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, 2013

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)

Ricardo Gómez Barredo

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, 2013, was:

Ordinary shares, par value €0.49 per share—5,785,954,443

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

Yes  x            No   ¨

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

Yes  ¨            No   x

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

Yes  x            No   ¨

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

Yes  ¨            No   ¨

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

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

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

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

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

Item 17  ¨             Item 18  ¨

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

Yes  ¨            No   x

BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		5
A.	Directors and Senior Management		5
B.	Advisers		5
C.	Auditors		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		24
A.	History and Development of the Company		24
B.	Business Overview		27
C.	Organizational Structure		50
D.	Property, Plants and Equipment		51
E.	Selected Statistical Information		51
F.	Competition		71
ITEM 4A.	UNRESOLVED STAFF COMMENTS		73
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		73
A.	Operating Results		79
B.	Liquidity and Capital Resources		116
C.	Research and Development, Patents and Licenses, etc.		120
D.	Trend Information		120
E.	Off-Balance Sheet Arrangements		123
F.	Tabular Disclosure of Contractual Obligations		123
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		123
A.	Directors and Senior Management		124
B.	Compensation		130
C.	Board Practices		134
D.	Employees		140
E.	Share Ownership		143
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		143
A.	Major Shareholders		143
B.	Related Party Transactions		144
C.	Interests of Experts and Counsel		145
ITEM 8.	FINANCIAL INFORMATION		145
A.	Consolidated Statements and Other Financial Information		145
B.	Significant Changes		146
ITEM 9.	THE OFFER AND LISTING		146
A.	Offer and Listing Details		146
B.	Plan of Distribution		153
C.	Markets		153
D.	Selling Shareholders		153
E.	Dilution		153
F.	Expenses of the Issue		153
ITEM 10.	ADDITIONAL INFORMATION		153
A.	Share Capital		153
B.	Memorandum and Articles of Association		154

		PAGE
C.	Material Contracts		156
D.	Exchange Controls		156
E.	Taxation		158
F.	Dividends and Paying Agents		164
G.	Statement by Experts		164
H.	Documents on Display		164
I.	Subsidiary Information		164
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		164
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		173
A.	Debt Securities		173
B.	Warrants and Rights		173
C.	Other Securities		173
D.	American Depositary Shares		173
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		175
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		175
ITEM 15.	CONTROLS AND PROCEDURES		175
ITEM 16.	[RESERVED]		177
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		177
ITEM 16B.	CODE OF ETHICS		177
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		178
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		179
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		179
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		179
ITEM 16G.	CORPORATE GOVERNANCE		180
ITEM 16H.	MINE SAFETY DISCLOSURE		182
PART III
ITEM 17.	FINANCIAL STATEMENTS		182
ITEM 18.	FINANCIAL STATEMENTS		182
ITEM 19.	EXHIBITS		182

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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 Grupo Financiero BBVA Bancomer, S.A. de C.V. 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, 2013, 2012 and 2011 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, unless otherwise indicated or the context otherwise requires.

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 and includes statements regarding future growth rates. 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;

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

• 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, 2013. 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.

The financial information as of and for the years ended December 31, 2012, 2011, 2010 and 2009 may differ from previously reported financial information as of such dates and for such periods in our respective annual reports for certain prior years, mainly as a result of the implementation of changes in the accounting standards set out in IFRS 10 and 11 that came into force in 2013.

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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 advances.

• 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, 2013, 2012 and 2011 has been selected from, and should be read together with, the Consolidated Financial Statements included herein. The audited financial statements for 2010 and 2009 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.

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

	Year Ended December 31,
	2013			2012			2011			2010			2009
	(In Millions of Euros, Except Per Share/ADS Data (In Euros))
Consolidated Statement of Income Data
Interest and similar income		23,512			24,815			23,229			21,130			23,773
Interest and similar expenses		(9,612	)		(10,341	)		(10,505	)		(7,814	)		(9,893	)
Net interest income		13,900			14,474			12,724			13,316			13,880
Dividend income		235			390			562			529			443
Share of profit or loss of entities accounted for using the equity method		694			1,039			787			331			118
Fee and commission income		5,478			5,290			4,874			4,864			4,841
Fee and commission expenses		(1,228	)		(1,134	)		(980	)		(831	)		(790	)
Net gains (losses) on financial assets and liabilities		1,608			1,636			1,070			1,372			821
Net exchange differences		903			69			410			455			651
Other operating income		4,995			4,765			4,212			3,537			3,395
Other operating expenses		(5,627	)		(4,705	)		(4,019	)		(3,240	)		(3,145	)
Administration costs		(9,701	)		(9,396	)		(8,634	)		(8,007	)		(7,486	)
Depreciation and amortization		(1,095	)		(978	)		(810	)		(754	)		(690	)
Provisions (net)		(609	)		(641	)		(503	)		(475	)		(446	)
Impairment losses on financial assets (net)		(5,612	)		(7,859	)		(4,185	)		(4,718	)		(5,473	)
Impairment losses on other assets (net)		(467	)		(1,123	)		(1,883	)		(489	)		(1,619	)
Gains (losses) on derecognized assets not classified as non-current assets held for sale		(1,915	)		3			44			41			20
Negative goodwill		—			376			—			1			99
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(399	)		(624	)		(271	)		127			859
Operating profit before tax		1,160			1,582			3,398			6,059			5,478
Income tax		(46	)		352			(158	)		(1,345	)		(1,085	)
Profit from continuing operations		1,114			1,934			3,240			4,714			4,394
Profit from discontinued operations (net) (3)		1,866			393			245			281			201
Profit		2,981			2,327			3,485			4,995			4,595
Profit attributable to parent company		2,228			1,676			3,004			4,606			4,210
Profit attributable to non-controlling interests		753			651			481			389			385
Per share/ADS (1) Data
Numbers of shares outstanding (at period end)		5,785,954,443			5,448,849,545			4,903,207,003			4,490,908,285			3,747,969,121
Profit attributable to parent company (2)		0.40			0.32			0.62			1.10			1.02
Dividends declared		0.100			0.200			0.200			0.270			0.420

(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, October 2012, April 2013 and October 2013, and excluding the weighted average number of treasury shares during the period (5,692 million, 5,622 million, 5,093 million, 4,388 million and 4,259 million shares in 2013, 2012, 2011, 2010 and 2009, respectively). With respect to the years ended December 31, 2013, 2012 and 2011, see Note 5 to the Consolidated Financial Statements.

(3) For 2013, includes the capital gains from the sale of Afore Bancomer in Mexico and the South America pension fund administrators, as well as the earnings posted by these companies up to the date of these sales.

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	As of and for Year Ended December 31,
	2013			2012			2011			2010			2009
	(In Millions of Euros, Except Percentages)
Consolidated Balance Sheet Data
Total assets		582,575			621,072			582,838			552,738			535,065
Common stock		2,835			2,670			2,403			2,201			1,837
Loans and receivables (net)		350,945			371,347			369,916			364,707			346,117
Customer deposits		300,490			282,795			272,402			275,789			254,183
Debt certificates and subordinated liabilities		74,676			98,070			96,427			102,599			117,817
Non-controlling interest		2,371			2,372			1,893			1,556			1,463
Total equity		44,850			43,802			40,058			37,475			30,763
Consolidated ratios
Profitability ratios:
Net interest margin (1)		2.32	%		2.38	%		2.29	%		2.38	%		2.56	%
Return on average total assets (2)		0.5	%		0.4	%		0.6	%		0.9	%		0.9	%
Return on average equity (3)		5.0	%		4.0	%		8.0	%		15.8	%		16.0	%
Credit quality data
Loan loss reserve (4)		14,995			14,159			9,139			9,473			8,805
Loan loss reserve as a percentage of total loans and receivables (net)		4.27	%		3.81	%		2.47	%		2.60	%		2.54	%
Non-performing asset ratio (NPA ratio) (5)		6.9	%		5.1	%		4.0	%		4.1	%		4.3	%
Impaired loans and advances to customers		25,445			19,960			15,416			15,361			15,197
Impaired contingent liabilities to customers (6)		410			312			217			324			405
		25,855			20,272			15,633			15,685			15,602
Loans and advances to customers		338,557			356,278			351,634			348,253			332,162
Contingent liabilities to customers		36,183			36,891			37,126			35,816			32,614
		374,740			393,169			388,760			384,069			364,776

(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, excluding “Non-controlling interest”.

(4) Represents impairment losses of loans and receivables to credit institutions, loans and advances 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 7.5%, 5.6%, 4.4%, 4.4% and 4.6% as of December 31, 2013, 2012, 2011, 2010 and 2009, 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.

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

7

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)
2009		1.3955
2010		1.3216
2011		1.4002
2012		1.2908
2013		1.3303
2014 (through April, 25, 2014)		1.3728

(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, 2013		1.3537		1.3120
October 31, 2013		1.3810		1.3490
November 30, 2013		1.3606		1.3357
December 31, 2013		1.3816		1.3552
January 31, 2014		1.3682		1.3500
February 28, 2014		1.3806		1.3507
March 31, 2014		1.3927		1.3731
April 30, 2014 (through April 25, 2014)		1.3898		1.3704

The noon buying rate for euro from the Federal Reserve Bank of New York, expressed in dollars per €1.00, on April 25, 2014, was $1.3838.

As of December 31, 2013, approximately 40% of our assets and approximately 40% 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 Portfolio in 2013—Structural Risk Structural Currency 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

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

The financial services industry is among the most highly regulated industries in the world. The Bank’s 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 it operates. This is particularly the case in the current market environment, which is witnessing increased

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levels of government and regulatory intervention in the banking sector which the Bank expects to continue for the foreseeable future. As a result, we may further be subject to an increasing incidence or amount of liability or regulatory sanctions and may be required to make greater expenditures and devote additional resources to address potential liability.

The regulations which most significantly affect the Bank, or which could most significantly affect the Bank in the future, include regulations relating to capital and provisions requirements, which have become increasingly more strict in the past three years, steps taken 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.

In addition, the Bank is subject to substantial regulation relating to other matters such as liquidity. The Bank considers that future liquidity standards could require maintaining a greater proportion of its assets in highly-liquid but lower-yielding financial instruments, which would negatively affect the Bank’s net interest margin.

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

Moreover, the Bank’s regulators, as part of their supervisory function, periodically review the Bank’s allowance for loan losses. Such regulators may require the Bank to increase its allowance for loan losses or to recognize further losses. Any such additional provisions for loan losses, as required by these regulatory agencies, whose views may differ from those of the Bank’s management, could have an adverse effect on the Bank’s earnings and financial condition.

Recent Spanish regulatory developments include (i) Royal Decree-Law 2/2012, of February 3 and Law 8/2012 of October 30, which increased coverage requirements to be met by December 31, 2012 for performing and non-performing real estate assets, (ii) Law 9/2012, of November 14 (“Law 9/2012”) which established a new regime on restructuring and resolution of credit institutions and a statutory loss absorbency regime applicable within the framework of restructuring and resolution processes, which was based on the June 2012 draft of the proposed EU Recovery and Resolution Directive (“RRD”), and (iii) Royal Decree-Law 14/2013, of November 29 (“RD-L 14/2013”) which partially incorporated Capital Requirements Directive IV (“CRD IV”) into Spanish law. In addition, on February 5, 2014 a new Bank of Spain Circular 2/2014, of January 31, was published. By means of this new circular, the Bank of Spain has made certain regulatory determinations under the Capital Requirements Regulation (which is directly applicable in EU member states, without the need to be implemented by national laws) (“CRR”) pursuant to the delegation contained in RD-L 14/2013 including, among other things, certain rules concerning the applicable transitional regime on capital requirements and the treatment of deductions and. establishes a 4.5% common equity tier 1 requirement and a 6% tier 1 capital requirement.

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

Capital requirements

Increasingly onerous capital requirements constitute one of the Bank’s main regulatory concerns.

As a Spanish financial institution, Banco Bilbao Vizcaya Argentaria, S.A. is subject to CRD IV, through which the European Union has implemented the Basel III capital standards and which are in the process of being phased in until January 1, 2019. The CRR entered into force on January 1, 2014 and the CRD IV Directive has already been partially implemented in Spain as of January 1, 2014 by RD-L 14/2013. RD-L 14/2013 has repealed, with effect from January 1, 2014, any Spanish regulatory provisions that may be incompatible with CRR.

Despite the CRD IV/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 implementation calendars.

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For example, in the last three years the Bank of Spain and the European Banking Authority (the “EBA”) have imposed new capital requirements in advance of the entering into force of CRD IV. These measures have included Bank of Spain Circular 3/2008 (“Circular 3/2008”) of May 22, on the calculation and control of minimum capital requirements, which was amended by Bank of Spain Circular 4/2011 (“Circular 4/2011”) and which implemented Capital Requirements Directive III in Spain. In addition, some of the requirements of Basel III were already implemented by the Spanish Government in 2011 with Royal Decree-Law 2/2011 (“RD-L 2/2011”) of February 18 (as amended by Law 9/2012) which established a new minimum requirement in terms of capital on risk-weighted assets (“Capital Principal”) and required such capital to be greater than 9% from January 1, 2013. RD-L 14/2013 repealed, with effect from January 1, 2014, Title I of Royal Decree-Law 2/2011, which imposed the minimum Capital Principal requirement with respect to credit institutions. Despite such repeal, the Bank of Spain has been given powers to prohibit or restrict, until December 31, 2014, any distributions of Tier 1 Capital by credit institutions (including the Bank) which would have been comprised in the minimum Capital Principal requirements stipulated in RD-L 2/2011, provided such distributions, in aggregate terms, imply not fulfilling by up to 20% of the minimum Capital Principal legally required as at December 31, 2013, the Capital Principal requirement on a temporary basis and any credit institution making any such distribution would further risk non-compliance with additional capital requirements that could be imposed by the Bank of Spain.

Furthermore, following an evaluation of the capital levels of 71 financial institutions throughout Europe (including the Bank) based on data available as of September 30, 2011, the EBA issued a recommendation on December 8, 2011 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 has been replaced by the EBA recommendation of July 22, 2013 on the preservation of Core Tier 1 capital during the transition to CRD IV implementation. This new recommendation provides for the maintenance of a nominal floor of capital denominated in the relevant reporting currency of Core Tier 1 capital corresponding to the amount of capital needed as at June 30, 2012 to meet the requirements of the above recommendation of December 8, 2011. Competent authorities may waive this requirement for institutions which maintain a minimum of 7% of common equity Tier 1 capital under CRD IV rules applied after the transitional period.

Finally, in order to complete the implementation of CRD IV initiated by RD-L 14/2013, the Spanish Ministry of Economy and Competitiveness has prepared and recently published a draft of a new comprehensive law on the supervision and solvency of financial institutions.

Additionally, the Mexican government introduced the Basel III capital standards in 2012 and the Basel III transposition in the United States will be effective in 2015. 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 the Bank and could undermine its profitability.

At its meeting of January 12, 2014, the oversight body of the Basel Committee endorsed the definition of the leverage ratio set forth in CRD IV, to promote consistent disclosure, starting on January 1, 2015. There will be a mandatory minimum capital requirement on January 1, 2018, with an initial minimum leverage ratio of 3% that can be raised after calibration.

There can be no assurance that the implementation of these new standards or recommendations will not adversely affect the Bank’s ability to pay dividends, or require it 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 the Bank’s business, financial condition and results of operations. Furthermore, increased capital requirements may negatively affect the Bank’s return on equity and other financial performance indicators.

Tax treatment of deferred tax assets following the implementation of CRD IV

In addition to introducing new capital requirements, CRD IV provides that the deferred tax assets (“DTAs”) of a financial institution must be deducted from its regulatory capital (specifically from its core capital or CET1 Capital) for prudential reasons, as there is generally no guarantee that DTAs will retain their value in the event of the institution facing difficulties.

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This new deduction introduced by CRD IV has a significant impact on Spanish banks due to the particularly restrictive nature of certain aspects of Spanish tax law. For example, in some EU countries when a bank reports a loss the tax authorities refund a portion of taxes paid in previous years but in Spain the bank must earn profits in subsequent years in order for this set-off to take place. Additionally, Spanish tax law does not recognize as tax-deductible certain amounts recorded as costs in the accounts of a bank, unlike the tax legislation of other EU countries.

Due to these differences and the greater impact of the requirements of CRD IV with respect to DTAs, the Spanish regulator implemented certain amendments to the Spanish Law on Corporate Income Tax (Royal Decree Law 4/2004 of March 5, as amended) through RD-L 14/2013. This provides for certain DTAs to be treated as a direct claim against the tax authorities if a Spanish bank is unable to reverse those temporary differences within 18 years or if it is liquidated, becomes insolvent or incurs accounting losses. This amendment will allow a Spanish bank not to deduct such DTAs from its regulatory capital.

However, there can be no assurance that the tax amendments implemented by RD-L 14/2013 will not be challenged by the European Commission, that the final interpretation of these amendments will not change (as further clarifying regulation is expected during 2014) and that Spanish banks will ultimately be allowed to maintain certain DTAs as regulatory capital. If this regulation is challenged, this may negatively affect the Bank’s regulatory capital and therefore its ability to pay dividends or require it 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 a material adverse effect on the Bank’s business, financial condition and results of operations.

Contributions for assisting in the restructuring of the Spanish banking sector

Royal Decree-Law 6/2013 of March 22, on protection for holders of certain savings and investment products and other financial measures, included a requirement for banks, including the Bank, to make an exceptional one-off contribution to the Deposit Guarantee Fund (Fondo de Garantía de Depósitos) in addition to the annual contribution to be made by member institutions, equal to €3.00 per each €1,000 of deposits held as of December 31, 2012. The purpose of such contribution was for the Deposit Guarantee Fund to be able to purchase at market prices the unlisted shares of certain Spanish financial institutions involved in restructuring or resolution processes under Law 9/2012 (none of which are part of the Group). There can be no assurance that additional funding requirements will not be imposed by the Spanish authorities for assisting in the restructuring of the Spanish banking sector.

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 exists and significant advances have been made in terms of the development of a single-rule book through CRD IV, there is ongoing debate on the extent and pace of integration. On September 13, 2012, the European Parliament approved a proposal for the creation of the Single Supervisory Mechanism, so that 128 of the largest EU banks (including the Bank) will come under the ECB’s direct oversight from November 2014. Other issues include 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 EBA, the development of a new bank resolution regime and the creation of a common deposit-guarantee scheme. In particular, the RRD and the Deposit Guarantee Schemes Directive were submitted to the European Parliament in June 2013. An agreement on the RRD was reached in the February 2014 ECOFIN. The final approval of the RRD is expected by April-May 2014. The RRD is expected to enter into force in 2015, but the bail-in tool will only be operational from 2016. The final regulation on direct recapitalization of banks by the European Stability Mechanism (ESM) is still pending. European leaders have also supported the reinforcement of the fiscal union but continue negotiating on how to achieve it.

Prior to the ECB assuming the supervision of European banks (including the Bank), the ECB is conducting, with the help of national supervisors, external advisors, consultants and other appraisers, a comprehensive assessment consisting of three elements: (i) a supervisory risk assessment, which will assess the main risks on the balance sheet including liquidity, funding and leverage; (ii) an asset quality review, which will focus on credit and

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market risks; and (iii) a stress test to examine the need to strengthen capital or take other corrective measures which could affect the Group’s business, financial condition and results of operations. It is expected that the results of this comprehensive agreement will be released at the end of 2014.

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

In addition, on January 29, 2014, the European Commission released its proposal on the structural reforms of the European banking sector that will impose new constraints on the structure of European banks. The proposal aims at ensuring the harmonization between the divergent national initiatives in Europe, and includes a prohibition of proprietary trading such as in the US Volcker Rule and a mechanism to require the separation of trading activities including market making such as in the UK Banking Reform.

Regulatory reforms initiated in the United States

The Bank’s 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. In July 2013, U.S. federal bank regulators issued final rules implementing many elements of the Basel III framework and other U.S. capital reforms. In December 2013, the Federal Reserve, the OCC, the FDIC, the CFTC and the SEC issued final rules to implement the Volcker Rule, as required by the Dodd-Frank Act. The Volcker Rule prohibits an insured depository institution, its affiliates and any company that controls an insured depository institution from engaging in proprietary trading and from investing in or sponsoring certain covered funds, such as hedge funds and private equity funds, in each case subject to certain limited exceptions. The final rules also impose significant compliance and reporting obligations.

In February 2014, the Federal Reserve approved a final rule to enhance its supervision and regulation of the U.S. operations of foreign banking organizations (“FBOs”) such as BBVA. Under this rule, FBOs with $50 billion or more in U.S. assets held outside of their U.S. branches and agencies (“Large FBOs”), such as BBVA, will be required to create a separately capitalized top-tier U.S. intermediate holding company (“IHC”) that will hold all of the Large FBO’s U.S. bank and nonbank subsidiaries, such as Compass Bank and BBVA Compass. The IHC will be subject to U.S. risk-based and leverage capital, liquidity, risk management, stress testing and other enhanced prudential standards on a consolidated basis. Under the final rule, a Large FBO that is subject to the IHC requirement may request permission from the Federal Reserve to establish multiple IHCs or use an alternative organizational structure. The final rule also permits the Federal Reserve to apply the IHC requirement in a manner that takes into account the separate operations of multiple foreign banks that are owned by a single Large FBO. Although U.S. branches and agencies of Large FBOs will not be required to be held beneath an IHC, such branches and agencies will be subject to liquidity, and, in certain circumstances, asset maintenance requirements. Large FBOs generally will be required to form IHCs and comply with enhanced prudential standards beginning July 1, 2016, although an IHC’s compliance with applicable U.S. leverage ratio requirements is generally delayed until January 1, 2018, and certain enhanced prudential standards will apply to BBVA’s top-tier U.S. bank holding company, BBVA Compass, beginning January 1, 2015. The Federal Reserve has stated that it will issue, at a later date, final rules to implement certain other enhanced prudential standards under the Dodd-Frank Act for large bank holding companies and Large FBOs, including single counterparty credit limits and an early remediation framework. The rule does not constitute any significant additional burden for FBOs that already organized their main US subsidiaries through a BHC structure such as BBVA. Indeed, those FBOs would have anyway been subject to US prudential standards.

In addition, the Federal Reserve and other U.S. regulators issued for public comment in October 2013 a proposed rule that would introduce a quantitative liquidity coverage ratio requirement on certain large banks and bank holding companies. The proposed liquidity coverage ratio is broadly consistent with the Basel Committee’s revised Basel III liquidity rules, but is more stringent in several important respects. The Federal Reserve has also stated that it intends, through future rulemakings, to apply the Basel III liquidity coverage ratio and net stable funding ratio to the U.S. operations of some or all large FBOs.

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Although there remains uncertainty as to how regulatory implementation of these laws will occur, various elements of the new laws may cause changes that impact the profitability of the Bank’s business activities and require that it changes certain of its business practices, and could expose the Bank to additional costs (including increased compliance costs). These changes may also cause the Bank to invest significant management attention and resources to make any necessary changes.

Taxation of the financial sector

On February 14, 2013 the European Commission published its proposal for a Council Directive implementing a common financial transaction tax, which was intended to take effect on January 1, 2014 but negotiations are still ongoing. The proposed Directive aims to ensure that the financial sector makes a fair and substantial contribution to covering the costs of the recent crisis and creating a level playing field with other sectors from a taxation point of view. In Spain, legislation passed in March 2013 imposed extraordinary levies on deposits (see “—Contributions for assisting in the restructuring of the Spanish banking sector”) but the final terms of this tax are expected to be adopted in 2014, along with other tax reforms. It is expected that the Spanish Government will set a tax on outstanding deposits to be paid annually by banks, which will subsequently be distributed to regional authorities. There can be no assurance that additional national or transnational bank levies or financial transaction taxes will not be adopted by the authorities of the jurisdictions where the Bank operates. Any such additional levies and taxes could have a material adverse effect on the Bank’s business, financial condition, results of operations and prospects.

Withdrawals of deposits or other sources of liquidity may make it more difficult or costly for the Group to fund its business on favorable terms or cause the Group to take other actions

Historically, one of the Group’s principal sources of funds has been savings and demand deposits. 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) or competition from investment funds or other products. The expected introduction of national taxes on outstanding deposits could be negative for the market in Spain. Moreover, there can be no assurance 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 the Group operates, the Group will be able to maintain its current levels of funding without incurring higher funding costs or having to liquidate certain of its 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, there can be no assurance that the Group will be able to maintain its current levels of funding without incurring higher funding costs or having to liquidate certain of its assets or taking additional deleverage measures.

The Group’s earnings and financial condition have been, and its future earnings and financial condition may continue to be, materially affected by depressed asset valuations resulting from poor market conditions

Financial markets, among other matters, reflect the perception of risk, economic conditions and economic policies in their present and short to mid-term future outlooks. Especially in 2012, negative growth expectations and lack of confidence that policy changes would solve problems led to steep falls in asset values and a severe reduction in market liquidity. Additionally, in dislocated markets, hedging and other risk management strategies may not be as effective as they are in more normal market conditions due in part to the decreasing credit quality of hedge counterparties. Severe market events such as the sovereign debt crisis, rising risk premiums and falls in share market prices, have resulted in the Group recording large write-downs on its credit market exposures in recent years. Any deterioration in economic and financial market conditions could lead to further impairment charges and write-downs.

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The Group faces increasing competition in its business lines

The markets in which the Group operates are highly competitive and the Group believes that this trend will continue. In addition, the trend towards consolidation in the banking industry has created larger and stronger banks with which the Group must now compete, some of which have recently received public capital from the European Stability Mechanism. Foreign competitors or funds may consider acquiring the institutions who have received such public capital in future auctions, such as occurred with respect to Novagalicia Banco, which was acquired by Banesco, a Venezuelan bank.

The Group also faces 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 have recently been offered as a consequence of the sovereign debt crisis, there has been a crowding out effect in the financial markets).

There can be no assurance that this competition will not adversely affect the Group’s business, financial condition, cash flows and results of operations.

