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, 2012

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****
Guarantee of Guaranteed Fixed Rate Senior Notes due 2015 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, 2012, was:

Ordinary shares, par value €0.49 per share—5,448,849,545

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x Yes  ¨ 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  x No

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.  x Yes  ¨ 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  x No

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		5
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE		5
ITEM 3.	KEY INFORMATION		5
A.	Selected Consolidated Financial Data		5
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		24
C.	Organizational Structure		46
D.	Property, Plants and Equipment		46
E.	Selected Statistical Information		46
F.	Competition		66
ITEM 4A.	UNRESOLVED STAFF COMMENTS		67
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		67
A.	Operating Results		75
B.	Liquidity and Capital Resources		108
C.	Research and Development, Patents and Licenses, etc.		112
D.	Trend Information		112
E.	Off-Balance Sheet Arrangements		114
F.	Tabular Disclosure of Contractual Obligations		115
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		116
A.	Directors and Senior Management		116
B.	Compensation		122
C.	Board Practices		126
D.	Employees		131
E.	Share Ownership		135
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		135
A.	Major Shareholders		135
B.	Related Party Transactions		135
C.	Interests of Experts and Counsel		136
ITEM 8.	FINANCIAL INFORMATION		137
A.	Consolidated Statements and Other Financial Information		137
B.	Significant Changes		138
ITEM 9.	THE OFFER AND LISTING		138
A.	Offer and Listing Details		138
B.	Plan of Distribution		145
C.	Markets		145
D.	Selling Shareholders		145
E.	Dilution		145
F.	Expenses of the Issue		145
ITEM 10.	ADDITIONAL INFORMATION		145
A.	Share Capital		145
B.	Memorandum and Articles of Association		145
C.	Material Contracts		148
D.	Exchange Controls		148

		PAGE
E.	Taxation		149
F.	Dividends and Paying Agents		155
G.	Statement by Experts		155
H.	Documents on Display		155
I.	Subsidiary Information		156
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		156
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		183
A.	Debt Securities		183
B.	Warrants and Rights		183
C.	Other Securities		183
D.	American Depositary Shares		183
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		185
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		185
ITEM 15.	CONTROLS AND PROCEDURES		185
ITEM 16.	[RESERVED]		187
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		187
ITEM 16B.	CODE OF ETHICS		187
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		188
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		189
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		189
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		189
ITEM 16G.	CORPORATE GOVERNANCE		190
ITEM 16H.	MINE SAFETY DISCLOSURE		192
PART III
ITEM 17.	FINANCIAL STATEMENTS		192
ITEM 18.	FINANCIAL STATEMENTS		192
ITEM 19.	EXHIBITS		192

2

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 BBVA 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, 2012, 2011 and 2010 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 and provision requirements;

3

• 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;

• downgrades in our credit ratings, including as a result of a decline in the Kingdom of Spain’s credit ratings;

• the success of our acquisitions divestitures, mergers and strategic alliances;

• 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.

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, 2012. 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 mentioned in “Item 4. Information on the Company History and Development of the Company—Capital Divestitures—2013” and Note 3 to the Consolidated Financial Statements, the Group announced its decision to conduct a study on strategic alternatives for its pension business in Latin America. The alternatives considered in this process include the total or partial sale of the businesses of the Pension Fund Administrators (AFP) in Chile, Colombia and Peru, and the Retirement Fund Administrator (Afore) in Mexico. For that reason on-balance figures for our companies related to the pension businesses in Latin America, have been reclassified under the headings “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale” of the

4

consolidated balance sheet as of December 31, 2012, and the revenues and expenses of these companies for 2012 have been reclassified under the heading “Profit from discontinued operations” in the accompanying consolidated income statement. In accordance with IFRS 5, and in order to present financial information for all periods on a consistent basis, we have reclassified the revenues and expenses from these companies under the heading “Profit from discontinued operations” in the consolidated income statement for 2011 and 2010. This reclassifications has had no impact on our “Profit”.

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, 2012, 2011 and 2010 has been selected from, and should be read together with, the Consolidated Financial Statements included herein. The audited financial statements for 2009 and 2008 are not included in this document, and they instead can be found in the respective annual reports on Form 20-F for certain prior years previously filed by us. In annual reports on Form 20-F for years prior to 2011, the financial statements for 2008 were prepared under EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, and thus were presented on a non-comparable basis.

5

For information concerning the preparation and presentation of the financial information contained herein, see “Presentation of Financial Information”.

	Year Ended December 31,
	2012			2011(*)			2010(*)			2009(*)			2008(*)
	(In Millions of Euros, Except Per Share/ADS Data (In Euros))
Consolidated Statement of Income Data
Interest and similar income		26,262			24,180			21,130			23,773			30,403
Interest and similar expenses		(11,140	)		(11,028	)		(7,814	)		(9,893	)		(18,717	)
Net interest income		15,122			13,152			13,316			13,880			11,685
Dividend income		390			562			529			443			447
Share of profit or loss of entities accounted for using the equity method		727			595			331			118			291
Fee and commission income		5,574			5,075			4,864			4,841			5,057
Fee and commission expenses		(1,221	)		(1,044	)		(831	)		(790	)		(868	)
Net gains(losses) on financial assets and liabilities		1,645			1,117			1,372			821			1,374
Net exchange differences		122			364			455			651			232
Other operating income		4,812			4,244			3,537			3,395			3,554
Other operating expenses		(4,730	)		(4,037	)		(3,240	)		(3,145	)		(3,085	)
Administration costs		(9,768	)		(8,898	)		(8,007	)		(7,486	)		(7,588	)
Depreciation and amortization		(1,018	)		(839	)		(754	)		(690	)		(694	)
Provisions (net)		(651	)		(509	)		(475	)		(446	)		(1,416	)
Impairment losses on financial assets (net)		(7,980	)		(4,226	)		(4,718	)		(5,473	)		(4,098	)
Impairment losses on other assets (net)		(1,123	)		(1,885	)		(489	)		(1,619	)		(45	)
Gains (losses) on derecognized assets not classified as non-current asset held for sale		4			46			41			20			72
Negative goodwill		376			—			1			99			—
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(622	)		(271	)		127			859			748
Operating profit before tax		1,659			3,446			6,059			5,478			5,669
Income tax		275			(206	)		(1,345	)		(1,085	)		(1,193	)
Profit from continuing operations		1,934			3,240			4,714			4,394			4,476
Profit from discontinued operations (net)		393			245			281			201			99
Profit		2,327			3,485			4,995			4,595			4,575
Profit attributable to parent company		1,676			3,004			4,606			4,210			4,210
Profit attributable to non-controlling interests		651			481			389			385			365
Per share/ADS(1) Data
Numbers of shares outstanding (at period end)		5,448,849,545			4,903,207,003			4,490,908,285			3,747,969,121			3,747,969,121
Income attributable to parent company(2)		0.32			0.62			1.10			1.02			1.21
Dividends declared		0.200			0.200			0.270			0.420			0.501

(*) Revenues and expenses of our pension business in Latin America have been reclassified for comparative purposes. See “Presentation of Financial Information—Accounting Principles.”

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

(2) 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, October 2011, April 2012 and October 2012, and excluding the weighted average number of treasury shares during the period (5,464 million, 4,945 million, 4,264 million, 4,133 million and 4,134 million shares in 2012, 2011, 2010, 2009 and 2008, respectively). With respect to the years ended December 31, 2012, 2011 and 2010, see Note 5 to the Consolidated Financial Statements.

6

	As of and for Year Ended December 31,
	2012			2011			2010			2009			2008
	(In Millions of Euros, Except Percentages)
Consolidated balance sheet data
Total assets		637,785			597,688			552,738			535,065			542,650
Common stock		2,670			2,403			2,201			1,837			1,837
Loans and receivables (net)		383,410			381,076			364,707			346,117			369,494
Customer deposits		292,716			282,173			275,789			254,183			255,236
Debt certificates and subordinated liabilities		99,043			97,349			102,599			117,817			121,144
Non-controlling interest		2,372			1,893			1,556			1,463			1,049
Total equity		43,802			40,058			37,475			30,763			26,705
Consolidated ratios
Profitability ratios:
Net interest margin(1)		2.66	%		2.3	%		2.4	%		2.6	%		2.3	%
Return on average total assets(2)		0.4	%		0.6	%		0.9	%		0.8	%		0.9	%
Return on average equity(3)		4.0	%		8.0	%		15.8	%		16.0	%		15.5	%
Credit quality data
Loan loss reserve(4)		14,534			9,470			9,473			8,805			7,505
Loan loss reserve as a percentage of total loans and receivables (net)		3.79	%		2.5	%		2.6	%		2.5	%		2.0	%
Non-performing asset ratio (NPA ratio)(5)		5.1	%		4.0	%		4.1	%		4.3	%		2.3	%
Impaired loans and advances to customers		20,287			15,647			15,361			15,197			8,437
Impaired contingent liabilities to customers(6)		317			219			324			405			131
		20,604			15,866			15,685			15,602			8,568
Loans and advances to customers		367,415			361,310			348,253			332,162			342,682
Contingent liabilities to customers		39,407			39,398			35,816			32,614			35,952
		406,822			400,709			384,069			364,776			378,635

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

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

(3) Represents profit attributable to parent company as a percentage of average equity.

(4) Includes impairment losses of loans and receivables to credit institutions, loans and advance to customers and debt securities see Note 13 to the Consolidated Financial Statements.

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

(6) We include contingent liabilities in the calculation of our non-performing asset ratio (NPA ratio). We believe that impaired 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 impaired 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 5.6%, 4.3%, 4.4%, 4.6% and 2.5% as of December 31, 2012, 2011, 2010, 2009 and 2008, respectively.

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.

7

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)
2008		1.4695
2009		1.3955
2010		1.3216
2011		1.4002
2012		1.2908
2013 (through March, 22, 2013)		1.3220

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

Month ended	High		Low
September 30, 2012		1.3142		1.2566
October 31, 2012		1.3133		1.2876
November 30, 2012		1.3010		1.2715
December 31, 2012		1.3260		1.2930
January 31, 2013		1.3584		1.3047
February 28, 2013		1.3692		1.3054
March 31, 2013 (through March 22, 2013)		1.3098		1.2888

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on March 22, 2013, was $1.2996.

As of December 31, 2012, approximately 39% of our assets and approximately 38% 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 2012—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, or which could most significantly affect us in the future, include regulations relating to capital and provisions requirements, which have become increasingly stricter in the past two years, steps taking towards achieving a fiscal and banking union in the European Union and regulatory reforms in the United States. These risks are discussed in further detail below.

8

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.

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”). In addition, the Royal Decree-Law 24/2012 of August 31, 2012 established a new minimum requirement in terms of core capital on risk-weighted assets which is more restrictive than the one set out in Circular 3/2008, and that must be greater than 9%. This Royal Decree-Law came into force in 2013.

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 still in place.

Moreover, we will be subject to the new Basel III capital standards, which will be phased in 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 Capital Requirements Directive (“CRD IV”) that is expected to be approved in 2013 and to come into force during 2014, the Spanish Government anticipated certain requirements of Basel III in 2011 with the Royal Decree-Law 2/2011, of February 18, which was superseded by Royal Decree-Law 24/2012, by imposing stricter capital requirements. Additionally, the Mexican government introduced the Basel III capital standards in 2012 and the Basel III transposition in the United States is pending to be clarified. 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.

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.

9

Provision requirements

Royal Decree-Law 2/2012, of February 3, and Royal Decree-Law 18/2012, of May 11 increased coverage requirements (which had to be met by December 31, 2012) for performing and non-performing real estate assets and required an additional capital buffer. Subsequently, requisites of both RD-L were included in Law 8/2012 of October 30, 2012 (“Law 8/2012”). There can be no assurance that additional provision requirements will not be adopted by the authorities of the jurisdictions where we operate (including Spanish authorities).

Steps taken towards achieving an EU fiscal and banking union

In June 2012, a number of agreements were reached to reinforce the monetary union, including the definition of a broad roadmap towards a single banking and fiscal union.

While support for a banking union in Europe is strong and significant advances will be done in terms of the development of a single-rule book through the CRD IV, there is ongoing debate on the extent and pace of integration. It has been decided that the European Central Bank (“ECB”) will play a key role in supervision; although a consensus on how to dovetail its central position with the role of national supervisors has not yet been agreed. Other issues are still open, such as the representation and voting power of non-eurozone countries, the accountability of the ECB to European institutions as part of the single supervision mechanism, the final status of the European Banking Authority, the development of a new bank resolution regimen and the creation of a common deposit-guarantee scheme.

European leaders have also supported the reinforcement of the fiscal union but continue negotiating how to achieve it.

Regulations adopted towards achieving a banking and/or fiscal union in the EU and decisions adopted by the ECB in its future capacity as our main supervisory authority may have a material impact on our business, financial condition and results of operations.

Regulatory reforms initiated in the United States

Our operations may also be affected by other 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. Section 619 of the Dodd-Frank Act, also known as the Volcker Rule, is a key component of this effort. The Volcker Rule prohibits banking entities, which benefit from federal insurance on customer deposits or access to the discount window, from engaging in proprietary trading and from investing in or sponsoring hedge funds and private equity funds, subject to certain exceptions. In addition, in December 2012 the Fed published new draft regulation on Foreign Banking Organizations, covering issues such as solvency, liquidity, supervision and crisis management. 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.

10

Memorandum of Understanding on the Spanish Financial Sector

On June 25, 2012, the Spanish government formally requested the European Union financial aid to recapitalize certain Spanish financial institutions. The details and conditions of the related Memorandum of Understanding on Financial-Sector Policy reached (“MoU”) were announced on July 20, 2012. The MoU establishes a series of conditions to be met by all Spanish financial institutions, including those that have no capital deficits. Such conditions include the compliance with the EBA’s Core Tier 1 ratio of 9%, early intervention and resolution measures including burden sharing measures from hybrid capital holders and subordinated debt holders in banks receiving public capital, and new financial reporting requirements on capital, liquidity and loan portfolio quality. The Spanish government implemented the agreements reached in the MoU through Royal-Decree Law 24/2012, of August 31, which was later replaced by Law 9/2012, of November 14, on restructuring and resolution of credit entities. See “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Law 9/2012 of November 14, on Restructuring and Resolution of Credit Entities.” As of the date of this Annual Report, we cannot predict the impact that the conditions set forth in the MoU or the implementing regulation may have on our business, financial condition or results of operations.

Withdrawals of deposits or other sources of liquidity may make it more difficult or costly for us to fund our business on favorable terms or cause us to take other actions.

Historically, one of our principal sources of funds has been savings and demand deposits. As of December 31, 2012, 2011 and 2010, time deposits represented 26%, 27%, and 29% of our total funding 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. The level of wholesale and retail deposits may also fluctuate due to other factors outside the Group’s control, such as a loss of confidence (including as a result of political initiatives, including bail-in and/or confiscation and/or taxation of creditors’ funds, in connection with the Eurozone crisis, as seen recently in Cyprus). Moreover, 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 or taking additional deleverage measures.

Our earnings and financial condition have been, and our future earnings and financial condition may continue to be, materially affected by depressed asset valuations resulting from poor market conditions.

Financial markets continue to be subject to significant stress conditions, where steep falls in perceived or actual asset values have been accompanied by a severe reduction in market liquidity, especially during 2012. In dislocated markets, hedging and other risk management strategies may not be as effective as they are in normal market conditions due in part to the decreasing credit quality of hedge counterparties. Severe market events have resulted in us recording large write-downs on our credit market exposures in recent years. Any deterioration in economic and financial market conditions could lead to further impairment charges and write-downs.

We face increasing competition in our business lines.

The markets in which we operate are highly competitive 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 from the European Stability Mechanism (the “ESM”).

11

We also face competition from non-bank competitors, such as: payment platforms; ecommerce businesses; department stores (for some credit products); automotive finance corporations; leasing companies; factoring companies; 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, there is a crowding out effect in the financial markets).

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 fiscal and monetary policies of governments and central banks, regulation of the financial sectors in the markets in which we operate, domestic and international economic and political conditions and other factors. Changes in market interest rates can affect the interest rates that we receive on our interest-earning assets differently than the rates that we pay for our interest-bearing liabilities. This may, in turn, result in a reduction of the net interest income we receive, which could have a material adverse effect on our results of operations.

In addition, the high proportion of loans referenced to variable interest rates (approximately 70% of our loan to customer portfolio as of December 31, 2012) makes debt service on such loans more vulnerable to changes in interest rates. In addition, a rise in interest rates could reduce the demand for credit and our ability to generate credit for our clients, as well as contribute to an increase in the credit default rate. As a result of these and the above factors, significant changes or volatility in interest rates could have a material adverse impact on our business, financial condition or results of operations.

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 €2,728 million, €2,758 million and €310 million, respectively, as of December 31, 2012, €2,429 million, €2,904 million and €244 million, respectively, as of December 31, 2011 and €2,497 million, €3,106 million and €377 million, respectively, as of December 31, 2010. 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 (see Note 26 to our Consolidated Financial Statements). 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 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 covered bonds 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.

12

Risks Relating to Spain and Europe

Continuing economic tensions in the European Union and Spain, including as a result of the ongoing European sovereign debt crisis, could have a material adverse effect on our business, financial condition and results of operations.

The continuing crisis in worldwide financial and credit markets has led to a global economic slowdown in recent years, with many economies around the world showing significant signs of weakness or slow growth. In Europe, uncertainty regarding the budget deficits and solvency of several countries, together with the risk of contagion to other more stable countries, has further exacerbated the global economic crisis. In addition, the risk of default on the sovereign debt of certain EU countries and the impact this would have on the Eurozone countries, including the potential risk that one or more countries may leave the Eurozone—either voluntarily or involuntarily—has raised concerns about the ongoing viability of the euro currency and the European Monetary Union (the “EMU”). These concerns have been further exacerbated by the rise of Euro-skepticism in certain EU countries, including countries that decided not to enter the EMU such as the United Kingdom. These and other concerns could lead to the re-introduction of individual currencies in one or more EU Member States. The exit of one or more EU Member States from the EMU could materially adversely affect the European and global economy, cause a redenomination of financial instruments or other contractual obligations from the euro to a different currency and substantially disrupt capital, interbank, banking and other markets, among other effects, any of which could have a material adverse effect on our business, results of operations, financial condition and prospects. In addition, tensions among Member States of the EU, and growing Euro-skepticism in certain EU countries, could pose additional difficulties in the EU’s ability to react to the ongoing economic crisis.

The Spanish economy contracted during 2012 and the Bank of Spain has predicted the recession to continue in 2013. Spain continues to be one of the focal points of the continuing sovereign debt crisis and concerns surrounding the ability of the Spanish government to service its debt or the health of the Spanish banking sector could lead, and/or the prospect of the continued contraction of the Spanish economy could lead, Spanish leaders to consider requesting financial assistance from the European authorities. Any such financial assistance could impose austerity measures and other restrictions on the Spanish government, including enhanced requirements directed toward Spanish banking institutions, which could make it difficult for Spain to generate revenues and raise additional concerns regarding its ability to service its sovereign debt. Any such restrictions, including additional capital requirements applicable to Spanish banking institutions, could also materially affect our financial condition. Furthermore, any such austerity measures could adversely affect the Spanish economy and reduce the capacity of our borrowers to repay loans we have made to them, increasing our non-performing loans.

Economic conditions remain uncertain in Spain 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 us, adversely affect the quality of our loan portfolio, require us to take impairments on our exposures to the sovereign debt of one or more countries in the eurozone or otherwise adversely affect our business, financial condition and results of operations.

We are dependent on our credit ratings and any reduction in our or the Kingdom of Spain’s credit ratings could materially and adversely affect our business, financial condition and results of operations.

We are rated by various credit rating agencies. Our credit ratings are an assessment by rating agencies of our ability to pay our obligations when due. Any actual or anticipated decline in our credit ratings to below investment grade or otherwise may increase the cost of and decrease our ability to finance ourselves in the capital markets, secured funding markets (by affecting our ability to replace downgraded assets with better rated ones), interbank markets, through wholesale deposits or otherwise, harm our reputation, require us to replace funding lost due to the downgrade, which may include the loss of customer deposits, and make third parties less willing to transact business with us or otherwise materially adversely affect our business, financial condition and results of operations. Furthermore, any decline in our credit ratings to below investment grade or otherwise could breach certain of our agreements or trigger additional obligations under such agreements, such as a requirement to post additional collateral, which could materially adversely affect our business, financial condition and results of operations.

13

Since we are a Spanish company with substantial operations in Spain, our credit ratings may be adversely affected by the assessment by rating agencies of the creditworthiness of the Kingdom of Spain. Moody’s, Fitch, Standard & Poor’s and DBRS have downgraded Spain’s sovereign debt rating since May 2012. In May 2012, DBRS was the first rating agency to downgrade the debt rating of both, the Kingdom of Spain to AH from AAL and the large Spanish banks. Following DBRS’ rating action, Moody’s and Fitch downgraded Spain’s sovereign debt rating in June 2012 to Baa3 from A3 and to BBB from A, respectively. In June 2012, following their respective downgrade of the Kingdom of Spain, Moody’s and Fitch downgraded all of the large Spanish banks, including us. In August 2012, DBRS further downgraded the rating of Spain’s sovereign debt to AL from AH and the rating of the large Spanish banks. Standard & Poor’s announced in October 2012 that it had lowered its long-term sovereign credit rating on the Kingdom of Spain to BBB- from BBB+ and the short-term sovereign credit rating to A-3 from A-2, with a negative outlook on the long-term rating. In October 2012, following its downgrade of the Kingdom of Spain, Standard & Poor’s downgraded all of the large Spanish banks, including us. Any further decline in the Kingdom of Spain’s sovereign credit ratings could, in turn, result in a further decline in our credit ratings.

In addition, we hold a substantial amount of securities issued by the Kingdom of Spain, autonomous communities within Spain and other Spanish issuers. Any decline in the Kingdom of Spain’s credit ratings could also adversely affect the value of the Kingdom of Spain’s and other Spanish issuers’ respective securities held by us in our various portfolios or otherwise materially adversely affect our business, financial condition and results of operations. Furthermore, the counterparties to many of our loan agreements could be similarly affected by any decline in the Kingdom of Spain’s credit rating, which could limit their ability to raise additional capital or otherwise adversely affect their ability to repay their outstanding commitments to us and, in turn, materially and 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, 2012, business activity in Spain accounted for 57% 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”) contracted by 3.7% and 0.3% in 2009 and in 2010, respectively, grew by 0.4% in 2011 and contracted by 1.4% in 2012. Our Economic Research Department (“BBVA Research”) estimates that the Spanish economy will contract by 1.1% in 2013. As a result of this expected contraction, it is expected that economic conditions and unemployment in Spain will continue to deteriorate.

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 because of the weaker economic activity and, above all, a deterioration in employment in 2012, which is expected to continue in 2013.

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 public deficit. Real or perceived difficulties in making the payments associated with this deficit 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.

14

• Spanish domestic demand in 2012 was heavily impacted by fiscal policy both directly, through the progressive contraction of public sector demand (as a result, among other reasons, of tighter fiscal targets), and indirectly, through the impact of the fiscal policy reforms on the consumption and investment decisions of private parties (as a result, for example, of the increases in various taxes, including income tax and value added tax (VAT), and the elimination of certain tax benefits (including tax benefits on the purchase of a home)).

• Despite the adoption of a labor market reform in early February 2012 which was intended to slow the amount of jobs lost in 2012, unemployment continued to increase in 2012 and is expected to remain above 25% during 2013.

• In 2013, 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 2013 will continue to reduce the non-wage component of disposable income, despite the possible increase in the volume of unemployment benefits. Higher personal income taxes are also expected to have a negative effect. Households’ nominal disposable income remained constant in 2011, is estimated to have fallen by 3.3 % in 2012 and 1.5% in 2013.

• Net financial wealth is not expected to recover during 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 6.7% and 8.0 % in 2011 and 2012, respectively, and is expected to contract by 8.3% in 2013. Demand for real estate decreased in 2012, primarily as a result of the high unemployment rates, the elimination of tax benefits on the purchase of a home and the rise in the personal income tax.

Our loan portfolio in Spain has been adversely affected by the deterioration of the Spanish economy since 2009. Our total impaired loans to customers in Spain amounted to €15,152 million, €11,043 million and €10,954 million as of December 31, 2012, 2011 and 2010, respectively, principally due to the deterioration in the macroeconomic environment. Our total impaired loans to customers in Spain as a percentage of total loans and receivables to customers in Spain were 7.3%, 5.5% and 5.2% as of December 31, 2012, 2011 and 2010, respectively. Our loan loss reserves to customers in Spain as a percentage of impaired loans to customers is Spain as of December 31, 2012, 2011 and 2010 were 64%, 43% and 45%, 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 business, financial condition and results of operations.

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

In the years prior to 2008, population increase, economic growth, declines in unemployment rates and increases in levels of household disposable income, together with the low interest rates within the EU, led to an increase in demand for mortgage loans in Spain. 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. Spanish real estate prices continued to decline during 2012 in light of deteriorating economic conditions. It is expected that housing demand will remain weak and housing transactions will continue decreasing in 2013.

We have substantial exposure to the Spanish real estate market and the continuing deterioration of Spanish real estate prices could materially and adversely affect our business, financial condition and results of operations. We are exposed to the Spanish real estate market due to the fact that Spanish real estate assets secure many of our outstanding loans and due to the significant amount of Spanish real estate assets held on our balance sheet, including real estate received in lieu of payment for certain underlying loans. Furthermore, we have restructured certain of the loans we have made relating to real estate and the capacity of such borrowers to repay such restructured loans may be materially adversely affected by declining real estate prices. Residential real estate mortgages to individuals

15

represented 23.8%, 21.9% and 23.1% of our domestic loan portfolio as of December 31, 2012, 2011 and 2010, respectively. Our loans for the development of real estate and housing construction in Spain amounted to €15,358 million as of December 31, 2012, and represented 7% of our gross domestic lending as of December 31, 2012. Our non-performing real estate loans represented 44.4% of our real estate portfolio as of such date.

If Spanish real estate prices continue to decline or if changes currently debated in the Spanish Congress related to mortgage regulation favoring borrowers or if future changes in the simplified mortgage enforcement proceedings provided for under Spanish law lead to substantial changes in the current guarantee system of mortgage, our business may be materially adversely affected, which could materially and adversely affect our financial condition and results of operations.

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 70% of our loan portfolio as of December 31, 2012) 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 dependent on our Mexican operations, with approximately €1,821 million, €1,711 million, and €1,683 million of the profit attributable to parent company in 2012, 2011 and 2010, respectively, being generated in Mexico. 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. While the Mexican economy is expected to grow in 2013, there are economic risks due to a possible lower demand from the U.S. In the second half of 2012, signs of weakness in external demand have been observed, among which a slowdown in manufactured exports and a decline in remittance flows to Mexico are particularly significant. In addition, growing social disruptions in Mexico could adversely affect growth.

As of December 31, 2012, 2011 and 2010, our mortgage loan portfolio delinquency rates in Mexico were 6.4%, 4.1% and 3.3%, respectively, and our consumer loan portfolio delinquency rates were 3.3%, 2.5% and 2.9%, respectively. The default rate is evolving in line with the increase in the activity of our subsidiary, the risk premium has stabilized around 3.49%. If there is an increase in unemployment rates (currently 5% from 5.2% in 2011), 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.

In addition, inflation was 4.1% year-on-year in December 2012, exceeding the target set by the Mexican Central Bank. 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. 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. Among the reforms currently debated there is a fiscal reform (to extend social security across the whole population, an increase in value added tax and a decrease of non-wage labor cost) and an energy reform (to increase investment in the sector) Finally, growing social tensions in Mexico, including as a result of drug-related corruption and escalating violence, could weigh on the economic outlook, which could increase economic uncertainty and capital outflows.

16

According to the mandate of the Law for Transparent and Ordered Financial Services in place (last modified in 2010), the Mexican National Commission for the Protection and Defense of Financial Services Users (Comisión Nacional para la Defensa de los Usuarios de los Servicios Financieros or “Condusef”) has continued to request that banks send for revision several of its service contracts (e.g., credit cards, insurance, etc.), in order to check that they comply the dispositions on transparency and clarity for protecting financial service users. Condusef still does not have systematic ways to evaluate and grade service contracts, and this reflects on a substantial variation in grades from one year to the next and no clear instructions for adequating such contracts. Therefore, the Law Committee of the Banking Association (ABM) is coordinating a working group to propose improvements in the process. In addition, Condusef has asked banks to formulate new procedures so that beneficiaries of deposit accounts can collect the funds in the case of the death of the account owner.

The Money Laundering Law (Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita) will become effective in July 2013. The Ministry of Finance (Secretaría de Hacienda y Crédito Público) and a special analysis unit within the Federal Attorney’s Office (Unidad Especializada en Análisis Financiero en Contra de la Delincuencia Organizada, de la Procuraduría General de la República) are in charge of this process. The Law specifies more severe penalties for non compliance and more information requirements for some transactions. However, authorities are working on evaluating the impact of the law before it comes into force.

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 profit attributable to parent company.

Many of the main challenges for the region relate to the evolution of external factors, including the crisis in Europe or the fiscal adjustment measures in the U.S., and the increasing use of macroprudential measures to control global liquidity, which could deter financial flows to enter in Latin American countries. In addition, inflationary pressure and inflation forecasts have worsened in most countries in the region (with inflation in some countries exceeding the relevant central banks’ targets) due to the strength of economic activity and increased food prices. Price overheating is leaving Latin America economies more vulnerable to an adverse external shock since the more important role of exports in their GDP is making them more dependent on the maintenance of high terms of trade. Moreover, uncertainty on the evolution of the global economy conjunction with upward pressure from domestic demand will like make most central banks in the region to remain on hold, leaving interest rates unchanged. Therefore monetary policy is less likely to act as and stabilizer in case of domestic overheating.

In addition, 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.

17

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. The region’s growth has decelerated in 2012, registering a growth rate of 3%, in particular due to the economic slowdown of Brazil. 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 emerging market economies. We believe that the main global risk for Latin America countries is currently posed by the possible deterioration of the European crisis, which would especially affect countries with less capacity to access international markets to cushion the fall in commodity prices and with less room to use counter-cyclical policies. Any such 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, non-performing loan ratios rose and bank deposits and loans contracted. These trends are been corrected in the last few quarters in most countries. 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, European 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, or the distribution of dividends. For example, in October 2012, Argentina sharply raised its excess-capital requirements from 30% to 75% of minimum capital before banks (including our subsidiary BBVA Banco Francés, S.A.) can distribute dividends. As a result, BBVA Banco Francés, S.A. will not make a dividend payment with respect to 2012. Furthermore, while most Latin American currencies to which we are exposed appreciated during 2012, this trend could be reversed. For example, in February 2013, the Venezuelan government decided to devaluate the Venezuelan bolivars fuerte for the fifth time in nine years by approximately 32% (from 4.30 to 6.30 per U.S. dollar), which undermined the dividends of our Venezuelan subsidiary awaiting repatriation.

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.

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.

18

Risks Relating to the United States

Adverse economic conditions in the United States may have a material effect on our business, financial condition, results of operations and cash flows.

As a result of the business of our subsidiaries in the United States we are 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 had significant effects on the real economy and resulted in significant volatility and uncertainty in markets and economies around the world. The recovery is still weak, as the economy is growing at low rates and unemployment is persistently high. 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), as of December 31, 2012, our ownership interests in members of the CITIC Group, a Chinese banking group, were a 29.7% stake in CITIC International Financial Holdings Ltd (“CIFH”) and a 15% stake in China CITIC Bank Corporation Limited (“CNCB”). 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 increase in local government debt and financial stresses in smaller companies as their access to various forms of non-bank credit is tightened.

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. China’s growth momentum continued to slow more than expected in 2012 due to external pressures and lags in the effect of policy stimulus put in place in 2012. 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 Asia or the business, financial condition, results of operations and cash flows of the Group.

19

Since Garanti operates primarily in Turkey, economic, political 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 Bankası 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 economic, political and other conditions prevailing in or that otherwise affect Turkey. For instance, 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 2.6% in 2012 and by 4.4% in 2013. In addition, inflation increased by 8.9% in 2012 on average and is expected to further increase by 5.3% in 2013. Furthermore, Turkey’s recent credit boom led to the rapid widening of its current account deficit, which reached a multi-year high of 9.9% of GDP in 2011 and is expected to amount to 6.5% by the end of 2012. Despite Turkey’s increased political and economic stability in recent years, the recent rating upgrade by Fitch in November 2012 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 (including as a result of a deterioration in the EU accession process), could dampen capital flows to Turkey and adversely affect the Turkish economy.

In addition, actions taken by the Turkish government could adversely affect Garanti’s business and prospects. 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, the Turkish government may increase its participation in the economy, including through 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. Moreover, political uncertainty or instability within Turkey and in some of its neighboring countries (including as a result of the ongoing civil war in Syria) has historically been one of the potential risks associated with investments in Turkish companies.

Furthermore, 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.

Any of the risks referred to above could 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.

20

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.

Weaknesses or failures in our internal processes, systems and security could materially adversely affect our results of operations, financial condition or prospects, and could result in reputational damage.

Operational risks, through inadequate or failed internal processes, systems (including financial reporting and risk monitoring processes) or security, or from people-related or external events, including the risk of fraud and other criminal acts carried out against us, are present in our businesses. Our businesses are dependent on processing and reporting accurately and efficiently a high volume of complex transactions across numerous and diverse products and services, in different currencies and subject to a number of different legal and regulatory regimes. Any weakness in these internal processes, systems or security could have an adverse effect on our results, reporting of such results, and on the ability to deliver appropriate customer outcomes during the affected period. In addition, any breach in security of our systems could disrupt our business, result in the disclosure of confidential information and create significant financial and legal exposure for us. Although we devote significant resources to maintain and regularly update our processes and systems that are designed to protect the security of our systems, software, networks and other technology assets, there is no assurance that all of our security measures will provide absolute security. Any damage to our reputation (including to customer confidence) arising from actual or perceived inadequacies, weaknesses or failures in our systems, processes or security could have a material adverse effect on our results of operations, financial condition or prospects.

Compliance with anti-money laundering and anti-terrorism financing rules involves significant cost and effort.

We are subject to rules and regulations regarding money laundering and the financing of terrorism. Monitoring compliance with anti-money laundering and anti-terrorism financing rules can put a significant financial burden on banks and other financial institutions and pose significant technical problems. Although we believe that our current policies and procedures are sufficient to comply with applicable rules and regulations, we cannot guarantee that our group-wide anti-money laundering and anti-terrorism financing policies and procedures completely prevent situations of money laundering or terrorism financing. Any of such events may have severe consequences, including sanctions, fines and notably reputational consequences, which could have a material adverse effect on our financial condition and results of operations.

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 Emiliano Salcines (1345 Avenue of Americas, 44th Floor New York, NY 10105, telephone number +1-212-728-2405). BBVA is incorporated for an unlimited term.

Capital Expenditures

Our principal investments are financial investments in our subsidiaries and affiliates. The main capital expenditures from 2010 to the date of this Annual Report were the following:

21

2013

Acquisition of Unnim Vida. On February 4, 2013, Unnim Banc, S.A. reached an agreement with Aegon Spain Holding B.V. to acquire its 50% stake in Unnim Vida, S.A. de Seguros y Reaseguros (“Unnim Vida”). As a result BBVA Group’s total holding in the share capital of Unnim Vida is 100%.

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 entered into a purchase agreement, by virtue of which BBVA acquired 100% of the shares of Unnim for a purchase price of €1.

In addition, BBVA, the FGD, the FROB and Unnim 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 incurred by a predetermined asset portfolio of Unnim for a period of 10 years following the transaction.

On July 27, 2012, following the completion of the transaction, BBVA became the holder of 100% of the capital of Unnim.

As of December 31, 2012, Unnim’s assets amounted to €24,756 million, of which €15,932 million corresponded to Loans and advances to customers. Customer deposits amounted to €11,083 million as of such date.

Pursuant to the acquisition method of accounting, as of December 31, 2012, we recorded the difference between the fair values assigned to the assets acquired and the liabilities assumed from Unnim, on one hand, and the cash payment made to the FROB in consideration of the transaction on the other hand, which totaled €376 million, under the heading “Negative goodwill in business combinations” in our consolidated income statement for the year 2012. As of the date of preparation of our Consolidated Financial Statements, this amount is provisional, since IFRS 3 grants a period of one year to make a definitive determination on this negative consolidation difference; however, the Group does not expect any significant changes in the valuations of the assets and liabilities related to this acquisition. See Note 20.1 to our Consolidated Financial Statements for additional information.

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 Bankası 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. For additional information, see Note 3 to the Consolidated Financial Statements.

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 CITIC Bank Corporation Limited (“CNCB”) in 2011, in order to maintain its stake in CNCB (15%), with a payment of €425 million.

22

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.

Capital Divestitures

Our principal divestitures are financial divestitures in our subsidiaries and in affiliates. The main capital divestitures from 2010 to the date of this Annual Report were the following:

2013

On May 24, 2012, we announced our decision to conduct a study on strategic alternatives for our pension business in Latin America. The alternatives considered in this process include the total or partial sale of the businesses of the Pension Fund Administrators (AFP) in Chile, Colombia and Peru, and the Retirement Fund Administrator (Afore) in Mexico. For additional information, see Note 3 to the Consolidated Financial Statements.

On December 24, 2012, we reached an agreement with Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir, S.A., a subsidiary of Grupo Aval Acciones y Valores, S.A., for the sale to the former of the total stake that we hold directly or indirectly in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A. (“Horizonte”). The closing of the transaction is subject to obtaining the required Colombian regulatory authorizations. The base purchase price agreed upon is $ 530 million (COP 941,731 million), subject to certain adjustments. It is anticipated that the closing of the transaction will take place in the first half of 2013 and that the capital gain net of taxes arising from the transaction will amount to approximately € 265 million.

On January 9, 2013, after having obtained the necessary approvals, we announced that we had completed the sale of our stake in the Mexican company Administradora de Fondos para el Retiro Bancomer, S.A. de C.V. to Afore XXI Banorte, S.A. de C.V. The purchase price agreed upon was $1,735 million. The capital gain (net of taxes) arising from this transaction amounted to approximately €800 million.

On February 1, 2013, we reached an agreement (the “Agreement”) with MetLife, Inc., for the sale of our stake in the Chilean pension fund manager Administradora de Fondos de Pensiones Provida S.A. (“AFP Provida”), representing 64.3% of the share capital of AFP Provida.

Pursuant to the terms of the Agreement and subject to the satisfaction of the conditions set forth therein:

• MetLife, Inc. has agreed to cause one or more of its wholly-owned affiliates to commence, both in the Republic of Chile and in the United States of America, a tender offer in cash (the “Tender Offer”) for 100% of the issued and outstanding shares of AFP Provida; and

• BBVA has agreed to transfer the entirety of its 64.3% interest in AFP Provida to such affiliates of MetLife, Inc. either (i) directly through the Tender Offer, or (ii) partially directly through the Tender Offer and partially indirectly through the sale to MetLife, Inc. of a newly incorporated BBVA affiliate in Chile. In this case, BBVA shall be paid the same price that it would be paid by the transfer of the shares of AFP Provida through the Tender Offer.

The purchase price set forth in the Agreement for a 100% interest in AFP Provida, $2 billion, shall be supplemented by a fixed amount for each day having elapsed between the date of the most recent month-end balance sheet of AFP Provida available prior to the commencement of the Tender Offer and the date of publication of the Tender Offer’s results (as determined pursuant to the Agreement). In addition to the purchase price, the Agreement permits AFP Provida, subject to the prior approval of AFP Provida’s governing bodies, to make certain dividends prior to the commencement of the Tender Offer.

23

The commencement of the Tender Offer and the subsequent closing of the transaction are subject, among other conditions, to receipt of regulatory approvals both in Chile and Ecuador. It is anticipated that the closing of the transaction will take place in the second half of 2013 and that the capital gain net of taxes arising from the transaction will amount to approximately €500 million.

2012

In June 2012, BBVA reached an agreement to sell its business in Puerto Rico to Oriental Financial Group Inc. The sale price was $500 million (approximately €385 million at the exchange rate on the date of the transaction). Gross capital losses from this sale amounted to approximately €15 million (taking into account the exchange rate at the time of the transaction and the earnings of the sold companies up to the closing of the transaction, on December 18, 2012).

2011 and 2010

During 2011 and 2010, 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.

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.

Operating Segments

The main change in the reporting structure of the BBVA Group’s operating segments in 2012 relates to the transfer of the assets and liabilities of a branch located in Houston from our Mexico operating segment to our United States operating segment. This was done to reflect the increasingly geographical orientation of the Group’s reporting structure. Despite this change and other insignificant changes, the composition of the operating segments in 2012 has remained very similar to their composition in 2011. Nevertheless, operating segment data relating to 2011 and 2010 contained in this Annual Report has been presented on a uniform basis consistent with our organizational structure in 2012 to ensure like-for-like comparisons.

Set forth below are our five operating segments. As indicated above, the composition of our operating segments in 2012 is very similar to last year’s:

• Spain

• Eurasia

• Mexico

• South America

• United States

In addition to these operating segments, we continue to have a separate “Corporate Activities” segment. This segment 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 segment 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.

24

The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2012, 2011 and 2010 is as follows:

	As of December 31,
Total Assets by Operating Segment	2012		2011		2010
	(In Millions of Euros)
Spain		317,151		311,987		299,186
Eurasia		48,282		53,354		45,980
Mexico		82,432		72,488		73,321
South America		78,419		63,444		51,671
United States		53,850		57,207		59,173
Subtotal Assets by Operating Segments		580,134		558,480		529,331
Corporate Activities		57,652		39,208		23,407
Total Assets BBVA Group		637,786		597,688		552,738

The following table sets forth information relating the profit attributable to parent company by each of our operating segments for the years ended December 31, 2012, 2011 and 2010.

	Profit/(Loss) Attributable to Parent Company									% of Profit/(Loss) Attributable to Parent Company
	For the Year Ended December 31,
	2012(1)			2011(2)			2010			2012(1)			2011(2)			2010
	(In Millions of Euros)									(In Percentage)
Spain		(1,267	)		1,352			2,210			(38.1	)		30.7			39.3
Eurasia		950			1,031			575			28.6			23.4			10.2
Mexico(*)		1,821			1,711			1,683			54.8			38.8			30.0
South America(*)		1,347			1,007			889			40.5			22.8			15.8
United States		475			(691	)		260			14.3			(15.7	)		4.6
Subtotal Operating Segments		3,326			4,410			5,617			100.0			100.0			100.0
Corporate Activities		(1,649	)		(1,405	)		(1,011	)
Profit attributable to the BBVA Group		1,677			3,004			4,606

(1) Profit/(Loss) attributable to parent company for the year ended December 31, 2012 has been affected by the significant loan-loss provisions made to reflect the steady impairment of our real estate portfolios in Spain.

(2) Profit/(Loss) attributable to parent company 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 operating segments.

(*) Information of our pension business for 2011 and 2010 has been reclassified for comparative purposes. See “Presentation of Financial Information—Accounting Principles.”

25

The following table sets forth information relating to the income of each operating segment for the years ended December 31, 2012, 2011 and 2010:

			Operating Segments
	BBVA Group		Spain			Eurasia		Mexico(*)		South America(*)		United States			Corporate Activities
	(In Millions of Euros)
2012
Net interest income		15,122		4,836			847		4,164		4,291		1,682			(697	)
Operating profit / (loss) before tax		1,659		(1,841	)		1,054		2,225		2,240		667			(2,686	)
Profit		1,676		(1,267	)		950		1,821		1,347		475			(1,649	)
2011
Net interest income		13,152		4,391			802		3,776		3,161		1,635			(614	)
Operating profit / (loss) before tax		3,446		1,897			1,176		2,146		1,671		(1,020	)		(2,425	)
Profit		3,004		1,352			1,031		1,711		1,007		(691	)		(1,405	)
2010
Net interest income		13,316		4,898			333		3,648		2,494		1,825			117
Operating profit / (loss) before tax		6,059		3,127			660		2,137		1,424		336			(1,625	)
Profit		4,606		2,210			575		1,683		889		260			(1,011	)

(*) Information of our pension business for 2011 and 2010 has been reclassified for comparative purposes. See “Presentation of Financial Information—Accounting Principles.”

Given the business model of the BBVA Group, the economic capital allocated to our operating segments is mainly determined by the credit risk arising from loans and advances to customers. Accordingly, changes in the amounts of allocated economic capital to each operating segment are mainly related to the evolution of such portfolios. A brief explanation of changes in the amounts of allocated economic capital to each operating segment is included in the segmental discussions that follow.

Spain

The operating segment 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 operating segment 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.

• 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 operating segment for the years ended December 31, 2012, 2011 and 2010:

26

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Total Assets		317,151		311,987		299,186
Loans and advances to customers		210,982		214,277		218,620
Of which:
Residential mortgages		84,886		77,167		78,936
Consumer finance		7,663		8,077		8,106
Loans		6,043		6,500		6,453
Credit cards		1,620		1,577		1,653
Loans to enterprises		56,335		70,867		71,045
Loans to public sector		24,937		25,006		23,198
Total customer deposits		129,640		109,421		106,073
Current and savings accounts		45,325		41,613		41,471
Time deposits		61,055		48,447		48,116
Other customer funds		23,260		19,361		16,486
Off-balance sheet funds		52,735		51,159		53,559
Mutual funds		19,937		20,357		23,393
Pension funds		18,313		17,224		16,811
Other placements		14,486		13,578		13,355
Economic capital allocated		12,110		10,558		10,100

As of December 31, 2012, the balance of loans and advances to customers was €210,982 million, a 1.5% decrease from the €214,277 million recorded as of December 31, 2011, 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, 2012, our outstanding payment protection insurance policies amounted to €39 billion and insured approximately 19% of our total loans and advances to customers in Spain as of 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 5.5% 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, 2012, total on-balance and off-balance sheet customer deposits and funds, including mutual funds, pension funds and customer portfolios, were €182,375 million, a 13.6% increase from the €160,580 million posted as of December 31, 2011.

Customer deposits were €129,640 million as of December 31, 2012 compared to €109,421 as of December 31, 2011, an increase of 18.5%, mainly due to the high percentage of renewals of time deposits during the period and, to a lesser extent, the integration of Unnim in 2012.

Mutual fund assets under management were €19,937 million as of December 31, 2012, a 2.1% decrease from the €20,357 million recorded as of December 31, 2011 as a result of a reduction in the assets under management due to turmoil in the markets.

As of December 31, 2012, our outstanding guaranteed mutual fund products amounted to €11,423 million (approximately 59.8% 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.

27

Pension fund assets under management were €18,313 million as of December 31, 2012, a 6.3% increase from the €17,224 million recorded as of December 31, 2011, as a result of the positive management of renewals and new accounts.

The economic capital allocated was €12,110 million as of December 31, 2012, a 14.7% increase from the €10,558 million recorded as of December 31, 2011. This increase was mainly related to the incorporation of Unnim, the recalibration of our internal model in mid 2012 based on backtesting results and the increased market risk resulting from the application of capital requirements currently applicable to BBVA.

Eurasia

This operating segment 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, and the retail and wholesale activity carried out within the various regions comprised in this business segment. It also includes the Group’s interest in Türkiye Garanti Bankası A.Ş (“Garanti”), which is proportionally consolidated, and its equity-accounting holdings in China CITIC Bank Corporation Limited (“CNCB”) and CITIC International Financial Holding Ltd. (“CIFH”).

The importance of this segment 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.

The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2012, 2011 and 2010:

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Total Assets		48,282		53,354		45,980
Loans and advances to customers		30,228		34,740		23,909
Of which:
Residential mortgages		4,291		4,025		2,961
Consumer finance		4,281		3,421		913
Loans		3,069		2,400		903
Credit cards		1,212		1,021		10
Loans to enterprises		19,804		25,851		11,534
Loans to public sector		102		107		113
Total customer deposits		16,484		21,142		20,788
Current and savings accounts		3,098		3,162		1,358
Time deposits		9,576		10,012		2,380
Other customer funds		3,810		7,968		17,050
Off-balance sheet funds		1,195		1,036		566
Mutual funds		587		562		194
Pension funds		608		474		372
Economic capital allocated		4,607		4,245		2,546

28

As of December 31, 2012, the loans and advances to customers was €30,228 million, a 13.0% decrease from the €34,740 million recorded as of December 31, 2011, mainly due to the reduced loan portfolio with wholesale clients, due to the deleveraging process under way in Europe as a result of difficult economic conditions.

As of December 31, 2012 customer deposits were €16,484 million, a 22% decrease from the €21,142 million as of December 31, 2011. While Turkey performed well, wholesale deposits in the Paris, London and Brussels branches fell as a result mainly of the difficult economic conditions in the Eurozone, which have resulted in wholesale financial markets being affected by the high volatility of the risk premiums of certain EU peripheral countries (and, correspondingly, wholesale deposit flight from banks incorporated in such countries, including BBVA) and by the successive downgrades of sovereign ratings, which have also had an impact on the ratings of the financial institutions located in such countries.

The economic capital allocated was €4,607 million as of December 31, 2012, an 8.5% increase from the €4,245 million recorded as of December 31, 2011. This increase was mainly attributable to the increase in credit activity in Turkey and the increase in the value of our stake in CNCB, which increased our equity risk.

Mexico

The Mexico operating segment 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. On January 9, 2013, after having obtained the necessary approvals, we completed the sale of our stake in Administradora de Fondos para el Retiro Bancomer, S.A. de C.V. (“Afore Bancomer”).

The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2012, 2011 and 2010:

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Total Assets		82,432		72,488		73,321
Loans and advances to customers		38,937		34,084		34,754
Of which:
Residential mortgages		9,399		8,854		9,538
Consumer finance		9,675		8,129		7,162
Loans		4,311		3,643		2,907
Credit cards		5,364		4,486		4,256
Loans to enterprises		12,494		11,435		12,372
Loans to public sector		3,590		2,871		2,957
Total customer deposits		34,071		31,097		32,054
Current and savings accounts		23,707		21,129		20,963
Time deposits		7,157		6,792		7,770
Other customer funds		3,207		3,177		3,322
Off-balance sheet funds		40,805		35,317		34,895
Mutual funds		17,492		15,612		15,341
Pension funds		16,390		13,132		12,781
Other placements		6,922		6,572		6,773
Economic capital allocated		4,991		4,236		3,290

29

As of December 31, 2012, the balance of loans and advances to customers was €38,937 million, a 14.2% increase from the €34,084 million as of December 31, 2011 which was attributable in part to the year-on-year appreciation of the Mexican peso against the euro as of December 31, 2012.

As of December 31, 2012, customer deposits were €34,071 million, a 9.6% increase from the €31,097 million recorded as of December 31, 2011, which was attributable to the year-on-year appreciation of the Mexican peso against the euro as of December 31, 2012 and increased retail network activity. The retail portfolio increased by 9.6% whereas the wholesale portfolio increased by 7.4% year-on-year.

Mutual fund assets under management were €17,492 million as of December 31, 2012, a 12.0% increase from the €15,612 million recorded as of December 31, 2011.

Pension fund assets under management were €16,390 million as of December 31, 2012, a 24.8% increase from the €13,132 million recorded as of December 31, 2011 due to the positive performance of Afore Bancomer. On January 9, 2013, after having obtained the necessary approvals, we completed the sale of our stake in Afore Bancomer. See “—History and Development of the Company—Capital Divestures—2013”.

The economic capital allocated was €4,991 million as of December 31, 2012, a 17.82% increase from the €4,236 million recorded as of December 31, 2011. This increase was mainly attributable to the recalibration of our internal model in mid 2012 based on backtesting results and lending growth.

South America

The South America operating segment manages the BBVA Group’s banking, pension and insurance businesses in the region.

The business units included in the South America operating segment 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. As of the date of this Annual Report, we have entered into agreements to sell our stakes in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A. (“Horizonte”) and in the Chilean pension fund manager Administradora de Fondos de Pensiones Provida S.A. (“AFP Provida”), respectively.

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

30

The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2012, 2011 and 2010:

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Total Assets		78,419		63,444		51,671
Loans and advances to customers		48,721		40,219		31,512
Of which:
Residential mortgages		8,653		7,047		5,851
Consumer finance		12,888		9,888		6,608
Loans		9,564		7,454		5,029
Credit cards		3,325		2,434		1,579
Loans to enterprises		16,896		17,492		14,569
Loans to public sector		623		763		681
Total customer deposits		56,937		45,279		35,963
Current and savings accounts		34,352		26,131		19,341
Time deposits		17,107		15,094		12,958
Other customer funds		5,478		4,054		3,664
Off-balance sheet funds		57,820		50,855		51,744
Mutual funds		3,355		3,037		2,944
Pension funds		54,465		47,818		48,800
Economic capital allocated		3,275		2,912		2,423

As of December 31, 2012, the loans and advances to customers were €48,721 million, a 21.1% increase from the €40,219 million recorded as of December 31, 2011. All countries in this operating segment have seen growth, with significant increases in the retail segment (where loans and advances to customers grew by 38.6% year-on-year), consumer loans and credit cards. In Venezuela, loans and advances to customers grew by almost 50% year-on-year principally as a result of increased consumer finance activity.

As of December 31, 2012, customer deposits were €56,937 million, a 25.7% increase from the €45,279 million recorded as of December 31, 2011. In 2012, there has been strong growth in lower-cost transactional items (such as checking and savings accounts), which have increased by 30.6%. In Venezuela, customer deposits grew by over 50% year-on-year.

As of December 31, 2012, off-balance sheet funds were €57,820 million, a 13.7% increase from the €50,855 million recorded as of December 31, 2011 principally due to the increase in assets of our pension funds. As indicated above, as of the date of this Annual Report, we have entered into agreements to sell our stakes in Horizonte and AFP Provida. We expect the sales of Horizonte and AFP Provida to close during the first and second half of 2013, respectively. See “—History and Development of the Company—Capital Divestitures—2013.”

The economic capital allocated was €3,275 million as of December 31, 2012, a 12.5% increase from the €2,912 million recorded as of December 31, 2011. This increase was principally the result of the general and strong lending growth in all the countries in the region and the appreciation of the currencies in the region against the euro.

United States

This operating segment encompasses the Group’s business in the United States. BBVA Compass accounted for approximately 95% of the area’s balance sheet as of December 31, 2012. Given its weight, most of the comments below refer to BBVA Compass. This operating segment also covers the assets and liabilities of the BBVA office in

31

New York, which specializes in transactions with large corporations. Until December 2012, this operating segment also encompassed the Group’s business in Puerto Rico. In December 2012, the Group closed the sale of its business in Puerto Rico to Oriental Financial Group Inc. See “—History and Development of the Company—Capital Divestitures—2012.”

The business units included in the United States operating segment are:

• BBVA Compass Banking Group, and

• Other units: Bancomer Transfers Services (“BTS”).

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Total Assets		53,850		57,207		59,173
Loans and advances to customers		36,892		41,819		41,127
Of which:
Residential Mortgages		9,107		8,487		6,762
Consumer Finance		4,406		5,399		5,551
Loans		3,926		4,949		5,151
Credit cards		480		450		400
Loans to enterprises		19,199		21,450		17,213
Loans to public sector		1,961		1,979		1,339
Total Customer deposits		37,721		37,137		41,702
Current and savings accounts		29,060		27,716		25,216
Time deposits		7,885		8,569		9,596
Other customer funds		775		852		6,890
Economic capital allocated		2,638		3,379		2,827

As of December 31, 2012, loans and advances to customers were €36,892 million, an 11.8% decrease from the €41,819 million recorded as of December 31, 2011, principally due to the sale of our business in Puerto Rico and, to a lesser extent, due to the fall in real estate construction in the United States. If loans and advances to customers contributed by our Puerto Rico business were disregarded both as of December 31, 2012 and December 31, 2011 in order to ensure like-for-like comparisons, loans and advances to customers would have decreased by 4.9%. In 2012 we 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 (which increased by 24.5% year-on-year) and reducing higher risk portfolios such as construction real estate loans (which decreased by 48.2% year-on-year principally as a result of the sale of certain loan portfolios).

As of December 31, 2012, customer deposits were €37,721 million, a 1.6% increase from €37,137 million as of December 31, 2011. If deposits contributed by our Puerto Rico business were disregarded both as of December 31, 2012 and December 31, 2011 in order to ensure like-for-like comparisons, customer deposits would have increased by 7.2%. In 2012, demand deposits grew by 12.3% and accounted for 29.1% of the customer deposits in BBVA Compass as of December 31, 2012.

The economic capital allocated was €2,638 million as of December 31, 2012, a 21.9% decrease from the €3,379 million recorded as of December 31, 2011, principally due to the sale of our business in Puerto Rico.

32

Insurance Activity

See Note 18 to our Consolidated Financial Statements for information on our insurance activity.

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;

• 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

33

• 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;

• 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, the rate of our contributions is equal to 0.2% of the year-end amount of bank deposits to which the guarantee extends and 0.2% over 5% of the securities held on our clients’ behalf as of December 31.

34

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. This contribution was repealed in 2012 pursuant to Royal Decree-Law 24/2012, of August 31.

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. 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

35

• 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 FGD. 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 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, 2012, 2011 and 2010, 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.

36

• 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.

• 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.

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, 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, 2012 and December 31, 2011:

	Basel II Capital Ratio			RD-L 2/2011 “Capital Principal” ratio
Minimum required		8	%		8	%
December 2012		13.0	%		10.5	%
December 2011		12.9	%		9.7	%

Our estimated capital ratios and its related components are non-GAAP financial measures. We believe these metrics provide useful information to investors and others by measuring our progress against regulatory capital standards. For additional information on how these ratios were calculated, please see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital.”

37

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. In recent years we have taken various actions in connection with our capital management and in order to comply with various capital requirements applicable to us. We may make securities issuances or undertake asset sales in the future, which could involve outright sales of businesses or reductions in interests held by us, which could be material and could be undertaken at less than their respective book values, resulting in material losses thereon, in connection with our capital management and in order to comply with capital requirements or otherwise.

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 operating segments 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 operating segments, the Group realizes a capital allocation to each operating segment.

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.

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.

38

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 profit attributable 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 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

As in 2011, during 2012, a scrip dividend scheme called “Dividendo Opción” was successfully implemented as approved by the annual general meeting of shareholders held on March 16, 2012. In line with the 2012 “Dividendo Opción” scheme, the BBVA annual general meeting of shareholders held on March 15, 2013, passed two resolutions 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 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 free-of-charge 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.

39

Shareholders may have the “Dividendo Opción” available to them on two different dates, 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, so that one may be executed on a different date than the other and either one, or both of them, may even not be implemented.

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.

Increasing social pressure for the reform of mortgage legislation in Spain has resulted in recent changes to such legislation (which are described below) and may result in further changes to such legislation in the future.

Royal Decree 6/2012, of March 9, on Urgent measures to protect mortgage debtors without financial resources introduced measures to enable the restructuring of mortgage debt and easing of collateral foreclosure aimed to protect especially vulnerable debtors.

Such measures include the following:

• the moderation of interest rates charged on mortgage arrears;

• the improvement of extrajudicial procedures as an alternative to legal foreclosure;

• the introduction of a voluntary code of conduct among lenders for regulated mortgage debt restructuring affecting especially vulnerable debtors; and

• where restructuring is unviable, lenders may, where appropriate and on an optional basis, offer the debtor partial debt forgiveness.

In addition, Royal Decree 27/2012, of November 15, on Urgent measures to enhance the protection of mortgage debtors provided for a two year moratorium, from the date of its adoption, on evictions applicable to debtor groups especially susceptible to social exclusion, who may resultantly remain at their homes for such period.

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.

40

Spanish Corporate Enterprises Act

The consolidated text of the Corporate Enterprises Act adopted under Legislative Royal Decree 1/2010, of July 2, repealed the former Companies Act, adopted under Legislative Royal Decree 1564/1989, of December 22. This royal legislative decree has consolidated the legislation for joint stock companies (“sociedades anónimas”) and limited liability companies (“sociedades de responsabilidad limitada”) in a single text, bringing together the contents of the two aforementioned acts, as well as a part of the Securities Exchange Act. 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.

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 12/2010 and repealed Law 19/1988, of July 12.

Law 9/2012 of November 14, on Restructuring and Resolution of Credit Entities

Law 9/2012, of November 14, 2012, on restructuring and resolution of credit entities, sets up a comprehensive framework to deal with financial institutions in stressed situations. Depending on the financial entity’s situation, three types of measures can be applied: early intervention (for mild difficulties), restructuring measures (for temporary troubles, able to be coped with by means of public financial support) and orderly resolution (for non-viable institutions). Law 9/2012 also grants the Fund for Orderly Bank Restructuring (FROB) the power to implement these measures and provides for the creation of an Asset Management Company which will allow the removal from the balance sheet of state aided banks of certain problematic assets in order to ease their viability. The FROB is entitled to commit the entities receiving state aids to transfer those problematic assets.

Law 9/2012 also establishes the burden sharing regime between the public sector and the private stakeholders, defining the mechanism by means of which the owners of hybrid capital instruments could be forced to bear part of the losses of a troubled institution. This burden sharing could be done through exchanges of hybrid capital instruments into capital instruments, direct or conditioned cash repurchases, or reduction and anticipated amortization of the nominal value of the relevant instruments.

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.

A bank holding company 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 its U.S. bank subsidiary.

The Group’s U.S. bank subsidiary and BBVA’s U.S. branch 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 BBVA USA Bancshares, Inc., a direct subsidiary of BBVA, and its wholly-owned subsidiary, BBVA Compass Bancshares, Inc. (“BBVA Compass”), 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,

41

Colorado, Florida, New Mexico, and Texas. Compass Bank is supervised and inspected 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 inspection by their respective state banking regulators in such states. Compass Bank is also a depository institution insured by, and subject to the regulation of, the Federal Deposit Insurance Corporation (the “FDIC”).

