interest income		13,160		4,399		801		3,827		3,164		1,590			(621	)
Gross income		20,566		6,357		1,952		5,550		4,457		2,277			(27	)
Operating income(*)		10,615		3,556		1,307		3,539		2,415		786			(987	)
Income before tax		3,770		1,914		1,170		2,299		1,877		(1,061	)		(2,430	)
Net income		3,004		1,363		1,027		1,741		1,007		(722	)		(1,413	)
2010
Net interest income		13,320		4,878		345		3,688		2,495		1,794			121
Gross income		20,910		7,055		1,080		5,496		3,797		2,551			932
Operating income(*)		11,942		4,240		785		3,597		2,129		1,034			158
Income before tax		6,422		3,160		675		2,281		1,670		309			(1,673	)
Net income		4,606		2,255		588		1,707		889		239			(1,072	)
2009
Net interest income		13,882		5,571		387		3,307		2,566		1,679			372
Gross income		20,666		7,875		953		4,870		3,637		2,412			919
Operating income(*)		12,307		5,031		675		3,316		2,058		1,047			180
Income before tax		5,735		3,890		611		1,770		1,575		(1,428	)		(683	)
Net income		4,210		2,801		473		1,357		780		(950	)		(251	)

(*) “Gross income” minus “Administration costs” and “Depreciation and amortization”.

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Spain

The business area of Spain includes all of BBVA’s banking and non-banking businesses in Spain, other than those included in the Corporate Activities area. The main business units included in this business area are:

• Spanish Retail Network: including the segments of individual customers, private banking, small companies and businesses in the domestic market.

• Corporate and Business Banking (CBB): which manages small and medium sized enterprises (“SMEs”), companies and corporations, public institutions and developer segments.

• Corporate and Investment Banking (C&IB): responsible for business with large corporations and multinationals.

• Global Markets (GM): which covers treasury and distribution activities on the Spanish market.

• Other units: which include the insurance business unit in Spain (BBVA Seguros), and the Asset Management unit, which manages Spanish mutual fund and pension funds.

The following table sets forth information relating to the activity of this business area for the years ended December 31, 2011, 2010 and 2009:

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Total Assets		309,912		297,641		294,843
Loans and advances to customers		214,156		218,127		211,651
Of which:
Residential mortgages		77,015		78,882		75,976
Consumer finance		8,114		9,205		10,867
Loans		6,484		7,499		9,022
Credit cards		1,631		1,706		1,845
Loans to enterprises		75,813		78,774		82,912
Loans to public sector		24,915		23,110		19,964
Total customer deposits		117,174		112,852		96,132
Current and savings accounts		41,587		41,157		43,647
Time deposits		48,447		48,116		32,241
Other customers funds		27,139		23,579		20,244
Off-balance sheet funds		51,156		53,598		62,322
Mutual funds		20,366		23,445		32,086
Pension funds		17,212		16,799		17,162
Other placements		13,578		13,355		13,074
Economic capital allocated		10,306		10,160		9,273

As of December 31, 2011, the balance of loans and advances to customers was €214,156 million, a 1.8% decrease from the €218,127 million recorded as of December 31, 2010, as a result of the deleveraging process and weak consumption. The general trend has been a weak turnover, with the most notable decreases recorded in the segment of higher-risk businesses and corporations, and in consumer loans.

As of December 31, 2011, our outstanding payment protection insurance policies amounted to €41 billion and insured approximately 20% of our total loans and advances to customers in Spain as of

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such date. Substantially all of our payment protection insurance products provide consumer or mortgage payment protection in the case of loss of life or disability (while approximately 5% of these products provide protection in the case of unemployment or a work-related illness). These insurance products are granted by our insurance subsidiary to borrowers within our own consumer and mortgage portfolio. Upon the occurrence of the insured event, our insurance subsidiary pays the entire outstanding principal amount, together with any accrued interest, of the related loan. Since the risk remains within the Group, we do not consider our payment protection insurance products when determining the appropriate amount of allowance for loan losses on the related loans. We account for these products as insurance contracts.

As of December 31, 2011, total on-balance and off-balance sheet customer deposits including mutual funds, pension funds and customer portfolios, were €168,330 million, a 1.1% increase from the €166,450 million posted as of December 31, 2010. There were changes in the mix of total customer deposits as a result of turmoil in the markets, which reduced the value of assets under management and led to a change in customer preference from mutual funds to other liability products, particularly promissory notes carrying high fixed levels of interest. Time deposits remained stable due to the high percentage of renewals during the third quarter of 2011.

Customer deposits were €117,174 million as of December 31, 2011 compared to €112,852 as of December 31, 2010, an increase of 3.8%, mainly due to the high percentage of renewals of time deposits during the period.

Mutual fund assets under management were €20,366 million as of December 31, 2011, a 13.1% decrease from the €23,445 million recorded as of December 31, 2010.

As of December 31, 2011, our outstanding guaranteed mutual fund products amounted to €12 billion (approximately 58% of our outstanding mutual fund products in Spain as of such date). Our guaranteed fund products relate mainly to mutual funds in respect of which the return of principal (rather than the yield) is guaranteed by means of a deposit and a derivative contract entered into by us, both of which are recognized on our balance sheet. We account for these products as deposits or derivative contracts.

Pension fund assets under management were €17,212 million as of December 31, 2011, a 2.5% increase from the €16,799 million recorded as of December 31, 2010.

Eurasia

This business area covers the Group’s activity in Europe (excluding Spain) and Asia. Accordingly, it includes BBVA Portugal, Consumer Finance Italy and Portugal, the retail business of branches in Paris, London and Brussels (which in 2010 had been reported under the “Spain and Portugal” business area), and WB&AM activity (comprised of Corporate and Investment Banking, Global Markets and CNCB) within this geographical area. It also covers the Group’s holding in Garanti.

The importance of this area is increasing both in terms of earnings and our balance sheet and, as the rest of the franchises, it has evolved positively and increased the Group’s diversification and growth capacity. The positive contribution of Garanti starting in March 2011 and the increase in earnings from CNCB are worth mentioning in this regard.

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The following table sets forth information relating to the business activity of this business area for the years ended December 31, 2011, 2010 and 2009:

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Total Assets		53,398		45,975		48,402
Loans and advances to customers		34,740		24,281		23,964
Of which:
Residential mortgages		2,688		2,652		1,932
Consumer finance		3,420		913		735
Loans		2,400		903		727
Credit cards		1,020		10		9
Loans to enterprises		11,998		4,956		4,585
Loans to public sector		107		113		115
Total customer deposits		20,987		20,078		29,686
Current and savings accounts		2,688		836		917
Time deposits		9,778		2,191		2,945
Other customer funds		8,521		17,050		25,824
Off-balance sheet funds		1,036		590		637
Mutual funds		562		194		245
Pension funds		474		397		392
Economic capital allocated		4,254		2,546		1,032

As of December 31, 2011, the loans and advances to customers was €34,740 million, a 43.1% increase from the €24,281 million recorded as of December 31, 2010, mainly due to the incorporation of Garanti. Excluding the amounts from the Turkish bank, the loan book increased by 3.2%.

As of December 31, 2011 customer deposits were €20,987 million, a 4.5% increase from the €20,078 million as of December 31, 2010, mainly due to the contribution of Garanti, principally of retail deposits (current and saving accounts and time deposits), which was partially offset by the decrease in wholesale funds, which affected mainly the European branches (in London, Frankfurt and Brussels).

Mexico

The Mexico business area comprises the banking, pension and insurance businesses conducted in Mexico by the BBVA Bancomer financial group. The business units included in the Mexico area are:

• Retail and Corporate banking, and

• Pensions and Insurance.