The Group’s business is particularly vulnerable to volatility in interest rates

The Group’s results of operations are substantially dependent upon the level of its 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 its control, including fiscal and monetary policies of governments and central banks, regulation of the financial sectors in the markets in which it operates, domestic and international economic and political conditions and other factors. Changes in market interest rates can affect the interest rates that the Group receives on its interest-earning assets differently than the rates that it pays for its interest-bearing liabilities. This may, in turn, result in a reduction of the net interest income the Group receives, which could have a material adverse impact on its results of operations.

In addition, the high proportion of loans referenced to variable interest rates 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 the Group’s ability to generate credit for its 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 the Group’s business, financial condition or results of operations.

The Group has a substantial amount of commitments with personnel considered wholly unfunded due to the absence of qualifying plan assets

The Group’s commitments with personnel which are considered to be wholly unfunded are recognized under the heading “Provisions—Funds for Pensions and Similar Obligations” in its consolidated balance sheets included in the Consolidated Financial Statements. These amounts, which comprise “Post-employment benefits”, “Early retirements” and “Post-employment welfare benefits”, are considered wholly unfunded due to the absence of qualifying plan assets.

The Group faces liquidity risk in connection with its ability to make payments on these unfunded amounts which it seeks to mitigate, with respect to “Post-employment benefits”, by maintaining insurance contracts which were contracted with insurance companies owned by the Group. The insurance companies have recorded in their balance sheets specific assets (fixed interest deposit and bonds) assigned to the funding of these commitments. The insurance companies also manage derivatives (primarily swaps) to mitigate the interest rate risk in connection with the payments of these commitments. The Group seeks 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 the Bank fail to adequately manage liquidity risk and interest rate risk either as described above or otherwise, it could have a material adverse effect on the Group’s business, financial condition, cash flows and results of operations.

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We may face risks related to our acquisitions and divestitures

Our mergers and acquisitions activity involves divesting our interests in some businesses and strengthening other business areas through acquisitions. We may not complete these transactions in a timely manner, on a cost-effective basis or at all. Even though we review the companies we plan to acquire, it is generally not feasible for these reviews to be complete in all respects. As a result, we may assume unanticipated liabilities, or an acquisition may not perform as well as expected. In addition, transactions such as these are inherently risky because of the difficulties of integrating people, operations and technologies that may arise. There can be no assurance that any of the businesses we acquire can be successfully integrated or that they will perform well once integrated. Acquisitions may also lead to potential write-downs due to unforeseen business developments that may adversely affect our results of operations.

Our results of operations could also be negatively affected by acquisition or divestiture-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets. We may be subject to litigation in connection with, or as a result of, acquisitions or divestitures, including claims from terminated employees, customers or third parties, and we may be liable for future or existing litigation and claims related to the acquired business or divestiture because either we are not indemnified for such claims or the indemnification is insufficient. These effects could cause us to incur significant expenses and could materially adversely affect our business, financial condition, cash flows and results of operations.

We are party to lawsuits, tax claims and other legal proceedings

Due to the nature of our business, we and our subsidiaries are involved in litigation, arbitration and regulatory proceedings in jurisdictions around the world, the financial outcome of which is unpredictable. An adverse outcome or settlement in these proceedings could result in significant costs and may have a material adverse effect on the Group’s business, financial condition, cash flows, results of operations and reputation. In addition, responding to the demands of litigation may divert management’s time and attention and financial resources. While we believe that we have provisioned such risks appropriately based on the opinions and advice of our legal advisors and in accordance with applicable accounting rules, it is possible that losses resulting from such risks, if proceedings are decided in whole or in part adversely to us, could exceed the amount of provisions made for such risks. See “Item 8. Financial information—Consolidated Statements and Other Financial Information—Legal proceedings” and Note 25 to the Consolidated Financial Statements for additional information on our legal, regulatory and arbitration proceedings.

Risks Relating to Spain and Europe

Economic conditions in the European Union and Spain could have a material adverse effect on our business, financial condition and results of operations

The crisis in worldwide financial and credit markets led to a global economic slowdown in recent years, with many economies around the world showing significant signs of weakness or slow growth. While there has been a significant reduction in risk premiums in Europe since the second half of 2012 and economic growth has resumed positive figures since the second quarter of 2013, the possibility of future deterioration of the economic scenario exists. Any such deterioration could adversely affect the cost and availability of funding for Spanish and European banks, including us, and 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.

The probability of country defaults or rupture of the Eurozone has decreased significantly since 2012. However, if one or more EU Member States were to exit from the European Monetary Union (“EMU”), this 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 the Group’s business, results of operations, financial condition and cash flows. In addition, tensions among Member States of the EU, and Euro-skepticism in certain EU countries, could pose additional difficulties in the EU’s ability to react to an economic crisis.

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In addition, the risk of low inflation (inflation continues to be positive but well below the 2% growth rate of harmonized indices of consumer prices) or deflation (i.e., a continued period with negative rates of inflation) in the Eurozone cannot be completely ruled out. If economic conditions in the European Union and Spain deteriorate as a result, this could have a material adverse effect on our business, financial condition and results of operations.

Additionally, certain upcoming events such as the European Parliamentary elections, could have an adverse impact on the progress that has been made in establishing a European banking union and strengthening the monetary union of the Eurozone or could otherwise cause instability in the Eurozone.

The Bank is dependent on its credit ratings and any reduction of its or the Kingdom of Spain’s credit ratings could materially and adversely affect the Group’s business, financial condition and results of operations

The Bank is rated by various credit rating agencies. The Bank’s credit ratings are an assessment by rating agencies of its ability to pay its obligations when due. Any actual or anticipated decline in the Bank’s credit ratings to below investment grade or otherwise may increase the cost of and decrease the Bank’s ability to finance itself in the capital markets, secured funding markets (by affecting its ability to replace downgraded assets with better rated ones), interbank markets, through wholesale deposits or otherwise, harm its reputation, require it 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 the Group or otherwise materially adversely affect its business, financial condition and results of operations. Furthermore, any decline in the Bank’s credit ratings to below investment grade or otherwise could breach certain of the Bank’s agreements or trigger additional obligations under such agreements, such as a requirement to post additional collateral, which could materially adversely affect the Group’s business, financial condition and results of operations.

Since the Bank has substantial operations in Spain, its credit ratings may be adversely affected by the assessment by rating agencies of the creditworthiness of the Kingdom of Spain. Any decline in the Kingdom of Spain’s sovereign credit ratings could result in a decline in the Bank’s credit ratings.

In addition, the Group holds 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 the Group or otherwise materially adversely affect the Group’s business, financial condition and results of operations. Furthermore, the counterparties to many of the Group’s 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 the Group and, in turn, materially and adversely affect the Group’s business, financial condition and results of operations.

Since the Bank’s loan portfolio is highly concentrated in Spain, adverse changes affecting the Spanish economy could have a material adverse effect on its financial condition

The Group has historically developed its lending business in Spain, which continues to be its main place of business. The Group’s loan portfolio in Spain has been adversely affected by the deterioration of the Spanish economy since 2009. While the last quarter of 2013 showed signs of a slowdown of such deterioration pattern, given the concentration of the Group’s loan portfolio in Spain, any adverse changes affecting the Spanish economy are likely to have a significant adverse impact on the Group’s business financial condition and results of operations.

After rapid economic growth until 2007, Spanish gross domestic product (“GDP”) contracted in the period 2009-10 and 2012-13. The GDP is growing again since the second half of 2013 and the Bank’s Economic Research Department (“BBVA Research”) estimates that the Spanish economy will maintain this positive trend in the years to come based on the improvement of the foreign demand and the measures adopted by the authorities in response to the economic crisis, including the structural reforms to foster competitiveness and productivity and the measures to reduce the public deficit. However, in the case that foreign demand is lower than expected and/or the measures and

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reforms do not contribute to enhancing competitiveness and productivity, the estimated positive scenario for the Spanish economy could be revised downwards. It is worth noting that the effects of the financial crisis were particularly pronounced in Spain given the country’s heightened need for foreign financing as reflected by its high current account and 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 circumstances referred to below:

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. Also, the interruption of the incoming recovery in the Eurozone might have a deep impact on Spanish economy growth.

Lastly, a change in the current recovery of the labor market might be very worrisome since it would affect households’ gross disposable income.

Exposure to the Spanish real estate market makes the Group 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 low interest rates within the EU, led to an increase in the 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. Housing demand has remained weak and housing transactions continued to decrease during 2013 but are expected to stabilize in 2014.

The Group has substantial exposure to the Spanish real estate market and the continuing deterioration of Spanish real estate prices could materially and adversely affect its business, financial condition and results of operations. The Group is exposed to the Spanish real estate market due to the fact that Spanish real estate assets secure many of its outstanding loans and due to the significant amount of Spanish real estate assets held on its balance sheet, including real estate received in lieu of payment for certain underlying loans. Furthermore, the Group has restructured certain of the loans it has made relating to real estate and the capacity of the borrowers to repay those restructured loans may be materially adversely affected by declining real estate prices.

If Spanish real estate prices fail to recover, the Group’s business may be materially adversely affected, which could materially and adversely affect its financial condition and results of operations.

Highly-indebted households and corporations could endanger the Group’s 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 makes debt service on such loans more vulnerable to upward movements in interest rates. 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 the Group’s loan portfolio and, as a result, on its 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 the Group may otherwise be able to sell them and limiting the Group’s ability to attract new customers in Spain satisfying its credit standards, which could have an adverse effect on the Group’s ability to achieve its growth plans.

Risks Relating to Latin America

Events in Mexico could adversely affect the Group’s operations

The Mexican operations are relevant to the Group. The Group faces several types of risks in Mexico which could adversely affect its banking operations in Mexico or the Group as a whole. Despite signs of recovery following Mexico’s recession in 2009, economic conditions remain uncertain in Mexico. In addition, drug-related violence remains as a significant challenge for Mexico.

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The Mexican economy grew by 1.2% in 2013 and is expected to grow by 3.4% in 2014. However, part of 2013 was characterized by a more acute downturn than originally forecasted due to the considerable slowdown in the industrial sector, partially driven by the weak private demand and also a contraction in public demand. The slowdown in the rate of job creation and the contribution of salaries to disposable income in real terms have been significant factors underlying the downturn in domestic demand. Another fact to consider is the low foreign-currency inflows from remittances, which continue to decline.

Delinquency rates on loans have increased in the past three years. If there is an increase in unemployment rates (which were 4.9% in 2013, 5.0% in 2012 and 5.2% in 2011 and are expected to be 4.6% in 2014), as a result for example of a more pronounced or prolonged slowdown in Europe or the United States, such rates may increase.

In addition, average inflation was 3.8% in 2013, 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 the Group’s 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 the Bank’s Mexican subsidiary or the Group as a whole.

In addition, the Bank’s operations are subject to regulatory risks, including the effects of changes in laws, regulations, policies and interpretations, in Mexico. On January 9, 2014, certain financial reforms which had been proposed in May 2013, were adopted. Such measures address the following matters (i) the establishment of a new mandate for development banks, (ii) the promotion of competition to reduce interest rates, (iii) the creation of incentives for banks to give more credit and (iv) the strengthening of the banking system.

Moreover, 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) (“Condusef”) has continued to request that banks submit several of their service contracts to revision by the Condusef (for example, contracts relating to credit cards and insurance), in order to check that they comply with the relevant transparency and clarity requirements. Condusef 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. The Law Committee of the Banking Association (ABM) is coordinating the creation of a working group that is expected 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. We may have to incur compliance costs in connection with any new measures adopted by Condusef.

Furthermore, the Anti-Money Laundering Law (Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita) became effective in July 2013. The Law establishes more severe penalties for non-compliance and sets forth enhanced information requirements for some transactions.

Any of the risks referred to above or risks that may result from 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 the Bank’s Mexican subsidiary or the Group as a whole.

The Bank’s 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 the Group operates 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 the Group lends. Negative and fluctuating economic conditions, such as a changing interest rate environment, also affect the Group’s profitability by causing lending margins to decrease and leading to decreased demand for higher-margin products and services. In addition, significant inflation (such as inflation recently experienced by Venezuela and Argentina) and local currency devaluations (such as in Venezuela and Argentina) can negatively affect the Group’s results of operations.

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The start of the withdrawal of monetary stimuli by the Federal Reserve in the U.S., and the slowing of economic activity in several emerging markets led to an increase in volatility in the international financial markets in recent years. Latin America, like other emerging markets, has been one of the hardest hit in this new environment, particularly as Latin America benefited significantly from the increase in liquidity and the expansion in demand by countries such as China in recent years.

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 macro-prudential measures to control global liquidity, which could deter financial flows to enter in Latin American countries. In addition, inflationary pressure in some countries in the region (with inflation in some countries exceeding the relevant central banks’ targets) has led to different approaches from central banks when dealing with turbulence in the financial markets. Price overheating could leave 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 and lower global liquidity will likely contribute to a slight depreciation in exchange rates in most countries. This would result in monetary policy being less likely to act as a stabilizer in case of domestic overheating. The region needs to promote reforms to increase productivity and to consolidate growth in the long term, as the sustainable growth of per capita income cannot be based only on capital accumulation and employment growth.

In addition, negative and fluctuating economic conditions in some Latin American countries could result in government defaults on public debt. This could affect the Group 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 the Group operates.

While the Group seeks to mitigate these risks through what it believes to be conservative risk policies, no assurance can be given that its Latin American subsidiaries’ growth, asset quality and profitability will not be further affected by volatile macroeconomic conditions in the Latin American countries in which it operates.

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 the Group operates are, to varying degrees, influenced by economic and market conditions in other countries in Latin America and beyond. The region’s growth decelerated in 2012 and 2013, registering a growth rate of 2.1% (considering Argentina, Brazil, Chile, Colombia, Peru and Venezuela), in particular due to the economic slowdown of Brazil and Argentina, and was 2.6% in 2013. The region is expected to grow by 2.4% in 2014. The international financial outlook for Latin America has become less benign in recent months. Latin America, together with other emerging markets, has been one of the hardest hit regions by the economic crisis, with capital outflows, increases in sovereign spreads, stock market falls and devaluations in exchange rates. There has also been an adjustment in the prices of some of the most important export commodities during 2013. In addition, the outlook for foreign balances in Latin America worsened in 2013 due to the above mentioned correction in raw material prices and weak foreign demand.

Negative developments in the economy or securities markets in one country or area, particularly in the U.S., China or in Europe under current circumstances, may have a negative impact on emerging market economies. Among the main global risks for Latin American countries are those currently posed by the effects of the withdrawal of monetary stimuli or tapering in the U.S. by the Federal Reserve and the lower foreign demand of commodities mainly from Asian countries. Any such developments may adversely affect the business, financial condition, operating results and cash flows of BBVA’s 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, with limited damage

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to their financial sectors, non-performing loan ratios rose and bank deposits and loans contracted. These trends have been corrected in recent months 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 BBVA’s subsidiaries in Latin America are likely to be materially adversely affected.

The Group is exposed to foreign exchange and, in some instances, political risks as well as other risks in the Latin American countries in which it operates, which could cause an adverse impact on its business, financial condition and results of operations

The Group operates commercial banks and insurance and other financial services companies in various Latin American countries and its overall success as a global business depends, in part, upon its ability to succeed in differing economic, social and political conditions. The Group is confronted with different legal and regulatory requirements in many of the jurisdictions in which it operates. These include, but are not limited to, different tax regimes and laws relating to the repatriation of funds or nationalization or expropriation of assets. The Group’s international operations may also expose it to risks and challenges which its 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 instance, the repatriation of dividends paid and the payments of dividends by our Venezuelan and Argentinean subsidiaries need to be approved in advance by the relevant local authorities. Market outlook for the withdrawal of monetary stimuli or tapering in the U.S., together with the risk of an increased slowdown in China, triggered widespread devaluation in exchange rates in the region in 2013.

The Group’s presence in Latin American markets also requires it to respond to rapid changes in market conditions in these countries. There can be no assurance that the Group will succeed in developing and implementing policies and strategies that are effective in each country in which it operates or that any of the foregoing factors will not have a material adverse effect on its business, financial condition and results of operations.

Regulatory changes in Latin America that are beyond the Group’s control may have a material effect on its 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 the Group operates. Local regulations differ in a number of material respects from equivalent regulations in Spain and the United States.

Changes in regulations may have a material effect on its 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 the Group’s business, financial condition, results of operations and cash flows.

Risks Relating to the United States

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

As a result of the business of the Bank’s subsidiaries in the United States, the Group is vulnerable to developments in this market, particularly the real estate market. The recent crisis had a significant effect 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 U.S. economy registered a 1.9% growth rate for 2013, down from 2.8% in 2012. A 2.5% growth rate is expected for 2014. 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 the Bank’s subsidiary BBVA Compass, or the Group as a whole, and could require the Bank to provide BBVA Compass with additional capital.

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A further reduction in expansive monetary policies (“tapering”) could increase exchange rate volatility

In order to stimulate their economies, countries such as the United States and Japan are currently carrying out expansive monetary policies. A reduction of this stimulus (“tapering”), such as that being implemented by the United States, could potentially increase exchange rate volatility. The change of direction in U.S. monetary policy has had a global impact. The emerging economies are being subjected to capital outflows and currency depreciation, intensified in some cases by domestic events that have increased uncertainty regarding the management of their respective local economic policies. There continues to be a differentiation between economies depending on their fundamentals: higher external deficits and more dependence on short-term and foreign-currency funding are associated with greater vulnerability to capital outflows and currency depreciation. The monetary tightening being introduced by some of these countries to control currency depreciation and inflation expectations may have a negative impact on growth. This might especially impact emerging economies such as Asia, Latin America and Turkey, which would negatively affect the business, financial condition, operating results and cash flows of the Bank’s subsidiaries in such regions.

Risks Relating to Other Countries

The Group’s business in Asia exposes it to regulatory, economic and geopolitical risk relating to emerging markets in the region, particularly in China

BBVA’s ownership interest in members of the CITIC Group, a Chinese banking group, are a 29.7% stake in CITIC International Financial Holdings Ltd (“CIFH”) and a 9.9% 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 the Group’s expansion into Asia, it is 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 the Group’s 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. The Group’s 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 the Group believes 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. For 2013, China registered a 7.7% growth in GDP and 7.6% growth is expected for 2014. While there was uncertainty at the beginning of 2013 regarding the sustainability of its growth and the possibility of a hard landing, the economy recovered in the second half of 2013, although some of the more recent data on confidence and expectations of manufacturing activity are once again below market expectations.

In addition, fundamental changes in China’s economic policy have been announced. At the third plenum of the Chinese Communist Party, the authorities reiterated their commitment to maintaining high rates of growth, while at the same time proposing measures that will strengthen the role of the market in allocating resources and a rebalancing of the Chinese economy from a model of investment and exports towards increasing household consumption. These measures have high execution risks. For example, the rapid growth of credit is being reflected in liquidity tensions in the interbank market which are particularly affecting the shadow banking sector and a continuation of these tensions could have adverse effects on the stability of the system.

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

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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 the Bank’s investment in Garanti

In 2011, the Bank 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 2.4% in 2012 and 3.9% in 2013, the Turkish economy is expected to grow at a slower pace in 2014. In addition, inflation was 8.7% in 2012 and 7.6% in 2013, and may increase in 2014. The recent civil developments and political situation in Turkey as well as the interest rate increases to address the depreciation of the Turkish lira could adversely affect economic growth. The political crisis deepened in December 2013 and may continue. 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, 5.9% in 2012 and around 7.4% in 2013. Turkey is an emerging market and it is subject to greater risks than more developed markets, as witnessed by the recent civil developments, which may also have an adverse effect on the financial sector. Financial turmoil in any emerging market could negatively affect other emerging markets, including Turkey, or the global economy in general. Moreover, financial turmoil in emerging markets tends to adversely affect stock prices and debt securities prices of other emerging markets as investors move their money to more stable and developed markets, and may reduce liquidity to companies located in the affected markets. An increase in the perceived risks associated with investing in emerging economies in general, or Turkey in particular, could dampen capital flows to Turkey and adversely affect the Turkish economy.

In addition, 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 the Bank’s 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 the Bank’s 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 the Bank’s investment in Garanti.

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

The Bank entered into a shareholders’ agreement with Doğuş Holding A.Ş. (Doğuş)¸ in connection with the Garanti acquisition. Pursuant to the shareholders’ agreement, the Bank and Doğuş have agreed to manage Garanti through the appointment of board members and senior management. Doğuş is one of the largest Turkish

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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 the Bank. Furthermore, the Bank must successfully cooperate with Doğuş in order to manage Garanti and grow its business. It is possible that the Bank 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 the Bank’s investment and lead to the Bank’s failure to achieve the expected benefits from the Garanti acquisition.

Other Risks

Weaknesses or failures in the Group’s internal processes, systems and security could materially adversely affect its 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 Group companies, are present in the Group’s businesses. These 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 the Group’s results, the reporting of such results, and on the ability to deliver appropriate customer outcomes during the affected period. In addition, any breach in security of the Group’s systems could disrupt its business, result in the disclosure of confidential information and create significant financial and legal exposure for the Group. Although the Group devotes significant resources to maintain and regularly update its processes and systems that are designed to protect the security of its systems, software, networks and other technology assets, there is no assurance that all of its security measures will provide absolute security. Any damage to the Group’s reputation (including to customer confidence) arising from actual or perceived inadequacies, weaknesses or failures in its systems, processes or security could have a material adverse effect on its results of operations, financial condition or prospects.

The financial industry is increasingly dependent on information technology systems, which may fail, may not be adequate for the tasks at hand or may no longer be available

Banks and their activities are increasingly dependent on highly sophisticated information technology (“IT”) systems. IT systems are vulnerable to a number of problems, such as software or hardware malfunctions, computer viruses, hacking and physical damage to vital IT centers. IT systems need regular upgrading and banks may not be able to implement necessary upgrades on a timely basis or upgrades may fail to function as planned. Furthermore, failure to protect financial industry operations from cyber-attacks could result in the loss or compromise of customer data or other sensitive information. These threats are increasingly sophisticated and there can be no assurance that banks will be able to prevent all breaches and other attacks on its IT systems. In addition to costs that may be incurred as a result of any failure of IT systems, banks could face fines from bank regulators if it fails to comply with applicable banking or reporting regulations.

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

Group companies 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 the Group believes that its current policies and procedures are sufficient to comply with applicable rules and regulations, it cannot guarantee that its 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 the Group’s financial condition and results of operations.

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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 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.

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 Banco Bilbao Vizcaya Argentaria, S.A., New York Branch (1345 Avenue of the Americas, New York, New York 10105 (Telephone: 212-728-1660)). 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 2011 to the date of this Annual Report were the following:

2013

Acquisition of Unnim Vida. On February 1, 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.

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2011

Acquisition of a capital holding in the Turkish bank Garanti. On March 22, 2011, through the execution of the agreements signed in November 2010 with the Doğuş group and having obtained the corresponding authorizations, BBVA completed the acquisition of a 24.89% holding of the share capital of Türkiye Garanti 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 €4,140 million at the exchange rate on the date of the transaction).

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.

Capital Divestitures

Our principal divestitures are financial divestitures in our subsidiaries and in affiliates. The main capital divestitures from 2011 to the date of this Annual Report were the following:

2013

Sale of BBVA Panama

On July 20, 2013, BBVA announced that it had reached an agreement with Leasing Bogotá S.A., Panamá, a subsidiary of Grupo Aval Acciones y Valores, S.A., for the sale of BBVA’s direct and indirect ownership interest (98.92%) in Banco Bilbao Vizcaya Argentaria (Panamá), S.A. (“BBVA Panamá”). On December 19, 2013, after having obtained the necessary approvals, BBVA completed the sale.

The total consideration that BBVA received pursuant to this sale amounted to approximately $645 million. BBVA received part of the consideration through the distribution of dividends from BBVA Panamá prior to the closing of the transaction amounting to $140 million (such amount reduced the purchase price to be paid to BBVA on closing).

After deducting such distribution of dividends the capital gain for BBVA, gross of taxes, amounted to approximately €230 million which was recognized under the heading “Gains (losses) in non-current assets held for sale not classified as discontinued operations” in the consolidated income statement in 2013. See Note 52.1 to our Consolidated Financial Statements for additional information.

Sale of pension businesses 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 considered in this process included 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.

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On October 2, 2013, with the sale of AFP Provida (as defined below), BBVA finalized this process. Below is a description of each of the transactions that have been carried out during this process:

Sale of AFP Provida (Chile)

On February 1, 2013, BBVA reached an agreement with MetLife, Inc., for the sale of the 64.3% stake that BBVA held direct and indirectly in the Chilean Pension Fund manager Administradora de Fondos de Pensiones Provida S.A. (“AFP Provida”).

On October 2, 2013, BBVA completed the sale. The total amount in cash received by BBVA was approximately $1,540 million, taking into account the purchase price amounting to roughly $1,310 million as well as the dividends paid by AFP Provida since February 1, 2013 amounting to roughly $230 million. The gain on disposal, attributable to the parent company net of taxes, amounted to approximately €500 million which was recognized under the heading “Profit from discontinued operations (net)” in the consolidated income statement in 2013. See Note 52.2 to our Consolidated Financial Statements for additional information.

Sale of BBVA AFP Horizonte S.A. (Peru)

On April 23, 2013, BBVA sold its wholly-owned Peruvian subsidiary AFP Horizonte S.A. to AFP Integra S.A. and Profuturo AFP, S.A. who have each acquired 50% of AFP Horizonte, S.A. The total consideration paid for such shares was approximately $544 million. This consideration consisted in a cash payment of approximately $516 million and the distribution of a dividend prior to the closing of approximately $28 million.

The gain on disposal, attributable to parent company net of taxes, amounted to approximately €206 million at the moment of the sale and such gain was recognized under the heading “Profit from discontinued operations (net)” in the consolidated income statement in 2013. See Note 52.2 to our Consolidated Financial Statements for additional information.

Sale of BBVA AFP Horizonte S.A. (Colombia)

On December 24, 2012, BBVA 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 BBVA held directly or indirectly in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A.

On April 18, 2013, after having obtained the necessary approvals, BBVA completed the sale. The adjusted total price was $541.4 million. The gain on disposal, attributable to parent company net of taxes, amounted to approximately €255 million at the moment of the sale, and was recognized under the heading “Profit from discontinued operations (net)” in the consolidated income statement in 2013. See Note 52.2 to our Consolidated Financial Statements for additional information.