BBVA Bancomer, S.A.’s 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 compliance programs under the Bank Secrecy Act and the sanctions programs administered by 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.

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 affiliate is subject to regulation and supervision by various U.S. state insurance regulatory authorities.

Dodd-Frank Act

In July 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 extends to almost every area of U.S. financial regulation. The Dodd-Frank Act addresses, among other issues, systemic risk oversight, bank capital standards, the resolution 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.

42

U.S. regulators are implementing many provisions of the Dodd-Frank Act through detailed rulemaking, and the implementation process will likely continue for several more years. Once 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 provisions.

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. In June 2012, the Federal banking agencies proposed a broad revision of the regulatory capital rules applicable to U.S. banks and bank holding companies. The new rules, which are intended to implement the Basel III capital standards and comply with the Dodd-Frank Act’s minimum risk-based capital requirements, will be phased in over a multi-year period and, once fully implemented, will generally require higher amounts of capital to be held against risk weighted assets. In November 2012, the implementation of these rules, which was originally planned to begin in January 2013, was delayed, and the Federal banking agencies are continuing their work towards developing final versions of the rules.

The Dodd-Frank Act also provides Federal banking agencies with tools to impose greater capital, leverage and liquidity requirements and other enhanced prudential standards, particularly for financial institutions that pose significant systemic risk and bank holding companies with greater than $50 billion in assets. The Federal Reserve has proposed two different sets of rules pursuant to its enhanced prudential standards authority under the Dodd-Frank Act. The first set of rules is applicable to U.S.-based bank holding companies with consolidated assets in excess of $50 billion, and it provides for 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 second set of rules, proposed in December 2012, is directly applicable to foreign bank holding companies such as BBVA.

Under the prudential standards rules proposed in December 2012, most large foreign bank holding companies would be required to create a separately capitalized top-tier U.S. intermediate holding company (“IHC”) that would hold all of a foreign bank holding company’s U.S. bank and nonbank subsidiaries, although a foreign bank holding company subject to the IHC requirement could request permission from the Federal Reserve to establish multiple IHCs or use an alternative organizational structure, and the proposed rules permit the Federal Reserve to apply the IHC requirements in a manner that takes into account the separate operations of multiple foreign banks that are owned by a single foreign bank holding company. An IHC would be subject to U.S. capital, liquidity and other enhanced prudential standards on a consolidated basis, and the Federal Reserve would have the authority to examine any IHC and any subsidiary of an IHC. Although U.S. branches and agencies of foreign banks would not be required to be held beneath an IHC, branches and agencies would be subject to liquidity, single counterparty credit limits, and, in certain circumstances, asset maintenance requirements. The rules include a proposed effective date of July 1, 2015. The Federal Reserve is currently accepting comments on the proposed rules.

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. BBVA USA Bancshares, Inc. submitted its most recent annual capital plan on January 7, 2013.

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, but final rules have not yet been issued. The Dodd-Frank Act also changes the FDIC deposit insurance

43

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, necessitating 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. Since July 2012, the Dodd-Frank Act has broadened these restrictions to subject 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.

New consumer protection 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 with over $10 billion in assets (including Compass Bank) may conduct, and may impose restrictions and limitations on the conduct of such activities.

Furthermore, the Dodd-Frank Act requires the SEC to cause 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.

Disclosure of Iranian Activities under Section 13(r) of the Exchange Act

Section 13(r) of the Exchange Act, which requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified Executive Orders, including activities not prohibited by U.S. law and conducted outside the United States by non-U.S. affiliates in compliance with local law. In order to comply with this new requirement, we have requested relevant information from our affiliates globally.

The following activities are set forth below as required by Section 13(r) of the Exchange Act. These activities have also been reported to the relevant Spanish authorities where required.

Legacy contractual obligations related to counter indemnities. Before 2007, we issued certain counter indemnities to our non-Iranian customers in Europe for various business activities relating to Iran in support of guarantees provided by Bank Melli, four of which remained outstanding as of January 1, 2012 (three as of December 31, 2012). Estimated gross revenue for 2012 from these counter indemnities, which includes fees and/or commissions, did not exceed €9,000 and was entirely derived from payments made by our non-Iranian customers in Europe. We do not allocate direct costs to fees and commissions and therefore have not disclosed a separate profits measure. In addition, in accordance with Council Regulation (EU) No 267/2012 of March 23, payments of any amounts due to Bank Melli under these counter indemnities have been blocked. We are committed to terminating these business relationships as soon as contractually possible and we do not intend to enter into new business relationships involving Bank Melli.

44

Letters of credit. During 2012, we had credit exposure to Bank Mellat, Bank Tejarat and Bank Sepah arising from a total of four letters of credit issued by such Iranian banks (one by Bank Mellat, two by Bank Tejarat and one by Bank Sepah) to our non-Iranian clients in Europe. These letters of credit, all of which were granted before 2004, were used to secure our loans to our clients in order to finance certain Iran-related activities. These loans were supported by the Spanish export credit agency (CESCE). Three of these loans related to our clients’ exportation of goods to Iran (consisting of medical supplies, electrical equipment, air conditioning equipment and port infrastructures). The remaining loan, which matured in 2012, was granted to an Spanish customer in connection with its provision of engineering services and supply of equipment for the construction of a petrochemical plant in Iran.

As of December 31, 2012, only one of the letters of credit referred to above (issued by Bank Sepah) remained outstanding. Estimated gross revenue for 2012 from the loans underlying these letters of credit, which includes fees and/or commissions, did not exceed € 250,000. We do not allocate direct costs to fees and commissions and therefore have not disclosed a separate profits measure. Payments of any amounts due by Bank Mellat, Bank Tejarat or Bank Sepah in 2012 under these letters of credit were initially blocked and thereafter released upon authorization by the relevant Spanish authorities. We are committed to terminating the outstanding business relationship with Bank Sepah as soon as contractually possible and we do not intend to enter into new business relationships involving Bank Mellat, Bank Tejarat or Bank Sepah.

Bank Accounts. In 2012, we maintained one account (which was closed in March 2013) for a company that produces farm vehicles and tractors. and a number of accounts for certain of its employees (some of whom have the Iranian nationality). We believe that 51% of the share capital of such company is controlled by an Iranian company in which the Iranian Government might have an interest. Estimated gross revenue for 2012 from these accounts, which includes fees and/or commissions, did not exceed €5,000. We do not allocate direct costs to fees and commissions and therefore have not disclosed a separate profits measure. We are committed to terminating our business relationships with the employees of this company as soon as contractually possible and we do not intend to enter into new business relationships involving this company or its employees.

Iranian embassy-related activity. We maintain bank accounts in Spain for three employees of the Iranian embassy in Spain. In addition, we maintain bank accounts in Venezuela for seven employees of the Iranian embassy in Venezuela and have provided one employee with an insurance against theft at ATMs which will expire on November 6, 2013. Estimated gross revenue for 2012 from embassy-related activity, which includes fees and/or commissions, did not exceed €2,000. We do not allocate direct costs to fees and commissions and therefore have not disclosed a separate profits measure. We are committed to terminating these business relationships as soon as legally possible.

Activity related to U.S. Executive Order 13,224. Until January 2, 2012 we maintained two deposit accounts and three credit cards in Colombia for one individual designated by the U.S. under Executive Order 13,224 on December 29, 2011. On January 2, 2012 such deposit accounts and credit cards were closed and cancelled, respectively. Estimated gross revenue in 2012 for the activity referred to above, which includes fees and/or commissions, was nil.

Correspondent relationship with the Central Bank of Iran. Until September 11, 2012, we maintained a correspondent relationship with the Central Bank of Iran in connection with non-U.S. dollar payments made in connection with certain transactions described above. There were no transactions with the Central Bank of Iran during 2012. Accordingly, there was no related gross revenue or net profits recognized in 2012. On September 11, 2012, we terminated our correspondent relationship with the Central Bank of Iran.

45

C. Organizational Structure

As of December 31, 2012, the BBVA Group was made up of 320 fully consolidated and 29 proportionately consolidated companies, as well as 102 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, 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, 2012.

	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		99.97		75,845
COMPASS BANK	United States	Bank		100.00		100.00		56,622
UNNIM BANC, S.A.	Spain	Bank		100.00		100.00		28,044
BANCO PROVINCIAL S.A. – BANCO UNIVERSAL	Venezuela	Bank		55.60		55.60		19,977
BANCO CONTINENTAL, S.A.	Peru	Bank		46.12		46.12		14,762
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.	Chile	Bank		68.18		68.18		14,742
BBVA SEGUROS, S.A. DE SEGUROS Y REASEGUROS	Spain	Insurance		99.95		99.95		14,117
BBVA COLOMBIA, S.A.	Colombia	Bank		95.43		95.43		13,099
BBVA BANCO FRANCES, S.A.	Argentina	Bank		75.99		75.99		6,816
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A.	Portugal	Bank		100.00		100.00		6,203
PENSIONES BANCOMER, S.A. DE C.V.	Mexico	Insurance		100.00		100.00		3,276
SEGUROS BANCOMER, S.A. DE C.V.	Mexico	Insurance		100.00		99.98		2,969
BANCO BILBAO VIZCAYA ARGENTARIA (PANAMA), S.A.	Panama	Bank		98.92		98.92		1,609
BBVA SUIZA, S.A. (BBVA SWITZERLAND)	Switzerland	Bank		100.00		100.00		1,355
UNO-E BANK, S.A.	Spain	Bank		100.00		100.00		1,312
BBVA PARAGUAY, S.A.	Paraguay	Bank		100.00		100.00		1,252

D. Property, Plants and Equipment

We own and rent a substantial network of properties in Spain and abroad, including 3,518 branch offices in Spain and, principally through our various affiliates, 4,460 branch offices abroad as of December 31, 2012. As of December 31, 2012, approximately 84% of our branches in Spain and 54% of our branches abroad were rented from third parties pursuant to short-term leases that may be renewed by mutual agreement.

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, 2012, the accumulated investment for this project amounted to € 612 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.

46

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, 2012							Year Ended December 31, 2011							Year Ended December 31, 2010
	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		26,148		259		0.99	%		21,245		250		1.18	%		21,342		239		1.12	%
Debt securities, equity instruments and derivatives		167,080		4,793		2.87	%		141,780		4,238		2.99	%		145,993		3,939		2.70	%
Loans and receivables		385,215		21,008		5.45	%		368,312		19,485		5.29	%		358,582		16,797		4.68	%
Loans and advances to credit institutions		26,500		475		1.79	%		26,390		632		2.39	%		25,561		497		1.95	%
Loans and advances to customers		358,716		20,533		5.72	%		341,922		18,846		5.51	%		333,023		16,296		4.89	%
In Euros(2)		217,378		7,267		3.34	%		219,887		7,479		3.40	%		219,857		7,023		3.19	%
In other currencies(3)		141,337		13,266		9.39	%		122,034		11,367		9.31	%		113,167		9,273		8.19	%
Other financial income		—		—		—			—		—		—			—		—		—
Non-earning assets		45,470		202		0.44	%		37,241		214		0.57	%		32,895		158		0.48	%
Total average assets		623,912		26,263		4.21	%		568,579		24,180		4.25	%		558,814		21,130		3.78	%

(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.

	Average Balance Sheet—Liabilities and Interest Paid on Interest Bearing Liabilities
	Year Ended December 31, 2012							Year Ended December 31, 2011							Year Ended December 31, 2010
	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		107,917		2,307		2.14	%		77,382		2,037		2.63	%		80,177		1,515		1.89	%
Customer deposits		283,211		5,207		1.84	%		276,683		5,644		2.04	%		259,330		3,551		1.37	%
In Euros(2)		146,833		1,963		1.34	%		153,514		2,419		1.58	%		121,956		1,246		1.02	%
In other currencies(3)		136,377		3,244		2.38	%		123,169		3,225		2.62	%		137,374		2,304		1.68	%
Debt certificates and subordinated liabilities		104,117		2,818		2.71	%		109,860		2,613		2.38	%		119,684		2,126		1.95	%
Other financial costs		—		—		—			—		—		—			—		—		—
Non-interest-bearing liabilities		85,834		808		0.94	%		65,980		734		1.11	%		66,541		622		0.94	%
Stockholders’ equity		42,833		—		—			38,674		—		—			33,079		—		—
Total average liabilities		623,912		11,140		1.79	%		568,579		11,028		1.94	%		558,807		7,814		1.40	%

(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.

47

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 2012 compared to 2011, and 2011 compared to 2010. 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.

	2012/2011
	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		58			(48	)		9
Securities portfolio and derivatives		756			(202	)		555
Loans and advances to credit institutions		3			(159	)		(157	)
Loans and advances to customers		926			762			1,687
In Euros		(85	)		(126	)		(212	)
In other currencies		1,798			101			1,899
Other assets		47			(59	)		(12	)
Total income		2,353			(270	)		2,083
Interest expense
Deposits from central banks and credit institutions		804			(534	)		270
Customer deposits		133			(569	)		(436	)
In Euros		(105	)		(351	)		(456	)
In other currencies		346			(326	)		20
Debt certificates and subordinated liabilities		(137	)		342			206
Other liabilities		221			(147	)		73
Total expense		1,073			(960	)		113
Net interest income		1,280			690			1,970

(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.

	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
Securities portfolio and derivatives		(114	)		413			299
Loans and advances to credit institutions		16			118			135
Loans and advances to customers		435			2,114			2,549
In Euros		1			455			456
In other currencies		727			1,367			2,094
Other assets		21			35			56
Total income		369			2,681			3,050
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		(175	)		661			487
Other liabilities		(5	)		117			112
Total expense		137			3,077			3,214
Net interest income		232			(396	)		(164	)

(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.

48

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,
	2012			2011			2010
	(In Millions of Euro, except Percentages)
Average interest earning assets		578,443			531,337			525,919
Gross yield(1)		4.5	%		4.6	%		4.0	%
Net yield(2)		4.2	%		4.3	%		3.8	%
Net interest margin(3)		2.6	%		2.5	%		2.5	%
Average effective rate paid on all interest-bearing liabilities		2.2	%		2.4	%		1.7	%
Spread(4)		2.3	%		2.2	%		2.3	%

(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, 2012, interbank deposits represented 3.81% of our assets. Of such interbank deposits, 34.63% were held outside of Spain and 65.37% 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, 2012, our securities were carried on our consolidated balance sheet at a carrying amount of €112,894 million, representing 17.7% of our assets. €36,048 million, or 31.9%, of our securities consisted of Spanish Treasury bonds and Treasury bills. The average yield during 2012 on investment securities that BBVA held was 4.3%, compared to an average yield of approximately 5.5% earned on loans and receivables during 2012. The market or appraised value of our total securities portfolio as of December 31, 2012, was €112,592 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.

49

The following tables analyze the carrying amount and market value of debt securities as of December 31, 2012, December 31, 2011 and December 31, 2010, 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, 2012
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
DEBT SECURITIES—
AVAILABLE FOR SALE PORTFOLIO
Domestic		35,043		34,451		388		(980	)
Spanish Government and other government agency debt securities		25,439		24,822		243		(860	)
Other debt securities		9,604		9,629		145		(120	)
Issued by central banks		—		—		—		—
Issued by credit institutions		7,888		7,900		71		(59	)
Issued by other institutions		1,716		1,729		74		(61	)
International		32,012		33,092		1,732		(652	)
Mexico		8,251		9,214		964		(1	)
Mexican Government and other government agency debt securities		7,251		8,086		835		—
Other debt securities		1,000		1,128		129		(1	)
Issued by central banks		—		—		—		—
Issued by credit institutions		334		389		56		(1	)
Issued by other institutions		666		739		73		—
United States		6,944		7,045		189		(88	)
U.S. Treasury and other U.S. government agencies debt securities		228		228		1		(1	)
States and political subdivisions		486		497		20		(9	)
Other debt securities		6,230		6,320		168		(78	)
Issued by central banks		—		—		—		—
Issued by credit institutions		151		155		11		(7	)
Issued by other institutions		6,079		6,165		157		(71	)
Other countries		16,817		16,833		579		(563	)
Securities of other foreign Governments		9,285		9,229		321		(377	)
Other debt securities		7,532		7,604		258		(186	)
Issued by central banks		1,161		1,162		2		(1	)
Issued by credit institutions		4,663		4,772		210		(101	)
Issued by other institutions		1,708		1,670		46		(84	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		67,055		67,543		2,120		(1,632	)
HELD TO MATURITY PORTFOLIO
Domestic		7,278		6,849		4		(433	)
Spanish Government and other government agency debt securities		6,469		6,065		2		(406	)
Other debt securities		809		784		2		(27	)
Issued by central banks		—		—		—		—
Issued by credit institutions		250		249		2		(3	)
Issued by other institutions		559		535		—		(24	)
International		2,884		3,011		127		—
Securities of other foreign Governments		2,741		2,862		121		—
Other debt securities		143		149		6		—
TOTAL HELD TO MATURITY PORTFOLIO		10,162		9,860		131		(433	)
TOTAL DEBT SECURITIES		77,217		77,403		2,251		(2,065	)

(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, 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.

51

	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.

52

As of December 31, 2012 the carrying amount of the debt securities classified within the available for sale portfolio and the held to maturity portfolio by rating categories defined by external rating agencies, were as follows:

	As of December 31, 2012
	Debt Securities Available for Sale					Debt Securities Held to Maturity
	Carrying Amount (In Millions of Euros)		%			Carrying Amount (In Millions of Euros)		%
AAA		1,436		2.1	%		320		3.2	%
AA+		5,873		8.7	%		24		0.2	%
AA		214		0.3	%		—		—
AA-		1,690		2.5	%		350		3.4	%
A+		741		1.1	%		8		0.1	%
A		1,125		1.7	%		—		—
A-		6,521		9.7	%		2,690		26.5	%
With rating BBB+ or below		41,153		60.9	%		6,756		66.5	%
Non-rated		8,790		13.0	%		14		0.1	%
TOTAL		67,543		100.0	%		10,162		100.0	%

The following tables analyze the carrying amount and market value of our ownership of equity securities as of December 31, 2012, 2011 and 2010, respectively. Trading portfolio and investments in affiliated companies consolidated under the equity method are 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, 2012
	Amortized Cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
EQUITY SECURITIES—
AVAILABLE FOR SALE PORTFOLIO
Domestic		3,377		3,117		124		(384	)
Equity listed		3,301		3,043		122		(380	)
Equity unlisted		76		74		2		(4	)
International		868		840		17		(45	)
United States		506		503		1		(4	)
Equity listed		32		29		1		(4	)
Equity unlisted		474		474		—		—
Other countries		362		337		16		(41	)
Equity listed		265		233		9		(41	)
Equity unlisted		97		104		7		—
TOTAL AVAILABLE FOR SALE PORTFOLIO		4,245		3,957		141		(429	)
TOTAL EQUITY SECURITIES		4,245		3,957		141		(429	)
TOTAL INVESTMENT SECURITIES		81,462		81,360		2,392		(2,494	)

(1) Fair values for listed securities are determined on the basis of their quoted values at the end of the year. Appraised values are used for unlisted securities based on our estimates or on unaudited financial statements, when available.

53

	As of December 31, 2011
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
EQUITY SECURITIES—
AVAILABLE FOR SALE PORTFOLIO
Domestic		3,838		4,304		468		(2	)
Equity listed		3,802		4,268		468		(2	)
Equity unlisted		36		36		—		—
International		999		926		18		(91	)
United States		601		591		2		(12	)
Equity listed		41		29		—		(12	)
Equity unlisted		560		562		2		—
Other countries		398		335		16		(79	)
Equity listed		320		246		5		(79	)
Equity unlisted		78		89		11		—
TOTAL AVAILABLE FOR SALE PORTFOLIO		4,837		5,230		486		(93	)
TOTAL EQUITY SECURITIES		4,837		5,230		486		(93	)
TOTAL INVESTMENT SECURITIES		70,388		68,334		1,720		(3,774	)

(1) Fair values for listed securities are determined on the basis of their quoted values at the end of the year. Appraised values are used for unlisted securities based on our estimates or on unaudited financial statements, when available.

	As of December 31, 2010
	Amortized cost		Fair Value(1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
EQUITY SECURITIES—
AVAILABLE FOR SALE PORTFOLIO
Domestic		3,403		4,608		1,212		(7	)
Equity listed		3,378		4,583		1,212		(7	)
Equity unlisted		25		25		—		—
International		927		973		71		(25	)
United States		605		662		56		—
Equity listed		11		13		1		—
Equity unlisted		594		649		55		—
Other countries		322		311		15		(25	)
Equity listed		258		240		7		(25	)
Equity unlisted		64		71		8		—
TOTAL AVAILABLE FOR SALE PORTFOLIO		4,330		5,581		1,283		(32	)
TOTAL EQUITY SECURITIES		4,330		5,581		1,283		(32	)
TOTAL INVESTMENT SECURITIES		66,314		65,645		2,488		(3,157	)

(1) Fair values for listed securities are determined on the basis of their quoted values at the end of the year. Appraised values are used for unlisted securities based on our estimates or on unaudited financial statements, when available.

54

The following table analyzes the maturities of our debt investment and fixed income securities, excluding trading portfolio, by type and geographical area as of December 31, 2012.

	Maturity at One Year or Less				Maturity After One Year to Five Years				Maturity After Five Years to 10 Years				Maturity After 10 Years				Total
	Amount		Yield %(1)		Amount		Yield %(1)		Amount		Yield %(1)		Amount		Yield %(1)		Amount
	(Millions of Euros, Except Percentages)
DEBT SECURITIES
AVAILABLE-FOR-SALE PORTFOLIO
Domestic
Spanish government and other government agency debt securities		3,088		16.88		13,156		3.69		4,040		4.90		4,539		5.21		24,822
Other debt securities		3,607		2.27		5,108		4.22		423		3.49		490		5.90		9,629
Total Domestic		6,695		7.76		18,264		3.85		4,463		4.70		5,029		5.33		34,451
International
Mexico		666		7.98		4,483		6.07		255		7.15		3,810		6.24		9,214
Mexican Government and other government agency debt securities		652		8.00		4,168		6.07		73		5.50		3,193		4.49		8,086
Other debt securities		14		7.10		315		6.07		183		8.08		617		6.42		1,128
United States		568		2.57		4,405		2.80		1,583		2.58		489		5.35		7,045
U.S. Treasury and other government agency debt securities		148		0.36		39		3.18		25		3.53		16		5.26		228
States and political subdivisions debt securities		49		6.68		274		4.29		151		4.64		23		4.98		497
Other debt securities		371		3.66		4,091		2.69		1,408		2.35		450		5.37		6,320
Other countries		3,623		2.26		7,720		3.59		2,812		8.83		2,675		5.18		16,833
Securities of foreign governments(2)		1,377		1.31		4,540		3.52		2,154		10.05		1,159		5.38		9,229
Other debt securities of other countries		2,246		2.80		3,181		3.70		659		4.33		1,517		5.01		7,604
Total International		4,857		3.04		16,609		4.08		4,651		6.54		6,975		5.30		33,092
TOTAL AVAILABLE-FOR-SALE		11,552		6.12		34,873		3.96		9,114		5.58		12,004		5.32		67,543
HELD-TO-MATURITY PORTFOLIO
Domestic
Spanish government		2		6.15		1,239		3.37		1,921		4.25		3,307		4.95		6,469
Other debt securities		83		4.06		597		4.33		129		3.81		—		—		809
Total Domestic		85		4.11		1,836		3.68		2,050		4.22		3,307		4.95		7,278
Total International		49		2.69		2,055		3.32		780		4.09		—		—		2,884
TOTAL HELD-TO-MATURITY		134		3.59		3,891		3.49		2,830		4.18		3,307		4.95		10,162
TOTAL DEBT SECURITIES		11,686		6.09		38,764		3.91		11,944		5.25		15,311		5.24		77,705

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

(2) Securities of other foreign Governments mainly include investments made by our subsidiaries in securities issued by the Governments of the countries where they operate.

Loans and Advances to Credit Institutions

As of December 31, 2012, our total loans and advances to credit institutions amounted to €26,447 million, or 4.2% of total assets. Net of our valuation adjustments, loans and advances to credit institutions amounted to €26,522 million as of December 31, 2012, or 4.2% of our total assets.

55

Loans and Advances to Customers

As of December 31, 2012, our total loans and leases amounted to €366,047 million, or 57.4% of total assets. Net of our valuation adjustments, loans and leases amounted to €352,931 million as of December 31, 2012, or 55.3% of our total assets. As of December 31, 2012 our loans in Spain amounted to €207,131 million. Our foreign loans amounted to €158,916 million as of December 31, 2012. For a discussion of certain mandatory ratios relating to our loan portfolio, see “—Business Overview—Supervision and Regulation—Liquidity Ratio” and “—Business Overview—Supervision and Regulation—Investment Ratio”.

Loans by Geographic Area

The following table analyzes, by domicile of the customer, our net loans and leases as of December 31, 2012, 2011 and 2010:

	As of December 31,
	2012			2011			2010
	(In Millions of Euros)
Domestic		207,131			198,948			210,102
Foreign
Western Europe		29,944			32,445			23,139
Latin America		90,079			81,205			70,497
United States		35,838			41,222			38,649
Other		3,055			6,035			4,823
Total foreign		158,916			160,907			137,108
Total loans and leases		366,047			359,855			347,210
Valuation adjustments		(13,116	)		(7,955	)		(8,353	)
Total net lending		352,931			351,900			338,857

Loans by Type of Customer

The following table analyzes by domicile and type of customer our net loans and leases for each of the years indicated. The analyses by type of customer are based principally on the requirements of the regulatory authorities in each country.

	As of December 31,
	2012			2011			2010
	(In Millions of Euros)
Domestic
Government		25,407			25,372			23,542
Agriculture		1,417			1,526			1,619
Industrial		16,415			16,286			17,452
Real estate and construction		30,642			29,261			29,944
Commercial and financial		17,202			21,800			23,409
Loans to individuals(1)		96,003			85,207			91,730
Other		20,047			19,496			22,406
Total domestic		207,133			198,948			210,102
Foreign
Government		9,636			9,718			7,682
Agriculture		3,469			3,315			2,358
Industrial		16,374			20,931			19,126
Real estate and construction		18,663			21,728			25,910
Commercial and financial		34,956			33,948			22,280
Loans to individuals		58,380			53,856			44,138
Other		17,436			17,411			15,614
Total foreign		158,914			160,907			137,108
Total loans and leases		366,047			359,855			347,210
Valuation adjustments		(13,116	)		(7,955	)		(8,353	)
Total net lending		352,931			351,900			338,857

(1) Includes mortgage loans to households for the acquisition of housing.

56

The following table sets forth a breakdown, by currency, of our net loan portfolio for 2012, 2011 and 2010.

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
In euros		212,742		216,889		221,269
In other currencies		140,189		135,011		117,588
Total net lending		352,931		351,900		338,857

As of December 31, 2012, loans by BBVA and its subsidiaries to associates and jointly controlled companies amounted to €820 million, compared to €372 million as of December 31, 2011. Loans outstanding to the Spanish government and its agencies amounted to €25,408 million, or 6.9% of our total loans and leases as of December 31, 2012, compared to €25,372 million, or 7.1% of our total loans and leases as of December 31, 2011. None of our loans to companies controlled by the Spanish government are guaranteed by the government and, accordingly, we apply normal credit criteria in extending credit to such entities. Moreover, we carefully monitor such loans because governmental policies necessarily affect such borrowers.

Diversification in our loan portfolio is our principal means of reducing the risk of loan losses. We also carefully monitor our loans to borrowers in sectors or countries experiencing liquidity problems. Our exposure to our five largest borrowers as of December 31, 2012, excluding government-related loans, amounted to €18,480 million or approximately 5.1% of our total outstanding loans and leases. As of December 31, 2012 there did not exist any concentration of loans exceeding 10% of our total outstanding loans and leases, other than by category as disclosed in the chart above.

Maturity and Interest Sensitivity

The following table sets forth an analysis by maturity of our total loans and leases by domicile of the office that issued the loan and type of customer as of December 31, 2012. The determination of maturities is based on contract terms.

	Maturity
	Due in One Year or Less		Due After One Year Through Five Years		Due After Five Years		Total
	(In Millions of Euros)
Domestic
Government		12,149		7,614		5,644		25,407
Agriculture		598		510		309		1,417
Industrial		12,307		2,940		1,168		16,415
Real estate and construction		15,657		11,005		3,980		30,642
Commercial and financial		9,078		3,415		4,709		17,202
Loans to individuals		10,645		16,309		69,049		96,003
Other		13,913		3,265		2,869		20,047
Total Domestic		74,347		45,058		87,728		207,133
Foreign
Government		1,357		1,659		6,620		9,636
Agriculture		2,053		1,028		388		3,469
Industrial		7,152		5,535		3,687		16,374
Real estate and construction		6,026		6,804		5,833		18,663
Commercial and financial		15,863		16,249		2,844		34,956
Loans to individuals		9,049		14,793		34,538		58,380
Other		8,511		5,651		3,274		17,436
Total Foreign		50,011		51,719		57,184		158,914
Total Loans and Leases		124,358		96,777		144,912		366,047

57

The following table sets forth a breakdown of our fixed and variable rate loans which had a maturity of one year or more as of December 31, 2012.

	Interest Sensitivity of Outstanding Loans and Leases Maturing in More Than One Year
	Domestic		Foreign		Total
	(In Millions of Euros)
Fixed rate		19,514		53,146		72,660
Variable rate		113,271		55,758		169,028
Total loans and leases		132,785		108,903		241,688

Loan Loss Reserve

For a discussion of loan loss reserves, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Allowance for loan losses” and Note 2.2.1) to the Consolidated Financial Statements.

The following table provides information, by domicile of customer, regarding our loan loss reserve and movements of loan charge-offs and recoveries for periods indicated.

	As of December 31,
	2012			2011			2010			2009			2008
		(In Millions of Euros, except Percentages)
Loan loss reserve at beginning of period:
Domestic		4,714			4,935			4,853			3,765			2,899
Foreign		4,755			4,539			3,952			3,740			3,088
Total loan loss reserve at beginning of period		9,470			9,473			8,805			7,505			5,987
Loans charged off:
Total domestic(1)		(2,283	)		(1,977	)		(1,774	)		(966	)		(655	)
Total foreign(2)		(1,842	)		(2,062	)		(2,628	)		(2,876	)		(1,296	)
Total Loans charged off		(4,125	)		(4,039	)		(4,402	)		(3,842	)		(1,951	)
Provision for possible loan losses:
Domestic		5,881			2,229			2,038			3,079			2,110
Foreign		2,392			2,299			2,778			2,307			2,035
Total Provision for possible loan losses		8,273			4,528			4,816			5,386			4,145
Acquisition and disposition of subsidiaries		2,066			305			—			—			—
Effect of foreign currency translation		58			(123	)		344			(29	)		(487	)
Other		(1,208	)		(674	)		(90	)		(216	)		(189	)
Loan loss reserve at end of period:
Domestic		9,687			4,714			4,935			4,853			3,765
Foreign		4,847			4,755			4,539			3,952			3,740
Total Loan loss reserve at end of period		14,534			9,470			9,473			8,805			7,505
Loan loss reserve as a percentage of total loans and receivables at end of period		3.79	%		2.48	%		2.60	%		2.54	%		2.03	%
Net loan charge-offs a percentage of total loans and receivables at end of period		1.08	%		1.06	%		1.21	%		1.11	%		0.53	%

(1) Loans charged off in 2012 were mainly related to the real estate sector.

(2) Loans charged off in 2012 include €1,646 million related to real estate loans and loans to individuals and others, €195 million related to commercial and financial loans and €1 million related to loans to governmental and non-governmental agencies. Loans charged off in 2011 include €1,794 million related to real estate loans and loans to individuals and others, €267 million related to commercial and financial loans and €1 million related to loans to governmental and non-governmental agencies.

58

When the recovery of any recognized amount is considered to be remote, this amount is removed from the consolidated balance sheet, without prejudice to any actions taken by the consolidated entities in order to collect the amount until their rights extinguish in full through expiry, forgiveness or for other reasons.

The loans charged off amounted to €4,125 million as of December 31, 2012 compared to €4,039 million as of December 31, 2011.

Our loan loss reserves as a percentage of total loans and leases increased to 3.8% as of December 31, 2012 from 2.5% as of December 31, 2011, principally due to the impairment of the assets related to the real state sector in Spain.

Impaired Loans

As described in Note 2.2.1) to the Consolidated Financial Statements, loans are considered to be impaired loans when there are reasonable doubts that the loans will be recovered in full and/or the related interest will be collected for the amounts and on the dates initially agreed upon, taking into account the guarantees received by the consolidated entities to assure (in part or in full) the performance of transactions.

Amounts collected in relation to impaired loans and receivables are used to recognize the related accrued interest and any excess amount is used to reduce the principal not yet repaid. The approximate amount of interest income on our impaired loans which was included in profit attributable to parent company in 2012, 2011, 2010, 2009 and 2008 was €228.1 million, €203.4 million, €203.5 million, €192.3 million and €149.7 million, respectively.

The following table provides information regarding our impaired loans, by domicile and type of customer, as of the dates indicated:

	As of December 31,
	2012			2011			2010			2009			2008
	(In Millions of Euros, Except Percentages)
Impaired loans
Domestic		15,160			11,043			10,954			10,973			5,562
Public sector		145			130			111			61			79
Other resident sector		15,015			10,913			10,843			10,912			5,483
Foreign		5,165			4,642			4,518			4,338			2,979
Public sector		20			6			12			25			20
Non-resident sector		5,145			4,637			4,506			4,313			2,959
Total Impaired loans		20,325			15,685			15,472			15,311			8,541
Total loan loss reserve		(14,534	)		(9,470	)		(9,473	)		(8,805	)		(7,505	)
Impaired loans net of reserves		5,790			6,215			5,999			6,506			1,036

Our total impaired loans amounted to €20,325 million as of December 31, 2012, a 29.6% increase compared to €15,685 million as of December 31, 2011. This increase is mainly attributable to the increase in impaired loans in the “Other resident sector” as a result of the economic deterioration in Spain and the incorporation of Unnim. The increase is also attributable, to a lesser extent, to the increase in impaired loans in the “Non-resident sector” as a result of the ongoing deterioration of the economic situation in Portugal.

59

As mentioned in Note 2.2.1 to the Consolidated Financial Statements, our loan loss reserve includes loss reserve for impaired assets and loss reserve for not impaired assets but which present an inherent loss. As of December 31, 2012, the loss reserve for impaired assets amounted to €9,870 million, a 54.8% increase compared to €6,378 million as of December 31, 2011. As of December 31, 2012, the loss reserve for not impaired assets amounted to €4,664 million, a 50.9% increase compared to €3,091 million as of December 31, 2011. These increases in our loss reserve for impaired assets and loss reserve for not impaired assets are due to the deterioration of the real estate sector in Spain.

The following table provides information, by domicile and type of customer, regarding our impaired loans and the loan loss reserves to customers taken for each impaired loan category, as of December 31, 2012.

	Impaired Loans		Loan Loss Reserve			Impaired Loans as a percentage of Loans in Category
	(In Millions of Euros)
Domestic:
Government		145		(10	)		0.57	%
Credit institutions		—		—			—
Other sectors		15,013		(7,158	)		8.26	%
Agriculture		123		(44	)		8.66	%
Industrial		914		(389	)		5.57	%
Real estate and construction		8,032		(4,685	)		26.21	%
Commercial and other financial		989		(352	)		5.75	%
Loans to individuals		3,733		(1,177	)		3.89	%
Other		1,222		(511	)		6.10	%
Total Domestic		15,159		(7,168	)		7.21	%
Foreign:
Government		20		(1	)		0.20	%
Credit institutions		31		(22	)		0.14	%
Other sectors		5,114		(2,444	)		3.43	%
Agriculture		185		(94	)		5.34	%
Industrial		180		(131	)		1.10	%
Real estate and construction		1,700		(476	)		9.11	%
Commercial and other financial		717		(474	)		2.05	%
Loans to individuals		2,089		(1,071	)		3.58	%
Other		243		(198	)		1.40	%
Total Foreign		5,165		(2,466	)		2.84	%
General reserve		—		(4,900	)
Total Impaired loans		20,324		(14,534	)		5.18	%

Troubled Debt Restructurings

As of December 31, 2012, “troubled debt restructurings” totaling €11,952 million were not considered impaired loans. For additional information on our restructured or renegotiated loans, see Appendix XI to our Consolidated Financial Statements.

60

Potential Problem Loans

The identification of “Potential problem loans” is based on the analysis of historical delinquency rates trends, categorized by products/clients and geographical locations. This analysis is focused on the identification of portfolios with delinquency rates higher than our average delinquency rates. Once these portfolios are identified, we segregate such portfolios into groups with similar characteristics based on the activities to which they are related, geographical location, type of collateral, solvency of the client and loan to value ratio.

The delinquency rate in our domestic real estate and construction portfolio was 26.1% as of December 31, 2012, substantially higher than the average delinquency rate for all of our domestic activities (7.2%) and the average delinquency rate for all of our consolidated activities (5.1%) as of such date. Within such portfolio, construction loans and property development loans (which exclude mainly infrastructure and civil construction) had a delinquency rate of 28.1% as of such date. Given such delinquency rate, we performed an analysis in order to define the level of loan provisions attributable to these loan portfolios (see Note 2.2.1 to our Consolidated Financial Statements). The table below sets forth additional information on our “Potential problem loans” as of December 31, 2012:

	Book Value		Allowance for Loan Losses		% of Loans in Each Category to Total Loans to Customers
	(In Millions of Euros, Except Percentages)
Domestic(1)
Doubtful Loans		6,814		3,193		1.8	%
Substandard loans		2,092		731		0.5	%
Of which:
Troubled debt restructurings		1,784		600		0.5	%

(1) Potential problem loans outside of Spain as of December 31, 2012 were not significant.

Foreign Country Outstandings

The following table sets forth, as of the end of the years indicated, the aggregate amounts of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked) where outstandings in the borrower’s country exceeded 1% of our total assets as of December 31, 2012, December 31, 2011 and December 31, 2010. Cross-border outstandings do not include loans in local currency made by our subsidiary banks to customers in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the vast majority of the loans made by our subsidiaries in South America, Mexico and United States.

	2012					2011					2010
	Amount		% of Total Assets			Amount		% of Total Assets			Amount		% of Total Assets
	(In Millions of Euros, Except Percentages)
United Kingdom		6,227		1.0	%		6,258		1.1	%		5,457		1.0	%
Mexico		1,539		0.2	%		1,885		0.3	%		2,175		0.4	%
Other OECD		7,168		1.1	%		7,521		1.3	%		5,674		1.0	%
Total OECD		14,934		2.3	%		15,664		2.6	%		13,306		2.4	%
Central and South America		2,176		0.3	%		3,161		0.5	%		3,074		0.6	%
Other		3,626		0.6	%		4,568		0.8	%		5,411		1.0	%
Total		20,736		3.3	%		23,393		3.9	%		21,791		3.9	%

61

The following table sets forth the amounts of our cross-border outstandings as of December 31 of each year indicated by type of borrower where outstandings in the borrower’s country exceeded 1% of our total assets.

	Governments		Banks and Other Financial Institutions		Commercial, Industrial and Other		Total
	(In Millions of Euros)
As of December 31, 2012
Mexico		3		47		1,490		1,539
United Kingdom		—		4,082		2,145		6,227
Total		3		4,129		3,635		7,766
As of December 31, 2011
Mexico		31		210		1,644		1,885
United Kingdom		—		4,145		2,113		6,258
Total		31		4,355		3,757		8,143
As of December 31, 2010
Mexico		51		1		2,123		2,175
United Kingdom		—		4,078		1,379		5,457
Total		51		4,079		3,502		7,632

The Bank of Spain requires that minimum reserves be maintained for cross-border risk arising with respect to loans and other outstandings to countries, or residents of countries, falling into certain categories established by the Bank of Spain on the basis of the level of perceived transfer risk. The category that a country falls into is determined by us, subject to review by the Bank of Spain.

The following table shows the minimum required reserves with respect to each category of country for BBVA’s level of coverage as of December 31, 2012.

Categories(1)	Minimum Percentage of Coverage (Outstandings Within Category)
Countries belonging to the OECD whose currencies are listed in the Spanish foreign exchange market		0.0
Countries with transitory difficulties(2)		10.1
Doubtful countries(2)		22.8
Very doubtful countries(2)(3)		83.5
Bankrupt countries(4)		100.0

(1) Any outstanding which is guaranteed may be treated, for the purposes of the foregoing, as if it were an obligation of the guarantor.

(2) Coverage for the aggregate of these three categories (countries with transitory difficulties, doubtful countries and very doubtful countries) must equal at least 35% of outstanding loans within the three categories. The Bank of Spain has recommended up to 50% aggregate coverage.

(3) Outstandings to very doubtful countries are treated as substandard under Bank of Spain regulations.

(4) Outstandings to bankrupt countries must be charged off immediately. As a result, no such outstandings are reflected on our consolidated balance sheet. Notwithstanding the foregoing minimum required reserves, certain interbank outstandings with an original maturity of three months or less have minimum required reserves of 50%. We met or exceeded the minimum percentage of required coverage with respect to each of the foregoing categories.

Our exposure to borrowers in countries with difficulties (the last four categories in the foregoing table), excluding our exposure to subsidiaries or companies we manage and trade-related debt, amounted to €279 million, €340 million and €311 million as of December 31, 2012, 2011 and 2010, respectively. These figures do not reflect loan loss reserves of 14.3%, 13.2%, and 11.6% respectively, against the relevant amounts outstanding at such dates. Deposits with or loans to borrowers in all such countries as of December 31, 2012 did not in the aggregate exceed 0.1% of our total assets.

62

The country-risk exposures described in the preceding paragraph as of December 31, 2012, 2011 and 2010 do not include exposures for which insurance policies have been taken out with third parties that include coverage of the risk of confiscation, expropriation, nationalization, non-transfer, non-convertibility and, if appropriate, war and political violence. The sums insured as of December 31, 2012, 2011 and 2010 amounted to $47 million, $58 million and $44 million, respectively (approximately €36 million, €45 million and €33 million, respectively, based on a euro/dollar exchange rate on December 31, 2012 of $1.00 = €0.76, on December 31, 2011 of $1.00 = €0.77, and on December 31, 2010 of $1.00 = €0.75).

LIABILITIES

Deposits

The principal components of our customer deposits are domestic demand and savings deposits and foreign time deposits. The following tables provide information regarding our deposits by principal geographic area for the dates indicated, disregarding any valuation adjustments and accrued interest.

	As of December 31, 2012
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		137,013		45,808		11,647		194,468
Foreign
Western Europe		22,807		664		22,418		45,889
Mexico		37,267		—		14,861		52,128
South America		54,770		32		4,308		59,110
United States		38,989		—		5,762		44,751
Other		725		—		464		1,189
Total Foreign		154,558		696		47,813		203,067
Total		291,571		46,504		59,460		397,535

	As of December 31, 2011
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		124,928		24,570		9,230		158,729
Foreign
Western Europe		37,137		8,098		27,547		72,781
Latin America		79,792		228		14,913		94,932
United States		37,199		241		6,318		43,757
Other		1,925		—		1,040		2,965
Total Foreign		156,053		8,566		49,817		214,435
Total		280,981		33,136		59,047		373,164

63

	As of December 31, 2010
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		133,032		2,779		8,867		144,679
Foreign
Western Europe		24,120		7,205		22,626		53,951
Latin America		72,014		96		14,758		86,869
United States		42,495		364		6,840		49,698
Other		3,179		543		3,855		7,576
Total Foreign		141,808		8,208		48,079		198,094
Total		274,840		10,987		56,946		342,773

For an analysis of our deposits, including non-interest bearing demand deposits, interest-bearing demand deposits, saving deposits and time deposits, see Note 23 to the Consolidated Financial Statements.

As of December 31, 2012, the maturity of our time deposits (excluding interbank deposits) in denominations of $100,000 (approximately €75,838 considering the noon buying rate as of December 31, 2012) or greater was as follows:

	As of December 31, 2012
	Domestic		Foreign		Total
	(In Millions of Euros)
3 months or under		8,809		20,380		29,189
Over 3 to 6 months		6,731		3,781		10,512
Over 6 to 12 months		11,687		5,451		17,138
Over 12 months		10,505		6,692		17,198
Total		37,733		36,304		74,037

Time deposits from Spanish and foreign financial institutions amounted to €32,684 million as of December 31, 2012, substantially all of which were in excess of $100,000 (approximately €75,838 considering the noon buying rate as of December 31, 2012).

Large denomination deposits may be a less stable source of funds than demand and savings deposits because they are more sensitive to variations in interest rates. For a breakdown by currency of customer deposits as of December 31, 2012, 2011 and 2010, see Note 23 to the Consolidated Financial Statements.

64

Short-term Borrowings

Securities sold under agreements to repurchase and promissory notes issued by us constituted the only categories of short-term borrowings that equaled or exceeded 30% of stockholders’ equity as of December 31, 2012, 2011 and 2010.

	2012					2011					2010
	Amount		Average Rate			Amount		Average Rate			Amount		Average Rate
	(In Millions of Euros, Except Percentages)
Securities sold under agreements to repurchase (principally Spanish Treasury bills)
As of December 31		48,820		1.9	%		59,738		2.1	%		39,587		2.0	%
Average during year		50,008		1.8	%		49,670		2.0	%		31,056		2.2	%
Maximum quarter-end balance		56,440		—			59,738		—			39,587		—
Bank promissory notes
As of December 31		10,893		3.7	%		6,970		3.1	%		13,215		0.9	%
Average during year		10,802		3.0	%		11,502		1.4	%		24,405		0.6	%
Maximum quarter-end balance		13,590		—			14,890		—			28,937		—
Bonds and Subordinated debt
As of December 31		19,538		3.4	%		11,736		3.9	%		11,041		2.6	%
Average during year		16,388		3.8	%		11,945		4.0	%		10,825		3.2	%
Maximum quarter-end balance		19,537		—			15,738		—			13,184		—
Total short-term borrowings as of December 31		79,251		2.5	%		78,444		2.5	%		63,844		1.9	%

Return on Equity

The following table sets out our return on equity ratios:

	As of or for the Year Ended December 31,
	2012		2011		2010
	(In Percentages)
Return on equity(1)		4.0		8.0		15.8
Return on assets(2)		0.4		0.6		0.9
Dividend pay-out ratio(3)		79.6		37.4		23.4
Equity to assets ratio(4)		6.9		6.8		5.9

(1) Represents profit attributable to parent company for the year as a percentage of average stockholder’s funds for the year.

(2) Represents profit attributable to parent company as a percentage of average total assets for the year.

(3) Represents dividends declared by BBVA (including the cash remuneration paid under the “Dividendo Opción” scheme) as a percentage of profit attributable to parent company. This ratio does not take into account the non-cash remuneration paid by BBVA under the “Dividendo Opción” scheme (in the form of BBVA shares or ADSs). See “—Business Overview—Supervision and Regulation—Dividends” and “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Dividends”.

(4) Represents average total equity over average total assets.

65

F. Competition

The commercial banking sector in Spain has undergone significant consolidation. In the majority of the markets where we provide financial services, the Banco Santander Group is our largest competitor, but the restructuring process that it is taking place is expected to increase the size of certain banks, such as Bankia (an integration of seven regional saving banks, led by Caja Madrid and Bancaja) and La Caixa (which has recently acquired Banco de Valencia).

We face strong competition in all of our principal areas of operations. The deregulation of interest rates on deposits in the past decade led to increased competition for large demand deposits in Spain and the widespread promotion of interest-bearing demand deposit accounts and mutual funds. The Bank of Spain, through its Circular 3/2011, of June 30, required that a higher contribution be made to the FGD in connection with deposits the remuneration of which exceeded certain thresholds dependent on the evolution of the Euribor. However, this new requirement was removed in the summer of 2012. While in early 2013 the Bank of Spain informally advised financial institutions not to over-remunerate their deposits, some local branches of foreign banks have continued to offer high yields.

Former Spanish savings banks, many of which have become banks and received financial or other support from the Spanish government and the European Stability Mechanism, and money market mutual funds provide strong competition for savings deposits, particularly in the context of increasing interest rates of term deposits, which form an important part of our deposit base, and, in the case of savings banks, for other retail banking services. While the European Commission has imposed certain size limits to institutions receiving public capital, such limits affect only entities that account for around 30% of the total assets of the Spanish financial system which, in addition, will have a relatively long period (five years) to comply with such limits.

Credit cooperatives, which are active principally in rural areas, where they provide savings bank and loan services and related services such as the financing of agricultural machinery and supplies, are also a source of competition. The entry of on-line banks into the Spanish banking system has also increased competition, including in customer funds businesses such as deposits. Insurance companies and other financial services firms also compete for customer funds. In addition, the high interest rates offered by Spanish public debt has made it a strong competitor to deposits. Like the commercial banks, former savings banks, insurance companies and other financial services firms are expanding the services offered to consumers in Spain. We face competition in mortgage loans from saving banks and, to a lesser extent, cooperatives.

Furthermore, the EU Directive on Investment Services took effect on December 31, 1995. The EU Directive permits all brokerage houses authorized to operate in other member states of the EU to carry out investment services in Spain. Although the EU Directive is not specifically addressed to banks, it affects the activities of banks operating in Spain. Besides, several initiatives have been implemented recently in order to facilitate the creation of a Pan-European financial market. For example, SEPA (Single Euro Payments Area), which is a payment-integration initiative for simplification of bank transfers mainly within the EU and the MiFID project (Markets in Financial Instruments Directive), which aims to create a European framework for investment services. In addition, steps are being taken towards achieving a banking union in Europe (as agreed at a Eurogroup meeting in June 2012). It has been decided that the ECB will play a key role in the supervision of around 130 entities (including us) in the Eurozone beginning in May-June 2014. Other aspects of the EU banking union are still under discussion, such as the representation and voting power of non-eurozone countries, the accountability of the ECB to European institutions as part of the supervision mechanism, the adoption of a single resolution mechanism, the final status of the European Banking Authority and the creation of a common deposit-guarantee scheme.

Following the recent financial turmoil, a number of banks have disappeared or have been absorbed by other banks. The trend indicates that this will continue in the future, with a number of mergers and acquisitions between financial entities. In Spain, Royal Decree-Laws 2/2012, of February 3, and 18/2012, of May 11, represent an additional step in the reform of the Spanish financial system which, with the purpose of achieving a stronger banking sector, is expected to intensify this process. Besides, the Memorandum of Understanding signed by the government in order to receive ESM funds reinforces this objective. In the U.S., the government has already facilitated the purchase of troubled banks by other competitors, and European governments, including the Spanish government, have expressed their willingness to facilitate these types of operations.

66

In the United States, where we operate through BBVA Compass, the competitive landscape has also been significantly affected by the financial crisis. The U.S. banking industry has experienced significant impairment on its assets since 2009, which has resulted in continuing losses in select product categories and slow loan growth. Data published by the Federal Deposit Insurance Corporation’s (FDIC) in the Quarterly Banking Profile for the third quarter of 2012 suggests that the total delinquency rate for commercial banks declined in almost all portfolios. However, residential delinquencies in the third quarter of 2012 increased by 3.4%, the first quarterly increase in almost a year and the largest since the crisis started. Charge-offs for mortgage loans also increased. We believe that improvement in banks’ asset quality is dependent on the evolution of the real estate market, while consumer and commercial and industrial charge-offs and delinquencies are closer to normal ranges.

In Mexico, where we operate through BBVA Bancomer, the banking industry remained solvent throughout the financial crisis. The total credit of the banking system has registered 30 consecutive months of growth from April 2010 to September 2012. We expect that credit will continue increasing only if economic growth is positive and sustained.

In Mexico, changes in banking regulation could have a significant potential impact on competition. Rules to limit loans to firms within a certain financial group (préstamos relacionados) were adopted in March 2011. Such limits impact some small banks of the system with strong connections with retail stores (for example, Inbursa and Banco Azteca). In addition, authorities have strengthened the measures to improve transparency and information about financial services by enacting new legislation that gives more powers to the central bank (Banco de México) to regulate interest rates and bank fees. It also gives more powers to the Mexican National Commission for the Protection and Defense of Financial Services Users (Comisión Nacional para la Defensa de los Usuarios de los Servicios Financieros or “Condusef”) to set information requirements for bank account statements, product publicity, and contracts, and to improve financial education. The consolidation and restructuring of some non-banking financial intermediaries (Sofoles) will imply that some of them will go out of business or be acquired. Along these lines, the mortgage subsidiary of BBVA-Bancomer (Hipotecaria Nacional) acquired the portfolio of certain Sofoles in 2010.

In October 2012, the Monitoring Rules of the Condusef were passed by a Presidential decree. Among other provisions, the Monitoring Rules set forth preventive and corrective measures that may be adopted by the Condusef and set forth the Condusef’s supervisory procedures. In addition, a new federal law was passed in 2012 for the prevention and identification of operations with illicit funds.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

In the first half of 2012, the global economy was affected by a new outbreak of financial tensions resulting from the debt and institutional crisis in Europe, which dissipated only in part in the second half of the year. Bold actions taken by central banks have improved the global economic outlook but challenges remain for policy makers to avoid setbacks. This improvement has been supported by lower risk aversion, following the influential decisions taken by central banks, especially the European Central Bank (“ECB”). However, three factors stand out among those that could make this outlook deteriorate significantly: first and foremost, troubles in Europe if the euro break-up fears that loomed large during the first half of the year among market participants resurface; second, in the United States,

67

the still-hanging threat of the so-called fiscal cliff (the American Taxpayer Relief Act of 2012 was passed by Congress on January 1, 2013, but discussions on the debt ceiling and on the level of indebtedness are ongoing); third, a severe slowdown in the emerging economies, in particular in China and some commodity-oriented economies, if Chinese appetite for raw materials decreased.

The financial turmoil in Europe has been a fundamental reason for the worsening of the global economic activity in 2012. The European authorities have implemented a number of measures aimed at tackling the current tensions, one of the most important among which is the announcement by the ECB of the implementation of a new bond-purchase program (Outright Monetary Transactions or “OMT”) in late July, which was a decisive step to ease the financial tensions. Other measures have also been implemented. First, the establishment of a permanent bailout fund (the European Stability Mechanism or “ESM”) that, subject to certain conditions, will provide financial assistance to members of the Eurozone in financial difficulty. Second, steps are being taken towards achieving a banking union in Europe (as agreed at a Eurogroup meeting in June 2012), though progress remains slow.

However, these measures have not been enough to dissipate tensions as they do not target the underlying sources of the crisis: the depressed growth of the global economy. Advanced economies have been losing momentum since 2011.

In Spain, the economy had a negative performance, which translated into a decline in GDP for 2012 of 1.4%. After a significant upturn in the third quarter of 2012, sales overseas fell back towards the end of the year. In addition, domestic demand decreased during the fourth quarter of 2012 and it continues to be affected by fiscal adjustments implemented in Spain. As a result, the Spanish economy is expected to continue in recession for the coming quarters and it is probable that GDP will decrease further in 2013. The Spanish economy remains exposed to several risks, including financial tensions in the Eurozone arising from Cyprus’ financial crisis.

The recovery in the U.S. has not been particularly vigorous. With the U.S. economy growing at low rates, the unemployment rate remaining persistently high and amid huge uncertainty in Europe, the fiscal cliff debate has helped increasing uncertainty during 2012.

More recently, the emerging economies have also begun to slow down. In this regard, exports and GDP growth have been negatively affected by the decline in international trade. Certainly that is the case in the three largest emerging economies. Brazil’s economy almost stalled in the first half of the year; India’s GDP grew by 5.3% and 5.5% year-on-year in the first and second quarter of 2012, respectively, the slowest pace since the beginning of 2009; and in the third quarter of 2012 the Chinese economy slowed to a rate of 7.4%, the lowest growth rate since 2009 although the most recent data points to a bottoming-out. Chinese economy is expected to grow by 7.9% in 2013.

In Mexico, despite the global slowdown, the outlook for growth in 2013 is still positive (3.0%), supported by the positive performance of employment and financing. While inflation levels exceed the target set by the Mexican Central Bank, their increase is expected to be temporary and inflation is expected to return to below 4%.

Turkey has been affected by European tensions, both through the financial markets and the lower external demand. In addition, measures taken to contain the deficit and inflation imbalances have also had a negative effect on activity. The 2012 growth rate has remained around 3%.

Critical Accounting Policies

The Consolidated Financial Statements as of and for the years ended December 31, 2012, 2011 and 2010 were prepared by the Bank’s directors in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004, and in compliance with IFRS-IASB, and by applying the basis of consolidation, accounting policies and measurement bases described in Note 2 to the Consolidated Financial Statements, so that they present fairly the Group’s equity and financial position as of and for the years ended December 31, 2012, 2011 and 2010, and its results of operations and consolidated cash flows in 2012, 2011 and 2010. The Consolidated Financial Statements were prepared on the basis of the accounting records kept by the Bank and by each of the other Group companies and include the adjustments and reclassifications required to unify the accounting policies and measurement bases used by the Group. See Note 2.2 to the Consolidated Financial Statements.

68

In preparing the Consolidated Financial Statements estimates were made by the Group and the consolidated companies in order to quantify certain of the assets, liabilities, income, expenses and commitments reported herein. These estimates relate mainly to the following:

• The impairment on certain assets.

• The assumptions used to quantify other provisions and for the actuarial calculation of the post-employment benefit liabilities and commitments.

• The useful life and impairment losses of tangible and intangible assets.

• The measurement of goodwill arising on consolidation.

• The fair value of certain unlisted financial assets and liabilities.

Although these estimates were made on the basis of the best information available as of December 31, 2012, 2011 and 2010, respectively, on the events analyzed, events that take place in the future might make it necessary to revise these estimates (upwards or downwards) in coming years.

Note 2 to the Consolidated Financial Statements contains a summary of our significant accounting policies. We consider certain of these policies to be particularly important due to their effect on the financial reporting of our financial condition and because they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Our reported financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the preparation of the Consolidated Financial Statements. The nature of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing our Consolidated Financial Statements and the discussion below. We have identified the following accounting policies as critical to the understanding of our results of operations, since the application of these policies requires significant management assumptions and estimates that could result in materially different amounts to be reported if conditions or underlying circumstances were to change.

Fair value of financial instruments

The fair value of an asset or a liability on a given date is taken to be the amount for which it could be exchanged or settled, respectively, between two knowledgeable, willing parties in an arm’s length transaction. The most objective and common reference for the fair value of an asset or a liability is the price that would be paid for it on an organized, transparent and deep market (“quoted price” or “market price”).

If there is no market price for a given asset or liability, its fair value is estimated on the basis of the price established in recent transactions involving similar instruments and, in the absence thereof, by using mathematical measurement models sufficiently tried and trusted by the international financial community. Such estimates would take into consideration the specific features of the asset or liability to be measured and, in particular, the various types of risk associated with the asset or liability. However, the limitations inherent to the measurement models developed and the possible inaccuracies of the assumptions required by these models may signify that the fair value of an asset or liability thus estimated does not coincide exactly with the price for which the asset or liability could be purchased or sold on the date of its measurement.

See Note 2.2.1 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies.

Derivatives and other future transactions

These instruments include outstanding foreign currency purchase and sale transactions, outstanding securities purchase and sale transactions, futures transactions relating to securities, exchange rates or interest rates, forward interest rate agreements, options relating to exchange rates, securities or interest rates and various types of financial swaps.

69

All derivatives are recognized on the balance sheet at fair value from the date of arrangement. If the fair value of a derivative is positive, it is recorded as an asset and if it is negative, it is recorded as a liability. Unless there is evidence to the contrary, it is understood that on the date of arrangement the fair value of the derivatives is equal to the transaction price. Changes in the fair value of derivatives after the date of arrangement are recognized with a balancing entry under the heading “Gains or Losses on Financial Assets and Liabilities” in the consolidated income statement.

Specifically, the fair value of the standard financial derivatives included in the held for trading portfolios is equal to their daily quoted price. If, under exceptional circumstances, their quoted price cannot be established on a given date, these derivatives are measured using methods similar to those used to measure over-the-counter (“OTC”) derivatives.

The fair value of OTC derivatives is equal to the sum of the future cash flows arising from the instruments discounted at the measurement date (“present value” or “theoretical value”). These derivatives are measured using methods recognized by the financial markets, including the net present value (“NPV”) method and option price calculation models.

Financial derivatives that have as their underlying equity instruments, whose fair value cannot be determined in a sufficiently objective manner and are settled by delivery of those instruments, are measured at cost.

Financial derivatives designated as hedging items are included in the heading of the balance sheet “Hedging derivatives”. These financial derivatives are valued at fair value.

See Note 2.2.1 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies with respect to these instruments.

Goodwill in consolidation

Pursuant to IFRS 3, if the difference on the date of a business combination between the sum of the fair value of the price paid, the amount of all the non-controlling interests and the fair value of stock previously held in the acquired entity, on one hand, and the fair value of the assets acquired and liabilities assumed, on the other hand, is positive, it is recorded as goodwill on the asset side of the balance sheet. Goodwill represents the future economic benefits from assets that cannot be individually identified and separately recognized. Goodwill is not amortized and is subject periodically to an impairment analysis. Any impaired goodwill is written off.

If the difference is negative, it is recognized directly in the income statement under the heading “Negative goodwill in business combinations”.

Goodwill is allocated to one or more cash-generating units, or CGUs, expected to benefit from the synergies arising from business combinations. The CGUs units represent the Group’s smallest identifiable business and/or geographical segments as managed internally by its directors within the Group.

The CGUs to which goodwill has been allocated are tested for impairment based on the carrying amount of the unit including the allocated goodwill. Such testing is performed at least annually and whenever there is an indication of impairment.