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The following table sets forth information relating to the business activity of this business area for the years ended December 31, 2011, 2010 and 2009:

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Total Assets		74,283		75,152		62,855
Loans and advances to customers		36,205		36,526		28,996
Of which:
Residential mortgages		8,234		8,511		6,887
Consumer finance		8,070		7,186		5,485
Loans		3,584		2,931		2,071
Credit cards		4,486		4,255		3,414
Loans to enterprises		14,104		14,792		11,454
Loans to public sector		3,316		3,275		2,554
Total customer deposits		37,704		38,051		31,252
Current and savings accounts		21,129		20,963		15,740
Time deposits		7,398		8,333		8,102
Other customer funds		9,176		8,756		7,411
Off-balance sheet funds		34,499		34,895		25,106
Mutual funds		15,612		15,341		10,546
Pension funds		13,132		12,781		9,519
Other placements		5,754		6,773		5,042
Economic capital allocated		4,444		3,714		2,892

As of December 31, 2011, the balance of loans and advances to customers was €36,205 million, a 0.9% decrease from the €36,526 million as of December 31, 2010 mainly due to the decrease in wholesale lending as a result, among others, of the early payment by the Federal Government of a credit line underwritten by several banks (including us) in the country, and the switch made by large corporations from bank lending to financing in wholesale markets due to the low interest rates.

As of December 31, 2011, customer deposits were €37,704 million, a 0.9% decrease from the €38,051 million recorded as of December 31, 2010, due to the exchange rate effect. Excluding this effect, there was an increase of 8.1%.

Mutual fund assets under management were €15,612 million as of December 31, 2011, a 1.8% increase from the €15,341 million recorded as of December 31, 2010.

Pension fund assets under management were €13,132 million as of December 31, 2011, a 2.8% increase from the €12,781 million recorded as of December 31, 2010, due to the positive performance of Afore Bancomer, which continued to perform well as result of the stability of the Mexican labor market.

South America

The South America business area manages the BBVA Group’s banking, pension and insurance businesses in the region. In 2011, Credit Uruguay (which was purchased in January 2011 and merged with BBVA Uruguay in May 2011) was incorporated. In addition, we sold the Group’s holding in the insurance company Consolidar Retiro of Argentina. Finally, we acquired an additional 24.5% stake in Forum (a leading vehicle financing company in Chile) in September 2011.

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The business units included in the South America business area are:

• Retail and Corporate Banking: includes banks in Argentina, Chile, Colombia, Panama, Paraguay, Peru, Uruguay and Venezuela.

• Pension businesses: includes pension businesses in Bolivia, Chile, Colombia, Ecuador and Peru.

• Insurance businesses: includes insurance businesses in Argentina, Chile, Colombia, and Venezuela.

The following table sets forth information relating to the business activity of this business area for the years ended December 31, 2011, 2010 and 2009:

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Total Assets		63,444		51,671		44,378
Loans and advances to customers		40,219		31,512		26,223
Of which:
Residential mortgages		7,124		5,932		4,567
Consumer finance		10,087		6,741		5,994
Loans		7,594		5,129		4,577
Credit cards		2,493		1,611		1,417
Loans to enterprises		20,829		16,862		13,831
Loans to public sector		914		830		527
Total customer deposits		45,776		36,085		31,556
Current and savings accounts		26,140		19,326		17,753
Time deposits		15,094		12,964		10,273
Other customer funds		4,542		3,795		3,530
Off-balance sheet funds		50,668		51,862		38,720
Mutual funds		2,850		3,063		2,617
Pension funds		47,818		48,800		36,104
Economic capital allocated		2,912		2,519		2,306

As of December 31, 2011, the loans and advances to customers were €40,219 million, a 27.6% increase from the €31,512 million recorded as of December 31, 2010. All countries in this business area have seen growth, with significant increases in consumer finance, cards and small companies and businesses.

As of December 31, 2011, customer deposits were €45,776 million, a 26.9% increase from the €36,085 million recorded as of December 31, 2010. Lower-cost transactional deposits such as current and savings accounts increased by 35.3%, which explains a portion of the improvement in net interest income.

Off-balance sheet funds, however, fell by 2.3% as a result of turmoil in the markets.

United States

This business area encompasses the Group’s business in the United States and Puerto Rico. BBVA Compass accounted for approximately 82% of the area’s balance sheet as of

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December 31, 2011. Given its weight, most of the comments below refer to BBVA Compass. This business area also covers the assets and liabilities of the BBVA office in New York, which specializes in transactions with large corporations.

The business units included in the United States business area are:

• BBVA Compass Banking Group, and

• Other units: BBVA Puerto Rico and Bancomer Transfers Services (“BTS”).

	As of December 31,
	2011		2010		2009
	(In Millions of Euros)
Total Assets		55,413		57,575		77,676
Loans and advances to customers		40,069		39,570		41,120
Of which:
Residential mortgages		8,487		6,762		4,899
Consumer finance		5,503		5,647		6,079
Loans		4,961		5,168		5,679
Credit cards		541		479		400
Loans to enterprises		20,681		19,585		19,966
Total customer deposits		36,664		41,354		60,963
Current and savings accounts		27,716		25,217		21,708
Time deposits		7,963		9,033		10,572
Other customer funds		986		7,104		28,683
Off-balance sheet funds		6,199		5,307		5,204
Other placements		6,199		5,307		5,204
Economic capital allocated		3,170		2,972		2,995

As of December 31, 2011, loans and advances to customers were €40,069 million, a 1.3% increase from the €39,570 million recorded as of December 31, 2010. In 2011, we have continued to aim for the selective growth of lending in BBVA Compass, with a change in the portfolio mix towards items with less cyclical risk (such as loans to the commercial and industrial sector) and reducing higher risk portfolios (such as construction real estate loans).

As of December 31, 2011, customer deposits were €36,664 million, an 11.3% decrease from €41,354 million as of December 31, 2010. In 2011, there was an improvement in the structure of the balance sheet as a result of the decrease in high-interest deposits and an increase in non-interest accounts.

Monetary Policy

The integration of Spain into the European Monetary Union (“EMU”) on January 1, 1999 implied the yielding of monetary policy sovereignty to the Eurosystem. The “Eurosystem” is composed of the ECB and the national central banks of the 17 member countries that form the EMU.

The Eurosystem determines and executes the policy for the single monetary union of the 17 member countries of the EMU. The Eurosystem collaborates with the central banks of member countries to take advantage of the experience of the central banks in each of its national markets. The basic tasks carried out by the Eurosystem include:

• defining and implementing the single monetary policy of the EMU;

• conducting foreign exchange operations in accordance with the set exchange policy;

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• lending to national monetary financial institutions in collateralized operations;

• holding and managing the official foreign reserves of the member states; and

• promoting the smooth operation of the payment systems.

In addition, the Treaty on European Union (“EU Treaty”) establishes a series of rules designed to safeguard the independence of the system, in its institutional as well as in its administrative functions.

Supervision and Regulation

The Spanish government traditionally has been closely involved with the Spanish banking system, both as a direct participant through its ownership of ICO and as a regulator retaining an important role in the regulation and supervision of financial institutions.

The Bank of Spain

The Bank of Spain was established in 1962 as a public law entity (entidad de derecho público) that operates as Spain’s autonomous central bank. In addition, it has the ability to function as a private bank. Except in its public functions, the Bank of Spain’s relations with third parties are governed by private law and its actions are subject to the civil and business law codes and regulations.

Until January 1, 1999, the Bank of Spain was also the sole entity responsible for implementing Spanish monetary policy. For a description of monetary policy since the introduction of the euro, see “—Monetary Policy”.

Since January 1, 1999, the Bank of Spain has performed the following basic functions attributed to the Eurosystem:

• defining and implementing the Eurosystem’s monetary policy, with the principal aim of maintaining price stability across the euro area;

• conducting currency exchange operations consistent with the provisions of Article 111 of the EU Treaty, and holding and managing the Member States’ official currency reserves;

• promoting the sound working of payment systems in the euro area; and

• issuing legal tender banknotes.

Recognizing the foregoing functions as a fully-fledged member of the Eurosystem, the Bank of Spain Law of Autonomy (Ley de Autonomía del Banco de España) stipulates the performance of the following functions by the Bank of Spain:

• holding and managing currency and precious metal reserves not transferred to the ECB;

• supervising the solvency and behavior of credit institutions, other entities and financial markets, for which it has been assigned supervisory responsibility, in accordance with the provisions in force;

• promoting the sound working and stability of the financial system and, without prejudice to the functions of the ECB, of national payment systems;

• placing coins in circulation and the performance, on behalf of the State, of all such other functions entrusted to it in this connection;

• preparing and publishing statistics relating to its functions, and assisting the ECB in the compilation of the necessary statistical information;

• providing treasury services and acting as financial agent for government debt;

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• advising the government, preparing the appropriate reports and studies; and

• exercising all other powers attributed to it by legislation.