Sale of Afore Bancomer (Mexico)

On November 27, 2012, BBVA reached an agreement to sell to Afore XXI Banorte, S.A. de C.V. its entire stake directly or indirectly held in the Mexican subsidiary Administradora de Fondos para el Retiro Bancomer, S.A. de C.V. Once the corresponding authorization was obtained from the competent authorities, the sale was closed on January 9, 2013.

The total sale price was $1,735 million (approximately €1,327 million). The gain on disposal, attributable to parent company net of taxes, was approximately €771 million. See Note 52.2 to our Consolidated Financial Statements for additional information.

New agreement with CITIC Group

As of October 17, 2013, BBVA reached a new agreement with the CITIC Group which contemplated the sale of BBVA’s 5.1% stake in China CITIC Bank Corporation Limited (CNCB) to CITIC Limited for an amount of approximately €944 million. After this sale, the stake of BBVA in CNCB was reduced to 9.9%.

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BBVA and the CITIC Group also agreed to adapt their strategic cooperation agreement to the new circumstances by removing the exclusivity obligations that affected the activities of BBVA in China and agreeing to negotiate new areas of cooperation among both banks.

As a result of the changes referred to above, the Company began accounting for its investment in CNCB as an “Available-for-sale financial asset” as of October 1, 2013. See Note 12 to our Consolidated Financial Statements for additional information.

The change in the accounting criteria and the sale referred to above resulted in a loss attributable to the BBVA Group at the time of the sale of approximately €2,600 million which was recognized under the heading “Gains (losses) on derecognized assets not classified as non-current assets held for sale” in the consolidated income statement in 2013. See Note 51 to our Consolidated Financial Statements for additional information.

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). See Note 51 to our Consolidated Financial Statements for additional information.

2011

During 2011, BBVA sold its participation in certain non-strategic associates and also concluded the liquidation and merger of several issuers, financial services and real estate affiliates.

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 changes in the reporting structure of the Group’s operating segments in 2013 are as follows:

• As a result of the increasingly geographical orientation of the Group’s reporting structure, certain portfolios, finance and structural euro balance sheet positions managed by the Assets and Liabilities Committee (ALCO) that were previously reported under the Corporate Center (formerly, Corporate Activities) are now part of the Spain segment (described below) of the Group.

• Due to the particularities of their management, the assets and results pertaining to the real estate business in Spain are now presented under a separate segment: Real Estate Activity in Spain. This new segment includes lending to real estate developers (which was previously included in the Spain segment) and foreclosed real estate assets (which were previously included in the Corporate Center segment).

Set forth below are the Group’s current six operating segments:

• Spain

• Real Estate Activity in Spain

• Eurasia

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• Mexico

• South America

• United States

For comparison purposes, the Group’s 2012 and 2011 financial information by operating segment has been restated to reflect the Group’s current reporting structure.

In addition to the operating segments referred to above, the Group has a Corporate Center which includes those items that have not been allocated to an operating segment. It includes the Group’s general management functions, including: costs from central units that have a strictly corporate function; management of structural exchange rate positions carried out by the Financial Planning unit; specific issues of capital instruments to ensure adequate management of the Group’s overall capital position; proprietary portfolios such as industrial holdings and their corresponding results; certain tax assets and liabilities; provisions related to commitments with pensioners; and goodwill and other intangibles. It also comprises the following items (i) with respect to 2013, the earnings from the sale of the pension businesses in Mexico, Colombia, Peru and Chile and also the earnings of these businesses until their sale; the capital gain from the sale of BBVA Panama; and the impact of the reduction of the stake in CNCB (which led to the repricing at market value of BBVA’s stake in CNCB, as well as the impact of the equity-adjusted earnings from CNCB, excluding dividends), (ii) with respect to 2012, the badwill generated by the Unnim acquisition, the capital gain from the sale of BBVA Puerto Rico, the earnings from the pension business in Latin America, and the equity-adjusted earnings from CNCB (excluding dividends), and (iii) with respect to 2011, the results from the pension business in Latin America and the equity-adjusted earnings from CNCB (excluding dividends).

Set forth below is financial information for each of the Group’s current operating segments as of and for the years ended December 31, 2013, 2012 and 2011.

The breakdown of the Group’s total assets by operating segments as of December 31, 2013, 2012 and 2011 is as follows:

	As of December 31,
Total Assets by Operating Segment	2013			2012			2011
	(In Millions of Euros)
Spain		315,561			345,362			323,249
Real Estate Activity in Spain		20,563			21,923			22,558
Eurasia (*)		41,223			48,324			53,439
Mexico		82,171			81,723			72,156
South America		78,141			77,474			62,651
United States		53,042			53,892			53,090
Subtotal Assets by Operating Segments		590,700			628,698			587,143
Corporate Center and other adjustments (**)		(8,125	)		(7,626	)		(4,305	)
Total Assets BBVA Group		582,575			621,072			582,838

(*) The information is presented under management criteria, pursuant to which Garanti’s information has been proportionally integrated based on our 25.01% interest in Garanti.

(**) Other adjustments include adjustments made to account for the fact that, in our Consolidated Financial Statements, Garanti is accounted for using the equity method rather than using the management criteria referred above. For more information see “Item 5. Operating and Financial Review and Prospects”.

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The following table sets forth information relating to the profit attributable to the parent company by each of BBVA’s operating segments for the years ended December 31, 2013, 2012 and 2011:

	Profit/(Loss) Attributable to Parent Company									% of Profit/(Loss) Attributable to Parent Company
	For the Year Ended December 31,
	2013			2012			2011			2013			2012			2011
	(In Millions of Euros)									(In Percentage)
Spain		583			1,162			1,075			18.1			136.2			40.5
Real Estate Activity in Spain		(1,254	)		(4,044	)		(809	)		(38.9	)		(474.1	)		(30.5	)
Eurasia		454			404			563			14.1			47.4			21.2
Mexico		1,805			1,689			1,638			55.9			198.0			61.7
South America		1,249			1,199			898			38.7			140.6			33.8
United States		390			443			(713	)		12.1			51.9			(26.9	)
Subtotal Operating Segments		3,227			853			2,654			100.0			100.0			100.0
Corporate Center		(999	)		823			351
Profit attributable to Parent Company		2,228			1,676			3,004

The following table sets forth information relating to the income of each operating segment for the years ended December 31, 2013, 2012 and 2011 and reconciles the income statement of the various operating segments to the consolidated income statement of the Group:

	Operating Segments
	Spain		Real Estate Activity in Spain			Eurasia(*)		Mexico		South America		United States			Corporate Center			Total		Adjustments (**)			BBVA Group
	(In Millions of Euros)
2013
Net interest income		3,830		(3	)		911		4,484		4,703		1,407			(719	)		14,613		(713	)		13,900
Operating profit/(loss) before tax		222		(1,840	)		593		2,362		2,387		534			(1,507	)		2,750		(1,590	)		1,160
Profit		583		(1,254	)		454		1,805		1,249		390			(999	)		2,228		—			2,228
2012
Net interest income		4,748		(20	)		851		4,178		4,288		1,551			(473	)		15,122		(648	)		14,474
Operating profit/(loss) before tax		1,652		(5,705	)		508		2,229		2,271		619			(826	)		749		833			1,582
Profit		1,162		(4,044	)		404		1,689		1,199		443			823			1,676		—			1,676
2011
Net interest income		4,248		104			806		3,782		3,159		1,518			(465	)		13,152		(428	)		12,724
Operating profit/(loss) before tax		1,515		(1,216	)		722		2,153		1,677		(1,053	)		(852	)		2,946		452			3,398
Profit		1,075		(809	)		563		1,638		898		(713	)		351			3,004		—			3,004

(*) The information is presented under management criteria, pursuant to which Garanti’s information has been proportionally integrated based on our 25.01% interest in Garanti.

(**) Other adjustments include adjustments made to account for the fact that, in our Consolidated Financial Statements, Garanti is accounted for using the equity method rather than using the management criteria referred above. For more information see “Item 5. Operating and Financial Review and Prospects”.

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Spain

The Spain operating segment includes all of BBVA’s banking and non-banking businesses in Spain, other than those included in the Corporate Center area and Real Estate Activity in Spain. 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 multinational groups and the trading floor and distribution business in Spain; and

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

In addition, it includes certain portfolios, finance and structural euro balance sheet positions as described above.

The following table sets forth information relating to the activity of this operating segment for the years ended December 31, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Total Assets		315,561		345,362		323,249
Loans and advances to customers		178,081		193,101		194,147
Of which:
Residential mortgages		77,575		84,602		76,900
Consumer finance		6,703		7,663		8,077
Loans		4,962		6,043		6,500
Credit cards		1,741		1,620		1,577
Loans to enterprises		36,969		47,635		55,349
Loans to public sector		21,694		24,772		25,092
Customer deposits under management (*)		147,782		133,802		109,160
Current and savings accounts		53,380		47,449		44,044
Time deposits		74,435		62,587		44,719
Other customer funds		19,967		23,765		20,397
Off-balance sheet funds		42,911		40,134		43,048
Mutual funds		22,298		19,116		19,598
Pension funds		20,428		18,577		17,224
Other placements		185		2,441		6,227

(*) Excluding repos.

Loans and advances to customers of this operating segment as of December 31, 2013 amounted to €178,081 million, a 7.8% decrease from the €193,101 million recorded as of December 31, 2012, mainly as a result of lower lending activity due to the deteriorated economic situation in Spain.

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Customer deposits under management of this operating segment as of December 31, 2013 amounted to €147,782 million, a 10.4% increase from the €133,802 million recorded as of December 31, 2012, as a result of the growth of time deposits (18.9% year-on-year), due to the boosting of the multichannel business and a higher than 80% deposits renewal rate every month of 2013 despite the declining interest rates.

Mutual funds of this operating segment as of December 31, 2013 amounted to €22,298 million, a 16.6% increase from the €19,116 million recorded as of December 31, 2012, due to the boosting of the commercial strategy during the second half of the year and improving market trends.

Pension funds of this operating segment as of December 31, 2013 amounted to €20,428 million, a 10.0% increase from the €18,577 million recorded as of December 31, 2012, as a result of the higher level of newly signed individual pension plans when compared to 2012.

This operating segment’s non-performing assets ratio increased to 6.4% as of December 31, 2013, from 4.1% as of December 31, 2012, mainly due to the declining lending volumes and the deterioration of refinanced loans. This operating segment non-performing assets coverage ratio decreased to 41% as of December 31, 2013, from 48% as of December 31, 2012.

Real Estate Activity in Spain

This operating segment has been set up with the aim of providing specialized and structured management of the real estate assets accumulated by the Group as a result of the economic crisis in Spain. It includes primarily lending to real estate developers (which was previously included in the Spain segment) and foreclosed real estate assets (which were previously included in the Corporate Center).

The exposure, including loans and advances to customers and foreclosed assets, to the real estate sector in Spain is declining. As of December 31, 2013, the balance stood at €14,570 million, 6.5% lower than as of December 31, 2012. In 2013 there was an increase in the balance of non-performing developer loans, primarily with respect to refinanced loans. Within the exposure to the Spanish real estate sector, property securing mortgage loans to private individuals has increased year-on-year by 14.6%.

As of December 31, 2013, the segment’s coverage of non-performing and potential problem loans was 51% and overall coverage of real estate exposure was 45%. In the latter part of 2013, sales of owned real estate assets picked up pace and 21,383 units were sold during 2013.

Eurasia

This operating segment covers the retail and wholesale banking businesses of the Group in the rest of Europe and Asia. It also includes BBVA’s stakes in the Turkish bank Garanti and the Chinese banks CNCB and CIFH. Following management criteria, assets and liabilities corresponding to our 25.01% stake in Garanti are included in every balance sheet line.

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The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Total Assets		41,223		48,324		53,439
Loans and advances to customers		28,397		30,228		34,740
Of which:
Residential mortgages		4,156		4,291		4,203
Consumer finance		3,983		4,262		3,729
Loans		2,743		3,051		2,767
Credit cards		1,240		1,211		962
Loans to enterprises		18,361		19,777		25,056
Loans to public sector		251		102		107
Customer deposits under management (*)		16,475		16,484		20,384
Current and savings accounts		3,148		3,098		2,773
Time deposits		9,009		9,576		9,679
Other customer funds		4,318		3,810		7,933
Off-balance sheet funds		1,966		2,016		1,729
Mutual funds		1,332		1,408		1,255
Pension funds		634		608		474

(*) Excluding repos.

Loans and advances to customers of this operating segment as of December 31, 2013 amounted to €28,397 million, a 6.1% decrease from the €30,228 million recorded as of December 31, 2012, as a result of the deleveraging of the wholesale business and the negative impact of the Turkish lira exchange rate.

Customer deposits under management of this operating segment as of December 31, 2013 amounted to €16,475 million, a 0.1% decrease from the €16,484 million recorded as of December 31, 2012, as a result of lower time deposit volumes.

Mutual funds of this operating segment as of December 31, 2013 amounted to €1,332 million, a 5.4% decrease from the €1,408 million recorded as of December 31, 2012, due to a decline of mutual funds in Turkey which more than offset the growth in Portugal.

Pension funds of this operating segment as of December 31, 2013 amounted to €634 million, a 4.3% increase from the €608 million recorded as of December 31, 2012, mainly as a result of increases in Turkey and Portugal.

This operating segment’s non-performing assets ratio increased to 3.4% as of December 31, 2013 from 2.8% as of December 31, 2012, mainly as a result of a lower volume of loans and advances to customers and an increase in non-performing loans, as a result of the consolidation of prudent risk management policy by BBVA (wholesale business and Portugal). This operating segment non-performing assets coverage ratio was 87% as of December 31, 2012 and 2013.

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Mexico

The Mexico operating segment comprises the banking and insurance businesses conducted in Mexico by the BBVA Bancomer financial group. The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Total Assets		82,171		81,723		72,156
Loans and advances to customers		40,129		39,052		34,450
Of which:
Residential mortgages		8,985		9,399		8,854
Consumer finance		10,096		9,785		8,220
Loans		4,748		4,421		3,734
Credit cards		5,348		5,364		4,486
Loans to enterprises		13,975		12,512		10,938
Loans to public sector		3,594		3,590		3,313
Customer deposits under management (*)		34,726		34,071		37,130
Current and savings accounts		24,498		23,707		21,103
Time deposits		6,409		7,157		7,398
Other customer funds		3,819		3,207		2,629
Off-balance sheet funds		19,680		19,896		17,623
Mutual funds		16,896		17,492		15,612
Other placements		2,784		2,404		2,011

(*) Excluding repos.

Loans and advances to customers of this operating segment as of December 31, 2013 amounted to €40,129 million, a 2.8% increase from the €39,052 million recorded as of December 31, 2012, mainly due to the increase in financing to medium-sized enterprises.

Customer deposits under management of this operating segment as of December 31, 2013 amounted to €34,726 million, a 1.9% increase from the €34,071 million recorded as of December 31, 2012, mainly as a result of the increase in customer deposits in U.S. dollars in Mexico.

Mutual funds of this operating segment as of December 31, 2013 amounted to €16,896 million, a 3.4% decrease from the €17,492 million recorded as of December 31, 2012, mainly as a result of a decrease in fixed-income products.

This operating segment’s non-performing assets ratio decreased to 3.6% as of December 31, 2013, from 3.7% as of December 31, 2012. This operating segment non-performing assets coverage ratio decreased to 110% as of December 31, 2013, from 114% as of December 31, 2012. Both changes are mainly as a result of the increase in loans and advances to customers.

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South America

The South America operating segment manages the BBVA Group’s banking 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, Paraguay, Peru, Uruguay and Venezuela.

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

The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Total Assets		78,141		77,474		62,651
Loans and advances to customers		48,470		48,721		40,213
Of which:
Residential mortgages		8,533		8,627		7,018
Consumer finance		13,112		13,033		9,849
Loans		9,441		9,570		7,352
Credit cards		3,670		3,463		2,496
Loans to enterprises		18,565		17,529		15,912
Loans to public sector		601		625		766
Customer deposits under management (*)		58,881		56,933		44,890
Current and savings accounts		37,639		34,339		26,120
Time deposits		15,869		17,107		15,094
Other customer funds		5,374		5,487		3,676
Off-balance sheet funds		6,552		6,436		5,698
Mutual funds		2,952		3,355		3,037
Pension funds		3,600		3,081		2,661

(*) Excluding repos.

Loans and advances to customers of this operating segment as of December 31, 2013 amounted to €48,470 million, a 0.5% decrease from the €48,721 million recorded as of December 31, 2012, mainly due to the negative effect of exchange rate movements which offset the increased activity in credit cards, customer finance and, to a lesser extent, mortgage lending.

Customer deposits under management of this operating segment as of December 31, 2013 amounted to €58,881 million, a 3.4% increase from the €56,933 million recorded as of December 31, 2012, mainly due to an increase in the balance of current and saving accounts, which was partially offset by the negative effect of exchange rate movements.

Mutual funds of this operating segment as of December 31, 2013 amounted to €2,952 million, a 12.0% decrease from the €3,355 million recorded as of December 31, 2012, mainly as a result of the positive performance in Peru and Chile.

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Pension funds of this operating segment as of December 31, 2013 amounted to €3,600 million, a 16.8% increase from the €3,081 million recorded as of December 31, 2012, mainly as a result of the increased volumes in Bolivia.

This operating segment’s non-performing assets ratio was 2.1% as of December 31, 2012 and 2013. This operating segment non-performing assets coverage ratio decreased to 141% as of December 31, 2013, from 146% as of December 31, 2012.

United States

This operating segment encompasses the Group’s business in the United States. BBVA Compass accounted for approximately 95 per cent of the area’s balance sheet as of December 31, 2013. 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 New York, which specializes in transactions with large corporations.

The following table sets forth information relating to the business activity of this operating segment for the years ended December 31, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Total Assets		53,042		53,892		53,090
Loans and advances to customers		38,067		36,892		38,775
Of which:
Residential mortgages		9,591		9,109		7,787
Consumer finance		4,464		4,422		4,584
Loans		3,984		3,942		4,134
Credit cards		481		480		450
Loans to enterprises		19,427		19,292		20,926
Loans to public sector		2,772		1,961		1,533
Customer deposits under management (*)		38,448		37,721		35,127
Current and savings accounts		29,800		29,060		26,458
Time deposits		7,300		7,885		7,269
Other customer funds		1,348		775		1,399

(*) Excluding repos.

Loans and advances to customers of this operating segment as of December 31, 2013 amounted to €38,067 million, a 3.2% increase from the €36,892 million recorded as of December 31, 2012, as a result of growth in all of the segment’s portfolios.

Customer deposits under management of this operating segment as of December 31, 2013 amounted to €38,448 million, a 1.9% increase from the €37,721 million recorded as of December 31, 2012, mainly due to an increase in the balance of current and saving accounts.

This operating segment’s non-performing assets ratio decreased to 1.2% as of December 31, 2013, from 2.4% as of December 31, 2012. This operating segment non-performing assets coverage ratio increased to 138% as of December 31, 2013, from 90% as of December 31, 2012. Both changes are mainly as a result of the decrease in impaired loans and advances to customers due to improvements in credit quality and increases in repayments.

Insurance Activity

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

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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

• 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;

36

• 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.

It is expected that the European Central Bank (ECB) will assume its new banking supervision responsibilities in the autumn of 2014. Under the new supervision system, the ECB will directly supervise significant credit institutions (including the Bank). It will work closely with the national competent authorities to supervise all other credit institutions under the overall oversight of the ECB. The ECB may decide at any time to take responsibility for a less-significant credit institution.

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. Pursuant to Royal Decree-Law 19/2011, the current rate of our annual 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.

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.

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Finally, Royal Decree-Law 6/2013 established a special contribution of 0.3% of the deposits held as of December 31, 2012. The first tranche of such contribution, amounting to two fifths of it, had to be disbursed within the first 20 working days of 2014, subject to the deductions allowed by Royal Decree-Law 6/2013. The second tranche, for the remaining 60% of the special contribution, will have to be disbursed from 2014 onwards within a maximum of seven years, in accordance with the payment schedule set by the FGD’s Management Committee.

As of December 31, 2013, 2012 and 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;

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

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

The FROB has to act in what is an absolutely exceptional situation that is closely linked to the development of the financial crisis. In order to comply with its objectives, FROB will be funded jointly from the Spanish national budget and the 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.

Law 9/2012, of November 14 (see “—Law 9/2012 of November 14, on Restructuring and Resolution of Credit Entities”) grants the FROB the power to implement early intervention measures (for mild difficulties), restructuring measures (for temporary troubles, able to be coped with by means of public financial support) and orderly resolution measures (for non-viable institutions). It also provides for the creation of an Asset Management Company intended to purchase certain problematic assets from state aided banks in order to ease their viability. The FROB is entitled to require entities receiving state aids to transfer those problematic assets.

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, 2013, 2012 and 2011, 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.

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

The main changes considered in these directives are:

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

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

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

• 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 a new stricter minimum capital requirement for Spanish credit institutions of a minimum of 8%. This ratio was 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.

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.

Pursuant to the Memorandum of Understanding agreed by Spain and the Eurogroup in July 2012, from January 2013, Law 9/2012 replaced the minimum capital requirements of 8% and 10% referred to above with a single minimum requirement of 9%. The criteria for calculating the ratio was also modified to make it similar to the criteria that was used for purposes of carrying out the EU Capital Exercise (EBA/REC/2011/1).

As of December 31 2013, the “Capital Principal” ratio of the BBVA Group (as calculated in accordance with Law 9/2012 exceeded the minimum requirements in €7,000 millions approximately.

As shown below, we fulfilled the minimum capital requirements as required by Law 9/2012 as of December 31, 2013 and December 31, 2012:

	Basel II Capital Ratio			Law 9/2012 “Capital Principal” ratio
Minimum required		8	%		9	%
December 2013		14.9	%		11.2	%
December 2012		13.0	%		10.5	%

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The minimum Capital Principal requirements established by RD-L 2/2011, were derogated by Royal Decree-Law 14/2013, of November 29 with effect as of January 1, 2014.

For additional information on how these ratios were calculated, please see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Capital.”

On July 17, 2013, the CRD IV package, which transposes (through the adoption of a Regulation and a Directive) the new global standards on bank capital (the Basel III agreement) into EU law, entered into force.

The new framework divides the current CRD (Capital Requirements Directive) into two legislative instruments: a directive governing the access to deposit-taking activities and a regulation establishing the prudential requirements institutions need to comply with.

While Member States will have to transpose the directive into national law, the CRR is directly applicable, without a need to be implemented by national laws.

These new rules, which are in effect since January 1, 2014 tackle some of the vulnerabilities shown by the banking institutions during the crisis. They set stronger prudential requirements for banks, requiring them to keep sufficient capital reserves and liquidity. In addition, a leverage ratio back stop mechanism is being defined in order to limit the growth of the total balance sheet as compared to available own funds.

This new framework is intended to make EU banks more solid and to strengthen their capacity to adequately manage the risks linked to their activities, and absorb any losses they may incur in doing business.

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

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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”.

Impairment on Financial Assets

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

Regulation of the Disclosure of Fees and Interest Rates

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

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

Employee Pension Plans

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

Dividends

A bank may dedicate all of its net profits and its distributable reserves to the payment of dividends. In no event may dividends be paid from non-distributable reserves.

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 2013 and 2014 to Spanish banks to limit cash dividend payouts up to 25% of their consolidated earnings.

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Going forward, BBVA intends to substitute progressively the current shareholder pay-out policy with a policy to pay the full amount of the dividends in cash and in line with the performance of the Group earnings, with the final aim of having an annual pay-out of between 35% and 40% of the profits obtained in each financial year, depending on market circumstances and the applicable regulatory framework.

Effective since January 1, 2014, new banking regulation (Basel III, transposed into European Law under the CRD IV Directive) has affected the restrictions to dividend payments that may be applicable in the following years, in circumstances where solvency requirements are not fulfilled. Financial entities will be required to hold a combined buffer requirement above the minimum capital requirements in order to be able to distribute freely their distributable results. This mechanism will not be in force until 2016 and will not be fully applicable until 2019.

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

Scrip Dividend

As in 2011 and 2012, during 2013, a scrip dividend scheme called “Dividend Option” was successfully approved by the annual general meeting of shareholders held on March 15, 2013. The BBVA annual general meeting of shareholders held on March 14, 2014 passed four resolutions adopting four different free-of-charge capital increases for the implementation of a new “Dividend Option” scheme. These resolutions will allow the Board of Directors to implement, depending on the situation on the markets, the regulatory framework, the earnings obtained and possible recommendations on dividend payouts, the Dividend Option during a period of one year since the approval of such resolutions.

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

The “Dividend Option” 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, whilst maintaining the possibility to choose to receive the entire remuneration in cash, in line with the current trend that is being put into practice by other entities in the domestic and international markets.

Shareholders may have the “Dividend Option” available to them on different dates. 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.

BBVA’s Board of Directors, at its March 26, 2014 meeting, approved the execution of a capital increase on the terms approved by the annual general meeting of shareholders held on March 14, 2014 in connection with the implementation of the “Dividend Option”. The number of new shares issued as a consequence of the execution of the capital increase was 101,214,267.

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

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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, which 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.

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.

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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”). BBVA’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 securities 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.

BBVA’s U.S. bank subsidiary, Compass Bank (“Compass Bank”), 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. Compass Bank is an Alabama state-chartered bank, is a member of the Federal Reserve System, and has branches in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. Compass Bank is supervised and 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 the 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”).

On May 14, 2013, BBVA Compass Bancshares, Inc., the Company’s former mid-tier U.S. bank holding company, was merged into BBVA USA Bancshares, Inc., the Company’s top-tier U.S. bank holding company. Subsequent to the merger, the surviving entity’s name was changed to BBVA Compass Bancshares, Inc. (“BBVA Compass”). Compass Bank is a direct subsidiary of BBVA Compass. BBVA Compass is a bank holding company within the meaning of the BHC Act and is subject to supervision and regulation by the Federal Reserve.