For the purpose of determining the impairment of a CGU to which a part or all of goodwill has been allocated, the carrying amount of that unit, adjusted by the theoretical amount of the goodwill attributable to the non-controlling interest, shall be compared to its recoverable amount. The resulting loss shall be apportioned by reducing, firstly, the carrying amount of the goodwill allocated to that unit and, secondly, if there are still impairment losses remaining to be recognized, the carrying amount of the rest of the assets. This shall be done by allocating the remaining loss in proportion to the carrying amount of each of the assets in the unit. In any case, impairment losses on goodwill can never be reversed.

See Notes 2.2.7 and 2.2.8 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies related to goodwill.

70

As mentioned in Note 20.1 to the Consolidated Financial Statements, the Group has performed a goodwill impairment test as of December 31, 2012, 2011 and 2010.

The results from each of these tests on the dates mentioned were as follows:

As of December 31, 2012, there were no indications of significant impairment losses on the principal Group’s CGUs, except for insignificant impairments on the goodwill of the Retail Banking Euro (estimated to amount to €49 million) and the goodwill of the Corporate & Investment Banking Euro (estimated to amount to €4 million). These amounts have been recognized under “Impairment losses on other assets (net)—Goodwill and other intangible assets” in the consolidated income statement for 2012.

As of December 31, 2011, impairment losses of €1,444 million were estimated in the United States CGU which were recognized under “Impairment losses on other assets (net)—Goodwill and other intangible assets” in the consolidated income statement for 2011. This loss was the result of a downward revision of the cash flows projections estimated for this CGU, as a result of the following factors:

• the economic recovery was slower than expected and demand for loans was lower than forecasted; this, together with a low interest rate forecast implied a bigger than expected slowdown in net interest income growth; and

• growing regulatory pressure, with the implementation of new regulations, will imply lower than expected fee income, mainly related to the use of credit cards, while operating costs will rise with respect to our initial expectations.

Both the U.S. CGU’s fair values and the fair values assigned to its assets and liabilities were based on the estimates and assumptions that the Group’s management deemed most likely given the circumstances. However, some changes to the valuation assumptions used could result in differences in the impairment test result. If the discount rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by up to €585 million and €671 million, respectively, as of December 31, 2011. If the growth rate had increased or decreased by 50 basis points, the difference between the carrying amount and its recoverable amount would have increased or decreased by €517 million and €452 million, respectively, as of such date.

As of December 31, 2010, there were no impairment losses on the goodwill recognized in the Group’s CGUs, except for an insignificant impairment on the goodwill of the Spain CGU, related to the impairment on the investments in Rentrucks, Alquiler y Servicios de Transportes, S.A. and in BBVA Finanzia SpA (of €9 million and €4 million, respectively).

The most significant goodwill corresponded to the United States CGU. The recoverable amount of this CGU was equal to its value in use. This was calculated as the discounted value of the cash flow projections estimated by our management based on the latest budgets available for the next five years. As of December 31, 2010, the Group used an estimated sustainable growth rate of 4.2% to extrapolate the cash flows in perpetuity based on the U.S. real GDP growth rate. The discount rate used to discount the cash flows was the cost of capital of the CGU, which stood at 11.4% as of December 31, 2010, consisting of the free risk rate plus a risk premium.

Insurance contracts

The methods and techniques used to calculate the mathematical reserves for the insurance contracts mainly involve the valuation of the estimated future cash flows, discounted at the technical interest rate for each contract. Changes in insurance mathematical reserves may occur in the future as a consequence of changes in interest rates and other key assumptions. See Note 18 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies and assumptions about our most significant insurance contracts.

Post-employment benefits and other long term commitments to employees

Pension and post-retirement benefit costs and credits are based on actuarial calculations. Inherent in these calculations are assumptions including discount rates, rate of salary increase and expected return on plan assets. Changes in pension and post-retirement costs may occur in the future as a consequence of changes in interest rates, expected return on assets or other assumptions. See Note 2.2.12 to the Consolidated Financial Statements, which contains a summary of our significant accounting policies about pension and post-retirement benefit costs and credits.

71

Allowance for loan losses

As we describe in Note 2.2.1 to the Consolidated Financial Statements, a loan is considered to be an impaired loan and, therefore, its carrying amount is adjusted to reflect the effect of its impairment when there is objective evidence that events have occurred which give rise to a negative impact on the future cash flows that were estimated at the time the transaction was arranged. The potential impairment of these assets is determined individually or collectively.

Losses determined collectively are calculated using statistical procedures and are deemed equivalent to the portion of losses incurred on the date that the consolidated financial statements are prepared that has yet to be allocated to specific transactions.

The Group uses historic statistical data in its internal ratings models (“IRBs”), which were approved by the Bank of Spain for some portfolios in 2009, albeit only for the purpose of estimating regulatory capital under Basel II. It uses these internal models to calculate the economic capital required in its activities and uses the expected loss concept to quantify the cost of credit risk for incorporation in its calculation of the risk-adjusted return on capital of its operations.

These models allow us to estimate the expected loss of the credit risk of each portfolio during the one-year period after the relevant reporting date, taking into consideration the characteristics of the counterparty and the guarantees and collateral associated with the transactions.

The expected loss is calculated taking into account three factors: exposure at default, probability of default and loss given default.

• Exposure at default (“EAD”) is the amount of risk exposure at the date of default by the counterparty.

• Probability of default (“PD”) is the probability of the counterparty failing to meet its principal and/or interest payment obligations. The PD is associated with the rating/scoring of each counterparty/transaction. PD is measured using a time horizon of one year, i.e., it quantifies the probability of the counterparty defaulting in the coming year. The definition of default used includes amounts past due by 90 days or more and cases in which there is no default but there are doubts as to the solvency of the counterparty (subjective doubtful assets). A PD of 100% is assigned when the asset is considered impaired.

• Loss given default (“LGD”) is the estimated loss arising in the event of default. It depends mainly on the characteristics of the counterparty, and the valuation of the guarantees or collateral associated with the transaction.

• In order to calculate the LGD at each balance sheet date, the Group evaluates the estimated cash flows from the sale of the collateral by estimating its sale price (in the case of real estate collateral, the Group takes into account declines in property values which could affect the value of such collateral) and its estimated cost of sale. In the event of a default, the Group becomes contractually entitled to the property at the end of the foreclosure process or when purchased from borrowers in distress, and recognizes the collateral at its fair value. After the initial recognition of these assets classified as “Non-current assets held for sale” (see Note 2.2.4 to the Consolidated Financial Statements) or “Inventories” (see Note 2.2.6 to the Consolidated Financial Statements), they are valued at the lower of their carrying amount and their fair value less their estimated selling price.

The expected loss calculation used to determine the economic capital under our internal models includes ‘through-the-cycle’ adjustments of the aforementioned factors, particularly of PD and LGD. Through these adjustments, the Group seeks to set the value of the parameters used in our model at their average level throughout the economic cycle. The Group’s calculation of economic capital is expected to be more stable and accurate as a result.

By contrast, allowances for loan losses are calculated based on estimates of incurred losses at the reporting date (without any ‘through-the-cycle’ adjustments), in compliance with IFRS-IASB requirements.

72

With its methodology for determining the allowance for determined collectively losses, the Group seeks to identify the amounts of losses which, although incurred at the reporting date, have not yet been reported and which the Group knows, on the basis of historical experience and other specific information, will arise following the reporting date.

In order to calculate such non-reported incurred losses, the Group makes certain adjustments to the expected loss used to calculate economic capital under our internal models in order to eliminate the ‘through-the-cycle’ adjustments and focus on incurred loss (rather than expected loss) as required by IFRS-IASB. Such adjustments are based on the following two parameters:

• The point-in-time (“PIT”) parameter, which is an adjustment to eliminate the ‘through-the-cycle’ component of the expected loss.

The ‘point-in-time’ parameter converts a ‘through-the-cycle’ probability of default (defined as the average probability of default over a complete economic cycle) into the probability of default at the reporting date (‘point-in-time’ probability).

• The loss identification period (“LIP”) parameter, which is the time lag period between the occurrence of a specific impairment or loss event and objective evidence of impairment becoming apparent on an individual basis; in other words, the time lag period between the loss event and the date an entity identified its occurrence.

This adjustment relates to the fact that, in calculating expected loss for purposes of calculating economic capital and BIS II regulatory capital, the Group measures the probability of default using a time horizon of one year. Therefore, in order to calculate our allowance for loan losses, the Group has to convert the one-year expected loss to the incurred loss concept at the reporting date required by IAS 39. The Group calculates the incurred loss at the reporting date by adjusting the expected loss for the next twelve months based on the estimated LIPs of the various homogenous portfolios.

The analysis of LIPs is performed on a homogenous portfolio basis. For the portfolios in Spain and in Mexico, which are the most significant portfolios, BBVA uses the following methodology to determine an interval of LIP that has occurred over time:

• Analysis of the frequency of regulatory and internal review: The review of the credit quality of customers results in loss being identified. The more frequently the entity reviews the credit quality of its customers, the quicker losses are identified and therefore the lower is the resulting LIP (incurred but not reported losses decrease but ‘identified’ incurred losses increase). By contrast, the less frequently the entity reviews the credit quality of its customers, the slower losses are identified and therefore the higher is the resulting LIP.

• Analysis of the correlation between macroeconomic factors and probability of default: The deterioration of certain macroeconomic factors can be considered as a loss event if it results in an increase in the credit risk of a portfolio. Analysis performed shows the existence of correlation between some macroeconomic indicators and the probability of default, with a time lag existing between changes in such parameters and changes in the default rate. The Economic Research Department (“BBVA Research”) analyses the correlation between macroeconomic indicators (mainly GDP and interest rates) and probability of default (PD) for the portfolios.

The analysis includes PD available information by portfolio for the last 25 years. The purpose of the analysis is to evaluate the impact of macroeconomic indicators on the PD and identify the time lag between the deterioration of a macroeconomic indicator and the increase in PD. This time lag illustrates the time period between the loss event and the identification of the loss which leads to an individual provisioning. The research shows that changes in macroeconomic indicators, such as GDP and interest rates, result in variations in the PD of these portfolios within less than six months

• An internal benchmark of the LIPs used by European peers (based on 12 European banks from Belgium, Germany, Italy, the Netherlands and the United Kingdom): For corporate loans, 3-12 months; for retail loans, 2-9 months.

73

The LIPs BBVA uses, which were determined in accordance with the methodology described above, are set forth in the table below:

Portfolio		Ranges of LIPs	Weighted Average of LIPs Used as of December 31, 2012
Sovereign and Public Institutions		12 months	12 months
Corporates	Real estate developers	From 1 months to 18 months	3 months
	Large corporates Others corporates SMEs	From 1 months to 12 months	9-10 months
Retail	Mortgage loans Consumer loans	From 2 months to 9 months	7-8 months

At least once a year, BBVA performs a backtesting analysis in order to assess the accuracy of the LIP estimates for the corporate portfolios. The backtesting involves assessing the evolution of the most significant impaired loans over a period of time, on a periodic basis, to identify the actual LIPs for each portfolio. In addition, with respect to all of the portfolios, BBVA reviews the correlation between the evolution of macroeconomic indicators (mainly GDP and interest rates) and PD for such portfolios.

The allowance for loan losses for loan portfolios of BBVA’s U.S. subsidiaries (which represented approximately 9.1% of the consolidated loans and receivables as of December 31, 2012) is determined under U.S. GAAP. There is no significant difference between the allowance for loan losses accounting under ASC-310 and under IAS 39. The methodology followed by Compass (BBVA’s bank subsidiary in the U.S.) for determining the allowance for loan losses is based on the average expected loss over the last five years. The calculation of expected losses is segmented by common portfolio characteristics such as product type, risk rating, bureau score, past due status, collateral type and loan to value. In the process of calculating the allowance for loan losses, Compass assigns a PD and an LGD for the different portfolios. The weighted average of the LIP used as of December 31, 2012 was one year, based on internal analysis of the management, following an approach that is consistent with that described above for the Spain and Mexico loan portfolios.

The Bank of Spain requires that the calculation of the allowance for collective losses incurred must also be calculated based on the information provided by the Bank of Spain until the Spanish regulatory authority has verified and approved these internal models.

For the years ended December 31, 2012, 2011 and 2010, there is no material difference in the amount of allowances for loan losses calculated in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and IFRS-IASB.

The estimates of the portfolio’s inherent risks and overall recovery vary with changes in the economy, individual industries, countries and individual borrowers’ or counterparties’ ability and willingness to repay their obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.

Key judgments used in determining the allowance for loan losses include: (i) risk ratings for pools of commercial loans and leases; (ii) market and collateral values and discount rates for individually evaluated loans; (iii) product type classifications for consumer and commercial loans and leases; (iv) loss rates used for consumer and commercial loans and leases; (v) adjustments made to assess current events and conditions; (vi) considerations regarding domestic, global and individual countries economic uncertainty; and (vii) overall credit conditions.

Cybersecurity and fraud management

The BBVA Group has established computer security controls to prevent and mitigate potential computer attacks that may materially affect the Group’s results. These controls are part of the risk assessment and mitigation system established in our corporate operational risk and internal control structure in order to ensure compliance with the Sarbanes-Oxley Act, with a view to guaranteeing the proper identification and effective control of such risks. In the implementation, audit and review of such controls we have identified no material risk to our operations, owing to the effective mitigation of such risk as such security controls have provided.

We have divided identified risks into two categories distinguishing between risks that may affect the availability of our computer systems and their supporting processes and risks that may affect the confidentiality and integrity of the information processed by such systems.

Risks related to lack of availability are managed and mitigated through our Business Continuity Plans and our Systems Continuity Plans.

We have 128 Business Continuity Plans in operation across 26 countries. A number of such plans have been activated during the past year as a result the of floods that have affected New York in the fourth quarter of 2012 due to hurricane Sandy.

The European Union Critical Infrastructure Protection Directive was incorporated into Spanish law in 2011. We believe that BBVA is fully prepared to fulfill any possible obligations and requirements set forth therein.

74

The risks identified that may affect the confidentiality and integrity of our information are managed and mitigated within the programs established throughout the BBVA Group in our respective Information security master plans. These plans are designed to mitigate prospective risks through a security model that includes Identity Management, Security Architectures, Monitoring Systems and Incident Management.

We believe that the services outsourced by the BBVA Group are not exposed to material cyber security risks.

The BBVA Group has not undergone any security incidents which individually or in the aggregate can be considered material.

For the type of business and operations carried out by the BBVA Group, we have identified no cyber security incident related risks that could remain undetected for an extended period of time and represent a material risk. Moreover, and with regard to any possible banking-related cyber security risks which might affect the Group, there is no public evidence of incidents occurring within the financial sector which might represent a material risk to the Group.

In 2012, fraud management in the various businesses segments and geographical areas has been focused primarily on fraud prevention and early detection of alerts through the use of technology.

A. Operating Results

Factors Affecting the Comparability of our Results of Operations and Financial Condition

Trends in Exchange Rates

We are exposed to foreign exchange rate risk in that our reporting currency is the euro, whereas certain of our subsidiaries keep their accounts in other currencies, principally Mexican pesos, U.S. dollars, Argentine pesos, Chilean pesos, Colombian pesos, Venezuelan bolivars fuerte and New Peruvian Soles. For example, if Latin American currencies and the U.S. dollar depreciate against the euro, when the results of operations of our subsidiaries in the countries using these currencies are included in our consolidated financial statements, the euro value of their results declines, even if, in local currency terms, their results of operations and financial condition have remained the same or improved relative to the prior period. Accordingly, declining exchange rates may limit the ability of our results of operations, stated in euro, to fully describe the performance in local currency terms of our subsidiaries. By contrast, the appreciation of Latin American currencies and the U.S. dollar against the euro would have a positive impact on the results of operations of our subsidiaries in the countries using these currencies when their results of operations are included in our consolidated financial statements. We are also exposed to fluctuations of the Turkish lira and the Chinese yuan, as a result of our investments in Garanti and CIFH and CNCB, respectively.

The assets and liabilities of our subsidiaries which maintain their accounts in currencies other than the euro have been converted to the euro at the period-end exchange rates for inclusion in our Consolidated Financial Statements. Income statement items have been converted at the average exchange rates for the period. The following table sets forth the exchange rates of several Latin American currencies, the U.S. dollar, the Turkish lira and the Chinese yuan against the euro, expressed in local currency per €1.00 for 2012, 2011 and 2010 and as of December 31, 2012, 2011 and 2010 according to the European Central Bank (“ECB”).

75

	Average Exchange Rates				Period-End Exchange Rates
	Year Ended December 31, 2012		Year Ended December 31, 2011		As of December 31, 2012		As of December 31, 2011
Mexican peso		16.9033		17.2906		17.1845		18.0512
U.S. dollar		1.2850		1.3916		1.3194		1.2939
Argentine peso		5.8434		5.7467		6.4768		5.5679
Chilean peso		625.0000		672.0430		633.3122		674.7638
Colombian peso		2,309.4688		2,570.6941		2,331.0023		2,512.5628
Peruvian new sol		3.3896		3.8323		3.3678		3.4890
Venezuelan bolivar		5.5187		5.9765		5.6616		5.5569
Turkish lira		2.3139		2.3383		2.3551		2.4432
Chinese Yuan		8.1063		8.9932		8.2207		8.1588

During 2012, all currencies whose fluctuation may have an impact on the Group’s financial statements appreciated against the euro on average terms, with the exception of the Argentine peso. However, there was a year-on-year slight depreciation of the U.S. dollar, Argentine peso, Venezuelan bolivar and Chinese yuan against the euro as of December 31, 2012. Overall, the effect of changes in the exchange rates on the year-on-year comparison of the Group’s income statement and balance sheet was positive.

Divestment of the Pension Business in Latin America

On May 24, 2012, we announced our decision to conduct a study on strategic alternatives for our pension business in Latin America. The alternatives contemplated in this process include the partial or total sale of the Pension Fund Administrators Companies in Chile, Colombia and Peru, as well as the Mexican Pension Fund business. As of December 31, 2012, the aforementioned pension businesses had total registered assets of €1,150 million and liabilities of €318 million, which have been reclassified under the headings “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale,” respectively, in our consolidated balance sheet as of December 31, 2012. In accordance with IFRS 5, the revenues and expenses from these companies have been reclassified under the heading “Profit from discontinued operations” in our consolidated income statements for the years ended December 31, 2012, 2011 and 2010.

As of the date hereof, we have entered into agreements to sell our stakes in the Mexican company Administradora de Fondos para el Retiro Bancomer, S.A. de C.V. and in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A., respectively (see Note 3 to the Consolidated Financial Statements). In addition, on February 1, 2013, we reached an agreement with MetLife, Inc., for the sale of our stake in the Chilean pension fund manager Administradora de Fondos de Pensiones Provida S.A. (“AFP Provida”), representing 64.3% of the share capital of AFP Provida. See “Item 4. Information on the Company—History and Development of the Company—Capital Divestitures—2013.”

Proportional Consolidation of Garanti for the Full Year

We consolidated Garanti for the full year ended December 31, 2012 (compared with only nine months for the year ended December 31, 2011), which has generally had a positive effect on our 2012 consolidated income statement.

76

BBVA Group Results of Operations for 2012 Compared to 2011

The changes in the Group’s consolidated income statements for 2012 and 2011 were as follows:

	Year Ended December 31,
	2012			2011			Change (In %)
	(In Millions of Euros)
Interest and similar income		26,262			24,180			8.6
Interest expense and similar charges		(11,140	)		(11,028	)		1.0
Net interest income		15,122			13,152			15.0
Dividend income		390			562			(30.6	)
Share of profit or loss of entities accounted for using the equity method		727			595			22.2
Fee and commission income		5,574			5,075			9.8
Fee and commission expenses		(1,221	)		(1,044	)		17.0
Net gains (losses) on financial assets and liabilities		1,645			1,117			47.3
Net exchange differences		122			364			(66.5	)
Other operating income		4,812			4,244			13.4
Other operating expenses		(4,730	)		(4,037	)		17.2
Administration costs		(9,768	)		(8,898	)		9.8
Personnel expenses		(5,662	)		(5,191	)		9.1
General and administrative expenses		(4,106	)		(3,707	)		10.8
Depreciation and amortization		(1,018	)		(839	)		21.3
Provisions (net)		(651	)		(509	)		27.9
Impairment losses on financial assets (net)		(7,980	)		(4,226	)		88.8
Impairment losses on other assets (net)		(1,123	)		(1,885	)		(40.4	)
Gains (losses) on derecognized assets not classified as non-current assets held for sale		4			46			(91.3	)
Negative goodwill		376			—			n.m.	(1)
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(622	)		(271	)		129.5
Operating profit before tax		1,659			3,446			(51.9	)
Income tax		275			(206	)		n.m.	(1)
Profit from continuing operations		1,934			3,240			(40.3	)
Profit from discontinued operations (net)		393			245			60.4
Profit		2,327			3,485			(33.2	)
Profit attributable to parent company		1,676			3,004			(44.2	)
Profit attributable to non-controlling interests		651			481			35.3

(1) Not meaningful.

The changes in our consolidated income statements for 2012 and 2011 were as follows:

77

Net interest income

The following table summarizes the principal components of net interest income for 2012 compared to 2011.

	Year Ended December 31,
	2012			2011			Change (In %)
	(In Millions of Euros)
Interest and similar income		26,262			24,180			8.6
Interest expense and similar charges		(11,140	)		(11,028	)		1.0
Net interest income		15,122			13,152			15.0

Net interest income increased 15.0% to €15,122 million for the year ended December 31, 2012 from €13,152 million for the year ended December 31, 2011 due to the reduction of the cost of deposits in Spain and in Mexico and South America, the proportional consolidation of Garanti for the full year ended December 31, 2012 compared with only nine months for the year ended December 31, 2011, and strong business activity in Mexico and South America. These positive effects were partially offset by the performance of the Unites States, where net interest income continued to be negatively affected by the Guaranty run-off, lower business volume in Corporate Investment Banking, and the current environment of low interest rates with a practically flat curve.

Dividend income

Dividend income decreased 30.6% to €390 million for the year ended December 31, 2012 from €562 million for the year ended December 31, 2011. This decrease was primarily due to the year-on-year decrease in the dividends received from Telefónica, S.A., which decreased from €1.52 per share in 2011 to €0.53 per share in 2012. Telefónica, S.A. has publicly announced that it will pay no dividends until November 2013.

Share of profit or loss of entities accounted for using the equity method

Share of profit or loss of entities accounted for using the equity method increased 22.2% to €727 million for the year ended December 31, 2012 from €595 million for the year ended December 31, 2011 due to the increased profit of CNCB.

Fee and commission income

The breakdown of fee and commission income for 2012 and 2011 is as follows:

	Year Ended December 31,
	2012		2011		Change (In %)
	(In Millions of Euros)
Commitment fees		186		157		18.5
Contingent risks		355		318		11.6
Letters of credit		60		54		11.1
Bank and other guarantees		295		264		11.7
Arising from exchange of foreign currencies and banknotes		25		25		0.0
Collection and payment services income		3,088		2,694		14.6
Bills receivables		77		67		14.9
Current accounts		404		360		12.2
Credit and debit cards		1,913		1,619		18.2
Checks		224		229		(2.2	)
Transfers and others payment orders		338		294		15.0
Rest		132		125		5.6
Securities services income		1,147		1,105		3.8
Securities underwriting		100		70		42.9
Securities dealing		206		200		3.0
Custody securities		329		330		(0.3	)
Investment and pension funds		388		389		(0.3	)
Rest assets management		124		116		6.9
Counseling on and management of one-off transactions		8		13		(38.5	)
Financial and similar counseling services		40		55		(27.3	)
Factoring transactions		38		33		15.2
Non-banking financial products sales		107		97		10.3
Other fees and commissions		580		578		0.3
Fee and commission income		5,574		5,075		9.8

78

Fee and commission income increased by 9.8% to €5,574 million for the year ended December 31, 2012 from €5,075 million for the year ended December 31, 2011 due principally to greater business activity in Mexico and South America, where credit and debit cards commissions increased by 8.1% and 41.8% respectively, and the proportional consolidation of Garanti for the full year ended December 31, 2012 compared with only nine months for the year ended December 31, 2011.

Fee and commission expenses

The breakdown of fee and commission expenses for 2012 and 2011 is as follows:

	Year Ended December 31,
	2012		2011		Change (In %)
	(In Millions of Euros)
Brokerage fees on lending and deposit transactions		3		5		(40.0	)
Fees and commissions assigned to third parties		898		741		21.2
Credit and debit cards		758		609		24.5
Transfers and others payment orders		46		34		35.3
Securities dealing		13		14		(7.1	)
Rest		81		84		(3.6	)
Other fees and commissions		320		298		7.4
Fee and commission expenses		1,221		1,044		17.0

Fee and commission expenses increased by 17.0% to €1,221 million for the year ended December 31, 2012 from €1,044 million for the year ended December 31, 2011, primarily due to the greater business activity in Mexico and South America.

Net gains (losses) on financial assets and liabilities and exchange differences

Net gains (losses) on financial assets and liabilities increased by 47.3% to €1,645 million for the year ended December 31, 2012 from €1,117 million for the year ended December 31, 2011. This increase is mainly attributable to the increase in the net gains on “Available-for-sale financial assets”, which reflects the capital gains derived from the repurchase of securitization bonds and subordinated debt (which has generated gross capital gains of approximately €444 million) and, to a lesser extent, the capital gains derived from the sale of public debt in Turkey and South America. In addition, net gains on “Loans and receivables” increased by 66.7% from €33 million in 2011 to €55 million in 2012, primarily due to the higher activity on loan sales mainly in Mexico and South America. These increases were partially offset by the 38.3% year-on-year decrease in the net gains on “Financial assets held for trading”, which was primarily due to the turbulences in the markets which resulted in lower intermediation income in Spain and Mexico.

79

The table below provides a breakdown of net gains (losses) on financial assets and liabilities for 2012 and 2011:

	Year Ended December 31,
	2012		2011			Change (In %)
	(In Millions of Euros)
Financial assets held for trading		649		1,052			(38.3	)
Other financial assets designated at fair value through profit or loss		73		8			n.m.	(1)
Other financial instruments not designated at fair value through profit or loss		923		57			n.m.	(1)
Available-for-sale financial assets		806		82			n.m.	(1)
Loans and receivables		55		33			66.7
Rest		62		(58	)		n.m.	(1)
Net gains (losses) on financial assets and liabilities		1,645		1,117			47.3

(1) Not meaningful.

Net exchange differences decreased to €122 million for the year ended December 31, 2012 from €364 million for the year ended December 31, 2011, due primarily to the evolution of foreign currencies.

Other operating income and expenses

Other operating income amounted to €4,812 million for the year ended December 31, 2012 a 13.4% increase compared to €4,244 million for the year ended December 31, 2011, due primarily to increased income derived from insurance and reinsurance contracts.

Other operating expenses for the year ended December 31, 2012, amounted to €4,730 million, a 17.2% increase compared to the €4,037 million recorded for the year ended December 31, 2011 due primarily to higher contributions to deposit guarantee funds in the countries in which we operate and to increased provisions related to insurance and reinsurance contracts.

Administration costs

Administration costs comprise personnel expenses and general and administrative expenses and for the year ended December 31, 2012 were €9,768 million, a 9.8% increase from the €8,898 million recorded for the year ended December 31, 2011, due primarily to the investments made to implement our expansion and technological transformation plans and, to a lesser extent, to the proportional consolidation of Garanti for the full year ended December 31, 2012 compared with only nine months for the year ended December 31, 2011 and the acquisition of Unnim in the second half of 2012.

The table below provides a breakdown of personnel expenses for 2012 and 2011.

	Year Ended December 31,
	2012		2011		Change (In %)
	(In Millions of Euros)
Wages and salaries		4,348		4,023		8.1
Social security costs		678		614		10.4
Transfers to internal pension provisions		56		51		9.8
Contributions to external pension funds		85		80		6.3
Other personnel expenses		495		423		17.0
Personnel expenses		5,662		5,191		9.1

Wages and salaries expenses increased from €4,023 million in 2011 to €4,348 million in 2012 mainly due to the proportional consolidation of Garanti for the full year ended December 31, 2012, compared with only nine months for the year ended December 31, 2011 and the acquisition of Unnim, in the second half of 2012 and, to a lesser extent, to the high inflation recorded in South America and the expansion plans carried out during 2012.

80

The table below provides a breakdown of general and administrative expenses for 2012 and 2011:

	Year Ended December 31,
	2012		2011		Change (In %)
	(In Millions of Euros)
Technology and systems		745		647		15.1
Communications		330		289		14.2
Advertising		378		369		2.4
Property, fixtures and materials		916		839		9.2
Of which:
Rent expenses		516		470		9.8
Taxes other than income tax		433		356		21.6
Other expenses		1,304		1,207		8.0
Other General and administrative expenses		4,106		3,707		10.8

Technology and systems expenses increased from €647 million in 2011 to €745 million in 2012. In recent years, we have undertaken significant investments in global technology projects, particularly in the area of transformation and innovation. We started up a number of projects in 2012, including the implementation of the new BBVA Compass technological platform in all our branches in the United States. Progress has also been made in the Group’s multichannel distribution model.

Depreciation and amortization

Depreciation and amortization for the year ended December 31, 2012 amounted to €1,018 million a 21.3% increase compared to €839 million recorded for the year ended December 31, 2011, due primarily to the amortization of software and tangible assets for own use.

Provisions (net)

Provisions (net) for the year ended December 31, 2011 amounted to €651 million, a 27.9% increase compared to €509 million recorded for the year ended December 31, 2011, primarily to cover early retirement benefits, other allocations to pension funds and transfers to provisions for contingent liabilities.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) for the year ended December 31, 2012 amounted to €7,980 million, a 88.8% increase compared to the €4,226 million recorded for the year ended December 31, 2011. This increase is mainly due to the increase of provisions in connection with assets related to the real estate business in Spain to cover the additional impairment in the value of such assets owing to the worsening macroeconomic conditions in Spain. The Group’s non-performing assets ratio was 5.1% as of December 31, 2012, compared to 4.0% as of December 31, 2011.

Impairment losses on other assets (net)

Impairment losses on other assets (net) for the year ended December 31, 2012 amounted to €1,123 million, a 40.4% decrease compared to the €1,885 million recorded for the year ended December 31, 2011, when an impairment in goodwill of €1,444 million was registered. However, impairments losses on real estate inventories were higher in 2012 than in 2011, as a result of the continuing deterioration of the value of these assets.

81

Gains (losses) on derecognized assets not classified as non-current assets held for sale

Gains (losses) on derecognized assets not classified as non-current assets held for sale for the year ended December 31, 2012 amounted to a gain of €4 million, a 91.3% decrease compared to €46 million for the year ended December 31, 2011.

Negative goodwill

Negative goodwill for the year ended December 31, 2012 amounted to a gain of €376 million, compared with no gain for the year ended December 31, 2011. Negative goodwill for the year ended December 31, 2012 was derived from the acquisition of Unnim Banc, S.A. (“Unnim”). See “Item 4. Information on the Company—History and Development of the Company—Capital Expenditures—2012—Acquisition of Unnim” and Note 20.1 to our Consolidated Financial Statements for additional information.

Gains (losses) in non-current assets held for sale not classified as discontinued operations

Gains (losses) in non-current assets held for sale not classified as discontinued operations for the year ended December 31, 2012, amounted to a loss of €622 million, compared to a loss of €271 million for the year ended December 31, 2011. This increase was primarily due to the higher provisions made in connection with real estate foreclosed assets in Spain and sales of these assets which amounted to a loss of €83 million in 2012 compared to a gain of €127 million in 2011.

Operating profit before tax

As a result of the foregoing, operating profit before tax for the year ended December 31, 2012 was €1,659 million, a 51.9% decrease from the €3,446 million recorded for the year ended December 31, 2011.

Income tax

Income tax for the year ended December 31, 2012 was a benefit of €275 million, compared to an expense of €206 million recorded for the year ended December 31, 2011, due to lower operating profit before tax, the higher proportion of revenues with low or zero tax rates (primarily dividends and equity accounted earnings), the higher proportion of results coming from Latin America and Garanti, which carry a lower effective tax rate, and the higher provisions made with respect to real estate assets.

Profit from continuing operations

As a result of the foregoing, profit from continuing operations for the year ended December 31, 2012 was €1,934 million, a 40.3% decrease from the €3,240 million recorded for the year ended December 31, 2011.

Profit from discontinued operations (net)

Profit from discontinued operations for the year ended December 31, 2012 was €393 million, a 60.4% increase from the €245 million recorded for the year ended December 31, 2011, due to increased activity in the insurance and pension business. See “Item 4. Information on the Company—History and Development of the Company—Capital Divestitures—2013” and “—Factors Affecting the Comparability of our Results of Operations and Financial Condition—Divestment of the Pension Business in Latin America.”

Profit

As a result of the foregoing, profit for the year ended December 31, 2012 was €2,327 million, a 33.2% decrease from the €3,485 million recorded for the year ended December 31, 2011.

Profit attributable to parent company

Profit attributable to parent company for the year ended December 31, 2012 was €1,676 million, a 44.2% decrease from the €3,004 million recorded for the year ended December 31, 2011.

82

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests for the year ended December 31, 2012 was €651 million, a 35.3% increase over the €481 million recorded for the year ended December 31, 2011, principally due to the positive performance of our Venezuelan and Peruvian operations where there are significant minority shareholders.

BBVA Group Results of Operations for 2011 Compared to 2010

The changes in the Group’s consolidated income statements for 2011 and 2010 were as follows:

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Interest and similar income		24,180			21,130			14.4
Interest expense and similar charges		(11,028	)		(7,814	)		41.1
Net interest income		13,152			13,316			(1.2	)
Dividend income		562			529			6.2
Share of profit or loss of entities accounted for using the equity method		595			331			79.8
Fee and commission income		5,075			4,864			4.3
Fee and commission expenses		(1,044	)		(831	)		25.6
Net gains (losses) on financial assets and liabilities		1,117			1,372			(18.6	)
Net exchange differences		364			455			(20.0	)
Other operating income		4,244			3,537			20.0
Other operating expenses		(4,037	)		(3,240	)		24.6
Administration costs		(8,898	)		(8,007	)		11.1
Personnel expenses		(5,191	)		(4,698	)		10.5
General and administrative expenses		(3,707	)		(3,309	)		12.0
Depreciation and amortization		(839	)		(754	)		11.3
Provisions (net)		(509	)		(475	)		7.2
Impairment losses on financial assets (net)		(4,226	)		(4,718	)		(10.4	)
Impairment losses on other assets (net)		(1,885	)		(489	)		285.5
Gains (losses) on derecognized assets not classified as non-current assets held for sale		46			41			12.2
Negative goodwill		—			1			(100.0	)
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(271	)		127			n.m.	(1)
Operating profit before tax		3,446			6,059			(43.1	)
Income tax		(206	)		(1,345	)		(84.7	)
Profit from continuing operations		3,240			4,714			(31.3	)
Profit from discontinued operations (net)		245			281			(12.8	)
Profit		3,485			4,995			(30.2	)
Profit attributable to parent company		3,004			4,606			(34.8	)
Profit attributable to non-controlling interests		481			389			23.7

(1) Not meaningful.

The changes in our consolidated income statements for 2011 and 2010 were as follows:

Net interest income

The following table summarizes the principal components of net interest income for 2011 compared to 2010.

83

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Interest and similar income		24,180			21,130			14.4
Interest and similar expense		(11,028	)		(7,814	)		41.1
Net interest income		13,152			13,316			(1.2	)

Net interest income decreased 1.2% to €13,152 million for the year ended December 31, 2011 from €13,316 million for year ended December 31, 2010, due mainly to the upturn in interest rates in the Eurozone in the 2011, which affected liability costs to a greater extent, and a faster impact, than the return on assets. The decrease in net interest income was also the result of the extremely complex environment in which it was produced, with restricted lending activity in Spain and more expensive wholesale funding due to the increased spread paid for Spain’s risk. The decrease in net interest income was modestly offset by the increased volume of business and sound price management in South America as well as the acquisition of Garanti in March 2011.

Dividend income

Dividend income increased 6.2% to €562 million for the year ended December 31, 2011 from €529 million for the year ended December 31, 2010, due primarily to dividends from Telefónica, S.A.

Share of profit or loss of entities accounted for using the equity method

Share of profit or loss of entities accounted for using the equity method increased to €595 million for the year ended December 31, 2011 from €331 million for the year ended December 31, 2010 due to the increased profit of CNCB.

Fee and commission income

The breakdown of fee and commission income for 2011 and 2010 is as follows:

	Year Ended December 31,
	2011		2010		Change (In %)
	(In Millions of Euros)
Commitment fees		157		133		18.0
Contingent risks		318		282		12.8
Letters of credit		54		45		20.0
Bank and other guarantees		264		237		11.4
Arising from exchange of foreign currencies and banknotes		25		19		31.6
Collection and payment services income		2,694		2,500		7.8
Bills receivables		67		60		11.7
Current accounts		360		402		(10.4	)
Credit and debit cards		1,619		1,384		17.0
Checks		229		263		(12.9	)
Transfers and others payment orders		294		274		7.3
Rest		125		117		6.8
Securities services income		1,105		1,142		(3.2	)
Securities underwriting		70		64		9.4
Securities dealing		200		181		10.5
Custody securities		330		357		(7.6	)
Investment and pension funds		389		414		(6.0	)
Rest assets management		116		126		(7.9	)
Counseling on and management of one-off transactions		13		11		18.2
Financial and similar counseling services		55		60		(8.3	)
Factoring transactions		33		29		13.8
Non-banking financial products sales		97		102		(4.9	)
Other fees and commissions		578		586		(1.4	)
Fee and commission income		5,075		4,864		4.3

84

Fee and commission income increased 4.3% to €5,075 million for the year ended December 31, 2011 from €4,864 million for the year ended December 31, 2010 due principally to increased fees linked to credit and debit cards (€100 million originated by Garanti), which more than offset a decline in fees related to current accounts and checks.

Fee and commission expenses

The breakdown of fee and commission expenses for 2011 and 2010 is as follows:

	Year Ended December 31,
	2011		2010		Change (In %)
	(In Millions of Euros)
Brokerage fees on lending and deposit transactions		5		5		0.0
Fees and commissions assigned to third parties		741		571		29.8
Credit and debit cards		609		449		35.6
Transfers and others payment orders		34		27		25.9
Securities dealing		14		13		7.7
Rest		84		82		2.4
Other fees and commissions		298		255		16.9
Fee and commission expenses		1,044		831		25.6

Fee and commission expenses increased 25.6% to €1,044 million for the year ended December 31, 2011 from €831 million for the year ended December 31, 2010, primarily due to the increase in fees and commissions assigned to third party banking services, specifically credit and debit cards, and other fees and commissions.

Net gains (losses) on financial assets and liabilities and exchange differences

Net gains (losses) on financial assets and liabilities decreased by 18.6% to €1,117 million for the year ended December 31, 2011 from €1,372 million for the year ended December 31, 2010, primarily due to declines in the value of assets as a result of market prices evolution, reduced customer activity and the absence of earnings from portfolio sales.

Net exchange differences decreased 20.0% to €364 million for the year ended December 31, 2011 from €455 million for the year ended December 31, 2010. In the first half of 2011, the euro appreciated against the U.S. dollar due to the increasing spread between interest rates; however, in the second half of the year, the European debt crisis weakened the euro’s position. The combination of a stronger euro and the relative strength of emerging currencies against the U.S. dollar resulted in a generally unfavorable performance.

Other operating income and expenses

Other operating income amounted to €4,244 million for the year ended December 31, 2011, a 20.0% increase compared to €3,537 million for the year ended December 31, 2010, due primarily to increased income derived from insurance and reinsurance contracts.

Other operating expenses for the year ended December 31, 2011, amounted to €4,037 million, a 24.6% increase compared to the €3,240 million recorded for the year ended December 31, 2010 due primarily to higher contributions to deposit guarantee funds in the countries in which we operate and to increased provisions related to insurance and reinsurance contracts.

85

Administration costs

Administration costs comprise personnel expenses and general and administrative expenses and for the year ended December 31, 2011 were €8,898 million, an 11.1% increase from the €8,007 million recorded for the year ended December 31, 2010, due primarily to the Group’s growth (mainly through the acquisition of our stake in Garanti) and expansion plans. Progress continues to be made in developing customer products and segments in franchises operating in emerging countries and in extending banking penetration to take advantage of economic growth. In contrast, in developed markets, BBVA focuses on improving customer relations and distribution efficiency. Additionally, investment in technology, personnel and brand awareness continues in the Bank as a whole.

The table below provides a breakdown of personnel expenses for 2011 and 2010.

	Year Ended December 31,
	2011		2010		Change (In %)
	(In Millions of Euros)
Wages and salaries		4,023		3,643		10.4
Social security costs		614		555		10.6
Transfers to internal pension provisions		51		37		37.8
Contributions to external pension funds		80		84		(4.8	)
Other personnel expenses		423		379		11.6
Personnel expenses		5,191		4,698		10.5

The table below provides a breakdown of general and administrative expenses for 2011 and 2010.

	Year Ended December 31,
	2011		2010		Change (In %)
	(In Millions of Euros)
Technology and systems		647		551		17.4
Communications		289		274		5.5
Advertising		369		336		9.8
Property, fixtures and materials		839		739		13.5
Of which:
Rent expenses		470		393		19.6
Taxes other than income tax		356		318		11.9
Other expenses		1,207		1,091		10.6
Other General and administrative expenses		3,707		3,309		12.0

Depreciation and amortization

Depreciation and amortization for the year ended December 31, 2011 amounted to €839 million an 11.3% increase compared to €754 million recorded for the year ended December 31, 2010, due primarily to the amortization of software and tangible assets for own use.

Provisions (net)

Provisions (net) for the year ended December 31, 2011 amounted to €509 million, a 7.2% increase compared to €475 million recorded for the year ended December 31, 2010, primarily to cover early retirement benefits, other allocations to pension funds and transfers to provisions for contingent liabilities.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) for the year ended December 31, 2011 amounted to €4,226 million, a 10.4% decrease compared to the €4,718 million recorded for the year ended December 31, 2010.

86

Impairment on financial assets (net) was negatively affected in 2009 and 2010 in Spain and in the United States by the significant increase in substandard loans, mainly as a result of the deterioration of the economic environment. Impairment losses on financial assets (net) for the year ended December 31, 2011, continued to be impacted in Spain, Portugal and, to a lesser extent, in the United States by the challenging economic environment. The Group’s non-performing assets ratio was 4.0% as of December 31, 2011, compared to 4.1% as of December 31, 2010.

Impairment losses on other assets (net)

Impairment losses on other assets (net) for the year ended December 31, 2011 amounted to €1,885 million, compared to the €489 million recorded for the year ended December 31, 2010. Impairment losses on other assets (net) for 2011 includes impairment losses relating to goodwill of €1,444 million in the United States and provisions made for real estate and foreclosed assets.

Gains (losses) on derecognized assets not classified as non-current assets held for sale

Gains (losses) on derecognized assets not classified as non-current assets held for sale for the year ended December 31, 2011 amounted to a gain of €46 million, a 12.2% increase over the €41 million gain recorded for the year ended December 31, 2010.

Gains (losses) in non-current assets held for sale not classified as discontinued operations

Gains (losses) in non-current assets held for sale not classified as discontinued operations for the year ended December 31, 2011, amounted to a loss of €271 million, compared to a gain of €127 million for the year ended December 31, 2010, mainly as a result of an increase in write-downs on real estate investments and a decrease in the profits on sales and lease back operations which amounted to €67 million in 2011 compared to €273 million in 2010.

Operating profit before tax

As a result of the foregoing, operating profit before tax for the year ended December 31, 2011 was €3,446 million, a 43.1% decrease from the €6,059 million recorded for the year ended December 31, 2010.

Income tax

Income tax for the year ended December 31, 2011 amounted to €206 million, an 84.7% decrease from the €1,345 million recorded for the year ended December 31, 2010, due to lower operating profit before tax, a decrease in tax expenses due to the amortization of certain goodwill arising from investments in foreign companies made prior to December 31, 2007, whose deductibility is contemplated in the European Union decision published on May 21, 2011, revenues with low or zero tax rates (basically dividends and equity accounted earnings), and the higher proportion of results coming from Latin America and Garanti, which carry a low effective tax rate.

Profit from continuing operations

As a result of the foregoing, profit from continuing operations for the year ended December 31, 2011 was €3,240 million, a 31.3% decrease from the €4,714 million recorded for the year ended December 31, 2010.

Profit from discontinued operations (net)

Profit from discontinued operations for the year ended December 31, 2011 was €245 million, a 12.8% decrease from the €281 million recorded for the year ended December 31, 2011.

Profit

As a result of the foregoing, profit for the year ended December 31, 2011 was €3,485 million, a 30.2% decrease from the €4,995 million recorded for the year ended December 31, 2010.

87

Profit attributable to parent company

Profit attributable to parent company for the year ended December 31, 2011 was €3,004 million, a 34.8% decrease from the €4,606 million recorded for the year ended December 31, 2010.

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests for the year ended December 31, 2011 was €481 million, a 23.7% increase over the €389 million recorded for the year ended December 31, 2010, principally due to the performance of Venezuela.

Results of Operations by Operating Segment for 2012 Compared to 2011

SPAIN

	Year Ended December 31,
	2012			2011			Change (In %)
	(In Millions of Euros)
Net interest income		4,836			4,391			10.1
Net fees and commissions		1,607			1,461			10.0
Net gains (losses) on financial assets and liabilities and net exchange differences		(13	)		11			n.m.	(1)
Other operating income and expenses		355			464			(23.6	)
Administration costs		(2,722	)		(2,689	)		1.2
Depreciation and amortization		(96	)		(98	)		(1.9	)
Impairment losses on financial assets (net)		(5,710	)		(1,711	)		233.6
Provisions (net) and other gains (losses)		(98	)		68			n.m.	(1)
Operating profit / (loss) before tax		(1,841	)		1,897			n.m.	(1)
Income tax		575			(546	)		n.m.	(1)
Profit from continuing operations		(1,267	)		1,352			n.m.	(1)
Profit from discontinued operations (net)		—			—			n.m.	(1)
Profit		(1,267	)		1,352			n.m.	(1)
Profit attributable to non-controlling interests		(1	)		—			106.4
Profit attributable to parent company		(1,267	)		1,352			n.m.	(1)

(1) Not meaningful.

Spain’s income statement for 2012 was adversely affected by the significant loan-loss provisions made to reflect the steady impairment of our real estate portfolios. The acquisition of Unnim in July 2012 had a non-material impact on the performance of this area.

Net interest income

Net interest income of this operating segment for 2012 was €4,836 million, a 10.1% increase compared to the €4,391 million recorded for 2011, due mainly to the reduction of the cost of deposits that which more than offset the decrease in income from loans.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,607 million for 2012, a 10.0% increase from the €1,461 million recorded for 2011, primarily due to an increase in securities services income.

88

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment for 2012 was a loss of €13 million compared with the €11 million gain recorded for 2011, mainly due to the negative effect of exchanges differences (which resulted in a loss of €122 million in 2012 compared with a gain of €51 million in 2011) which was partially offset by the higher net gains on financial assets (a gain of €109 million in 2012 compared with a €40 million loss in 2011) which were principally due to the sales of some portfolios of Unnim.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012 was a gain of €355 million, a 23.6% decrease from the €464 million gain recorded for 2011, primarily due to increased contributions to the Deposit Guarantee Fund.

Administration costs

Administration costs of this operating segment for 2012 were €2,722 million, a 1.2% increase from the €2,689 million recorded for 2011, primarily due to an increase in general and personnel expenses due to the acquisition of Unnim.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €5,710 million, a 233.6% increase from the €1,711 million recorded for 2011 which is mainly attributable to the impairment of assets related to the real estate sector as a result of the deterioration of economic conditions in Spain. This operating segment’s non-performing assets ratio increased to 6.5%, as of December 31, 2012, from 4.8% as for December 31, 2011, due to the increase in substandard loans which was partially offset by a decrease in loans and advances to customers.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2012 was €1,841 million, compared with operating profit before tax of €1,897 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was a benefit of €575 million, compared with a €546 million expense recorded in 2011, primarily as result of the operating loss before tax.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2012 was a loss of €1,267 million, compared with a gain of €1,352 million recorded in 2011.

89

EURASIA

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		847			802			5.5
Net fees and commissions		451			391			15.4
Net gains (losses) on financial assets and liabilities and net exchange differences		131			113			16.4
Other operating income and expenses		781			655			19.2
Administration costs		(724	)		(604	)		19.8
Depreciation and amortization		(54	)		(44	)		23.6
Impairment losses on financial assets (net)		(328	)		(149	)		120.8
Provisions (net) and other gains (losses)		(50	)		11			n.m.(1)
Operating profit / (loss) before tax		1,054			1,176			(10.4	)
Income tax		(103	)		(145	)		(28.6	)
Profit from continuing operations		950			1,031			(7.8	)
Profit from discontinued operations (net)		—			—			n.m.(1)
Profit		950			1,031			(7.8	)
Profit attributable to non-controlling interests		—			—			n.m.(1)
Profit attributable to parent company		950			1,031			(7.8	)

(1) Not meaningful.

In 2012, the importance of this area continued to increase both in terms of total income and our balance sheet, primarily due to the proportional consolidation of Garanti for the full year ended December 31, 2012 (compared with only nine months for the year ended December 31, 2011) and the increase of earnings from CNCB.

Net interest income

Net interest income of this operating segment for 2012 was €847 million, a 5.5% increase compared to the €802 million recorded for 2011 primarily due to the proportional consolidation of Garanti for the full year ended December 31, 2012 (compared with only nine months for the year ended December 31, 2011).

Net fees and commissions

Net fees and commissions of this operating segment amounted to €451 million for 2012, a 15.4% increase from the €391 million recorded for 2011 primarily due to the proportional consolidation of Garanti for the full year ended December 31, 2012 (compared with only nine months for the year ended December 31, 2011).

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains and financial assets and liabilities and exchange differences of this operating segment for 2012 was €131 million, a 16.4% increase compared with the €113 million recorded for 2011, primarily due to the positive impact of exchange rates.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012 was a gain of €781 million, a 19.2% increase from the €655 million gain recorded for 2011, primarily due to the growing contribution of CNCB.

90

Administration costs

Administration costs of this operating segment for 2012 were €724 million, a 19.8% increase over the €604 million recorded for 2011, primarily due to the proportional consolidation of Garanti for the full year ended December 31, 2012 (compared with only nine months for the year ended December 31, 2011)

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €328 million, a 120.8% increase from the €149 million recorded for 2011 due to the loan-loss provisions made in Portugal due to the ongoing deterioration of the economic situation. The operating segment’s non-performing assets ratio increased to 1.7% as of December 31, 2012 from 1.5% as of December 31, 2011.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2012 was €1,054 million, a 10.4% decrease from the €1,176 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was €103 million, a 28.6% decrease from the €145 million recorded in 2011, primarily as result of the decrease in operating profit before tax.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2012 was €950 million, a 7.8% decrease from the €1,031 million recorded in 2011.

MEXICO

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		4,164			3,776			10.3
Net fees and commissions		1,087			1,022			6.4
Net gains (losses) on financial assets and liabilities and net exchange differences		218			296			(26.3	)
Other operating income and expenses		288			227			27.0
Administration costs		(2,038	)		(1,831	)		11.3
Depreciation and amortization		(133	)		(105	)		27.0
Impairment losses on financial assets (net)		(1,320	)		(1,180	)		11.9
Provisions (net) and other gains (losses)		(41	)		(59	)		(30.5	)
Operating profit / (loss) before tax		2,225			2,146			3.7
Income tax		(538	)		(513	)		4.7
Profit from continuing operations		1,688			1,633			3.4
Profit from discontinued operations (net)		136			81			69.1
Profit		1,824			1,714			6.4
Profit attributable to non-controlling interests		(3	)		(3	)		20.6
Profit attributable to parent company		1,821			1,711			6.4

91

As discussed above under “—Factors Affecting the Comparability of our Results of Operations and Financial Condition,” in 2012 the Mexican peso appreciated against the euro on average terms, resulting in a positive exchange rate effect on our income statement for 2012.

In the second half of 2012, we signed an agreement for the sale of our pension business in Mexico. The earnings from this activity have therefore been classified under discontinued operations in the income statement for 2012 and also for 2011, for comparison purposes.

Net interest income

Net interest income of this operating segment for 2012 was €4,164 million, a 10.3% increase from the €3,776 million recorded for 2011, due primarily to increased business activity, with greater volumes of lending and customer funds, and sound price management, which effects were partially offset by the impact of lower interest rates throughout the year.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,087 million for 2012, a 6.4% increase from the €1,022 million recorded for 2011, due to increased transactions by customers with credit cards and the higher volume of assets under management of mutual funds.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains on financial assets and liabilities and exchange differences of this operating segment for 2012 amounted to €218 million, a 26.3% decrease from the €296 million for 2011, primarily due to lower brokerage revenues.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012, was a gain €288 million, a 27.0% increase from the €227 million gain recorded for 2011, principally due to growth in the insurance business.

Administration costs

Administration costs of this operating segment for 2012 amounted to €2,038 million, an 11.3% increase from the €1,831 million recorded for 2011, primarily due to the investment in technology and infrastructure. The number of ATMs grew over the year to 7,733 units, while the POS terminals increased by 9,176 units.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €1,320 million, an 11.9% increase from the €1,180 million recorded for 2011, in line with the activity increase in the area. The operating segment’s non-performing assets ratio increased to 3.8% as of December 31, 2012 from 3.7% as of December 31, 2011.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2012 was €2,225 million, a 3.7% increase from the €2,146 million recorded for 2011.

Income tax

Income tax of this operating segment for 2012 was €538 million, a 4.7% increase from the €513 million recorded for 2011.

92

Profit from continuing operations

Profit from continuing operations of this operating segment for 2012 was €1,688 million, a 3.4% increase from the €1,633 million recorded for 2011.

Profit from discontinued operations (net)

As mentioned above, in the second half of 2012, we signed an agreement for the sale of our pension business in Mexico. Accordingly, the earnings from this activity have been classified under discontinued operations in the income statement for 2012 and 2011 (for comparison purposes). Profit from discontinued operations (net) of this operating segment for 2012 was €136 million, a 69.1% increase from the €81 million recorded for 2011.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2012 was €1,821 million, a 6.4% increase from the €1,711 million recorded for 2011.

SOUTH AMERICA

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		4,291			3,161			35.7
Net fees and commissions		910			720			26.4
Net gains (losses) on financial assets and liabilities and net exchange differences		443			485			(8.6	)
Other operating income and expenses		(281	)		(264	)		6.4
Administration costs		(2,154	)		(1,741	)		23.7
Depreciation and amortization		(173	)		(152	)		14.3
Impairment losses on financial assets (net)		(593	)		(449	)		32.1
Provisions (net) and other gains (losses)		(202	)		(89	)		127.7
Operating profit / (loss) before tax		2,240			1,671			34.1
Income tax		(486	)		(343	)		41.6
Profit from continuing operations		1,754			1,327			32.2
Profit from discontinued operations (net)		241			160			51.2
Profit		1,995			1,487			34.2
Profit attributable to non-controlling interests		(649	)		(480	)		35.1
Profit attributable to parent company		1,347			1,007			33.8

As discussed above under “—Factors Affecting the Comparability of our Results of Operations and Financial Condition,” the average exchange rates of the currencies of the countries in which we operate in South America, except for the Argentine peso, against the euro, increased in 2012, resulting in a positive impact on the results of operations of the South America operating segment expressed in euro.

During the second half of 2012 we embarked on various negotiations for the sale of our pension business in South America and, in late 2012, we entered into an agreement for the sale of our stake in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A. The earnings from our pension business in South America have been classified as discontinued operations in the income statement for 2012 and 2011 (for comparison purposes).

Net interest income

Net interest income of this operating segment for 2012 was €4,291 million, a 35.7% increase from the €3,161 million recorded in 2011, mainly due to the increase in volume of customer loans and deposits during the period, combined with sound price management.

93

Net fees and commissions

Net fees and commissions of this operating segment amounted to €910 million in 2012, a 26.4% increase from the €720 million recorded in 2011, primarily due to the increasing pace of business in most of the countries throughout the region.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains on financial assets and liabilities and exchange differences of this operating segment in 2012 were €443 million, an 8.6% decrease from the €485 million recorded in 2011. Net gains on financial assets and liabilities and exchange differences of this operating segment in 2011 were positively affected by the revaluation of the U.S. dollar positions of BBVA Provincial in Venezuela, and no similar revaluation was recorded in 2012.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012, was a loss of €281 million, a 6.4% increase from the loss of €264 million recorded for 2011, principally due to the impact of Venezuela as a hyperinflationary economy since 2009 and the greater contribution made to the deposit guarantee funds in the countries in which we operate.

Administration costs

Administration costs of this operating segment in 2012 were €2,154 million, a 23.7% increase from the €1,741 million recorded in 2011, primarily due to the implementation of growth plans and the higher inflation recorded in the area.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment in 2012 was €593 million, 32.1% increase from the €449 million recorded in 2011, primarily due to the growth of loans and advances to customers. The operating segment’s non-performing assets ratio was 2.1% as of December 31, 2012, compared with 2.2% as of December 31, 2011.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment in 2012 amounted to €2,240 million, a 34.1% increase compared to the €1,671 million recorded in 2011.

Income tax

Income tax of this operating segment in 2012 was €486 million, a 41.6% increase from the €343 million recorded in 2011.

Profit from continuing operations

Profit from continuing operations of this operating segment for 2012 was €1,754 million, a 32.2% increase from the €1,327 million recorded for 2011.

Profit from discontinued operations (net)

As discussed above, the earnings from our pension business in South America have been classified as discontinued operations in the income statement for 2012 and 2011 (for comparison purposes). Profit from discontinued operations (net) of this operating segment for 2012 was €241 million, a 51.2% increase from the €160 million recorded for 2011.

94

Profit attributable to parent company

Profit attributable to parent company of this operating segment in 2012 was €1,347 million, a 33.8% increase from the €1,007 million recorded in 2011.

UNITED STATES

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		1,682			1,635			2.8
Net fees and commissions		603			633			(4.8	)
Net gains (losses) on financial assets and liabilities and net exchange differences		160			140			14.5
Other operating income and expenses		(49	)		(84	)		(41.8	)
Administration costs		(1,396	)		(1,327	)		5.2
Depreciation and amortization		(188	)		(170	)		10.4
Impairment losses on financial assets (net)		(90	)		(346	)		(73.8	)
Provisions (net) and other gains (losses)		(54	)		(1,501	)		n.m.(1)
Operating profit / (loss) before tax		667			(1,020	)		n.m.(1)
Income tax		(192	)		329			n.m.(1)
Profit from continuing operations		475			(691	)		n.m.(1)
Profit from discontinued operations (net)		—			—			n.m.(1)
Profit		475			(691	)		n.m.(1)
Profit attributable to non-controlling interests		—			—			n.m.(1)
Profit attributable to parent company		475			(691	)		n.m.(1)

(1) Not meaningful.

As discussed above under “—Factors Affecting the Comparability of our Results of Operations and Financial Condition” in 2012 the U.S. dollar appreciated against the euro on average terms, resulting in a positive exchange rate effect on our income statement in 2012.

Net interest income

Net interest income of this operating segment for 2012 was €1,682 million, a 2.8% increase from the €1,635 million recorded in 2011, primarily as a result of the appreciation of the U.S. dollar.

Net fees and commissions

Net fees and commissions of this operating segment in 2012 were €603 million, a 4.8% decrease from the €633 million recorded in 2011, due primarily to the coming into force of restrictive regulations on fees and commissions. This negative effect was partially offset by the positive performance of service fees from new residential mortgages.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment in 2012 were €160 million, a 14.5% increase from the €140 million recorded in 2011, mainly due to the appreciation of the U.S. dollar.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment in 2012 were an expense of €49 million, compared to an expense of €84 million recorded in 2011 mainly due to lower contributions to the Federal Deposit Insurance Corporation (FDIC).

95

Administration costs

Administration costs of this operating segment in 2012 were €1,396 million, a 5.2% increase from the €1,327 million recorded in 2011.

Depreciation and amortization

Depreciation and amortization of this operating segment for 2012 was €188 million, a 10.4% increase from €170 million in 2011.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €90 million, a 73.8% decrease from the €346 million recorded for 2011, primarily due to the improvement in the loan-book mix. The non-performing assets ratio of this operating segment as of December 31, 2012 decreased to 2.4% from 3.5% as of December 31, 2011.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2012 reflected losses of €54 million, compared to the €1,501 million losses recorded for 2011. Provisions (net) and other gains (losses) for 2011 were mainly related to impairment losses for goodwill (totaling €1,444 million). This goodwill adjustment was of an accounting nature and did not have any negative impact on the liquidity or capital adequacy of either the operating segment or the Group.

Operating profit / (loss) before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2012 was a gain of €667 million, compared to a loss of €1,020 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was a loss of €192 million, compared to a gain of €329 million recorded in 2011.

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2012 was a gain of €475 million, compared to a loss of €691 recorded in 2011.

96

CORPORATE ACTIVITIES

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		(697	)		(614	)		13.6
Net fees and commissions		(304	)		(196	)		55.6
Net gains (losses) on financial assets and liabilities and net exchange differences		828			436			89.7
Other operating income and expenses		105			366			(71.2	)
Administration costs		(734	)		(706	)		4.0
Depreciation and amortization		(373	)		(270	)		38.1
Impairment losses on financial assets (net)		60			(392	)		n.m.	(1)
Provisions (net) and other gains (losses)		(1,569	)		(1,049	)		49.6
Operating profit / (loss) before tax		(2,686	)		(2,425	)		10.8
Income tax		1,020			1,012			0.9
Profit from continuing operations		(1,665	)		(1,413	)		17.9
Profit from discontinued operations (net)		15			5			177.3
Profit		(1,651	)		(1,407	)		17.3
Profit attributable to non-controlling interests		2			2			(26.1	)
Profit attributable to parent company		(1,649	)		(1,405	)		17.3

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2012 was an expense of €697 million compared to an expense of €614 million recorded in 2011. Net interest income has been negatively affected by the rising cost of wholesale finance resulting from the instability in the Euro zone area.