Subject to the rules and regulations issued by the Ministry of Economy, the Bank of Spain has the following supervisory powers over Spanish banks:

• conducting periodic inspections of Spanish banks to evaluate a bank’s compliance with current regulations including the preparation of financial statements, account structure and credit policies;

• advising a bank’s board of directors and management on its dividend policy;

• undertaking extraordinary inspections of banks; and

• collaborating with other regulatory entities to impose penalties for infringement or violation of applicable regulations.

Deposit Guarantee Fund of Credit Institutions

The Deposit Guarantee Fund of Credit Institutions (Fondo de Garantía de Depósitos or “FGD”), which operates under the guidance of the Bank of Spain, was set up by virtue of Royal Decree-Law 16/2011, of October 14. It is an independent legal entity and enjoys full authority to fulfill its functions. Royal Decree-Law 16/2011 unified the three previous guarantee funds that existed in Spain: the Deposit Guarantee Fund of Saving Banks, the Deposit Guarantee Fund of Credit Entities and the Deposit Guarantee Fund of Banking Establishments.

The main objective of the FGD is to guarantee deposits and securities held by credit institutions, up to the limit of €100,000. It also has the authority to carry out any such actions necessary to reinforce the solvency and operation of credit institutions in difficulty, with the purpose of defending the interests of depositors and deposit guarantee funds.

The FGD is funded by annual contributions from member banks. The rate of our contributions in 2011 was 0.06% of the year-end amount of bank deposits to which the guarantee extended and 0.06% over the 5% of the securities held on our clients’ behalf. Pursuant to Royal Decree-Law 19/2011, starting in 2012, our contribution will be equal to 0.2% of the year-end amount of bank deposits to which the guarantee extends and 0.06% over the 5% of the securities held on our clients’ behalf.

In addition, pursuant to Royal Decree-Law 771/2011, during 2011 an additional contribution was made in connection with deposits the remuneration of which exceeded the level established by the Bank of Spain in its Circular 3/2011, of June 30.

As of December 31, 2011, all of the Spanish banks belonging to the BBVA Group were members of the FGD and thus obligated to make annual contributions to it.

Investment Guarantee Fund

Royal Decree 948/2001, of August 3, regulates investor guarantee schemes (Fondo de Garantía de Inversores) related to both investment firms and to credit institutions. These schemes are set up through an investment guarantee fund for securities broker and broker-dealer firms and the deposit guarantee funds already in place for credit institutions. A series of specific regulations have also been enacted, defining the system for contributing to the funds.

The General Investment Guarantee Fund Management Company was created in a relatively short period of time and is a business corporation with capital in which all the fund members hold an interest.

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Member firms must make a joint annual contribution to the fund equal to 0.06% over the 5% of the securities that they hold on their client’s behalf. However, it is foreseen that these contributions may be reduced if the fund reaches a level considered to be sufficient.

Liquidity Ratio

In an effort to implement European Union monetary policy, effective January 1, 1999, the ECB and the national central banks of the member states of the EMU adopted a regulation that requires banks to deposit an amount equal to two percent of their qualifying liabilities, as defined by the regulation, with the central bank of their home country. These deposits will earn an interest rate equal to the average interest rate of the European System of Central Banks (“ESCB”). Qualifying liabilities for this purpose include:

• deposits;

• debt securities issued; and

• monetary market instruments.

Furthermore, the liquidity ratio is set at 0% instead of 2% for those qualifying liabilities that have a maturity over two years and are sold under repurchase agreements.

Investment Ratio

In the past, the government used the investment ratio to allocate funds among specific sectors or investments. As part of the liberalization of the Spanish economy, it was gradually reduced to a rate of zero percent as of December 31, 1992. However, the law that established the ratio has not been abolished and the government could re-impose the ratio, subject to applicable EU requirements.

Fund for Orderly Bank Restructuring

The crisis that has affected the financial markets since 2007 obliged the Spanish authorities to create the Fund for Orderly Bank Restructuring (Fondo de Restructuración Ordenada Bancaria or “FROB”) by Decree-Law 9/2009, of June 26. Its purpose is to help the restructuring processes undertaken by credit institutions and strengthen their capital positions subject to certain conditions. The FROB will support the restructuring strategy of those institutions that require assistance, in three distinct stages:

• search for a private solution by the credit institution itself;

• adopt measures to tackle any weaknesses that may affect the viability of credit institutions; and

• initiate a restructuring process in which the Fund itself has to intervene directly.

The FROB has to act in what is an absolutely exceptional situation that is closely linked to the development of the financial crisis. In order to comply with its objectives, FROB will be funded jointly from the Spanish national budget and the FDG. The FROB will be able to raise funds on securities markets through the issue of debt securities, lending and engaging in any other debt transaction necessary to fulfill its objects.

Capital Requirements

Bank of Spain Circular 3/2008 (“Circular 3/2008”), of May 22, on the calculation and control of minimum capital requirements, regulates the minimum capital requirements for Spanish credit

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institutions, on an individual and consolidated group basis, and sets forth how to calculate capital meeting such requirements, as well as the various internal capital adequacy assessment processes credit institutions should have in place and the information they should disclose to the market.

Circular 3/2008 is the final implementation, for credit institutions, of the legislation on capital and consolidated supervision of financial institutions, which was contained in Law 36/2007, of November 16, amending Law 13/1985, of May 25, on the investment ratios, capital and reporting requirements of financial intermediaries, and other financial regulations, which also includes Royal Decree 216/2008, of February 15, on the capital of financial institutions. Circular 3/2008 also conforms Spanish legislation to Directive 2006/48/EC of the European Parliament and of the Council, of June 14, 2006, and Directive 2006/49/EC of the European Parliament and of the Council, of June 14, 2006. The minimum capital requirements for credit institutions and their consolidated groups were thoroughly revised in both EC directives based on the Capital Accord adopted by the Basel Committee on Banking Supervision (“Basel II”).

The minimum capital requirements established by Circular 3/2008 are calculated on the basis of the Group’s exposure (i) to credit risk and dilution risk (on the basis of the assets, obligations and contingent exposures and commitments that present these risks, depending on their amounts, characteristics, counterparties, guarantees, etc.); (ii) to counterparty risk and position and settlement risk in the trading book; (iii) to foreign exchange risk (on the basis of the overall net foreign currency position); and (iv) to operational risk. Additionally, the Group is subject to compliance with the risk concentration limits established in Circular 3/2008 and with the requirements related to corporate governance, internal capital adequacy assessment, measurement of interest rate risk and certain additional public disclosure obligations set forth therein. With a view to ensuring compliance with the aforementioned objectives, the Group performs integrated management of these risks, in accordance with its internal policies. See Note 7 to the Consolidated Financial Statements.

As of December 31, 2011, 2010 and 2009, the eligible capital of the Group exceeded the minimum required under the regulations then in force. See Note 33 to the Consolidated Financial Statements.

Under Basel II calculation of the minimum regulatory capital requirements under the standards, referred to as “Pillar 1”, is supplemented with an internal capital adequacy assessment and supervisory review process, referred to as “Pillar 2”. The Group’s internal capital adequacy assessment process is based on the internal model for the quantification of the economic capital required on the basis of the Group’s overall risk profile. Finally, Basel II standards establish, through what is referred to as “Pillar 3”, strict transparency requirements regarding the information on risks to be disclosed to the market.

Circular 3/2008 was modified by Circular 9/2010, of December 22, and Circular 4/2011, of November 30, in order to proceed with the implementation in Spain of the changes to the solvency framework approved at a European level and known as CRD II (Directive 2009/27/EC, of April 7, Directive 2009/89/EC of July 27 and Directive 2009/111/EC, of September 16) and CRD III (Directive 2010/76/EU, of November 24).

The main changes considered in these directives are:

• European harmonization of large exposures limits: a bank will be restricted in lending beyond a certain limit (25% of regulatory capital) to any one party.

• Obligation to establish and maintain, for categories of staff whose professional activities have a material impact on the risk profile of a bank, remuneration policies and practices that are consistent with effective risk management.

• Improved quality of banks’ capital: additional loss absorbency criteria for hybrid capital instruments have been introduced, anticipating Basel III recommendations.