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.

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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

BBVA’s indirect U.S. broker-dealer subsidiary, BBVA Securities Inc. (“BSI”), is subject to regulation and supervision by the SEC and the Financial Industry Regulatory Authority (“FINRA”) with respect to its securities activities, as well as various U.S. state regulatory authorities. Additionally, the securities underwriting and dealing activities of BSI 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 certain private equity funds, hedge funds and other covered 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.

On March 31, 2013 BBVA registered as a “swap dealer” (as defined in the Commodity Exchange Act and the regulations promulgated thereunder (the “CEA”)) under Title VII of the Dodd-Frank Act. This registration subjects BBVA to regulation and supervision by the U.S. Commodity Futures Trading Commission (the “CFTC”). BBVA’s world-wide swap activities are also subject to regulations adopted by the European Commission pursuant to the European Market Infrastructure Regulation (“EMIR”) and the EU’s Markets in Financial Instruments Directive (“MiFID”) and other European regulations and directives. The CFTC will deem BBVA to have complied with certain Dodd-Frank Act Title VII provisions for which, subject to certain conditions, the CFTC has found certain corresponding European provisions to be essentially identical or comparable, provided BBVA complies with such European provisions, as applicable.

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Currently BBVA is not considering registration as a “security-based swap dealer” with the SEC.

Compass Bank (and other entities of the Group) may register as a swap dealer if required by its swap activities or if it is determined to be beneficial to its business.

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. As it is 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 July 2013, the Federal banking agencies issued the U.S. Basel III final rule implementing the Basel III capital framework for U.S. banks and bank holding companies and also implementing certain provisions of the Dodd-Frank Act. Certain aspects of the final rule, such as the new minimum capital ratios and the revised methodology for calculating risk-weighted assets, will become effective on January 1, 2015 for BBVA Compass and Compass Bank. Other aspects of the final rule, such as the capital conservation buffer and the new regulatory deductions from and adjustments to capital, will be phased in over several years beginning on January 1, 2015. 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. To be considered “well capitalized,” BBVA on a consolidated basis, BBVA Compass and Compass Bank are required to maintain a Tier 1 risk-based capital ratio of at least 6% and a total risk-based capital ratio of at least 10%. BBVA Compass is also required to maintain a leverage ratio of at least 5% in order to be “well capitalized.” Under the U.S. Basel III final rule, Compass Bank will be required to maintain the following in order to meet the “well capitalized” test: a common equity tier 1 capital to risk-weighted assets ratio of at least 6.5%, a total risk-based capital ratio of at least 10% and a tier 1 risk-based capital ratio of at least 8%, and a leverage ratio of at least 5%.

The Federal Reserve approved a final rule in February 2014 to enhance its supervision and regulation of the U.S. operations of Large FBOs such as BBVA. Under the Federal Reserve’s rule, Large FBOs with $50 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, will be required to create a separately capitalized top-tier U.S. intermediate holding company that will hold all of the Large FBOs’ U.S. bank and nonbank subsidiaries, such as Compass Bank and BBVA Compass. An intermediate holding company will be subject to U.S. risk-based and leverage capital, liquidity, risk management, stress testing and other enhanced prudential standards on a consolidated basis. Under the final rule, a Large FBO that is subject to the IHC requirement may request permission from the Federal Reserve to establish multiple IHCs or use an alternative organizational structure. The final rule also permits the Federal Reserve to apply the IHC requirement in a manner that takes into account the separate operations of multiple foreign banks that are owned by a single Large FBO. Although U.S. branches and agencies of Large FBOs will not be required to be held beneath an IHC, such branches and agencies will be subject to liquidity, and, in certain circumstances, asset maintenance requirements. Large FBOs generally will be required to establish IHCs and comply with the enhanced prudential standards beginning July 1, 2016. An IHC’s compliance with applicable U.S. leverage ratio requirements is generally delayed until January 1, 2018. FBOs that have $50 billion or more in non-branch/agency U.S. assets as of June 30, 2014, such as BBVA, will be required to submit an implementation plan by January 1, 2015 on how the FBO will comply with the intermediate holding company requirement. As a bank holding company, BBVA Compass will be required to comply with the enhanced prudential standards applicable under the final rule to top-tier U.S.-based bank holding companies beginning on January 1, 2015 and until BBVA forms or designates an IHC and the IHC becomes subject to corresponding enhanced prudential standards. The Federal Reserve has stated that it will issue, at a later date, final

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rules to implement certain other enhanced prudential standards under the Dodd-Frank Act for large bank holding companies and Large FBOs, including single counterparty credit limits and an early remediation framework. Under the early remediation framework, the Federal Reserve would implement prescribed regulations and penalties against the FBO and its U.S. operations and certain of its officers and directors, if the FBO and/or its U.S. operations do not meet certain requirements, and would authorize the termination of U.S. operations under certain circumstances. The February 2014 final rule could affect BBVA’s U.S. operations.

In addition, the Federal Reserve and other U.S. regulators issued for public comment in October 2013 a proposed rule that would introduce a quantitative liquidity coverage ratio requirement on certain large banks and bank holding companies. The proposed liquidity coverage ratio is broadly consistent with the Basel Committee’s revised Basel III liquidity rules, but is more stringent in several important respects. The Federal Reserve has also stated that it intends, through future rulemakings, to apply the Basel III liquidity coverage ratio and net stable funding ratio to the U.S. operations of some or all Large FBOs.

Under capital plan and stress test rules adopted by the Federal Reserve, BBVA Compass 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 Compass has submitted annual capital plans in January 2012 and January 2013. Beginning in 2014, BBVA Compass will participate in the Comprehensive Capital Analysis and Review (“CCAR”) program and will submit a CCAR plan in January 2015. Based on a qualitative and quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to a large U.S. bank holding company’s capital plan, in whole or in part, or provide a notice of non-objection to the company by March 31 of a calendar year for plans submitted by the January submission date. If the Federal Reserve Board objects to a capital plan, the bank holding company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection.

In addition, the Dodd-Frank Act and implementing rules issued by the Federal Reserve Board impose stress test requirements on both BBVA Compass and Compass Bank. BBVA Compass began conducting semi-annual company-run stress tests in October 2013 and is subject to an annual supervisory stress test conducted by the Federal Reserve Board.

On December 10, 2013, U.S. regulators issued final rules to implement the Dodd-Frank Act’s Volcker Rule. The Volcker Rule limits the ability of banking entities to sponsor or invest in certain covered funds and to engage in certain types of proprietary trading unrelated to serving clients subject to certain exclusions and exemptions. The final rules also limit the ability of banking entities and their affiliates to enter into certain transactions with such funds with which they or their affiliates have certain relationships. The final rules contain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations as well as certain foreign government obligations, trading solely outside the United States, and also permit certain ownership interests in certain types of funds to be retained. The final rules extended the deadline for financial institutions, including BBVA and its subsidiaries, to conform to the Volcker Rule, and implement a compliance program, until July 2015 (with the possibility of two one-year extensions under certain circumstances). As it was finally approved in mid-December 2013, BBVA continues to assess the impact of the Volcker Rule to its business operations. Further implementation efforts may be necessary based on subsequent regulatory interpretations, guidelines or examinations.

The Dodd-Frank Act also changes the FDIC deposit insurance assessment framework (the amounts paid by FDIC-insured institutions into the deposit insurance fund of the FDIC), primarily by basing assessments on an FDIC-insured institution’s total assets less tangible equity rather than on U.S. domestic deposits, which is expected to shift a greater portion of the aggregate assessments to large banks (such as Compass Bank).

The so-called “push-out” provision, Section 716 of the Dodd-Frank Act, prohibits U.S. federal assistance to be provided to any swaps entity, including any swap dealer, with respect to certain types of swaps, subject to certain exceptions. The swap activities of BBVA’s New York branch already conformed to the requirements of this provision, as there were no swaps subject to push-out in the New York branch books. Should Compass Bank

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become a swap dealer, it will need to restrict its swap activities to conform to the Dodd-Frank Act “push-out” provision. 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 affiliate BSI and to Compass Bank with its non-banking 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.

The Durbin Amendment to the Dodd-Frank Act required the Federal Reserve to establish a cap on the rate merchants pay banks for electronic clearing of debit transactions (i.e., the interchange rate). The Federal Reserve issued final rules, effective October 1, 2011, for establishing standards, including a cap, for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. The final rule established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions. The interchange fee allowed by the rule reduced the average interchange fee by approximately 50%.

In July 2013, a decision by a Washington D.C. District Court judge invalidated the Federal Reserve’s interchange rule, ruling that the new lower interchange fees had been inappropriately set too high by the Federal Reserve. The Federal Reserve has appealed the decision and a stay on the rule is in effect. It is not possible to predict the outcome of this litigation and how the Federal Reserve, if required to do so, would revise the interchange rule.

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, the Exchange Act and the Investment Advisers Act of 1940.

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

We are disclosing the following information pursuant to 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.

Legacy contractual obligations related to counter indemnities. Before 2007, BBVA Group issued certain counter indemnities to its non-Iranian customers in Europe for various business activities relating to Iran in support of guarantees provided by Bank Melli, three of which remained outstanding during 2013. Estimated gross revenue for 2013 from these counter indemnities, which includes fees and/or commissions, did not exceed $9,000 and was entirely derived from payments made by BBVA Group’s non-Iranian customers in Europe. BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure. In addition, in accordance with Council Regulation (EU) Nr. 267/2012 of March 23, payments of any amounts due to Bank Melli under these counter indemnities have been blocked. BBVA Group is committed to terminating these business relationships as soon as contractually possible and does not intend to enter into new business relationships involving Bank Melli.

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Letters of credit. During 2013, BBVA Group had credit exposure to Bank Sepah arising from a letter of credit issued by such Iranian Bank Sepah to a non-Iranian client of BBVA Group in Europe. This letter of credit, which was granted before 2004, was used to secure a loan granted by BBVA Group to a client in order to finance certain Iran-related activities. This loan was supported by the Spanish export credit agency (CESCE). The loan related to the client’s’ exportation of goods to Iran (consisting of goods relating to a pelletizing plant for iron concentration and equipment). Estimated gross revenue for 2013 from this loan, which includes fees and/or commissions, did not exceed $12,000. Payments of any amounts due by Bank Sepah in 2013 under this letter of credit referred to above were initially blocked and thereafter released upon authorization by the relevant Spanish authorities. In addition, during 2013, BBVA Group received an indemnity payment from CESCE (which totaled approximately $7 million) in connection with a letter of credit which had been granted by Bank Mellat before 2004 and which matured in 2012. The loan underlying this letter of credit was granted by BBVA Group to a Spanish customer in connection with its provision of engineering services and supply of equipment for the construction of a petrochemical plant in Iran. This loan was supported by CESCE. BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure in connection with the two letters of credit referred to above.

BBVA Group is committed to terminating the outstanding business relationship with Bank Sepah as soon as contractually possible and does not intend to enter into new business relationships involving Bank Sepah or Bank Mellat.

Bank accounts. In 2013, BBVA Group 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). BBVA Group believes 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 2013 from these accounts, which includes fees and/or commissions, did not exceed $6,100. BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure. BBVA Group is committed to terminating its business relationships with the employees of this company as soon as contractually possible and does not intend to enter into new business relationships involving this company or its employees.

Iranian embassy-related activity. BBVA Group maintains bank accounts in Spain for three employees of the Iranian embassy in Spain. In addition, BBVA Group maintains bank accounts in Venezuela for seven employees of the Iranian embassy in Venezuela. Moreover, prior to 2013, BBVA Group provided one employee of the Iranian embassy in Venezuela with an insurance against theft at ATMs which expired on November 6, 2013. Estimated gross revenue for 2013 from embassy-related activity, which includes fees and/or commissions, did not exceed $1,100. BBVA Group does not allocate direct costs to fees and commissions and therefore have not disclosed a separate profits measure. BBVA Group is committed to terminating these business relationships as soon as legally possible.

C. Organizational Structure

As of December 31, 2013, the BBVA Group was made up of 301 consolidated entities and 127 entities accounted for 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, Peru, Portugal, Spain, Switzerland, United Kingdom, United States of America, Uruguay and Venezuela. In addition, BBVA has an active presence in Asia.

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Below is a simplified organizational chart of BBVA’s most significant subsidiaries as of December 31, 2013.

	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		75,330
COMPASS BANK	United States	Bank		100.00		100.00		56,106
BANCO PROVINCIAL S.A. - BANCO UNIVERSAL	Venezuela	Bank		55.21		55.21		22,932
BBVA SEGUROS, S.A. DE SEGUROS Y REASEGUROS	Spain	Insurance		99.95		99.95		16,243
BANCO CONTINENTAL, S.A.	Peru	Bank		46.12		46.12		14,804
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A.	Chile	Bank		68.18		68.18		13,903
BBVA COLOMBIA, S.A.	Colombia	Bank		95.43		95.43		13,114
BBVA BANCO FRANCES, S.A.	Argentina	Bank		75.96		75.96		6,349
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL), S.A.	Portugal	Bank		100.00		100.00		5,471
PENSIONES BANCOMER, S.A. DE C.V.	Mexico	Insurance		100.00		100.00		3,576
SEGUROS BANCOMER, S.A. DE C.V.	Mexico	Insurance		100.00		99.97		3,050
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY, S.A.	Uruguay	Bank		100.00		100.00		2,133
BBVA SUIZA, S.A. (BBVA SWITZERLAND)	Switzerland	Bank		100.00		100.00		1,356
UNO-E BANK, S.A.	Spain	Bank		100.00		100.00		1,329
BBVA PARAGUAY, S.A.	Paraguay	Bank		100.00		100.00		1,322

D. Property, Plants and Equipment

We own and rent a substantial network of properties in Spain and abroad, including 3,230 branch offices in Spain and, principally through our various affiliates, 4,282 branch offices abroad as of December 31, 2013. As of December 31, 2013, approximately 76% of our branches in Spain and 55% 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, 2013, the accumulated investment for this project amounted to € 686 million.

E. Selected Statistical Information

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

Average Balances and Rates

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

	Average Balance Sheet - Assets and Interest from Earning Assets
	Year Ended December 31, 2013							Year Ended December 31, 2012							Year Ended December 31, 2011
	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		26,463		262		0.99	%		24,574		259		1.05	%		19,991		250		1.25	%
Debt securities, equity instruments and derivatives		166,013		4,385		2.64	%		164,435		4,414		2.68	%		139,644		3,969		2.84	%
Loans and receivables		361,246		18,736		5.19	%		372,458		19,939		5.35	%		360,107		18,796		5.22	%
Loans and advances to credit institutions		25,998		411		1.58	%		25,122		442		1.76	%		25,209		606		2.40	%
Loans and advances to customers		335,248		18,325		5.47	%		347,336		19,497		5.61	%		334,898		18,190		5.43	%
In Euros (2)		204,124		5,835		2.86	%		217,533		7,267		3.34	%		219,864		7,479		3.40	%
In other currencies (3)		131,125		12,489		9.52	%		129,802		12,230		9.42	%		115,034		10,712		9.31	%
Other financial income		—		—					—		—					—		—
Non-earning assets		45,982		128		0.28	%		46,613		203		0.44	%		37,074		214		0.58	%
Total average assets		599,705		23,512		3.92	%		608,081		24,815		4.08	%		556,816		23,229		4.17	%

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

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

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

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	Average Balance Sheet - Liabilities and Interest Paid on Interest Bearing Liabilities
	Year Ended December 31, 2013							Year Ended December 31, 2012							Year Ended December 31, 2011
	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		86,600		1,551		1.79	%		104,231		2,089		2.00	%		74,027		1,881		2.54	%
Customer deposits		290,105		4,366		1.51	%		271,828		4,531		1.67	%		269,842		5,176		1.92	%
In Euros (2)		153,634		1,734		1.13	%		146,996		1,828		1.24	%		153,773		2,295		1.49	%
In other currencies (3)		136,470		2,632		1.93	%		124,832		2,703		2.16	%		116,069		2,881		2.48	%
Debt certificates and subordinated liabilities		94,130		2,812		2.99	%		102,563		2,783		2.71	%		108,735		2,590		2.38	%
Other financial costs		—		—		—			—		—		—			—		—		—
Non-interest-bearing liabilities		82,257		883		1.07	%		86,627		938		1.08	%		65,515		858		1.31	%
Stockholders’ equity		46,614		—		—			42,832		—		—			38,696		—		—
Total average liabilities		599,705		9,612		1.60	%		608,081		10,341		1.70	%		556,816		10,505		1.89	%

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

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

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

Changes in Net Interest Income-Volume and Rate Analysis

The following table allocates changes in our net interest income between changes in volume and changes in rate for 2013 compared to 2012, and 2012 compared to 2011. 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.

	2013 / 2012
	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		20			(16	)		4
Securities portfolio and derivatives		42			(71	)		(29	)
Loans and advances to credit institutions		15			(46	)		(31	)
Loans and advances to customers		(679	)		(494	)		(1,173	)
In Euros		(448	)		(984	)		(1,432	)
In other currencies		125			135			259
Other assets		(3	)		(72	)		(75	)
Total income		(342	)		(961	)		(1,303	)
Interest expense
Deposits from central banks and credit institutions		(353	)		(185	)		(538	)
Customer deposits		305			(469	)		(164	)
In Euros		83			(176	)		(94	)
In other currencies		252			(323	)		(71	)
Debt certificates and subordinated liabilities		(229	)		257			28
Other liabilities		(47	)		(7	)		(55	)
Total expense		(142	)		(586	)		(729	)
Net interest income		(200	)		(375	)		(575	)

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

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

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	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		57			(48	)		9
Securities portfolio and derivatives		705			(260	)		445
Loans and advances to credit institutions		(2	)		(162	)		(164	)
Loans and advances to customers		676			631			1,307
In euro		(79	)		(133	)		(212	)
In other currencies		1,375			143			1,519
Other assets		55			(66	)		(11	)
Total income		2,139			(552	)		1,586
Interest expense
Deposits from central banks and credit institutions		768			(560	)		208
Customer deposits		38			(683	)		(645	)
In euro		(101	)		(366	)		(467	)
In other currencies		217			(396	)		(178	)
Debt certificates and subordinated liabilities		(147	)		341			194
Other liabilities		277			(197	)		79
Total expense		967			(1,131	)		(164	)
Net interest income		1,172			579			1,750

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

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

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Interest Earning Assets—Margin and Spread

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

	December 31,
	2013			2012			2011
	(In Millions of Euro, except Percentages)
Average interest earning assets		553,722			561,468			519,742
Gross yield (1)		4.2	%		4.4	%		4.5	%
Net yield (2)		3.9	%		4.1	%		4.2	%
Net interest margin (3)		2.5	%		2.6	%		2.4	%
Average effective rate paid on all interest-bearing liabilities		2.0	%		2.2	%		2.3	%
Spread (4)		2.2	%		2.3	%		2.1	%

(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, 2013, interbank deposits represented 3.66% of our assets. Of such interbank deposits, 24.75% were held outside of Spain and 75.25% 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, 2013, our securities were carried on our consolidated balance sheet at a carrying amount of €112,248 million, representing 19.3% of our assets. €36,630 million, or 32.6%, of our securities consisted of Spanish Treasury bonds and Treasury bills. The average yield during 2013 on investment securities that BBVA held was 3.6%, compared to an average yield of approximately 5.2% earned on loans and receivables during 2013. The market or appraised value of our total securities portfolio as of December 31, 2013, was €112,248 million. See Notes 10, 12 and 14 to the Consolidated Financial Statements. For a discussion of our investments in affiliates, see Note 17 to the Consolidated Financial Statements. For a discussion of the manner in which we value our securities, see Notes 2.2.1 and 8 to the Consolidated Financial Statements.

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The following tables analyze the carrying amount and fair value of debt securities as of December 31, 2013, December 31, 2012 and December 31, 2011, respectively. The 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, 2013
	Amortized cost		Fair Value (1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
DEBT SECURITIES -
AVAILABLE FOR SALE PORTFOLIO
Domestic -		39,224		40,116		1,008		(115	)
Spanish Government and other government agencies debt securities		30,688		31,379		781		(90	)
Other debt securities		8,536		8,738		227		(25	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		5,907		6,027		124		(4	)
Issued by other institutions		2,629		2,711		103		(21	)
International -		31,323		31,690		956		(589	)
Mexico		10,433		10,583		328		(178	)
Mexican Government and other government agencies debt securities		9,028		9,150		281		(160	)
Other debt securities		1,404		1,433		47		(19	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		84		93		11		(2	)
Issued by other institutions		1,320		1,340		36		(16	)
The United States		5,962		5,937		58		(82	)
U.S. Treasury and other U.S. government agencies debt securities		171		170		3		(4	)
States and political subdivisions debt securities		884		885		8		(7	)
Other debt securities		4,907		4,881		46		(72	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		234		233		2		(2	)
Issued by other institutions		4,674		4,648		44		(70	)
Other countries		14,928		15,170		570		(329	)
Other foreign governments and other government agencies debt securities		7,128		7,199		333		(261	)
Other debt securities		7,801		7,971		237		(67	)
Issued by Central Banks		1,209		1,208		9		(10	)
Issued by credit institutions		4,042		4,166		175		(51	)
Issued by other institutions		2,550		2,597		54		(6	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		70,547		71,806		1,964		(704	)
HELD TO MATURITY PORTFOLIO
Domestic -		—		—		—		—
International -		—		—		—		—
TOTAL HELD TO MATURITY PORTFOLIO		—		—		—		—
TOTAL DEBT SECURITIES		70,547		71,806		1,964		(704	)

(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.

55

	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 -		34,955		34,366		388		(977	)
Spanish Government and other government agencies debt securities		25,375		24,761		243		(857	)
Other debt securities		9,580		9,605		145		(120	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		7,868		7,880		71		(59	)
Issued by other institutions		1,712		1,725		74		(61	)
International -		28,211		29,182		1,620		(649	)
Mexico		8,230		9,191		962		(1	)
Mexican Government and other government agencies debt securities		7,233		8,066		833		—
Other debt securities		997		1,125		129		(1	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		333		388		56		(1	)
Issued by other institutions		664		737		73		—
The United States		6,927		7,028		189		(88	)
U.S. Treasury and other U.S. government agencies debt securities		228		228		1		(1	)
States and political subdivisions debt securities		485		496		20		(9	)
Other debt securities		6,214		6,304		168		(78	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		150		154		11		(7	)
Issued by other institutions		6,064		6,150		157		(71	)
Other countries		13,054		12,963		469		(560	)
Other foreign governments and other government agencies debt securities		5,557		5,395		212		(374	)
Other debt securities		7,497		7,568		257		(186	)
Issued by Central Banks		1,158		1,159		2		(1	)
Issued by credit institutions		4,642		4,750		209		(101	)
Issued by other institutions		1,697		1,659		46		(84	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		63,166		63,548		2,008		(1,626	)
HELD TO MATURITY PORTFOLIO
Domestic -		7,278		6,849		4		(433	)
Spanish Government and other government agencies debt securities		6,469		6,065		2		(406	)
Other domestic 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		—
Foreign government and other government agency debt securities		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		73,328		73,408		2,139		(2,059	)

(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.

56

	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 -		24,943		23,447		183		(1,679	)
Spanish Government and other government agencies debt securities		20,531		19,209		58		(1,380	)
Other debt securities		4,412		4,238		125		(299	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		3,297		3,130		80		(247	)
Issued by other institutions		1,115		1,108		45		(52	)
International -		26,084		25,969		1,039		(1,154	)
Mexico		4,799		4,974		175		—
Mexican Government and other government agencies debt securities		4,727		4,890		163		—
Other debt securities		72		84		12		—
Issued by Central Banks		—		—		—		—
Issued by credit institutions		59		70		11		—
Issued by other institutions		14		15		1		—
The United States		7,332		7,339		242		(235	)
U.S. Treasury and other U.S. government agencies debt securities		486		482		8		(12	)
States and political subdivisions debt securities		507		535		28		—
Other debt securities		6,339		6,322		206		(223	)
Issued by Central Banks		—		—		—		—
Issued by credit institutions		629		615		22		(36	)
Issued by other institutions		5,710		5,708		184		(186	)
Other countries		13,953		13,656		622		(919	)
Other foreign governments and other government agencies debt securities		8,235		7,977		344		(602	)
Other debt securities		5,718		5,679		278		(317	)
Issued by Central Banks		843		852		10		(0	)
Issued by credit institutions		3,067		2,986		184		(265	)
Issued by other institutions		1,808		1,841		84		(51	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		51,027		49,416		1,222		(2,833	)
HELD TO MATURITY PORTFOLIO
Domestic -		7,373		6,848		1		(526	)
Spanish Government and other government agencies debt securities		6,520		6,060		1		(461	)
Other domestic 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	)
Foreign government and other government agency debt securities		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		61,982		59,606		1,235		(3,611	)

(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.

57

As of December 31, 2013 the carrying amount of the debt securities classified within the available for sale portfolio by rating categories defined by external rating agencies, were as follows:

	As of December 31, 2013
	Debt Securities Available for Sale
	Carrying Amount (In Millions of Euros)		%
AAA		847		1.2	%
AA+		4,927		6.9	%
AA		198		0.3	%
AA-		748		1.0	%
A+		554		0.8	%
A		8,463		11.8	%
A-		4,588		6.4	%
BBB+		7,203		10.0	%
BBB		29,660		41.3	%
BBB-		9,152		12.7	%
BB+ or below		3,548		4.9	%
Without rating		1,918		2.7	%
TOTAL		71,806		100.0	%

The following tables analyze the carrying amount and fair value of our ownership of equity securities as of December 31, 2013, 2012 and 2011, respectively. See Note 10 to the Consolidated Financial Statements.