Net fees and commissions

Net fees and commissions of this operating segment amounted to an expense of €304 million for 2012, a 55.6% increase from the €196 million expense recorded for 2011.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment for 2012 were a gain of €828 million, a 89.7% increase from the €436 million gain recorded in 2011, primarily as a result of the capital gains derived from the repurchase of securitization bonds and subordinated debt carried out in 2012.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012 was a gain of €105 million, a 71.2% decrease from the €366 million gain recorded in 2011. Other operating income and expenses (net) of this operating segment for both years was primarily composed of Telefónica, S.A.’s dividends, which decreased from €1.52 per share in 2011 to €0.53 per share in 2012.

97

Administration costs

Administration costs of this operating segment for 2012 were €734 million, a 4.0% increase from the €706 million recorded in 2011, primarily due to the increase in costs associated with certain investments that are currently being undertaken including for the upgrading of systems, infrastructure and image and brand identity.

Depreciation and amortization

Depreciation and amortization of this operating segment for 2012 was €373 million, a 38.1% increase from the €270 million recorded in 2011, primarily due to charges related to corporate offices and software amortization.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was a gain of €60 million compared with a loss of €392 million recorded for 2011, when higher provisions for loan losses were made to increase the Group’s coverage ratio in light of the adverse economic conditions.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2012 was an expense of €1,569 million, a 49.6% increase from the €1,049 million expense recorded in 2011, primarily due to an increase in provisions for foreclosed assets and real estate assets and partially offset by the negative goodwill generated by the acquisition of Unnim. See “Item 4. Information on the Company—History and Development of the Company—Capital Expenditures—2012—Acquisition of Unnim” and Note 20.1 to our Consolidated Financial Statements for additional information.

Operating profit / (loss) before tax

As a result of the foregoing, operating loss before tax of this operating segment for 2012 was a loss of €2,686 million, compared to a loss of €2,425 million in 2011.

Income tax

Income tax of this operating segment for 2012 was €1,020 million, a 0.9% increase from the €1,012 million recorded for 2011.

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2012 was a loss of €1,649 million, compared to a loss of €1,405 million in 2011.

98

Results of Operations by Operating Segment for 2011 Compared to 2010

SPAIN

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		4,391			4,898			(10.4	)
Net fees and commissions		1,461			1,673			(12.7	)
Net gains (losses) on financial assets and liabilities and net exchange differences		11			3			n.m.	(1)
Other operating income and expenses		464			497			(6.7	)
Administration costs		(2,689	)		(2,764	)		(2.7	)
Depreciation and amortization		(98	)		(97	)		0.8
Impairment losses on financial assets (net)		(1,711	)		(1,321	)		29.6
Provisions (net) and other gains (losses)		68			236			(71.3	)
Operating profit / (loss) before tax		1,897			3,127			(39.3	)
Income tax		(546	)		(914	)		(40.3	)
Profit from continuing operations		1,352			2,212			(38.9	)
Profit from discontinued operations (net)		—			—			n.m.	(1)
Profit		1,352			2,212			(38.9	)
Profit attributable to non-controlling interests		—			(3	)		(89.5	)
Profit attributable to parent company		1,352			2,210			(38.8	)

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2011 was €4,391 million, a 10.4% decrease compared to the €4,898 million recorded for 2010, due mainly to the upturn in interest rates in the Eurozone in the 2011, which affected liability costs to a greater extent, and a faster impact, than the return on assets. The decrease in net interest income was also the result of the extremely complex environment in which it was produced, with restricted lending activity in Spain and more expensive wholesale funding due to the increased spread paid for Spain’s risk.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,461 million for 2011, a 12.7% decrease from the €1,673 million recorded for 2010, primarily due to the application of loyalty-based reductions to a greater number of customers and the fall in the volume of managed mutual funds.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment for 2011 was a gain of €11 million compared with the €3 million gain recorded for 2010. The positive effect of exchanges differences (€51 million in 2011 compared with €4 million in 2010) was partially offset by the higher net losses on financial assets (€40 million in 2011 compared with €1 million in 2010).

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2011 was a gain of €464 million, a 6.7% decrease from the €497 million gain recorded for 2010, primarily due to the increased contributions to the Deposit Guarantee Fund.

Administration costs

Administration costs of this operating segment for 2011 were €2,689 million, a 2.7% decrease from the €2,764 million recorded for 2010, primarily due to the decline in general and personnel expenses.

99

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2011 was €1,711 million, a 29.6% increase from the €1,321 million recorded for 2010 which is mainly attributable to the deterioration of the economic situation. This operating segment’s non-performing assets ratio remained stable during 2011 and was 4.8%, as of December 31, 2011, due to the decrease in loans and advances to customers and in substandard loans due to the write-off.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2011 was €1,897 million, a 39.3% decrease from the €3,127 million recorded in 2010.

Income tax

Income tax of this operating segment for 2011 was €546 million, a 40.3% decrease from the €914 million recorded in 2010, primarily as result of the decrease in operating profit before tax.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2011 was €1,352 million, a 38.8% decrease from the €2,210 million recorded in 2010.

EURASIA

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		802			333			141.2
Net fees and commissions		391			228			71.5
Net gains (losses) on financial assets and liabilities and net exchange differences		113			132			(14.6	)
Other operating income and expenses		655			367			78.4
Administration costs		(604	)		(274	)		120.9
Depreciation and amortization		(44	)		(17	)		158.0
Impairment losses on financial assets (net)		(149	)		(89	)		66.3
Provisions (net) and other gains (losses)		11			(20	)		n.m.	(1)
Operating profit / (loss) before tax		1,176			660			78.2
Income tax		(145	)		(85	)		70.1
Profit from continuing operations		1,031			575			79.5
Profit from discontinued operations (net)		—			—			n.m.	(1)
Profit		1,031			575			79.5
Profit attributable to non-controlling interests		—			1			(100.0	)
Profit attributable to parent company		1,031			575			79.2

(1) Not meaningful.

The importance of this operating segment increased in 2011 both in terms of earnings and our balance sheet, primarily due to the contribution of Garanti starting in March 2011 and the increase of earnings from CNCB.

Net interest income

Net interest income of this operating segment for 2011 was €802 million, a 141.2% increase compared to the €333 million recorded for 2010.

100

Net fees and commissions

Net fees and commissions of this operating segment amounted to €391 million for 2011, a 71.5% increase from the €228 million recorded for 2010.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains and financial assets and liabilities and exchange differences of this operating segment for 2011 was €113 million, a 14.6% decrease compared with the €132 million recorded for 2010, primarily due to the negative impact of exchange rates.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2011 was a gain of €655 million, a 78.4% increase from the €367 million gain recorded for 2010, primarily due to the growing contribution of CNCB.

Administration costs

Administration costs of this operating segment for 2011 were €604 million, a 120.9% increase over the €274 million recorded for 2010.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2011 was €149 million, a 66.3% increase from the €89 million recorded for 2010. The operating segment’s non-performing assets ratio increased to 1.5% as of December 31, 2011 from 0.9% as of December 31, 2010.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2011 was €1,176 million, a 78.2% increase from the €660 million recorded in 2010.

Income tax

Income tax of this operating segment for 2011 was €145 million, a 70.1% increase from the €85 million recorded in 2010, primarily as result of the increase in operating profit before tax.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2011 was €1,031 million, a 79.2% increase from the €575 million recorded in 2010.

101

MEXICO

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		3,776			3,648			3.5
Net fees and commissions		1,022			1,066			(4.2	)
Net gains (losses) on financial assets and liabilities and net exchange differences		296			384			(22.7	)
Other operating income and expenses		227			180			26.3
Administration costs		(1,831	)		(1,742	)		5.1
Depreciation and amortization		(105	)		(85	)		24.1
Impairment losses on financial assets (net)		(1,180	)		(1,229	)		(4.0	)
Provisions (net) and other gains (losses)		(59	)		(85	)		(30.6	)
Operating profit / (loss) before tax		2,146			2,137			0.4
Income tax		(513	)		(530	)		(3.2	)
Profit from continuing operations		1,633			1,607			1.6
Profit from discontinued operations (net)		81			80			1.1
Profit		1,714			1,687			1.6
Profit attributable to non-controlling interests		(3	)		(4	)		(32.4	)
Profit attributable to parent company		1,711			1,683			1.7

In 2011 the Mexican peso depreciated against the euro on average terms, resulting in a negative exchange rate effect on our income statement for 2011.

Net interest income

Net interest income of this operating segment for 2011 was €3,776 million, a 3.5% increase from the €3,648 million recorded for 2010, due primarily to increased business activity, with greater volumes of lending and customer funds, and sound price management.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,022 million for 2011, a 4.2% decrease from the €1,066 million recorded for 2010, primarily as a result of the exchange rate effect.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains on financial assets and liabilities and exchange differences of this operating segment for 2011 amounted to €296 million, a 22.7% decrease from the €384 million for 2010, primarily due to the lower intermediation income received as a result of the financial markets situation.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2011, was a gain €227 million, a 26.3% increase from the €180 million gain recorded for 2010, principally due to growth in the insurance business.

Administration costs

Administration costs of this operating segment for 2011 amounted to €1,831 million, a 5.1% increase from the €1,742 million recorded for 2010, primarily due to a three-year expansion and transformation plan implemented by BBVA Bancomer to take advantage of the long-term growth opportunities offered by the Mexican market.

102

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2011 was €1,180 million, a 4.0% decrease from the €1,229 million recorded for 2010, primarily due to the recovery in economic conditions in Mexico. However, the operating segment’s non-performing assets ratio increased to 3.5% as of December 31, 2011 from 3.2% as of December 31, 2010.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2011 was €2,146 million, a 0.4% increase from the €2,137 million recorded for 2010.

Income tax

Income tax of this operating segment for 2011 was €513 million, a 3.2% decrease from the €530 million recorded for 2010.

Profit from discontinued operations (net)

Profit from discontinued operations (net) of this operating segment for 2011 was €81 million, a 1.1% increase from the €80 million recorded for 2010.

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2011 was €1,711 million, a 1.7% increase from the €1,683 million recorded for 2010.

SOUTH AMERICA

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		3,161			2,494			26.8
Net fees and commissions		720			620			16.0
Net gains (losses) on financial assets and liabilities and net exchange differences		485			458			5.9
Other operating income and expenses		(264	)		(170	)		55.3
Administration costs		(1,741	)		(1,398	)		24.5
Depreciation and amortization		(152	)		(126	)		20.5
Impairment losses on financial assets (net)		(449	)		(419	)		7.2
Provisions (net) and other gains (losses)		(89	)		(35	)		156.3
Operating profit / (loss) before tax		1,671			1,424			17.3
Income tax		(343	)		(347	)		(1.0	)
Profit from continuing operations		1,327			1,077			23.2
Profit from discontinued operations (net)		160			195			(18.3	)
Profit		1,487			1,273			16.8
Profit attributable to non-controlling interests		(480	)		(383	)		25.3
Profit attributable to parent company		1,007			889			13.2

The average exchange rates of the currencies of the countries in which we operate in South America, except for the Chilean peso, against the euro, decreased in 2011, resulting in a negative impact on the results of operations of the South America operating segment expressed in euro.

103

Net interest income

Net interest income of this operating segment for 2011 was €3,161 million, a 26.8% increase from the €2,494 million recorded in 2011, mainly due to the increase in volume of customer loans and deposits during the period, combined with sound price management.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €720 million in 2011, a 16.0% increase from the €620 million recorded in 2010, primarily due to the increasing pace of business in most of the countries throughout the region.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains on financial assets and liabilities and exchange differences of this operating segment in 2011 were €485 million, a 5.9% decrease from the €458 million recorded in 2010, primarily due to the negative impact of exchange differences.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2011, was a loss of €264 million, a 55.3% increase from the loss of €170 million recorded for 2010, principally due to the impact of Venezuela as a hyperinflationary economy since 2009.

Administration costs

Administration costs of this operating segment in 2011 were €1,741 million, a 24.5% increase from the €1,398 million recorded in 2010, primarily due to the implementation of growth plans.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment in 2011 was €449 million, a 7.2% increase from the €419 million recorded in 2010, primarily due to the growth of loans and advances to customers. The operating segment’s non-performing assets ratio decreased to 2.2% as of December 31, 2011 from 2.5% as of December 31, 2010.

Operating profit / (loss) before tax

As a result of the foregoing, operating profit before tax of this operating segment in 2011 amounted to €1,671 million, a 17.3% increase compared to the €1,424 million recorded in 2010.

Income tax

Income tax of this operating segment in 2011 was €343 million, a 1.0% decrease from the €347 million recorded in 2010.

Profit from discontinued operations (net)

Profit from discontinued operations (net) of this operating segment for 2011 was €160 million, a 18.3% decrease from the €195 million recorded for 2010.

Profit attributable to parent company

Profit attributable to parent company of this operating segment in 2011 was €1,007 million, a 13.2% increase from the €889 million recorded in 2010.

104

UNITED STATES

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		1,635			1,825			(10.4	)
Net fees and commissions		633			651			(2.8	)
Net gains (losses) on financial assets and liabilities and net exchange differences		140			156			(10.6	)
Other operating income and expenses		(84	)		(50	)		69.8
Administration costs		(1,327	)		(1,322	)		0.4
Depreciation and amortization		(170	)		(199	)		(14.7	)
Impairment losses on financial assets (net)		(346	)		(703	)		(50.9	)
Provisions (net) and other gains (losses)		(1,501	)		(22	)		n.m.	(1)
Operating profit / (loss) before tax		(1,020	)		336			n.m.	(1)
Income tax		329			(76	)		n.m.	(1)
Profit from continuing operations		(691	)		260			n.m.	(1)
Profit from discontinued operations (net)		—			—			n.m.	(1)
Profit		(691	)		260			n.m.	(1)
Profit attributable to non-controlling interests		—			—			n.m.	(1)
Profit attributable to parent company		(691	)		260			n.m.	(1)

(1) Not meaningful.

In 2011 the U.S. dollar depreciated against the euro on average terms, resulting in a negative exchange rate effect on our income statement in 2011.

Net interest income

Net interest income of this operating segment for 2011 was €1,635 million, a 10.4% decrease from the €1,825 million recorded in 2010, primarily due to the strategies implemented by the operating segment to reduce the loan portfolio risk. Our developer and construction portfolios, which have high interest rates but also represents high risks, contracted significantly, while mortgage loans and individual loans and lending to the industrial and commercial sector, which entail a lower risk and therefore have a narrower spread, grew.

Net fees and commissions

Net fees and commissions of this operating segment in 2011 were €633 million, a 2.8% decrease from the €651 million recorded in 2010, due primarily to the exchange rate effect

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment in 2011 were €140 million, a 10.6% decrease from the €156 million recorded in 2010, mainly due to the turmoil in the markets.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment in 2011 were a loss of €84 million, compared to a loss of €50 million recorded in 2010 mainly due to higher contributions to the Federal Deposit Insurance Corporation (FDIC).

Administration costs

Administration costs of this operating segment in 2011 were €1,327 million, a 0.4% decrease from the €1,322 million recorded in 2010.

105

Depreciation and amortization

Depreciation and amortization of this operating segment for 2011 was €170 million, a 14.7% decrease from €199 million in 2010.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2011 was €346 million, a 50.9% decrease from the €703 million recorded for 2010, primarily due to the improvement in the loan-book mix. The non-performing assets ratio of this operating segment as of December 31, 2011 decreased to 3.6% from 4.4% as of December 31, 2010.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2011 reflected losses of €1,501 million, compared to the €22 million losses recorded for 2010, due primarily to impairment losses for goodwill (totaling €1,444 million). This goodwill adjustment was of an accounting nature and did not have any negative impact on the liquidity or capital adequacy of either the operating segment or the Group.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2011 was €1,020 million, compared to a gain of €336 million recorded in 2010.

Income tax

Income tax of this operating segment for 2011 was a gain of €329 million, compared to a loss of €76 million recorded in 2010, due to the operating loss before tax referred to above.

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2011 was a loss of €691 million, compared to a gain of €260 recorded in 2010.

CORPORATE ACTIVITIES

	Year Ended December 31,
	2011			2010			Change (In %)
	(In Millions of Euros)
Net interest income		(614	)		117			n.m.	(1)
Net fees and commissions		(196	)		(205	)		(4.8	)
Net gains (losses) on financial assets and liabilities and net exchange differences		436			695			(37.3	)
Other operating income and expenses		366			332			10.0
Administration costs		(706	)		(508	)		39.40
Depreciation and amortization		(270	)		(230	)		17.7
Impairment losses on financial assets (net)		(392	)		(957	)		(59.0	)
Provisions (net) and other gains (losses)		(1,049	)		(870	)		20.6
Operating profit / (loss) before tax		(2,425	)		(1,625	)		49.2
Income tax		1,012			608			66.5
Profit from continuing operations		(1,413	)		(1,017	)		38.9
Profit from discontinued operations (net)		5			6			(5.0	)
Profit		(1,407	)		(1,011	)		39.2
Profit attributable to non-controlling interests		2			—			n.m.	(1)
Profit attributable to parent company		(1,405	)		(1,011	)		39.0

(1) Not meaningful.

106

Net interest income

Net interest income of this operating segment for 2011 was a loss of €614 million compared to a gain of €117 million recorded in 2010. Net interest income in 2011 was negatively affected by the rising cost of wholesale finance.

Net fees and commissions

Net fees and commissions of this operating segment amounted to a loss of €196 million for 2011, a 4.8% decrease from the €205 million loss recorded for 2010.

Net gains (losses) on financial assets and liabilities and net exchange differences

Net gains (losses) on financial assets and liabilities and net exchange differences of this operating segment for 2011 were a gain of €436 million, a 37.3% decrease from the €695 million gain recorded in 2010, primarily due to the absence of earnings from portfolio sales and the loss of value of the assets as a result of the turmoil in the markets.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2011 was a gain of €366 million, a 10.0% increase from the €332 million gain recorded in 2010.

Administration costs

Administration costs of this operating segment for 2011 were €706 million, a 39.0% increase from the €508 million recorded in 2010, primarily due to the increase in costs associated with certain investments that are currently being undertaken including for the upgrading of systems, infrastructure and image and brand identity.

Depreciation and amortization

Depreciation and amortization of this operating segment for 2011 was €270 million, a 17.7% increase from the €230 million recorded in 2010.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2011 was €392 million compared with €957 million recorded for 2010, when higher provisions for loan losses were made to increase the Group’s coverage ratio in light of the adverse economic conditions.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2011 was a loss of €1,049 million, a 20.6% increase from a loss of €870 million for 2010, primarily due to an increase in provisions for foreclosed assets and real estate assets designed to maintain coverage at an adequate level.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2011 was €2,425 million, compared to a loss of €1,625 million in 2010.

Income tax

Income tax of this operating segment for 2011 was €1,012 million, a 66.5% increase from the €608 million recorded for 2010.

107

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2011 was a loss of €1,405 million, compared to a loss of €1,011 million in 2010.

B. Liquidity and Capital Resources

Liquidity risk management and controls are explained in Note 7.3 to the Consolidated Financial Statements. In addition, information on outstanding contractual maturities of assets and liabilities is provided in Note 7.5 to the Consolidated Financial Statements. For information concerning our short-term borrowing, see “Item 4. Information on the Company—Selected Statistical Information—LIABILITIES—Short-term Borrowings”.

Liquidity and finance management of the BBVA Group’s balance sheet seeks to fund the growth of the banking business at suitable maturities and costs, using a wide range of instruments that provide access to a large number of alternative sources of finance.

A core principle in the BBVA Group’s liquidity and finance management is the financial independence of its banking subsidiaries. This aims to ensure that the cost of liquidity is correctly reflected in price formation. Accordingly, we maintain a liquidity pool at an individual entity level at each of Banco Bilbao Vizcaya Argentaria, S.A. and our banking subsidiaries, including BBVA Compass, BBVA Bancomer and our Latin American subsidiaries. The only exception to this principle is Banco Bilbao Vizcaya Argentaria (Portugal), S.A., which is funded by Banco Bilbao Vizcaya Argentaria, S.A. Banco Bilbao Vizcaya Argentaria (Portugal), S.A. represented 0.91% of our total consolidated assets and 0.43% of our total consolidated liabilities, as of December 31, 2012.

Our principal source of funds is our customer deposit base, which consists primarily of demand, savings and time deposits. In addition to relying on our customer deposits, we also access the interbank market (overnight and time deposits) and domestic and international capital markets for our additional liquidity requirements. To access the capital markets, we have in place a series of domestic and international programs for the issuance of commercial paper and medium- and long-term debt. We also generally maintain a diversified liquidity pool of liquid assets and securitized assets at an individual entity level (except with respect to Banco Bilbao Vizcaya Argentaria (Portugal), S.A.). Another source of liquidity is our generation of cash flow from our operations. Finally, we supplement our funding requirements with borrowings from the Bank of Spain and from the European Central Bank (“ECB”) or the respective central banks of the countries where our subsidiaries are located. See Note 9 to the Consolidated Financial Statements for information on our borrowings from central banks.

The table below shows the types and amounts of securities included within the liquidity pool of Banco Bilbao Vizcaya Argentaria, S.A. and Banco Bilbao Vizcaya Argentaria (Portugal), S.A. and each of our significant subsidiaries as of December 31, 2012:

	BBVA Eurozone(1)		BBVA Bancomer		BBVA Compass		Others
	(In Millions of Euros)
Cash and balances with central banks		10,106		5,950		4,310		6,133
Assets for credit operations with central banks		33,086		6,918		10,215		7,708
Central governments issues		25,148		3,865		—		7,275
Of Which: Spanish government securities		21,729		—		—		—
Other issues		7,939		3,053		3,627		432
Loans		—		—		6,587		—
Other non-eligible liquid assets		3,975		460		198		765
Accumulated available balance		47,167		13,328		14,723		14,606

(1) Includes Banco Bilbao Vizcaya Argentaria, S.A. and Banco Bilbao Vizcaya Argentaria (Portugal), S.A.

108

The following table shows the balances as of December 31, 2012, 2011 and 2010 of our principal sources of funds (including accrued interest, hedge transactions and issue expenses):

	As of December 31,
	2012		2011		2010
	(in Millions of Euros)
Deposits from central banks		46,790		33,147		11,010
Deposits from credit institutions		59,722		59,356		57,170
Customer deposits		292,716		282,173		275,789
Debt certificates		87,212		81,930		85,179
Subordinated liabilities		11,831		15,419		17,420
Other financial liabilities		8,216		7,879		6,596
Total		506,487		479,904		453,164

Customer deposits

Customer deposits amounted to €292,716 million as of December 31, 2012, compared to €282,173 million as of December 31, 2011 and €275,789 million as of December 31, 2010. The increase from December 31, 2011 to December 31, 2012 was primarily caused by an increase in fixed-term deposits in the domestic sector.

Our customer deposits, excluding assets sold under repurchase agreements, amounted to €263,663 million as of December 31, 2012 compared to €237,686 million as of December 31, 2011 and €234,302 million as of December 31, 2010.

Amounts due to credit institutions

Amounts due to credit institutions, including central banks, amounted to €106,512 million as of December 31, 2012, compared to €92,503 million as of December 31, 2011 and €68,180 million as of December 31, 2010. The increase as of December 31, 2012 compared to December 31, 2011, was related to increased deposits from central banks, mainly from the ECB long-term financing.

	As of December 31,
	2012		2011		2010
Deposits from credit entities		59,722		59,356		57,170
Deposits from central banks		46,790		33,147		11,010
Total Deposits from credit institutions		106,512		92,503		68,180

Capital markets

We have continued making debt issuances in the domestic and international capital markets in order to finance our activities and as of December 31, 2012 we had €87,212 million of senior debt outstanding, comprising €76,028 million in bonds and debentures and €11,183 million in promissory notes and other securities, compared to €81,930 million, €74,429 million and €7,501 million outstanding as of December 31, 2011, respectively (€85,179 million, €71,964 million and €13,215 million outstanding, respectively, as of December 31, 2010). See Note 23.3 to the Consolidated Financial Statements.

109

In addition, we had a total of €9,275 million in subordinated debt and €1,847 million in preferred securities outstanding as of December 31, 2012, compared to €12,781 million and €1,760 million outstanding as of December 31, 2011, respectively.

The breakdown of the outstanding subordinated debt and preferred securities by entity issuer, maturity, interest rate and currency is disclosed in Appendix VI of the Consolidated Financial Statements.

The following is a breakdown as of December 31, 2012 of the maturities of our debt certificates (including bonds) and subordinated liabilities, disregarding any valuation adjustments and accrued interest:

	Demand		Up to 1 Month		1 to 3 Months		3 to 12 Months		1 to 5 Years		Over 5 Years		Total
	(in Millions of Euros)
Debt certificates (including bonds)		—		6,140		4,146		18,116		39,332		15,126		82,860
Subordinated liabilities		—		50		—		724		3,243		7,104		11,122
Total		—		6,190		4,146		18,840		42,575		22,230		93,982

(*) Regulatory equity instruments have been classified according to their contractual maturity

Generation of Cash Flow

We operate in Spain, Mexico, the United States and over 30 other countries, mainly in Europe, Latin America, and Asia. Our banking subsidiaries around the world, including BBVA Compass, are subject to supervision and regulation by a variety of regulatory bodies relating to, among other things, the satisfaction of minimum capital requirements. The obligation to satisfy such capital requirements may affect the ability of our banking subsidiaries, including BBVA Compass, to transfer funds to us in the form of cash dividends, loans or advances. In addition, under the laws of the various jurisdictions where our subsidiaries, including BBVA Compass, are incorporated, dividends may only be paid out of funds legally available therefor. For example, BBVA Compass is incorporated in Alabama and under Alabama law it is not able to pay any dividends without the prior approval of the Superintendent of Banking of Alabama if the dividend would exceed the total net earnings for the year combined with the bank’s retained net earnings of the preceding two years.

Even where minimum capital requirements are met and funds are legally available therefore, the relevant regulator could advise against the transfer of funds to us in the form of cash dividends, loans or advances, for prudence reasons or otherwise.

There is no assurance that in the future other similar restrictions will not be adopted or that, if adopted, they will not negatively affect our liquidity. The geographic diversification of our businesses, however, could help to limit the effect on the Group any restrictions that could be adopted in any given country.

We believe that our working capital is sufficient for our present requirements and to pursue our planned business strategies.

See Note 53 of the Consolidated Financial Statements for additional information on our Consolidated Statements of Cash Flows.

Capital

Our estimated capital ratios and its related components are non-GAAP financial measures. We believe these metrics provide useful information to investors and others by measuring our progress against regulatory capital standards. Our estimated capital ratios are based on our interpretation, expectations and understanding of the respective requirements, and are necessarily subject to further regulatory clarity and rulemaking.

110

Under the Bank of Spain’s capital adequacy regulations applicable as of December 31, 2012, 2011 and 2010, we were required to have a ratio of consolidated stockholders’ equity to risk-weighted assets and off-balance sheet items (net of certain amounts) of not less than 8%. As of December 31, 2012, this ratio was 10.5%, down from 10.9% as of December 31, 2011, and our stockholders’ equity exceeded the minimum level required by 40.3%, up from 40.1% as of December 31, 2011. As of December 31, 2010, this ratio was 11.9% and our stockholders’ equity exceeded the minimum level required by 53.7%. For additional information on the calculation of these ratios, see Note 33 to the Consolidated Financial Statements.

Based on the Basel II framework, our estimated consolidated ratios as of December 31, 2012 and 2011 are as follows:

	As of December 31, 2012			As of December 31, 2011			% Change 2012-2011
Stockholders’ funds		43,614			40,952			6.5
Adjustments		(9,401	)		(10,221	)		(8.0	)
Mandatory convertible bonds		1,238			3,430			(63.9	)
CORE CAPITAL		35,451			34,161			3.8
Preferred securities		1,860			1,759			5.7
Adjustments		(1,860	)		(1,759	)		5.7
CAPITAL (TIER I)		35,451			34,161			3.8
Subordinated debt and other		10,022			11,258			(11.0	)
Deductions		(2,636	)		(2,649	)		(0.5	)
OTHER ELIGIBLE CAPITAL (TIER II)		7,386			8,609			(14.2	)
CAPITAL BASE (TIER I + TIER II) (a)		42,836			42,770			0.2
Minimum capital requirement (BIS II Regulations)		26,323			26,462			(0.5	)
CAPITAL SURPLUS		16,514			16,308			1.3
RISK WEIGHTED ASSETS (b)		329,033			330,771			(0.5	)
BIS RATIO (a)/(b)		13.0	%		12.9	%
CORE CAPITAL		10.8	%		10.3	%
TIER I		10.8	%		10.3	%
TIER II		2.2	%		2.6	%

The Group’s capital base, calculated in accordance with the rules set forth in the Basel II capital accord, stood at €42,836 million as of December 31, 2012, in line with our capital base as of December 31, 2011.

Risk-weighted assets (“RWA”) decreased slightly in 2012, reaching €329,033 million as of December 31, 2012 (compared with €330,771 as of December 31, 2011). This decrease was mainly due to the deleveraging process in Spain, reduced activity with wholesale customers and the sale of our Puerto Rico subsidiary, which was partially offset by the increased banking business in emerging countries and the incorporation of Unnim.

The minimum capital requirements under BIS II (8% of RWA) amounted to €26,323 million as of December 31, 2012. Thus, excess capital resources (over the required 8% of RWA) stood at €16,514 million. Therefore, as of December 31, 2012, the Group’s capital resources were 62.7% higher than the minimum required levels.

The quality of the capital base improved during 2012, since core capital as of December 31, 2012 amounted to €35,451 million, up from €34,161 million as of December 31, 2011. This increase was principally due to the generation of earnings attributed both to the Group and to non-controlling interests and to foreign exchange rate differences (see Note 4 of the Consolidated Financial Statements for additional information).

Core capital accounted for 10.8% of RWA as of December 31, 2012, compared with 10.3% as of December 31, 2011, an increase of 50 basis points.

111

Tier I capital stood at €35,451 million or 10.8% of RWA as of December 31, 2012, 50 basis points up higher than on December 31, 2011. Preferred securities accounted for 5.25% of Tier I capital as of December 31, 2012.

As of December 31, 2012, Tier II capital was €7,386 million or 2.2% of RWA, 40 basis points lower than on December 31, 2011, due mainly to repurchases and conversions of subordinated debt in 2012.

By aggregating Tier I and Tier II capital, as of December 31, 2012, the BIS total capital ratio is 13.0%, compared with 12.9% as of December 31, 2011.

Other Requirements on Minimum Capital Levels

In addition to the requirements referred to above, in 2011, the European Banking Authority (“EBA”) issued a recommendation pursuant to which financial institutions based in the EU should reach a new minimum Core Tier 1 (CT1) ratio of 9%, after setting an additional buffer against sovereign risk holdings, by June 30, 2012. While this recommendation was initially made on an exceptional and temporary basis, it continues to be in place. As of June 30, 2012 and December 31, 2012, the BBVA Group’s EBA Core Tier I capital stood at 9.9% and 9.7% (this is a provisional figure), respectively, thus complying with the minimum required level.

In recent years we have taken various actions in connection with our capital management and in order to comply with various capital requirements applicable to us. We may make securities issuances or undertake asset sales in the future, which could involve outright sales of businesses or reductions in interests held by us, which could be material and could be undertaken at less than their respective book values, resulting in material losses thereon, in connection with our capital management and in order to comply with capital requirements or otherwise.

See “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” and “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Capital Requirements”. For qualitative and quantitative information on the principal risks we face, including market, credit, and liquidity risks as well as information on funding and treasury policies and exchange rate risk, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

C. Research and Development, Patents and Licenses, etc.

In 2012, we continued to foster the use of new technologies as a key component of our global development strategy. We explored new business and growth opportunities, focusing on three major areas: emerging technologies; asset capture/exploitation; and the customer as the focal point of our banking business.

The BBVA Group is not materially dependent on the issuance of patents, licenses and industrial, mercantile or financial contracts or on new manufacturing processes in carrying out its business purpose.

D. Trend Information

The European financial services sector is likely to remain competitive. Further consolidation in the sector (through mergers, acquisitions or alliances) is likely as the other major banks look to increase their market share or combine with complementary businesses or via acquisition of distressed entities. It is foreseeable that regulatory changes will take place in the future that will diminish barriers to such consolidation transactions. However, some of the hurdles that should be dealt with are the result of local preferences and their impact on legal culture, as it is the case with consumer protection rules. If there are clear local consumer preferences, leading to specific local consumer protection rules, the same products cannot be sold across all the jurisdictions in which the Group operates, which reduces potential synergies.

In addition, there are other challenges which are unrelated to the interest or preferences of consumers, such as the Value Added Tax regime for banks. The Value Added Tax regime for banks is consistent with a more general trend of increasing pressure on financial systems. Within the Euro area, several countries are imposing new taxes on the financial industry, such as bank levies, financial activity taxes or financial transactions taxes. In addition, the introduction of a general Financial Transaction Tax at a EU-level is being discussed. Differing tax regimes could set incentives for banks to operate, or transactions to take place, in those geographies where the tax pressure is lower. The implementation of new regulations in countries where we operate which results in increased tax pressure, or our inability to operate in geographies where the tax pressure is lower, could have a material impact on our profitability.

112

Regarding consumer protection rules, initiatives such as the review of the Markets in Financial Instruments Directive (MiFID), the EU Commission consultation on the legislative steps for the Packaged Retail Investment Products (PRIPs) proposal or the EU proposal for a regulation on a new Key Information Document for investment products (of July 3, 2012) could entail significant costs for our operations. In addition, it is unclear whether these initiatives will be applied equally across European countries, and differences in the implementation of these initiatives could affect the level-playing-field in the industry.

Regarding MiFID, on October 20, 2011, the European Commission presented a legislative proposal to review the MiFID in order to set clearer and more comprehensive rules across all financial instruments, in line with G-20 recommendations and specific U.S. Dodd-Frank Act provisions. The current proposal includes enhanced transparency requirements concerning trading activities in equity markets, tougher rules for algorithmic and high frequency trading activities and stricter requirements for portfolio management, investment advice and the offer of complex financial products such as structured products. These stricter rules on investment advice include, among others, telephone recordings, stricter categorization of clients, limits to “execution only” services for retail clients and stricter information duties for complex products. According to estimates published by the European Commission, the MiFID review is estimated to impose initial compliance costs of between €512 and €732 million and ongoing costs of between €312 and €586 million per year in the aggregate for participants in the EU banking sector. This represents an impact for initial and ongoing costs of 0.10% to 0.15% and 0.06% to 0.12%, respectively, of total operating spending in the EU banking sector. However, banking industry estimates are higher since the European Commission’s estimates do not account for all costs associated with the implementation of the MiFID review, including IT costs to be incurred in order to comply with the new transparency requirements. In addition, the MiFID review represents an overhaul of our business model, mainly regarding our investment advice services.

Regarding PRIPs, the measures planned by the European Commission aim to achieve higher transparency in the packaged retail investment products sector by requiring that certain mandatory information is made available to investors prior to making an investment decision and imposing stricter commercial practices. The MiFID provisions are considered to be a benchmark on conduct of business and the management of conflicts of interest. The preparation and provision to investors of the proposed mandatory information, as well as the revision of our commercial practices and the monitoring of the implementation of the new rules, are expected to entail costs for BBVA.

The following are the most important trends, uncertainties and events that are reasonably likely to have a material adverse effect on us or that would cause the financial information disclosed herein not to be indicative of our future operating results or financial condition:

• the prolonged downturn in the Spanish economy and sustained unemployment above historical averages;

• the restructuring and consolidation of the Spanish banking sector, after recent injections of €39 billion of capital from the European Financial Stability Fund;

• doubts about European economies (both peripheral and core Eurozone economies) may continue in 2013 affecting financial markets;

• uncertainties relating to the sustainability of any recovery in economic growth and interest rate cycles, especially in the United States;

• the fragility of the recovery from the financial crisis triggered by defaults on subprime mortgages and related asset-backed securities in the United States which has significantly disrupted the liquidity of financial institutions and markets;

• the fragility of the Greek, Italian, Portuguese, Cypriot and Irish economies, which could affect the funding costs of Spanish financial institutions and the Spanish Government;

• the effects of the withdrawal of significant monetary and fiscal stimulus programs and uncertainty over government responses to growing public deficits;

113

• uncertainty over regulation of the financial industry, including the potential limitation on the size or scope of the activities of certain financial institutions, the regulation on systemic financial institutions or additional capital requirements, coming both from the Bank of Spain or globally;

• uncertainty over the minimum solvency levels to be required in the future to the financial institutions by the Spanish government or the European authorities;

• the continued downward adjustment in the housing sector in Spain, which could further negatively affect credit demand and household wealth, disposable income and consumer confidence. The existence of a significant over supply in the housing market in Spain and the pessimistic expectations about house price increases may postpone investment decisions, therefore negatively affecting mortgage growth rates;

• continued volatility in capital markets or a downturn in investor confidence, linked to factors such as geopolitical risk, particularly in the Middle East. Continued or new crises in the region, such as Iran-U.S. tensions, could cause an increase in oil prices, generating inflationary pressures that could have a negative effect on interest rates and economic growth;

• the effect that an economic slowdown may have over Latin American markets and fluctuations in local interest and exchange rates; and

• although it is foreseeable that entry barriers to domestic markets in Europe will be lowered, our plans for expansion into other European markets could be affected by entry barriers in such countries by protectionist policies of national governments, which are generally higher in times of crisis.

E. Off-Balance Sheet Arrangements

In addition to loans, we had outstanding the following contingent liabilities and commitments at the dates indicated:

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Contingent Risk
Rediscounts, endorsements and acceptances		111		88		49
Guarantees and other sureties		32,007		31,103		28,092
Other contingent risk		7,422		8,713		8,300
Total contingent risk		39,540		39,904		36,441
Contingent Commitments
Balances drawable by third parties:
Credit entities		1,946		2,417		2,303
Public authorities		1,360		3,143		4,135
Other domestic customers		21,982		24,119		27,201
Foreign customers		60,939		59,299		53,151
Total balances drawable by third parties		86,227		88,978		86,790
Other contingent commitments		6,871		4,788		3,784
Total contingent commitments		93,098		93,766		90,574
Total contingent risk and contingent commitments		132,638		133,670		127,015

114

In addition to the contingent liabilities and commitments described above, the following table provides information regarding off-balance sheet funds managed by us as of December 31, 2012, 2011 and 2010:

	As of December 31,
	2012		2011		2010
	(In Millions of Euros)
Mutual funds		40,118		43,134		41,006
Pension funds		84,500		73,783		72,598
Other managed assets		28,138		26,349		25,435
Total		152,756		143,266		139,039

See Note 38 to the Consolidated Financial Statements for additional information with respect to our off-balance sheet arrangements.

F. Tabular Disclosure of Contractual Obligations

Our consolidated contractual obligations as of December 31, 2012 based on when they are due, were as follows:

	Less Than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
	(In Millions of Euros)
Senior debt		28,402		35,429		3,903		15,126		82,860
Subordinated liabilities		775		2,028		1,215		7,104		11,122
Deposits from customers		256,535		22,834		3,825		8,384		291,577
Capital lease obligations		—		—		—		—		—
Operating lease obligations		136		157		67		69		428
Purchase obligations		38		—		—		—		38
Post-employment benefits(1)		861		1,524		1,293		2,217		5,895
Insurance commitments		1,403		1,268		924		5,437		9,032
Total(2)		288,150		63,239		11,227		38,336		400,952

(1) Represents the Group’s estimated aggregate amounts for pension commitments in defined-benefit plans and other post-employment commitments (such as early retirement and welfare benefits) for the next ten years, based on certain actuarial assumptions. Post-employment benefits are detailed in Note 26.2 to the Consolidated Financial Statements.

(2) Interest to be paid is not included. The majority of the senior and subordinated debt was issued at variable rates. The financial cost of such issuances for 2012, 2011 and 2010 is detailed in Note 39.2 to the Consolidated Financial Statements.

115

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Our Board of Directors is committed to a good corporate governance system in the design and operation of our corporate bodies in the best interests of the Company and our shareholders.

Our Board of Directors is subject to Board regulations that reflect and implement the principles and elements of BBVA’s concept of corporate governance. These Board regulations comprise standards for the internal management and operation of the Board and its committees, as well as the rights and obligations of directors in pursuit of their duties, which are contained in the directors’ charter.

Shareholders’ general meetings are subject to their own set of regulations on issues such as how they operate and what rights shareholders enjoy regarding such meetings. These establish the possibility of exercising or delegating votes over remote communication media.

Our Board of Directors has approved a report on corporate governance for 2012, according to the guidelines set forth under Spanish regulation for listed companies, and a report on the remuneration policy of the Board of Directors.

Shareholders and investors may find the documents referred to above on our website (www.bbva.com).

Our website was created as an instrument to facilitate information and communication with shareholders. It provides special direct access to all information considered relevant to BBVA’s corporate governance system in a user-friendly manner. In addition, all the information required by article 539 of the Corporate Enterprises Act can be accessed on BBVA’s website (www.bbva.com) in the section entitled Corporate Governance.

A. Directors and Senior Management

We are managed by a Board of Directors that currently has 14 members.

Pursuant to article one of the Board regulations, Bank directorships may be executive or external. Executive directors have been conferred general powers to represent the Company on a permanent basis; they perform senior-management duties or are employees of the Company or its Group companies. All other Board members will be considered external.

Independent directors are those external directors who have been appointed in view of their personal and professional qualifications and can carry out their duties without being compromised by their relationships with us, our significant shareholders or our senior managements. Independent directors may not:

(i) Have been employees or executive directors in Group companies, unless three or five years, respectively, have passed since they ceased to be so.

(ii) Receive any amount or benefit from the Company or its Group companies for any reason other than remuneration of their directorship, unless it is insignificant.

Neither dividends nor supplementary pension payments that the director may receive from earlier professional or employment relationships shall be taken into account for the purposes of this section, provided they are not subject to conditions and the company paying them may not at its own discretion suspend, alter or revoke their accrual without breaching its obligations.

(iii) Be or have been a partner in the external auditors’ firm or in charge of the auditor’s report with respect to the Company or any other Group company during the last three years.

(iv) Be executive director or senior manager in any other company on which a Company executive director or senior manager is external director.

116

(v) Maintain or have maintained during the past year an important business relationship with the Company or any of its Group companies, either on his/her own behalf or as relevant shareholder, director or senior manager of a company that maintains or has maintained such relationship.

Business relationships shall mean relationships as provider of goods and/or services, including financial, advisory and/or consultancy services.

(vi) Be significant shareholders, executive directors or senior managers of any organization that receives or has received significant donations from the Company or its Group during the last three years.

Those who are merely trustees on a foundation receiving donations shall not be ineligible under this letter.

(vii) Be married to or linked by equivalent emotional relationship, or related by up to second-degree family ties to an executive director or senior manager of the Company.

(viii) Have not been proposed by the Appointments Committee for appointment or renewal.

(ix) Fall within the cases described under letters i), v), vi) or vii) above, with respect to any significant shareholder or shareholder represented on the Board. In cases of family relationships described under letter g), the limitation shall not only apply to the shareholder, but also to the directors it nominates for the Company’s Board.

Directors owning shares in the Company may be independent providing they comply with the above conditions and their shareholding is not legally considered as significant.

Regulations of the Board of Directors

The principles and elements comprising our corporate governance are set forth in our Board regulations, which govern the internal procedures and the operation of the Board and its committees and directors’ rights and duties as described in their charter.

The Board regulations can be read on the Bank’s corporate website (www.bbva.com)

The following provides a brief description of several significant matters covered in the regulations of the Board of Directors.

Appointment and Re-election of Directors

The proposals that the Board submits to the Company’s annual shareholders’ general meeting for the appointment or re-election of directors and the resolutions to appoint directors made by the Board of Directors shall be approved at the proposal of the Appointments Committee in the case of independent directors and on the basis of a report from said committee in the case of all other directors.

To such end, the committee assesses the skills, knowledge and experience required on the Board and the capacities the candidates must offer to cover any vacant seats. It evaluates how much time and work members may need to carry out their duties properly as a function of the needs that the Company’s governing bodies may have at any time.

Term of Directorships and Director Age Limit

Directors shall stay in office for the term defined by our bylaws (three years). If a director has been co-opted, they shall stay in office until the first shareholders’ general meeting is held. The general meeting may then ratify their appointment for the term of office remaining to the director whose vacancy they have covered through co-option, or else appoint them for the term of office established under our bylaws.

117

BBVA’s Board of Directors regulations establish an age limit for sitting on the Bank’s Board. Directors must present their resignation at the first Board meeting following the annual shareholders’ general meeting approving the accounts of the year in which they reach the age of seventy-five.

Evaluation

Article 17 of the Board regulations indicates that the Board of Directors will be responsible for assessing the quality and efficiency in the operation of the Board and its Committees, on the basis of the reports that said Committees submit. The Board is also tasked with assessing the performance of the Chairman of the Board and, where pertinent, of the Company’s Chief Executive Officer, on the basis of the report submitted by the Appointments Committee.

Moreover, article 5 of the Board regulations establishes that the Chairman, who is responsible for the efficient running of the Board, will organize and coordinate with the Chairs of the relevant Committees to carry out periodic assessments of the Board and of the Chief Executive Officer of the Bank, when this post is not also held by the Chairman.

Pursuant to the provisions of these Board regulations, as in previous years, in 2012 the Board of Directors assessed the quality and efficiency of its own operation and that of its Committees, as well as the performance of the duties of the Chairman, both as Chairman of the Board and as Chief Executive Officer of the Bank.

Performance of Directors’ Duties

Board members must comply with their duties as defined by legislation and by the bylaws in a manner that is faithful to the interests of the Company.

They shall participate in the deliberations, discussions and debates arising on matters put to their consideration and shall have sufficient information to be able to form a sound opinion on the questions corresponding to our governing bodies. They may request additional information and advice if they so require in order to perform their duties. Their participation in the Board’s meetings and deliberations shall be encouraged.

The directors may also request help from external experts with respect to business submitted to their consideration whose complexity or special importance makes it advisable.

Conflicts of Interest

The rules comprising the BBVA directors’ charter detail different situations in which conflicts of interest could arise between directors, their family members and/or organizations with which they are linked, and the BBVA Group. They establish procedures for such cases, in order to avoid conduct contrary to our best interests.

These rules help ensure directors’ conduct reflects stringent ethical codes, in keeping with applicable standards and according to core values of the BBVA Group.

Incompatibilities

Directors are also subject to a regime of incompatibilities, which places strict constraints on holding posts on governing bodies of Group companies or companies in which the Group has a holding. Non-executive directors may not sit on the boards of subsidiaries or related companies because of the Group’s holding in them, whilst executive directors may only do so if they have express authority.

Directors who cease to be members of the Bank’s Board may not offer their services to any other financial institution competing with the Bank or of its subsidiaries for two years after leaving, unless expressly authorized by the Board. Such authorization may be denied on the grounds of corporate interest.

118

Directors’ Resignation and Dismissal

Furthermore, in the following circumstances, reflected in the Board regulations, directors must tender their resignation to the Board and accept its decision regarding their continuity in office (formalizing said resignation when the Board so resolves):

• When barred (on grounds of incompatibility or other) under prevailing legal regulations, under the bylaws or under the directors’ charter.

• When significant changes occur in their professional situation or that may affect the condition by virtue of which they were appointed to the Board.

• When they are in serious dereliction of their duties as directors.

• When the director, acting as such, has caused severe damage to the Company’s assets or its reputation or credit, and/or no longer displays the commercial and professional honor required to hold a Bank directorship.

The Board of Directors

Our Board of Directors is currently comprised of 14 members.

The following table sets forth the names of the members of the Board of Directors as of that date of this Annual Report on Form 20-F, their date of appointment and, if applicable, reelection, their current positions and their present principal outside occupation and employment history.

119

Name	Birth Year	Current Position	Date Nominated	Date Re-elected	Present Principal Outside Occupation and Employment History(*)
Francisco González Rodríguez(1)	1944	Chairman and Chief Executive Officer	January 28, 2000	March 15, 2013	Chairman and CEO of BBVA, since January 2000. Director of Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer S.A.
Ángel Cano Fernández(1)	1961	President and Chief Operating Officer	September 29, 2009	March 15, 2013	President and Chief Operating Officer of BBVA, since 2009. Substitute director of Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. de C.V., and director of China Citic Bank Corporation Limited and Türkiye Garanti Bankası A.Ş. BBVA Director of Resources and Means from 2005 to 2009.
Tomás Alfaro Drake(2)(3)	1951	Independent Director	March 18, 2006	March 11, 2011	Chairman of the Appointments Committee of BBVA since May 25, 2010. Director of Internal Development and Professor in the Finance department of Universidad Francisco de Vitoria.
Juan Carlos Álvarez Mezquíriz(1)(3)	1959	Independent Director	January 28, 2000	March 11, 2011	Managing Director of Grupo El Enebro, S.A. Former Manager Director of Grupo Eulen. S.A. until 2010.
Ramón Bustamante y de la Mora(2)(5)	1948	Independent Director	January 28, 2000	March 15, 2013	Was Director and General Manager and Non-Executive Vice-President of Argentaria and Chairman of Unitaria (1997).
José Antonio Fernández Rivero(3)(5)	1949	Independent Director	February 28, 2004	March 16, 2012	Chairman of the Risk Committee since March 30, 2004; On 2001 was appointed Group General Manager, until January 2003. Has been director representing BBVA on the Boards of Telefónica, Iberdrola, and of Banco de Crédito Local, and Chairman of Adquira.
Ignacio Ferrero Jordi(1)(4)	1945	Independent Director	January 28, 2000	March 15, 2013	Chief Operating Officer of Nutrexpa, S.A. and Chairman and Chief Operating Officer of La Piara, S.A. Chairman of Aneto Natural.
Belén Garijo López(2)	1960	Independent Director	March 16, 2012	—	Chair of the International Executive Committee of PhRMA, ISEC (Pharmaceutical Research and Manufacturers of America) and Chief Operating Officer of Merck Serono, S.A. (Geneva, Switzerland) since 2011.
Carlos Loring Martínez de Irujo(2)(4)	1947	Independent Director	February 28, 2004	March 11, 2011	Chairman of the Compensation Committee of BBVA since May 2010 (former Chairman of the Appointments and Compensation Committee). Was Partner of J&A Garrigues, from 1977 until 2004.
José Maldonado Ramos(1)(3)(4)	1952	External Director	January 28, 2000	March 16, 2012	Was appointed Director and General Secretary of BBVA, in January 2000. Took early retirement as Bank executive in December 2009.
Enrique Medina Fernández(1)(5)	1942	Independent Director	January 28, 2000	March 16, 2012	State Attorney. Deputy Chairman of Ginés Navarro Construcciones until it merged to become Grupo ACS.
José Luis Palao García-Suelto(2)(5)	1944	Independent Director	February 1, 2011	March 11, 2011	Chairman of the Audit and Compliance Committee of BBVA since March 29, 2011. Senior Partner of the Financial Division in Spain at Arthur Andersen, from 1979 until 2002. Freelance consultant, from 2002 to 2010.
Juan Pi Llorens(4)(5)	1950	Independent Director	July 27, 2011	March 16, 2012	Had a professional career at IBM holding various senior posts at a national and international level including Vice President for Sales at IBM Europe, Vice President of Technology & Systems at IBM Europe and Vice President of the Finance department at GMU (Growth Markets Units) in China. He was executive chairman of IBM Spain.
Susana Rodríguez Vidarte(2)(3)(4)	1955	Independent Director	May 28, 2002	March 11, 2011	Full-time professor of Strategy at the School of Economics and Business Studies at Universidad de Deusto. Member of the Instituto de Contabilidad y Auditoría de Cuentas (Accountants and Auditors Institute) and PhD degree from Universidad de Deusto.

120

(*) Where no date is provided, the position is currently held.

(1) Member of the Executive Committee.

(2) Member of the Audit and Compliance Committee.

(3) Member of the Appointments Committee.

(4) Member of the Compensation Committee.

(5) Member of the Risk Committee.

Executive Officers or Management Committee (Comité de Dirección)

Our executive officers were each appointed for an indefinite term. Their positions as of the date of this Annual Report on Form 20-F are as follows:

Name	Current Position	Present Principal Outside Occupation and Employment History(*)
Francisco González Rodríguez	Chairman and Chief Executive Officer	Chairman and CEO of BBVA, since January 2000. Director of Grupo Financiero BBVA Bancomer, S.A. de C.V. and BBVA Bancomer, S.A.
Ángel Cano Fernández	President and Chief Operating Officer	President and Chief Operating Officer of BBVA, since 2009. Substitute director of Grupo Financiero BBVA Bancomer and BBVA Bancomer, S.A. de C.V., and director of China Citic Bank Corporation Limited and Türkiye Garanti Bankası A.Ş. BBVA Director of Resources and Means from 2005 to 2009.
Juan Ignacio Apoita Gordo	Head of Human Resources and Services	BBVA Head of Human Resources and Services since September 2009. BBVA Head of Human Resources Director from 2006 to 2009.
Eduardo Arbizu Lostao	Head of Legal, Audit and Compliance Services	Head of Legal department of BBVA, since 2002; Managing Director of Barclays Retail Operations in Continental Europe (France, Spain, Portugal, Italy and Greece) from 2000 to 2002.
Juan Asúa Madariaga	Head of Corporate and Investment Banking	Head of Corporate and Investment Banking in BBVA. Head of Spain and Portugal in BBVA from 2007 to 2012. Head of Spain and Portugal in BBVA from 2006 to 2007.
Manuel Castro Aladro	Head of Global Risk Management	Head of BBVA Global Risk Management department since September 2009. Head of Business Development and Innovation in BBVA from 2003 to 2009.
Ignacio Deschamps González	Head of Global Retail and Business Banking	Head of Global Retail and Business Banking of BBVA since 2012. Chairman of the Board of Directors and CEO of BBVA Bancomer from 2008 to 2012. Vice Chairman of the Board of Directors and CEO of BBVA Bancomer from 2006 to 2008.
Ricardo Gómez Barredo	Head of Global Accounting and Information Management	Head of Global Accounting and Information Management since 2011. Head of Planning, analysis and control of BBVA’s Group from 2006 to 2011.
Manuel González Cid	Chief Financial Officer	Chief Financial Officer since 2005. Head of Corporate Development of BBVA from 2001 to 2002. Head of the Merger-Office of BBVA from 1999 to 2001. Director and Vice president of Repsol YPF, S.A. from 2003 to 2005.
Ignacio Moliner Robredro	Global Communications and Brand Director	Global Communications and Brand Director since 2012. Deputy Director of Communication and Brand department in BBVA from 2010 to 2012. Chief Executive Officer of Uno-e Bank and Consumer Finance from 2008 to 2010.
Ramón Monell Valls	Head of Innovation & Technology	Head of BBVA Innovation and Technology since September 2009. BBVA Director of Technology & Operations from 2006 to 2009. From 2002 to 2005, Chief Executive Officer of BBVA in Chile.
Vicente Rodero Rodero	Head of Mexico	Head of Mexico since 2011. General Manager for Commercial Banking at BBVA Spain from 2004 to 2007. Regional Manager at BBVA Madrid from 2002 to 2004.
Jaime Saenz de Tejada	Head of Spain and Portugal	Head of Spain and Portugal since 2012. Business Development Manager of Spain and Portugal at BBVA from 2010 to 2012. Central Area Manager of Madrid and Castilla La Mancha from 2007 to 2010.
Manuel Sánchez Rodríguez	Country Manager BBVA USA	Chairman and CEO of BBVA Compass from 2008 to 2010 and Country Manager from 2010. From 2007 to 2008 Chief of Community Banking at BBVA. Chairman and CEO of Laredo National Bank from 2005 to 2007.
Carlos Torres Vila	Head of Strategy & Corporate Development	BBVA Strategy & Corporate Development Director since January 2009. He entered in BBVA on September 2008. Corporate Director of Strategy and Chief Financial Officer at Endesa S.A. Vice-Chairman of Endesa Chile from 2003 to 2008.

(*) Where no date is provided, positions are currently held.

121

B. Compensation

The provisions of BBVA’s bylaws that relate to compensation of directors are in strict accordance with the relevant provisions of Spanish law.

Remuneration of Non-executive Directors

The remuneration paid to non-executive directors who were members of the Board of Directors during 2012 is indicated below, broken down by type of remuneration in thousands of euros:

	Board		Executive Committee		Audit and Compliance Committee		Risk Committee		Appointments Committee		Compensation Committee		Total
Tomás Alfaro Drake		129		—		71		—		102		—		302
Juan Carlos Álvarez Mezquíriz		129		167		—		—		41		—		336
Ramón Bustamante y de la Mora		129		—		71		107		—		—		307
José Antonio Fernández Rivero(1)		129		—		—		214		41		—		383
Ignacio Ferrero Jordi		129		167		—		—		—		43		338
Belén Garijo López(2)		107		—		24		—		—		—		131
Carlos Loring Martínez de Irujo		129		—		71		—		—		107		307
José Maldonado Ramos		129		167		—		—		41		43		379
Enrique Medina Fernández		129		167		—		107		—		—		402
Jose Luis Palao García-Suelto		129		—		179		107		—		—		414
Juan Pi Llorens		129		—		—		107		—		43		278
Susana Rodríguez Vidarte		129		—		71		—		41		43		284
Total		1,523		667		488		642		265		278		3,863

(1) Mr. José Antonio Fernández Rivero, apart from the amounts detailed in the table above, also received a total of €652 thousand in early retirement benefits as a former director of BBVA.

(2) Ms. Belén Garijo López was appointed as director of BBVA on March 16, 2012 and member of the Audit Committee on September 26, 2012.

122

Remuneration of Executive Directors

The remuneration paid to executive directors of the Bank in 2012 is indicated below, broken down by type of remuneration in thousands of euros:

	Fixed Remuneration in Cash		Variable Remuneration in Cash(1)		Total Remuneration in Cash(2)		Variable Remuneration in BBVA Shares(1)
Chairman and CEO		1,966		1,000		2,966		155,479
President and COO		1,748		636		2,384		98,890
Total		3,714		1,636		5,350		254,369

(1) These amounts correspond to annual variable remuneration for 2011 received in 2012. The annual variable remuneration is made up of ordinary variable remuneration in cash and variable remuneration paid in shares, based on an incentive plan for the executive team of the BBVA Group, whose settlement and payment conditions are detailed below.

(2) In addition, the executive directors were paid remunerations in kind and in other forms in 2012 for a total amount of €36 thousand, of which €12 thousand correspond to the Chairman and CEO and €24 thousand to the President and COO.

In 2012, the executive directors received the fixed remuneration corresponding to 2012 and 50% of the annual variable remuneration in cash and shares corresponding to 2011, in accordance with the settlement and payment system agreed by the annual shareholders’ general meeting held on March 11, 2011.

This settlement and payment system for the annual variable remuneration (“Settlement and Payment System”) applies to all categories of employees who carry out professional activities which have a material impact on the Bank’s risk profile or who perform control functions. It also establishes the following conditions with respect to executive directors and other members of the Management Committee:

• At least 50% of the total annual variable remuneration shall be paid in BBVA shares.

• Payment of 50% of the annual variable remuneration, in both cash and shares, shall be deferred, with the deferred amount being paid over a period of three years.

• Any shares awarded as part of the annual variable remuneration shall not be freely disposable for one year from their award, except for a portion equivalent to the taxes derived from the allotment of the shares with respect to each beneficiary;

• In addition, under certain circumstances, payment of the annual variable remuneration that has been deferred and pending payment may be limited or even stopped, and it has been decided to update these deferred amounts.

Deferred Part of the Variable Remuneration for 2011

Under the Settlement and Payment System, payment of the remaining 50% of the annual variable remuneration of the executive directors for 2011 has been deferred for a 3-year period, to be paid out in thirds in each of the first quarters of 2013, 2014 and 2015, in accordance with the aforementioned conditions. As a result, after the corresponding update, on 2013 the executive directors will be paid €364,519 and 51,826 shares in the case of the

123

Chairman and CEO, and €231,848 and 32,963 shares in the case of the President and COO. Payment of the remaining two-thirds of the deferred part of the annual variable remuneration for 2011 has been deferred until the first quarter of 2014 and 2015, each third representing an amount of €333,244 and 51,826 BBVA shares in the case of the Chairman and CEO, and €211,955 and 32,963 BBVA shares in the case of the President and COO.

Annual Variable Remuneration for 2012

At the close of 2012, the annual variable remuneration for the executive directors corresponding to that year has been determined in accordance with the conditions established by the annual shareholders’ general meeting. Thus, in the first quarter of 2013, the executive directors will receive 50% of this remuneration, amounting to €785,028 and 108,489 BBVA shares in the case of the Chairman and CEO and €478,283 and 66,098 BBVA shares in the case of the President and COO. Payment of the remaining 50% has been deferred for a 3-year period. In each of the first quarters of 2014, 2015 and 2016, the Chairman and CEO will be paid €261,676 and 36,163 BBVA shares, while the President and COO will receive €159,428 and 22,032 BBVA shares.

Payment of the deferred part of the annual variable remuneration for 2012 is subject to the conditions set out in the Settlement and Payment System established in accordance with the resolution adopted by the annual shareholders’ general meeting.

As of December 31, 2012, these amounts were recognized under the heading “Other liabilities—Accrued interest” of the consolidated balance sheet.

Remuneration of the Members of the Management Committee

Set forth below is aggregate information on the remuneration of the members of the Management Committee who held this position as of December 31, 2012 (13 members, including the deferments pending for the members of the Management Committee who joined in 2012), excluding the executive directors.