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• Improved liquidity risk management: for banking groups that operate in multiple countries, their liquidity risk management—i.e. how they fund their operations on a day-to-day basis—will also be discussed and coordinated within ‘colleges of supervisors’.

• Improved risk management for securitized products: rules on securitized debt—the repayment of which depends on the performance of a dedicated pool of loans—have been tightened. Firms that re-package loans into tradable securities will be required to retain some risk exposure to these securities, while firms that invest in the securities will be allowed to make their decisions only after conducting comprehensive due diligence. If they fail to do so, they will be subject to capital penalties.

• Strengthened capital requirements have been introduced to cover risks in the trading book and related to re-securitizations, following Basel 2.5 agreement.

As part of a wider plan of the Spanish Government for the strengthening of the financial sector, the Royal Decree-Law 2/2011, of February 18 (“RD-L 2/2011”), established new stricter minimum capital requirements for Spanish credit institutions, with a new capital requirement (“capital principal”) for all credit institutions of a minimum of 8%. This ratio will be 10% for those institutions that are not listed on an stock exchange, which have a small presence of private investors, and are dependent upon wholesale funding markets for over 20% of their assets, since they have more limited access to the capital markets. Entities with capital shortages were forced to implement a strategy for closing any detected capital gap in 2011, with the FROB acting as a backstop, in the event of a failure to cover the capital needs through the market.

The entry into force of RD-L 2/2011 opened up a new stage in the process of restructuring and strengthening of the Spanish savings banks. The focus was on recapitalizing institutions that need more capital and encouraging savings banks to merge or to transfer their financial activity to a bank to ease their access to capital markets and wholesale funding. These restructuring and recapitalization processes should ease compliance with Basel III, or at least Basel III-2013, even if some differences exist between the RD-L 2/2011 and the Basel III capital standards.

RD-L 2/2011’s “capital principal” is largely composed of the same items as those considered in the Basel III accord, that is, capital instruments, share premiums, reserves and minority interests. In addition, losses, intangibles and negative value adjustments are deducted in both definitions. The differences between the definitions set forth in RD-L 2/2011 and Basel III relate to the treatment of some deductions, such as investments in financial institutions.

As shown below, we fulfilled the minimum capital requirements as required by RD-L 2/2011 as of December 31, 2011 and December 31, 2010:

	Basel II Capital Ratio			RD-L 2/2011 “Capital Principal” ratio
Minimum required		8	%		8	%
December 2011(1)		12.9	%		9.7	%
December 2010		13.7	%		9.5	%

(1) The decrease in capital ratios as of December 31, 2011 was mainly due to the acquisition of Garanti (see “Item 4. Information on the Company—History and Development of the Company”).

The new Royal Decree-Law 2/2012, of February 3 (“RD-L 2/2012”), introduces, among other measures, a capital buffer requirement, in terms of “Capital Principal”, equal to 20% of an entity’s problematic credit assets and foreclosed real estate assets. The deadline for complying with this new requirement is December 31, 2012. We believe BBVA will meet this new requirement as of December 31, 2012.

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In addition, we believe we will meet the EBA’s new minimum capital recommendations referred to in “Item 3. Key Information—Risk Factors—Risks Relating to Us and Our Business—We are subject to substantial regulation, and regulatory and governmental oversight. Adverse regulatory developments or changes in government policy could have a material adverse effect on our business, results of operations and financial condition,” as of June 30, 2012.

Capital Management

Basel Capital Accord—Basel II—Economic Capital

The Group’s capital management is performed at both the regulatory and economic levels.

Regulatory capital management is based on the analysis of the capital base and the capital ratios (core capital, Tier 1, etc.) using Basel (“BIS”) and Bank of Spain criteria. See Note 33 to the Consolidated Financial Statements.

The aim is to achieve a capital structure that is as efficient as possible in terms of both cost and compliance with the requirements of regulators, ratings agencies and investors. Active capital management includes securitizations, sales of assets, and preferred and subordinated issues of equity and hybrid instruments.

The Bank has obtained the Bank of Spain’s approval with respect to its internal model of capital estimation (“IRB”) concerning certain portfolios and its operational risk internal model.

From an economic standpoint, capital management seeks to optimize value creation at the Group and at its different business units.

The Group allocates economic capital (“CER”) commensurate with the risks incurred by each business. This is based on the concept of unexpected loss at a certain level of statistical confidence, depending on the Group’s targets in terms of capital adequacy. These targets are applied at two levels: the first is core equity, which determines the allocated capital. The Group uses this amount as a basis for calculating the return generated on the equity (“ROE”) in each business. The second level is total capital, which determines the additional allocation in terms of subordinated debt and preference shares. The CER calculation combines lending risk, market risk (including structural risk associated with the balance sheet and equity positions), operational risk and fixed asset and technical risks in the case of insurance companies.

Stockholders’ equity, as calculated under BIS rules, is an important metric for the Group. However, for the purpose of allocating capital to business areas the Group prefers CER. It is risk-sensitive and thus better reflects management policies for the individual businesses and the business portfolio. These provide an equitable basis for assigning capital to businesses according to the risks incurred and make it easier to compare returns.

To internal effects of management and pursuit of the business areas, the Group realizes a capital allocation to each business area.

Concentration of Risk

The Bank of Spain regulates the concentration of risk. Since January 1, 1999, any exposure to a person or group exceeding 10% of a group’s or bank’s regulatory capital has been deemed a concentration. The total amount of exposure represented by all of such concentrations may not exceed 800% of regulatory capital. Exposure to a single person or group may not exceed 25% (20% in the case of non-consolidated companies of the economic group) of a bank’s or group’s regulatory capital.

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Legal and Other Restricted Reserves

We are subject to the legal and other restricted reserves requirements applicable to Spanish companies. Please see “—Capital Requirements”.

Allowance for Loan Losses

For a discussion of allowances for loan losses and country risk, see Note 2.2.1 to the Consolidated Financial Statements.

Regulation of the Disclosure of Fees and Interest Rates

Interest rates on most kinds of loans and deposits are not subject to a maximum limit. Banks must publish their preferential rates, rates applied on overdrafts, and fees and commissions charged in connection with banking transactions. Banking clients must be provided with written disclosure adequate to permit customers to ascertain transaction costs. The foregoing regulations are enforced by the Bank of Spain in response to bank client complaints.

Law 44/2002, of November 22, concerning measures to reform the Spanish financial system, contained a rule concerning the calculation of variable interest applicable to loans and credit secured by mortgages, bails, pledges or any other equivalent guarantee.

Employee Pension Plans

Under the relevant collective labor agreements, BBVA and some of its subsidiaries provide supplemental pension payments to certain active and retired employees and their beneficiaries. These payments supplement social security benefits from the Spanish state. See Note 2.2.12 and Note 26 to the Consolidated Financial Statements.

Dividends

If a bank meets the Bank of Spain’s minimum capital requirements described above under “—Capital Requirements”, it may dedicate all of its net profits to the payment of dividends, although, in practice, banks consult with the Bank of Spain before declaring a dividend. Compliance with such requirements notwithstanding, the Bank of Spain may advise a bank against the payment of dividends on grounds of prudence. In no event may dividends be paid from non-distributable reserves. Banks which fail to comply with the capital adequacy ratio by more than 20% are required to devote all of their net profits to increasing their capital ratios. Banks which fail to meet the required ratio by 20% or less must obtain prior approval of the Bank of Spain to distribute any dividends and must devote at least 50% of net profits to increasing their capital ratios. In addition, banks, and their directors and executive officers that do not comply with the liquidity and investment ratios and capital adequacy requirements may be subject to fines or other sanctions. Compliance with the Bank of Spain’s capital requirements is determined on both a consolidated and individual basis. Our Spanish subsidiaries are in compliance with these capital adequacy requirements on both a consolidated and individual basis. If a bank has no net profits, the board of directors may propose at the general meeting of the stockholders that a dividend be declared out of retained earnings.