	As of December 31, 2013
	Amortized cost		Fair Value (1)		Unrealized Gains		Unrealized Losses
	(In Millions of Euros)
EQUITY SECURITIES -
AVAILABLE FOR SALE PORTFOLIO
Domestic -		3,331		3,337		54		(47	)
Equity listed		3,270		3,277		54		(46	)
Equity unlisted		61		60		—		(1	)
International -		2,584		2,629		55		(10	)
United States -		471		471		—		—
Equity listed		16		16		—		—
Equity unlisted		455		455		—		—
Other countries -		2,113		2,158		55		(10	)
Equity listed		2,014		2,051		46		(9	)
Equity unlisted		99		107		9		(1	)
TOTAL AVAILABLE FOR SALE PORTFOLIO		5,915		5,966		109		(57	)
TOTAL EQUITY SECURITIES		5,915		5,966		109		(57	)
TOTAL INVESTMENT SECURITIES		76,462		77,772		2,073		(761	)

(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.

58

	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 -		3,378		3,118		124		(384	)
Equity listed		3,301		3,043		122		(380	)
Equity unlisted		77		75		2		(4	)
International -		862		834		16		(44	)
United States -		506		503		1		(4	)
Equity listed		32		29		1		(4	)
Equity unlisted		474		474		—		—
Other countries -		356		331		15		(40	)
Equity listed		262		230		8		(40	)
Equity unlisted		94		101		7		—
TOTAL AVAILABLE FOR SALE PORTFOLIO		4,240		3,952		140		(428	)
TOTAL EQUITY SECURITIES		4,240		3,952		140		(428	)
TOTAL INVESTMENT SECURITIES		77,568		77,360		2,279		(2,487	)

(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, 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		3,803		4,269		468		(2	)
Equity unlisted		35		35		—		—
International -		993		920		18		(91	)
United States -		600		590		2		(12	)
Equity listed		41		29		—		(12	)
Equity unlisted		559		561		2		—
Other countries -		393		330		16		(79	)
Equity listed		318		244		5		(79	)
Equity unlisted		75		86		11		—
TOTAL AVAILABLE FOR SALE PORTFOLIO		4,832		5,225		486		(93	)
TOTAL EQUITY SECURITIES		4,832		5,225		486		(93	)
TOTAL INVESTMENT SECURITIES		66,813		64,830		1,721		(3,704	)

(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.

59

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, 2013.

	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 agencies debt securities		983		4.02		16,484		3.65		6,326		4.42		7,585		5.08		31,379
Other debt securities		2,645		3.74		5,173		3.87		542		3.33		377		5.58		8,738
Total Domestic		3,629		3.81		21,657		3.71		6,868		4.28		7,962		5.12		40,116
International
Mexico		2,401		5.31		4,243		4.36		588		4.06		3,351		0.77		10,583
Mexican Government and other government agencies debt securities		2,141		5.31		3,758		4.23		335		5.03		2,915		0.04		9,150
Other debt securities		260		5.30		485		5.28		253		2.94		436		3.06		1,433
United States		334		2.15		3,446		2.15		1,642		2.58		515		4.41		5,937
U.S. Treasury and other government agencies debt securities		77		2.63		83		0.37		10		2.16		—		—		170
States and political subdivisions debt securities		58		2.01		223		2.93		485		2.42		119		1.69		885
Other debt securities		199		1.99		3,140		2.15		1,147		2.68		395		5.25		4,881
Other countries		3,328		2.91		6,551		4.78		2,787		9.21		2,504		5.88		15,170
Securities of foreign governments (2)		727		4.52		3,612		5.58		1,638		12.00		1,223		6.39		7,199
Other debt securities of other countries		2,601		2.62		2,939		3.78		1,149		4.84		1,281		5.32		7,971
Total International		6,063		3.94		14,240		3.98		5,017		6.42		6,370		2.88		31,690
TOTAL AVAILABLE-FOR-SALE		9,692		3.88		35,897		3.81		11,885		5.16		14,332		4.08		71,806
HELD-TO-MATURITY PORTFOLIO
Domestic
Spanish government		—		—		—		—		—		—		—		—		—

60

	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
Other debt securities
Total Domestic		—		—		—		—		—		—		—		—		—
Total International		—		—		—		—		—		—		—		—		—
TOTAL HELD-TO-MATURITY		—		—		—		—		—		—		—		—		—
TOTAL DEBT SECURITIES		9,692		3.88		35,897		3.81		11,885		5.16		14,332		4.08		71,806

(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, 2013, our total loans and advances to credit institutions amounted to €22,792 million, or 3.9% of total assets. Net of our valuation adjustments, loans and advances to credit institutions amounted to €22,862 million as of December 31, 2013, or 3.9% of our total assets.

Loans and Advances to Customers

As of December 31, 2013, our total loans and advances amounted to €336,758 million, or 57.8% of total assets. Net of our valuation adjustments, loans and advances amounted to €323,607 million as of December 31, 2013, or 55.6% of our total assets. As of December 31, 2013 our loans in Spain amounted to €187,400 million. Our foreign loans amounted to €149,358 million as of December 31, 2013. 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 advances as of December 31, 2013, 2012 and 2011:

	As of December 31,
	2013			2012			2011
	(In Millions of Euros)
Domestic		187,400			205,216			203,459
Foreign
Western Europe		17,519			19,979			22,392
Latin America		92,223			90,588			79,262
United States		36,047			36,040			39,384
Other		3,569			3,151			5,742
Total foreign		149,358			149,757			146,780
Total loans and advances		336,758			354,973			350,239
Valuation adjustments		(13,151	)		(12,810	)		(7,696	)
Total net lending		323,607			342,163			342,543

61

Loans by Type of Customer

The following table analyzes by domicile and type of customer our net loans and advances 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,
	2013			2012			2011
	(In Millions of Euros)
Domestic
Government		22,166			25,408			25,372
Agriculture		1,275			1,402			1,566
Industrial		13,774			16,240			16,710
Real estate and construction		25,323			30,319			30,022
Commercial and financial		15,534			17,021			22,367
Loans to individuals (1)		90,364			94,991			87,420
Other		18,964			19,836			20,002
Total domestic		187,400			205,216			203,458
Foreign
Government		10,234			9,509			9,569
Agriculture		3,707			3,337			3,131
Industrial		14,905			14,491			18,124
Real estate and construction		15,163			16,904			19,396
Commercial and financial		31,635			34,891			32,369
Loans to individuals		59,527			56,252			50,018
Other		14,187			14,373			14,173
Total foreign		149,358			149,757			146,780
Total loans and advances		336,758			354,973			350,239
Valuation adjustments		(13,151	)		(12,810	)		(7,696	)
Total net lending		323,607			342,163			342,543

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

The following table sets forth a breakdown, by currency, of our net loan portfolio for 2013, 2012 and 2011.

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
In euros		190,090		211,346		215,500
In other currencies		133,517		130,817		127,043
Total net lending		323,607		342,163		342,543

As of December 31, 2013, loans by BBVA and its subsidiaries to associates and jointly controlled companies amounted to €792 million, compared to €820 million as of December 31, 2012. Loans outstanding to the Spanish government and its agencies amounted to €22,166 million, or 6.6% of our total loans and advances as of December 31, 2013, compared to €25,407 million, or 7.2% of our total loans and advances as of December 31, 2012. 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.

62

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, 2013, excluding government-related loans, amounted to €18,122 million or approximately 5.4% of our total outstanding loans and advances. As of December 31, 2013 there did not exist any concentration of loans exceeding 10% of our total outstanding loans and advances, 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 advances by domicile of the office that issued the loan and type of customer as of December 31, 2013. 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		10,995		6,988		4,183		22,166
Agriculture		605		426		244		1,275
Industrial		10,911		2,036		827		13,774
Real estate and construction		11,880		7,808		5,635		25,323
Commercial and financial		10,237		2,123		3,174		15,534
Loans to individuals		14,549		16,819		58,996		90,364
Other		11,795		4,178		2,991		18,964
Total domestic		70,972		40,378		76,050		187,400
Foreign
Government		1,506		1,252		7,476		10,234
Agriculture		1,990		1,186		531		3,707
Industrial		7,606		4,238		3,061		14,905
Real estate and construction		4,746		5,986		4,431		15,163
Commercial and financial		14,463		14,143		3,029		31,635
Loans to individuals		9,044		15,832		34,651		59,527
Other		6,864		4,769		2,554		14,187
Total foreign		46,219		47,406		55,733		149,358
Total loans and advances		117,191		87,784		131,783		336,758

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, 2013.

	Interest Sensitivity of Outstanding Loans and Advances Maturing in More Than One  Year
	Domestic		Foreign		Total
	(In Millions of Euros)
Fixed rate		13,952		48,262		62,214
Variable rate		102,476		54,877		157,353
Total loans and advances		116,428		103,139		219,567

63

Impairment losses on financial assets

For a discussion of loan loss reserves, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Impairment losses on financial assets” 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 and for the year ended December 31,
	2013			2012			2011			2010			2009
	(In Millions of Euros, except Percentages)
Loan loss reserve at beginning of period:
Domestic		9,649			4,694			4,935			4,853			3,765
Foreign		4,510			4,445			4,539			3,952			3,740
Total loan loss reserve at beginning of period		14,159			9,139			9,473			8,805			7,505
Loans charged off:
Total domestic (1)		(1,965	)		(2,283	)		(1,977	)		(1,774	)		(966	)
Total foreign (2)		(1,709	)		(1,824	)		(2,062	)		(2,628	)		(2,876	)
Total Loans charged off:		(3,673	)		(4,107	)		(4,039	)		(4,402	)		(3,842	)
Provision for possible loan losses:
Domestic		3,417			5,867			2,229			2,038			3,079
Foreign		2,522			2,286			2,261			2,778			2,307
Total Provision for possible loan losses		5,939			8,153			4,490			4,816			5,386
Acquisition and disposition of subsidiaries		(30	)		2,066			32			—			—
Effect of foreign currency translation		(557	)		40			(98	)		344			(29	)
Other		(842	)		(1132	)		(720	)		(90	)		(216	)
Loan loss reserve at end of period:
Domestic		10,514			9,649			4,694			4,935			4,853
Foreign		4,481			4,510			4,445			4,539			3,952
Total Loan loss reserve at end of period		14,995			14,159			9,139			9,473			8,805
Loan loss reserve as a percentage of total loans and receivables at end of period		4.27	%		3.81	%		2.47	%		2.60	%		2.54	%
Net loan charge-offs as a percentage of total loans and receivables at end of period		1.05	%		1.11	%		1.09	%		1.21	%		1.11	%

(1) Loans charged off in 2013 were mainly related to the real estate sector. Loans charged off in 2012 were also mainly related to the real estate sector.

(2) Loans charged off in 2013 include €1,592 million related to real estate loans and loans to individuals and others, €114 million related to commercial and financial loans and €3 million related to loans to governmental and non-governmental agencies. Loans charged off in 2012 include €1,628 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.

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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 €3,673 million during the year ended December 31, 2013 compared to €4,107 million during the year ended December 31, 2012.

Our loan loss reserves as a percentage of total loans and advances increased to 4.3% as of December 31, 2013 from 3.8% as of December 31, 2012

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 2013, 2012, 2011, 2010 and 2009 was € 253.3 million, €228.1 million, €203.4 million, €203.5 million and €192.3 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,
	2013			2012			2011			2010			2009
	(In Millions of Euros, Except %)
Impaired loans
Domestic		20,985			15,165			11,043			10,954			10,973
Public sector		158			145			130			111			61
Other resident sector		20,826			15,019			10,913			10,843			10,912
Foreign		4,493			4,836			4,409			4,518			4,338
Public sector		11			20			6			12			25
Non-resident sector		4,482			4,816			4,403			4,506			4,313
Total impaired loans		25,478			20,001			15,452			15,472			15,311
Total loan loss reserve		(14,995	)		(14,159	)		(9,139	)		(9,473	)		(8,805	)
Impaired loans net of reserves		10,483			5,842			6,313			5,999			6,506

Our total impaired loans amounted to €25,478 million as of December 31, 2013, a 27.4% increase compared to €20,001 million as of December 31, 2012. This increase is mainly attributable to the increase in impaired loans in the “Other resident sector” as a result of the deterioration in the real estate sector in Spain.

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 unimpaired assets but which present an inherent loss. As of December 31, 2013, the loss reserve for impaired assets amounted to €12,599 million, a 34.1% increase compared to €9,394 million as of December 31, 2012. This increase in our loss reserve for impaired assets is mainly due to the deterioration of the real estate sector in Spain. As of December 31, 2013, the loss reserve for unimpaired assets amounted to €2,396 million, a 49.7% decrease compared to €4,764 million as of December 31, 2012. The decrease in our loan loss reserve for unimpaired assets is due to the transfer of certain assets to impaired assets.

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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, 2013.

	Impaired Loans		Loan Loss Reserve			Impaired Loans as a percentage of Loans by Type
	(In Millions of Euros)
Domestic:
Government		158		(11	)		0.71	%
Credit institutions		—		—			—
Other sectors		20,826		(10,268	)		12.60	%
Agriculture		142		(70	)		11.18	%
Industrial		1,804		(886	)		13.10	%
Real estate and construction		10,387		(6,084	)		41.02	%
Commercial and other financial		1,103		(579	)		7.10	%
Loans to individuals		5,745		(1,660	)		6.36	%
Other		1,645		(988	)		8.67	%
Total Domestic		20,985		(10,279	)		10.89	%
Foreign:
Government		11		(4	)		0.11	%
Credit institutions		33		(26	)		0.19	%
Other sectors		4,449		(2,290	)		3.20	%
Agriculture		170		(137	)		4.59	%
Industrial		288		(159	)		1.93	%
Real estate and construction		1,734		(715	)		11.44	%
Commercial and other financial		269		(166	)		0.85	%
Loans to individuals		1,202		(646	)		2.02	%
Other		785		(467	)		5.54	%
Total Foreign		4,493		(2,320	)		2.69	%
General reserve		—		(2,396	)
Total impaired loans		25,478		(14,995	)		7.26	%

Troubled Debt Restructurings

As of December 31, 2013, “troubled debt restructurings”, as described in Note 7 to our Consolidated Financial Statements, totaling €9,658 million were not considered impaired loans. For additional information on our restructured or renegotiated loans, see Note 7 to our Consolidated Financial Statements.

Potential Problem Loans

The identification of “Potential problem loans” is based on the analysis of historical non-performing assets ratios trends, categorized by products/clients and geographical locations. This analysis is focused on the identification of portfolios with non-performing assets ratios higher than our average non-performing assets ratios. 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.

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The non-performing assets ratios in our domestic real estate and construction portfolio was 41.02% as of December 31, 2013 (compared to 26.1% as of December 31, 2012), substantially higher than the average non-performing asset ratio for all of our domestic activities (10.89% as of December 31. 2013 and 7.2% as of December 31, 2012) and the average non-performing assets ratio for all of our consolidated activities (6.9% as of December 31, 2013 and 5.1% as of December 31, 2012) as of such date. Within such portfolio, construction loans and property development loans (which exclude mainly infrastructure and civil construction) had a non-performing asset ratio of 43.9% as of such date (compared to 28.1% as of December 31, 2012). Year-on-year increases in non-performing assets ratio were mainly due to the deterioration of economic conditions. Given such non-performing assets ratio, 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 domestic real estate and construction portfolio “Potential problem loans” as of December 31, 2013:

	Book Value		Allowance for Loan Losses		% of Loans in Each Category to Total Loans to Customers
	(In Millions of Euros, Except Percentages)
Domestic (1)
Impaired loans		8,838		4,735		2.5	%
Special monitoring loans		1,445		502		0.4	%
Of which:
Troubled debt restructurings		924		322		0.3	%

(1) Potential problem loans outside of Spain as of December 31, 2013 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, 2013, December 31, 2012 and December 31, 2011. 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.

	2013					2012					2011
	Amount		% of Total Assets			Amount		% of Total Assets			Amount		% of Total Assets
	(In Millions of Euros, Except Percentages)
United Kingdom		5,727		1.0	%		5,769		0.93	%		5,570		1.0	%
Mexico		1,432		0.2	%		1,539		0.25	%		1,885		0.3	%
Other OECD		6,242		1.1	%		6,217		1.01	%		6,455		1.1	%
Total OECD		13,401		2.3	%		13,525		2.18	%		13,910		2.4	%
Central and South America		3,461		0.6	%		2,167		0.35	%		3,148		0.5	%
Other		4,903		0.8	%		3,366		0.54	%		4,316		0.7	%
Total		21,765		3.7	%		19,058		3.07	%		21,374		3.7	%

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The following table sets forth the amounts of our cross-border outstandings as of December 31 of the years indicated below 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, 2013
Mexico		22		8		1,401		1,432
United Kingdom		—		3,703		2,024		5,727
Total		22		3,711		3,426		7,159
As of December 31, 2012
Mexico		3		47		1,490		1,539
United Kingdom		—		3,668		2,100		5,768
Total		3		3,715		3,590		7,307
As of December 31, 2011
Mexico		31		210		1,644		1,885
United Kingdom		—		3,516		2,054		5,570
Total		31		3,726		3,698		7,454

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, 2013.

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 impaired 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 €271 million, €269 million and €363 million as of December 31, 2013, 2012 and 2011, respectively. These figures do not reflect loan loss reserves of 14.3%, 14.3%, and 12.4% respectively, against the relevant amounts outstanding at such dates. Deposits with or loans to borrowers in all such countries as of December 31, 2013 did not in the aggregate exceed 0.1% of our total assets.

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The country-risk exposures described in the preceding paragraph as of December 31, 2013, 2012 and 2011 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, 2013, 2012 and 2011 amounted to $125 million, $47 million and $58 million, respectively (approximately €91 million, €36 million and €45 million, respectively, based on a euro/dollar exchange rate on December 31, 2013 of $1.00 = €0.73, on December 31, 2012 of $1.00 = €0.76, and on December 31, 2011 of $1.00 = €0.77).

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, 2013
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		142,829		25,103		9,149		177,082
Foreign
Western Europe		19,244		36		26,826		46,106
Mexico		40,913		5,238		5,831		51,982
South America		56,218		127		3,750		60,094
United States		39,128		—		5,716		44,844
Other		1,272		190		982		2,444
Total Foreign		156,775		5,591		43,105		205,471
Total		299,604		30,694		52,254		382,552

	As of December 31, 2012
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		137,011		45,808		11,642		194,461
Foreign
Western Europe		13,203		350		18,661		32,214
Mexico		37,267		—		14,861		52,128
South America		54,749		32		4,308		59,089
United States		38,834		—		5,594		44,428
Other		624		—		380		1,002
Total Foreign		144,676		383		43,803		188,862
Total		281,687		46,190		55,445		383,323

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	As of December 31, 2011
	Customer Deposits		Bank of Spain and Other Central Banks		Other Credit Institutions		Total
	(In Millions of Euros)
Total Domestic		124,927		24,570		9,220		158,717
Foreign
Western Europe		27,588		7,827		24,981		60,396
Mexico		36,292		—		11,320		47,612
South America		43,396		228		3,593		47,217
United States		37,199		241		6,253		43,693
Other		1,852		—		960		2,812
Total Foreign		146,327		8,296		47,107		201,730
Total		271,254		32,866		56,327		360,447

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, 2013, the maturity of our time deposits (excluding interbank deposits) in denominations of $100,000 (approximately €72,574 considering the noon buying rate as of December 31, 2013) or greater was as follows:

	As of December 31, 2013
	Domestic		Foreign		Total
	(In Millions of Euros)
3 months or under		11,291		19,003		30,294
Over 3 to 6 months		7,143		2,544		9,687
Over 6 to 12 months		13,349		4,935		18,284
Over 12 months		18,967		7,176		26,143
Total		50,749		33,675		84,424

Time deposits from Spanish and foreign financial institutions amounted to €27,088 million as of December 31, 2013, substantially all of which were in excess of $100,000 (approximately €72,574 considering the noon buying rate as of December 31, 2013).

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, 2013, 2012 and 2011, see Note 23 to the Consolidated Financial Statements.

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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, 2013, 2012 and 2011.

	2013					2012					2011
	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		43,602		1.0	%		47,644		1.9	%		59,001		2.0	%
Average during year		42,978		1.2	%		50,008		1.8	%		49,670		2.0	%
Maximum quarter-end balance		51,698		—			55,947		—			59,001		—
Bank promissory notes
As of December 31		1,252		1.3	%		10,893		3.7	%		2,362		1.8	%
Average during year		6,699		3.0	%		10,802		3.0	%		9,582		1.2	%
Maximum quarter-end balance		8,791		—			13,590		—			14,300		—
Bonds and Subordinated debt
As of December 31		15,185		5.8	%		19,333		3.3	%		11,522		3.8	%
Average during year		16,693		2.9	%		16,156		3.9	%		11,945		4.0	%
Maximum quarter-end balance		19,037		—			19,332		—			15,530		—
Total short-term borrowings as of December 31		60,038		3.7	%		77,870		2.5	%		72,885		2.3	%

Return on Equity

The following table sets out our return on equity ratios:

	As of or for the Year Ended December 31,
	2013		2012		2011
	(In Percentages)
Return on equity (1)		5.0		4.0		8.0
Return on assets (2)		0.5		0.4		0.6
Dividend pay-out ratio (3)		32.9		79.6		37.4
Equity to assets ratio (4)		7.8		7.0		6.8

(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 “Dividend Option” 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 “Dividend Option” scheme (in the form of BBVA shares or ADSs). See “—Business Overview—Supervision and Regulation—Dividends—Scrip Dividend” and “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Dividends”.

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

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 is underway has increased the size of certain banks, such as Bankia (an integration of seven regional saving banks, led by Caja Madrid), La Caixa (which in 2012 acquired Banco de Valencia) and Banco Sabadell.

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

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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. 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 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, have a relatively long period (five years) to comply with such limits. Some of these entities remain particularly active in some sectors, for example, in lending to small and medium enterprises (SMEs).

Credit cooperatives, which are active principally in rural areas, where they provide savings 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, despite their recent decrease, 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, direct debits and payment cards 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 be the single supervisor of around 130 entities (including us) in the Eurozone beginning in May-June 2014. In addition, there will be a single resolution mechanism. The EU Commission proposal is expected to be approved in the first quarter of 2014. Final rules on the European Stability Mechanism (ESM) direct recapitalization of banks are still pending. The creation of a common deposit-guarantee scheme is expected to be the final step, of the integration process and a harmonization of national mechanisms is expected.

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 the RD-L 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. In addition, the Memorandum of Understanding signed by the government in order to receive ESM funds reinforces this objective. In the U.S., the government has 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.

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. U.S. commercial banks have in large part recovered from the crisis, although the mortgage delinquency rate remains significantly high at 8.4% in December 2014, according to the Federal Reserve. Commercial banks continue to make strides toward healthy balance sheets, with delinquency and charge-off rates falling throughout 2013.Consumer delinquencies of the system have actually fallen below pre-crisis levels. Commercial real estate asset quality remains high, being their delinquency rate 2.4% in December 2013 according to the Federal Reserve. Asset quality has come a long way since the crisis, and we expect the positive trends to continue on the back of rising economic confidence.

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In Mexico, where we operate through BBVA Bancomer, the banking industry remained solvent throughout the financial crisis. The banking system has remained solid during 2013, as the Financial System Stability Council (Consejo de Estabilidad del Sistema Financiero, CESF) stated last September. However, total bank lending to the private sector and traditional bank deposits have slowed during 2013, due to slower growth in economic activity and employment in the formal sector.

In Mexico, changes in banking regulation could have a significant potential impact on competition. In particular, the government proposed a Financial Reform Initiative in May 2013 that was approved in January 2014. The reform includes:

• Changes in the mandate of development banks (public banks) to foster the growth of the financial system;

• Measures to promote competition in the financial sector in order to make financial services cheaper;

• Additional incentives to boost lending; and

• An improvement of prudential regulation to strengthen the financial and banking systems.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview

In the fourth quarter of 2013, global economic growth reached 3.5% year-on-year (based on our own estimates), confirming the improvement in the previous quarter. In the second half of 2013, the recession in the Eurozone came to an end, GDP growth accelerated in the U.S., growth in Japan started to show the positive impact of an ultra-expansive monetary policy and some emerging economies recovered from a difficult period in the summer, although with an increasing differentiation between the various geographies. In short, the fourth quarter of 2013 showed an overall positive scenario that increases the probability of a global recovery in 2014-15, though with vulnerability to risk factors.

We believe that the Federal Reserve’s decision to start withdrawing the extraordinary liquidity made available since 2008 is a sign of the strength of the U.S. cycle. There has been an upturn in employment and private spending which has not required additional monetary measures. In addition, the agreement reached on the 2014-15 budget could stimulate investment and lead to growth of more than the 2.5% expected for 2014. Altogether, the beginning of the end of quantitative easing is a process full of uncertainty which will also have an impact on global financial conditions.

In the EMU, expected growth of approximately 1% and 2% in 2014 and 2015, respectively, require an on-going improvement in funding access for governments, corporates and banks, and also for households in peripheral economies in the region. 2014 will be crucial for ending the fragmentation caused by the absence of common and effective bank regulation and supervision and resolution mechanisms, beyond national boundaries and regulatory niches. Risks relating to Europe include periods of instability as we approach events that could alter the outlook, such as the European Parliamentary elections, or the publication of the results of the EBA stress test and the ECB asset quality review of the European banking sector.

Another element of risk in Europe is the possibility of getting too close to a situation in which deflation is a real risk given how difficult it is to get out of a spiral of deflation and lack of growth. Although deflation is unlikely, the scope for response in the region as a whole is restricted, given the current configuration of the EMU. The ECB could implement additional measures, from making available new cheap fixed-cost funding for the banking system to considering a quantitative easing.

The global economic outlook would be clearer were it not for the complications that the end of monetary stimuli in the U.S. is causing in emerging economies, highlighting the disparity in their economic growth and

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financial vulnerability. This is the result of their differing degrees of global financial integration and their different individual economic policies. Those economies with greater external imbalances and that tend to rely on short-term finance are the ones that are at the greatest risk of capital inflows coming to a sudden stop and thus of an adjustment with the potential for cross-border contagion. Thus these countries could need more restrictive monetary policies to tackle these scenarios (or in some more extreme cases, fiscal consolidation). China is a special case, with a trade surplus and barriers that prevent financial contagion beyond its borders. Nonetheless, it could be a source of global instability if the measures to restrict the growth of credit result in a sharp economic deceleration that reduces demand in some of the most financially vulnerable economies.