The remuneration paid in 2012 to the members of BBVA’s Management Committee amounted to a total of €8,563 thousand in fixed remuneration and €3,142 thousand and 485,207 BBVA shares in variable remuneration.

In addition, the members of the Management Committee received remuneration in kind and other items totaling €729 thousand in 2012.

The amounts received as variable remuneration in 2012 amount to 50% of the annual variable remuneration for 2011 for this group, under the Settlement and Payment System approved by the annual shareholders’ general meeting in March 2011. Payment of the remaining 50% of the annual variable remuneration for 2011 has been deferred for a 3-year period, to be paid out in thirds during each of the first quarters of 2013, 2014 and 2015, in accordance with the aforementioned conditions. As a result, after the corresponding update, in 2013 the members of the Management Committee as a whole will be paid €1,120 thousand and 158,214 BBVA shares. Payment of the remaining two-thirds of the deferred part of the annual variable remuneration for 2011 has been deferred until the first quarter of 2014 and 2015, each third representing the amount of €1,024 thousand and 158,214 BBVA shares.

Multi-Year Variable Share-Based Remuneration Program for 2010-2011

Under the Settlement and Payment System agreed by the annual shareholders’ general meeting in March 2011 for the Multi-Year Variable Share-Based Remuneration Program for 2010-2011 (hereinafter the “Program”) approved by the annual shareholders’ general meeting on March 12, 2010, in 2012 the executive directors and remaining members of the Management Committee received 50% of the shares due to them under the settlement of the Program, i.e., 105,000 BBVA shares for the Chairman and CEO, 90,000 BBVA shares for the President and COO and 329,000 shares for all the remaining members of the Management Committee.

The remaining 50% of the shares resulting from the settlement of the Program corresponding to the executive directors and the rest of the members of the Management Committee have been deferred, to be paid out in thirds in 2013, 2014 and 2015. As a result, in 2013 the executive directors will be paid as follows: 35,000 shares for the Chairman and CEO and 30,000 shares for the President and COO, in addition to an amount in cash of €15 thousand

124

in the case of the Chairman and CEO and €13 thousand in the case of the President and COO as a result of the update. Delivery of the remaining two-thirds of the deferred part of the Program has been deferred, so that the Chairman and CEO will be paid 35,000 shares and the President and COO will receive 30,000 shares in the each of the first quarters of 2014 and 2015.

The rest of the members of the Management Committee will receive 106,998 shares in 2013, in addition to €45 thousand resulting from the corresponding update. Delivery to this group of the remaining two-thirds has been deferred until 2014 and 2015.

Scheme for Remuneration for Non-Executive Directors with Deferred Distribution of Shares

BBVA has a remuneration system with deferred distribution of shares in place for its non-executive directors that was approved by the annual shareholders’ general meeting held on March 18, 2006 and renewed for an additional 5-year period through a resolution of the annual shareholders’ general meeting held on March 11, 2011.

This system consists in the annual allocation of a number of “theoretical shares” to the non-executive directors equivalent to 20% of the total remuneration received by each in the previous year. This is based on the average closing prices of the BBVA shares during the sixty trading sessions prior to the dates of the ordinary general meetings approving the annual financial statements for each year.

The shares will be delivered to each beneficiary, if applicable, on the date he or she leaves the position of director for any reason except serious breach of duties.

The number of “theoretical shares” allocated in 2012 to the non-executive directors who are beneficiaries of the deferred share distribution system, corresponding to 20% of the total remuneration received by each in 2011, is as follows:

	Theoretical Shares Assigned in 2012		Accumulated Theoretical Shares as of December 31, 2012
Tomás Alfaro Drake		8,987		28,359
Juan Carlos Álvarez Mezquíriz		10,061		57,534
Ramón Bustamante y de la Mora		9,141		54,460
José Antonio Fernández Rivero		11,410		50,224
Ignacio Ferrero Jordi		10,072		58,117
Carlos Loring Martínez de Irujo		9,147		42,245
José Maldonado Ramos		10,955		17,688
Enrique Medina Fernández		11,979		73,293
José Luis Palao García-Suelto		9,355		9,355
Juan Pi Llorens		2,712		2,712
Susana Rodríguez Vidarte		8,445		39,484
Total		102,264		433,471

Pension Commitments

Under rule 78 of IAS 19, at the close of 2012 the deteriorating situation in the high-quality corporate bond markets required an update of the interest rates used by the Group entities to discount post-employment benefits. While the pension commitments assumed by the Bank have not changed during 2012, this deterioration has resulted in an increase in the amount of the provisions needed to cover them.

Thus, the provisions registered as of December 31, 2012 for pension commitments to the President and COO amounted to €22,703 thousand. Of this amount, under current accounting regulations, €1,701 were provisioned in 2012 against earnings and €4,307 thousand against equity in order to adapt the interest rate assumption used for the valuation of our pension commitments in Spain. As of that date, there were no further pension commitments with respect to the executive directors.

125

As for the rest of the members of the Management Committee, the provisions registered as of December 31, 2012 for pension commitments amounted to €80,602 thousand. Of this amount, under current accounting regulations, €13,077 thousand were charged in 2012 against earnings and €17,347 thousand against equity in order to adapt the aforementioned interest rate assumption.

In addition, insurance premiums totaling €117 thousand were paid in 2012 on behalf of non-executive directors who are members of the Board of Directors.

Termination of the Contractual Relationship

There were no commitments as of December 31, 2012 for the payment of compensation to executive directors.

In the case of the President and COO, the contract lays down that in the event that he lose this status due to a reason other than his own will, retirement, disability or dereliction of duty, he shall take early retirement with a pension, which can be received as a life annuity or lump sum equivalent to 75% of his pensionable salary if this occurs before he reaches the age of 55, or 85% after that age.

C. Board Practices

Committees

Our corporate governance system is based on the distribution of functions between the Board, the Executive Committee and the other specialized Board Committees, namely: the Audit and Compliance Committee; the Appointments Committee; the Compensation Committee; and the Risk Committee.

Executive Committee

Our Board of Directors is assisted in fulfilling its responsibilities by the Executive Committee (Comisión Delegada Permanente) of the Board of Directors. The Board of Directors delegates all management functions, except those that it must retain due to legal or statutory requirements, to the Executive Committee.

As of the date of this Annual Report, BBVA’s Executive Committee was comprised of two executive directors and four external directors being three of them independent, as follows:

Position	Name
Chairman	Mr. Francisco González Rodríguez
Members	Mr. Ángel Cano Fernández Mr. Juan Carlos Álvarez Mezquíriz Mr. Ignacio Ferrero Jordi Mr. José Maldonado Ramos Mr. Enrique Medina Fernández

According to our bylaws, the Executive Committee’s responsibilities include the following: to formulate and propose policy guidelines, the criteria to be followed in the preparation of programs and to fix targets, to examine the proposals put to it in this regard, comparing and evaluating the actions and results of any direct or indirect activity carried out by the Group; to determine the volume of investment in each individual activity; to approve or reject operations, determining methods and conditions; to arrange inspections and internal or external audits of all operational areas of the Group; and in general to exercise the faculties delegated to it by the Board of Directors.

Specifically, the Executive Committee is entrusted with evaluation of our system of corporate governance. This shall be analyzed in the context of our development and of the results we have obtained, taking into account any regulations that may be passed and/or recommendations made regarding best market practices and adapting these to our specific circumstances.

126

The Executive Committee shall meet on the dates indicated in the annual calendar of meetings and when the chairman or acting chairman so decides. During 2012, the Executive Committee met 22 times.

Audit and Compliance Committee

This committee shall perform the duties required under applicable laws, regulations and our bylaws. Essentially, it has authority from the Board to supervise the financial statements and the oversight of the Group.

The Board regulations establish that the Audit and Compliance Committee shall have a minimum of four non-executive directors appointed by the Board in light of their know-how and expertise in accounting, auditing and/or risk management. They shall all be independent directors, one of whom shall act as chairman, also appointed by the Board. See “Item 16.A. Audit Committee Financial Expert”.

As of the date of this Annual Report, the Audit and Compliance Committee members were:

Position	Name
Chairman	Mr. José Luis Palao García-Suelto
Members	Mr. Tomás Alfaro Drake Mr. Ramón Bustamante y de la Mora Mr. Carlos Loring Martínez de Irujo Mrs. Susana Rodríguez Vidarte Mrs. Belén Garijo López

The scope of its functions is as follows (for purposes of the below, “entity” refers to BBVA):

• Report to the shareholders’ general meeting on matters that are raised at its meetings on matters within its competence.

• Supervise the efficacy of the Company’s internal control and oversight, internal audit, where applicable, and the risk-management systems, and discuss with the auditors or audit firms any significant issues in the internal control system detected when the audit is conducted.

• Supervise the process of drawing up and reporting regulatory financial information.

• Propose the appointment of auditors or audit firms to the Board of Directors for it to submit the proposal to the shareholders’ general meeting, in accordance with applicable regulations.

• Establish correct relations with the auditors or audit firms in order to receive information on any matters that may jeopardize their independence, for examination by the Committee, and any others that have to do with the process of auditing the accounts; as well as those other communications provided for in laws and standards of audit. It must unfailingly receive written confirmation by the auditors or audit firms each year of their independence with regard to the entity or entities directly or indirectly related to it and information on additional services of any kind provided to these entities by said auditors or audit firms, or by persons or entities linked to them as provided under Law 19/1988, July 12, on the auditing of accounts.

• Each year, before the audit report is issued, to put out a report expressing an opinion on the independence of the auditors or audit firms. This report must, in all events, state the provision of any additional services referred to in the previous subsection.

• Oversee compliance with applicable domestic and international regulations on matters related to money laundering, conduct on the securities markets, data protection and the scope of Group activities with respect to anti-trust regulations. Also to ensure that any requests for action or information made by official authorities in these matters are dealt with in due time and in due form.

• Ensure that the internal codes of ethics and conduct and securities market trading, as they apply to Group personnel, comply with legislation and are appropriate for the Bank.

127

• Especially to enforce compliance with provisions contained in BBVA Director’s Charter, and ensure that directors satisfy applicable standards regarding their conduct on the securities markets.

• Any others that may have been allocated under these regulations or attributed to the committee by a Board of Directors resolution.

• The committee shall also monitor the independence of external auditors. This entails the following two duties:

• Ensuring that the auditors’ warnings, opinions and recommendations are followed.

• Establishing the incompatibility between the provision of audit and the provision of consultancy services, unless there are no alternatives in the market to the auditors or companies in the auditors’ group of equal value in terms of their content, quality or efficiency. In such event, the committee must grant its approval, which can be done in advance by delegation to its chairman.

The committee selects the external auditor for the Bank and its Group, and for all the Group companies. It must verify that the audit schedule is being carried out under the service agreement and that it satisfies the requirements of the competent authorities and the Bank’s governing bodies. The committee will also require the auditors, at least once each year, to assess the quality of the Group’s internal oversight procedures.

The Audit and Compliance Committee meets as often as necessary to comply with its tasks, although an annual meeting schedule is drawn up in accordance with its duties. During 2012, the Audit and Compliance Committee met 12 times.

Executives responsible for control, internal audit and regulatory compliance can be invited to attend its meetings and, at the request of these executives, other staff from these departments who have particular knowledge or responsibility in the matters contained in the agenda, can also be invited when their presence at the meeting is deemed appropriate. However, only the committee members and the secretary shall be present when the results and conclusions of the meeting are evaluated.

The committee may engage external advisory services for relevant issues when it considers that these cannot be properly provided by experts or technical staff within the Group on grounds of specialization or independence.

Likewise, the committee can call on the personal cooperation and reports of any member of the Management Committee when it considers that this is necessary to carry out its functions with regard to relevant issues.

The committee has its own specific regulations, approved by the Board of Directors. These are available on our website and, amongst other things, regulate its operation.

Appointments Committee

The Appointments Committee is tasked with assisting the Board on issues related to the appointment and re-election of Board members.

This committee shall comprise a minimum of three members who shall be external directors appointed by the Board, which shall also appoint its chairman. However, the chairman and the majority of its members must be independent directors, in compliance with the Board regulations.

128

As of the date of this Annual Report, the members of the Appointments Committee were:

Position	Name
Chairman	Mr. Tomás Alfaro Drake
Members	Mr. Juan Carlos Álvarez Mezquíriz Mr. José Antonio Fernández Rivero Mr. José Maldonado Ramos Mrs. Susana Rodríguez Vidarte

The duties of the Appointments Committee are as follows:

• Draw up and report proposals for appointment and re-election of directors.

To such end, the Committee will evaluate the skills, knowledge and experience that the Board requires, as well as the conditions that candidates should display to fill the vacancies arising.

The Committee will ensure that the selection procedures are not marred by implicit biases that may hinder the selection of female directors to fill vacancies, while trying to ensure that women who possess the professional profile sought are included on the shortlists when there are no or few current female directors.

When drafting proposals for the appointment and re-election of directors, the Committee will consider applications for potential candidates submitted by current Board members when appropriate.

• Review the status of each director each year, so that this may be reflected in the annual report on corporate governance.

• Report on the performance of the Chairman of the Board and, where applicable, the Company’s CEO, such that the Board can make its periodic assessment, under the terms established in the Board regulations.

• Should the chairmanship of the Board or the post of CEO fall vacant, the Committee will examine or organize, in the manner it deems suitable, the succession of the Chairman and/or CEO and make corresponding proposals to the Board for an orderly, well-planned succession.

• Report any appointment and separation of senior managers.

• Any others that may have been allocated under the Board regulations or attributed to the Committee by a Board of Directors resolution.

In the performance of its duties, the Appointments Committee will consult with the Chairman of the Board and, where applicable, the CEO via the committee chair, especially with respect to matters related to executive directors and senior managers.

In accordance with our Board regulations, the Committee may ask members of the BBVA Group to attend its meetings, when their responsibilities relate to its duties. It may also receive any advisory services it requires to inform its criteria on issues falling within the scope of its powers.

The chair of the Appointments Committee will convene it as often as necessary to comply with its functions although an annual meeting schedule will be drawn up in accordance with its duties. During 2012, the Appointments Committee met 5 times.

Compensation Committee

The Compensation Committee’s essential function is to assist the Board on matters regarding the remuneration policy for directors and senior management. It seeks to ensure that the remuneration policy established by the Company is duly observed.

129

The Committee will comprise a minimum of three members who will be external directors appointed by the Board, which will also appoint its chair. The chair and the majority of its members must be independent directors, in compliance with the Board regulations.

As of the date of this Annual Report, the members of the Appointments Committee were:

Position	Name
Chairman	Mr. Carlos Loring Martínez de Irujo
Members	Mr. Ignacio Ferrero Jordi Mr. José Maldonado Ramos Mr. Juan Pi Llorens Mrs. Susana Rodríguez Vidarte

The scope of the functions of the Compensation Committee is as follows:

• Propose the remuneration system for the Board of Directors as a whole, in accordance with the principles established in the Company bylaws, their amounts and method of payment.

• Determine the extent and amount of the remuneration, entitlements and other economic rewards for the Chairman and CEO, the President and COO and, where applicable, other executive directors of the Bank, so that these can be reflected in their contracts. The Committee’s proposals on such matters will be submitted to the Board of Directors.

• Issue a report on the directors’ remuneration policy each year. This will be submitted to the Board of Directors, which will apprise the Company’s annual shareholders’ general meeting of this.

• Propose the remuneration policy for senior management to the Board, and the basic terms and conditions to be contained in their contracts, directly supervising the remuneration of the senior managers responsible for risk management and with compliance functions within the Bank.

• Propose the remuneration policy to the Board for employees whose professional activities may have a significant impact on the Bank’s risk profile.

• Oversee observance of the remuneration policy established by the Company and periodically review the remuneration policy applied to executive directors, senior management and employees whose professional activities may have a significant impact on the Bank’s risk profile.

• Any others that may have been allocated under the Board regulations or attributed to the Committee by a Board of Directors resolution.

In the performance of its duties, the Compensation Committee will consult with the Chairman of the Board and, where applicable, the Company’s CEO via the Committee chair, especially with respect to matters related to executive directors and senior managers.

Pursuant to our Board regulations, the Committee may ask members of the BBVA Group to attend its meetings, when their responsibilities relate to its duties. It may also receive any advisory services it requires to inform its criteria on matters falling within the scope of its powers.

The chair of the Compensation Committee will convene it as often as necessary to comply with its functions although an annual meeting schedule will be drawn up in accordance with its duties. During 2012, the Compensation Committee met 8 times.

130

Risk Committee

The Board’s Risk Committee is tasked with the analysis of issues related to our risk management and control policy and strategy. It assesses and approves any risk transactions that may be significant.

The Risk Committee shall have a majority of external directors, with a minimum of three members, appointed by the Board of Directors, which shall also appoint its chairman.

As of the date of this Annual Report, the members of the Risk Committee were:

Position	Name
Chairman	Mr. José Antonio Fernández Rivero
Members	Mr. Ramón Bustamante y de la Mora Mr. Enrique Medina Fernández Mr. José Luis Palao García-Suelto Mr. Juan Pi Llorens

Under the Board regulations, it has the following duties:

• Analyze and evaluate proposals related to our risk management and oversight policies and strategy. In particular, these shall identify:

a) the risk map;

b) the setting of the level of risk considered acceptable according to the risk profile (expected loss) and capital map (risk capital) broken down by our businesses and areas of activity;

c) the internal information and oversight systems used to oversee and manage risks; and

d) the measures established to mitigate the impact of risks identified should they materialize.

• Monitor the match between risks accepted and the profile established.

• Assess and approve, where applicable, any risks whose size could compromise our capital adequacy or recurrent earnings, or that present significant potential operational or reputational risks.

• Check that we possess the means, systems, structures and resources benchmarked against best practices to allow implementation of its risk management strategy.

Pursuant to our Board regulations, the Committee may request the attendance at its sessions of persons with positions in the group that are related to the Committee’s functions. It may also obtain advice as necessary to establish criteria related to its functions.

The committee meets as often as necessary to best perform its duties, usually once a week. In 2012, it held 46 meetings.

D. Employees

As of December 31, 2012, we, through our various affiliates, had 115,852 employees. Approximately 85% of our employees in Spain held technical, managerial and executive positions, while the remainder were clerical and support staff. The table below sets forth the number of BBVA employees by geographic area.

131

Country	BBVA		Banks		Companies		Total
Spain		25,841		2,947		2,909		31,697
United Kingdom		166		—		—		166
France		94		—		—		94
Italy		54		—		168		222
Germany		46		—		—		46
Switzerland		—		131		—		131
Portugal		—		855		—		855
Belgium		34		—		—		34
Russia		3		—		—		3
Ireland		—		5		—		5
Luxembourg		3		—		—		3
Turkey		16		—		—		16
Total Europe		26,257		3,938		3,077		33,272
United States		204		11,384		—		11,588
Panama		—		378		—		378
Argentina		—		5,371		—		5,371
Brazil		3		—		6		9
Colombia		—		6,460		—		6,460
Venezuela		—		5,316		—		5,316
Mexico		—		39,244		—		39,244
Uruguay		—		585		—		585
Paraguay		—		495		—		495
Bolivia		—		—		249		249
Chile		—		6,256		—		6,256
Cuba		1		—		—		1
Peru		—		6,162		—		6,162
Ecuador		—		—		221		221
Total Latin America		4		70,267		476		70,747
Hong Kong		164		—		—		164
Japan		10		—		—		10
China		12		—		17		29
Singapore		9		—		—		9
India		4		—		—		4
South Korea		18		—		—		18
United Arab Emirates		1		—		—		1
Taiwan		8		—		—		8
Total Asia		226		—		17		243
Australia		2		—		—		2
Total Oceania		2		—		—		2
Total		26,693		85,589		3,570		115,852

132

As of December 31, 2011, we, through our various affiliates, had 110,645 employees. Approximately 84% of our employees in Spain held technical, managerial and executive positions, while the remainder were clerical and support staff. The table below sets forth the number of BBVA employees by geographic area.

Country	BBVA		Banks		Companies		Total
Spain		26,188		19		2,727		28,934
United Kingdom		162		—		—		162
France		98		—		—		98
Italy		55		—		226		281
Germany		51		—		—		51
Switzerland		—		127		—		127
Portugal		—		877		—		877
Belgium		37		—		—		37
Russia		4		—		—		4
Ireland		—		5		—		5
Luxembourg		3		—		—		3
Turkey		11		—		—		11
Total Europe		26,609		1,028		2,953		30,590
United States		228		11,947		—		12,175
Panama		—		365		—		365
Puerto Rico		—		906		—		906
Argentina		—		5,896		—		5,896
Brazil		3		—		13		16
Colombia		—		6,151		—		6,151
Venezuela		—		5,398		—		5,398
Mexico		—		35,950		—		35,950
Uruguay		—		542		—		542
Paraguay		—		452		—		452
Bolivia		—		—		206		206
Chile		—		5,710		—		5,710
Cuba		1		—		—		1
Peru		—		5,769		—		5,769
Ecuador		—		—		235		235
Total Latin America		4		67,139		454		67,597
Hong Kong		198		—		—		198
Japan		11		—		—		11
China		16		—		16		32
Singapore		15		—		—		15
India		5		—		—		5
South Korea		18		—		—		18
Total Asia		263		—		16		279
Australia		4		—		—		4
Total Oceania		4		—		—		4
Total		27,108		80,114		3,423		110,645

133

As of December 31, 2010, we, through our various affiliates, had 106,976 employees. Approximately 83% of our employees in Spain held technical, managerial and executive positions, while the remainder were clerical and support staff. The table below sets forth the number of BBVA employees by geographic area.

Country	BBVA		Banks		Companies		Total
Spain		25,939		442		2,035		28,416
United Kingdom		93		—		—		93
France		94		—		—		94
Italy		53		—		226		279
Germany		40		—		—		40
Switzerland		—		128		—		128
Portugal		—		925		—		925
Belgium		40		—		—		40
Russia		4		—		—		4
Ireland		—		5		—		5
Total Europe		26,263		1,500		2,261		30,024
United States		165		11,975		—		12,140
Panama		—		345		—		345
Puerto Rico		—		865		—		865
Argentina		—		5,705		—		5,705
Brazil		3		—		17		20
Colombia		—		5,867		—		5,867
Venezuela		—		5,509		—		5,509
Mexico		—		34,082		—		34,082
Uruguay		—		200		—		200
Paraguay		—		372		—		372
Bolivia		—		—		209		209
Chile		—		5,413		—		5,413
Cuba		1		—		—		1
Peru		—		5,715		—		5,715
Ecuador		—		—		273		273
Total Latin America		4		64,073		499		64,576
Hong Kong		169		—		—		169
Japan		13		—		—		13
China		13		—		11		24
Singapore		17		—		—		17
India		2		—		—		2
South Korea		8		—		—		8
Total Asia		222		—		11		233
Australia		3		—		—		3
Total Oceania		3		—		—		3
Total		26,657		77,548		2,771		106,976

The terms and basic conditions of employment in private sector banks in Spain are negotiated with trade unions representing sector bank employees. Wage negotiations take place on an industry-wide basis. This process has historically produced collective bargaining agreements binding upon all Spanish banks and their employees. The collective bargaining agreement in application during 2009 and 2010 came into effect as of January 1, 2007 and ended on December 31, 2010. On March 14, 2012, the XXII collective bargain agreement was signed. This agreement became effective on January 1, 2011 and will remain in effect until December 31, 2014.

As of December 31, 2012, 2011 and 2010, we had 1,145, 1,689 and 1,060 temporary employees in our Spanish offices, respectively.

134

E. Share Ownership

As of March 22, 2013, the members of the Board of Directors owned an aggregate of BBVA shares as shown in the table below:

Name	Directly owned shares		Indirectly owned shares		Total shares		% Capital Stock
Gonzalez Rodríguez, Francisco		1,581,665		1,446,647		3,028,312		0.056
Cano Fernández, Ángel		682,062		—		682,062		0.013
Alfaro Drake, Tomás		14,584		—		14,584		0.000
Álvarez Mezquíriz, Juan Carlos		183,515		—		183,515		0.003
Bustamante y de la Mora, Ramón		13,271		2,617		15,888		0.000
Fernández Rivero, José Antonio		65,455		—		65,455		0.001
Ferrero Jordi, Ignacio		4,080		61,730		65,810		0.001
Garijo López, Belén		—		—		—		—
Loring Martínez de Irujo, Carlos		51,250		—		51,250		0.001
Maldonado Ramos, José		73,264		—		73,264		0.001
Medina Fernández, Enrique		45,096		1,695		46,791		0.001
Palao García-Suelto, José Luis		9,607		—		9,607		0.000
Pi Llorens, Juan		35,892		—		35,892		0.001
Rodriguez Vidarte, Susana		23,177		835		24,012		0.000
TOTAL		2,782,918		1,513,524		4,296,442		0.079

BBVA has not granted options on its shares to any members of its administrative, supervisory or Management bodies. Information regarding the variable share-based remuneration system for BBVA’s executive team, including the executive director’s and the Multi-year variable share-based remuneration program for 2010-2011, is provided under Compensation.

As of March 22, 2013 the Management Committee (excluding executive directors) and their families owned 1,968,557 shares. None of the members of our Management Committee held 1% or more of BBVA’s shares as of such date.

As of March 22, 2013 a total of 23,388 employees (excluding the members of the Management committee and executive directors) owned 56,546,208 shares, which represents 1.04% of our capital stock.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of March 22, 2013, no person, corporation or government beneficially owned, directly or indirectly, five percent or more of BBVA’s shares. BBVA’s major shareholders do not have voting rights which are different from those held by the rest of its shareholders. To the extent known to us, BBVA is not controlled, directly or indirectly, by any other corporation, government or any other natural or legal person. As of March 22, 2013, there were 988,926 registered holders of BBVA’s shares, with an aggregate of 5,448,849,545 shares, of which 485 shareholders with registered addresses in the United States held a total of 1,448,548,894 shares (including shares represented by American Depositary Receipts (“ADRs”)). Since certain of such shares and ADRs are held by nominees, the foregoing figures are not representative of the number of beneficial holders.

B. Related Party Transactions

Loans to Directors, Executive Officers and Other Related Parties

As of December 31, 2012 and 2011 there were no loans granted by the Group’s credit institutions to the members of the Bank’s Board of Directors (compared loans totaling to €531 thousand as of December 31, 2010). As of December 31, 2012, 2011 and 2010, the amounts disposed under the loans granted by the Group’s entities to the members of the Management Committee (excluding executive directors) amounted to €7,401, €6,540 and €4,924 thousand, respectively.

As of December 31, 2012, 2011 and 2010, the amounts disposed of the loans granted to parties related to the members of the Bank’s Board of Directors amounted to €13,152, €20,593 and €28,493 thousand, respectively. As of these dates, there were no loans granted to parties linked to members of the Bank’s Management Committee.

135

As of December 31, 2012, 2011 and 2010 no guarantees had been granted to any member of the Board of Directors.

As of December 31, 2012 and 2010, no guarantees had been granted to any member of the Management Committee, and the amount of guarantees granted as of December 31, 2011 totaled €9 thousand.

As of December 31, 2012, 2011 and 2010, guarantees and commercial loans to parties related to the members of the Bank’s Board of Directors and Management Committee amounted to €3,327, €10,825 and €4,424 thousand, respectively.

Related Party Transactions in the Ordinary Course of Business

Loans extended to related parties were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features.

BBVA subsidiaries engage, on a regular and routine basis, in a number of customary transactions with other BBVA subsidiaries, including:

• overnight call deposits;

• foreign exchange purchases and sales;

• derivative transactions, such as forward purchases and sales;

• money market fund transfers;

• letters of credit for imports and exports;

and other similar transactions within the scope of the ordinary course of the banking business, such as loans and other banking services to our shareholders, to employees of all levels, to the associates and family members of all the above and to other BBVA non-banking subsidiaries or affiliates. All these transactions have been made:

• in the ordinary course of business;

• on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons; and

• did not involve more than the normal risk of collectability or present other unfavorable features.

C. Interests of Experts and Counsel

Not Applicable.

136

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Financial Information

See Item 18.

Dividends

The table below sets forth the amount of interim, final and total cash dividends paid by BBVA on its shares for the years 2008 to 2012. The rate used to convert euro amounts to dollars was the noon buying rate at the end of each year.

	Per Share
	First Interim				Second Interim				Third Interim				Final				Total
	€		$		€		$		€		$		€		$		€		$
2008	€	0.167	$	0.232	€	0.167	$	0.232	€	0.167	$	0.232		(*)		(*)	€	0.501	$	0.697
2009	€	0.090	$	0.129	€	0.090	$	0.129	€	0.090	$	0.129	€	0.150	$	0.215	€	0.420	$	0.602
2010	€	0.090	$	0.119	€	0.090	$	0.119	€	0.090	$	0.119		(**)		(**)	€	0.270	$	0.307
2011	€	0.100	$	0.130		(**)		(**)	€	0.100	$	0.130		(**)		(**)	€	0.200	$	0.259
2012	€	0.100	$	0.132		(**)		(**)	€	0.100	$	0.132		(**)		(**)	€	0.200	$	0.264

(*) On March 13, 2009, our shareholders approved the distribution of additional shareholder remuneration to complement the 2008 cash dividend in the form of an in-kind distribution of a portion of the share premium reserve. On April 20, 2009, our shareholders received BBVA shares from treasury stock in the proportion of one share for every 62 shares outstanding. Accordingly, the number of shares distributed was 60,451,115. This payment entailed a charge against the share premium reserve of €317 million, the weighted average market price of BBVA shares in the continuous electronic market on the trading session on March 12, 2009, the day immediately preceding the date of the annual shareholders’ general meeting.

(**) In execution of the 2011, 2012 and 2013 “Dividendo Opción” schemes described under “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Dividends” approved by the shareholders in the respective general shareholders meetings, BBVA shareholders were given the option to receive all or part of their remuneration in newly issued free-of-charge shares or in cash.

We have paid annual dividends to our shareholders since the date we were founded. Historically, we have paid interim dividends each year. The cash dividend for a year is proposed by the Board of Directors to be approved by the general shareholders meeting following the end of the year to which it relates. The scrip dividends are proposed for approval of our shareholders in the general shareholders meeting, for being implemented during a period of one year from their approval. The unpaid portion of this dividend (the final dividend) is paid in cash or scrip after the approval of our financial statements by the shareholders at the annual shareholders’ general meeting. Interim and final dividends are payable to holders of record on the record date for the dividend payment date. Unclaimed cash dividends revert to BBVA five years after declaration. For additional information see “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Dividends”.

While we expect to declare and pay dividends (in cash or scrip) on our shares on a quarterly basis in the future, the payment of dividends will depend upon our earnings, financial condition, governmental regulations and policies and other factors.

As described under “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Dividends”, the annual shareholders’ general meeting held on March 15, 2013 passed two resolutions adopting a new scrip dividend scheme called “Dividendo Opción” on similar terms as the 2012 and 2011 “Dividendo Opción” schemes. Accordingly, 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 free-of-charge shares of the Bank, without thereby altering BBVA’s cash remuneration policy.

137

Subject to the terms of the deposit agreement entered into with the Bank of New York Mellon, holders of ADSs are entitled to receive dividends (in cash or scrip) attributable to the shares represented by the ADSs evidenced by their ADRs to the same extent as if they were holders of such shares.

For a description of BBVA’s access to the funds necessary to pay dividends on the shares, see “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Dividends”. In addition, BBVA may not pay dividends except out of its unrestricted reserves available for the payment of dividends, after taking into account the Bank of Spain’s capital adequacy requirements. Capital adequacy requirements are applied by the Bank of Spain on both a consolidated and individual basis. See “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Capital Requirements” and “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital”. Under Spain’s capital adequacy requirements, we estimate that as of December 31, 2012, BBVA had approximately €11 billion of reserves in excess of applicable capital and reserve requirements, which were not restricted as to the payment of dividends.

Legal Proceedings

The Group is party to certain legal actions in a number of jurisdictions, including, among others, Spain, Mexico and the United States, arising in the ordinary course of business. BBVA considers that none of such actions is material, individually or in the aggregate, and none of such actions is expected to result in a material adverse effect on the Group’s financial position, results of operations or liquidity, either individually or in the aggregate. Management believes that adequate provisions have been made in respect of the actions arising in the ordinary course of business. BBVA has not disclosed to the markets any contingent liability that could arise from such actions as it does not consider them material.

B. Significant Changes

No significant change has occurred since the date of the Consolidated Financial Statements other than those mentioned in our Consolidated Financial Statements.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

BBVA’s shares are listed on the Spanish stock exchanges in Madrid, Bilbao, Barcelona and Valencia (the “Spanish Stock Exchanges”) and listed on the computerized trading system of the Spanish Stock Exchanges (the “Automated Quotation System”). BBVA’s shares are also listed on the Mexican and London stock exchanges as well as quoted on SEAQ International in London. BBVA’s shares are listed on the New York Stock Exchange as American Depositary Shares (ADSs).

ADSs are listed on the New York Stock Exchange and are also traded on the Lima (Peru) Stock Exchange, by virtue of an exchange agreement entered into between these two exchanges. Each ADS represents the right to receive one share.

Fluctuations in the exchange rate between the euro and the dollar will affect the dollar equivalent of the euro price of BBVA’s shares on the Spanish Stock Exchanges and the price of BBVA’s ADSs on the New York Stock Exchange. Cash dividends are paid by BBVA in euro, and exchange rate fluctuations between the euro and the dollar will affect the dollar amounts received by holders of ADRs on conversion by The Bank of New York Mellon (acting as depositary) of cash dividends on the shares underlying the ADSs evidenced by such ADRs.

The table below sets forth, for the periods indicated, the high and low sales closing prices for the shares of BBVA on the Automated Quotation System.

138

	Euro per Share
	High		Low
Fiscal year ended December 31, 2008
Annual		16.58		7.16
Fiscal year ended December 31, 2009
Annual		13.17		4.68
Fiscal year ended December 31, 2010
Annual		13.15		7.08
Fiscal year ended December 31, 2011
Annual		9.43		5.14
First Quarter		9.43		6.92
Second Quarter		8.82		7.49
Third Quarter		8.34		5.14
Fourth Quarter		6.93		5.50
Fiscal year ended December 31, 2012
Annual		7.30		4.43
First Quarter		7.30		5.86
Second Quarter		5.97		4.57
Third Quarter		6.68		4.43
Fourth Quarter		7.04		5.92
Month ended September 30, 2012		6.68		6.06
Month ended October 31, 2012		6.66		5.92
Month ended November 30, 2012		6.55		6.02
Month ended December 31, 2012		7.04		6.50
Fiscal year ended December 31, 2013
Month ended January 31, 2013		7.82		7.25
Month ended February 28, 2013		7.70		6.97
Month ended March 31, 2013 (through March 22)		7.79		7.23

From January 1, 2012 through December 31, 2012 the percentage of outstanding shares held by BBVA and its affiliates ranged between 0.240% and 2.019%, calculated on a daily basis. As of March 21, 2013, the percentage of outstanding shares held by BBVA and its affiliates was 0.183%.

The table below sets forth the reported high and low sales closing prices for the ADSs of BBVA on the New York Stock Exchange for the periods indicated.

139

	U.S. Dollars per ADS
	High		Low
Fiscal year ended December 31, 2008
Annual		24.27		8.45
Fiscal year ended December 31, 2009
Annual		19.69		5.76
Fiscal year ended December 31, 2010
Annual		18.99		8.87
Fiscal year ended December 31, 2011
Annual		12.95		7.32
First Quarter		12.95		9.03
Second Quarter		12.90		10.49
Third Quarter		12.13		7.49
Fourth Quarter		9.94		7.32
Fiscal year ended December 31, 2012
Annual		9.72		5.34
First Quarter		9.72		7.61
Second Quarter		7.97		5.63
Third Quarter		8.67		5.34
Fourth Quarter		9.42		7.60
Month ended September 30, 2012		8.67		7.59
Month ended October 31, 2012		8.67		7.60
Month ended November 30, 2012		8.45		7.66
Month ended December 31, 2012		9.42		8.38
Fiscal year ended December 31, 2013
Month ended January 31, 2013		10.54		9.44
Month ended February 28, 2013		10.29		9.33
Month ended March 31, 2013 (through March 22)		10.11		9.33

Securities Trading in Spain

The Spanish securities market for equity securities consists of the Automated Quotation System and the four stock exchanges located in Madrid, Bilbao, Barcelona and Valencia. During 2012, the Automated Quotation System accounted for the majority of the total trading volume of equity securities on the Spanish Stock Exchanges.

Automated Quotation System. The Automated Quotation System (Sistema de Interconexión Bursátil) links the four local exchanges, providing those securities listed on it with a uniform continuous market that eliminates certain of the differences among the local exchanges. The principal feature of the system is the computerized matching of buy and sell orders at the time of entry of the order. Each order is executed as soon as a matching order is entered, but can be modified or canceled until executed. The activity of the market can be continuously monitored by investors and brokers. The Automated Quotation System is operated and regulated by Sociedad de Bolsas, S.A. (“Sociedad de Bolsas”), a corporation owned by the companies that manage the local exchanges. All trades on the Automated Quotation System must be placed through a bank, brokerage firm, an official stock broker or a dealer firm member of a Spanish Stock Exchange directly. Since January 1, 2000, Spanish banks have been allowed to place trades on the Automated Quotation System and have been allowed to become members of the Spanish Stock Exchanges. We are currently a member of the four Spanish Stock Exchanges and can trade through the Automated Quotation System.

In a pre-opening session held from 8:30 a.m. to 9:00 a.m. each trading day, an opening price is established for each security traded on the Automated Quotation System based on orders placed at that time. The regime concerning opening prices was changed by an internal rule issued by the Sociedad de Bolsas. In this new regime all references to maximum changes in share prices are substituted by static and dynamic price ranges for each listed share, calculated on the basis of the most recent historical volatility of each share, and made publicly available and updated on a regular basis by the Sociedad de Bolsas. The computerized trading hours are from 9:00 a.m. to 5:30 p.m., during which time the trading price of a security is permitted to vary by up to the stated levels. If, during the open session, the quoted price of a share exceeds these static or dynamic price ranges, Volatility Auctions are triggered, resulting in new static or dynamic price ranges being set for the share object of the same. Between 5:30 p.m. and 5:35 p.m. a closing price is established for each security through an auction system similar to the one held for the pre-opening early in the morning.

Trading hours for block trades (i.e., operations involving a large number of shares) are also from 9:00 a.m. to 5:30 p.m.

Between 5:30 p.m. and 8:00 p.m., special operations, whether Authorized or Communicated, can take place outside the computerized matching system of the Sociedad de Bolsas if they fulfill certain requirements. In such respect Communicated special operations (those that do not need the prior authorization of the Sociedad de Bolsas) can be traded if all of the following requirements are met: (i) the trade price of the share must be within the range of 5% above the higher of the average price and closing price for the day and 5% below the lower of the average price and closing price for the day; (ii) the market member executing the trade must have previously covered certain positions in securities and cash before executing the trade; and (iii) the size of the trade must involve at least

140

€300,000 and represent at least a 20% of the average daily trading volume of the shares in the Automated Quotation System during the preceding three months. If any of the aforementioned requirements is not met, a special operation may still take place, but it will need to take the form of Authorized special operation (i.e., those needing the prior authorization of the Sociedad de Bolsas). Such authorization will only be upheld if any of the following requirements is met:

• the trade involves more than €1.5 million and more than 40% of the average daily volume of the stock during the preceding three months;

• the transaction derives from a merger or spin-off process or from the reorganization of a group of companies;

• the transaction is executed for the purposes of settling a litigation or completing a complex group of contracts; or

• the Sociedad de Bolsas finds other justifiable cause.

Information with respect to the computerized trades between 9:00 a.m. and 5:30 p.m. is made public immediately, and information with respect to trades outside the computerized matching system is reported to the Sociedad de Bolsas by the end of the trading day and published in the Boletín de Cotización and in the computer system by the beginning of the next trading day.

Sociedad de Bolsas is also the manager of the IBEX 35^® Index. This index is made up by the 35 most liquid securities traded on the Spanish Market and, technically, it is a price index that is weighted by capitalization and adjusted according to the free float of each company comprised in the index. Apart from its quotation on the four Spanish Exchanges, BBVA is also currently included in the IBEX 35^® Index.

Clearing and Settlement System.

On April 1, 2003, by virtue of Law 44/2002 and of Order ECO 689/2003 of March 27, 2003 approved by the Spanish Ministry of Economy, the integration of the two main existing book-entry settlement systems existing in Spain at the time—the equity settlement system Servicio de Compensación y Liquidación de Valores (“SCLV”) and the Public Debt settlement system Central de Anotaciones de Deuda del Estado (“CADE”)—took place. As a result of this integration, a single entity, known as Sociedad de Gestión de los Sistemas de Registro Compensación y Liquidación de Valores (“Iberclear”) assumed the functions formerly performed by SCLV and CADE according to the legal regime stated in article 44 bis of the Spanish Securities Market Act.

Notwithstanding the above, rules concerning the book-entry settlement systems enacted before this date by SCLV and the Bank of Spain, as former manager of CADE, continue in force, but any reference to the SCLV or CADE must be substituted by Iberclear.

In addition, and according to Law 41/1999, Iberclear manages three securities settlement systems for securities in book-entry form: The system for securities listed on the four Spanish Stock Exchanges, the system for Public Debt and the system for debt securities traded in AIAF Mercado de Renta Fija. Cash settlement, from February 18, 2008 for all systems is managed through the TARGET2-Banco de España payment system.

The following four paragraphs exclusively address issues relating to the securities settlement system managed by Iberclear for securities listed on the Spanish Stock Exchanges (the “SCLV system”).

Under Law 41/1999 and Royal Decree 116/1992, transactions carried out on the Spanish Stock Exchanges are cleared and settled through Iberclear and its participants (each an “entidad participante”), through the SCLV system. Only Iberclear participants to this SCLV system are entitled to use it, with participation restricted to authorized members of the Spanish Stock Exchanges (for whom participation was compulsory until March 2007), the Bank of Spain (when an agreement, approved by the Spanish Ministry of Economy and Finance, is reached with Iberclear) and, with the approval of the CNMV, other brokers not members of the Spanish Stock Exchanges, banks, savings banks and foreign clearing and settlement systems. BBVA is currently a participant in Iberclear. Iberclear and its participants are responsible for maintaining records of purchases and sales under the book-entry system. In

141

order to be listed, shares of Spanish companies must be held in book-entry form. Iberclear, maintains a “two-step” book-entry registry reflecting the number of shares held by each of its participants as well as the amount of such shares held on behalf of beneficial owners. Each participant, in turn, maintains a registry of the owners of such shares. Spanish law considers the legal owner of the shares to be:

• the participant appearing in the records of Iberclear as holding the relevant shares in its own name, or

• the investor appearing in the records of the participant as holding the shares.

Iberclear settles Stock Exchange trades in the SCLV system in the so-called “D+3 Settlement” by which the settlement of Stock Exchange trades takes place three business days after the date on which the transaction was carried out in the Stock Exchange.

Ministerial Order EHA/2054/2010, amended Iberclear’s Regulation permitting Iberclear to clear and settle trades of equity securities listed in the Spanish Stock Exchanges that are entered into outside such stock exchanges (whether over-the-counter or in multilateral trading facilities).

Obtaining legal title to shares of a company listed on a Spanish Stock Exchange requires the participation of a Spanish broker-dealer, bank or other entity authorized under Spanish law to record the transfer of shares in book-entry form in its capacity as Iberclear participant for the SCLV system. To evidence title to shares, at the owner’s request the relevant participant entity must issue a certificate of ownership. In the event the owner is a participant entity, Iberclear is in charge of the issuance of the certificate with respect to the shares held in the participant entity’s own name.

According to article 42 of the Securities Market Act brokerage commissions are not regulated. Brokers’ fees, to the extent charged, will apply upon transfer of title of our shares from the depositary to a holder of ADSs, and upon any later sale of such shares by such holder. Transfers of ADSs do not require the participation of a member of a Spanish Stock Exchange. The deposit agreement provides that holders depositing our shares with the depositary in exchange for ADSs or withdrawing our shares in exchange for ADSs will pay the fees of the official stockbroker or other person or entity authorized under Spanish law applicable both to such holder and to the depositary.

Securities Market Legislation

The Securities Markets Act was enacted in 1988 with the purpose of reforming the organization and supervision of the Spanish securities markets. This legislation and the regulation implementing it:

• established an independent regulatory authority, the CNMV, to supervise the securities markets;

• established a framework for the regulation of trading practices, tender offers and insider trading;

• required stock exchange members to be corporate entities;

• required companies listed on a Spanish Stock Exchange to file annual audited financial statements and to make public quarterly financial information;

• established the legal framework for the Automated Quotation System;

• exempted the sale of securities from transfer and value added taxes;

• deregulated brokerage commissions; and

• provided for transfer of shares by book-entry or by delivery of evidence of title.

On February 14, 1992, Royal Decree No. 116/92 established the clearance and settlement system and the book-entry system, and required that all companies listed on a Spanish Stock Exchange adopt the book-entry system.

On April 12, 2007, the Spanish Congress approved Law 6/2007, which amends the Securities Markets Act in order to adapt it to Directive 2004/25/EC on takeover bids, and Directive 2004/109/EC on the harmonization of

142

transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (amending Directive 2001/34/EC). Regarding the transparency of listed companies, Law 6/2007 has amended the reporting requirements and the disclosure regime, and has established changes in the supervision system. On the takeover bids side, Law 6/2007 has established the cases in which a company must launch a takeover bid and the ownership thresholds at which a takeover bid must be launched. It also regulates conduct rules for the board of directors of target companies and the squeeze-out and sell-out when a 90% of the share capital is held after a takeover bid. Additionally, Law 6/2007 has been further developed by Royal Decree 1362/2007, on transparency requirements for issuers of listed securities.

On December 19, 2007, the Spanish Congress approved Law 47/2007, which amends the Securities Markets Act in order to adapt it to Directive 2004/37/EC on markets in financial instruments (MiFID), Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions, and Directive 2006/73/EC implementing Directive 2004/39/EC with respect to organizational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive. Further MiFID implementation has been introduced by Royal Decree 217/2008 and Ministerial Order EHA/1665/2010, which developed articles 71 and 76 of such Royal Decree 217/2008 regarding fees and types of agreements.

On October 4, 2011, the Spanish Congress approved Law 32/2011, which amends the Securities Markets Act by enhancing the clearing, settlement and book-entry system (by establishing central counterparty equity clearing).

The Regulation of the European Parliament and of the Council on short selling and certain aspects of credit default swaps (EU) No 236/2012 (Regulation) has been in force since March 25, 2012 and became directly effective in EU countries from November 1, 2012. This Regulation introduced a pan-European regulatory framework for dealing with short selling and requires persons to disclose short positions in relation to shares of EU listed companies and EU sovereign debt. For significant net short positions in shares of EU listed companies, these regulations create a two-tier reporting model: (i) when a net short position reaches 0.20% of an issuer’s share capital (and at every 0.1% thereafter), such position must be privately reported to the relevant regulator; and (ii) when such position reaches 0.50% (and at every 0.1% thereafter) of an issuer’s share capital, apart from being disclosed to the regulators, such position must be publicly reported to the market.

Law 9/2012 and Royal Decree 1698/2012 implemented European Directive 2010/73/EU, (which amended Directive 2003/71/EC, on the prospectus to be published when securities are offered to the public or admitted to trading and Directive 2004/109/EC, on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market).

Trading by the Bank and its Affiliates in the Shares

Trading by subsidiaries in their parent companies shares is restricted by the Corporate Enterprises Act.

Neither BBVA nor its affiliates may purchase BBVA’s shares unless the making of such purchases is authorized at a meeting of BBVA’s shareholders by means of a resolution establishing, among other matters, the maximum number of shares to be acquired and the authorization term, which cannot exceed five years. Restricted reserves equal to the purchase price of any shares that are purchased by BBVA or its subsidiaries must be made by the purchasing entity. The total number of shares held by BBVA and its subsidiaries may not exceed ten percent of BBVA’s total capital, as per the new treasury stock limits set forth in Law 3/2009 of structural modifications of commercial companies. It is the practice of Spanish banking groups, including ours, to establish subsidiaries to trade in their parent company’s shares in order to meet imbalances of supply and demand, to provide liquidity (especially for trades by their customers) and to modulate swings in the market price of their parent company’s shares.

Reporting Requirements

Royal Decree 1362/2007 requires that any person or entity which acquires or transfers shares and as a consequence the number of voting rights held exceeds, reaches or is below the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% y 90% of the capital stock of a company listed on a Spanish Stock Exchange must, within four days after that acquisition or transfer, report it to such company, and to the CNMV. This duty to report the holding of a significant stake will be applicable not only to the acquisitions and transfers in the terms described above, but also to those cases in which in the absence of an acquisition or transfer of shares, the ratio of an individual’s voting rights exceeds, reaches or is below the thresholds that trigger the duty to report, as a consequence of an alteration in the total number of voting rights of an issuer.

143

In addition, any company listed on a Spanish Stock Exchange must report on a non-public basis to the CNMV, within 4 Stock Exchange business days, any acquisition by such company (or an affiliate) of the company’s own shares if such acquisition, together with any previous one from the date of the last communication, exceeds 1% of its capital stock, regardless of the balance retained. Members of the board of directors must report the ratio of voting rights held at the time of their appointment as members of the board, when they are ceased as members, as well as any transfer or acquisition of share capital of a company listed on the Spanish Stock Exchanges, regardless of the size of the transaction. Additionally, since we are a credit entity, any individual or company who intends to acquire a significant participation in BBVA’s share capital must obtain prior approval from the Bank of Spain in order to carry out the transaction. See “Item 10. Additional Information—Exchange Controls—Restrictions on Acquisitions of Shares”.

Royal Decree 1362/2007 also establishes reporting requirements in connection with any entity acting from a tax haven or a country where no securities regulatory commission exists, in which case the threshold of three percent is reduced to one percent.

Each Spanish bank is required to provide to the Bank of Spain a list dated the last day of each quarter of all the bank’s shareholders that are financial institutions and other non-financial institution shareholders owning at least 0.25% of a bank’s total share capital. Furthermore, the banks are required to inform the Bank of Spain, as soon as they become aware, and in any case not later than in 15 days, of each acquisition by a person or a group of at least one percent of such bank’s total share capital.

In addition, BBVA shares were included, among others, in Annex 1 of the Agreement of the Executive Committee of the CNMV on naked short selling dated September 22, 2008, which was supplemented by a further agreement of this body dated May 27, 2010. Different temporary restrictions on short selling over securities admitted to trading in Spanish regulated markets (including BBVA’s securities) have subsequently been imposed by the CNMV. Upon Regulation (EU) 236/2012’s entry into force (on November 1, 2012) the CNMV made public a new agreement extending the ban on transactions by any legal or natural person which create a short position in shares listed in the Spanish regulated markets (including BBVA’s shares), setting forth some exceptions, such as for market making transactions. This ban was in effect until January 31, 2013, when CNMV decided not to extend the same.

Ministerial Order EHA/1421/2009, implements Article 82 of Securities Market (Law 24/1988 of July 28, 1988) on the publication of significant information. The Ministerial Order specifies certain aspects relating to notice of significant information that were pending implementation in Law 24/1988. In this respect, the principles to be followed and conditions to be met by entities when they publish and report significant information are set forth, along with the content requirements, including when significant information is connected with accounting, financial or operational projections, forecasts or estimates. The reporting entity must designate at least one interlocutor whom the CNMV may consult or from whom it may request information relating to dissemination of the significant information. Lastly, some of the circumstances in which it is considered that an entity is failing to comply with the duty to publish and report significant information are described. These include, among others, cases in which significant information is disseminated at meetings with investors or shareholders or at presentations to analysts or to media professionals, but is not communicated, at the same time, to the CNMV.

Circular 4/2009 of the CNMV further develops Ministerial Order EHA1421/2009. In this respect, the Circular sets forth a precise proceeding for the actual report of the significant information and draws up an illustrative list of the events that may be deemed to constitute significant information. This list includes, among others, events connected with strategic agreements and mergers and acquisitions, information relating to the reporting entity’s financial statements or those of its consolidated group, information on notices of call and official matters and information on significant changes in factors connected with the activities of the reporting entity and its group.

144

Tax Requirements

According to Law 19/2003 and its associated regulations, an issuer’s parent company (credit entity or listed company) is required, on an annual basis, to provide the Spanish tax authorities with the following: (i) disclosure of information regarding those investors with Spanish Tax residency obtaining income from securities and (ii) the amount of income obtained by them in each period.

B. Plan of distribution

Not Applicable.

C. Markets

Not Applicable.

D. Selling Shareholders

Not Applicable.

E. Dilution

Not Applicable.

F. Expenses of the Issue

Not Applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not Applicable.

B. Memorandum and Articles of Association

Spanish law and BBVA’s bylaws are the main sources of regulation affecting the Company. All rights and obligations of BBVA’s shareholders are contained in its bylaws and in Spanish law.

Registry and Company’s Objects and Purposes

BBVA is registered with the Commercial Registry of Vizcaya (Spain). Its registration number at the Commercial Registry of Vizcaya is volume 2,083, Company section folio 1, sheet BI-17-1, 1^st entry. Its corporate objects and purposes are to: (i) directly or indirectly conduct all types of activities, transactions, acts, agreements and services relating to the banking business which are permitted or not prohibited by law and all banking ancillary activities; (ii) acquire, hold and dispose of securities; and (iii) make public offers for the acquisition and sale of securities and all types of holdings in any kind of company. BBVA’s objects and purposes are contained in Article 3 of the bylaws.

Certain Powers of the Board of Directors

In general, provisions regarding directors are contained in our bylaws. Also, our Board regulations govern the internal procedures and the operation of the Board and its committees and directors’ rights and duties as described in their charter. The referred Board regulations (i) limit a director’s right to vote on a proposal, arrangement or contract in which the director is materially interested; (ii) limit the power or directors to vote on compensation for themselves; (iii) limit borrowing powers exercisable by the directors and how such borrowing powers can be amended; or (iv) require retirement of directors at a certain age. In addition, the Board regulations contain a series of ethical standards. See “Item 6. Directors, Senior Management and Employees”.

145

Certain Provisions Regarding Privileged Shares

The bylaws authorize us to issue ordinary, non-voting, redeemable and privileged shares. As of the date of the filing of this Annual Report, we have no non-voting, redeemable or privileged shares outstanding.

The Company may issue shares that confer some privilege over ordinary shares under the legally established terms and conditions, complying with the formalities prescribed for amending our bylaws.

Only shares that have been issued as redeemable may be redeemed by us. Redemption of shares may only occur according to the terms set forth when they are issued. Redeemable shares must be fully paid-up at the time of their subscription. If the right to redeem redeemable shares is exclusively given to BBVA, it may not be exercised until at least three years after the issue. Redemption of shares must be financed against profits, free reserves or the proceeds of new securities issued especially for financing the redemption of an issue. If financed against profits or free reserves, BBVA must create a reserve for the amount of the par value of the redeemed shares. If the redemption is not financed against profits, free reserves or a new issue, it may only be done in compliance with the requirements of a reduction in share capital by the refund of contributions.

Holders of non-voting shares, if issued, are entitled to a minimum annual dividend, fixed or variable, set out at the time of the issue. The right of non-voting shares to accumulate unpaid dividends whenever funds to pay dividends are not available, any preemptive rights associated with non-voting shares, and the ability of holders of non-voting shares to recover voting rights also must be established at the time of the issue. Non-voting shares are entitled to the dividends to which ordinary shares are entitled in addition to their minimum dividend.

Certain Provisions Regarding Shareholders Rights

As of the date of the filing of this Annual Report, our capital is comprised of one class of ordinary shares, all of which have the same rights.

Once the perquisites established by law or in our bylaws have been covered, dividends may be paid out to shareholders and charged to the year’s profit or to unrestricted reserves, in proportion to the capital they may have paid up, provided the value of the total net assets is not, or as a result of such distribution would not be, less than the share capital. Shareholders will participate in the distribution of dividends in proportion to their paid-in capital. The right to collect a dividend lapses after five years as of the date in which it was first available to the shareholders. Shareholders also have the right to participate in proportion to their paid-in capital in any distribution resulting from our liquidation.

Each voting share will confer the right to one vote on the holder present or represented at the general meeting. However, unpaid shares with respect to which a shareholder is in default of the resolutions of the Board of Directors relating to their payment will not be entitled to vote. The bylaws contain no provisions regarding cumulative voting.

The bylaws do not contain any provisions relating to sinking funds or potential liability of shareholders to further capital calls by us.

The bylaws do not establish that special quorums are required to change the rights of shareholders. Under Spanish law, the rights of shareholders may only be changed by an amendment to the bylaws that complies with the requirements explained below under “—Shareholders’ Meetings”, plus the affirmative vote of the majority of the shares of the class that will be affected by the amendment.

Shareholders’ Meetings

The annual shareholders’ general meeting has its own set of regulations on issues such as how it operates and what rights shareholders enjoy regarding annual general shareholders’ meeting. These establish the possibility of exercising or delegating votes over remote communication media.

General shareholders’ meetings may be annual or extraordinary. Annual general shareholders’ meetings are held within the first six months of each financial year in order to review, among other things, the management of the company, and to approve, if applicable, annual financial statements for the previous fiscal year. Extraordinary general shareholders’ meetings are those meetings that are not ordinary. In any case, the requirements mentioned below for constitution and adoption of resolutions are applicable to both categories of general meetings.

146

General shareholders’ meetings must be convened by the Board of Directors, whether by their own decision or upon the request of shareholders holding at least five percent of our share capital.

Our shareholders’ general meeting regulations establish that annual and extraordinary shareholders’ general meetings must be called within the notice period required by law. This will be done by means of an announcement published by the Board of Directors or its proxy in the Official Gazette of the Companies Registry (“BORME”) or one of the daily newspapers in Spain with the highest-readership, within the notice period required by law, as well as being disseminated on the CNMV website and the Company website, except when legal provisions establish other media for disseminating the notice.

The Company’s shareholders’ general meetings may be attended by anyone owning the minimum number of shares established in our bylaws(500), provided that their holding is registered in the corresponding accounting records five days before the general meeting is scheduled and that they conserve at least this same number of shares until the time when the general meeting is held. Holders of fewer shares may group together until achieving the required number, appointing a representative.

General shareholders’ meetings will be validly constituted on first call with the presence of at least 25% of our voting capital, either in person or by proxy. No minimum quorum is required to hold a general shareholders’ meeting on second call. In either case, resolutions will be agreed by the majority of the votes. However, a general shareholders’ meeting will only be validly held with the presence of 50% of our voting capital on first call or of 25% of the voting capital on second call, in the case of resolutions concerning the following matters:

• issuances of debt;

• capital increases or decreases;

• the elimination on or limitation of the pre-emptive subscription rights over new shares;

• transformation, merger of BBVA or break-up of the company and global assignment of assets and liabilities;

• the off-shoring of domicile, and

• any other amendment to the bylaws.

In these cases, resolutions may only be approved by the vote of the majority of the shares if at least 50% of the voting capital is present at the meeting. If the voting capital present at the meeting is less than 50%, then resolutions may only be adopted by two-thirds of the shares present.

Additionally, our bylaws state that, in order to adopt resolutions regarding a change in corporate purpose or the total liquidation or dissolution of BBVA, at least two-thirds of the voting capital must be present at the meeting on first call and at least 60% of voting capital must be present on second call.

Restrictions on the Ownership of Shares

Our bylaws do not provide for any restrictions on the ownership of our ordinary shares. Spanish law, however, provides for certain restrictions which are described below under “—Exchange Controls—Restrictions on Acquisitions of Shares”.

Restrictions on Foreign Investments

The Spanish Stock Exchanges are open to foreign investors. However, the acquisition of 50% or more of the share capital of a Spanish company by a person or entity residing in a tax haven must be notified to the Ministry of Economy and Treasury prior to its execution. All other investments in our shares by foreign entities or individuals only require the notification of the Spanish authorities through the Spanish intermediary that took part in the investment once it is executed.

Current Spanish regulations provide that once all applicable taxes have been paid, see “—Exchange Controls”, foreign investors may freely transfer out of Spain any amounts of invested capital, capital gains and dividends.

147

C. Material Contracts

Shareholders’ agreement in connection with Garanti

On November 1, 2010, we entered into share purchase agreements with GE Araştırma ve Müşavirlik Limited Şirketi and General Electric Capital Corporation and Doğuş Holding A.Ş. (“Doğuş”), respectively, pursuant to which, on March 22, 2011, we acquired Garanti shares representing 18.60% and 6.29%, respectively, of the total issued share capital of Garanti. In addition, on November 1, 2010, we entered into a shareholders’ agreement with Doğuş which is in effect since March 2011 (the “SHA”). Doğuş is one of the largest Turkish conglomerates and has business interests in the financial services, construction, tourism and automotive sectors. Pursuant to the SHA, BBVA and Doğuş have agreed to manage Garanti through the appointment of board members and senior management. The SHA provides for two phases (“Phase 1” and “Phase 2”, respectively), with the rights between the two shareholders differing based on the respective phase. In addition, during the Phase 2 period, BBVA’s rights will depend on the level of Doğuş’ shareholding. The Phase 1 period commenced in March 2011 and will end upon the occurrence of certain trigger events which relate to changes in BBVA’s and Doğuş’ shareholding in Garanti. If further new shares are acquired by either BBVA or Doğuş during Phase 1, the other party will have the right to acquire 50% of the shares so acquired and, if such party chooses not to acquire them, it will nevertheless have voting usufruct rights over 50% of the shares acquired. In addition, the shareholders’ agreement provides for rights of first offer, tag-along rights and a lock-up period in respect of Garanti shares owned by BBVA and Doğuş which will end on the earlier of (i) the end of the Phase 1 period, or (ii) March 22, 2014. Moreover, the parties will seek to maintain Garanti’s listing on the Istanbul Exchange and to distribute at least 25% of Garanti’s distributable profits as long as they hold a certain stake in Garanti. BBVA also has a perpetual option to purchase an additional 1% of Garanti, which will become exercisable on March 22, 2016.