The Bank of Spain recommends that interim dividends not exceed an amount equal to one-half of net income attributed to parent company from the beginning of the corresponding fiscal year. No interim dividend may be declared when a bank does not meet the minimum capital requirements and, according to the recommendations of the Bank of Spain, interim dividends may not be declared until the Bank of Spain has sufficient knowledge with respect to the year’s profits. Although banks are not legally required to seek prior approval from the Bank of Spain before declaring interim dividends, the

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Bank of Spain had asked that banks consult with it on a voluntary basis before declaring interim dividends. It should be noted that the Bank of Spain recommended in 2008 to Spanish banks general moderation on the distribution of dividends, to increase their voluntary reserves in order to strengthen their financial situation and to distribute any dividends in treasury stock.

Our bylaws allow for dividends to be paid in cash or in kind as determined by shareholder resolution.

Scrip Dividend

During 2011, a scrip dividend scheme called “Dividendo Opción” was successfully implemented as approved by the shareholders’ general meeting held on March 11, 2011. In line with the 2011 “Dividendo Opción” scheme, the BBVA annual shareholders’ general meeting held on March 16, 2012, passed a resolution adopting two different free-of-charge capital increases for the implementation of a new “Dividendo Opción” scheme for this year.

Upon the execution of each such free-of-charge capital increase, BBVA shareholders will have the option to receive all or part of their remuneration in newly issued free-of-charge shares or to receive all of their remuneration in cash. For additional information on the “Dividendo Opción” scheme, including its tax implications, see “Item 10. Additional Information—Taxation—Spanish Tax Considerations—Taxation of Dividends—Scrip Dividend”.

The “Dividendo Opción” is implemented as an alternative remuneration scheme for BBVA shareholders with the aim to provide BBVA shareholders with a flexible option to receive newly issued shares of the Bank, without thereby altering BBVA’s cash remuneration policy, in line with the current trend that is being put into practice by other entities in the domestic and international markets.

Shareholders will have the “Dividendo Opción” available to them on two different dates in 2012, coinciding with the dates on which dividends have been historically paid out. However, it should be noted that each capital increase is independent of the other, such that either one may be executed on different dates and either one, or both, may not be made.

Limitations on Types of Business

Spanish banks are subject to certain limitations on the types of businesses in which they may engage directly, but they are subject to few limitations on the types of businesses in which they may engage indirectly.

Mortgage Legislation

Law 2/1981, of March 25, on mortgage market, as amended by Law 41/2007, regulates the different aspects of the Spanish mortgage market and establishes additional rules for the mortgage and financial system.

Royal Decree 716/2009, of April 24, implements several aspects of Law 2/1981, of March 25. The most significant aspects implemented by Royal Decree 716/2009 are, among others, (i) the modification on the loan-to-value ratio requirement intending to improve the quality of Spanish mortgage-backed securities; (ii) the elimination of many of the administrative requirements for the issuance of covered bonds and mortgage bonds; and (iii) the implementation of a special accounting record of the loans and credit facilities used to back issuances of covered bonds and mortgage-backed bonds.

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Mutual Fund Regulation

Mutual funds in Spain are regulated by the Ministry of the Economy (Dirección General del Tesoro y Política Financiera del Ministerio de Economía) and by the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores or “CNMV”). All mutual funds and mutual fund management companies are required to be registered with the CNMV. Spanish mutual funds may be subject to investment limits with respect to single sectors or companies and overall portfolio diversification minimums. In addition, periodic reports including a review of the fund’s performance and any material events affecting the fund are required to be distributed to the fund’s investors and filed with the CNMV.

Reform of the Spanish Corporate Enterprises Act

The consolidated text of the Corporate Enterprises Act adopted under Legislative Royal Decree 1/2010, of July 2, has repealed the former Companies Act, adopted under Legislative Royal Decree 1564/1989, of December 22. This royal legislative decree stems from the authorization set out in the Law 3/2009, of April 3, on structural changes in companies, enabling the Government to proceed to consolidate the legislation for joint stock (“sociedades anónimas”) and limited liability (“sociedades de responsabilidad limitada”) in a single text, bringing together the contents of the two aforementioned acts, as well, the part of the Securities Exchange Act that regulates the most purely corporate-related aspects of joint stock companies whose securities are traded on an official secondary market. The consolidated text also includes the articles of the Commercial Code that address limited partnerships, a derivative corporate device that is barely used in practice. Law 25/2011, of August 1, partially amended the Corporate Enterprises Act and incorporated Directive 2007/36/EC, of July 11, on the exercise of certain rights of shareholders in listed companies.

Reform of the Spanish Auditing Law

Law 12/2010, of June 30, amended Law 19/1988, of July 12, on Accounts Audit, Law 24/1988, of July 28, on Securities Exchanges and the consolidated text of the former Companies Act adopted by Legislative Royal Decree 1564/1989, of December 22 (currently, the Corporate Enterprises Act), for its adaptation to EU regulations. This law transposed Directive EU/2006/43 which regulates aspects, among others, related to: authorization and registry of auditors and auditing companies, confidentiality and professional secrecy which the auditors may observe, rules on independency and liability as well as certain rules on the composition and functions of the auditing committee. The Royal Decree 1/2011, of July 1, approved the consolidated text of the Accounts Audit Law.

U.S. Regulation

Banking Regulation

BBVA is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As such, BBVA is subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Among other things, the Group’s direct and indirect activities and investments in the United States are limited to banking activities and certain non-banking activities that are “closely related to banking,” as determined by the Federal Reserve, and certain other activities permitted under the BHC Act. BBVA also is required to obtain the prior approval of the Federal Reserve before acquiring, directly or indirectly, the ownership or control of more than 5% of any class of voting stock of any U.S. bank or bank holding company.

Under current Federal Reserve policy, BBVA is required to act as a source of financial strength for its U.S. bank subsidiaries. Among other things, this source of strength obligation may result in a requirement for BBVA, as controlling shareholder, to inject capital into any of its U.S. bank subsidiaries.

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The Group’s U.S. bank subsidiaries and BBVA’s U.S. branches are also subject to supervision and regulation by a variety of other U.S. regulatory agencies. In addition to supervision by the Federal Reserve, BBVA’s New York branch is licensed and supervised by the New York State Department of Financial Services. Each of BBVAPR Holding Corporation, a direct subsidiary of BBVA, BBVA USA Bancshares, Inc., a direct subsidiary of BBVA, and its wholly-owned subsidiary, BBVA Compass Bancshares, Inc., an indirect subsidiary of BBVA, is considered a bank holding company within the meaning of the BHC Act and is subject to supervision and regulation by the Federal Reserve. Compass Bank is an Alabama state-chartered bank, is a member of the Federal Reserve System, and has branches in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. Compass Bank is supervised and examined by the Federal Reserve and the State of Alabama Banking Department. In addition, certain aspects of Compass Bank’s branch operations in Arizona, California, Colorado, Florida, New Mexico, and Texas are subject to examination by their respective state banking regulators in such states. Banco Bilbao Vizcaya Argentaria Puerto Rico (“BBVA Puerto Rico”) is a bank chartered and supervised by the Oficina del Comisionado de Instituciones Financieras de Puerto Rico. Compass Bank and BBVA Puerto Rico are also depository institutions insured by, and subject to the regulation of, the Federal Deposit Insurance Corporation.

BBVA Bancomer, S.A. agency office in Houston, Texas is a non-FDIC insured agency office of BBVA Bancomer, S.A., an indirect subsidiary of BBVA, that is licensed under the laws of the State of Texas and supervised by the Texas Department of Banking and the Federal Reserve.

Bancomer Transfer Services, Inc., a non-banking affiliate of BBVA and a direct subsidiary of BBVA Bancomer USA, Inc., is licensed as a money transmitter by the State of California Department of Financial Institutions, the Texas Department of Banking, and certain other state regulatory agencies. Bancomer Transfer Services, Inc. is also registered as a money services business with the Financial Crimes Enforcement Network of the U.S. Department of the Treasury.

A major focus of U.S. governmental policy relating to financial institutions in recent years has been aimed at fighting money laundering and terrorist financing. Regulations applicable to BBVA and certain of its affiliates impose obligations to maintain appropriate policies, procedures, and controls to detect, prevent, and report money laundering. In particular, Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), as amended, requires financial institutions operating in the United States to (i) give special attention to correspondent and payable-through bank accounts, (ii) implement enhanced reporting due diligence, and ‘know your customer’ standards for private banking and correspondent banking relationships, (iii) scrutinize the beneficial ownership and activity of certain non-U.S. and private banking customers (especially for so-called politically exposed persons), and (iv) develop new anti-money laundering programs, due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance programs under the Bank Secrecy Act and regulations of the Office of Foreign Assets Control. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the institution.