Critical Accounting Policies

The Consolidated Financial Statements as of and for the years ended December 31, 2013, 2012 and 2011 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, 2013, 2012 and 2011, and its results of operations and consolidated cash flows in 2013, 2012 and 2011. 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.

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 financial 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.

• 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, 2013, 2012 and 2011, 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.

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Fair value of financial instruments

The fair value of an asset or a liability on a given date is taken to be the price that would be received upon the sale of an asset, or paid, upon the transfer of a liability in an orderly transaction between market participants at the measurement date. 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 Notes 2.2.1 and 8 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.

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.

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Goodwill in consolidation

Pursuant to IFRS 3, if the difference on the date of a business combination between the sum of the consideration transferred, the amount of all the non-controlling interests and the fair value of equity interest 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.

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

As of December 31, 2013, no indicators of impairment had been identified in any of the main CGUs. The Group’s most significant goodwill corresponded to the CGU in the United States. The calculation of the impairment loss used the cash flow projections estimated by the Group’s management, based on the latest budgets available for the next five years. As of December 31, 2013, the Group used a sustainable growth rate of 4.0% (the same rate was considered as of December 31, 2012 and 2011) to extrapolate the cash flows in perpetuity starting on the fifth year (2018), based on the real GDP growth rate of the United States and the income recurrence. The rate used to discount the cash flows is the cost of capital assigned to the CGU, 10.8% as of December 31, 2013 (11.2% and 11.4% as of December 31, 2012 and 2011, respectively), which consists of the free risk rate plus a risk premium.

If the discount rate had increased or decreased by 50 basis points, the recoverable amount would have decreased or increased by €691million and €801 million respectively. If the growth rate had increased or decreased by 50 basis points, the recoverable amount would have increased or decreased by €648 million and €560 million respectively.

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.

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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.

Insurance contracts

The methods and techniques used to calculate the mathematical reserves for 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.

Impairment losses on financial assets

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.

Impairment losses on financial assets collectively evaluated for impairment are calculated by using statistical procedures, and they 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 assets. The BBVA Group estimates losses through statistical processes that apply historical data and other specific parameters that, although having been generated as of closing date for these consolidated financial statements, have arisen on an individual basis following the reporting date.

The incurred loss is calculated taking into account three key 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.

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• 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. In addition, the PD calculation includes the following parameters:

- 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 when objective evidence of impairment becomes apparent on an individual basis; in other words, the time lag period between the loss event and the date an entity identified its occurrence. The analysis of LIPs is performed on a homogenous portfolio basis.

A PD of 100% is assigned when a loan is considered impaired. 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).

• 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 asset.

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 if it purchases the property from borrowers in distress, and such property is recognized in the financial statements. 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 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, 2013, 2012 and 2011, 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 that such security controls have provided.

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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 127 Business Continuity Plans in operation across 26 countries. A number of such plans have been activated during the past year as a result of the tropical storms that affected Mexico and the riots and blockade that affected Venezuela.

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.

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. Master Plans are updated on a continuous basis taking into account new technological risks faced by the Group, and establish both organizational and technical mechanisms to support new technological challenges with the necessary security measures.

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 2013, management of fraud in the BBVA Group has focused on improving processes and tools to improve prevention and reduce fraud.

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 as a result of our investment in Garanti and, to a lesser extent, to the Chinese yuan as a result of our investments in the CITIC Group.

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

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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 2013, 2012 and 2011 and as of December 31, 2013, 2012 and 2011 according to the European Central Bank (“ECB”).

	Average Exchange Rates						Period-End Exchange Rates
	Year Ended December 31, 2013		Year Ended December 31, 2012		Year Ended December 31, 2011		As of December 31, 2013		As of December 31, 2012		As of December 31, 2011
Mexican peso		16.9627		16.9033		17.2906		18.0731		17.1845		18.0512
U.S. dollar		1.3281		1.2850		1.3916		1.3791		1.3194		1.2939
Argentine peso		7.2767		5.8434		5.7467		8.9890		6.4768		5.5679
Chilean peso		658.3278		625.0000		672.0430		722.5434		633.3122		674.7638
Colombian peso		2,481.3896		2,309.4688		2,570.6941		2,659.5745		2,331.0023		2,512.5628
Peruvian new sol		3.5903		3.3896		3.8323		3.8535		3.3678		3.4890
Venezuelan bolivar		8.0453		5.5187		5.9765		8.6775		5.6616		5.5569
Turkish lira		2.5339		2.3139		2.3383		2.9605		2.3551		2.4432
Chinese Yuan		8.1644		8.1063		8.9932		8.3491		8.2207		8.1588

During 2013, all of the above currencies depreciated against the euro in average terms. Similarly, there was a year-on-year depreciation of these currencies against the euro as of December 31, 2013. The effect of changes in exchange rates on the year-on-year comparison of the Group’s income statement and balance sheet was negative.

BBVA Group Results of Operations for 2013 Compared to 2012

The changes in the Group’s consolidated income statements for 2013 and 2012 were as follows:

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Interest and similar income		23,512			24,815			(5.3	)
Interest expense and similar charges		(9,612	)		(10,341	)		(7.0	)
Net interest income		13,900			14,474			(4.0	)
Dividend income		235			390			(39.7	)
Share of profit or loss of entities accounted for using the equity method		694			1,039			(33.2	)
Fee and commission income		5,478			5,290			3.6
Fee and commission expenses		(1,228	)		(1,134	)		8.3
Net gains (losses) on financial assets and liabilities		1,608			1,636			(1.7	)
Net exchange differences		903			69			n.m.	(1)
Other operating income		4,995			4,765			4.8
Other operating expenses		(5,627	)		(4,705	)		19.6
Administration costs		(9,701	)		(9,396	)		3.2
Personnel expenses		(5,588	)		(5,467	)		2.2
General and administrative expenses		(4,113	)		(3,929	)		4.7
Depreciation and amortization		(1,095	)		(978	)		12.0
Provisions (net)		(609	)		(641	)		(5.0	)
Impairment losses on financial assets (net)		(5,612	)		(7,859	)		(28.6	)
Impairment losses on other assets (net)		(467	)		(1,123	)		(58.4	)
Gains (losses) on derecognized assets not classified as non-current assets held for sale		(1,915	)		3			n.m.	(1)
Negative goodwill		—			376			(100.0	)
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(399	)		(624	)		(36.1	)
Operating profit before tax		1,160			1,582			(26.7	)
Income tax		(46	)		352			n.m.	(1)
Profit from continuing operations		1,114			1,934			(42.4	)
Profit from discontinued operations (net)		1,866			393			n.m.	(1)
Profit		2,980			2,327			28.1
Profit attributable to parent company		2,228			1,676			32.9
Profit attributable to non-controlling interests		753			651			15.7

(1) Not meaningful.

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The changes in our consolidated income statements for 2013 and 2012 were as follows:

Net interest income

The following table summarizes the principal components of net interest income for 2013 compared to 2012.

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Interest and similar income		23,512			24,815			(5.3	)
Interest expense and similar charges		(9,612	)		(10,341	)		(7.0	)
Net interest income		13,900			14,474			(4.0	)

Net interest income for the year ended December 31, 2013 amounted to €13,900 million, a 4.0% decrease compared with the €14,474 million recorded for the year ended December 31, 2012 mainly due to the decrease in the yield on loans, as a result of the difficult economic conditions in Spain, characterized by a low lending activity and pressure on margins (which was higher than the decline in the cost of deposits) and the impact of the elimination of mortgage floor clauses.

Dividend income

Dividend income for the year ended December 31, 2013 amounted to €235 million, a 40% decrease compared with the €390 million recorded for the year ended December 31, 2012 mainly due to the year-on-year decrease in the dividends received from Telefónica, S.A., which decreased from €0.53 per share in 2012 to €0.35 per share in 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 for the year ended December 31, 2013 amounted to €694 million, a 33% decrease compared with the €1,039 million recorded for the year ended December 31, 2012 mainly due to the decreased profits of CIFH and CNCB (during the nine months in which we accounted for our participation in CNCB under the equity method), and Garanti.

Fee and commission income

The breakdown of fee and commission income for 2013 and 2012 is as follows:

	Year Ended December 31,
	2013		2012		Change
	(In Millions of Euros)				(In %)
Commitment fees		190		186		2.2
Contingent risks		316		334		(5.4	)
Letters of credit		50		56		(10.7	)
Bank and other guarantees		266		278		(4.3	)
Arising from exchange of foreign currencies and banknotes		23		24		(4.2	)
Collection and payment services income		3,095		2,881		7.4
Bills receivables		68		77		(11.7	)
Current accounts		349		381		(8.4	)
Credit and debit cards		1,989		1,756		13.3
Checks		237		222		6.8
Transfers and others payment orders		329		313		5.1
Rest		123		132		(6.8	)
Securities services income		1,142		1,120		2.0
Securities underwriting		74		100		(26.0	)
Securities dealing		205		194		5.7
Custody securities		323		328		(1.5	)
Investment and pension funds		413		375		10.1
Rest assets management		127		123		3.3
Counseling on and management of one-off transactions		14		7		100.0
Financial and similar counseling services		45		41		9.8
Factoring transactions		37		38		(2.6	)
Non-banking financial products sales		109		97		12.4
Other fees and commissions		507		562		(9.8	)
Fee and commission income		5,478		5,290		3.6

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Fee and commission income increased by 3.6% to €5,478 million for the year ended December 31, 2013 from €5,290 million for the year ended December 31, 2012 due principally to the increased activity in credit and debit cards in Mexico and South America, where the impact of the hyperinflation of Venezuela was significant.

Fee and commission expenses

The breakdown of fee and commission expenses for 2013 and 2012 is as follows:

	Year Ended December 31,
	2013		2012		Change
	(In Millions of Euros)				(In %)
Brokerage fees on lending and deposit transactions		1		3		(66.7	)
Fees and commissions assigned to third parties		894		817		9.4
Credit and debit cards		762		685		11.2
Transfers and others payment orders		49		42		16.7
Securities dealing		5		11		(54.5	)
Rest		78		79		(1.3	)
Other fees and commissions		333		314		6.1
Fee and commission expenses		1,228		1,134		8.3

Fee and commission expenses increased by 8.3% to €1,228 million for the year ended December 31, 2013 from €1,134 million for the year ended December 31, 2012, primarily due to the greater business activity in credit and debit cards in South America, mainly as a result of the hyperinflation of Venezuela.

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

Net gains (losses) on financial assets and liabilities decreased by 1.7% to €1,608 million for the year ended December 31, 2013 from €1,636 million for the year ended December 31, 2012.

The table below provides a breakdown of net gains (losses) on financial assets and liabilities for 2013 and 2012:

	Year Ended December 31,
	2013			2012		Change
	(In Millions of Euros)					(In %)
Financial assets held for trading		540			653		(17.3	)
Other financial assets designated at fair value through profit or loss		49			69		(29.0	)
Other financial instruments not designated at fair value through profit or loss		1,019			914		11.5
Available-for-sale financial assets		1,046			801		30.6
Loans and receivables		126			51		147.1
Other		(153	)		62		n.m.	(1)
Net gains (losses) on financial assets and liabilities		1,608			1,636		(1.7	)

(1) Not meaningful.

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Net exchange differences increased to €903 million for the year ended December 31, 2013 from €69 million for the year ended December 31, 2012, due primarily to the evolution of foreign currencies and the structural management of exchange rates, mainly by entering into derivatives transactions.

Other operating income and expenses (net)

Other operating income amounted to €4,995 million for the year ended December 31, 2013 a 4.8% increase compared to €4,765 million for the year ended December 31, 2012, due primarily to increased income derived from insurance and reinsurance contracts.

Other operating expenses for the year ended December 31, 2013, amounted to €5,627 million, a 19.6% increase compared to the €4,705 million recorded for the year ended December 31, 2012 due primarily to increased provisions related to insurance and reinsurance contracts, expenses related to inflation and higher contributions to deposit guarantee funds in the countries in which we operate.

Administration costs

Administration costs for the year ended December 31, 2013 amounted to €9,701 million, a 3.2% increase compared with the €9,396 million recorded for the year ended December 31, 2012 mainly due to the investments made to implement our expansion and technological transformation plans in Mexico and South America as well as the incorporation of Unnim at the end of July 2012.

The table below provides a breakdown of personnel expenses for 2013 and 2012.

	Year Ended December 31,
	2013		2012		Change
	(In Millions of Euros)				(In %)
Wages and salaries		4,232		4,192		1.0
Social security costs		693		657		5.5
Transfers to internal pension provisions		70		54		29.6
Contributions to external pension funds		80		84		(4.8	)
Other personnel expenses		513		480		6.9
Personnel expenses		5,588		5,467		2.2

Wages and salaries expenses increased 1% from €4,192 million in 2012 to €4,232 million in 2013.

The table below provides a breakdown of general and administrative expenses for 2013 and 2012:

	Year Ended December 31,
	2013		2012		Change
	(In Millions of Euros)				(In %)
Technology and systems		791		735		7.6
Communications		294		311		(5.5	)
Advertising		336		359		(6.4	)
Property, fixtures and materials		920		873		5.4
Of which:
Rent expenses		470		490		(4.1	)
Taxes other than income tax		421		417		1.0
Other expenses		1,351		1,234		9.5
General and administrative expenses		4,113		3,929		4.7

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Technology and systems expenses increased from €735 million in 2012 to €791 million in 2013. Other expenses increased from €1,234 million in 2012 to €1,351 million in 2013 mainly due to the increase of outsourced services in Mexico.

Depreciation and amortization

Depreciation and amortization for the year ended December 31, 2013 was €1,095 million, a 12% increase compared with the €978 million recorded for the year ended December 31, 2012 mainly due to the amortization of software and tangible assets for own use.

Provisions (net)

Provisions (net) for the year ended December 31, 2013 was €609 million, a 5% decrease compared with the €641 million recorded for the year ended December 31, 2012 when higher provisions were recognized due to remeasurements arising from changes in financial assumptions used to calculate early retirements in Spain and other similar benefits commitments.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) for the year ended December 31, 2013 was a loss of €5,612 million, a 29% decrease compared with the €7,859 million loss recorded for the year ended December 31, 2012 mainly due to the fact that during 2013 there were lower write-downs to address the deterioration of the loans related to real estate in Spain (although there was an increase in impairment losses on non-real estate loans in Spain). The Group’s non-performing assets ratio was 6.9% as of December 31, 2013, compared to 5.1% as of December 31, 2012.

Impairment losses on other assets (net)

Impairment losses on other assets (net) for the year ended December 31, 2013 amounted to €467 million, a 58.4% decrease compared to the €1,123 million recorded for the year ended December 31, 2012, when impairments losses on real estate inventories were higher as a result of the deterioration of the value of these 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, 2013 amounted to a loss of €1,915 million, compared to a gain of €3 million recognized for the year ended December 31, 2012 mainly due to the realized losses related to the sale of the stake in CNCB amounting to approximately €2,600 million, offset in part by gains from the realized gains of the reinsurance agreement with Scor Global Life. See “Item 4. Information on the Company—History and Development of the Company—Capital Divestitures—2013—New agreement with CITIC Group” for additional information.

Negative goodwill

There was no negative goodwill for the year ended December 31, 2013. Negative goodwill for the year ended December 31, 2012 amounted to a gain of €376 million. Negative goodwill for the year ended December 31, 2012 was derived from 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.

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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, 2013, amounted to a loss of €399 million, a 36.1% decrease compared to a loss of €624 million for the year ended December 31, 2012. This decrease was primarily due to the sale of BBVA Panamá that partially offset the high provisions made in connection with real estate foreclosed assets in Spain in 2013.

Operating profit before tax

As a result of the foregoing, operating profit before tax for the year ended December 31, 2013 was €1,160 million, a 26.7% decrease from the €1,582 million recorded for the year ended December 31, 2012.

Income tax

Income tax for the year ended December 31, 2013 was an expense of €46 million, compared to a benefit of €352 million recorded for the year ended December 31, 2012. The low tax rate is mainly due to the high proportion of revenues with low or zero tax rates (primarily dividends and equity accounted earnings), the high proportion of results coming from Latin America, which carry a lower effective tax rate, and the high 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, 2013 was €1,114 million, a 42.4% decrease from the €1,934 million recorded for the year ended December 31, 2012.

Profit from discontinued operations (net)

Profit from discontinued operations for the year ended December 31, 2013 was €1,866 million, compared to the €393 million registered for the year ended December 31, 2012, due to the divestment in 2013 of the pension business in Latin America. See “Item 4. Information on the Company—History and Development of the Company—Capital Divestitures—2013” for additional information.

Profit

As a result of the foregoing, profit for the year ended December 31, 2013 was €2,980 million, a 28.1% increase from the €2,327 million recorded for the year ended December 31, 2012.

Profit attributable to parent company

Profit attributable to parent company for the year ended December 31, 2013 was €2,228 million, a 32.9% increase from the €1,676 million recorded for the year ended December 31, 2012.

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests for the year ended December 31, 2013 was €753 million, a 15.7% increase over the €651 million registered for the year ended December 31, 2012, principally due to the positive performance of our Venezuelan and Peruvian operations where there are significant minority shareholders.

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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 Millions of Euros)						(In %)
Interest and similar income		24,815			23,229			6.8
Interest expense and similar charges		(10,341	)		(10,505	)		(1.6	)
Net interest income		14,474			12,724			13.8
Dividend income		390			562			(30.6	)
Share of profit or loss of entities accounted for using the equity method		1,039			787			32.0
Fee and commission income		5,290			4,874			8.5
Fee and commission expenses		(1,134	)		(980	)		15.7
Net gains (losses) on financial assets and liabilities		1,636			1,070			52.9
Net exchange differences		69			410			(83.2	)
Other operating income		4,765			4,212			13.1
Other operating expenses		(4,705	)		(4,019	)		17.1
Administration costs		(9,396	)		(8,634	)		8.8
Personnel expenses		(5,467	)		(5,053	)		8.2
General and administrative expenses		(3,929	)		(3,581	)		9.7
Depreciation and amortization		(978	)		(810	)		20.7
Provisions (net)		(641	)		(503	)		27.4
Impairment losses on financial assets (net)		(7,859	)		(4,185	)		87.8
Impairment losses on other assets (net)		(1,123	)		(1,883	)		(40.4	)
Gains (losses) on derecognized assets not classified as non-current assets held for sale		3			44			(93.2	)
Negative goodwill		376			—			n.m.	(1)
Gains (losses) in non-current assets held for sale not classified as discontinued operations		(624	)		(271	)		130.3
Operating profit before tax		1,582			3,398			(53.4	)
Income tax		352			(158	)		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:

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 Millions of Euros)						(In %)
Interest and similar income		24,815			23,229			6.8
Interest expense and similar charges		(10,341	)		(10,505	)		(1.6	)
Net interest income		14,474			12,724			13.8

Net interest income increased 13.8% to €14,474 million for the year ended December 31, 2012 from €12,724 million for the year ended December 31, 2011 due to the reduction of the cost of deposits in Spain, Mexico and South America and

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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 32% to €1,039 million for the year ended December 31, 2012 from €787 million for the year ended December 31, 2011. This increase was mainly attributable to the fact that we accounted for the profit of Garanti for the full year ended December 31, 2012, compared with only nine months for the year ended December 31, 2011, and to a lesser extent 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 Millions of Euros)				(In %)
Commitment fees		186		157		18.5
Contingent risks		334		302		10.6
Letters of credit		56		51		9.8
Bank and other guarantees		278		251		10.8
Arising from exchange of foreign currencies and banknotes		24		25		(4.0	)
Collection and payment services income		2,881		2,560		12.5
Bills receivables		77		66		16.7
Current accounts		381		348		9.5
Credit and debit cards		1,756		1,518		15.7
Checks		222		228		(2.6	)
Transfers and others payment orders		313		276		13.4
Rest		132		124		6.5
Securities services income		1,120		1,079		3.8
Securities underwriting		100		70		42.9
Securities dealing		194		192		1.0
Custody securities		328		329		(0.3	)
Investment and pension funds		375		372		0.8
Rest assets management		123		116		6.0
Counseling on and management of one-off transactions		7		12		(41.7	)
Financial and similar counseling services		41		56		(26.8	)
Factoring transactions		38		33		15.2
Non-banking financial products sales		97		90		7.8
Other fees and commissions		562		560		0.4
Fee and commission income		5,290		4,874		8.5

Fee and commission income increased by 8.5% to €5,290 million for the year ended December 31, 2012 from €4,874 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.

87

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 Millions of Euros)				(In %)
Brokerage fees on lending and deposit transactions		3		4		(25.0	)
Fees and commissions assigned to third parties		817		682		19.8
Credit and debit cards		685		554		23.6
Transfers and others payment orders		42		31		35.5
Securities dealing		11		14		(21.4	)
Rest		79		83		(4.8	)
Other fees and commissions		314		294		6.8
Fee and commission expenses		1,134		980		15.7

Fee and commission expenses increased by 15.7% to €1,134 million for the year ended December 31, 2012 from €980 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 net exchange differences

Net gains (losses) on financial assets and liabilities increased by 52.9% to €1,636 million for the year ended December 31, 2012 from €1,070 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 South America. In addition, net gains on “Loans and receivables” increased by 88.9% from €27 million in 2011 to €51 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 37.9% 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.

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 Millions of Euros)					(In %)
Financial assets held for trading		653		1,004			(35.0	)
Other financial assets designated at fair value through profit or loss		69		16			n.m.	(1)
Other financial instruments not designated at fair value through profit or loss		914		50			n.m.	(1)
Available-for-sale financial assets		801		80			n.m.	(1)
Loans and receivables		51		27			88.9
Rest		62		(57	)		n.m.	(1)
Net gains (losses) on financial assets and liabilities		1,636		1,070			52.9

(1) Not meaningful.

Net exchange differences decreased to €69 million for the year ended December 31, 2012 from €410 million for the year ended December 31, 2011, due primarily to the evolution of foreign currencies.

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Other operating income and expenses (net)

Other operating income amounted to €4,765 million for the year ended December 31, 2012 a 13.1% increase compared to €4,212 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 €4,705 million, a 17.1% increase compared to the €4,019 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 €9,396 million, an 8.8% increase from the €8,634 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 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 Millions of Euros)				(In %)
Wages and salaries		4,192		3,911		7.2
Social security costs		657		600		9.5
Transfers to internal pension provisions		54		51		5.9
Contributions to external pension funds		84		80		5.0
Other personnel expenses		480		411		16.8
Personnel expenses		5,467		5,053		8.2

Wages and salaries expenses increased from €3,911 million in 2011 to €4,192 million in 2012 mainly due to 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.

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

	Year Ended December 31,
	2012		2011		Change
	(In Millions of Euros)				(In %)
Technology and systems		735		639		15.0
Communications		311		275		13.1
Advertising		359		355		1.1
Property, fixtures and materials		873		808		8.0
Of which:
Rent expenses		490		457		8.3
Taxes other than income tax		417		345		20.9
Other expenses		1,234		1,159		6.5
General and administrative expenses		3,929		3,581		9.7

Technology and systems expenses increased from €639 million in 2011 to €735 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.

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Depreciation and amortization

Depreciation and amortization for the year ended December 31, 2012 amounted to €978 million a 20.7% increase compared to €810 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, 2012 amounted to €641 million, a 27.4% increase compared to €503 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 €7,859 million, an 87.8% increase compared to the €4,185 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 €1,883 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.

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 €3 million, a 93.2% decrease compared to €44 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. 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 €624 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 €1,582 million, a 53.4% decrease from the €3,398 million recorded for the year ended December 31, 2011.

Income tax

Income tax for the year ended December 31, 2012 was a benefit of €352 million, compared to an expense of €158 million recorded for the year ended December 31, 2011, due to lower operating profit before tax, the higher proportion of

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revenues with low or zero tax rates (primarily dividends and equity accounted earnings), the higher proportion of results coming from Latin America, 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”.

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.

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.

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Results of Operations by Operating Segment

The information contained in this section is presented under management criteria

The tables set forth below reconcile the income statement of our operating segments presented in this section to the consolidated income statement of the Group. The “Adjustments” column reflects the differences between the Group income statement and the income statement calculated in accordance with management operating segment reporting criteria, which are the following:

• The treatment of Garanti: Under management criteria, 25.01% of the assets liabilities and income statement of Garanti are included in every line of the balance sheet and income statement, respectively, while for purposes of the Group financial statements the participation in Garanti is accounted under “Share of profit or loss of entities accounted for using the equity method”.

• The creation of a line in the income statement called “Profit from corporate operations” which is in place of “Profit from discontinued operations” that includes the following:

• With respect to 2013;

– The earning from the transaction entered into by BBVA Seguros and SCOR Global Life Reinsurance Ireland plc. (“SCOR”), pursuant to which SCOR assumed a quota share of 90% of the majority of BBVA Seguros’ single premium and regular premium business in Spain in the Spain operating segment. The gross impact is €630 million, and

– The earnings from the sale of the pension businesses in Mexico, Colombia, Peru and Chile and also the earnings of these businesses until their sale (€1,866 million net); the capital gain from the sale of BBVA Panama (€230 million gross); and the reduction of the stake in CNCB (which led to the repricing at market value of BBVA’s stake in CNCB, as well as the impact of the equity-adjusted earnings from CNCB, excluding dividends, (negative €2,374 million gross), in the Corporate Center.

• With respect to 2012

– The badwill generated by the Unnim acquisition (€376 million net), the capital gain from the sale of BBVA Puerto Rico (negative €15 million gross), the earnings from the pension business in Latin America (€392 million net), and the equity-adjusted earnings from CNCB, excluding dividends, (€550 million gross), in the Corporate Center.

• With respect to 2011

– The earnings from the pension business in Latin America and the equity accounted earning from CNCB (excluding dividends), in the Corporate Center.