D. Exchange Controls

In 1991, Spain adopted the EU standards for free movement of capital and services. As a result, exchange controls and restrictions on foreign investments have generally been abolished and foreign investors may transfer invested capital, capital gains and dividends out of Spain without limitation as to amount, subject to applicable taxes. See “—Taxation”.

Pursuant to Spanish Law 18/1992 on Foreign Investments and Royal Decree 664/1999, foreign investors may freely invest in shares of Spanish companies, except in the case of certain strategic industries.

Shares in Spanish companies held by foreign investors must be reported to the Spanish Registry of Foreign Investments by the depositary bank or relevant Iberclear member. When a foreign investor acquires shares that are subject to the reporting requirements of the CNMV, notice must be given by the foreign investor directly to the Registry of Foreign Investments in addition to the notices of majority interests that must be sent to the CNMV and the applicable stock exchanges. This notice must be given through a bank or other financial institution duly registered with the Bank of Spain and the CNMV or through bank accounts opened with any branch of such registered entities.

Investment by foreigners domiciled in enumerated tax haven jurisdictions is subject to special reporting requirements under Royal Decree 1080/1991.

On July 5, 2003, Law 19/2003 came into effect. This law is an update to other Spanish exchange control and money laundering prevention laws.

Restrictions on Acquisitions of Shares

The Discipline and Intervention of Credit Institutions Act (Law 26/1988), amended by Law 5/2009, of June 29, provides that any individual or corporation, acting alone or in concert with others, intending to directly or indirectly acquire a significant holding in a Spanish financial institution (as defined in article 56 of the aforementioned Law 26/1998) or to directly or indirectly increase its holding in one in such a way that either the percentage of voting rights or of capital owned were equal to or more than 20%, 30% or 50%, or by virtue of the acquisition, might take control over the financial institution, must first notify the Bank of Spain. The Bank of Spain will have 60 working days after the date on which the notification was received, to evaluate the transaction and, where applicable, challenge the proposed acquisition on the grounds established by law.

148

A significant participation is considered 10% of the outstanding share capital of a bank or a lower percentage if such holding allows for the exercise of a significant influence.

Any acquisition without such prior notification, or before the period established in article 58.2 has elapsed or against the objection of the Bank of Spain, will produce the following results:

• the acquired shares will have no voting rights; and

• if considered appropriate, the target bank may be taken over or its directors replaced and a sanction imposed.

The Bank of Spain has 60 working days after the date on which the notification was received to object to a proposed transaction. Such objection may be based on the fact that the Bank of Spain does not consider the acquiring person suitable to guarantee the sound and prudent operation of the target bank.

Regarding the transparency of listed companies, Law 6/2007 amended the Securities Markets Act on takeover bids and transparency requirements for issuers. The transparency requirements have been further developed by Royal Decree 1362/2007 developing the Securities Markets Act on transparency requirement for issuers of listed securities, specifically information on significant stakes, reducing the communication threshold to 3%, and extending the disclosure obligations to the acquisition or transfer of financial instruments that grant rights to acquire shares with voting rights.

Tender Offers

The Spanish legal regime concerning takeover bids was amended by Law 6/2007 in order to adapt the Spanish Securities Market Act to the Directive 2004/25/EC on takeover bids, and Directive 2004/109/EC on the harmonization of transparency requirements in relation to information about issuers.

Additionally, Royal Decree 1066/2007, of July 29, on takeover bids, completes the modifications introduced by Law 6/2007, further developing the takeover bids legal framework in Spain and harmonizing the Spanish legislation with Directive 2004/25/EC.

E. Taxation

Spanish Tax Considerations

The following is a summary of the material Spanish tax consequences to U.S. Residents (as defined below) of the acquisition, ownership and disposition of BBVA’s ADSs or ordinary shares as of the date of the filing of this Annual Report. This summary does not address all tax considerations that may be relevant to all categories of potential purchasers, some of whom (such as life insurance companies, tax-exempt entities, dealers in securities or financial institutions) may be subject to special rules. In particular, the summary deals only with the U.S. Holders (as defined below) that will hold ADSs or ordinary shares as capital assets and who do not at any time own individually, and are not treated as owning, 25% or more of BBVA’s shares, including ADSs.

As used in this particular section, the following terms have the following meanings:

(1) “U.S. Holder” means a beneficial owner of BBVA’s ADSs or ordinary shares that is for U.S. federal income tax purposes:

• a citizen or an individual resident of the United States,

• a corporation or other entity treated as a corporation, created or organized under the laws of the United States, any state therein or the District of Columbia, or

• an estate or trust the income of which is subject to United States federal income tax without regard to its source.

(2) “Treaty” means the Convention between the United States and the Kingdom of Spain for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, together with a related Protocol.

(3) “U.S. Resident” means a U.S. Holder that is a resident of the United States for the purposes of the Treaty and entitled to the benefits of the Treaty, whose holding is not effectively connected with (1) a permanent establishment in Spain through which such holder carries on or has carried on business, or (2) a fixed base in Spain from which such holder performs or has performed independent personal services.

149

Holders of ADSs or ordinary shares should consult their tax advisors, particularly as to the applicability of any tax treaty. The statements regarding Spanish tax laws set out below are based on interpretations of those laws in force as of the date of this Annual Report. Such statements also assume that each obligation in the Deposit Agreement and any related agreement will be performed in full accordance with the terms of those agreements.

Taxation of Dividends

Under Spanish law, cash dividends paid by BBVA to a holder of ordinary shares or ADSs who is not resident in Spain for tax purposes and does not operate through a permanent establishment in Spain, are subject to Spanish Non-Resident Income Tax, withheld at source at a 21% tax rate for 2012 and 2013 (after this period of time the tax rate is expected to be 19%). For these purposes, upon distribution of the dividend, BBVA or its paying agent will withhold an amount equal to the tax due according to the rules set forth above (i.e., applying a withholding tax rate of 21% for 2012 and 2013), transferring the resulting net amount to the depositary.

However, under the Treaty, if you are a U.S. Resident, you are entitled to a reduced withholding tax rate of 15%. To benefit from the Treaty-reduced rate of 15%, if you are a U.S. Resident, you must provide to BBVA through our paying agent depositary, before the tenth day following the end of the month in which the dividends were payable, a certificate from the U.S. Internal Revenue Service (“IRS”) stating that, to the best knowledge of the IRS, you are a resident of the United States within the meaning of the Treaty and entitled to its benefits.

If the paying agent depositary provides timely evidence (i.e., by means of the IRS certificate) of your right to apply the Treaty-reduced rate it will immediately receive the surplus amount withheld, which will be credited to you. The IRS certificate is valid for a period of one year from issuance.

To help shareholders obtain such certificates, BBVA has set up an online procedure to make this as easy as possible.

If the certificate referred to in the above paragraph is not provided to us through our paying agent depositary within said term, you may afterwards obtain a refund of the amount withheld in excess of the rate provided for in the Treaty.

Scrip Dividend

As described under “Item 4. Information on the Company Business—Overview—Supervision and Regulation—Dividends”, the BBVA annual shareholders’ general meeting held on March 15, 2013, passed a resolution adopting two different free-of-charge capital increases for the implementation of a new “Dividendo Opción” scheme for this year, the first of which relates to the dividend traditionally paid in April and which execution we expect to complete in early May 2013. This dividend scheme lets the shareholders choose how they would like to receive their dividends: in cash or in new shares.

Pursuant to the terms of the “Dividendo Opción” program, upon its implementation, the shareholders will receive one free-of-charge allocation right for each share of BBVA that they hold as of a given record date. These rights will be tradable on the Spanish Stock Exchanges for a minimum period of 15 natural days. BBVA will undertake to purchase free allocation rights tendered by a shareholder to it during a certain period of time at a fixed price, subject to the conditions that may be imposed each time the “Dividendo Opción” program is implemented. This fixed price will be the result of dividing the Reference Price (as defined below) by the number of rights necessary to receive one new share plus one. At the end of the 15 natural days period, the free-of-charge allocation rights not validly tendered to BBVA will be converted into newly-issued shares of the Company. The number of rights necessary for the allocation of one new share and the total number of shares to be issued by BBVA will depend, amongst other factors, on the arithmetic mean of the weighted average prices of BBVA’s shares on the Spanish Stock Exchanges over the five trading sessions immediately prior to the Board’s resolution concerning the implementation of the relevant free-of-charge capital increase (the “Reference Price”).

Consequently, when each of the free-of-charge capital increases implementing the “Dividendo Opción” scheme is executed, the shareholders of BBVA will be able to freely choose among:

150

(a) Not transferring their free-of charge allocation rights. In this case, at the end of the trading period, the shareholders will receive the number of new totally paid-up shares to which they are entitled. For tax purposes the delivery of paid-up shares does not constitute income for purposes of the Spanish Non-Resident Income Tax, whether or not non-residents act through a permanent establishment in Spain.

The acquisition value of both the new shares received and the shares from which they derive, will result from distributing the total cost among the number of securities (both existing and those issued as paid-up shares corresponding thereto). Such paid-up shares will be deemed to have been held for as long as the shares from which they derive.

(b) Sell their free-of-charge allocation rights on the market. In this event, the amount obtained for the transfer of such rights on the market will be subject to the following tax treatment:

For purposes of the Spanish Non-Resident Income Tax on non-residents without a permanent establishment, the amount obtained for the transfer of the free-of-charge allocation rights on the market is subject to the same treatment that tax regulations provide for pre-emptive rights. Accordingly, the amount obtained for the transfer of the free-of-charge allocation rights decreases the acquisition value for tax purposes of the shares from which such rights derive, pursuant to Section 37.1.a) of Law 35/2006, of November 28, on Personal Income Tax (Ley del Impuesto sobre la Renta de las Personas Físicas).

Thus, if the amount obtained for the aforementioned transfer is larger than the acquisition value of the securities from which they derive, the difference will be deemed to be a capital gain earned by the transferor in the tax period in which the transfer is effected.

(c) Use the purchase commitment assumed by BBVA of free-of-charge allocation rights. The tax treatment applicable to the amount received for the transfer to the Company of the free-of-charge allocation rights held by them in their capacity as shareholders or acquired on the market will be equal to the treatment applicable to dividends directly distributed in cash and, consequently, such amount will be subject to the corresponding withholding.

It should be borne in mind that this analysis does not cover all the possible tax consequences. Therefore, shareholders are advised to consult with their tax advisors.

Spanish Refund Procedure

According to Spanish Regulations on Non-Resident Income Tax, approved by Royal Decree 1776/2004 dated July 30, 2004, as amended, a refund for the amount withheld in excess of the Treaty-reduced rate can be obtained from the relevant Spanish tax authorities. To pursue the refund claim, if you are a U.S. Resident, you are required to file:

• the corresponding Spanish tax form,

• the certificate referred to in the preceding section, and

• evidence of the Spanish Non-Resident Income Tax that was withheld with respect to you.

The refund claim must be filed within four years from the date in which the withheld tax was collected by the Spanish tax authorities, but not before February 1, of the following year.

U.S. Residents are urged to consult their own tax advisors regarding refund procedures and any U.S. tax implications thereof.

Additionally, under the Spanish law, the first €1,500 of dividends received by individuals who are not resident in Spain for tax purposes, and do not operate through a permanent establishment in Spain, will be exempt from taxation in certain circumstances.

U.S. Holders should consult their tax advisors regarding the availability of, and the procedures to be followed in connection with, this exemption.

151

Taxation of Rights

Distribution of preemptive rights to subscribe for new shares made with respect to your shares in BBVA will not be treated as income under Spanish law and, therefore, will not be subject to Spanish Non-Resident Income Tax. The exercise of such preemptive rights is not considered a taxable event under Spanish law and thus is not subject to Spanish tax. Capital gains derived from the disposition of preemptive rights received by U.S. Residents are generally not taxed in Spain provided that certain conditions are met (See “—Taxation of Capital Gains” below).

Taxation of Capital Gains

Under Spanish law, any capital gains derived from securities issued by persons residing in Spain for tax purposes are considered to be Spanish-source income and, therefore, are taxable in Spain. For Spanish tax purposes, gain recognized by you, if you are a U.S. Resident, from the sale of BBVA’s ADSs or ordinary shares will be treated as capital gains. Spanish Non-Resident Income Tax is levied at a 21% tax rate for 2012 and 2013 (after this period of time the tax rate is expected to be 19%) on capital gains recognized by persons who are not residents of Spain for tax purposes, who are not entitled to the benefit of any applicable treaty for the avoidance of double taxation and who do not operate through a fixed base or a permanent establishment in Spain.

Notwithstanding the discussion above, capital gains derived from the transfer of shares on an official Spanish secondary stock market by any holder who is resident in a country that has entered into a treaty for the avoidance of double taxation with an “exchange of information” clause (the Treaty contains such a clause) will be exempt from taxation in Spain. Additionally, capital gains realized by non-residents of Spain who are entitled to the benefit of an applicable treaty for the avoidance of double taxation will, in the majority of cases, not be taxed in Spain (since most tax treaties provide for taxation only in the taxpayer’s country of residence). If you are a U.S. Resident, under the Treaty, capital gains arising from the disposition of ordinary shares or ADSs will not be taxed in Spain. You will be required to establish that you are entitled to this exemption by providing to the relevant Spanish tax authorities a certificate of residence in the United States from the IRS (discussed above in “—Taxation of Dividends”), together with the corresponding Spanish tax form.

Spanish Inheritance and Gift Taxes

Transfers of BBVA’s shares or ADSs upon death or by gift to individuals are subject to Spanish inheritance and gift taxes (Spanish Law 29/1987), if the transferee is a resident in Spain for tax purposes, or if BBVA’s shares or ADSs are located in Spain, regardless of the residence of the transferee. In this regard, the Spanish tax authorities may argue that all shares of a Spanish corporation and all ADSs representing such shares are located in Spain for Spanish tax purposes. The applicable tax rate for individuals, after applying all relevant factors, ranges between approximately 7.65% and 81.6%.

Corporations that are non-residents of Spain that receive BBVA’s shares or ADSs as a gift are subject to Spanish Non-Resident Income Tax at a 21% tax rate for 2012 and 2013 (after this period of time the tax rate is expected to be 19%) on the fair market value of such ordinary shares or ADSs as a capital gain tax. If the donee is a United States resident corporation, the exclusions available under the Treaty described in “—Taxation of Capital Gains” above will be applicable.

Spanish Transfer Tax

Transfers of BBVA’s ordinary shares or ADSs will be exempt from Transfer Tax (Impuesto sobre Transmisiones Patrimoniales) or Value-Added Tax. Additionally, no stamp duty will be levied on such transfers.

152

U.S. Tax Considerations

The following summary describes the material U.S. federal income tax consequences of the ownership and disposition of ADSs or ordinary shares, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a particular person’s decision to hold the securities. The summary applies only to U.S. Holders (as defined under “Spanish Tax Considerations” above) that are eligible for the benefits of the Treaty and that hold ADSs or ordinary shares as capital assets for tax purposes and does not address all of the tax consequences, including the potential application of the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), known as the Medicare contribution tax, and tax consequences that may be relevant to holders subject to special rules, such as:

• certain financial institutions;

• dealers or traders in securities who use a mark-to-market method of accounting;

• persons holding ADSs or ordinary shares as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to the ADSs or ordinary shares;

• persons whose “functional currency” for U.S. federal income tax purposes is not the U.S. dollar;

• persons liable for the alternative minimum tax;

• tax-exempt entities;

• partnerships or other entities classified as partnerships for U.S. federal income tax purposes;

• persons holding ADSs or ordinary shares in connection with a trade or business conducted outside of the United States;

• persons who acquired our ADSs or ordinary shares pursuant to the exercise of any employee stock option or otherwise as compensation; or

• persons who own or are deemed to own 10% or more of our voting shares.

If an entity that is classified as a partnership for U.S. federal income tax purposes holds ADSs or ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding ADSs or ordinary shares and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the ADSs or ordinary shares.

The summary is based upon the tax laws of the United States including the Code, the Treaty, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof. These laws are subject to change, possibly with retroactive effect. In addition, the summary is based in part on representations by the depositary and assumes that each obligation provided for in or otherwise contemplated by BBVA’s deposit agreement and any other related document will be performed in accordance with its terms. Prospective purchasers of the ADSs or ordinary shares are urged to consult their tax advisors as to the U.S., Spanish or other tax consequences of the ownership and disposition of ADSs or ordinary shares in their particular circumstances, including the effect of any U.S. state or local tax laws.

In general, for United States federal income tax purposes, a U.S. Holder who owns ADSs will be treated as the owner of the underlying ordinary shares represented by those ADSs. Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADSs for the underlying ordinary shares represented by those ADSs.

The U.S. Treasury has expressed concerns that parties to whom American depositary shares are pre-released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of American depositary shares. Such actions would also be inconsistent with the claiming of the reduced rate of tax applicable to dividends received by certain non-corporate U.S. Holders, as described below. Accordingly, the analysis of the creditability of Spanish taxes described below, and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, could be affected by future actions that may be taken by such parties.

153

This discussion assumes that BBVA is not, and will not become, a passive foreign investment company (“PFIC”) (as discussed below).

Taxation of Distributions

Distributions, before reduction for any Spanish income tax withheld by BBVA or its paying agent, made with respect to ADSs or ordinary shares (other than certain pro rata distributions of ordinary shares or rights to subscribe for ordinary shares of its capital stock) will be includible in the income of a U.S. Holder as ordinary dividend income, to the extent paid out of BBVA’s current or accumulated earnings and profits as determined in accordance with U.S. federal income tax principles. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Holders as dividends. The amount of such dividends will generally be treated as foreign-source dividend income and will not be eligible for the “dividends-received deduction” generally allowed to U.S. corporations under the Code. Subject to applicable limitations and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to certain non-corporate U.S. Holders will be taxable at favorable rates applicable to long-term capital gains. U.S. Holders should consult their own tax advisors to determine the availability of these favorable rates in their particular circumstances.

The amount of dividend income will equal the U.S. dollar value of the euro received, calculated by reference to the exchange rate in effect on the date of receipt (which, for U.S. Holders of ADSs, will be the date such distribution is received by the depositary), whether or not the depositary or U.S. Holder in fact converts any euro received into U.S. dollars at that time. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder should not be required to recognize foreign currency gain or loss in respect of the dividend income. A U.S. Holder may have foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of its receipt.

A scrip dividend (such as a dividend distributed under the “Dividendo Opción” program, described in “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Dividends”) will be treated in the same manner as a distribution of cash, regardless of whether a U.S. Holder elects to receive the dividend in shares rather than cash. If the U.S. Holder elects to receive the dividend in shares, the U.S. Holder will be treated as having received a distribution equal to the U.S. dollar fair market value of the shares on the date of distribution. The U.S. Holder’s tax basis in such shares received will be equal to the U.S. dollar fair market value of the shares on the date of distribution and the holding period for such shares will begin on the day following the distribution.

Subject to applicable limitations that may vary depending upon a U.S. Holder’s circumstances and subject to the discussion above regarding concerns expressed by the U.S. Treasury, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for Spanish income taxes withheld by BBVA or its paying agent at a rate not exceeding the rate the U.S. Holder is entitled to under the Treaty. Spanish taxes withheld in excess of the rate applicable under the Treaty will not be eligible for credit against the U.S. Holder’s U.S. federal income tax liability. See “Spanish Tax Considerations—Taxation of Dividends” for a discussion of how to obtain the Treaty rate. The rules governing foreign tax credits are complex and, therefore, U.S. Holders should consult their tax advisors regarding the availability of foreign tax credits in their particular circumstances.

Sale or Other Disposition of ADSs or Shares

For U.S. federal income tax purposes, gain or loss realized by a U.S. Holder on the sale or other disposition of ADSs or ordinary shares will be capital gain or loss in an amount equal to the difference between the U.S. Holder’s tax basis in the ADSs or ordinary shares disposed of and the amount realized on the disposition, in each case as determined in U.S. dollars. Such gain or loss will be long-term capital gain or loss if the U.S. Holder held the ordinary shares or ADSs for more than one year at the time of disposition. Gain or loss, if any, will generally be U.S. source for foreign tax credit purposes. The deductibility of capital losses is subject to limitations.

Passive Foreign Investment Company Rules

Based upon certain proposed Treasury regulations which are proposed to be effective for taxable years beginning after December 31, 1994 (“Proposed Regulations”), we believe that we were not a PFIC for U.S. federal

154

income tax purposes for our 2012 taxable year. However, since our PFIC status depends upon the composition of our income and assets and the market value of our assets (including, among others, less than 25% owned equity investments) from time to time and since there is no guarantee that the Proposed Regulations will be adopted in their current form and because the manner of the application of the Proposed Regulations is not entirely clear, there can be no assurance that we will not be considered a PFIC for any taxable year.

If we were treated as a PFIC for any taxable year during which a U.S. Holder held ADSs or ordinary shares, gain recognized by such U.S. Holder on a sale or other disposition (including certain pledges) of an ADS or an ordinary share would be allocated ratably over the U.S. Holder’s holding period for the ADS or the ordinary share. The amounts allocated to the taxable year of the sale or other exchange and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate for that taxable year, and an interest charge would be imposed on the amount allocated to such taxable year. The same treatment would apply to any distribution received by a U.S. Holder on its ordinary shares or ADSs to the extent that such distribution exceeds 125% of the average of the annual distributions on the ordinary shares or ADSs received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter. In addition, if we were a PFIC or, with respect to a particular U.S. Holder, were treated as a PFIC for the taxable year in which we paid a dividend or the prior taxable year, the favorable tax rates discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply. Certain elections may be available (including a mark-to-market election) that may provide alternative tax treatments. U.S. Holders should consult their tax advisors regarding whether we are or were a PFIC, the potential application of the PFIC rules to determine whether any of these elections for alternative treatment would be available and, if so, what the consequences of the alternative treatments would be in their particular circumstances. If we were a PFIC for any taxable year during which a U.S. Holder held an ADS or ordinary share, such U.S. Holder may be required to file a report containing such information as the U.S. Treasury may require.

Information Reporting and Backup Withholding

Information returns may be filed with the IRS in connection with payments of dividends on, and the proceeds from a sale or other disposition of, ADSs or ordinary shares. A U.S. Holder may be subject to U.S. backup withholding on these payments if the U.S. Holder fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS.

Certain U.S. Holders who are individuals (and under proposed Treasury regulations, certain entities controlled by individuals) may be required to report information relating to their ownership of an interest in certain foreign financial assets, including stock of a non-U.S. person, subject to certain exceptions (including an exception for stock held in custodial accounts maintained by a U.S. financial institution). Certain U.S. Holders who are entities may be subject to similar rules in the future. U.S. Holders should consult their tax advisors regarding their reporting obligations with respect to the ordinary shares or ADSs.

F. Dividends and Paying Agents

Not Applicable.

G. Statement by Experts

Not Applicable.

H. Documents on Display

The documents concerning BBVA which are referred to in this Annual Report may be inspected at its offices at Plaza de San Nicolás 4, 48005 Bilbao, Spain. In addition, we are subject to the information requirements of the Exchange Act, except that as a foreign private issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by BBVA with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which BBVA’s ADSs are listed. In addition, the SEC maintains a web site that contains information filed or furnished electronically with the SEC, which can be accessed over the internet at http://www.sec.gov.

155

I. Subsidiary Information

Not Applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial institutions that deal in financial instruments must assume or transfer one or more types of risks with each transaction. The main risks associated with financial instruments are:

• Credit risk: which arises from the possibility that one party to a financial instrument may fail to meet its contractual obligations, causing a financial loss for the other party.

• Market risk: which relates to the likelihood of losses with respect to the value of securities held in our portfolio as a result of changes in the market prices of financial instruments. It includes three types of risks:

• Interest-rate risk: which arises from variations in market interest rates.

• Currency risk: resulting from variations in foreign-currency rates.

• Price risk: resulting from variations in market prices, either due to factors specific to the instrument itself, or alternatively to factors which affect all the instruments traded on a specific market.

• Liquidity risk: which arises from the possibility that a company cannot meet its payment commitments without having to resort to borrowing funds under onerous conditions, or risking the image and the reputation of the entity.

Value-at-Risk (VaR) is the basic risk measure used to manage and control the Group’s market risks. It estimates the maximum loss at a specific confidence level, for a given portfolio, probability and time horizon. We calculate VaR based on a 99% confidence level and a one-day time horizon.

BBVA, S.A. and BBVA Bancomer have received approval from the Bank of Spain to use a model developed by the Group to calculate bank capital requirements related to market risk. This model estimates VaR in accordance with the “historical simulation” methodology, which consists of estimating the losses or gains that would have been produced in the current portfolio if the changes in market conditions occurring over a specific period of time were repeated. Using this information, we infer the maximum foreseeable loss in the current portfolio with a determined level of confidence. This methodology presents the advantage of replicating historical market variables rather than requiring the assumption of any specific probability distribution. The historical period used in this model is two years.

In addition, the Bank follows the guidelines set out by Spanish and European authorities regarding other metrics, including the Bank of Spain’s regulatory requirements. The new measurements of market risk for the trading portfolio include the calculation of stressed VaR (which quantifies the level of risk in extreme historical situations) and the quantification of default risks and the downgrading of credit ratings of bonds and credit portfolio derivatives.

We determine a system of VaR and economic capital limits by market risk for each business unit, with specific ad-hoc sub-limits by type of risk, activity and trading desk.

Validity tests are performed periodically on the risk measurement models used by the Group. They estimate the maximum loss that could have been incurred in the securities assessed with a certain level of probability (back-testing), as well as measurements of the impact of extreme market events on risk positions (stress testing). In addition, BBVA Research (the BBVA Group’s Research Department) carries out stress analysis by simulating historical crisis scenarios and evaluating the impacts resulting from profound market alterations.

156

Market Risk Management

Market Risk in Trading Portfolio in 2012

The market risk factors used to measure and control risks in the trading portfolio are the basis of all calculations using the VaR.

VaR measures the maximum loss with a given probability over a given period as a result of changes in the general conditions of financial markets and their effects on market risk factors. We mainly conduct daily VaR estimates using the historic simulation methodology.

The types of risk factors we use to measure VaR are:

• Interest rate risk: the potential loss in value of the portfolio due to movements in interest rate curves. We use all interest rate curves in which we have positions and risks exist. We also use a wide range of vertices reflecting the different maturities within each curve.

• Credit spread risk: the potential loss in the value of corporate bonds or any corporate bond derivatives caused by movements in credit spreads for such instruments. Credit spread VaR is estimated by moving the credit spreads used as risk factors through a range of scenarios. The risk factors used in the simulation are credit spread curves by sector and by rating, and specific spread curves for individual issuers.

• Exchange rate risk: the potential loss caused by movements in exchange rates. Exchange rate risk VaR is estimated by analyzing present positions with observed actual changes in exchange rates.

• Equity or commodity risk: the potential loss caused by movements in equity prices, stock-market indices and commodity prices. Equity or commodity risk VaR is estimated by re-measuring present positions using actual changes in equity prices, stock-market indices and commodity prices.

• Vega risk: the potential loss caused by movements in implied volatilities affecting the value of options. Vega (equities, interest rate and exchange rate) risk VaR is estimated by analyzing implied volatility surfaces with observed changes in the implied volatilities of equity, interest rate and exchange rate options.

• Correlation risk: the potential loss caused by a disparity between the estimated and actual correlation between two assets, currencies, derivatives, instruments or markets.

In addition, all these measurements are supplemented with VaR estimation with exponential smoothing, to better reflect the impact of movements.

157

The evolution of the BBVA Group’s market risk during 2012, measured as VaR without smoothing, with a 99% confidence level and 1-day horizon, was as follows:

The average daily VaR was €22 million in 2012, compared with €24 million in 2011 and €33 million in 2010. This decrease in the average daily VaR was basically related to the reduction of market activities in Europe which resulted in a reduction of its average risk by 14% year-on-year (having an average daily VaR of €13.8 million in 2012). This decrease was partially offset by the increase in the average risk faced by Global Market Bancomer and Global Market South America and Compass by 13% and 17%, respectively year-on-year (having average daily VaRs of €5.1 million and €3.5 million, respectively, in 2012) as a result of an increase in the volatility in Global Market Bancomer and an increase in the interest rate and spread factor in the case of Global Market South America.

The number of risk factors currently used to measure portfolio risk is around 2,200. This number varies according to the possibility of doing business with other underlying assets and in other markets.

By type of market risk assumed by the Group’s trading portfolio as of December 31, 2012, the main risks were interest rate and credit spread risks, which rose by €8 million compared with December 31, 2011. Equity risk decreased by €4 million compared with December 31, 2011, while currency correlation risk rose by €5 million compared with December 31, 2011, and currency risk remained stable year-on-year. The table below shows the components of VaR as of December 31, 2012 and 2011, respectively, and the average, maximum and minimum VaRs for the years then ended.

Risk	December 31, 2012			December 31, 2011
	(In Millions of Euros)
Interest/Spread risk		35			27
Currency risk		3			3
Stock-market risk		3			7
Vega/Correlation risk		9			4
Diversification effect(*)		(19	)		(23	)
Total		30			18
VaR average in the period		22			24
VaR max in the period		31			36
VaR min in the period		15			16

(*) The diversification effect is the difference between the sum of the average individual risk factors and the total VaR figure (which implicitly reflects the correlation between all the individual risk factors and scenarios used in the measurement).

158

Stress testing is carried out using historical crisis scenarios. The base historical scenario is the collapse of Lehman Brothers in 2008.

Economic crisis scenarios are also prepared on an ad hoc basis for each of the BBVA Group’s treasuries and they are updated on a monthly basis. The most significant market risk positions are identified for these scenarios, and an assessment is made of the impact that changes in market variables may have on them. The economic scenarios are established and analyzed by the Group’s Market Stress Committee.

BBVA continues to work on improving and enriching the information provided by stress exercises. It prepares scenarios intended to detect the possible combination of changes in market variables that may significantly affect the result of BBVA’s trading portfolios; this complements the information provided by VaR analysis and historical scenarios and reinforces BBVA’s normal policies of risk measurement and control by serving as an alert indicator.

The internal market risk model is validated periodically by back-testing. The back-testing comparison performed with market risk management results for the parent company (which accounts for most of the Group’s market risk) follows the principles set out in the Basel Accord. It makes a day-on-day comparison between actual risks and those estimated by the model, and proved that the risk measurement model continued to work correctly throughout 2012.

In 2012, portfolio losses in BBVA, S.A. were higher than daily VaR on one occasion (none in the case of BBVA Bancomer). This number of exceptions is within the bands set in the tests used in the Basel model. Accordingly, no significant changes have been made neither to the methodology of measurement, nor to the parameters of the current measurement model.

By geographical area, and as an annual average, 64.5% of the market risk in 2012 corresponded to our trading desks in Europe, the U.S. and Asia and 35.5% to the Group’s banks in Latin America, 24.3% of which was in Mexico.

159

The breakdown of our risk exposure by categories of the instruments within the trading portfolio as of December 31, 2012, 2011 and 2010 was as follows:

	As of December 31,
	2012		2011		2010
Financial assets held for trading	(In Millions of Euros)
Debt securities		28,066		20,975		24,358
Government		23,411		17,989		20,397
Credit institutions		2,548		1,882		2,275
Other sectors		2,107		1,104		1,687
Trading derivatives		48,722		47,429		33,665

Market Risk in Non–Trading Activities in 2012

Structural Interest Rate Risk

Structural interest rate risk refers to the potential alteration of a company’s net interest income and/or total net-asset value caused by variations in interest rates. A financial institution’s exposure to adverse changes in market rates is a risk inherent in the banking business, while also presenting an opportunity to create value.

In 2012, the economic slowdown became more pronounced, particularly in the Eurozone, where the crisis was aggravated by the doubts regarding the capacity of certain peripheral countries to undertake fiscal and structural reforms. This situation led to new falls in interest rates in Europe, where they stood at all-time lows, as well as in the United States and Mexico. In South America, central banks maintained an expansive policy, despite upward pressure on inflation.

Movements in interest rates lead to changes in a bank’s net interest income and book value, which constitutes a key source of asset and liability interest rate risk. The extent of impacts of this kind will depend on the bank’s exposure to changes in interest rates. This exposure is mainly the result of the time difference between the repricing and maturities of the different products on the banking book. The accompanying chart shows the difference between the interest rate sensitivity of assets on our banking book which will reprice within a specific period of time and the interest rate sensitivity of liabilities on our banking book which will reprice within such period of time, showing our exposure to changes in interest rates as of December 31, 2012.

160

As stated above, a financial institution’s exposure to adverse changes in interest rates is a risk inherent in the banking business, while at the same time representing an opportunity to generate value. This is why the management of asset and liability interest rate risk takes on particular importance in the current environment. This function falls to the Balance Sheet Management unit, within the Financial Management area. Working through the Assets and Liabilities Committee (“ALCO”) within each management unit and the Group’s ALCO, it is in charge of maximizing the Bank’s economic value, preserving the net interest income and guaranteeing the generation of recurrent earnings. To do so, it develops various strategies based on its expectations of the market. It seeks to achieve the risk profile defined by the BBVA Group’s management bodies and maintain a balance between expected results and the level of risk assumed. BBVA has a transfer pricing system, which centralizes the Bank’s interest rate risk on ALCO’s books and is designed to facilitate proper balance sheet risk management.

The Corporate Risk Management (“CRM”) area is responsible for controlling and monitoring asset and liability interest rate risk, acting as an independent unit to guarantee that the risk management and control functions are properly segregated. This policy is in line with the Basel Committee on Banking Supervision recommendations. The CRM area also calculates the asset and liability interest rate risk measurements used by the Group’s management, designs measurement models and systems and develops monitoring, information and control systems. In addition, it carries out the function of risk control and analysis through the Risk Management Committee (“RMC”). Information produced by the CRM is then reported to the main governing bodies, such as the Executive Committee and the Board of Director’s Risk Committee.

The BBVA Group has a structural interest rate risk model made up of a set of metrics and tools which objective is to enable its risk profile to be monitored precisely. For accurately characterizing the balance sheet, analysis models have been developed to establish assumptions dealing fundamentally with expected loans amortization and the behavior of deposits with no explicit maturity. In addition to risks associated with parallel movements from cash-flow mismatch, the model includes other sources of risk such as changes in the yield slope and curve. This is done by applying a simulation model of interest rate curves that quantify risks in probabilistic terms and take into account the diversity of currencies and business units. This calculates the Group’s earnings at risk (EaR) and economic capital, defined as the maximum adverse deviations in net interest income and economic value, respectively, for a particular confidence level and time horizon. The model is periodically subjected to internal validation through the back-testing of the simulation model and the assumptions.

161

In addition, sensitivity is measured to a standard deviation of 100 basis points for all the market yield curves. The chart below shows the asset and liability interest rate profile of the main entities in the BBVA Group, according to their sensitivities, as of December 31, 2012.

The risk appetite of each entity is determined by the Executive Committee and expressed through the limits structure, which is one of the mainstays in our control policies. The maximum negative impacts, in terms of both earnings and value, are in this way controlled in each of the Group’s entities through a limits policy. Active balance sheet management in 2012 has enabled the Group’s exposure to be maintained in keeping with its target risk profile, as presented in the chart below, which shows average limits used in each of the Group entities.

162

The risk measurement model is supplemented by analysis of specific scenarios and stress tests. Stress tests have taken on particular importance in recent years. Progress has therefore been made in the analysis of extreme scenarios in a possible breakthrough in both current interest rate levels and historical correlations and volatility. At the same time, the evaluation of scenarios forecast by BBVA Research has been maintained. In addition, monitoring of the contribution to risk by portfolios, factors and regions, and its subsequent integration into joint measurements, continued during 2012.

The table below shows the estimated impact on the BBVA Group’s net interest income and economic value for 2012 of a 100 basis point increase and decrease in average interest rates for the year.

	Impact on Net Interest Income		Impact on Economic Value(1)
	100 Basis-Point Increase	100 Basis-Point Decrease	100 Basis-Point Increase	100 Basis-Point Decrease
BBVA Group	+0.88%	-0.71%	+1.02%	-1.92%

(1) Percentage relating to equity.

Structural Exchange Rate Risk

Structural exchange rate risk management in BBVA aims to minimize the potential negative impact from fluctuations in exchange rates on the capital ratios and the contribution to earnings of international investments maintained on a long-term basis by the Group.

The CRM area acts as an independent unit responsible for monitoring and analyzing risks, standardizing risk management metrics and providing tools that can anticipate potential deviations from targets. It also monitors the level of compliance with established risk limits, and reports regularly to the RMC, the Board of Directors’ Risk Committee and the Executive Committee, particularly in the case of deviations in the levels of risk assumed.

The Balance Sheet Management unit, through the ALCO, designs and executes the risk mitigation strategies with the main objective of minimizing the effect of exchange rate fluctuations on capital adequacy ratios, as well as

163

assuring the equivalent value in euros of the foreign-currency earnings of the Group’s various subsidiaries, and adjusting transactions according to market expectations and risk mitigation measures costs. The Balance Sheet Management area carries out this work by ensuring that the Group’s risk profile is, at all times, adapted to the framework defined by the limits structure authorized by the Executive Committee. To do so, it uses risk metrics obtained according to the corporate model designed by the Global Risk Management (“GRM”) area.

The corporate model is based on simulating exchange rate scenarios, based on historical trends for the past five years (based on weekly data), and evaluating the impact on capital ratios, equity and the Group’s income statement.

The risk mitigation measures aimed at reducing exchange rate risk exposures are considered in calculating risk estimates. Diversification resulting from investments in different geographical areas is also considered through the analysis of historical correlations between different currencies.

Our model provides a distribution of the impact on three core elements (capital ratios, equity and the Group’s income statement) and helps determine their maximum adverse deviation for a particular confidence level and time horizon (of 3, 6 or 12 months), depending on market liquidity in each currency. The use of these holding periods assumes that all the exposures can be fully mitigated within those periods of time. The exposure is determined with a confidence level of 99%.

The Executive Committee authorizes the system of limits and alerts for these risk measurements, which include a sub-limit on the economic capital (an unexpected loss arising from the currency risk of investments financed in foreign currency).

In order to try to mitigate our model’s limitations, the risk measurements are complemented with analyses of scenarios, stress testing and back-testing, thus giving a more complete overview of the Group’s exposure to structural exchange rate risk.

In 2012, in a context characterized by market volatility and uncertainty, a policy of prudence has been maintained, which has moderated the risk assumed despite the growing contribution of the “non-euro” area to the Group’s earnings and equity. The risk mitigation level of the carrying value of the BBVA Group’s holdings in foreign currency has remained at 42% on average. The estimated exposure coverage of 2012 earnings in foreign currency has been 47%.

In 2012, the average asset exposure sensitivity to a 1% depreciation in exchange rates stood at €188 million, 33% of which related to the Mexican peso, 25% to South American currencies, 23% to Asian and Turkish currencies, and 16% to the U.S. dollar.

Structural Risk in Equity Portfolio

The BBVA Group’s exposure to structural equity risk is basically derived from investments in industrial and financial companies with medium- and long-term investment horizons. This exposure is mitigated through net short positions held in derivatives of the underlying securities, used to limit portfolio sensitivity to potential falls in prices.

The GRM area is responsible for measuring and effectively monitoring structural risk in the equity portfolio. To do so, it estimates the sensitivity figures and the capital necessary to cover possible unexpected losses due to the variations in the trading value of the companies making up the Group’s equity portfolio, at a confidence level that corresponds to Group’s target risk profile, and taking into account the liquidity of the positions and the statistical performance of the securities under consideration. These figures are supplemented by periodic stress tests, back-testing and scenario analyses.

164

Liquidity Risk Management

The aim of liquidity risk management, tracking and control is to ensure, in the short term, that the payment commitments of the BBVA Group entities can be duly met without having to resort to borrowing funds under burdensome terms, or damaging the image and reputation of the entities. In the medium term the aim is to ensure that the Group’s financing structure is ideal and that it is moving in the right direction with respect to the economic situation, the markets and regulatory changes.

Management of liquidity and structural finance within the BBVA Group is based on the principle of financial autonomy of the entities that make it up. This approach helps prevent and limit liquidity risk by reducing the Group’s vulnerability in periods of high risk.

A core principle of the BBVA Group’s liquidity management is the financial independence of our banking subsidiaries. This aims to ensure that the cost of liquidity is correctly reflected in price formation. Accordingly, the Group maintains a liquidity pool at an individual entity level, both in Banco Bilbao Vizcaya Argentaria, S.A. and in our banking subsidiaries, including BBVA Compass, BBVA Bancomer and our Latin American subsidiaries. The only exception to this principle is Banco Bilbao Vizcaya Argentaria (Portugal), S.A., which is funded by Banco Bilbao Vizcaya Argentaria, S.A. Banco Bilbao Vizcaya Argentaria (Portugal), S.A. accounted for 0.91% of our total consolidated assets and 0.43% of our total consolidated liabilities, as of December 31, 2012.

The management and monitoring of liquidity risk is carried out comprehensively in each of the BBVA Group’s business units using a double (short- and long-term) approach. The short-term liquidity approach has a time horizon of up to 365 days. It is focused on the management of payments and collections from the Treasury and market activity, and includes operations specific to the area and the possible liquidity requirements of each Group entity. The medium-term approach is focused on financial management of the whole consolidated balance sheet, with a time horizon of one year or more.

The ALCO within each business unit is responsible for the comprehensive management of liquidity. The Balance Sheet Management unit, as part of the Financial Division, analyzes the implications of the Bank’s various projects in terms of finance and liquidity and their compatibility with the target financing structure and the situation of the financial markets. The Balance Sheet Management unit executes the resolutions agreed by the ALCO in accordance with the agreed budgets and manages liquidity risk using a broad scheme of limits, sub-limits and alerts approved by the Executive Committee. The GRM measures and controls these limits independently and provides the managers with support tools and metrics needed for decision-making.

Each of the local risk areas, which are independent from the local managers, complies with the corporate principles of liquidity risk control established by GRM, the global unit which is in charge of structural risks for the entire BBVA Group.

At the level of each BBVA Group entity, the managing areas request and propose a scheme of quantitative and qualitative limits and alerts related to short- and medium-term liquidity risks. Once agreed with GRM, controls and limits are proposed to the Bank’s Board of Directors (through its delegate bodies) for approval at least once a year. The proposals submitted by GRM are adapted to the situation of the markets according to the risk appetite level aimed for by the Group.

The development and updating of the Group’s Corporate Liquidity and Finance Policy has contributed to the strict adjustment of liquidity risk management in terms of limits and alerts, as well as in procedures. In accordance such policy, GRM carries out regular measurements of risk incurred and monitors the consumption of limits. It develops management tools and adapts valuation models, carries out regular stress tests and reports on the liquidity risk levels to ALCO and the Group’s Management Committee on a monthly basis. Its reports to the management areas and Management Committee are more frequent.

Under the current Contingency Plan, the frequency of communication and the nature of the information provided are decided by the Liquidity Committee at the proposal of the Technical Liquidity Group (“TLG”). In the event of an alert or possible crisis, the TLG carries out an initial analysis of the liquidity situation (short- or long-term) of the entity affected.

165

The TLG is made up of technical staff from the Short-Term Cash Desk, the Balance Sheet Management and Structural Risk areas. If the alert signals established make clear that a situation of tension has arisen, the TLG informs the Liquidity Committee (made up of managers of the corresponding areas). The Liquidity Committee is responsible for calling the Financing Committee, if appropriate, which is made up of the BBVA’s President and COO and the managers from the Financial Area, the GRM, Global Business and the Operating Segment of the country affected.

One of the most significant aspects that have affected the BBVA Group in 2012 and in previous years is the continuation of the sovereign debt crisis, during which the role played by official bodies in the Eurozone and the ECB have been key in ensuring liquidity in the European banking system.

Our principal source of funds is our customer deposit base, which consists primarily of demand, savings and time deposit accounts. In addition to relying on our customer deposits, the Group also accesses the interbank market (overnight and time deposits) and domestic and international capital markets for our additional liquidity requirements. To access the capital markets, the Group has in place a series of domestic and international programs for the issuance of commercial paper and medium- and long-term debt. The Group also generally maintains a diversified liquidity pool of liquid assets and securitized assets at an individual entity level. Another source of liquidity is our generation of cash flow from our operations. Finally, we supplement our funding requirements with loans from the Bank of Spain and the European Central Bank (ECB) or the respective central banks of the countries where our subsidiaries are located.

The table below shows the types and amounts of securities included within the liquidity pool of Banco Bilbao Vizcaya Argentaria S.A. and Banco Bilbao Vizcaya Argentaria (Portugal), S.A. and each of our significant subsidiaries as of December 31, 2012:

	BBVA Eurozone(1)		BBVA Bancomer		BBVA Compass		Others
	(in Millions of Euros)
Cash and balances with central banks		10,106		5,950		4,310		6,133
Assets for credit operations with central banks		33,086		6,918		10,215		7,708
Central governments issues		25,148		3,865		—		7,275
Of Which: Spanish government securities		21,729		—		—		—
Other issues		7,939		3,053		3,627		432
Loans		—		—		6,587		—
Other non-eligible liquid assets		3,975		460		198		765
Accumulated available balance		47,167		13,328		14,723		14,606

(1) Includes Banco Bilbao Vizcaya Argentaria, S.A. and Banco Bilbao Vizcaya Argentaria (Portugal), S.A.

In recent years, the regulators have established new requirements with the aim of strengthening the balance sheets of banks and making them more resistant to potential short-term liquidity shocks. The Liquidity Coverage Ratio (“LCR”) is the metric proposed by the Committee on Banking Supervision of the Bank for International Settlements in Basel to achieve this objective. It aims to ensure that financial institutions have a sufficient stock of liquid assets to allow them to survive a 30-day liquidity stress scenario. Some aspects of the document published by the Committee on Banking Supervision in December 2010 were updated and made more flexible in January 2013. The revised LCR standards provide for a phased-in implementation of LCR beginning on January 1, 2015. In the first year, banks would be required to maintain an LCR of 60%. The required LCR would climb by 10 percentage points each year until it is fully implemented at 100% on January 1, 2019. However, the frequency for reporting information to the supervisory bodies has been increased from a quarterly basis to a monthly basis since January 2013.

Finally, until 2015, the Basel Committee intends to prioritize its review of the long-term funding ratio (more than twelve months) or Net Stable Funding Ratio (“NSFR”), which was introduced in the December 2010 Basel III liquidity framework alongside the LCR with the aim of increasing the weight of medium- and long-term funding on the banks’ balance sheets. The BBVA Group has continued to develop a plan to adapt to these regulatory ratios so as to allow it to adopt best practices and the most effective and strict criteria for their implementation sufficiently in advance.

166

Below is a breakdown by contractual maturity of the balances of certain headings in our consolidated balance sheets as of December 31, 2012, 2011 and 2010:

Contractual Maturities 2012	Demand		Up to 1 Month		1 to 3 Months		3 to 12 Months		1 to 5 Years		Over 5 Years		Total
Assets -	(In Millions of Euros)
Cash and balances with central banks		33,396		2,539		608		366		508		—		37,417
Loans and advances to credit institutions		3,633		14,641		1,516		1,813		3,678		1,187		26,468
Loans and advances to customers		23,305		34,848		22,615		43,619		96,879		145,024		366,291
Debt securities		198		3,247		4,573		12,853		48,052		40,644		109,568
Derivatives (trading and hedging)		—		1,332		1,370		3,783		15,682		31,449		53,616
Total		60,531		56,608		30,682		62,435		164,799		218,305		593,360
Liabilities -
Deposits from central banks		18		8,357		3,235		—		34,543		350		46,504
Deposits from credit institutions		3,966		31,174		2,415		8,089		9,611		4,204		59,459
Deposits from customers		138,282		51,736		15,772		50,745		26,658		8,384		291,577
Debt certificates (including bonds)		—		6,140		4,146		18,116		39,332		15,126		82,860
Subordinated liabilities		—		50		—		724		3,243		7,104		11,122
Other financial liabilities		4,899		1,809		382		252		841		34		8,216
Short positions(*)		6,580		—		—		—		—		—		6,580
Derivatives (trading and hedging)		—		1,105		1,264		3,813		15,366		30,767		52,316
Total		153,744		100,372		27,214		81,741		129,594		65,969		558,633

Contractual Maturities 2011	Demand		Up to 1 Month		1 to 3 Months		3 to 12 Months		1 to 5 Years		Over 5 Years		Total
Assets -	(In Millions of Euros)
Cash and balances with central banks		28,066		1,444		660		330		426		—		30,927
Loans and advances to credit institutions		2,771		7,551		1,393		3,723		7,608		2,967		26,013
Loans and advances to customers		18,021		38,741		22,887		45,818		93,138		141,251		359,855
Debt securities		842		2,297		2,761		8,025		39,603		34,199		87,727
Derivatives (trading and hedging)		—		1,798		1,877		4,704		16,234		27,368		51,981
Total		49,699		51,831		29,578		62,601		157,010		205,784		556,503
Liabilities -
Deposits from central banks		3		19,463		2,629		—		11,040		1		33,136
Deposits from credit institutions		2,202		27,266		4,374		5,571		15,964		3,669		59,047
Deposits from customers		116,924		69,738		17,114		41,397		28,960		6,861		280,994
Debt certificates (including bonds)		—		2,032		1,880		11,361		45,904		17,144		78,321
Subordinated liabilities		—		—		110		38		4,893		9,500		14,541
Other financial liabilities		5,015		1,283		355		490		1,254		1,307		9,704
Short positions(*)		4,611		—		—		—		—		—		4,611
Derivatives (trading and hedging)		—		1,687		1,636		5,232		15,533		25,313		49,401
Total		128,755		121,469		28,098		64,089		123,548		63,796		529,755

167

Contractual Maturities 2010	Demand		Up to 1 Month		1 to 3 Months		3 to 12 Months		1 to 5 Years		Over 5 Years		Total
Assets -	(In Millions of Euros)
Cash and balances with central banks		17,275		1,497		693		220		282		—		19,967
Loans and advances to credit institutions		2,471		10,590		1,988		1,658		4,568		2,329		23,604
Loans and advances to customers		16,543		33,397		21,127		49,004		85,800		141,338		347,209
Debt securities		497		3,471		12,423		8,123		35,036		28,271		87,821
Derivatives (trading and hedging)		—		636		1,515		3,503		13,748		17,827		37,229
Total		36,786		49,591		37,746		62,508		139,434		189,765		515,830
Liabilities -
Deposits from central banks		50		5,102		3,130		2,704		—		1		10,987
Deposits from credit institutions		4,483		30,031		4,184		3,049		9,590		5,608		56,945
Deposits from customers		111,090		69,625		21,040		45,110		21,158		6,818		274,841
Debt certificates (including bonds)		96		5,243		10,964		7,159		42,907		15,843		82,212
Subordinated liabilities		—		537		3		248		2,732		13,251		16,771
Other financial liabilities		4,177		1,207		175		433		647		1,564		8,203
Short positions(*)		4,047		—		—		—		—		—		4,047
Derivatives (trading and hedging)		—		826		1,473		3,682		12,813		16,037		34,831
Total		123,943		112,571		40,969		62,385		89,847		59,122		488,837

(*) The maturities of short positions are basically on demand.

Changes in our assets and liabilities balances as of December 31, 2012 compared to December 31, 2011, were mainly related to the acquisition of Unnim in July 2012. Changes in our assets and liabilities balances as of December 31, 2011 compared to December 31, 2010, were attributable in part to the acquisition of a 25.01% stake in Garanti in March 2011. For additional information, see Note 3 to our Consolidated Financial Statements.

Credit Risk Management

Credit risk is defined as the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge a contractual obligation due to the insolvency or incapacity of the natural or legal persons involved.

Maximum exposure to credit risk

The BBVA Group’s maximum credit risk exposure is calculated as follows:

• In the case of a financial asset recognized in the consolidated balance sheet, exposure to credit risk is considered equal to its gross accounting value, not including certain valuation adjustments (such as impairment losses), with the sole exception of trading and hedging derivatives.

• In the case of financial guarantees granted by the Group, the maximum exposure is equal to the maximum amount that the Group would be liable for if these guarantees were called in, which is equivalent to their carrying amount.

• Our calculation of risk exposure for derivatives is based on the sum of two factors: the derivatives market value and their potential risk (or “add-on”).

168

The first factor, market value, reflects the difference between original commitments and market values on the reporting date (“mark-to-market”). As indicated in Note 2.2.1 to the Consolidated Financial Statements, derivatives are accounted for as of each reporting date at fair value according to IAS 39.

The second factor, potential risk (“add-on”), is an estimate (using our internal models) of the maximum increase to be expected on risk exposure over a derivative market value (at a given statistical confidence level) as a result of future changes in valuation prices in the residual term to final maturity of the transaction.

The consideration of the potential risk (“add-on”) relates the risk exposure to the exposure level at the time of a customer’s default. The exposure level will depend on the customer’s credit quality and the type of transaction with such customer. Given the fact that default is an uncertain event which might occur any time during the life of a contract, the Group has to consider not only the credit exposure of the contract on the reporting date, but also the potential changes in exposure during the life of the contract. This is especially important for derivative contracts, whose valuation changes substantially throughout time, depending on the fluctuation of market prices.

Credit risk originating from the derivatives in which the Group operates is mitigated through the contractual rights existing for offsetting accounts at the time of their settlement. This has reduced the Group’s exposure to credit risk to €43,133 million as of December 31, 2012 (compared to €37,817 million and €27,026 million as of December 31, 2011 and 2010, respectively).

The BBVA Group’s maximum credit risk exposure by headings in the balance sheet as of December 31, 2012, 2011 and 2010 is provided in the table below. The amounts reflected in the table do not reflect the availability of collateral or other credit enhancements to guarantee compliance with payment obligations. The details are broken down by financial instruments and counterparties.

Maximum Credit Risk Exposure	2012		2011		2010
Financial assets held for trading		28,066		20,975		24,358
Debt securities		28,066		20,975		24,358
Government		23,411		17,989		20,397
Credit institutions		2,548		1,882		2,274
Other sectors		2,107		1,104		1,687
Other financial assets designated at fair value through profit or loss		753		708		691
Debt securities		753		708		691
Government		174		129		70
Credit institutions		45		44		87
Other sectors		534		535		535
Available-for-sale financial assets		66,612		52,008		50,602
Debt securities		66,612		52,008		50,602
Government		42,762		35,801		33,074
Credit institutions		13,224		7,137		11,235
Other sectors		10,626		9,070		6,293
Loans and receivables		396,468		388,949		373,037
Loans and advances to credit institutions		26,447		26,013		23,604
Loans and advances to customers		366,047		359,855		347,210
Government		35,043		35,090		31,224
Agriculture		4,886		4,841		3,977
Industry		32,789		37,217		36,578
Real estate and construction		49,305		50,989		55,854
Trade and finance		52,158		55,748		53,830
Loans to individuals		154,383		139,063		135,868
Other		37,483		36,907		29,879
Debt securities		3,974		3,081		2,223
Government		2,375		2,128		2,040
Credit institutions		576		631		6
Other sectors		1,023		322		177
Held-to-maturity investments		10,162		10,955		9,946
Government		9,210		9,896		8,792
Credit institutions		393		451		552
Other sectors		560		608		602
Derivatives (trading and hedging) (1)		59,755		57,077		44,762
Subtotal		561,816		530,672		503,396
Valuation adjustments		403		594		299
Total Financial Assets Risk		562,219		531,266		503,695
Financial guarantees (including bank guarantees and letter of credits)		39,540		39,904		36,441
Drawable by third parties		86,227		88,978		86,790
Government		1,360		3,143		4,135
Credit institutions		1,946		2,417		2,303
Other sectors		82,921		101,314		80,352
Other contingent commitments		6,871		4,787		3,784
Total Contingent Risks and Commitments		132,638		133,670		127,015
Total Maximum Credit Exposure		694,857		664,936		630,710

(1) Reflects their market value on the reporting date and the estimated potential risk of these transactions on their due date. Accordingly, these amounts are different from those reflected in our balance sheet (which only considers their carrying amounts). We believe the information on trading and hedging derivatives set out in this table to provide a better reflection of the related maximum credit risk exposure.

169

Mitigation of credit risk, collateral and other credit enhancements, including risk hedging and mitigation policies

In most cases, maximum exposure to credit risk is reduced by collateral, credit enhancements and other actions which mitigate our exposure.

We apply a credit risk hedging and mitigation policy deriving from a banking approach focused on relationship banking. The existence of guarantees could be a necessary but not sufficient instrument for accepting risks, because the assumption of risks by the Group requires the prior verification of the debtor’s capacity for repayment, or the debtor’s ability to generate sufficient resources to allow for the amortization of the risk incurred under the agreed terms.

The policy of accepting risks is therefore organized into three different levels in the BBVA Group:

• Analysis of the financial risk of the operation, based on the debtor’s capacity for repayment or generation of funds;

• The creation of guarantees that are adequate, or generally accepted, based on the risk assumed (i.e., monetary, secured, personal or hedge guarantees); and

• Assessment of the repayment risk (asset liquidity) of the guarantees received.

The procedures for the management and valuation of collaterals are set out in the Internal Manuals on Credit Risk Management Policies (retail and wholesale), which establish the basic principles for credit risk management, including the management of collateral assigned in transactions with customers.

The methods used for the valuation of the collateral are consistent with the best market practices and imply the use of appraisal of real estate collateral, the market price in securities, the trading price of shares in mutual funds, etc. All collaterals assigned must be properly recorded and entered in the corresponding register. They must also have the approval of the Group’s legal units.

The following is a description of the main collateral for each financial instrument class:

170

• Financial assets held for trading: the guarantees or credit enhancements obtained directly from the issuer or counterparty are implicit in the clauses of the instrument.

• Trading and hedging derivatives: in derivatives, credit risk is minimized through contractual netting agreements, where positive- and negative-value derivatives with the same counterparty are offset for their net balance. There may likewise be other kinds of guarantees, depending on counterparty solvency and the nature of the transaction.

The Group trades a wide range of credit derivatives. Through these contracts, the Group either purchases or sells protection on either a single-name or index basis. The Group uses credit derivatives to mitigate credit risk in its loan portfolio and other cash positions and to hedge risks assumed in other market transactions with clients and counterparties. Credit derivatives can follow different settlement and payment conventions, all of which are in accordance with the ISDA standards. The most common types of settlement triggers include bankruptcy of the reference credit entity, acceleration of indebtedness, failure to pay, restructuring, repudiation and dissolution of the entity. Since we typically confirm over 99% of our credit derivative transactions in the Depository Trust & Clearing Corporation (DTCC), substantially all of our credit derivatives portfolio is registered and matched against our counterparties.

• Other financial assets and liabilities designated at fair value through profit or loss and Available-for-sale financial assets: the guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument.

• Loans and receivables:

• Loans and advances to credit institutions. These usually only have the counterparty’s personal guarantee.

• Total lending to customers. Most of these operations are backed by personal guarantees extended by the counterparty. There may also be collateral to secure loans and advances to customers (such as mortgages, cash guarantees, pledged securities and other collateral), or to obtain other credit enhancements (bonds, hedging, etc.).

• Debt securities. Guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument.

• Held-to-maturity investments: guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent in the structure of the instrument.

• Financial guarantees, other contingent exposures and drawable by third parties: these have the counterparty’s personal guarantee.

Our collateralized credit risk as of December 31, 2012, 2011 and 2010, excluding balances deemed impaired, is broken down in the table below:

Collateralized Credit Risk	2012		2011		2010
	(In Millions of Euros)
Mortgage loans		139,228		130,703		132,630
Operating assets mortgage loans		4,357		3,732		3,638
Home mortgages		120,133		109,199		108,224
Rest of mortgages(1)		14,738		17,772		20,768
Secured loans, except mortgage		28,465		29,353		18,155
Cash guarantees		419		332		281
Secured loan (pledged securities)		997		590		563
Rest of secured loans(2)		27,049		28,431		17,310
Total		167,693		160,056		150,785

(1) Refers to real estate loans which are secured with properties (other than residential properties) in respect of which we provide financing to the borrower to buy or to construct such properties.

(2) Includes loans whose collateral consists of cash, other financial assets or partial guarantees.

171

As of December 31, 2012, in relation to mortgages, the average weighted amount pending loan amortization was 51% of the collateral pledged (52% as of December 31, 2011 and 53% as of December 31, 2010).

Credit quality of financial assets that are neither past due nor impaired

We have enhanced our credit quality requirements for new loan generation by applying stricter criteria to new transactions with Spanish customers based on their creditworthiness. In particular, we have lowered the maximum acceptable percentage which monthly principal and interest payments associated with a proposed new loan may represent of the monthly income of the relevant customer to a range of 33%-50%, depending on available collateral and other financial guarantees. We have also lowered our maximum acceptance loan-to-value ratio (i.e., requiring more collateral per unit of lending) to a range of 80-100%, depending on available collateral and other guarantees. We have focused our efforts on reducing our real estate exposure mainly by decreasing new loan generation, mainly in Spain, and improving loan recovery in the real estate sector.

We have tools (“scoring” and “rating”) that enable us to rank the credit quality of our operations and customers based on an assessment of each such operation or customer and its correspondence with our probability of default (“PD”) scales. To analyze the performance of PD, the Group uses a series of tracking tools and historical databases that collect the pertinent information generated internally, which can be grouped together in scoring and rating models.

Scoring

Scoring is a decision-making model that contributes to both the arrangement and management of retail loans (consumer loans, mortgages, credit cards for individuals, etc.). Scoring is the tool used to decide to whom a loan should be assigned, what amount should be assigned and what strategies can help establish the price, as it is an algorithm that sorts transactions by their credit quality. This algorithm enables the BBVA Group to assign a score to each transaction proposed by a customer, on the basis of a series of objective characteristics that have statistically been shown to discriminate between the quality and risk of this type of transactions. The advantage of scoring lies in its simplicity and homogeneity. All that is needed is a series of objective data for each customer, and this data is analyzed automatically using an algorithm.