Regulation of Other U.S. Entities

The Group’s U.S. broker-dealers are subject to regulation and supervision by the SEC and the Financial Industry Regulatory Authority (FINRA) with respect to their securities activities, as well as various U.S. state regulatory authorities. Additionally, the securities underwriting and dealing activities of BBVA’s indirect U.S. broker-dealer subsidiary, BBVA Securities, Inc., are subject to regulation and supervision by the Federal Reserve.

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The activities of the Group’s U.S. investment adviser affiliates are regulated and supervised by the SEC.

In addition, the Group’s U.S. insurance agency affiliates are subject to regulation and supervision by various U.S. state insurance regulatory authorities.

Dodd-Frank Act

On July 21, 2010, the United States enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which provides a broad framework for significant regulatory changes that will extend to almost every area of U.S. financial regulation. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the liquidation of failing systemically significant U.S. financial institutions, over-the-counter derivatives, restrictions on the ability of banking entities to engage in proprietary trading activities and invest in hedge funds and private equity funds (known as the “Volcker Rule”), consumer and investor protection, hedge fund registration, municipal advisor registration and regulation, securitization, investment advisor registration and regulation and the role of credit-rating agencies. Compass Bank has registered with the SEC and the Municipal Securities Rulemaking Board as a municipal advisor pursuant to the Dodd-Frank Act’s municipal advisor registration requirements.

Various U.S. regulators are implementing the Dodd-Frank Act through detailed rulemaking that will likely continue for several years. Once it is fully implemented, the Dodd-Frank Act and related rules are expected to result in additional costs and impose certain limitations and restrictions affecting the conduct of our businesses, although uncertainty remains about the final details, impact and timing of many of the rules.

Among other changes, the Dodd-Frank Act requires that the Federal banking agencies, including the Federal Reserve, establish minimum leverage and risk-based capital requirements applicable to insured depository institutions, bank and thrift holding companies and systemically important non-bank financial companies. These minimum requirements must be not less than the generally applicable risk-based capital and leverage capital requirements, and not quantitatively lower than the requirements in effect for insured depository institutions as of the date of enactment of the Dodd-Frank Act. In response to these requirements, the Federal banking agencies have adopted a rule effectively establishing a permanent capital floor for covered institutions equal to the risk-based capital requirements under the banking agencies’ Basel I capital adequacy guidelines. It is anticipated that additional rules will be proposed and adopted pursuant to the Dodd-Frank Act’s minimum capital provisions, including adjustments to minimum capital requirements in response to further revisions and refinements to the international standards adopted by the Basel Committee on Banking Supervision.

The Dodd-Frank Act also provides Federal banking agencies with tools to impose greater capital, leverage and liquidity requirements and other prudential standards for financial institutions that pose significant systemic risk and bank holding companies with greater than $50 billion in assets. In January 2012, the Federal Reserve proposed extensive rules to implement these enhanced supervisory and prudential requirements, including additional capital and leverage requirements, additional liquidity requirements, limits on single counterparty exposure, risk management and risk committee requirements, more stringent stress testing requirements and various mandatory remediation actions under certain circumstances. The rules proposed by the Federal Reserve to date are not directly applicable to foreign bank holding companies, such as BBVA, but are applicable to U.S.-based bank holding companies with consolidated assets in excess of $50 billion, including BBVA USA Bancshares, Inc. The Federal Reserve has announced that it is actively developing a proposed framework for applying the Dodd-Frank Act’s enhanced prudential standards and early remediation requirements to foreign banking organizations. In applying its enhanced prudential standards rulemaking to foreign

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bank holding companies, the Federal Reserve is required to take into account the principle of national treatment and equality of competitive opportunity, and the extent to which the foreign bank holding company is subject to comparable home country standards.

Under capital plan and stress test rules adopted by the Federal Reserve, BBVA USA Bancshares, Inc. is required to conduct periodic stress tests and submit an annual capital plan to the Federal Reserve for review, which must, among other things, include a description of planned capital actions and demonstrate the company’s ability to maintain minimum capital above existing minimum capital ratios and above a Tier 1 common equity-to-total risk-weighted asset ratio of 5% under both expected and stressed conditions over a minimum nine-quarter planning horizon.

The Dodd-Frank Act’s Volcker Rule also limits the ability of banking entities, except solely outside the United States in the case of non-U.S. banking entities, to sponsor or invest in private equity or hedge funds and to engage in certain types of proprietary trading unrelated to serving clients. U.S. regulators have proposed rules implementing the statute. The Dodd-Frank Act also changes the Federal Deposit Insurance Corporation (“FDIC”) deposit insurance assessment framework (the amounts paid by FDIC-insured institutions into the deposit insurance fund of the FDIC), primarily by basing assessments on an FDIC-insured institution’s total assets less tangible equity rather than on U.S. domestic deposits, which is expected to shift a greater portion of the aggregate assessments to large banks (such as Compass Bank).

Under the so-called swap “push-out” provisions of the Dodd-Frank Act, the derivatives activities of U.S. banks (such as Compass Bank) and U.S. branch offices of foreign banks (such as BBVA’s New York branch) will be restricted, which may necessitate changes to how we conduct our derivatives activities. Entities that are swap dealers, security-based swap dealers, major swap participants or major security-based swap participants will be required to register with the SEC, the U.S. Commodity Futures Trading Commission, or both, and will become subject to additional requirements relating to capital, margin, business conduct, and recordkeeping, among others.

There are various qualitative and quantitative restrictions on the extent to which BBVA and its non-bank subsidiaries can borrow or otherwise obtain credit from their U.S. banking affiliates or engage in certain other transactions involving those subsidiaries. In general, these transactions must be on terms that would ordinarily be offered to unaffiliated entities, must be secured by designated amounts of specified collateral and are subject to quantitative limitations. These restrictions also apply to certain transactions of our New York Branch with our U.S. broker-dealer affiliates and certain of our other affiliates. Effective in July 2012, the Dodd-Frank Act subjects credit exposure arising from derivative transactions, securities borrowing and lending transactions, as well as repurchase/reverse repurchase agreements to the above-mentioned collateral and quantitative limitations.

Regulations that may be adopted by the Consumer Financial Protection Bureau, established under the Dodd-Frank Act, could affect the nature of the activities which a bank (including Compass Bank) may conduct, and may impose restrictions and limitations on the conduct of such activities.

Furthermore, the Dodd-Frank Act requires issuers with listed securities, which may include foreign private issuers such as BBVA, to establish a “clawback” policy to recoup previously awarded employee compensation in the event of an accounting restatement. The Dodd-Frank Act also grants the SEC discretionary rule-making authority to impose a new fiduciary standard on brokers, dealers and investment advisers, and expands the extraterritorial jurisdiction of U.S. courts over actions brought by the SEC or the United States with respect to violations of the antifraud provisions in the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

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C. Organizational Structure

As of December 31, 2011, the BBVA Group was made up of 293 fully consolidated and 27 proportionately consolidated companies, as well as 73 companies consolidated using the equity method.

The companies are principally domiciled in the following countries: Argentina, Belgium, Bolivia, Brazil, Cayman Islands, Chile, Colombia, Ecuador, France, Germany, Ireland, Italy, Luxembourg, Mexico, Netherlands, Netherlands Antilles, Panama, Peru, Portugal, Puerto Rico, Spain, Switzerland, United Kingdom, United States of America, Uruguay and Venezuela. In addition, BBVA has an active presence in Asia.

Below is a simplified organizational chart of BBVA’s most significant subsidiaries as of December 31, 2011.