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	For the Year Ended December 31, 2013
	Spain			Real estate activity in Spain			Eurasia			Mexico			United States			South America			Corporate center			Total			Adjustments			Group Income
	(In Millions of Euros)
Net interest income		3,830			(3	)		911			4,484			1,407			4,703			(719	)		14,613			(713	)		13,900
Net fees and commissions		1,376			8			391			1,184			557			976			(61	)		4,431			(181	)		4,250
Net gains (losses) on financial assets and liabilities and net exchange differences		807			67			194			208			139			764			347			2,527			(16	)		2,511
Other operating income and expenses (net) (*)		82			(111	)		225			325			(3	)		(812	)		119			(175	)		472			297
Administration costs		(2,903	)		(130	)		(683	)		(2,173	)		(1,296	)		(2,213	)		(671	)		(10,068	)		367			(9,701	)
Depreciation and amortization		(111	)		(23	)		(51	)		(163	)		(179	)		(173	)		(434	)		(1,133	)		(571	)		(1,704	)
Impairment losses on financial assets (net)		(2,577	)		(643	)		(330	)		(1,439	)		(78	)		(701	)		(8	)		(5,776	)		164			(5,612	)
Provisions (net) and other gains (losses)		(282	)		(1,008	)		(65	)		(64	)		(14	)		(157	)		(80	)		(1,670	)		(1,111	)		(2,781	)
Operating profit/ (loss) before tax		222			(1,840	)		593			2,362			534			2,387			(1,507	)		2,750			(1,590	)		1,160
Income tax		(60	)		595			(139	)		(557	)		(144	)		(530	)		241			(593	)		547			(46	)
Profit from continuing operations		163			(1,245	)		454			1,805			390			1,856			(1,266	)		2,158			(1,044	)		1,114
Profit from discontinued operations/ Profit from corporate operations (net) (**)		440			—			—			—			—			—			383			823			1,043			1,866
Profit		603			(1,245	)		454			1,805			390			1,856			(883	)		2,981			—			2,981
Profit attributable to non-controlling interests		(20	)		(9	)		—			(1	)		—			(608	)		(116	)		(753	)		—			(753	)
Profit attributable to parent company		583			(1,254	)		454			1,805			390			1,249			(999	)		2,228			—			2,228

(*) Includes share of profit or loss of entities accounted for using the equity method.

(**) For Group income this line represents “Profit from discontinued operations” and for operating segments it represents “Profit from corporate operations”.

	For the Year Ended December 31, 2012
	Spain			Real estate activity in Spain			Eurasia			Mexico			United States			South America			Corporate center			Total			Adjustments			Group Income
	(In Millions of Euros)
Net interest income		4,748			(20	)		851			4,178			1,551			4,288			(473	)		15,122			(648	)		14,474
Net fees and commissions		1,342			18			451			1,073			581			913			(25	)		4,353			(197	)		4,156
Net gains (losses) on financial assets and liabilities and net exchange differences		256			(29	)		131			219			153			443			594			1,767			(62	)		1,705
Other operating income and expenses (net) (*)		318			(53	)		232			286			(41	)		(284	)		192			650			839			1,489
Administration costs		(2,788	)		(103	)		(724	)		(2,033	)		(1,321	)		(2,120	)		(679	)		(9,768	)		372			(9,396	)
Depreciation and amortization		(99	)		(24	)		(54	)		(133	)		(185	)		(173	)		(350	)		(1,018	)		(601	)		(1,619	)
Impairment losses on financial assets (net)		(1,853	)		(3,799	)		(328	)		(1,320	)		(72	)		(593	)		(15	)		(7,980	)		121			(7,859	)
Provisions (net) and other gains (losses)		(273	)		(1,695	)		(49	)		(41	)		(46	)		(202	)		(70	)		(2,377	)		1,009			(1,368	)
Operating profit/ (loss) before tax		1,652			(5,705	)		508			2,229			619			2,271			(826	)		749			833			1,582
Income tax		(487	)		1,659			(105	)		(539	)		(177	)		(494	)		418			276			76			352
Profit from continuing operations		1,165			(4,046	)		404			1,690			442			1,777			(408	)		1,024			910			1,934
Profit from discontinued operations/ Profit from corporate operations (net) (**)		—			—			—			—			—			—			1,303			1,303			(910	)		393
Profit		1,165			(4,046	)		404			1,690			442			1,777			895			2,327			—			2,327
Profit attributable to non-controlling interests		(3	)		3			—			(1	)		—			(578	)		(72	)		(651	)		—			(651	)
Profit attributable to parent company		1,162			(4,044	)		404			1,689			443			1,199			823			1,676			—			1,676

(*) Includes share of profit or loss of entities accounted for using the equity method.

(**) For Group income this line represents “Profit from discontinued operations” and for operating segments it represents “Profit from corporate operations”.

93

	For the Year Ended December 31, 2011
	Spain			Real estate activity in Spain			Eurasia			Mexico			United States			South America			Corporate center			Total			Adjustments			Group Income
	(In Millions of Euros)
Net interest income		4,248			104			806			3,782			1,518			3,159			(465	)		13,152			(428	)		12,724
Net fees and commissions		1,291			22			391			1,015			611			722			(21	)		4,031			(137	)		3,894
Net gains (losses) on financial assets and liabilities and net exchange differences		238			12			114			296			132			485			204			1,481			(1	)		1,480
Other operating income and expenses (net) (*)		468			(14	)		156			229			(79	)		(267	)		371			864			678			1,542
Administration costs		(2,737	)		(88	)		(602	)		(1,826	)		(1,253	)		(1,732	)		(659	)		(8,898	)		264			(8,634	)
Depreciation and amortization		(101	)		(13	)		(44	)		(105	)		(166	)		(152	)		(259	)		(839	)		(474	)		(1,313	)
Impairment losses on financial assets (net)		(1,619	)		(481	)		(111	)		(1,180	)		(320	)		(449	)		(66	)		(4,226	)		41			(4,185	)
Provisions (net) and other gains (losses)		(274	)		(757	)		13			(59	)		(1,496	)		(89	)		44			(2,618	)		508			(2,110	)
Operating profit/ (loss) before tax		1,515			(1,216	)		722			2,153			(1,053	)		1,677			(852	)		2,946			452			3,398
Income tax		(438	)		405			(159	)		(514	)		340			(346	)		505			(206	)		48			(158	)
Profit from continuing operations		1,077			(810	)		563			1,639			(713	)		1,332			(347	)		2,740			500			3,240
Profit from discontinued operations/ Profit from corporate operations (net) (**)		1			1			—			—			1			—			745			748			(503	)		245
Profit		1,077			(810	)		563			1,639			(713	)		1,332			398			3,485			—			3,485
Profit attributable to non-controlling interests		(2	)		2			1			(1	)		—			(434	)		(47	)		(481	)		—			(481	)
Profit attributable to parent company		1,075			(809	)		563			1,638			(713	)		898			351			3,004			—			3,004

(*) Includes share of profit or loss of entities accounted for using the equity method.

(**) For Group income this line represents “Profit from discontinued operations” and for operating segments it represents “Profit from corporate operations”.

94

Results of Operations by Operating Segment for 2013 Compared to 2012

SPAIN

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		3,830			4,748			(19.3	)
Net fees and commissions		1,376			1,342			2.5
Net gains (losses) on financial assets and liabilities and net exchange differences		807			256			215.2
Other operating income and expenses (net)		82			318			(74.2	)
Administration costs		(2,903	)		(2,788	)		4.1
Depreciation and amortization		(111	)		(99	)		12.2
Impairment losses on financial assets (net)		(2,577	)		(1,853	)		39.1
Provisions (net) and other gains (losses)		(282	)		(273	)		3.3
Operating profit before tax		222			1,652			(86.5	)
Income tax		(60	)		(487	)		(87.8	)
Profit from continuing operations		163			1,165			(86.0	)
Profit from corporate operations (net)		440			—			n.m.	(1)
Profit		603			1,165			(48.3	)
Profit attributable to non-controlling interests		(20	)		(3	)		n.m.	(1)
Profit attributable to parent company		583			1,162			(49.8	)

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2013 was €3,830 million, a 19.3% decrease compared to the €4,748 million recorded for 2012, as a result of reduced lending activity and narrow spreads due to current environment of low rates and the impact of the elimination of the mortgage floor clauses.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,376 million for 2013, a 2.5% increase from the €1,342 million recorded for 2012, primarily due to the greater contribution from fees and commissions from mutual and pension funds, as well as those from the activity with customers in wholesale banking transactions.

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 2013 was a gain of €807 million compared with the €256 million gain recorded for 2012, mainly due to the favorable performance of Spain’s Global Markets unit.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a gain of €82 million, a 74.2% decrease from the €318 million gain recorded for 2012, primarily due to increased contributions to the Deposit Guarantee Fund and the lower revenue from dividends received from financial assets held for trading.

95

Administration costs

Administration costs of this operating segment for 2013 were €2,903 million, a 4.1% increase from the €2,788 million recorded for 2012, primarily due to an increase in general and personnel expenses due to the incorporation of Unnim at the end of July 2012.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €2,577 million, a 39.1% increase from the €1,853 million recorded for 2012 which is mainly attributable to the increase in loan-loss provisions for restructured loans. This operating segment’s non-performing assets ratio increased to 6.4% as of December 31, 2013, from 4.1% as of December 31, 2012.

Operating profit before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2013 was €222 million, compared with operating profit before tax of €1,652 million recorded in 2012.

Income tax

Income tax of this operating segment for 2013 was an expense of €60 million, compared with a €487 million expense recorded in 2012, primarily as a result of the lower operating profit before tax.

Profit from corporate operations (net)

Profit from corporate operations for this operating segment for 2013 was a gain of €440 million compared with no gain or loss for 2012, due to the capital gain generated by the VIF (Value of In-Force) monetization transaction entered into by BBVA Seguros and SCOR Global Life Reinsurance Ireland plc. (“SCOR”), pursuant to which SCOR assumed a quota share of 90% of the majority of BBVA Seguros’ single premium and regular premium business in Spain (consisting mainly of life risk insurance policies).

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2013 was €583 million, a 49.8% decrease from the €1,162 million recorded in 2012.

96

REAL ESTATE ACTIVITY IN SPAIN

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		(3	)		(20	)		(87.1	)
Net fees and commissions		8			18			(54.0	)
Net gains (losses) on financial assets and liabilities and net exchange differences		67			(29	)		n.m.	(1)
Other operating income and expenses (net)		(111	)		(53	)		n.m.	(1)
Administration costs		(130	)		(103	)		26.3
Depreciation and amortization		(23	)		(24	)		(4.7	)
Impairment losses on financial assets (net)		(643	)		(3,799	)		(83.1	)
Provisions (net) and other gains (losses)		(1,008	)		(1,695	)		(40.6	)
Operating profit/loss before tax		(1,840	)		(5,705	)		(67.7	)
Income tax		595			1,659			(64.1	)
Profit from continuing operations		(1,245	)		(4,046	)		(69.2	)
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		(1,245	)		(4,046	)		(69.2	)
Profit attributable to non-controlling interests		(9	)		3			n.m.	(1)
Profit attributable to parent company		(1,254	)		(4,044	)		(69.0	)

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2013 was a loss of €3 million, an 87.1% decrease compared to the €20 million loss recorded for 2012 mainly as a result of a decrease in interest expense and similar charges.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €8 million for 2013, a 54.0% decrease from the €18 million recorded for 2012.

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 2013 was a gain of €67 million compared with the €29 million loss recorded for 2012 mainly as a result of the development during 2013 of a policy of divestment of non-real estate investments aimed to take advantage of the more favorable market situation.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a loss of €111 million compared to the €53 million loss recorded for 2012, as a result of the higher level of foreclosed assets which resulted in higher maintenance costs than in the prior year.

Administration costs

Administration costs of this operating segment for 2013 were €130 million, a 26.3% increase from the €103 million recorded for 2012, primarily due to increased personnel expenses, as a result of the allocation of additional staff to this segment in order to carry out its activity.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €643 million, an 83.1% decrease from the €3,799 million recorded for 2012 which is mainly attributable to the existence of lower losses in the real estate sector in Spain in 2013.

97

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2013 was €1,840 million, compared with operating loss before tax of €5,705 million recorded in 2012.

Income tax

Income tax of this operating segment for 2013 was a gain of €595 million, a 64.1% decrease compared with a €1,659 million gain recorded in 2012, primarily as a result of the lower operating loss before tax.

Profit / (loss) attributable to parent company

As a result of the foregoing, loss attributable to parent company of this operating segment for 2013 was €1,254 million, a 69.0% decrease from the €4,046 million loss recorded in 2012.

EURASIA

In accordance with IFRS 8, the information for the Eurasia operating segment is presented under management criteria, pursuant to which Garanti’s information has been proportionally integrated based on our 25.01% interest in Garanti.

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		911			851			7.0
Net fees and commissions		391			451			(13.4	)
Net gains (losses) on financial assets and liabilities and net exchange differences		194			131			47.8
Other operating income and expenses(net)		225			232			(2.7	)
Administration costs		(683	)		(724	)		(5.8	)
Depreciation and amortization		(51	)		(54	)		(6.7	)
Impairment losses on financial assets (net)		(330	)		(328	)		0.5
Provisions (net) and other gains (losses)		(65	)		(49	)		31.5
Operating profit before tax		593			508			16.6
Income tax		(139	)		(105	)		32.6
Profit from continuing operations		454			404			12.4
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		454			404			12.4
Profit attributable to non-controlling interests		—			—			n.m.	(1)
Profit attributable to parent company		454			404			12.4

(1) Not meaningful.

In 2013, the Turkish lira depreciated against the Euro in average terms, resulting in a negative exchange rate effect on our income statement for the year ended December 31, 2013. See “Factors Affecting the Comparability of our Results of Operations and Financial Condition.”

Net interest income

Net interest income of this operating segment for 2013 was €911 million, a 7.0% increase compared to the €851 million recorded for 2012, as a result of increased activity and favorable spreads mainly in Garanti.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €391 million for 2013, a 13.4% decrease from the €451 million recorded for 2012, due to lower revenue from wholesale customers.

98

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 2013 was a gain of €194 million a 47.8% increase compared to the €131 million gain recorded for 2012, mainly due to the earnings from of the Eurasia Global Markets unit.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a gain of €225 million, a 2.7% decrease from the €232 million gain recorded for 2012.

Administration costs

Administration costs of this operating segment for 2013 were €683 million, a 5.8% decrease from the €724 million recorded for 2012, despite the expansion plans implemented by Garanti throughout the year. Since the close of 2012, the Turkish bank’s branch network has expanded by 65 offices and the ATM network by 495 units, to which the costs arising from the launch of i-Garanti before the summer of 2013 should be added.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €330 million, a 0.5% increase from the €328 million recorded for 2012. This operating segment’s non-performing assets ratio increased to 3.4% as of December 31, 2013, from 2.8% as of December 31, 2012.

Operating profit before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2013 was €593 million, a 16.6% increase from the €508 million recorded for 2012.

Income tax

Income tax of this operating segment for 2013 was an expense of €139 million, a 32.6% increase compared with a €105 million expense recorded in 2012, primarily as a result of the increased 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 2013 was €454 million, a 12.4% increase from the €404 million recorded in 2012.

MEXICO

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		4,484			4,178			7.3
Net fees and commissions		1,184			1,073			10.3
Net gains (losses) on financial assets and liabilities and net exchange differences		208			219			(4.6	)
Other operating income and expenses (net)		325			286			13.4
Administration costs		(2,173	)		(2,033	)		6.9
Depreciation and amortization		(163	)		(133	)		22.1
Impairment losses on financial assets (net)		(1,439	)		(1,320	)		9.0
Provisions (net) and other gains (losses)		(64	)		(41	)		56.9
Operating profit before tax		2,362			2,229			5.9
Income tax		(557	)		(539	)		3.2
Profit from continuing operations		1,805			1,690			6.8
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		1,805			1,690			6.8
Profit attributable to non-controlling interests		(1	)		(1	)		2.3
Profit attributable to parent company		1,805			1,689			6.8

(1) Not meaningful.

99

In 2013, the Mexican peso slightly depreciated against the Euro in average terms, resulting in a negative exchange rate effect on our income statement for the year ended December 31, 2013. See “Factors Affecting the Comparability of our Results of Operations and Financial Condition.”

Net interest income

Net interest income of this operating segment for 2013 was €4,484 million, a 7.3% increase compared to the €4,178 million recorded for 2012, as a result of an increased activity in lending and funding.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,184 million for 2013, a 10.3% increase from the €1,073 million recorded for 2012. This growth in income from fees and commissions has been driven by a larger number of card transactions and the increase in revenue from our participation in market issues by our corporate customers.

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 2013 was a gain of €208 million a 4.6% decrease compared to the €219 million gain recorded for 2012 primarily due to lower earnings from gains on equity instruments and debt instruments.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a gain of €325 million, a 13.4% increase from the €286 million gain recorded for 2012, due to higher earnings from the insurance business as a result of an increase in activity and a lower level of claims.

Administration costs

Administration costs of this operating segment for 2013 were €2,173 million, a 6.9% increase from the €2,033 million recorded for 2012. This increase is the result of the implementation of the area’s “Investment Plan”, designed to remodel the branch network, the launch of projects for investment in technology and the construction of new corporate headquarters, as well as other strategies aimed at boosting commercial activity.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €1,439 million, a 9.0% increase from the €1,320 million recorded for 2012, in line with the growth of the activity in the year. This operating segment’s non-performing assets ratio decreased to 3.6% as of December 31, 2013, from 3.7% as of December 31, 2012.

Operating profit before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2013 was €2,362 million, a 5.9% increase from the €2,229 million recorded for 2012.

Income tax

Income tax of this operating segment for 2013 was an expense of €557 million, a 3.2% increase compared with a €539 million expense recorded in 2012, as a result of the increased operating profit before tax.

100

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2013 was €1,805 million, a 6.8% increase from the €1,689 million recorded in 2012.

SOUTH AMERICA

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		4,703			4,288			9.7
Net fees and commissions		976			913			6.9
Net gains (losses) on financial assets and liabilities and net exchange differences		764			443			72.3
Other operating income and expenses (net)		(812	)		(284	)		n.m.	(1)
Administration costs		(2,213	)		(2,120	)		4.4
Depreciation and amortization		(173	)		(173	)		(0.5	)
Impairment losses on financial assets (net)		(701	)		(593	)		18.3
Provisions (net) and other gains (losses)		(157	)		(202	)		(22.6	)
Operating profit before tax		2,387			2,271			5.1
Income tax		(530	)		(494	)		7.4
Profit from continuing operations		1,856			1,777			4.5
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		1,856			1,777			4.5
Profit attributable to non-controlling interests		(608	)		(578	)		5.1
Profit attributable to parent company		1,249			1,199			4.1

(1) Not meaningful.

The average exchange rates against the Euro of the currencies of the countries in which we operate in South America, decreased in 2013, resulting in a negative impact on the results of operations of the South America operating segment expressed in Euro. See “-Factors Affecting the Comparability of our Results of Operations and Financial Condition.”

Net interest income

Net interest income of this operating segment for 2013 was €4,703 million, a 9.7% increase compared to the €4,288 million recorded for 2012, mainly due to the increase in volume of customer loans and deposits during the period and the maintenance of customer spreads

Net fees and commissions

Net fees and commissions of this operating segment amounted to €976 million for 2013, a 6.9% increase from the €913 million recorded for 2012, in line with the increased activity in the region. In addition, fees and commissions benefited from a payment by VISA of €16 million in the second quarter of 2013 related to an increase in card usage volumes.

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 2013 was a gain of €764 million a 72.3% increase compared to the €443 million gain recorded for 2012, as a result of the positive effect of exchange differences due to the assets in U.S. dollars in the region.

101

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a loss of €812 million, compared to the €284 million loss recorded for 2012. This line includes basically the adjustment for hyperinflation in Venezuela, which has been more negative in 2013 than in the previous year, and the increased contribution to deposit guarantee funds in the different countries. These two effects have more than offset the good performance of the insurance business in the area.

Administration costs

Administration costs of this operating segment for 2013 were €2,213 million, a 4.4% increase from the €2,120 million recorded for 2012. This increase in expenses is mainly due to two factors: the expansion and technological transformation plans being implemented, and the negative impact of high inflation in the area.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €701 million, an 18.3% increase from the €593 million recorded for 2012. Excluding the effect of the recovery of provisions registered in 2012, the increase would be in line with the activity growth in the year. In addition, there was an increase in impairment losses on financial assets in Chile as a result of higher losses recognized in the mortgage portfolio.

This operating segment’s non-performing asset ratio was 2.1% as of December 31, 2013 and 2012.

Operating profit before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2013 was €2,387 million, a 5.1% increase from the €2,271 million recorded for 2012.

Income tax

Income tax of this operating segment for 2013 was an expense of €530 million, a 7.4% increase compared with a €494 million expense recorded in 2012 as a result of the increased 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 2013 was €1,249 million, a 4.1% increase from the €1,199 million recorded in 2012.

UNITED STATES

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		1,407			1,551			(9.3	)
Net fees and commissions		557			581			(4.0	)
Net gains (losses) on financial assets and liabilities and net exchange differences		139			153			(8.6	)
Other operating income and expenses (net)		(3	)		(41	)		(93.9	)
Administration costs		(1,296	)		(1,321	)		(1.9	)
Depreciation and amortization		(179	)		(185	)		(3.0	)
Impairment losses on financial assets (net)		(78	)		(72	)		8.7
Provisions (net) and other gains (losses)		(14	)		(46	)		(69.1	)
Operating profit before tax		534			619			(13.7	)
Income tax		(144	)		(177	)		(18.5	)
Profit from continuing operations		390			442			(11.8	)
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		390			442			(11.8	)
Profit attributable to non-controlling interests		—			—			n.m.	(1)
Profit attributable to parent company		390			442			(11.8	)

(1) Not meaningful.

102

In 2013 the U.S. dollar depreciated against the Euro in average terms, resulting in a negative exchange rate effect on our income statement. See “-Factors Affecting the Comparability of our Results of Operations and Financial Condition.”

Net interest income

Net interest income of this operating segment for 2013 was €1,407 million, a 9.3% decrease compared to the €1,551 million recorded for 2012, mainly due to the low interest rates, which offset the positive effect of improved activity over the year.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €557 million for 2013, a 4.0% decrease from the €581 million recorded for 2012. Fees and commissions have been strongly influenced by the coming into force of restrictive regulations on fees and commissions and the sale of our insurance business in 2012, which have had a negative impact.

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 2013 was a gain of €139 million an 8.6% decrease compared to the €153 million gain recorded for 2012. This decrease was mainly attributable to lower earnings from gains on derivatives and customer deposits.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a loss of €3 million, compared to the €41 million loss recorded for 2012, mainly due to lower contributions to the Federal Deposit Insurance Corporation (FDIC) resulting from the lowering of the contribution requirements.

Administration costs

Administration costs of this operating segment for 2013 were €1,296 million, a 1.9% decrease from the €1,321 million recorded for 2012.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €78 million, an 8.7% increase from the €72 million recorded for 2012, mainly due to the absence of recoveries, unlike in 2012. This operating segment’s non-performing assets ratio decreased to 1.2% as of December 31, 2013, from 2.4% as of December 31, 2012.

Operating profit before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2013 was €534 million, a 13.7% decrease from the €619 million recorded for 2012.

Income tax

Income tax of this operating segment for 2013 was an expense of €144 million, an 18.5% decrease compared with a €177 million expense recorded in 2012, due to lower profit before tax.

103

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2013 was €390 million, an 11.8% decrease from the €443 million recorded in 2012.

CORPORATE CENTER

	Year Ended December 31,
	2013			2012			Change
	(In Millions of Euros)						(In %)
Net interest income		(719	)		(473	)		51.9
Net fees and commissions		(61	)		(25	)		142.4
Net gains (losses) on financial assets and liabilities and net exchange differences		347			594			(41.6	)
Other operating income and expenses (net)		119			192			(38.2	)
Administration costs		(671	)		(679	)		(1.2	)
Depreciation and amortization		(434	)		(350	)		24.1
Impairment losses on financial assets (net)		(8	)		(15	)		(48.5	)
Provisions (net) and other gains (losses)		(80	)		(70	)		14.6
Operating profit/loss before tax		(1,507	)		(826	)		82.3
Income tax		241			418			(42.4	)
Profit/loss from continuing operations		(1,266	)		(408	)		n.m.	(1)
Profit from corporate operations (net)		383			1,303			(70.6	)
Profit/loss		(883	)		895			n.m.	(1)
Profit/loss attributable to non-controlling interests		(116	)		(72	)		60.8
Profit/loss attributable to parent company		(999	)		823			n.m.	(1)

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2013 was a loss of €719 million, a 51.9% increase compared to the €473 million loss recorded for 2012. Net interest income has been negatively affected by the rising cost of wholesale finance resulting from the instability in the Euro zone area throughout 2012, which had a negative impact in our interest expenses for the year ended December 31, 2013 as a result of the wholesale funding raised in 2012.

Net fees and commissions

Net fees and commissions of this operating segment amounted to a loss of €61 million for 2013 compared to a loss of €25 million recorded for 2012.

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 2013 was a gain of €347 million a 41.6% decrease compared to the €594 million gain recorded for 2012, primarily as a result of lower net trading income.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2013 was a gain of €119 million, a 38.2% decrease compared to the €192 million gain recorded for 2012, due mainly to the lower revenue from dividends received from Telefónica, S.A., which decreased from €0.53 per share in 2012 to €0.35 per share in 2013.

104

Administration costs

Administration costs of this operating segment for 2013 were €671 million, a 1.2% decrease from the €679 million recorded for 2012.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2013 was €8 million, a 48.5% decrease compared to the €15 million recorded for 2012.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2013 was €1,507 million, an 82.3% increase from the €826 million loss recorded for 2012.

Income tax

Income tax of this operating segment for 2013 was a gain of €241 million, a 42.4% decrease compared with a €418 million gain recorded in 2012 mainly as a result of lower revenues with low or zero taxes.

Profit from corporate operations (net)

Profit from corporate operations for this operating segment for 2013 was a gain of €383 million compared with a gain of €1,303 million for 2012. This heading comprises the following items: (i) with respect to 2013, the earnings from the sale of the pension businesses in Mexico, Colombia, Peru and Chile and also the earnings of these businesses until their sale; the capital gain from the sale of BBVA Panama; and the impact of the signing of the new agreement with the CITIC Group (which led to the repricing at market value of BBVA’s stake in CNCB, as well our accounting of as the equity-adjusted earnings from CNCB, excluding dividends), and (ii) with respect to 2012, the badwill generated by the Unnim acquisition; the earnings of the sale of BBVA Puerto Rico; the earnings from the pension business in Latin America and the equity-adjusted earnings from CNCB (excluding dividends).