There are three types of scoring based on the information used and its purpose:

• Reactive scoring: measures the risk of a transaction requested by an individual using variables relating to the requested transaction and to the customer’s socio-economic data available at the time of the request. The new transaction is approved or rejected depending on the score given.

• Behavioral scoring: scores transactions for a given product in an outstanding risk portfolio of the entity, enabling the credit rating to be tracked and the customer’s needs to be anticipated. It uses transaction and customer variables available internally. Specifically, variables that refer to the behavior of both the product and the customer.

• Proactive scoring: gives a score at customer level using variables related to the individual’s general behavior with the entity, and to his/her payment behavior in all the contracted products. The purpose is to track the customer’s credit quality and it is used to pre-grant new transactions.

Rating

Rating tools, as opposed to scoring tools, do not assess transactions but focus on the rating of customers (companies, corporations, SMEs, public authorities, etc.) instead. A rating tool is an instrument that, based on a detailed financial study, helps determine a customer’s ability to meet his/her financial obligations. The final rating is usually a combination of various factors: on the one hand, quantitative factors, and on the other hand, qualitative factors. It is a middle road between an individual analysis and a statistical analysis.

172

The main difference between ratings and scorings is that the latter are used to assess retail products, while ratings use a wholesale banking customer approach. Moreover, scorings only include objective variables, while ratings add qualitative information. And although both are based on statistical studies, adding a business view, rating tools give more weight to the business criterion compared to scoring tools.

For portfolios where the number of defaults is very low (sovereign risk, corporations, financial entities, etc.) the internal information is supplemented by “benchmarking” of the external rating agencies (Moody’s, Standard & Poor’s and Fitch). To this end, each year the PDs compiled by the rating agencies at each level of risk rating are compared, and the measurements compiled by the various agencies are mapped against those of the BBVA Master Rating Scale.

Once the PD of a transaction or customer has been calculated, a “business cycle adjustment” is carried out. This is a means of establishing a measure of risk that goes beyond the time of its calculation. The aim is to capture representative information of the behavior of portfolios over a complete economic cycle. This probability is linked to the Master Rating Scale prepared by the BBVA Group to enable uniform classification of the Group’s various asset risk portfolios.

The table below shows the abridged scale used to classify our outstanding risk as of December 31, 2012:

	Probability of default (basic points)
Internal rating Reduced List (17 groups)	Average		Minimum from >=		Maximum
AAA		1		—		2
AA+		2		2		3
AA		3		3		4
AA-		4		4		5
A+		5		5		6
A		8		6		9
A-		10		9		11
BBB+		14		11		17
BBB		20		17		24
BBB-		31		24		39
BB+		51		39		67
BB		88		67		116
BB-		150		116		194
B+		255		194		335
B		441		335		581
B-		785		581		1,061
C		2,122		1,061		4,243

173

The table below outlines the distribution of exposure, including derivatives by internal ratings, to corporations, financial entities and institutions (excluding sovereign risk), of the BBVA Group’s main entities as of December 31, 2012 and 2011:

	2012					2011
Credit Risk Distribution by Internal Rating	Amount		%			Amount		%
	(In Millions of Euros, Except Percentages)
AAA/AA+/AA/AA-		24,091		9.95	%		47,047		18.42	%
A+/A/A-		73,526		30.37	%		94,192		36.88	%
BBB+		31,951		13.20	%		23,685		9.27	%
BBB		23,410		9.67	%		10,328		4.04	%
BBB-		26,788		11.07	%		10,128		3.97	%
BB+		15,185		6.27	%		12,595		4.93	%
BB		10,138		4.19	%		11,361		4.45	%
BB-		8,493		3.51	%		14,695		5.75	%
B+		8,504		3.51	%		10,554		4.13	%
B		8,246		3.41	%		11,126		4.36	%
B-		5,229		2.16	%		6,437		2.52	%
CCC/CC		6,501		2.69	%		3,266		1.28	%
Total		242,064		100.00	%		255,414		100.00	%

Policies and procedures for preventing excessive risk concentration

In order to prevent the build-up of excessive concentrations of credit risk at the individual, country and sector levels, we maintain maximum permitted risk concentration indices updated at the individual and portfolio sector levels tied to the various observable variables within the field of credit risk management. Accordingly, the limit on the Group’s exposure or financial commitment to a specific customer depends on the customer’s credit rating, the nature of the risks involved, and the Group’s presence in a given market, based on the following guidelines:

• To the extent that it is possible, the goal is to combine the customer’s credit needs (commercial/financial, short-term/long-term, etc.) with the interests of the Group.

• Any legal limits that may exist concerning risk concentration are taken into consideration, such as the relationship between risks vis-à-vis a particular customer and the capital of the entity that assumes said risks, market volatility, the macroeconomic situation, etc.

• In order to properly manage risk concentration and, if necessary, take action on such risks, various different levels of monitoring have been implemented according to the global risk level of a customer. Any risk concentrations with one customer or group that are expected to generate losses of more than €18 million are authorized and monitored directly by the Bank’s Board of Directors Risk Committee. Financial assets past due but not impaired

174

The table below provides details of financial assets past due as of December 31, 2012, 2011 and 2010 but not considered to be impaired, listed by their first due date:

	2012						2011						2010
Financial Assets Past Due but Not Impaired	Less than 1 Month Past-Due		1 to 2 Months Past-Due		2 to 3 Months Past-Due		Less than 1 Month Past-Due		1 to 2 Months Past-Due		2 to 3 Months Past-Due		Less than 1 Month Past-Due		1 to 2 Months Past-Due		2 to 3 Months Past-Due
	(In Millions of Euros)
Loans and advances to credit institutions		21		—		—		—		—		—		—		—		—
Loans and advances to customers		1,075		623		312		1,998		392		366		1,082		311		277
Government		90		213		6		186		47		23		122		27		27
Other sectors		985		410		306		1812		345		343		960		284		250
Debt securities		—		—		—		—		—		—		—		—		—
Total		1,075		623		312		1,998		392		366		1,082		311		277

Impaired assets and impairment losses

The table below shows the composition of the balance of the impaired financial assets and risks as of December 31, 2012, 2011 and 2010, broken down by heading in the accompanying consolidated balance sheet:

Impaired Risks. Breakdown by Type of Asset and by Sector	2012		2011		2010
	(In Millions of Euros)
IMPAIRED RISKS ON BALANCE
Available-for-sale financial assets		90		125		140
Debt securities		90		125		140
Loans and receivables		20,325		15,685		15,472
Loans and advances to credit institutions		28		28		101
Loans and advances to customers		20,287		15,647		15,361
Debt securities		10		10		10
Total Impaired Risks on Balance(1)		20,415		15,810		15,612
Impaired Risks Off Balance
Contingent risks impaired(2)		317		219		324
Total impaired risks(1) + (2)		20,732		16,029		15,936
Of which:
Government		165		135		124
Credit institutions		73		84		129
Other sectors		20,177		15,590		15,360
Mortgage		13,843		9,639		8,627
With partial secured loans		113		83		159
Rest		6,221		5,868		6,574
Unsecured customers loans		4,517		3,884		3,779
Overdrafts		178		460		408
Commercial credit		392		304		364
Credit accounts		342		224		366
Credit cards		35		42		72
Other advances		757		954		1,387
Contingent Risks Impaired		317		219		324
TOTAL IMPAIRED RISKS		20,732		16,029		15,936

175

The changes in 2012, 2011 and 2010 in the impaired financial assets and contingent risks are as follows:

Changes in Impaired Financial Assets and Contingent Risks	2012			2011			2010
	(In Millions of Euros)
Balance at the beginning		16,029			15,936			15,928
Additions(A)		14,484			13,045			13,207
Decreases(B)		(8,293	)		(9,079	)		(9,138	)
Cash collections and return to performing		(6,018	)		(6,044	)		(6,267	)
Foreclosed assets(1)		(1,105	)		(1,417	)		(1,513	)
Real estate assets received in lieu of payment(2)		(1,170	)		(1,618	)		(1,358	)
Net additions(A)+(B)		6,191			3,966			4,069
Amounts written-off		(4,393	)		(4,093	)		(4,307	)
Exchange differences and other (Unnim)		2,905			221			246
Balance at the end		20,732			16,029			15,936

(1) Reflects the aggregate amount of impaired loans derecognized from our balance sheet throughout the period as a result of mortgage recoveries. Equals derecognition related to additions of “Foreclosed assets auctioned” (totaling €1,044 million, €1,326 million and €1,407 million in 2012, 2011 and 2010, respectively) and additions of “Foreclosed assets from finance leases” (totaling €61 million, €91 million and €106 million in 2012, 2011 and 2010, respectively). See Note 16 to our Consolidated Financial Statements for additional information.

(2) Reflects the aggregate amount of impaired loans derecognized from our balance sheet throughout the period as a result of real estate assets received in lieu of payment. Does not reflect acquisitions of real estate assets from distressed customers whose loans are not impaired. For information on the total balance of real estate assets received from distressed customers in lieu of payment (net of impairment losses) as of December 31, 2012, see Note 22 to our Consolidated Financial Statements.

Below are details of the impaired financial assets as of December 31, 2012, 2011 and 2010, classified by geographical area and by the time since their oldest past-due amount or the period since they were deemed impaired:

2012	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Spain		6,495		1,742		1,575		6,297		16,109
Rest of Europe		495		75		54		317		941
Mexico		941		112		153		289		1,495
South America		840		115		41		116		1,112
United States		639		26		13		80		758
Rest of the world		—		—		—		1		1
Total		9,409		2,070		1,836		7,100		20,415

2011	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Spain		4,640		1,198		1,187		4,482		11,507
Rest of Europe		217		38		41		235		531
Mexico		809		141		130		199		1,280
South America		767		66		38		109		980
United States		634		211		117		549		1,511
Rest of the world		—		—		—		1		1
Total		7,068		1,653		1,513		5,572		15,810

176

2010	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Spain		5,279		1,064		798		4,544		11,685
Rest of Europe		106		24		24		55		209
Mexico		753		60		69		324		1,206
South America		720		51		31		74		876
United States		1,110		84		111		331		1,636
Rest of the world		—		—		1		—		—
Total		7,968		1,284		1,034		5,327		15,612

Below are details of the impaired financial assets as of December 31, 2012, 2011 and 2010, classified by type of loan in accordance with its associated guarantee, and by the time since their oldest past-due amount or the period since they were deemed impaired:

2012	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Mortgage		5,156		1,507		1,405		5,775		13,843
Residential mortgage		1,601		529		474		1,738		4,343
Commercial mortgage (rural properties in operation and offices, and industrial buildings)		725		256		193		1,097		2,271
Rest of residential mortgage(2)		742		335		321		1,177		2,575
Plots and other real estate assets		2,088		386		416		1,763		4,654
Other partially secured loans		113		—		—		—		113
Unsecured loans		4,140		563		432		1,325		6,459	(1)
Total		9,409		2,070		1,836		7,100		20,415

2011	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Mortgage		3,570		1,055		979		4,033		9,639
Residential mortgage		1,080		390		357		1,373		3,200
Commercial mortgage (rural properties in operation and offices, and industrial buildings)		630		210		160		795		1,795
Rest of residential mortgage(2)		490		138		167		659		1,454
Plots and other real estate assets		1,370		317		295		1,206		3,188
Other partially secured loans		83		—		—		—		83
Unsecured loans		3,414		598		534		1,541		6,087	(1)
Total		7,067		1,653		1,513		5,574		15,810

177

2010	Less than 6 Months Past-Due		6 to 9 Months Past-Due		9 to 12 Months Past-Due		More than 12 Months Past-Due		Total
	(In Millions of Euros)
Mortgage		3,301		946		763		3,617		8,627
Residential mortgage		629		304		271		1,472		2,676
Commercial mortgage (rural properties in operation and offices, and industrial buildings)		561		128		100		602		1,391
Rest of residential mortgage(2)		701		132		99		593		1,525
Plots and other real estate assets		1,410		382		293		950		3,035
Other partially secured loans		159		—		—		—		159
Unsecured loans		4,507		338		271		1,710		6,628
Total		7,967		1,284		1,034		5,327		15,612

(1) For additional information see “Impaired assets and impairment losses” above.

(2) Refers to residential real estate loans which are secured by properties (other than those currently used as the family residential property of the borrower) and to loans through which we provide financing to a borrower to construct residential properties until such properties are finished and sold.

Below is the accumulated financial income accrued from impaired assets as of December 31, 2012, 2011 and 2010 that are not recognized in our consolidated income statement due to the existence of doubts as to the collection of these assets:

	2012		2011		2010
	(In Millions of Euros)
Financial Income from Impaired Assets		2,405		1,908		1,717

As of December 31, 2012, 2011 and 2010, the non-performing loan and coverage ratios of the transactions recorded under the “Loans and advances to customers” and “Contingent risk” headings of our consolidated balance sheet were as follows:

BBVA Group Ratios	2012		2011		2010
	(Percentage)
NPA ratio		5.1		4.0		4.1
NPA coverage ratio		71.9		61.1		62.0

Impairment losses

Below is a breakdown of the provisions recorded on our consolidated balance sheet covering estimated impairment losses in financial assets and contingent risks as of December 31, 2012, 2011 and 2010, classified according to the different headings used in our consolidated balance sheet:

Impairment Losses and Provisions for Contingent Risks	2012		2011		2010
	(In Millions of Euros)
Available-for-sale portfolio		342		569		619
Loans and receivables		14,534		9,469		9,473
Loans and advances to customers		14,484		9,409		9,396
Loans and advances to credit institutions		33		47		67
Debt securities		17		12		10
Held to maturity investment		—		1		1
Impairment losses		14,876		10,039		10,093
Provisions to Contingent Risks and Commitments		341		291		264
Total		15,217		10,330		10,357
Of which:
For impaired portfolio		10,117		7,058		7,507
For currently non-impaired portfolio		5,100		3,272		2,850

178

Below are the changes in the estimated impairment losses for the years ended December 31, 2012, 2011 and 2010, broken down by the headings used in our consolidated balance sheet:

2012	Available-for- Sale Portfolio			Held to Maturity Investment			Loans and Receivables			Contingent Risks and Commitments			Total
	(In Millions of Euros)
Balance at the beginning		569			1			9,469			291			10,329
Increase in impairment losses charged to income		74			1			10,578			105			10,757
Decrease in impairment losses credited to income		(31	)		—			(2,304	)		(44	)		(2,379	)
Impairment losses (net)		43			1			8,273			61			8,378
Entities incorporated/disposed in the year		1			—			2,066			5			2,073
Transfers to written-off loans		(18	)		—			(4,125	)		—			(4,143	)
Exchange differences and other		(254	)		(1	)		(1,150	)		(16	)		(1,420	)
Balance at the end		342			—			14,534			341			15,217

2011	Available-for- Sale Portfolio			Held to Maturity Investment		Loans and Receivables			Contingent Risks and Commitments			Total
	(In Millions of Euros)
Balance at the beginning		619			1		9,473			264			10,356
Increase in impairment losses charged to income		62			—		6,041			17			6,121
Decrease in impairment losses credited to income		(37	)		—		(1,513	)		(24	)		(1,574	)
Impairment losses (net)		25			—		4,528			(6	)		4,547
Entities incorporated in the year		—			—		305			12			318
Transfers to written-off loans		(75	)		—		(4,039	)		—			(4,114	)
Exchange differences and other		—			—		(798	)		22			(776	)
Balance at the end		569			1		9,469			291			10,330

179

2010	Available-for- Sale Portfolio			Held to Maturity Investment		Loans and Receivables			Contingent Risks and Commitments			Total
	(In Millions of Euros)
Balance at the beginning		449			1		8,805			243			9,498
Increase in impairment losses charged to income		187			—		7,020			62			7,268
Decrease in impairment losses credited to income		(32	)		—		(2,204	)		(40	)		(2,276	)
Impairment losses (net)		155			—		4,816			22			4,993
Transfers to written-off loans		(57	)		—		(4,431	)		—			(4,488	)
Exchange differences and other		72			—		283			(1	)		354
Balance at the end		619			1		9,473			264			10,357

The following table shows the changes in impaired financial assets written off from the balance sheet for the years ended December 31, 2012, 2011 and 2010 because the possibility of their recovery was deemed remote:

Changes in Impaired Financial Assets Written-Off from the Balance Sheet	2012			2011			2010
	(In Millions of Euros)
Balance at the beginning		15,871			13,367			9,833
Increase		4,364			4,284			4,788
Decrease		(1,754	)		(1,895	)		(1,447	)
Re-financing or restructuring		(9	)		(4	)		(1	)
Cash recovery		(337	)		(327	)		(253	)
Foreclosed assets		(133	)		(29	)		(5	)
Sales of written-off		(284	)		(840	)		(342	)
Debt forgiveness		(541	)		(604	)		(217	)
Time-barred debt and other causes		(450	)		(91	)		(629	)
Net exchange differences		785			115			193
Balance at the end		19,266			15,871			13,367

As indicated in Note 2.2.1 to our Consolidated Financial Statements, although they are not recognized in our consolidated balance sheet, we continue to attempt to collect on these write-offs until our rights to receive the related assets are fully extinguished, either because they become time-barred debt, the debt is forgiven, or other reasons.

180

Risk Concentrations

The tables below show a breakdown of the balances of financial instruments registered in our consolidated balance sheet according to their concentration in geographical areas and to the residence of the customer or counterparty, as of December 31, 2012, 2011 and 2010. It does not take into account valuation adjustments, impairment losses or loan-loss provisions.

2012 Risks On-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Financial assets held for trading		13,768		39,480		15,476		4,315		3,643		3,273		79,954
Loans and advances to customers		—		—		—		244		—		—		244
Debt securities		5,726		5,196		12,960		577		2,805		801		28,066
Equity instruments		1,270		526		543		101		239		243		2,922
Derivatives		6,772		33,758		1,973		3,392		599		2,229		48,722
Other financial assets designated at fair value through profit or loss		296		408		1,630		516		—		—		2,851
Loans and advances to credit institutions		—		21		—		—		—		—		21
Debt securities		190		42		9		512		—		—		753
Equity instruments		106		345		1,622		4		—		—		2,076
Available-for-sale portfolio		36,109		10,483		9,087		7,678		6,128		1,085		70,569
Debt securities		33,107		10,264		9,035		7,112		6,053		1,041		66,612
Equity instruments		3,002		219		51		566		75		45		3,957
Loans and receivables		211,701		42,690		46,149		40,087		51,704		4,137		396,469
Loans and advances to credit institutions		3,220		12,168		4,549		3,369		2,065		1,076		26,447
Loans and advances to customers		207,131		29,944		41,600		35,838		48,479		3,055		366,047
Debt securities		1,350		577		—		880		1,160		6		3,974
Held-to-maturity investments		7,279		2,884		—		—		—		—		10,162
Hedging derivatives		914		3,798		159		226		5		18		5,120
Total Risk in Financial Assets		270,066		99,743		72,501		52,822		61,480		8,514		565,126

Risks Off-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Contingent risks		16,189		12,429		872		3,217		5,858		975		39,540
Contingent liabilities		26,511		22,780		13,564		22,029		7,097		1,116		93,098
Total Contingent Risk		42,700		35,210		14,435		25,246		12,955		2,091		132,638
TOTAL		312,766		134,953		86,937		78,068		74,435		10,605		697,763

181

2011 Risks On-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Financial assets held for trading		12,958		33,305		11,675		4,672		5,452		2,539		70,603
Debt securities		5,075		2,068		10,933		565		2,030		305		20,975
Equity instruments		662		363		741		69		125		238		2,198
Derivatives		7,221		30,874		2		4,039		3,297		1,996		47,430
Other financial assets designated at fair value through profit or loss		234		311		1,470		509		454		—		2,977
Debt securities		117		77		6		508		1		—		708
Equity instruments		117		234		1,464		1		453		—		2,269
Available-for-sale portfolio		26,546		8,895		7,825		8,151		5,164		656		57,237
Debt securities		22,371		8,685		7,764		7,518		5,068		602		52,008
Equity instruments		4,175		210		61		633		96		54		5,229
Loans and receivables		203,348		44,305		42,489		44,625		46,479		7,704		388,949
Loans and advances to credit institutions		3,034		11,531		4,877		2,712		2,197		1,663		26,013
Loans and advances to customers		198,948		32,445		37,612		41,222		43,592		6,035		359,855
Debt securities		1,365		328		—		692		690		6		3,081
Held-to-maturity investments		7,373		3,582		—		—		—		—		10,955
Hedging derivatives		395		3,493		485		253		16		56		4,698
Total Risk in Financial Assets		250,854		93,890		63,943		58,210		57,565		10,955		535,419

Risks Off-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Contingent risks		16,175		12,289		1,098		4,056		4,733		1,554		39,904
Contingent liabilities		30,848		21,506		11,929		22,002		6,192		1,288		93,767
Total Contingent Risk		47,023		33,795		13,027		26,058		10,925		2,842		133,669
TOTAL		297,877		127,685		76,970		84,268		68,490		13,797		669,088

2010 Risks On-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Financial assets held for trading		18,903		22,899		9,578		3,951		5,549		2,404		63,284
Debt securities		9,522		2,839		8,853		654		2,086		405		24,359
Equity instruments		3,041		888		725		148		136		322		5,260
Derivatives		6,340		19,172		0		3,149		3,327		1,677		33,665
Other financial assets designated at fair value through profit or loss		284		98		1,437		481		476		1		2,777
Debt securities		138		66		7		480		—		—		691
Equity instruments		146		32		1,430		1		476		1		2,086
Available-for-sale portfolio		25,230		7,689		10,158		7,581		4,291		1,234		56,183
Debt securities		20,725		7,470		10,106		6,903		4,211		1,187		50,602
Equity instruments		4,505		219		52		678		80		47		5,581
Loans and receivables		218,399		30,985		40,540		39,944		37,320		5,847		373,035
Loans and advances to credit institutions		6,786		7,846		5,042		864		2,047		1,018		23,603
Loans and advances to customers		210,102		23,139		35,498		38,649		34,999		4,822		347,209
Debt securities		1,511		—		—		431		274		7		2,223
Held-to-maturity investments		7,504		2,443		—		—		—		—		9,947
Hedging derivatives		234		2,922		281		131		—		35		3,603
Total Risk in Financial Assets		270,554		67,036		61,994		52,088		47,636		9,521		508,829

Risks Off-Balance	Spain		Europe, Excluding Spain		Mexico		United States		Latin America		Rest		Total
	(In Millions of Euros)
Contingent risks		20,175		6,773		1,006		3,069		3,953		1,465		36,441
Contingent liabilities		35,784		19,144		11,421		17,604		5,711		910		90,574
Total Contingent Risk		55,959		25,917		12,427		20,673		9,664		2,375		127,015
TOTAL		326,513		92,953		74,421		72,761		57,300		11,896		635,844

182

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not Applicable.

B. Warrants and Rights

Not Applicable.

C. Other Securities

Not Applicable.

D. American Depositary Shares

Our ADSs are listed on the New York Stock Exchange under the symbol “BBVA”. The Bank of New York Mellon is the depositary (the “Depositary”) issuing ADSs pursuant to an amended and restated deposit agreement dated June 29, 2007 among BBVA, the Depositary and the holders from time to time of ADSs (the “Deposit Agreement”). Each ADS represents the right to receive one share. The table below sets forth the fees payable, either directly or indirectly, by a holder of ADSs as of the date of this Annual Report.

Category	Depositary Actions		Associated Fee / By Whom Paid
(a) Depositing or substituting the underlying shares	Issuance of ADSs		Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the new ADSs delivered (charged to person depositing the shares or receiving the ADSs)
(b) Receiving or distributing dividends	Distribution of cash dividends or other cash distributions; distribution of share dividends or other free share distributions; distribution of securities other than ADSs or rights to purchase additional ADSs		Not applicable
(c) Selling or exercising rights	Distribution or sale of securities		Not applicable
(d) Withdrawing an underlying security	Acceptance of ADSs surrendered for withdrawal of deposited securities		Up to $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADSs surrendered (charged to person surrendering or to person to whom withdrawn securities are being delivered)
(e) Transferring, splitting or grouping receipts	Transfers, combining or grouping of depositary receipts		Not applicable
(f) General depositary services, particularly those charged on an annual basis	Other services performed by the Depositary in administering the ADSs		Not applicable
(g) Expenses of the Depositary	Expenses incurred on behalf of holders in connection with		Expenses payable by holders of ADSs or persons depositing shares for the issuance of ADSs; expenses payable in connection with the conversion of foreign currency into U.S. dollars are payable out of such foreign currency
	Ÿ	stock transfer or other taxes (including Spanish income taxes) and other governmental charges;
	Ÿ	cable, telex and facsimile transmission and delivery charges incurred at request of holder of ADS or person depositing shares for the issuance of ADSs;
	Ÿ	transfer, brokerage or registration fees for the registration of shares or other deposited securities on the share register and applicable to transfers of shares or other deposited securities to or from the name of the custodian;
	Ÿ	reasonable and customary expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars

183

The Depositary may remit to us all or a portion of the Depositary fees charged for the reimbursement of certain of the expenses we incur in respect of the ADS program established pursuant to the Deposit Agreement upon such terms and conditions as we may agree from time to time. In the year ended December 31, 2012, the Depositary reimbursed us $722 thousand with respect to certain fees and expenses. The table below sets forth the types of expenses that the Depositary has agreed to reimburse and the amounts reimbursed in 2012.

Category of Expenses	Amount Reimbursed in the Year Ended December 31, 2012
	(In Thousands of Dollars)
NYSE Listing Fees		102
Investor Relations Marketing		489
Professional Services		70
Annual Shareholders’ General Meeting Expenses		61

184

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

ITEM 15. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of December 31, 2012, BBVA, under the supervision and with the participation of BBVA’s management, including our Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Global Accounting and Information Management Officer, performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). There are inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.

Based upon their evaluation, BBVA’s Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Global Accounting and Information Management Officer concluded, that BBVA’s disclosure controls and procedures are effective at a reasonable assurance level in ensuring that information relating to BBVA, including its consolidated subsidiaries, required to be disclosed in reports that it files under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) accumulated and communicated to the management, including principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The management of BBVA is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. BBVA’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of BBVA;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of BBVA’s management and directors; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

185

Under the supervision and with the participation of BBVA’s management, including our Chairman and Chief Executive Officer, President and Chief Operating Officer and Chief Accounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our management concluded that, as of December 31, 2012, our internal control over financial reporting was effective based on those criteria.

Our internal control over financial reporting as of December 31, 2012 has been audited by Deloitte S.L., an independent registered public accounting firm, as stated in their report which follows below.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Banco Bilbao Vizcaya Argentaria, S.A.:

We have audited the internal control over financial reporting of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”) and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group (the “Group”—Note 3) as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

186

In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2012 of the Group and our report dated April 2, 2013 expressed an unqualified opinion on those consolidated financial statements.

/s/DELOITTE, S.L.

Madrid – Spain

April 2, 2013

Changes in Internal Control Over Financial Reporting

There has been no change in BBVA’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The charter for our Audit and Compliance Committee provides that the Chairman of the Audit and Compliance Committee is required to have experience in financial matters as well as knowledge of the accounting standards and principles required by the banking regulators, and we have determined that Mr. José Luis Palao García Suelto, the Chairman of the Audit and Compliance Committee, has such experience and knowledge and is an “audit committee financial expert” as such term is defined by the regulations of the Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002. Mr. Palao is independent within the meaning of the New York Stock Exchange listing standards.

In addition, we believe that the remaining members of the Audit and Compliance Committee have an understanding of applicable generally accepted accounting principles, experience analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our Consolidated Financial Statements, an understanding of internal controls over financial reporting, and an understanding of audit committee functions. Our Audit and Compliance Committee has experience overseeing and assessing the performance of BBVA and its consolidated subsidiaries and our external auditors with respect to the preparation, auditing and evaluation of our Consolidated Financial Statements.

ITEM 16B. CODE OF ETHICS

BBVA’s Code of Ethics and Conduct applies, among others, to its chief executive officer, chief financial officer and chief accounting officer. This code establishes the principles that guide these officers’ respective actions: ethical conduct, professional standards and confidentiality. It also establishes the limitations and defines the conflicts of interest arising from their status as senior executives. We have not waived compliance with, nor made any amendment to, the Code of Ethics and Conduct in 2012. BBVA’s Code of Ethics and Conduct can be found on its website at www.bbva.com.

187

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table provides information on the aggregate fees billed by our principal accountants, Deloitte, S.L. and its worldwide affiliates, by type of service rendered for the periods indicated.

	Year ended December 31,
Services Rendered	2012		2011
	(In Millions of Euros)
Audit Fees(1)		19.3		17.6
Audit-Related Fees(2)		2.6		2.4
Tax Fees(3)		2.2		1.9
All Other Fees(4)		2.2		2.5
Total		26.3		24.4

(1) Aggregate fees billed for each of the last two fiscal years for professional services rendered by Deloitte, S.L. and its worldwide affiliates for the audit of BBVA’s annual financial statements or services that are normally provided by Deloitte, S.L. and its worldwide affiliates in connection with statutory and regulatory filings or engagements for those fiscal years.

(2) Aggregate fees billed in each of the last two fiscal years for assurance and related services by Deloitte, S.L. and its worldwide affiliates that are reasonably related to the performance of the audit or review of BBVA’s financial statements and are not reported under (1) above.

(3) Aggregate fees billed in each of the last two fiscal years for professional services rendered by Deloitte, S.L. and its worldwide affiliates for tax compliance, tax advice, and tax planning.

(4) Aggregate fees billed in each of the last two fiscal years for products and services provided by Deloitte, S.L. and its worldwide affiliates other than the services reported in (1), (2) and (3) above. Services in this category consisted primarily of consultancy and implementation of new regulation.

The Audit and Compliance Committee’s Pre-Approval Policies and Procedures

In order to assist in ensuring the independence of our external auditor, the regulations of our Audit and Compliance Committee provides that our external auditor is generally prohibited from providing us with non-audit services, other than under the specific circumstance described below. For this reason, our Audit and Compliance Committee has developed a pre-approval policy regarding the contracting of BBVA’s external auditor, or any affiliate of the external auditor, for professional services. The professional services covered by such policy include audit and non-audit services provided to BBVA or any of its subsidiaries reflected in agreements dated on or after May 6, 2003.

The pre-approval policy is as follows:

1. The hiring of BBVA’s external auditor or any of its affiliates is prohibited, unless there is no other firm available to provide the needed services at a comparable cost and that could deliver a similar level of quality.

2. In the event that there is no other firm available to provide needed services at a comparable cost and delivering a similar level of quality, the external auditor (or any of its affiliates) may be hired to perform such services, but only with the pre-approval of the Audit and Compliance Committee.

3. The Chairman of the Audit and Compliance Committee has been delegated the authority to approve the hiring of BBVA’s external auditor (or any of its affiliates). In such an event, however, the Chairman would be required to inform the Audit and Compliance Committee of such decision at the Committee’s next meeting.

4. The hiring of the external auditor for any of BBVA’s subsidiaries must also be pre-approved by the Audit and Compliance Committee.

188

5. Agreements entered into prior to May 6, 2003 between BBVA or any of its subsidiaries and any of their respective external auditors, required the approval of the Audit and Compliance Committee in the event that services provided under such agreements continued after May 6, 2004.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

2012	Total Number of Ordinary Shares Purchased		Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31		39,430,375	€ 6.40	—	—
February 1 to February 28		36,851,546	€ 6.90	—	—
March 1 to March 31		92,013,761	€ 6.40	—	—
April 1 to April 30		90,360,065	€ 5.44	—	—
May 1 to May 31		80,115,098	€ 4.95	—	—
June 1 to June 30		77,797,863	€ 5.20	—	—
July 1 to July 31		80,972,231	€ 5.02	—	—
August 1 to August 31		36,896,904	€ 5.53	—	—
September 1 to September 30		94,388,212	€ 6.41	—	—
October 1 to October 31		118,796,441	€ 6.35	—	—
November 1 to November 30		30,498,402	€ 6.28	—	—
December 1 to December 31		41,168,838	€ 6.81	—	—
Total		819,289,736	€ 5.90	—	—

During 2012, we sold a total of 850,224,983 shares for an average price of €6.04 per share.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

During the years ended December 31, 2012, 2011 and 2010 and through the date of this Annual Report, the principal independent accountant engaged to audit our financial statements, Deloitte S.L., has not resigned, indicated that it has declined to stand for re-election after the completion of its current audit or been dismissed. For each of the years ended December 31, 2012, 2011 and 2010, Deloitte S.L. has not expressed reliance on another accountant or accounting firm in its report on our audited annual accounts for such periods.

189

ITEM 16G. CORPORATE GOVERNANCE

Compliance with NYSE Listing Standards on Corporate Governance

On November 4, 2003, the SEC approved rules proposed by the New York Stock Exchange (the “NYSE”) intended to strengthen corporate governance standards for listed companies. In compliance therewith, the following is a summary of the significant differences between our corporate governance practices and those applicable to domestic issuers under the NYSE listing standards.

Independence of the Directors on the Board of Directors and Committees

Under the NYSE corporate governance rules, (i) a majority of a U.S. company’s board of directors must be composed of independent directors, (ii) all members of the audit committee must be independent and (iii) all U.S. companies listed on the NYSE must have a compensation committee and a nominations committee and all members of such committees must be independent. In each case, the independence of directors must be established pursuant to highly detailed rules promulgated by the NYSE and, in the case of the audit committee, the NYSE and the SEC.

Subject to certain exceptions not applicable to us and except as indicated below, Spanish law does not contain any requirement that members of the board of directors or the committees thereof be independent, nor does Spanish law provide for the time being any definition of what constitutes independence for the purpose of board or committee membership or otherwise.

With respect to board committees, pursuant to RD 771/2011, the Bank of Spain will determine which credit entities should have a Compensation Committee, taking into account, among other things, their size, internal organization and the complexity of their activities. The Chairman and the members of the Compensation Committee, if any, will be members of the Board of Directors with no executive functions. In addition, according to the Securities Market Act, listed companies should have an Audit Committee and at least one of its members must be an independent director.

Moreover, pursuant to certain non-binding recommendations applicable to listed companies in Spain, the Audit and Compliance Committee and the Compensation and Appointment Committees of such companies should be composed of a majority of non-executive directors and chaired by an independent director. These recommendations also contain a definition of what constitutes independence for the purpose of board or committee membership.

Pursuant to article 1 of our Board regulations BBVA considers that independent directors are those who fulfill the requirements described below:

Independent directors are external directors appointed for their personal and professional background who can pursue their duties without being constrained by their relations with the Company, its significant shareholders or its executives.

Independent directors may not:

a) Have been employees or executive directors in Group companies, unless three or five years, respectively, have passed since they ceased to be so.

b) Receive any amount or benefit from the Company or its Group companies for any reason other than remuneration of their directorship, unless it is insignificant.

Neither dividends nor supplementary pension payments that the director may receive from earlier professional or employment relationships shall be taken into account for the purposes of this section, provided they are not subject to conditions and the company paying them may not at its own discretion suspend, alter or revoke their accrual without breaching its obligations.

c) Be or have been a partner in the external auditors’ firm or in charge of the auditor’s report with respect to the Company or any other Group company during the last three years.

190

d) Be executive director or senior manager in any other company on which a Company executive director or senior manager is external director.

e) Maintain or have maintained during the past year an important business relationship with the Company or any of its Group companies, either on his/her own behalf or as relevant shareholder, director or senior manager of a company that maintains or has maintained such relationship.

“Business relationships” shall mean relationships as provider of goods and/or services, including financial, advisory and/or consultancy services.

f) Be significant shareholders, executive directors or senior managers of any organization that receives or has received significant donations from the Company or its Group during the last three years.

Those who are merely trustees on a foundation receiving donations shall not be ineligible under this section.

g) Be married to or linked by equivalent emotional relationship, or related by up to second-degree family ties to an executive director or senior manager of the Company.

h) Have not been proposed by the Appointments Committee for appointment or renewal.

i) Fall within the cases described under letters a), e), f) or g) of this section, with respect to any significant shareholder or shareholder represented on the Board. In cases of family relationships described under letter g), the limitation shall not only apply to the shareholder, but also to the directors it nominates for the Company’s Board.

Directors owning shares in the Company may be independent providing they comply with the above conditions and their shareholding is not legally considered as significant.

As of the date of this Annual Report, our Board of Directors has a large number of non-executive directors and eleven out of the 14 members of our Board are independent under the definition of independence described above.

In addition, our Audit and Compliance Committee is composed exclusively of independent directors and the committee chairman is required to have experience in financial management and an understanding of the standards and accounting procedures required by the governmental authorities that regulate the banking sector. Our Risk Committee is composed exclusively of independent directors, and also, in accordance with the non-binding recommendations, our Board of Directors has an Appointments Committee and a Compensation Committee which are composed exclusively of external directors, being the majority of them (including the chairman) independent directors.

Separate Meetings for Independent Directors

In accordance with the NYSE corporate governance rules, independent directors must meet periodically outside of the presence of the executive directors. Under Spanish law, this practice is not contemplated as such. We note, however, that our independent directors meet periodically outside the presence of our executive directors anytime the Audit and Compliance Committee, the Appointments Committee, the Compensation Committee and the Risk Committee meet, since these Committees are comprised solely of non- executive directors. In addition, our independent directors meet outside the presence of our executive directors as often as they deem fit, and usually prior to meetings of the Board of Directors or its Committees.

Code of Ethics

The NYSE listing standards require U.S. companies to adopt a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. For information with respect to BBVA’s code of business conduct and ethics see “Item 16B. Code of Ethics”.

191

ITEM 16H. MINE SAFETY DISCLOSURE

Not Applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18 in lieu of responding to this Item.

ITEM 18. FINANCIAL STATEMENTS

Reference is made to Item 19 for a list of all financial statements filed as a part of this Annual Report.

ITEM 19. EXHIBITS

Exhibit Number	Description
1.1	Amended and Restated Bylaws (Estatutos) of the Registrant.(*)
8.1	Consolidated Companies Composing Registrant (see Appendix I to XIII to our Consolidated Financial Statements included herein).
10.1	Shareholders’ Agreement entered into between the Company, Doğuş Holding A.Ş., Doğuş Nakliyat ve Ticaret, A.Ş. and Doğuş Araştırma Geliştirme ve Müşavirlik Hizmetleri A.Ş. on November 1, 2010.(*)(**)
12.1	Section 302 Chairman and Chief Executive Officer Certification.
12.2	Section 302 President and Chief Operating Officer Certification.
12.3	Section 302 Head of Global Accounting & Information Management Department Certification.
13.1	Section 906 Certification.
15.1	Consent of Independent Registered Public Accounting Firm

(*) Incorporated by reference to BBVA’s Annual Report on Form 20-F for the year ended December 31, 2011.

(**) Confidential treatment was requested with respect to certain portions of this agreement. Confidential portions were redacted and separately submitted to the SEC.

We will furnish to the Commission, upon request, copies of any unfiled instruments that define the rights of holders of our long-term debt.

192

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant certifies that it meets all of the requirements for filing on Form 20-F and had duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized.

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.
By:	/s/ RICARDO GOMEZ BARREDO
Name:	RICARDO GOMEZ BARREDO
Title:	Head of Global Accounting and Information Management Department

Date: April 2, 2013

193

CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-1
CONSOLIDATED FINANCIAL STATEMENTS
•	Consolidated balance sheets	F-2
•	Consolidated income statements	F-5
•	Consolidated statements of recognized income and expenses	F-7
•	Consolidated statements of changes in equity	F-8
•	Consolidated statements of cash flows	F-11

NOTES TO THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS

1.	Introduction, basis for the presentation of the consolidated financial statements and internal control of financial information.	F-13
2.	Principles of consolidation, accounting policies and measurement bases applied and recent IFRS pronouncements	F-16
3.	BBVA Group	F-41
4.	Shareholder remuneration system and allocation of earnings	F-45
5.	Earnings per share	F-46
6.	Bases and methodology for operating segment reporting	F-47
7.	Risk management	F-49
8.	Fair value of financial instruments	F-77
9.	Cash and balances with central banks	F-83
10.	Financial assets and liabilities held for trading	F-84
11.	Other financial assets and liabilities at fair value through profit or loss	F-87
12.	Available-for-sale financial assets	F-87
13.	Loans and receivables	F-93
14.	Held-to-maturity investments	F-96
15.	Hedging derivatives (receivable and payable) and Fair-value changes of the hedged items in portfolio hedges of interest-rate risk	F-98
16.	Non-current assets held for sale and liabilities associated with non-current assets held for sale	F-101
17.	Investments in entities accounted for using the equity method	F-104
18.	Insurance and reinsurance contracts	F-106
19.	Tangible assets	F-108
20.	Intangible assets	F-110
21.	Tax assets and liabilities	F-114
22.	Other assets and liabilities	F-117
23.	Financial liabilities at amortized cost	F-118
24.	Liabilities under insurance contracts	F-125
25.	Provisions	F-126
26.	Pensions and other post-employment commitments	F-127
27.	Common stock	F-135
28.	Share premium	F-138
29.	Reserves	F-138
30.	Treasury stock	F-141
31.	Valuation adjustments	F-142
32.	Non-controlling interests	F-142
33.	Capital base and capital management	F-143
34.	Contingent risks and commitments	F-146
35.	Assets assigned to other own and third-party obligations	F-146
36.	Other contingent assets and liabilities	F-146
37.	Purchase and sale commitments and future payment obligations	F-147
38.	Transactions for the account of third parties	F-147
39.	Interest income and expense and similar items	F-148
40.	Income from equity instruments	F-150
41.	Share of profit or loss of entities accounted for using the equity method	F-151
42.	Fee and commission income	F-151
43.	Fee and commission expenses	F-152

44.	Net gains (losses) on financial assets and liabilities (net)	F-152
45.	Other operating income and expenses	F-153
46.	Administration costs	F-154
47.	Depreciation and amortization	F-157
48.	Provisions (net)	F-157
49.	Impairment losses on financial assets (net)	F-158
50.	Impairment losses on other assets (net)	F-158
51.	Gains (losses) on derecognized assets not classified as non-current assets held for sale	F-158
52.	Gains (losses) on non-current assets held for sale	F-159
53.	Consolidated statements of cash flows	F-159
54.	Accountant fees and services	F-161
55.	Related-party transactions	F-161
56.	Remuneration and other benefits of the Board of Directors and Members of the Bank’s Management Committee	F-163
57.	Detail of the Directors’ holdings in companies with similar business activities	F-167
58.	Other information	F-167
59.	Subsequent events	F-170

APPENDICES

APPENDIX I	Additional information on consolidated subsidiaries composing the BBVA Group	A-2
APPENDIX II	Additional information on the jointly controlled companies accounted for under the proportionate consolidation method in the BBVA Group	A-10
APPENDIX III	Additional information on investments and jointly controlled companies accounted for using the equity method in the BBVA Group	A-11
APPENDIX IV	Changes and notification of investments and divestments in the BBVA Group in 2012	A-12
APPENDIX V	Fully consolidated subsidiaries with more than 10% owned by non-BBVA Group shareholders as of December 31, 2012	A-16
APPENDIX VI	BBVA Group’s securitization funds	A-17
APPENDIX VII	Details of the outstanding Subordinated Debt and Preferred Securities issued by the Bank or entities in the Group consolidated as of December 31, 2012 and December 31, 2011.	A-18
APPENDIX VIII	Consolidated balance sheets held in foreign currency as of December 31, 2012, 2011 and 2010	A-22
APPENDIX IX	Consolidated income statements for the first and second half of 2012 and 2011	A-23
APPENDIX X	Risks related to the developer and real-estate sector in Spain	A-24
APPENDIX XI	Refinanced and restructured operations and other Circular 6/2012 requirements	A-29
APPENDIX XII	Glossary	A-35
APPENDIX XIII	Additional disclosure required by the Regulation S-X	A-45

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Banco Bilbao Vizcaya Argentaria, S.A.:

We have audited the accompanying consolidated balance sheets of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. (the “Company”) and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group (the “Group”—Note 3) as of December 31, 2012, 2011 and 2010, and the related consolidated income statements, statements of recognized income and expense, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the controlling Company’s Directors. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of BANCO BILBAO VIZCAYA ARGENTARIA, S.A. and subsidiaries composing the BANCO BILBAO VIZCAYA ARGENTARIA Group as of December 31, 2012, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with the International Financial Reporting Standards, as issued by the International Accounting Standards Boards (“IFRS-IASB”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 2, 2013 expressed an unqualified opinion on the Group’s internal control over financial reporting.

DELOITTE, S.L.

Madrid – Spain

April 2, 2013

F-1

Consolidated balance sheets as of December 31, 2012, 2011 and 2010

		Millions of Euros
ASSETS	Notes	2012		2011		2010
CASH AND BALANCES WITH CENTRAL BANKS	9		37,434		30,939		19,981
FINANCIAL ASSETS HELD FOR TRADING	10		79,954		70,602		63,283
Loans and advances to credit institutions			—		—		—
Loans and advances to customers			244		—		—
Debt securities			28,066		20,975		24,358
Equity instruments			2,922		2,198		5,260
Trading derivatives			48,722		47,429		33,665
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	11		2,853		2,977		2,774
Loans and advances to credit institutions			24		—		—
Loans and advances to customers			—		—		—
Debt securities			753		708		688
Equity instruments			2,076		2,269		2,086
AVAILABLE-FOR-SALE FINANCIAL ASSETS	12		71,500		58,144		56,456
Debt securities			67,543		52,914		50,875
Equity instruments			3,957		5,230		5,581
LOANS AND RECEIVABLES	13		383,410		381,076		364,707
Loans and advances to credit institutions			26,522		26,107		23,637
Loans and advances to customers			352,931		351,900		338,857
Debt securities			3,957		3,069		2,213
HELD-TO-MATURITY INVESTMENTS	14		10,162		10,955		9,946
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	15		226		146		40
HEDGING DERIVATIVES	15		4,894		4,552		3,563
NON-CURRENT ASSETS HELD FOR SALE	16		4,245		2,090		1,529
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD	17		6,795		5,843		4,547
Associates			6,469		5,567		4,247
Jointly controlled entities			326		276		300
INSURANCE CONTRACTS LINKED TO PENSIONS			7		—		—
REINSURANCE ASSETS	18		50		26		28
TANGIBLE ASSETS	19		7,785		7,330		6,701
Property, plants and equipment			5,898		5,740		5,132
For own use			5,373		4,905		4,408
Other assets leased out under an operating lease			525		835		724
Investment properties			1,887		1,590		1,569
INTANGIBLE ASSETS	20		8,912		8,677		8,007
Goodwill			6,727		6,798		6,949
Other intangible assets			2,185		1,879		1,058
TAX ASSETS	21		11,829		7,841		6,649
Current			1,958		1,509		1,113
Deferred			9,871		6,332		5,536
OTHER ASSETS	22		7,729		6,490		4,527
Inventories			4,223		3,994		2,788
Rest			3,506		2,496		1,739
TOTAL ASSETS			637,785		597,688		552,738

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated balance sheet as of December 31, 2012.

F-2

Consolidated balance sheets as of December 31, 2012, 2011 and 2010

		Millions of Euros
LIABILITIES AND EQUITY	Notes	2012		2011		2010
FINANCIAL LIABILITIES HELD FOR TRADING	10		55,927		51,303		37,212
Deposits from central banks			—		—		—
Deposits from credit institutions			—		—		—
Customer deposits			—		—		—
Debt certificates			—		—		—
Trading derivatives			49,348		46,692		33,166
Short positions			6,579		4,611		4,046
Other financial liabilities			—		—		—
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	11		2,516		1,825		1,607
Deposits from central banks			—		—		—
Deposits from credit institutions			—		—		—
Customer deposits			—		—		—
Debt certificates			—		—		—
Subordinated liabilities			—		—		—
Other financial liabilities			2,516		1,825		1,607
FINANCIAL LIABILITIES AT AMORTIZED COST	23		506,487		479,904		453,164
Deposits from central banks			46,790		33,147		11,010
Deposits from credit institutions			59,722		59,356		57,170
Customer deposits			292,716		282,173		275,789
Debt certificates			87,212		81,930		85,179
Subordinated liabilities			11,831		15,419		17,420
Other financial liabilities			8,216		7,879		6,596
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	15		—		—		(2	)
HEDGING DERIVATIVES	15		2,968		2,710		1,664
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE	16		387		—		—
LIABILITIES UNDER INSURANCE CONTRACTS	18-24		9,032		7,737		8,034
PROVISIONS	25		7,927		7,561		8,322
Provisions for pensions and similar obligations	26		5,796		5,577		5,980
Provisions for taxes and other legal contingencies			408		350		304
Provisions for contingent risks and commitments			341		291		264
Other provisions			1,382		1,343		1,774
TAX LIABILITIES	21		4,077		2,330		2,195
Current			1,194		772		604
Deferred			2,883		1,558		1,591
OTHER LIABILITIES	22		4,662		4,260		3,067
TOTAL LIABILITIES			593,983		557,630		515,263

The accompanying Notes 1 to 60 and Appendices I to XIII are an integral part of the consolidated balance sheet as of December 31, 2012.

F-3

Consolidated balance sheets as of December 31, 2012, 2011 and 2010

		Millions of Euros
LIABILITIES AND EQUITY (Continued)	Notes	2012			2011			2010
STOCKHOLDERS’ FUNDS			43,614			40,952			36,689
Common Stock	27		2,670			2,403			2,201
Issued			2,670			2,403			2,201
Unpaid and uncalled (-)			—			—			—
Share premium	28		20,968			18,970			17,104
Reserves	29		19,672			17,940			14,360
Accumulated reserves (losses)			18,848			17,580			14,305
Reserves (losses) of entities accounted for using the equity method			824			360			55
Other equity instruments			62			51			37
Equity component of compound financial instruments			—			—			—
Other equity instruments			62			51			37
Less: Treasury stock	30		(111	)		(300	)		(552	)
Income attributed to the parent company			1,676			3,004			4,606
Less: Dividends and remuneration			(1,323	)		(1,116	)		(1,067	)
VALUATION ADJUSTMENTS	31		(2,184	)		(2,787	)		(770	)
Available-for-sale financial assets			(145	)		(682	)		333
Cash flow hedging			36			30			49
Hedging of net investment in foreign transactions			(322	)		(158	)		(158	)
Exchange differences			(1,356	)		(1,937	)		(978	)
Non-current assets held-for-sale			(104	)		—			—
Entities accounted for using the equity method			158			188			(16	)
Other valuation adjustments			(451	)		(228	)		—
NON-CONTROLLING INTEREST	32		2,372			1,893			1,556
Valuation adjustments			188			36			(86	)
Rest			2,184			1,857			1,642
TOTAL EQUITY			43,802			40,058			37,475
TOTAL LIABILITIES AND EQUITY			637,785			597,688			552,738

		Millions of Euros
MEMORANDUM ITEM	Notes	2012		2011		2010
CONTINGENT RISKS	34		39,540		39,904		36,441
CONTINGENT COMMITMENTS	34		93,098		93,766		90,574

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated balance sheet as of December 31, 2012.

F-4

Consolidated income statements for the years ended December 31, 2012, 2011 and 2010

		Millions of Euros
	Notes	2012			2011			2010
INTEREST AND SIMILAR INCOME	39		26,262			24,180			21,130
INTEREST AND SIMILAR EXPENSES	39		(11,140	)		(11,028	)		(7,814	)
NET INTEREST INCOME			15,122			13,152			13,316
DIVIDEND INCOME	40		390			562			529
SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD	41		727			595			331
FEE AND COMMISSION INCOME	42		5,574			5,075			4,864
FEE AND COMMISSION EXPENSES	43		(1,221	)		(1,044	)		(831	)
NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES	44		1,645			1,117			1,372
Financial instruments held for trading			649			1,052			640
Other financial instruments at fair value through profit or loss			73			8			18
Other financial instruments not at fair value through profit or loss			923			57			714
Rest			—			—			—
EXCHANGE DIFFERENCES (NET)			122			364			455
OTHER OPERATING INCOME	45		4,812			4,244			3,537
Income on insurance and reinsurance contracts			3,657			3,317			2,597
Financial income from non-financial services			827			656			647
Rest of other operating income			328			271			293
OTHER OPERATING EXPENSES	45		(4,730	)		(4,037	)		(3,240	)
Expenses on insurance and reinsurance contracts			(2,660	)		(2,436	)		(1,815	)
Changes in inventories			(406	)		(298	)		(554	)
Rest of other operating expenses			(1,664	)		(1,303	)		(871	)
ADMINISTRATION COSTS	46		(9,768	)		(8,898	)		(8,007	)
Personnel expenses			(5,662	)		(5,191	)		(4,698	)
General and administrative expenses			(4,106	)		(3,707	)		(3,309	)
DEPRECIATION AND AMORTIZATION	47		(1,018	)		(839	)		(754	)
PROVISIONS (NET)	48		(651	)		(509	)		(475	)
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)	49		(7,980	)		(4,226	)		(4,718	)
Loans and receivables			(7,936	)		(4,201	)		(4,563	)
Other financial instruments not at fair value through profit or loss			(44	)		(25	)		(155	)

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated income statement for the year ended December 31, 2012.

F-5

Consolidated income statements for the years ended December 31, 2012, 2011 and 2010

		Millions of Euros
(Continued)	Notes	2012			2011			2010
IMPAIRMENT LOSSES ON OTHER ASSETS (NET)	50		(1,123	)		(1,885	)		(489	)
Goodwill and other intangible assets			(54	)		(1,444	)		(13	)
Other assets			(1,069	)		(441	)		(476	)
GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE	51		4			46			41
NEGATIVE GOODWILL	20		376			—			1
GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE NOT CLASSIFIED AS DISCONTINUED OPERATIONS	52		(622	)		(271	)		127
OPERATING PROFIT BEFORE TAX			1,659			3,446			6,059
INCOME TAX	21		275			(206	)		(1,345	)
PROFIT FROM CONTINUING OPERATIONS			1,934			3,240			4,714
PROFIT FROM DISCONTINUED OPERATIONS (NET)	52		393			245			281
PROFIT			2,327			3,485			4,995
Profit attributable to parent company			1,676			3,004			4,606
Profit attributable to non-controlling interests	32		651			481			389

		Euros
	Note	2012		2011		2010
EARNINGS PER SHARE	5
Basic earnings per share			0.32		0.62		1.10
Diluted earnings per share			0.32		0.62		1.10

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated income statement for the year ended December 31, 2012.

F-6

Consolidated statements of recognized income and expenses for the years ended December 31, 2012, 2011 and 2010

	Millions of Euros
	2012			2011			2010
PROFIT RECOGNIZED IN INCOME STATEMENT		2.327			3.485			4.995
OTHER RECOGNIZED INCOME (EXPENSES)		754			(1.894	)		(813	)
Available-for-sale financial assets		861			(1.240	)		(2.166	)
Valuation gains/(losses)		723			(1.351	)		(1.963	)
Amounts removed to income statement		109			89			(206	)
Reclassifications		29			22			3
Cash flow hedging		7			(32	)		(190	)
Valuation gains/(losses)		7			(61	)		(156	)
Amounts removed to income statement		—			29			(34	)
Amounts removed to the initial carrying amount of the hedged items		—			—			—
Reclassifications		—			—			—
Hedging of net investment in foreign transactions		(164	)		—			(377	)
Valuation gains/(losses)		(164	)		—			(377	)
Amounts removed to income statement		—			—			—
Reclassifications		—			—			—
Exchange differences		722			(960	)		1.384
Valuation gains/(losses)		722			(963	)		1.380
Amounts removed to income statement		—			3			4
Reclassifications		—			—			—
Non-current assets held for sale		(103	)		—			—
Valuation gains/(losses)		(103	)		—			—
Amounts removed to income statement		—			—			—
Reclassifications		—			—			—
Actuarial gains and losses in post-employment plans		(321	)		(240	)		—
Entities accounted for using the equity method		(37	)		204			228
Valuation gains/(losses)		(37	)		204			228
Amounts removed to income statement		—			—			—
Reclassifications		—			—			—
Rest of recognized income and expenses		—			(90	)		—
Income tax		(211	)		464			308
TOTAL RECOGNIZED INCOME/EXPENSES		3.081			1.591			4.182
Attributable to the parent company		2.279			987			3.898
Attributable to non-controlling interest		802			604			284

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of recognized income and expenses for the year ended December 31, 2012.

F-7

Consolidated statements of changes in equity for the years ended December 31, 2012, 2011 and 2010

	Millions of Euros
	Total Equity Attributed to the Parent Company																															Non-controlling Interests (Note 32)			Total Equity
	Stockholders’ Funds																									Valuation Adjustments (Note 31)			Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)						Other Equity Instruments			Less: Treasury Stock (Note 30)			Profit Attributable to the Parent Company			Less: Dividends and Remunerations (Note 4)			Total Stockholders’ Funds
2012					Accumulated Reserves (Losses)			Reserves (Losses) from Entities Accounted for Using the  Equity Method
Balances as of January 1, 2012		2.403		18.970		17.580			360			51			(300	)		3.004			(1.116	)		40.952			(2.787	)		38.165			1.893			40.058
Effect of changes in accounting policies		—		—		—			—			—			—			—			—			—			—			—			—			—
Effect of correction of errors		—		—		—			—			—			—			—			—			—			—			—			—			—
Adjusted initial balance		2.403		18.970		17.580			360			51			(300	)		3.004			(1.116	)		40.952			(2.787	)		38.165			1.893			40.058
Total income/expense recognized		—		—		—			—			—			—			1.676			—			1.676			603			2.279			802			3.081
Other changes in equity		267		1.998		1.268			464			11			189			(3.004	)		(207	)		986			—			986			(323	)		663
Common stock increase		73		—		(73	)		—			—			—			—			—			—			—			—			—			—
Common stock reduction		—		—		—			—			—			—			—			—			—			—			—			—			—
Conversion of financial liabilities into capital		194		1.998		—			—			—			—			—			—			2.192			—			2.192			—			2.192
Increase of other equity instruments		—		—		—			—			32			—			—			—			32			—			32			—			32
Reclassification of financial liabilities to other equity instruments		—		—		—			—			—			—			—			—			—			—			—			—			—
Reclassification of other equity instruments to financial liabilities		—		—		—			—			—			—			—			—			—			—			—			—			—
Dividend distribution		—		—		—			—			—			—			—			(1.073	)		(1.073	)		—			(1.073	)		(357	)		(1.430	)
Transactions including treasury stock and other equity instruments (net)		—		—		81			—			—			189			—			—			270			—			270			—			270
Transfers between total equity entries		—		—		1.417			471			—			—			(3.004	)		1.116			—			—			—			—			—
Increase/Reduction due to business combinations		—		—		—			—			—			—			—			—			—			—			—			—			—
Payments with equity instruments		—		—		(28	)		—			(21	)		—			—			—			(49	)		—			(49	)		—			(49	)
Rest of increases/reductions in total equity		—		—		(129	)		(7	)		—			—			—			(250	)		(386	)		—			(386	)		34			(352	)
Of which:		—		—		—			—			—			—			—			—			—			—			—			—			—
Acquisition of the free allotment rights		—		—		—			—			—			—			—			(250	)		(250	)		—			(250	)		—			(250	)
Balances as of December 31, 2012		2.670		20.968		18.848			824			62			(111	)		1.676			(1.323	)		43.614			(2.184	)		41.430			2.372			43.802

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2012.

F-8

Consolidated statements of changes in equity for the years ended December 31, 2012, 2011 and 2010 (continued)

	Millions of Euros
	Total Equity Attributed to the Parent Company																													Non-controlling Interests (Note 32)			Total Equity
	Stockholders’ Funds																							Valuation Adjustments (Note 31)			Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)					Other Equity Instruments		Less: Treasury Stock (Note 30)			Profit Attributable to the Parent Company			Less: Dividends and Remunerations (Note 4)			Total Stockholders’ Funds
2011					Accumulated Reserves (Losses)			Reserves (Losses) from Entities Accounted for Using the Equity Method
Balances as of January 1, 2011		2.201		17.104		14.305			55		37		(552	)		4.606			(1.067	)		36.689			(770	)		35.919			1.556			37.475
Effect of changes in accounting policies		—		—		—			—		—		—			—			—			—			—			—			—			—
Effect of correction of errors		—		—		—			—		—		—			—			—			—			—			—			—			—
Adjusted initial balance		2.201		17.104		14.305			55		37		(552	)		4.606			(1.067	)		36.689			(770	)		35.919			1.556			37.475
Total income/expense recognized		—		—		—			—		—		—			3.004			—			3.004			(2.017	)		987			604			1.591
Other changes in equity		202		1.866		3.275			305		14		252			(4.606	)		(49	)		1.259			—			1.259			(267	)		992
Common stock increase		68		—		(68	)		—		—		—			—			—			—			—			—			—			—
Common stock reduction		—		—		—			—		—		—			—			—			—			—			—			—			—
Conversion of financial liabilities into capital		134		1.866		—			—		—		—			—			—			2.000			—			2.000			—			2.000
Increase of other equity instruments		—		—		—			—		14		—			—			—			14			—			14			—			14
Reclassification of financial liabilities to other equity instruments		—		—		—			—		—		—			—			—			—			—			—			—			—
Reclassification of other equity instruments to financial liabilities		—		—		—			—		—		—			—			—			—			—			—			—			—
Dividend distribution		—		—		—			—		—		—			—			(937	)		(937	)		—			(937	)		(273	)		(1.210	)
Transactions including treasury stock and other equity instruments (net)		—		—		(14	)		—		—		252			—			—			238			—			238			—			238
Transfers between total equity entries		—		—		3.239			300		—		—			(4.606	)		1.067			—			—			—			—			—
Increase/Reduction due to business combinations		—		—		—			—		—		—			—			—			—			—			—			—			—
Payments with equity instruments		—		—		—			—		—		—			—			—			—			—			—			—			—
Rest of increases/reductions in total equity		—		—		118			5		—		—			—			(179	)		(56	)		—			(56	)		6			(50	)
Of which:
Acquisition of the free allotment rights		—		—		—			—		—		—			—			(179	)		(179	)		—			(179	)		—			(179	)
Balances as of December 31, 2011		2.403		18.970		17.580			360		51		(300	)		3.004			(1.116	)		40.952			(2.787	)		38.165			1.893			40.058

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2012.