Subsidiary	Country of Incorporation	Activity		BBVA Voting Power		BBVA Ownership		Total Assets
				(in Percentages)				(In Millions of Euros)
BBVA BANCOMER, S.A. DE C.V.	Mexico		Bank		100.00		100.00		69,158
COMPASS BANK	United States		Bank		100.00		100.00		52,565
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.	Chile		Bank		68.18		68.18		12,489
BANCO CONTINENTAL, S.A.	Peru		Bank		92.24		46.12		12,118
BBVA SEGUROS, S.A. DE SEGUROS Y REASEGUROS	Spain		Insurance		99.95		99.95		13,807
BBVA COLOMBIA, S.A.	Colombia		Bank		95.43		95.43		10,391
BANCO PROVINCIAL S.A. – BANCO UNIVERSAL	Venezuela		Bank		55.60		55.60		12,906
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A.	Portugal		Bank		100.00		100.00		7,140
BBVA BANCO FRANCES, S.A.	Argentina		Bank		76.04		76.04		6,736
BANCO BILBAO VIZCAYA ARGENTARIA PUERTO RICO, S.A.	Puerto Rico		Bank		100.00		100.00		3,848
PENSIONES BANCOMER, S.A. DE C.V.	Mexico		Insurance		100.00		100.00		2,669
SEGUROS BANCOMER, S.A. DE C.V.	Mexico		Insurance		100.00		100.00		2,544
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.	Panama		Bank		98.92		98.92		1,670
BBVA SUIZA, S.A. (BBVA SWITZERLAND)	Switzerland		Bank		100.00		100.00		1,458
UNO-E BANK, S.A.	Spain		Bank		100.00		100.00		1,368
BBVA PARAGUAY, S.A.	Paraguay		Bank		100.00		100.00		1,294

D. Property, Plants and Equipment

We own and rent a substantial network of properties in Spain and abroad, including 3,016 branch offices in Spain and, principally through our various affiliates, 4,441 branch offices abroad as of December 31, 2011. As of December 31, 2011, approximately 84% of our branches in Spain and 58% of our branches abroad were rented from third parties pursuant to short-term leases that may be renewed by mutual agreement.

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BBVA, through a real estate company of the Group, is constructing its new corporate headquarters at a development area in the north of Madrid (Spain). As of December 31, 2011, the accumulated investment for this project amounted to € 528 million.

E. Selected Statistical Information

The following is a presentation of selected statistical information for the periods indicated. Where required under Industry Guide 3, we have provided such selected statistical information separately for our domestic and foreign activities, pursuant to our calculation that our foreign operations are significant according to Rule 9-05 of Regulation S-X.

Average Balances and Rates

The tables below set forth selected statistical information on our average balance sheets, which are based on the beginning and month-end balances in each year. We do not believe that monthly averages present trends materially different from those that would be presented by daily averages. Interest income figures, when used, include interest income on non-accruing loans to the extent that cash payments have been received. Loan fees are included in the computation of interest revenue.

	Average Balance Sheet—Assets and Interest from Earning Assets
	Year Ended December 31, 2011							Year Ended December 31, 2010							Year Ended December 31, 2009
	Average Balance		Interest		Average Yield(1)			Average Balance		Interest		Average Yield(1)			Average Balance		Interest		Average Yield(1)
	(In Millions of Euros, Except Percentages)
ASSETS
Cash and balances with central banks		21,245		250		1.2	%		21,342		239		1.1	%		18,638		253		1.4	%
Debt securities, equity instruments and derivatives		141,780		4,238		3.0	%		145,990		3,939		2.7	%		138,030		4,207		3.0	%
Loans and receivables		368,312		19,485		5.3	%		358,587		16,797		4.7	%		355,121		19,194		5.4	%
Loans and advances to credit institutions		26,390		639		2.4	%		25,561		501		2.0	%		26,152		697		2.7	%
Loans and advances to customers		341,922		18,846		5.5	%		333,021		16,296		4.9	%		328,969		18,498		5.6	%
In euros(2)		219,887		7,479		3.4	%		219,857		7,023		3.2	%		222,254		9,262		4.2	%
In other currencies(3)		122,034		11,367		9.3	%		113,164		9,273		8.2	%		106,715		9,236		8.7	%
Other financial income		—		215		—			—		159		—			—		120		—
Non-earning assets		37,241		—		—			32,894		—		—			31,180		—		—
Total average assets		568,579		24,188		4.3	%		558,808		21,134		3.8	%		542,969		23,775		4.4	%

(1) Rates have been presented on a non-taxable equivalent basis.

(2) Amounts reflected in euro correspond to predominantly domestic activities.

(3) Amounts reflected in other currencies correspond to predominantly foreign activities.

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	Average Balance Sheet—Liabilities and Interest Paid on Interest Bearing Liabilities
	Year Ended December 31, 2011							Year Ended December 31, 2010							Year Ended December 31, 2009
	Average Balance		Interest		Average Yield(1)			Average Balance		Interest		Average Yield(1)			Average Balance		Interest		Average Yield(1)
	(In Millions of Euros, Except Percentages)
LIABILITIES
Deposits from central banks and credit institutions		77,382		2,037		2.6	%		80,177		1,515		1.9	%		74,017		2,143		2.9	%
Customer deposits		276,683		5,644		2.0	%		259,330		3,551		1.4	%		249,106		4,056		1.6	%
In euros(2)		153,514		2,419		1.6	%		121,956		1,246		1.0	%		116,422		1,326		1.1	%
In other currencies(3)		123,169		3,225		2.6	%		137,374		2,304		1.7	%		132,684		2,730		2.1	%
Debt certificates and subordinated liabilities		109,860		2,613		2.4	%		119,684		2,334		1.9	%		120,228		3,098		2.6	%
Other financial costs		—		734		—			—		415		—			—		596		—
Non-interest-bearing liabilities		65,980		—		—			66,541		—		—			70,020		—		—
Equity		38,674		—		—			33,076		—		—			29,598		—		—
Total average liabilities		568,579		11,028		1.9	%		558,807		7,814		1.4	%		542,969		9,893		1.8	%

(1) Rates have been presented on a non-taxable equivalent basis.

(2) Amounts reflected in euro correspond to predominantly domestic activities.

(3) Amounts reflected in other currencies correspond to predominantly foreign activities.

Changes in Net Interest Income-Volume and Rate Analysis

The following table allocates changes in our net interest income between changes in volume and changes in rate for 2011 compared to 2010, and 2010 compared to 2009. Volume and rate variance have been calculated based on movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities. The only out-of-period items and adjustments excluded from the following table are interest payments on loans which are made in a period other than the period during which they are due. Loan fees were included in the computation of interest income.

	2011/2010
	Increase (decrease) Due to Changes in
	Volume(1)			Rate(1)(2)		Net Change
	(In Millions of Euros)
Interest income
Cash and balances with central banks		(1	)		12		11
Debt securities, equity instruments and derivatives		(114	)		413		299
Loans and advances to credit institutions		16			122		138
Loans and advances to customers		436			2,114		2,550
In euros		1			455		456
In other currencies		727			1,367		2,094
Other financial income		—			56		56
Total income		370			2,684		3,054

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	2011/2010
	Increase (decrease) Due to Changes in
	Volume(1)			Rate(1)(2)			Net Change
	(In Millions of Euros)
Interest expense
Deposits from central banks and credit institutions		(53	)		575			522
Customer deposits		238			1,855			2,093
In euros		323			850			1,173
In other currencies		(238	)		1,159			920
Debt certificates and subordinated liabilities		(192	)		471			279
Other financial costs		—			320			320
Total expense		137			3,077			3,214
Net interest income		233			(393	)		(160	)

(1) Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate.

(2) Rates have been presented on a non-taxable equivalent basis.

	2010/2009
	Increase (decrease) Due to Changes in
	Volume(1)			Rate(1)(2)			Net Change
	(In Millions of Euros)
Interest income
Cash and balances with central banks		37			(51	)		(14	)
Debt securities, equity instruments and derivatives		243			(511	)		(268	)
Loans and advances to credit institutions		(16	)		(179	)		(195	)
Loans and advances to customers		228			(2,429	)		(2,201	)
In euros		(100	)		(2,139	)		(2,239	)
In other currencies		558			(521	)		37
Other financial income		—			39			39
Total income		693			(3,333	)		(2,641	)
Interest expense
Deposits from central banks and credit institutions		178			(806	)		(628	)
Customer deposits		166			(672	)		(505	)
In euros		63			(143	)		(80	)
In other currencies		96			(522	)		(425	)
Debt certificates and subordinated liabilities		(14	)		(750	)		(764	)
Other financial costs		—			(181	)		(181	)
Total expense		288			(2,367	)		(2,078	)
Net interest income		405			(966	)		(562	)

(1) Variances caused by changes in both volume and rate have been allocated proportionally to volume and rate.