F-9

Consolidated statements of changes in equity for the years ended December 31, 2012, 2011 and 2010 (continued)

	Millions of Euros
	Total Equity Attributed to the Parent Company																														Non-controlling Interests (Note 32)			Total Equity
	Stockholders’ Funds																								Valuation Adjustments (Note 31)			Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)						Other Equity Instruments		Less: Treasury Stock (Note 30)			Profit Attributable to the Parent Company			Less: Dividends and Remunerations (Note 4)			Total Stockholders’ Funds
2010					Accumulated Reserves (Losses)			Reserves (Losses) from Entities Accounted for Using the Equity Method
Balances as of January 1, 2010		1.837		12.453		11.765			309			12		(224	)		4.210			(1.000	)		29.362			(62	)		29.300			1.463			30.763
Effect of changes in accounting policies		—		—		—			—			—		—			—			—			—			—			—			—			—
Effect of correction of errors		—		—		—			—			—		—			—			—			—			—			—			—			—
Adjusted initial balance		1.837		12.453		11.765			309			12		(224	)		4.210			(1.000	)		29.362			(62	)		29.300			1.463			30.763
Total income/expense recognized		—		—		—			—			—		—			4.606			—			4.606			(708	)		3.898			284			4.182
Other changes in equity		364		4.651		2.540			(254	)		25		(328	)		(4.210	)		(67	)		2.721			—			2.721			(191	)		2.530
Common stock increase		364		4.651		—			—			—		—			—			—			5.015			—			5.015			—			5.015
Common stock reduction		—		—		—			—			—		—			—			—			—			—			—			—			—
Conversion of financial liabilities into capital		—		—		—			—			—		—			—			—			—			—			—			—			—
Increase of other equity instruments		—		—		—			—			25		—			—			—			25			—			25			—			25
Reclassification of financial liabilities to other equity instruments		—		—		—			—			—		—			—			—			—			—			—			—			—
Reclassification of other equity instruments to financial liabilities		—		—		—			—			—		—			—			—			—			—			—			—			—
Dividend distribution		—		—		—			—			—		—			(558	)		(1.067	)		(1.625	)		—			(1.625	)		(197	)		(1.822	)
Transactions including treasury stock and other equity instruments (net)		—		—		(105	)		—			—		(328	)		—			—			(433	)		—			(433	)		—			(433	)
Transfers between total equity entries		—		—		2.865			(213	)		—		—			(3.652	)		1.000			—			—			—			—			—
Increase/Reduction due to business combinations		—		—		—			—			—		—			—			—			—			—			—			—			—
Payments with equity instruments		—		—		—			—			—		—			—			—			—			—			—			—			—
Rest of increases/reductions in total equity		—		—		(220	)		(41	)		—		—			—			—			(261	)		—			(261	)		6			(255	)
Balances as of December 31, 2010		2.201		17.104		14.305			55			37		(552	)		4.606			(1.067	)		36.689			(770	)		35.919			1.556			37.475

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2012.

F-10

Consolidated statements of cash flows for the years ended December 31, 2012, 2011 and 2010

		Millions of Euros
	Notes	2012			2011			2010
CASH FLOW FROM OPERATING ACTIVITIES (1)	53		10,596			19,811			8,503
Profit for the year			2,327			3,485			4,995
Adjustments to obtain the cash flow from operating activities:			10,897			3,090			(534	)
Depreciation and amortization			1,018			847			761
Other adjustments			9,879			2,243			(1,295	)
Net increase/decrease in operating assets			40,291			17,340			6,452
Financial assets held for trading			9,352			7,319			(6,450	)
Other financial assets designated at fair value through profit or loss			(124	)		203			437
Available-for-sale financial assets			12,898			1,131			(7,064	)
Loans and receivables			13,102			6,461			18,590
Other operating assets			5,063			2,226			939
Net increase/decrease in operating liabilities			37,939			30,291			9,067
Financial liabilities held for trading			4,625			14,090			4,383
Other financial liabilities designated at fair value through profit or loss			691			218			240
Financial liabilities at amortized cost			29,536			16,265			5,687
Other operating liabilities			3,087			(282	)		(1,243	)
Collection/Payments for income tax			(276	)		285			1,427
CASH FLOWS FROM INVESTING ACTIVITIES (2)	53		(1,085	)		(6,622	)		(7,078	)
Investment			2,547			8,524			8,762
Tangible assets			1,707			1,313			1,040
Intangible assets			780			612			464
Investments			—			430			1,209
Subsidiaries and other business units			—			4,653			77
Non-current assets held for sale and associated liabilities			—			1,516			1,464
Held-to-maturity investments			60			—			4,508
Other settlements related to investing activities			—			—			—
Divestments			1,462			1,902			1,684
Tangible assets			—			175			261
Intangible assets			—			1			6
Investments			19			—			1
Subsidiaries and other business units			—			18			69
Non-current assets held for sale and associated liabilities			590			870			1,347
Held-to-maturity investments			853			838			—
Other collections related to investing activities			—			—			—

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of cash flows for the year ended December 31, 2012.

F-11

Consolidated statements of cash flows for the years ended December 31, 2012, 2011 and 2010

		Millions of Euros
(Continued)	Notes	2012			2011			2010
CASH FLOWS FROM FINANCING ACTIVITIES (3)	53		(3,492	)		(1,269	)		1,148
Investment			10,387			6,282			12,410
Dividends			1,269			1,031			1,218
Subordinated liabilities			3,930			230			2,846
Common stock amortization			—			—			—
Treasury stock acquisition			4,831			4,825			7,828
Other items relating to financing activities			357			196			518
Divestments			6,895			5,013			13,558
Subordinated liabilities			1,793			—			1,205
Common stock increase			—			—			4,914
Treasury stock disposal			5,102			5,013			7,439
Other items relating to financing activities			—			—			—
EFFECT OF EXCHANGE RATE CHANGES (4)			471			(960	)		1,063
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (1+2+3+4)			6,490			10,960			3,636
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR			30,927			19,967			16,331
CASH OR CASH EQUIVALENTS AT END OF THE YEAR			37,417			30,927			19,967
		Millions of Euros
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR	Notes	2012			2011			2010
Cash			5,294			4,611			4,284
Balance of cash equivalent in central banks			32,123			26,316			15,683
Other financial assets			—			—			—
Less: Bank overdraft refundable on demand			—			—			—
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR	9		37,417			30,927			19,967
Of which:
Held by consolidated subsidiaries but not available for the Group			—			—			—

The accompanying Notes 1 to 59 and Appendices I to XIII are an integral part of the consolidated statement of cash flows for the year ended December 31, 2012.

F-12

Notes to the consolidated financial statements for the year ended December 31, 2012

1. Introduction, basis for the presentation of the consolidated financial statements and internal control of financial information.

1.1 Introduction

Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter “the Bank” or “BBVA”) is a private-law entity subject to the laws and regulations governing banking entities operating in Spain. It carries out its activity through branches and agencies across the country and abroad.

The Bylaws and other public information are available for consultation at the Bank’s registered address (Plaza San Nicolás, 4 Bilbao).

In addition to the transactions it carries out directly, the Bank heads a group of subsidiaries, jointly controlled and associated entities which perform a wide range of activities and which together with the Bank constitute the Banco Bilbao Vizcaya Argentaria Group (hereinafter, “the Group” or “the BBVA Group”). In addition to its own individual financial statements, the Bank is therefore required to prepare the Group’s consolidated financial statements.

As of December 31, 2012, the BBVA Group was made up of 320 fully consolidated and 29 proportionately consolidated companies, as well as 102 companies accounted for using the equity method (see Notes 3 and 17 Appendices II to VII).

The BBVA Group’s consolidated financial statements for the years ended December 31, 2011 and 2010 were approved by the shareholders at the Bank’s Annual General Meetings (“AGM”) held on March 16, 2012 and March 11, 2011, respectively.

The consolidated financial statements of the BBVA Group and the separate financial statements of the Bank for the year ended December 31, 2012 have been approved by the shareholders at the Annual General Meetings.

1.2 Basis for the presentation of the consolidated financial statements

The BBVA Group’s consolidated financial statements are presented in accordance with the International Financial Reporting Standards endorsed by the European Union (hereinafter, “EU-IFRS”) required to be applied under the Bank of Spain Circular 4/2004, of 22 December (and as amended thereafter) as of the close of the year 2012, and with any other legislation governing financial reporting applicable to the Group and in compliance with IFRS-IASB.

The BBVA Group’s consolidated financial statements for the year ended December 31, 2012 were prepared by the Bank’s Directors (at the Board of Directors meeting held on January 31, 2013) by applying the principles of consolidation, accounting policies and valuation criteria described in Note 2, so that they present fairly the Group’s consolidated equity and financial position as of December 31, 2012, together with the consolidated results of its operations and cash flows generated during year ended on that date.

These consolidated financial statements were prepared on the basis of the accounting records kept by the Bank and each of the other entities in the Group. Moreover, they include the adjustments and reclassifications required to harmonize the accounting policies and valuation criteria used by the Group (see Note 2.2).

All effective accounting standards and valuation criteria with a significant effect in the consolidated financial statements were applied in their preparation.

F-13

The amounts reflected in the accompanying consolidated financial statements are presented in millions of euros, unless it is more convenient to use smaller units. Some items that appear without a total in these consolidated financial statements do so because of the size of the units used. Also, in presenting amounts in millions of euros, the accounting balances have been rounded up or down. It is therefore possible that the amounts appearing in some tables are not the exact arithmetical sum of their component figures.

The percentage changes in amounts have been calculated using figures expressed in thousands of euros.

1.3 Comparative information

As mentioned in Note 3, the on-balance figures for the companies related to the pension businesses sold in Latin America have been reclassified under the headings “Non-current assets held for sale” and “Liabilities associated with non-current assets held for sale” of the consolidated balance sheet as of December 31 2012, and the earnings of these companies for 2012 have been registered under the heading “Profit from discontinued operations” in the accompanying consolidated income statement. In accordance with IFRS-5, and to make it easier to compare this information across different years, the earnings from these companies for the years 2011 and 2010 have been reclassified under the heading “Profit from discontinued operations” in the accompanying consolidated income statements.

As mentioned in Note 6, in 2012 minor changes are made to the operating segments in the BBVA Group with respect to the structure in place in 2011 and 2010, although they do not have any significant impact on the consolidated income statements or the information by operating segments. To make it easier to compare this information across different years, the figures for 2011 and 2010 have been reworked according to the criteria used in 2012, as established by IFRS 8, “Operating segments.”

1.4 Seasonal nature of income and expenses

The nature of the most significant operations carried out by the BBVA Group’s entities is mainly related to traditional activities carried out by financial institutions, which are not significantly affected by seasonal factors.

1.5 Responsibility for the information and for the estimates made

The information contained in the BBVA Group’s consolidated financial statements is the responsibility of the Group’s Directors.

Estimates have to be made at times when preparing these consolidated financial statements in order to calculate the registered amount of some assets, liabilities, income, expenses and commitments. These estimates relate mainly to the following:

• Impairment on certain financial assets (see Notes 7, 8, 12, 13, 14 and 17).

• The assumptions used to quantify certain provisions (see Notes 18, 24 and 25) and for the actuarial calculation of post-employment benefit liabilities and commitments (see Note 26).

• The useful life and impairment losses of tangible and intangible assets (see Notes 16, 19, 20 and 22).

• The valuation of goodwill (see Notes 17 and 20).

• The fair value of certain unlisted financial assets and liabilities in organized markets (see Notes 7, 8, 10, 11, 12 and 15).

Although these estimates were made on the basis of the best information available as of December 31, 2012 on the events analyzed, future events may make it necessary to modify them (either up or down) over the coming years. This would be done prospectively in accordance with applicable standards, recording the effects of changes in the estimates in the corresponding consolidated income statement.

1.6 Control of the BBVA Group’s financial reporting

The financial information prepared by the BBVA Group is subject to a system of internal control (hereinafter the “Internal Control over Financial Reporting” or “ICFR”). Its aim is to provide reasonable security with respect to its reliability and integrity, and to ensure that the transactions carried out and processed use the criteria established by the Group’s management and comply with applicable laws and regulations.

F-14

The ICFR was developed by the Group’s management in accordance with international standards established by the Committee of Sponsoring Organizations of the Treadway Commission (hereinafter, “COSO”). This stipulates five components that must form the basis of the effectiveness and efficiency of systems of internal control:

• Assessment of all of the risks that could arise during the preparation of financial information.

• Design the necessary controls to mitigate the most critical risks.

• Monitoring of the controls to ensure they perform correctly and are effective over time.

• Establishment of an appropriate system of information flows to detect and report system weaknesses or flaws.

• Establishment of a suitable control environment to track all of these activities.

The ICFR is a dynamic model that evolves continuously over time to reflect the reality of the Group’s business at any time, together with the risks affecting it and the controls designed to mitigate these risks. It is subject to continuous evaluation by the internal control units located in the Group’s different entities.

The internal control units comply with a common and standard methodology issued by the corporate internal control units, which also perform a supervisory role over them, as set out in the following diagram:

As well as the evaluation by the Internal Control Units, ICFR Model is subject to regular evaluations by the Group’s Internal Audit Department and external auditors. It is also supervised by the Audit and Compliance Committee of the Bank’s Board of Directors.

1.7 Mortgage market policies and procedures

The information on “Mortgage market policies and procedures” (for the granting of mortgage loans and for debt issues secured by such mortgage loans) required by Bank of Spain Circular 5/2011, applying Royal Decree 716/2009, dated April 24 (which developed certain aspects of Act 2/1981, dated 25 March, on the regulation of the mortgage market and other mortgage and financial market regulations), is set out in more detail in the Bank’s individual Financial Statements for 2012.

F-15

2. Principles of consolidation, accounting policies and measurement bases applied and recent IFRS pronouncements

Appendix XII, the Glossary, includes the definition of some of the financial and economic terms used in Note 2 and subsequent Notes.

2.1 Principles of consolidation

In terms of its consolidation, the BBVA Group is made up of three types of companies: subsidiaries, jointly controlled entities and associates.

Subsidiaries

Subsidiaries are companies controlled by the Group (for a more detailed definition of subsidiaries and the criterion for control, see Appendix XII, Glossary).

The financial statements of the subsidiaries are consolidated with those of the Bank using the global integration method, combining the financial statements of the parent and subsidiaries line by line

The share of non-controlling interests from subsidiaries in the Group’s consolidated equity is presented under the heading “Non-controlling interests” in the consolidated balance sheet. Their share in the profit or loss for the year is presented under the heading “Profit attributable to non-controlling interests” in the accompanying consolidated income statement (see Note 32).

Note 3 includes information related to the main subsidiaries in the Group as of December 31, 2012. Appendix I includes other significant information on these companies.

Jointly controlled entities

These are entities that are not dependent on a third party, but meet all the conditions for being considered a “joint business” (see the definition of jointly controlled entities in Appendix XII, Glossary). Since the implementation of EU-IFRS, the BBVA Group has applied the following criteria in relation to the consolidation of its jointly controlled entities:

• Jointly controlled financial entity: Since it is a financial entity, the best way of reflecting its activities within the Group’s consolidated financial statements is considered to be the proportionate method of consolidation.

As of December 31, 2012, 2011 and 2010, the contribution of the proportionately consolidated jointly controlled financial entities to the BBVA Group’s consolidated financial statements is shown in the table below:

	Millions of Euros
Contribution to the Group by Entities Accounted for Under the Proportionate Consolidation Method	2012		2011		2010
Assets		22.067		18.935		1.040
Liabilities		18.140		15.232		891
Profit		325		200		19

As of December 31, 2012, the most significant contribution of jointly controlled entities under the proportionate consolidation method is from Garanti (see Note 2.3). No additional information is presented with respect to the other entities as the holdings in these cases are not significant.

Appendix II shows the main figures for jointly controlled entities consolidated under the proportionate consolidation method.

F-16

• Jointly controlled non-financial entity. The effect of proportionately consolidating jointly controlled non-financial entities in the Group’s consolidated financial statements would distort the information provided to investors. It is therefore considered more appropriate to reflect these investments in the Group’s consolidated financial statements using the equity method.

Appendix III shows the main figures for jointly controlled entities accounted for using the equity method. Note 17 details the impact that application of the proportionate consolidation method on these entities would have had on the consolidated balance sheet and income statement.

Associate entities

Associates are companies in which the Group is able to exercise significant influence, without having total or joint control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.

However, certain entities in which the Group owns 20% or more of the voting rights are not included as Group associates, since the Group does not have the ability to exercise significant influence over these entities. Investments in these entities, which do not represent material amounts for the Group, are classified as “Available-for-sale financial assets.”

In contrast, some investments in entities in which the Group holds less than 20% of the voting rights are accounted for as Group associates, as the Group is considered to have the ability to exercise significant influence over these entities.

Appendix III shows the most significant information related to the associates (see Note 17), which are accounted for using the equity method.

In all cases, results of equity method investees acquired by the BBVA Group in a particular period are included taking into account only the period from the date of acquisition to the financial statements date. Similarly, the results of companies disposed of during any year are included taking into account only the period from the start of the year to the date of disposal.

2.2 Accounting policies and valuation criteria applied

The accounting standards and policies and the valuation criteria applied in preparing these consolidated financial statements may differ from those used by some of the entities within the BBVA Group. For this reason, necessary adjustments and reclassifications have been introduced in the consolidation process to standardize these principles and criteria and comply with the EU-IFRS, required to be applied under the Bank of Spain Circular 4/2004.

The accounting standards and policies and valuation criteria used in preparing the accompanying consolidated financial statements are as follows:

2.2.1 Financial instruments

Measurement of financial instruments and recognition of changes in subsequent fair value

All financial instruments are initially accounted for at fair value which, unless there is evidence to the contrary, shall be the transaction price.

All the changes in the fair value of the financial instruments, except in trading derivatives, arising from the accrual of interests and similar items are recognized under the headings “Interest and similar income” or “Interest and similar expenses”, as appropriate, in the accompanying consolidated income statement for the year in which the accrual took place (see Note 39). The dividends received from other companies are recognized under the heading “Dividend income” in the accompanying consolidated income statement for the year in which the right to receive them arises (see Note 40).

F-17

The changes in fair value after the initial recognition, for reasons other than those mentioned in the preceding paragraph, are treated as described below, according to the categories of financial assets and liabilities.

• “Financial assets held for trading” and “Other financial assets and liabilities designated at fair value through profit or loss”

The assets and liabilities recognized under these headings of the consolidated balance sheets are measured at fair value and changes in the fair value (gains or losses) are recognized as their net value under the heading “Net gains (losses) on financial assets and liabilities” in the accompanying consolidated income statements (see Note 44). However, changes in fair value resulting from variations in foreign exchange rates are recognized under the heading “Exchange differences (net)” in the accompanying consolidated income statements.

• “Available-for-sale financial assets”

Assets recognized under this heading in the consolidated balance sheets are measured at their fair value. Subsequent changes in fair value (gains or losses) are recognized temporarily for their amount net of tax effect, under the heading “Valuation adjustments - Available-for-sale financial assets” in the consolidated balance sheets.

Changes in the value of non-monetary items resulting from changes in foreign exchange rates are recognized temporarily under the heading “Valuation adjustments - Exchange differences” in the accompanying consolidated balance sheets. Changes in foreign exchange rates resulting from monetary items are recognized under the heading “Exchange differences (net)” in the accompanying consolidated income statements.

The amounts recognized under the headings “Valuation adjustments - Available-for-sale financial assets” and “Valuation adjustments - Exchange differences” continue to form part of the Group’s consolidated equity until the corresponding asset is derecognized from the consolidated balance sheet or until an impairment loss is recognized in the corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the headings “Net gains (losses) on financial assets and liabilities” or “Exchange differences (net)”, as appropriate, in the consolidated income statement for the year in which they are derecognized.

The gains from sales of other equity instruments considered strategic investments included under “Available-for-sale financial assets” are recognized under the heading “Gains (losses) in non-current assets held-for-sale not classified as discontinued operations” in the consolidated income statement, even if they had not been classified in a previous balance sheet as non-current assets held for sale (see Note 52).

The net impairment losses in “Available-for-sale financial assets” over the year are recognized under the heading “Impairment losses on financial assets (net) – Other financial instruments not at fair value through profit or loss” (see Note 49) in the consolidated income statements for that period.

• “Loans and receivables”, “Held-to-maturity investments” and “Financial liabilities at amortized cost”

Assets and liabilities recognized under these headings in the accompanying consolidated balance sheets are measured at “amortized cost” using the “effective interest rate” method. This is because the consolidated entities intend to hold such financial instruments to maturity.

Net impairment losses of assets recognized under these headings arising in a particular period are recognized under the heading “Impairment losses on financial assets (net) – Loans and receivables” or “Impairment losses on financial assets (net) – Other financial instruments not valued at fair value through profit or loss” (see Note 49) in the consolidated income statement for that period.

• “Hedging derivatives” and “Fair value changes of the hedged items in portfolio hedges of interest-rate risk”

Assets and liabilities recognized under these headings in the accompanying consolidated balance sheets are measured at fair value.

F-18

Changes occurring subsequent to the designation of the hedging relationship in the measurement of financial instruments designated as hedged items as well as financial instruments designated as hedge accounting instruments are recognized as follows:

• In fair value hedges, the changes in the fair value of the derivative and the hedged item attributable to the hedged risk are recognized under the heading “Net gains (losses) on financial assets and liabilities” in the consolidated income statement, with a corresponding item under the headings where hedging items (“Hedging derivatives”) and the hedged items are recognized, as applicable.

• In fair value hedges of interest rate risk of a portfolio of financial instruments (portfolio-hedges), the gains or losses that arise in the measurement of the hedging instrument are recognized in the consolidated income statement, and the gains or losses that arise from the change in the fair value of the hedged item (attributable to the hedged risk) are recognized in the consolidated income statement, using, as a balancing item, the headings “Fair value changes of the hedged items in portfolio hedges of interest rate risk” in the consolidated balance sheets, as applicable.

• In cash flow hedges, the gain or loss on the hedging instruments relating to the effective portion are recognized temporarily under the heading “Valuation adjustments – Cash flow hedging” in the consolidated balance sheets. These differences are recognized in the accompanying consolidated income statement at the time when the gain or loss in the hedged instrument affects profit or loss, when the forecast transaction is executed or at the maturity date of the hedged item. Almost all of the hedges used by the Group are for interest-rate risks. Therefore, the valuation changes are recognized under the headings “Interest and similar income” or “Interest and similar expenses”, as appropriate, in the accompanying consolidated income statement (see Note 39).

• Differences in the measurement of the hedging items corresponding to the ineffective portions of cash flow hedges are recognized directly in the heading “Net gains (losses) on financial assets and liabilities” in the consolidated income statement.

• In the hedges of net investments in foreign operations, the differences attributable to the effective portions of hedging items are recognized temporarily under the heading “Valuation adjustments – Hedging of net investments in foreign transactions” in the consolidated balance sheets. These differences in valuation are recognized under the heading “Exchange differences (net)” in the consolidated income statement when the investment in a foreign operation is disposed of or derecognized.

• Other financial instruments

The following exceptions are applicable with respect to the above general criteria:

• Equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have those instruments as their underlying asset and are settled by delivery of those instruments remain in the consolidated balance sheet at acquisition cost; this may be adjusted, where appropriate, for any impairment loss. (see Note 8)

• Valuation adjustments arising from financial instruments classified at the consolidated balance sheet date as non-current assets held for sale are recognized with a balancing entry under the heading “Valuation adjustments - Non-current assets held for sale” in the accompanying consolidated balance sheets.

Impairment losses on financial assets

Definition of impaired financial assets

A financial asset is considered to be impaired – and therefore its carrying amount is adjusted to reflect the effect of impairment – when there is objective evidence that events have occurred which:

• In the case of debt instruments (loans and debt securities), give rise to an adverse impact on the future cash flows that were estimated at the time the transaction was arranged. So they are considered impaired when there are reasonable doubts that the balances will be recovered in full and/or the related interest will be collected for the amounts and on the dates initially agreed.

• In the case of equity instruments, it means that their carrying amount may not be fully recovered.

As a general rule, the carrying amount of impaired financial instruments is adjusted with a charge to the consolidated income statement for the period in which the impairment becomes known. The recoveries of previously recognized impairment losses are reflected, if appropriate, in the consolidated income statement for the year in which the impairment is reversed or reduced, with an exception: any recovery of previously recognized impairment losses for an investment in an equity instrument classified as financial assets available for sale is not recognized in the consolidated income statement but under the heading “Valuation Adjustments - Available-for-sale financial assets” in the consolidated balance sheet (see Note 31).

F-19

In general, amounts collected in relation to impaired loans and receivables are used to recognize the related accrued interest and any excess amount is used to reduce the principal not yet paid.

When the recovery of any recognized amount is considered to be remote, this amount is written-off on the consolidated balance sheet, without prejudice to any actions that may be taken in order to collect the amount until the rights extinguish in full either because it is time-barred debt, the debt is forgiven, or other reasons.

In the case of particularly significant financial assets, and assets that cannot be classified within similar groups of instruments in terms of risk, the amounts recognized are measured individually. In the case of financial assets for lower amounts that can be classified in homogeneous groups, this measurement is carried out as a group.

According to our established policy, the recovery of a recognized amount is considered to be remote and, therefore, derecognized from our consolidated balance sheet in the following cases:

• Any loan (except for those carrying an effective guarantee) of a company in bankruptcy and/or in the last phases of a “concurso de acreedores” (the Spanish equivalent of a Chapter 11 bankruptcy proceeding), and

• Financial assets (bonds, debentures, etc.) whose issuer’s solvency had been undergone a notable and irreversible deterioration.

Additionally, loans classified as impairedsecured loans are written off in the balance sheet within a maximum period of four years of their classification as impaired, while impaired unsecured loans (such as commercial and consumer loans, credit cards, etc.) are written off within two years of their classification as impaired.

Calculation of impairment on financial assets

The impairment on financial assets is determined by type of instrument and other circumstances that could affect it, taking into account the guarantees received by the owners of the financial instruments to assure (in part or in full) the performance of the transactions. The BBVA Group recognizes impairment charges directly against the impaired asset when the likelihood of recovery is deemed remote, and uses an offsetting or allowance account when it registers non-performing loan provisions for the estimated losses.

Impairment of debt securities measured at amortized cost

The amount of impairment losses of debt securities at amortized cost is measured depending on whether the impairment losses are determined individually or collectively.

• Impairment losses determined individually

The amount of the impairment losses incurred on these instruments relates to the positive difference between their respective carrying amounts and the present values of their expected future cash flows. These cash flows are discounted using the original effective interest rate. If a financial instrument has a variable interest rate, the discount rate for measuring any impairment loss is the current effective rate determined under the contract.

As an exception to the rule described above, the market value of listed debt instruments is deemed to be a fair estimate of the present value of their future cash flows.

The following is to be taken into consideration when estimating the future cash flows of debt instruments:

• All the amounts that are expected to be recovered over the remaining life of the instrument; including, where appropriate, those which may result from the collateral and other credit enhancements provided for the instrument (after deducting the costs required for foreclosure and subsequent sale). Impairment losses include an estimate for the possibility of collecting accrued, past-due and uncollected interest.

• The various types of risk to which each instrument is subject.

• The circumstances in which collections will foreseeably be made.

F-20

In respect to impairment losses resulting from the materialization of insolvency risk of the obligors (credit risk), a debt instrument is impaired:

• When there is evidence of a reduction in the obligor’s capacity to pay, whether manifestly by default or for other reasons; and/or

• For these purposes, country risk is understood to refer to risk with respect to debtors resident in a particular country and resulting from factors other than normal commercial risk: sovereign risk, transfer risk or risks derived from international financial activity.

The BBVA Group has policies, methods and procedures for hedging its credit risk, for insolvency attributable to counterparties and country-risk. These policies, methods and procedures are applied to the arrangement, study and documentation of debt instruments, contingent risks and commitments, as well as the identification of their deterioration and in the calculation of the amounts needed to cover their credit risk.

• Impairment losses determined collectively

Impairment losses determined collectively are calculated by using statistical procedures, and they are deemed equivalent to the portion of losses incurred on the date that the accompanying consolidated financial statements are prepared that has yet to be allocated to specific transactions.

The BBVA Group uses the concept of expected loss to quantify the cost of the credit risk and include it in the calculation of the risk-adjusted return of its transactions. The parameters necessary for its calculation are also used to calculate economic capital and to calculate BIS II regulatory capital under internal models (see Note 33).

These models allow us to estimate the expected loss of the credit risk of each portfolio, in the one-year period after the reporting date, considering the characteristics of the counterparty and the guarantees and collateral associated with the transactions.

The expected loss is calculated taking into account three factors: exposure at default, probability of default and loss given default.

• Exposure at default (EAD) is the amount of risk exposure at the date of default by the counterparty.

• Probability of default (PD) is the probability of the counterparty failing to meet its principal and/or interest payment obligations. The PD is associated with the rating/scoring of each counterparty/transaction. PD is measured using a time horizon of one year, i.e. it quantifies the probability of the counterparty defaulting in the coming year. The definition of default used includes amounts past due by 90 days or more and cases in which there is no default but there are doubts as to the solvency of the counterparty (subjective doubtful assets). A PD of 100% is assigned when a loan is considered impaired.

• Loss given default (LGD) is the estimate of the loss arising in the event of default. It depends mainly on the characteristics of the counterparty, and the valuation of the guarantees or collateral associated with the transaction.

In order to calculate the LGD at each balance sheet date, the Group evaluates the estimated cash flows from the sale of the collateral by estimating its sale price (in the case of real estate collateral, the Group takes into account declines in property values which could affect the value of such collateral) and its estimated cost of sale. In the event of a default, the Group becomes contractually entitled to the property at the end of the foreclosure process or properties purchased from borrowers in distress, and recognize the collateral at its fair value. After the initial recognition of these assets classified as “Non-current assets held for sale” (see Note 2.2.4) or “Inventories” (see Note 2.2.6), they are valued at the lower of their carrying amount and their fair value less their estimated selling price.

The expected loss calculation used to determine the economic capital in our models includes ‘through-the-cycle’ adjustments of the aforementioned factors, particularly of PD and LGD. Through these adjustments, the Group seeks to set the value of the parameters used in our model at their average level throughout the economic cycle. The Group’s calculation of economic capital is more stable and accurate as a result.

By contrast, allowances for loan losses are calculated based on estimates of incurred losses at the reporting date (without any ‘through-the-cycle’ adjustments), in compliance with IFRS requirements.

F-21

With its methodology for determining the allowance for determined collectively losses, the Group seeks to identify the amounts of losses which, although incurred at the reporting date, have not yet been reported and which the Group knows, on the basis of historical experience and other specific information, will arise following the reporting date.

In order to calculate such non-reported incurred losses, the Group makes certain adjustments to the expected loss used to calculate economic capital under our internal models in order to eliminate the ‘through-the-cycle’ adjustments and focus on incurred loss (rather than expected loss) as required by IFRS. Such adjustments are based on the following two parameters:

• The point-in-time (‘PIT’) parameter, which is an adjustment to eliminate the ‘through-the-cycle’ component of the expected loss.

The ‘point-in-time’ parameter converts a ‘through-the-cycle’ probability of default (defined as the average probability of default over a complete economic cycle) into the probability of default at the reporting date (‘point-in-time’ probability).

• The loss identification period (‘LIP’) parameter, which is the time lag period between the occurrence of a specific impairment or loss event and objective evidence of impairment becoming apparent on an individual basis; in other words, the time lag period between the loss event and the date an entity identified its occurrence.

This adjustment relates to the fact that, in calculating expected loss for purposes of calculating economic capital and BIS II regulatory capital, the Group measures the probability of default using a time horizon of one year. Therefore, in order to calculate our allowance for loan losses, the Group has to convert the one-year expected loss to the incurred loss concept at the reporting date required by IAS 39. The Group calculates the incurred loss at the closing date by adjusting the expected loss for the next twelve months based on the estimated LIPs of the various homogenous portfolios.

The analysis of LIPs is performed on a homogenous portfolio basis. For the portfolios in Spain and in Mexico, which are the most significant portfolios, BBVA uses the following methodology to determine an interval of LIP that has occurred over time:

• Analysis of the frequency of regulatory and internal review: The review of the credit quality of customers results in loss being identified. The more frequently the entity reviews the credit quality of its customers, the quicker losses are identified and therefore the lower is the resulting LIP (incurred but not reported losses decrease but ‘identified’ incurred losses increase). By contrast, the less frequently the entity reviews the credit quality of its customers, the slower losses are identified and therefore the higher is the resulting LIP.

• Analysis of the correlation between macroeconomic factors and probability of default: The deterioration of certain macroeconomic factors can be considered as a loss event if it results in an increase in the credit risk of a portfolio. Analysis performed shows the existence of correlation between some macroeconomic indicators and the probability of default, with a time lag existing between changes in such parameters and changes in the default rate. The Economic Research Department (“BBVA Research”) analyses the correlation between macroeconomic indicators (mainly GDP and interest rates) and probability of default (PD) for the portfolios.

The analysis includes PD available information by portfolio for the last 25 years. The purpose of the analysis is to evaluate the impact of macroeconomic indicators on the PD and identify the time lag between the deterioration of a macroeconomic indicator and the increase in PD. This time lag illustrates the time period between the loss event and the identification of the loss which leads to an individual provisioning. The research shows that changes in macroeconomic indicators, such as GDP and interest rates, result in variations in the PD of these portfolios within less than six months.

• An internal benchmark of the LIPs used by European peers (based on 12 European banks from Belgium, Germany, Italy, the Netherlands and the United Kingdom): For corporate loans, 3-12 months; for retail loans, 2-9 months.

F-22

The LIPs BBVA uses, which were determined in accordance with the methodology described above, are set forth in the table below:

Portfolio		Ranges of LIPs	Weighted Average of LIPs Used as of December 31, 2012
Sovereign and Public Institutions		12 months	12 months
Corporates	Real estate developers	From 1 months to 18 months	3 months
	Large corporates Others corporates SMEs	From 1 months to 12 months	9-10 months
Retail	Mortgage loans Consumer loans	From 2 months to 9 months	7-8 months

At least once a year, BBVA performs a backtesting analysis in order to assess the accuracy of the LIP estimates for the corporate portfolios. The backtesting involves assessing the evolution of the most significant impaired loans over a period of time, on a periodic basis, to identify the actual LIPs for each portfolio. In addition, with respect to all of the portfolios, BBVA reviews the correlation between the evolution of macroeconomic indicators (mainly GDP and interest rates) and PD for such portfolios.

The allowance for loan losses for loan portfolios of BBVA’s U.S. subsidiaries (which represented approximately 9.1% of the consolidated loans and receivables as of December 31, 2012) is determined under U.S. GAAP. There is no significant difference between the allowance for loan losses accounting under ASC-310 and under IAS 39. The methodology followed by Compass (BBVA’s bank subsidiary in the U.S.) for determining the allowance for loan losses is based on the average expected loss over the last five years. The calculation of expected losses is segmented by common portfolio characteristics such as product type, risk rating, bureau score, past due status, collateral type and loan to value. In the process of calculating the allowance for loan losses, Compass assigns a PD and an LGD for the different portfolios. The weighted average of the LIP used as of December 31, 2012 was one year, based on internal analysis of the management, following an approach that is consistent with that described above for the Spain and Mexico loan portfolios.

The Bank of Spain requires that the calculation of the allowance for collective losses incurred must also be calculated based on the information provided by the Bank of Spain until the Spanish regulatory authority has verified and approved these internal models.

For the years ended December 31, 2012, 2011 and 2010, there is no material difference in the amount of allowances for loan losses calculated in accordance with EU-IFRS required to be applied under the Bank of Spain’s Circular 4/2004 and IFRS-IASB.

Impairment of other debt instruments

The impairment losses on debt securities included in the “Available-for-sale financial asset” portfolio are equal to the positive difference between their acquisition cost (net of any principal repayment), after deducting any impairment loss previously recognized in the consolidated income statement, and their fair value.

When there is objective evidence that the negative differences arising on measurement of these assets are due to impairment, they are no longer considered as “Valuation adjustments - Available-for-sale financial assets” and are recognized in the consolidated income statement.

If all, or part of the impairment losses are subsequently recovered, the amount is recognized in the consolidated income statement for the year in which the recovery occurred.

F-23

Impairment of equity instruments

The amount of the impairment in the equity instruments is determined by the category where they are recognized:

• Equity instruments measured at fair value: When there is objective evidence that the negative differences arising on measurement of these assets are due to impairment, they are no longer considered as “Valuation adjustments - Available-for-sale financial assets” and are recognized in the consolidated income statement. The Group considers that there is objective evidence of impairment on equity instruments classified as available-for-sale when significant unrealized losses have existed over a sustained period of time due to a price reduction of at least 40% or over a period of more than 18 months.

When applying this evidence of impairment, the Group takes into account the volatility in the price of each individual security to determine whether it is a percentage that can be recovered through its sale on the market; other different thresholds may exist for certain securities or specific sectors.

In addition, for individually significant investments, the Group compares the valuation of the most significant securities against valuations performed by independent experts.

Any recovery of previously recognized impairment losses for an investment in an equity instrument classified as available for sale is not recognized in the consolidated income statement, but under the heading “Valuation Adjustments - Available-for-sale financial assets” in the consolidated balance sheet (see Note 31).

• Equity instruments measured at cost: The impairment losses on equity instruments measured at acquisition cost are equal to the difference between their carrying amount and the present value of expected future cash flows discounted at the market rate of return for similar securities. These impairment losses are determined taking into account the equity of the investee (except for valuation adjustments due to cash flow hedges) for the last approved (consolidated) balance sheet, adjusted for the unrealized gains at the measurement date.

Impairment losses are recognized in the consolidated income statement for the year in which they arise as a direct reduction of the cost of the instrument. These losses may only be reversed subsequently in the event of the sale of these assets.

2.2.2 Transfers and derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets is determined by the form in which risks and benefits associated with the assets involved are transferred to third parties. Thus the financial assets are only derecognized from the consolidated balance sheet when the cash flows that they generate are extinguished, or when their implicit risks and benefits have been substantially transferred to third parties. In the latter case, the financial asset transferred is derecognized from the consolidated balance sheet, and any right or obligation retained or created as a result of the transfer is simultaneously recognized.

Similarly, financial liabilities are derecognized from the consolidated balance sheet only if their obligations are extinguished or acquired (with a view to subsequent cancellation or renewed placement).

The Group is considered to have transferred substantially all the risks and benefits if such risks and benefits account for the majority of the risks and benefits involved in ownership of the transferred assets. If substantially all the risks and benefits associated with the transferred financial asset are retained:

• The transferred financial asset is not derecognized from the consolidated balance sheet and continues to be measured using the same criteria as those used before the transfer.

• A financial liability is recognized at the amount equal to the amount received, which is subsequently measured at amortized cost.

In the specific case of securitizations, this liability is recognized under the heading “Financial liabilities at amortized cost – Debt certificates” in the consolidated balance sheets (see Note 23). In securitizations where the risks and benefits of the transferred assets are substantially retained by the BBVA Group, the part acquired by another company in the consolidated Group is deducted from the recognized financial liabilities (securitized bonds), as established by paragraph 42 of IAS 39.

• Both the income generated on the transferred (but not derecognized) financial asset and the expenses of the new financial liability continue to be recognized.

F-24

The criteria followed with respect to the most common transactions of this type made by the BBVA Group are as follows:

• Purchase and sale commitments: Financial instruments sold with a repurchase agreement are not derecognized from the consolidated balance sheets and the amount received from the sale is considered financing from third parties.

Financial instruments acquired with an agreement to subsequently resell them are not recognized in the consolidated balance sheets and the amount paid for the purchase is considered financing to third parties.

• Special purpose vehicles: In those cases where the Group sets up entities, or has a holding in such entities, known as special purpose vehicles, in order to allow its customers access to certain investments, or for transferring risks or for other purposes, in accordance with internal criteria and procedures and with applicable regulations, the Group determines whether control over the entity in question actually exists (as described in Note 2.1), and therefore whether it should be subject to consolidation.

Among other elements, such methods and procedures take into consideration the risks and profits obtained by the Group, and also take into account all relevant elements, including the guarantees granted or the losses associated with collection of the corresponding assets retained by the Group. Such entities include the so-called asset securitization funds, which are fully consolidated in those cases in where, based on the aforementioned analysis, it is determined that the Group has maintained control.

In the specific instance of the securitization funds to which the BBVA Group’s entities transfer their loan portfolios, the following indications of the existence of control are considered for the purpose of analyzing the possibility of consolidation:

• The securitization funds’ activities are undertaken in the name of the entity in accordance with its specific business requirements, with a view to generating benefits or gains from the securitization funds’ operations.

• The entity retains a decision-making power with a view to securing most of the gains derived from the securitization funds’ activities or has delegated this power in some kind of “auto-pilot” mechanism (the securitization funds are structured so that all the decisions and activities to be performed are pre-defined at the time of their creation).

• The entity is entitled to receive the bulk of the profits from the securitization funds and is accordingly exposed to the risks inherent in their business activities. The entity retains the bulk of the securitization funds’ residual profit.

• The entity retains the bulk of the securitization funds’ asset risks.

If there is control based on the preceding guidelines, the securitization funds are integrated into the consolidated Group. If the Group’s exposure to the changes in future net cash flows of securitized assets is not significant, the risks and benefits inherent to them will be deemed to have been substantially transferred. In this case, the Group could derecognize the securitized assets from the consolidated balance sheet.

The BBVA Group has applied the most severe criteria for determining whether or not it retains substantially all the risk and rewards on such assets for all securitizations performed since January 1, 2004. As a result of these analyses, the Group has concluded that none of the securitizations undertaken since that date meet the prerequisites for derecognizing the securitized assets from the consolidated balance sheets (see Note 13.2 and Appendix VI), as the Group retains substantially all the expected credit losses and possible changes in net cash flows, while retaining the subordinated loans and lines of credit extended by the BBVA Group to these securitization funds.

2.2.3 Financial guarantees

Financial guarantees are considered to be those contracts that require their issuer to make specific payments to reimburse the holder of the financias guarantee for a loss incurred when a specific borrower breaches its payment obligations on the terms – whether original or subsequently modified – of a debt instrument, irrespective of the legal form it may take. Financial guarantees may take the form of a deposit, financial guarantee, insurance contract or credit derivative, among others.

F-25

In their initial recognition, financial guarantees are recognized as liabilities in the consolidated balance sheet at fair value, which is generally the present value of the fees, commissions and interest receivable from these contracts over the term thereof, and the Group simultaneously recognize a corresponding asset in the consolidated balance sheet for the amount of the fees and commissions received at the inception of the transactions and the amounts receivable at the present value of the fees, commissions and interest outstanding.

Financial guarantees, irrespective of the guarantor, instrumentation or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required for them. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost (see Note 2.2.1).

The provisions recognized for financial guarantees considered impaired are recognized under the heading “Provisions - Provisions for contingent risks and commitments” on the liability side in the consolidated balance sheets (see Note 25). These provisions are recognized and reversed with a charge or credit, respectively, to “Provisions (net)” in the consolidated income statements (see Note 48).

Income from guarantee instruments is recorded under the heading “Fee and commission income” in the consolidated income statement and is calculated by applying the rate established in the related contract to the nominal amount of the guarantee (see Note 42).

2.2.4 Non-current assets held for sale and liabilities associated with non-current assets held for sale

The heading “Non-current assets held-for-sale” in the consolidated balance sheets includes the carrying amount of financial or non-financial assets that are not part of the BBVA Group’s operating activities. The recovery of this carrying amount is expected to take place through the price obtained on its disposal (see Note 16).

This heading includes individual items and groups of items (“disposal groups”) and disposal groups that form part of a major business unit and are being held for sale as part of a disposal plan (“discontinued operations”). The individual items include the assets received by the subsidiaries from their debtors, and those consolidated under the proportionate consolidated method, in full or partial settlement of the debtors’ payment obligations (assets foreclosed or donated in repayment of debt and recovery of lease finance transactions), unless the Group has decided to make continued use of these assets. The BBVA Group has units that specialize in real estate management and the sale of this type of asset.

Symmetrically, the heading “Liabilities associated with non-current assets held for sale” in the consolidated balance sheets reflects the balances payable arising from disposal groups and discontinued operations.

Non-current assets held for sale are generally measured at fair value less sale costs, or their carrying amount, calculated on the date of their classification within this category, whichever is the lower. Non-current assets held for sale are not depreciated while included under this heading.

The fair value of the non-current assets held for sale from foreclosures or recoveries is mainly based on appraisals or valuations made by independent experts and not more than one year old, or less if there are indications of impairment.

Gains and losses generated on the disposal of assets and liabilities classified as non-current held for sale, and related impairment losses and subsequent recoveries, where pertinent, are recognized in “Gains/(losses) on non-current assets held for sale not classified as discontinued operations” in the consolidated income statements (see Note 52.1). The remaining income and expense items associated with these assets and liabilities are classified within the relevant consolidated income statement headings.

Income and expenses for discontinued operations, whatever their nature, generated during the year, even if they have occurred before their classification as discontinued operations, are presented net of the tax effect as a single amount under the heading “Profit from discontinued operations” in the consolidated income statement, whether the business remains on the balance sheet or is derecognized from the balance sheet. This heading includes the earnings from their sale or other disposal (see Notes 1.3 and 52.2).

F-26

2.2.5 Tangible assets

Property, plant and equipment for own use

This heading includes the assets under ownership or acquired under lease finance, intended for future or current use by the BBVA Group and that it expects to hold for more than one year. It also includes tangible assets received by the consolidated entities in full or partial settlement of financial assets representing receivables from third parties and those assets expected to be held for continuing use.

Property, plant and equipment for own use are presented in the consolidated balance sheets at acquisition cost, less any accumulated depreciation and, where appropriate, any estimated impairment losses resulting from comparing this net carrying amount of each item with its corresponding recoverable amount.

Depreciation is calculated using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land on which the buildings and other structures stand is considered to have an indefinite life and is therefore not depreciated.

The tangible asset depreciation charges are recognized in the accompanying consolidated income statements under the heading “Depreciation and amortization” (see Note 47) and are based on the application of the following depreciation rates (determined on the basis of the average years of estimated useful life of the various assets):

Amortization Rates for Tangible Assets

Type of Assets	Annual Percentage
Buildings for own use	1.33% - 4%
Furniture	8% - 10%
Fixtures	6% - 12%
Office supplies and hardware	8% - 25%

The BBVA Group’s criteria for determining the recoverable amount of these assets, in particular the buildings for own use, is based on up-to-date independent appraisals that are no more than 3-5 years old at most, unless there are indications of impairment.

At each reporting date, the Group entities analyze whether there are internal or external indicators that a tangible asset may be impaired. When there is evidence of impairment, the entity analyzes whether this impairment actually exists by comparing the asset’s net carrying amount with its recoverable amount (as the higher between its recoverable amount less disposal costs and its value in use). When the carrying amount exceeds the recoverable amount, the carrying amount is written down to the recoverable amount and depreciation charges going forward are adjusted to reflect the asset’s remaining useful life.

Similarly, if there is any indication that the value of a tangible asset has been recovered, the consolidated entities will estimate the recoverable amounts of the asset and recognize it in the consolidated income statement, registering the reversal of the impairment loss registered in previous years and thus adjusting future depreciation charges. Under no circumstances may the reversal of an impairment loss on an asset raise its carrying amount above that which it would have if no impairment losses had been recognized in prior years.

Upkeep and maintenance expenses relating to tangible assets held for own use are recognized as an expense in the year they are incurred and recognized in the consolidated income statements under the heading “Administration costs - General and administrative expenses - Property, fixtures and equipment” (see Note 46.2).

Other assets leased out under an operating lease

The criteria used to recognize the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives and to register the impairment losses on them, are the same as those described in relation to tangible assets for own use.

F-27

Investment properties

The heading “Tangible assets - Investment properties” in the consolidated balance sheets reflects the net values (purchase cost minus the corresponding accumulated depreciation and, if appropriate, estimated impairment losses) of the land, buildings and other structures that are held either to earn rentals or for capital appreciation through sale and that are neither expected to be sold off in the ordinary course of business nor are destined for own use (see Note 19).

The criteria used to recognize the acquisition cost of investment properties, calculate their depreciation and their respective estimated useful lives and register the impairment losses on them, are the same as those described in relation to tangible assets held for own use.

The BBVA Group’s criteria for determining the recoverable amount of these assets is based on up-to-date independent appraisals that are no more than one year old at most, unless there are indications of impairment.

2.2.6 Inventories

The balance under the heading “Other assets - Inventories” in the consolidated balance sheets mainly includes the land and other properties that the BBVA Group’s real estate companies hold for development and sale as part of their real estate development activities (see Note 22).

The cost value of inventories includes the costs incurred for their acquisition and development, as well as other direct and indirect costs incurred in getting them to their current condition and location.

The cost value of real-estate assets accounted for as inventories is comprised of: the acquisition cost of the land, the cost of urban planning and construction, non-recoverable taxes and costs corresponding to construction supervision, coordination and management. Borrowing cost incurred during the year form part of the cost value, provided that the inventories require more than a year to be in a condition to be sold.

Properties purchased from borrowers in distress are measured, at the acquisition date and any subsequent time, at either their related carrying amount or the fair value of the property (less sale costs), whichever is lower. The acquisition cost of these real-estate assets is defined as the balance pending collection of the loans/credits that originated these purchases (net of associated provisions).

Impairment

If the fair value less costs to sell is lower than the amount registered in the balance sheet for the loan, a loss is recognized under the heading “Impairment losses on other assets (net)” in the income statement for the period. In the case of real-estate assets accounted for as inventories, the BBVA Group’s criterion for determining their net realizable value is mainly based on independent appraisals no more than one year old, or less if there are indications of impairment.

The amount of any inventory valuation adjustment for reasons such as damage, obsolescence, reduction in sale price to its net realizable value, as well as losses for other reasons and, if appropriate, subsequent recoveries of value up to the limit of the initial cost value, are registered under the heading “Impairment losses on other assets (net) – Other assets” in the accompanying consolidated income statements (see Note 50) for the year in which they are incurred.

Inventory sales

In sale transactions, the carrying amount of inventories is derecognized from the consolidated balance sheet and recognized as an expense under the heading “Other operating expenses – Changes in inventories” in the year in which the income from its sale is recognized. This income is recognized under the heading “Other operating income – Financial income from non-financial services” in the consolidated income statements (see Note 45).

F-28

2.2.7 Business combinations

The aim of a business combination is to obtain control of one or more businesses. It is accounted for by applying the acquisition method.

According to this method, the acquirer has to recognize the assets acquired and the liabilities and contingent liabilities assumed, including those that the acquired entity had not recognized in the accounts. The method involves the measurement of the consideration received for the business combination and its allocation to the assets, liabilities and contingent liabilities measured according to their fair value, at the purchase date.

In addition, the acquire shall recognize an asset in the consolidated balance sheet under the heading “Intangible asset - Goodwill” if on the purchase date there is a positive difference between:

• the sum of the consideration transferred, the amount of all the non-controlling interests and the fair value of stock previously held in the acquired business; and

• the fair value of the assets acquired and liabilities assumed.

If this difference is negative, it shall be recognized directly in the income statement under the heading “Negative Goodwill in business combinations”.

Non-controlling interests in the acquired entity may be measured in two ways: either at their fair value; or at the proportional percentage of net assets identified in the acquired entity. The method of valuing non-controlling interest may be elected in each business combination. So far, the BBVA Group has always elected for the second method.

The purchase of non-controlling interests subsequent to obtaining control of an entity is recognized as equity transactions; in other words, the difference between the consideration transferred and the carrying amount of the percentage of non-controlling interests acquired is charged directly to equity.

2.2.8 Intangible assets

Goodwill

Goodwill represents payment in advance by the acquiring entity for the future economic benefits from assets that cannot be individually identified and separately recognized . It is only recognized as goodwill when the business combinations are acquired at a price. Goodwill is never amortized. It is subject periodically to an impairment analysis, and is written off if it is clear that there has been impairment.

Goodwill is assigned to one or more cash-generating units that expect to be the beneficiaries of the synergies derived from the business combinations. The cash-generating units represent the Group’s smallest identifiable asset groups that generate cash flows for the Group and that are largely independent of the flows generated from the Group’s other assets or groups of assets. Each unit or units to which goodwill is allocated:

• is the lowest level at which the entity manages goodwill internally;

• is not larger than a business segment.

The cash-generating units to which goodwill has been allocated are tested for impairment (including the allocated goodwill in their carrying amount). This analysis is performed at least annually or more frequently if there is any indication of impairment.

For the purpose of determining the impairment of a cash-generating unit to which a part of goodwill has been allocated, the carrying amount of that unit, adjusted by the theoretical amount of the goodwill attributable to the non-controlling interests, in the event they are not valued at fair value, is compared with its recoverable amount.

The recoverable amount of a cash-generating unit is equal to the fair value less sale costs and its value in use, whichever is greater. Value in use is calculated as the discounted value of the cash flow projections that the unit’s management estimates and is based on the latest budgets approved for the coming years. The main assumptions used in its calculation are: a sustainable growth rate to extrapolate the cash flows indefinitely, and the discount rate used to discount the cash flows, which is equal to the cost of the capital assigned to each cash-generating unit, and equivalent to the sum of the risk-free rate plus a risk premium inherent to the cash-generating unit being evaluated for impairment.

F-29

If the carrying amount of the cash-generating unit exceeds the related recoverable amount, the Group recognizes an impairment loss; the resulting loss is apportioned by reducing, first, the carrying amount of the goodwill allocated to that unit and, second, if there are still impairment losses remaining to be recognized, the carrying amount of the rest of the assets. This is done by allocating the remaining loss in proportion to the carrying amount of each of the assets in the unit. In the event the non-controlling interests are measured at fair value, the deterioration of goodwill attributable to non-controlling interests will be recognized. In any case, an impairment loss recognized for goodwill shall not be reversed in a subsequent period.

They are recognized under the heading “Impairment losses on other assets (net) – Goodwill and other intangible assets” in the consolidated income statements (see Note 50).

Other intangible assets

These assets may have an indefinite useful life if, based on an analysis of all relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash flows for the consolidated entities. In all other cases they have a finite useful life.

Intangible assets with a finite useful life are amortized according to the duration of this useful life, using methods similar to those used to depreciate tangible assets. The depreciation charge of these assets is recognized in the accompanying consolidated income statements under the heading “Depreciation and amortization” (see Note 47).

The consolidated entities recognize any impairment loss on the carrying amount of these assets with charge to the heading “Impairment losses on other assets (net) - Goodwill and other intangible assets” in the accompanying consolidated income statements (see Note 50). The criteria used to recognize the impairment losses on these assets and, where applicable, the recovery of impairment losses recognized in prior years, are similar to those used for tangible assets.

2.2.9 Insurance and reinsurance contracts

The assets of the BBVA Group’s insurance companies are recognized according to their nature under the corresponding headings of the consolidated balance sheets and the initial regognition and valuation is carried out according to the criteria set out in IFRS 4.

The heading “Reinsurance assets” in the accompanying consolidated balance sheets includes the amounts that the consolidated entities are entitled to receive under the reinsurance contracts entered into by them with third parties and, more specifically, the share of the reinsurer in the technical provisions recognized by the consolidated insurance entities (see Note 18).

The heading “Liabilities under insurance contracts” in the accompanying consolidated balance sheets includes the technical provisions for direct insurance and inward reinsurance recognized by the consolidated entities to cover claims arising from insurance contracts in force at period-end (see Note 24).

The income or expenses reported by the BBVA Group’s insurance companies on their insurance activities is recognized, attending to its nature, in the corresponding items of the consolidated income statements.

The consolidated insurance entities of the BBVA Group recognize the amounts of the premiums written to the income statement and a charge for the estimated cost of the claims that will be incurred at their final settlement to their income statements. At the close of each year the amounts collected and unpaid, as well as the costs incurred and unpaid, are accrued.

The most significant provisions registered by consolidated insurance entities with respect to insurance policies issued by them are set out by their nature in Note 24.

F-30

According to the type of product, the provisions may be as follows:

• Life insurance provisions: Represents the value of the net obligations undertaken with the life insurance policyholder. These provisions include:

• Provisions for unearned premiums. These are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until the closing date that has to be allocated to the period from the closing date to the end of the insurance policy period.

• Mathematical reserves: Represents the value of the life insurance obligations of the insurance companies at year-end, net of the policyholder’s obligations, arising from life insurance contracted.

• Non-life insurance provisions:

• Provisions for unearned premiums. These provisions are intended for the accrual, at the date of calculation, of the premiums written. Their balance reflects the portion of the premiums accrued until year-end that has to be allocated to the period between the year-end and the end of the policy period.

• Provisions for unexpired risks: The provision for unexpired risks supplements the provision for unearned premiums by the amount by which that provision is not sufficient to reflect the assessed risks and expenses to be covered by the insurance companies in the policy period not elapsed at year-end.

• Provision for claims: This reflects the total amount of the outstanding obligations arising from claims incurred prior to year-end. Insurance companies calculate this provision as the difference between the total estimated or certain cost of the claims not yet reported, settled or paid, and the total amounts already paid in relation to these claims.

• Provision for bonuses and rebates: This provision includes the amount of the bonuses accruing to policyholders, insurees or beneficiaries and the premiums to be returned to policyholders or insurees, as the case may be, based on the behavior of the risk insured, to the extent that such amounts have not been individually assigned to each of them.

• Technical provisions for reinsurance ceded: Calculated by applying the criteria indicated above for direct insurance, taking account of the assignment conditions established in the reinsurance contracts in force.

• Other technical provisions: Insurance companies have recognized provisions to cover the probable mismatches in the market reinvestment interest rates with respect to those used in the valuation of the technical provisions.

The BBVA Group controls and monitors the exposure of the insurance companies to financial risk and, to this end, uses internal methods and tools that enable it to measure credit risk and market risk and to establish the limits for these risks.

2.2.10 Tax assets and liabilities

Expenses on corporation tax applicable to the BBVA Group’s Spanish companies and on similar taxes applicable to consolidated entities abroad are recognized in the consolidated income statement, except when they result from transactions on which the profits or losses are recognized directly in equity, in which case the related tax effect is also recognized in equity.

The total corporate income tax expense is calculated by aggregating the current tax arising from the application of the corresponding tax rate to the tax for the year (after deducting the tax credits allowable for tax purposes) and the change in deferred tax assets and liabilities recognized in the consolidated income statement.

Deferred tax assets and liabilities include temporary differences, defined as the amounts to be payable or recoverable in future fiscal years arising from the differences between the carrying amount of assets and liabilities and their tax bases (the “tax value”), and tax loss and tax credit carry forwards. These amounts are registered by applying to each temporary difference the tax rates that are expected to apply when the asset is realized or the liability settled (see Note 21).

The “Tax Assets” chapter of the accompanying consolidated balance sheets includes the amount of all the assets of a tax nature, and distinguishes between: “Current” (amounts recoverable by tax in the next twelve months) and “Deferred” (covering taxes recoverable in future years, including loss carry forwards or tax credits for deductions and tax rebates pending application).

F-31

The “Tax Liabilities” chapter of the accompanying consolidated balance sheets includes the amount of all the liabilities of a tax nature, except for provisions for taxes, broken down into: “Current” (income tax payable on taxable profit for the year and other taxes payable in the next twelve months) and “Deferred” (income taxes payable in subsequent years).

Deferred tax liabilities in relation to taxable temporary differences associated with investments in subsidiaries, associates or jointly controlled entities are recognized as such, except where the Group can control the timing of the reversal of the temporary difference and it is unlikely that it will reverse in the foreseeable future.

Deferred tax assets are recognized to the extent that it is considered probable that the consolidated entities will have sufficient taxable profits in the future against which the deferred tax assets can be utilized and are not from the initial recognition (except in the case of a business combination) of other assets or liabilities in a transaction that does not affect the fiscal outcome or the accounting result.

The deferred tax assets and liabilities recognized are reassessed by the consolidated entities at each balance sheet date in order to ascertain whether they are still current, and the appropriate adjustments are made on the basis of the findings of the analyses performed.

The income and expenses directly recognized in equity that do not increase or decrease taxable income are accounted for as temporary differences.

2.2.11 Provisions, contingent assets and contingent liabilities

The heading “Provisions” in the consolidated balance sheets includes amounts recognized to cover the BBVA Group’s current obligations arising as a result of past events. These are certain in terms of nature but uncertain in terms of amount and/or settlement date. The settlement of these obligations is deemed likely to entail an outflow of resources embodying economic benefits (see Note 25). The obligations may arise in connection with legal or contractual provisions, valid expectations formed by Group companies relative to third parties in relation to the assumption of certain responsibilities or through virtually certain developments of particular aspects of the regulations applicable to the operation of the entities; and, specifically, future legislation to which the Group will certainly be subject.

The provisions are recognized in the consolidated balance sheets when each and every one of the following requirements is met:

• They represent a current obligation that has arisen from a past event;

• At the date referred to by the consolidated financial statements, there is more probability that the obligation will have to be met than that it will not;

• It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and

• The amount of the obligation can be reasonably estimated.

Among other items, these provisions include the commitments made to employees by some of the Group entities (mentioned