(2) Rates have been presented on a non-taxable equivalent basis.

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Interest Earning Assets—Margin and Spread

The following table analyzes the levels of our average earning assets and illustrates the comparative gross and net yields and spread obtained for each of the years indicated.

	December 31,
	2011			2010			2009
	(In Millions of Euros, Except Percentages)
Average interest earning assets		531,337			525,914			511,789
Gross yield(1)		4.6	%		4.0	%		4.6	%
Net yield(2)		4.3	%		3.8	%		4.4	%
Net interest margin (3)		2.5	%		2.5	%		2.7	%
Average effective rate paid on all interest-bearing liabilities		2.4	%		1.7	%		2.2	%
Spread(4)		2.2	%		2.3	%		2.4	%

(1) Gross yield represents total interest income divided by average interest earning assets.

(2) Net yield represents total interest income divided by total average assets.

(3) Net interest margin represents net interest income as percentage of average interest earning assets.

(4) Spread is the difference between gross yield and the average cost of interest-bearing liabilities.

ASSETS

Interest-Bearing Deposits in Other Banks

As of December 31, 2011, interbank deposits represented 3.9% of our assets. Of such interbank deposits, 34.9% were held outside of Spain and 65.1% in Spain. We believe that our deposits are generally placed with highly rated banks and have a lower risk than many loans we could make in Spain. Such deposits, however, are subject to the risk that the deposit banks may fail or the banking system of certain of the countries in which a portion of our deposits are made may face liquidity or other problems.

Securities Portfolio

As of December 31, 2011, our securities were carried on our consolidated balance sheet at a carrying amount of €92,272 million, representing 15.4% of our assets. €30,115 million, or 32.6%, of our securities consisted of Spanish Treasury bonds and Treasury bills. The average yield during 2011 on investment securities that BBVA held was 4.6%, compared to an average yield of approximately 5.3% earned on loans and receivables during 2011. The market or appraised value of our total securities portfolio as of December 31, 2011, was €91,507 million. See Notes 10, 12 and 14 to the Consolidated Financial Statements. For a discussion of our investments in affiliates, see Note 17 to the Consolidated Financial Statements. For a discussion of the manner in which we value our securities, see Notes 2.2.1 and 8 to the Consolidated Financial Statements.

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The following tables analyze the carrying amount and market value of debt securities as of December 31, 2011, December 31, 2010 and December 31, 2009, respectively. Trading portfolio is not included in the tables below because the amortized costs and fair values of these items are the same. See Note 10 to the Consolidated Financial Statements.

	As of December 31, 2011
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
DEBT SECURITIES -
AVAILABLE FOR SALE PORTFOLIO
Domestic		25,023		23,522		183		(1,684	)
Spanish Government and other government agency debt securities		20,597		19,271		58		(1,384	)
Other debt securities		4,426		4,251		125		(300	)
Issued by central banks		—		—		—		—
Issued by credit institutions		3,307		3,140		80		(247	)
Issued by other institutions		1,119		1,111		45		(53	)
International		29,573		29,392		1,038		(1,219	)
Mexico		4,815		4,991		176		—
Mexican Government and other government agency debt securities		4,742		4,906		164		—
Other debt securities		73		85		12		—
Issued by central banks		—		—		—		—
Issued by credit institutions		59		70		11		—
Issued by other institutions		14		15		1		—
United States		7,355		7,363		243		(235	)
U.S. Treasury and other U.S. government agencies debt securities		487		483		8		(12	)
States and political subdivisions		509		537		28		—
Other debt securities		6,359		6,343		207		(223	)
Issued by central banks		—		—		—		—
Issued by credit institutions		631		617		22		(36	)
Issued by other institutions		5,728		5,726		185		(187	)
Other countries		17,403		17,038		619		(984	)
Securities of other foreign Governments		11,617		11,296		345		(666	)
Other debt securities		5,786		5,742		274		(318	)
Issued by central banks		849		855		6		—
Issued by credit institutions		3,080		2,998		184		(266	)
Issued by other institutions		1,857		1,889		84		(52	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		54,596		52,914		1,221		(2,903	)
HELD TO MATURITY PORTFOLIO
Domestic		7,373		6,848		1		(526	)
Spanish Government and other government agency debt securities		6,520		6,060		1		(461	)
Other debt securities		853		788		—		(65	)
Issued by central banks		—		—		—		—
Issued by credit institutions		255		244		—		(11	)
Issued by other institutions		598		544		—		(54	)
International		3,582		3,342		12		(252	)
Securities of other foreign Governments		3,376		3,149		9		(236	)
Other debt securities		206		193		3		(16	)
TOTAL HELD TO MATURITY PORTFOLIO		10,955		10,190		13		(778	)
TOTAL DEBT SECURITIES		65,551		63,104		1,234		(3,681	)

(1) Fair values for listed securities are determined on the basis of their quoted values at the end of the period. Appraised values are used for unlisted securities based on our estimates and valuation techniques. See Note 8 to the Consolidated Financial Statements.

49

	As of December 31, 2010
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
DEBT SECURITIES
AVAILABLE FOR SALE PORTFOLIO
Domestic		21,929		20,566		107		(1,470	)
Spanish Government and other government agency debt securities		16,543		15,337		58		(1,264	)
Other debt securities		5,386		5,229		49		(206	)
Issued by central banks		—		—		—		—
Issued by credit institutions		4,222		4,090		24		(156	)
Issued by other institutions		1,164		1,139		25		(50	)
International		30,109		30,309		1,080		(880	)
Mexico		9,653		10,106		470		(17	)
Mexican Government and other government agency debt securities		8,990		9,417		441		(14	)
Other debt securities		663		689		29		(3	)
Issued by central banks		—		—		—		—
Issued by credit institutions		553		579		28		(2	)
Issued by other institutions		110		110		1		(1	)
United States		6,850		6,832		216		(234	)
U.S. Treasury and other U.S. government agencies debt securities		580		578		6		(8	)
States and political subdivisions		187		193		7		(1	)
Other debt securities		6,083		6,061		203		(225	)
Issued by central banks		—		—		—		—
Issued by credit institutions		2,981		2,873		83		(191	)
Issued by other institutions		3,102		3,188		120		(34	)
Other countries		13,606		13,371		394		(629	)
Securities of other foreign Governments		6,743		6,541		169		(371	)
Other debt securities		6,863		6,830		225		(258	)
Issued by central banks		944		945		1		—
Issued by credit institutions		4,431		4,420		177		(188	)
Issued by other institutions		1,488		1,465		47		(70	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		52,038		50,875		1,187		(2,350	)
HELD TO MATURITY PORTFOLIO
Domestic		7,503		6,771		2		(734	)
Spanish Government and other government agency debt securities		6,611		5,942		2		(671	)
Other debt securities		892		829		—		(63	)
Issued by central banks		—		—		—		—
Issued by credit institutions		290		277		—		(13	)
Issued by other institutions		602		552		—		(50	)
International		2,443		2,418		16		(41	)
Securities of other foreign Governments		2,181		2,171		10		(20	)
Other debt securities		262		247		6		(21	)
TOTAL HELD TO MATURITY PORTFOLIO		9,946		9,189		18		(775	)
TOTAL DEBT SECURITIES		61,984		60,064		1,205		(3,125	)

(1) Fair values for listed securities are determined on the basis of their quoted values at the end of the period. Appraised values are used for unlisted securities based on our estimates and valuation techniques. See Note 8 to the Consolidated Financial Statements.

50

	As of December 31, 2009
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
DEBT SECURITIES
AVAILABLE FOR SALE PORTFOLIO
Domestic		24,577		24,869		487		(195	)
Spanish Government and other government agency debt securities		18,312		18,551		309		(70	)
Other debt securities		6,265		6,318		178		(125	)
International		31,868		32,202		1,067		(733	)
United States		6,804		6,805		174		(173	)
U.S. Treasury and other U.S. government agencies debt securities		414		416		4		(2	)
States and political subdivisions		214		221		7		—
Other debt securities		6,176		6,168		163		(171	)
Other countries		25,064		25,397		<