Profit / (loss) attributable to parent company

As a result of the foregoing, loss attributable to parent company of this operating segment for 2013 was €999 million compared to a profit of €823 million recorded in 2012.

Results of Operations by Operating Segment for 2012 Compared to 2011

SPAIN

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		4,748			4,248			11.8
Net fees and commissions		1,342			1,291			4.0
Net gains (losses) on financial assets and liabilities and net exchange differences		256			238			7.6
Other operating income and expenses (net)		318			468			(32.0	)
Administration costs		(2,788	)		(2,737	)		1.9
Depreciation and amortization		(99	)		(101	)		(1.3	)
Impairment losses on financial assets (net)		(1,853	)		(1,619	)		14.4
Provisions (net) and other gains (losses)		(273	)		(274	)		(0.6	)
Operating profit before tax		1,652			1,515			9.1
Income tax		(487	)		(438	)		11.2
Profit from continuing operations		1,165			1,077			8.2
Profit from corporate operations (net)		—			1			n.m.	(1)
Profit		1,165			1,077			8.2
Profit attributable to non-controlling interests		(3	)		(2	)		47.1
Profit attributable to parent company		1,162			1,075			8.1

(1) Not meaningful.

105

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 €4,748 million, an 11.8% increase compared to the €4,248 million recorded for 2011, due mainly to the reduction of the cost of deposits that more than offset the decrease in income from loans.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €1,342 million for 2012, a 4.0% increase from the €1,291 million recorded for 2011, primarily due to an increase in securities services income.

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 gain of €256 million, a 7.6% increase compared to the €238 million gain recorded for 2011, mainly due to the higher net gains on financial assets which were partially offset by the negative effect of exchanges differences.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012 was a gain of €318 million, a 32% decrease from the €468 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 €2,788 million, a 1.9% increase from the €2,737 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 €1,853 million, a 14.4% increase from the €1,619 million recorded for 2011 mainly due to the deterioration of economic conditions in Spain. This operating segment’s non-performing assets ratio increased to 4.05% as of December 31, 2012, from 3.06% as of December 31, 2011, due to the increase in impaired loans which was partially offset by a decrease in loans and advances to customers.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2012 was an expense of €273 million, a 0.6% decrease from the €274 million expense recorded in 2011.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2012 was €1,652 million, compared with operating profit before tax of €1,515 million recorded in 2011.

106

Income tax

Income tax of this operating segment for 2012 was €487 million, an 11.2% increase from the €438 million expense recorded in 2011.

Profit attributable to parent company

As a result of the foregoing, profit attributable to parent company of this operating segment for 2012 was a gain of €1,162 million, an 8.1% increase from the €1,075 million recorded in 2011.

REAL ESTATE ACTIVITY IN SPAIN

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		(20	)		104			n.m.	(1)
Net fees and commissions		18			22			(17.4	)
Net gains (losses) on financial assets and liabilities and net exchange differences		(29	)		12			n.m.	(1)
Other operating income and expenses(net)		(53	)		(14	)		294.5
Administration costs		(103	)		(88	)		16.8
Depreciation and amortization		(24	)		(13	)		83.2
Impairment losses on financial assets (net)		(3,799	)		(481	)		n.m.	(1)
Provisions (net) and other gains (losses)		(1,695	)		(757	)		123.8
Operating profit before tax		(5,705	)		(1,216	)		n.m.	(1)
Income tax		1,659			405			n.m.	(1)
Profit from continuing operations		(4,046	)		(810	)		n.m.	(1)
Profit from corporate operations (net)		—			1			n.m.	(1)
Profit		(4,046	)		(810	)		n.m.	(1)
Profit attributable to non-controlling interests		3			2			45.6
Profit attributable to parent company		(4,044	)		(809	)		n.m.	(1)

(1) Not meaningful.

Net interest income

Net interest income of this operating segment for 2012 was an expense of €20 million, compared to an income of €104 million recorded for 2011.

Net fees and commissions

Net fees and commissions of this operating segment amounted to €18 million for 2012, a 17.4% decrease from the €22 million 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 was a loss of €29 million compared with the €12 million gain recorded for 2011, mainly due to the losses on financial assets.

Other operating income and expenses (net)

Other operating income and expenses (net) of this operating segment for 2012 was a loss of €53 million, compared to the loss of €14 million recorded for 2011.

107

Administration costs

Administration costs of this operating segment for 2012 were €103 million, a 16.8% increase from the €88 million recorded for 2011.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €3,799 million, compared to the €481 million recorded for 2011. This increase was mainly attributable to the impairment of assets related to the real estate sector as a result of the deterioration of economic conditions in Spain.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2012 was an expense of €1,695 million, compared to the €757 million expense recorded in 2011, primarily due to an increase in provisions for foreclosed assets and real estate assets as a result of the deterioration of economic conditions in Spain.

Operating profit / (loss) before tax

As a result of the foregoing, the operating loss before tax of this operating segment for 2012 was €5,705 million, compared with operating loss before tax of €1,216 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was a benefit of €1,659 million, compared to the €405 million benefit recorded in 2011, primarily as a result of the increase in 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 €4,044 million, compared to the €809 million recorded in 2011.

EURASIA

In accordance with IFRS 8, the information for the Eurasia operating segment is presented under management criteria, pursuant to which Garanti’s information has been proportionally integrated based on our 25.01% interest in Garanti.

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		851			806			5.5
Net fees and commissions		451			391			15.4
Net gains (losses) on financial assets and liabilities and net exchange differences		131			114			14.9
Other operating income and expenses(net)		232			156			48.8
Administration costs		(724	)		(602	)		20.3
Depreciation and amortization		(54	)		(44	)		23.7
Impairment losses on financial assets (net)		(328	)		(111	)		195.5
Provisions (net) and other gains (losses)		(49	)		13			n.m.	(1)
Operating profit before tax		508			722			(29.6	)
Income tax		(105	)		(159	)		(34.2	)
Profit from continuing operations		404			563			(28.3	)
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		404			563			(28.3	)
Profit attributable to non-controlling interests		—			1			n.m.	(1)
Profit attributable to parent company		404			563			(28.3	)

(1) Not meaningful.

108

Net interest income

Net interest income of this operating segment for 2012 was €851 million, a 5.5% increase compared to the €806 million recorded for 2011 primarily due to increased net interest income from Garanti.

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 increased net fees and commissions from Garanti.

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

Net gains on financial assets and liabilities and net exchange differences of this operating segment for 2012 was €131 million, a 14.9% increase compared with the €114 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 €232 million, a 48.8% increase from the €156 million gain recorded for 2011, primarily due to the increased dividends from CNCB.

Administration costs

Administration costs of this operating segment for 2012 were €724 million, a 20.3% increase over the €602 million recorded for 2011, primarily due to the Garanti.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €328 million, a 195.5% increase from the €111 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 2.8% as of December 31, 2012 from 1.5% as of December 31, 2011.

Operating profit before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2012 was €508 million, a 29.6% decrease from the €722 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was €105 million, a 34.2% decrease from the €159 million recorded in 2011, primarily as a 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 €404 million, a 28.3% decrease from the €563 million recorded in 2011.

109

MEXICO

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		4,178			3,782			10.5
Net fees and commissions		1,073			1,015			5.7
Net gains (losses) on financial assets and liabilities and net exchange differences		219			296			(26.2	)
Other operating income and expenses(net)		286			229			25.0
Administration costs		(2,033	)		(1,826	)		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	)		(30.4	)
Operating profit before tax		2,229			2,153			3.5
Income tax		(539	)		(514	)		4.9
Profit from continuing operations		1,690			1,639			3.1
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		1,690			1,639			3.1
Profit attributable to non-controlling interests		(1	)		(1	)		(16.1	)
Profit attributable to parent company		1,689			1,638			3.1

(1) Not meaningful.

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

Net interest income

Net interest income of this operating segment for 2012 was €4,178 million, a 10.5% increase from the €3,782 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 €1,073 million for 2012, a 5.7% increase from the €1,015 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 net exchange differences of this operating segment for 2012 amounted to €219 million, a 26.2% 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 €286 million, a 25.0% increase from the €229 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 €2,033 million, an 11.3% increase from the €1,826 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.

110

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 before tax

As a result of the foregoing, operating profit before tax of this operating segment for 2012 was €2,229 million, a 3.5% increase from the €2,153 million recorded for 2011.

Income tax

Income tax of this operating segment for 2012 was €539 million, a 4.9% increase from the €514 million recorded for 2011.

Profit from continuing operations

Profit from continuing operations of this operating segment for 2012 was €1,690 million, a 3.1% increase from the €1,639 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 €1,689 million, a 3.1% increase from the €1,638 million recorded for 2011.

SOUTH AMERICA

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		4,288			3,159			35.7
Net fees and commissions		913			722			26.4
Net gains (losses) on financial assets and liabilities and net exchange differences		443			485			(8.6	)
Other operating income and expenses(net)		(284	)		(267	)		6.4
Administration costs		(2,120	)		(1,732	)		22.4
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 before tax		2,271			1,677			35.4
Income tax		(494	)		(346	)		43.0
Profit from continuing operations		1,777			1,332			33.4
Profit from corporate operations (net)		—			—			n.m.	(1)
Profit		1,777			1,332			33.4
Profit attributable to non-controlling interests		(578	)		(434	)		33.4
Profit attributable to parent company		1,199			898			33.5

(1) Not meaningful.

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. See “-Factors Affecting the Comparability of our Results of Operations and Financial Condition.”

111

Net interest income

Net interest income of this operating segment for 2012 was €4,288 million, a 35.7% increase from the €3,159 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 €913 million in 2012, a 26.4% increase from the €722 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 net 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 net 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 €284 million, a 6.4% increase from the loss of €267 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 €2,120 million, a 22.4% increase from the €1,732 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 before tax

As a result of the foregoing, operating profit before tax of this operating segment in 2012 amounted to €2,271 million, a 35.4% increase compared to the €1,677 million recorded in 2011.

Income tax

Income tax of this operating segment in 2012 was €494 million, a 43% increase from the €346 million recorded in 2011.

Profit from continuing operations

Profit from continuing operations of this operating segment for 2012 was €1,777 million, a 33.4% increase from the €1,332 million recorded for 2011.

Profit attributable to parent company

Profit attributable to parent company of this operating segment in 2012 was €1,199 million, a 33.5% increase from the €898 million recorded in 2011.

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UNITED STATES

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		1,551			1,518			2.2
Net fees and commissions		581			611			(4.9	)
Net gains (losses) on financial assets and liabilities and net exchange differences		153			132			15.2
Other operating income and expenses(net)		(41	)		(79	)		(48.0	)
Administration costs		(1,321	)		(1,253	)		5.4
Depreciation and amortization		(185	)		(166	)		11.1
Impairment losses on financial assets (net)		(72	)		(320	)		(77.5	)
Provisions (net) and other gains (losses)		(46	)		(1,496	)		(96.9	)
Operating profit before tax		619			(1,053	)		n.m.	(1)
Income tax		(177	)		340			n.m.	(1)
Profit from continuing operations		442			(713	)		n.m.	(1)
Profit from corporate operations (net)		—			1			n.m.	(1)
Profit		442			(713	)		n.m.	(1)
Profit attributable to non-controlling interests		—			—			n.m.	(1)
Profit attributable to parent company		442			(713	)		n.m.	(1)

(1) Not meaningful.

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

Net interest income

Net interest income of this operating segment for 2012 was €1,551 million, a 2.2% increase from the €1,518 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 €581 million, a 4.9% decrease from the €611 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 €153 million, a 15.2% increase from the €132 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 €41 million, compared to an expense of €79 million recorded in 2011 mainly due to lower contributions to the Federal Deposit Insurance Corporation (FDIC).

Administration costs

Administration costs of this operating segment in 2012 were €1,321 million, a 5.4% increase from the €1,253 million recorded in 2011.

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Depreciation and amortization

Depreciation and amortization of this operating segment for 2012 was €185 million, an 11.1% increase from €166 million in 2011.

Impairment losses on financial assets (net)

Impairment losses on financial assets (net) of this operating segment for 2012 was €72 million, a 77.5% decrease from the €320 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 €46 million, compared to the €1,496 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 before tax

As a result of the foregoing, the operating profit before tax of this operating segment for 2012 was a gain of €619 million, compared to a loss of €1,053 million recorded in 2011.

Income tax

Income tax of this operating segment for 2012 was a loss of €177 million, compared to a gain of €340 million recorded in 2011.

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2012 was a gain of €442 million, compared to a loss of €713 million recorded in 2011.

CORPORATE CENTER

	Year Ended December 31,
	2012			2011			Change
	(In Millions of Euros)						(In %)
Net interest income		(473	)		(465	)		1.7
Net fees and commissions		(25	)		(21	)		19.0
Net gains (losses) on financial assets and liabilities and net exchange differences		594			204			191.7
Other operating income and expenses(net)		192			371			(48.2	)
Administration costs		(679	)		(659	)		3.0
Depreciation and amortization		(350	)		(259	)		35.2
Impairment losses on financial assets (net)		(15	)		(66	)		(76.7	)
Provisions (net) and other gains (losses)		(70	)		44			n.m.	(1)
Operating profit/loss before tax		(826	)		(852	)		(3.0	)
Income tax		418			505			(17.1	)
Profit/loss from continuing operations		(408	)		(347	)		17.5
Profit from corporate operations (net)		1,303			745			74.9
Profit		895			398			125.0
Profit/loss attributable to non-controlling interests		(72	)		(47	)		53.5
Profit attributable to parent company		823			351			134.6

(1) Not meaningful.

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Net interest income

Net interest income of this operating segment for 2012 was an expense of €473 million compared to an expense of €465 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 €25 million for 2012, a 19% increase from the €21 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 €594 million, a 191.7% increase from the €204 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 €192 million, a 48.2% decrease from the €371 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.

Administration costs

Administration costs of this operating segment for 2012 were €679 million, a 3% increase from the €659 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 €350 million, a 35.2% increase from the €259 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 loss of €15 million compared with a loss of €66 million recorded for 2011.

Provisions (net) and other gains (losses)

Provisions (net) and other gains (losses) for 2012 was a loss of €70 million, compared to the €44 million gain recorded in 2011.

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 €826 million, compared to a loss of €852 million in 2011.

Income tax

Income tax of this operating segment for 2012 was €418 million, a 17.1% decrease from the €505 million recorded for 2011.

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Profit from corporate operations (net)

With respect to 2012, this heading includes the earnings from the following corporate operations completed by the Group in 2012: the badwill generated by the Unnim acquisition, the earnings of the sale of BBVA Puerto Rico, the earnings from the sold pension businesses and the equity-adjusted earnings from CNCB (excluding dividends). Profit from corporate operations (net) of this operating segment for 2012 was €1,303 million, compared to the €745 million recorded for 2011, that included the results from the pension business in Latin America and the equity-accounted earnings from CNCB (also excluding dividends).

Profit attributable to parent company

Profit attributable to parent company of this operating segment for 2012 was a gain of €823 million, compared to a loss of €351 million in 2011.

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 7.4 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 0.56% of our total consolidated liabilities as of December 31, 2013.

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, 2013:

	BBVA Eurozone (1)		BBVA Bancomer		BBVA Compass		Others
	(In Millions of Euros)
Cash and balances with central banks		10,826		6,159		1,952		6,843
Assets for credit operations with central banks		32,261		3,058		9,810		7,688
Central governments issues		16,500		229		904		7,199
Of Which: Spanish government securities		14,341		—		—		—
Other issues		15,761		2,829		2,224		489
Loans		—		—		6,682		—
Other non-eligible liquid assets		4,735		425		278		396
Accumulated available balance		47,822		9,642		12,040		14,927

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

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The following table shows the balances as of December 31, 2013, 2012 and 2011 of our principal sources of funds (including accrued interest, hedge transactions and issue expenses):

	As of December 31,
	2013		2012		2011
	(in Millions of Euros)
Deposits from central banks		30,893		46,475		32,877
Deposits from credit institutions		52,423		55,675		56,601
Customer deposits		300,490		282,795		272,402
Debt certificates		64,120		86,255		81,124
Subordinated liabilities		10,556		11,815		15,303
Other financial liabilities		5,659		7,590		7,410
Total		464,141		490,605		465,717

Customer deposits

Customer deposits amounted to €300,490 million as of December 31, 2013, compared to €282,795 million as of December 31, 2012 and €272,402 million as of December 31, 2011. The increase from December 31, 2012 to December 31, 2013 was primarily due to the positive performance of time deposits held by households and companies.

Our customer deposits, excluding assets sold under repurchase agreements, amounted to €272,630 million as of December 31, 2013 compared to €253,746 million as of December 31, 2012 and €228,423 million as of December 31, 2011.

Amounts due to credit institutions

Amounts due to credit institutions, including central banks, amounted to €83,316 million as of December 31, 2013, compared to €102,150 million as of December 31, 2012 and €89,478 million as of December 31, 2011. The decrease as of December 31, 2013 compared to December 31, 2012, was related to decreased deposits from central banks, mainly from the ECB long-term financing.

	As of December 31,
	2013		2012		2011
	(in Millions of Euros)
Deposits from credit institutions		52,423		55,675		56,601
Deposits from central banks		30,893		46,475		32,877
Total Deposits from Credit Institutions		83,316		102,150		89,478

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, 2013 we had €64,120 million of senior debt outstanding, comprising €62,802 million in bonds and debentures and €1,318 million in promissory notes and other securities, compared to €86,255

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million, €75,099 million and €11,156 million outstanding as of December 31, 2012, respectively (€81,124 million, €73,633 million and €7,491 million outstanding, respectively, as of December 31, 2011). See Note 23.3 to the Consolidated Financial Statements.

In addition, we had a total of €8,432 million in subordinated debt and €1,827 million in preferred securities outstanding as of December 31, 2013, compared to €9,259 million and €1,847 million outstanding as of December 31, 2012, 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, 2013 of the maturities of our debt certificates (including bonds) and subordinated liabilities, disregarding any valuation adjustments and accrued interest (regulatory equity instruments have been classified according to their contractual maturity):

	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)		—		4,039		383		9,901		35,581		12,640		62,544
Subordinated liabilities		—		38		1		993		1,389		7,847		10,268
Total		—		4,077		384		10,894		36,970		20,487		72,812

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 are based on our interpretation, expectations and understanding of the respective requirements, and are necessarily subject to further regulatory clarity and rulemaking.

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Under the Bank of Spain’s capital adequacy regulations applicable as of December 31, 2013, 2012 and 2011, 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, 2013, this ratio was 12.9%, up from 10.8% as of December 31, 2012, and our stockholders’ equity exceeded the minimum level required by 60.9%, up from 35.4% as of December 31, 2012. As of December 31, 2011, this ratio was 10.9% and our stockholders’ equity exceeded the minimum level required by 36.5%. 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, 2013 and 2012 are as follows:

	As of December 31,			As of December 31,			% Change
	2013			2012			2013-2012
	(in Millions of Euros)
Stockholders’ funds		44,527			43,614			6.2
Adjustments		(7,035	)		(9,401	)		(6.2	)
Mandatory convertible bonds		—			1,238			(100.0	)
CORE CAPITAL		37,492			35,451			5.8
Preferred securities		2,905			1,860			56.2
Adjustments		(786	)		(1,860	)		(57.7	)
CAPITAL (TIER I)		39,611			35,451			11.7
Subordinated debt and other		9,481			10,022			(5.4	)
Deductions		(786	)		(2,636	)		(70.2	)
OTHER ELIGIBLE CAPITAL (TIER II)		8,695			7,386			17.7
CAPITAL BASE (TIER I + TIER II) (a)		48,306			42,836			12.8
Minimum capital requirement (BIS II Regulations)		25,888			26,323			(1.7	)
CAPITAL SURPLUS		22,418			16,514			35.8
RISK WEIGHTED ASSETS (b)		323,605			329,033			(1.6	)
BIS RATIO (a)/(b)		14.90	%		13.02	%
CORE CAPITAL		11.60	%		10.77	%
TIER I		12.20	%		10.77	%
TIER II		2.70	%		2.24	%

The Group’s capital base, calculated in accordance with the rules set forth in the Basel II capital accord, stood at €48,306 million as of December 31, 2013, compared with €42,836 million as of December 31, 2012.

Risk-weighted assets (“RWA”) decreased slightly in 2013, reaching €323,605 million as of December 31, 2013 (compared with €329,033 million as of December 31, 2012). This decrease was mainly due to the deleveraging process in Spain, reduced activity with wholesale customers, exchange rate effects and the sale of our Panama subsidiary.

The minimum capital requirements under BIS II (8% of RWA) amounted to €25,888 million as of December 31, 2013. Thus, excess capital resources (over the required 8% of RWA) stood at € 22,418 million. Therefore, as of December 31, 2013, the Group’s capital resources were 86.6% higher than the minimum required levels.

The quality of the capital base improved during 2013, since core capital as of December 31, 2013 amounted to €37,492 million, compared with €35,451 million as of December 31, 2012. This increase was principally due to the generation of earnings attributed both to the Group and to non-controlling interests and the positive impact of the sale of 5,1% of CNCB and other corporate operations, sale of pension funds administrators in Latin America and sale of our Panama subsidiary (see Note 3 of the Consolidated Financial Statements for additional information).

Core capital accounted for 11.6% of RWA as of December 31, 2013, compared with 10.8% as of December 31, 2012, an increase of 80 basis points compared with December 31, 2012.

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Tier I capital stood at €39,611 million or 12.2% of RWA as of December 31, 2013, 140 basis points higher than on December 31, 2012. Preferred securities and contingent convertible notes accounted for 7.33% of Tier I capital as of December 31, 2013.

As of December 31, 2013, Tier II capital was €8,695 million or 2.7% of RWA, 50 basis points higher than on December 31, 2012, due mainly to the impact of the sale of 5.1% of CNCB .

By aggregating Tier I and Tier II capital, as of December 31, 2013, the BIS total capital ratio is 14.9%, compared with 13.9% as of December 31, 2012.

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.

Furthermore, on July 22, 2013, EBA published a recommendation about capital preservation addressed to the supervisory authorities in all EU member states. The recommendation aims to preserve the enhance capital base built as of June 30, 2012, in response to the EBA’s 2011 recapitalization. For BBVA Group, this limit was set at €32,152 million, and, as of December 31, 2013, the EBA CT1 stood at €35,038 million, with a surplus of €2,886 million over the limit.

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

In 2013, 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; digital banking; and data driven initiatives, in each case with 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, in the framework of the banking union, 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.

Regarding restructuring and resolution of credit institutions, an agreement on the RRD was reached in the February 2014 ECOFIN. The final approval of the RRD is expected by April-May 2014. The RRD is expected to enter into force in 2015, but the bail-in tool, which is one of the cornerstones of the RRD, will only be operational from 2016. The RRD sets a common framework for all EU countries with the intention to preempt bank crises and resolve financial institutions in an orderly manner in the event of failure, whilst preserving essential bank operations and minimizing taxpayers’ costs, thus helping restore confidence in Europe’s financial sector.

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With respect to banking structural reforms, the European Commission released a proposal in January 2014. The proposal is twofold and imposes: (i) a prohibition on proprietary trading and (ii) an annual supervisory examination of trading activities that may trigger the separation of market-making, complex derivatives and risky securitization if the thresholds on a certain number of metrics are breached (a wider separation is possible under supervisory discretion). The reform would apply to Global Systemically Important Banks and banks with significant trading activities. This initiative raises concerns from a global perspective. First, if implemented, it will affect activities that are essential for the well-functioning of the markets such as market-making. Further, it may also foster concentration in risky trading business lines with increased systemic risk by applying structural separation on a too large scope of banks including those predominantly retail banks that may be forced to divest from their trading activities as they would no longer be viable.

Regarding consumer protection rules, initiatives such as the review of the Markets in Financial Instruments Directive (MiFID II), the EU Commission consultation on the legislative steps for the Packaged Retail Investment Products (PRIPs) 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, which was approved by the European Parliament and the Council on January 14, 2014. The approved Directive 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.

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Finally, regulators have decided to increase transparency in the benchmark setting process. There are several initiatives that point in this direction. Among others there is a EU proposal for benchmark indices which is at an early stage of negotiation and is not expected to see the light before the end of 2014. In addition, the new Euribor EBF Code of Conduct, which will entry into force in April 2014, aims at improving governance procedures. Both initiatives stressed the need to base index quotes on real market transactions.

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,

• doubts about the fragile recovery of European economies (both peripheral and core Eurozone economies), difficulties in the banking union process and current financial markets fragmentation;

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

• 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, in particular in emerging economies which have experienced capital outflows and currency depreciations;

• 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, European authorities 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, 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 or the US tapering 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.

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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,
	2013		2012		2011
	(In Millions of Euros)
Contingent Risk
Rediscounts, endorsements and acceptances		39		36		35
Collateral, bank guarantees and indemnities		28,082		29,976		29,532
Other contingent risks		5,422		7,007		8,062
Total contingent risk		33,543		37,019		37,629
Contingent Commitments
Balances drawable by third parties:
Credit Institutions		1,583		1,946		2,417
Government and other government agency		4,354		1,360		3,143
Other resident sectors		20,713		21,982		24,119
Non-resident sector		60,892		58,231		56,696
Total balances drawable by third parties		87,542		83,519		86,375
Other contingent liabilities		6,628		6,623		4,313
Total contingent liabilities		94,170		90,142		90,688
Total contingent risk and contingent liabilities		127,213		127,161		128,317

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, 2013, 2012 and 2011:

	As of December 31,
	2013		2012		2011
	(In Millions of Euros)
Mutual funds		43,600		40,118		43,134
Pension funds		21,074		84,500		73,783
Other managed assets		31,073		28,138		26,349
Total		95,747		152,756		143,266

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, 2013 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		14,323		32,737		2,844		12,640		62,544
Subordinated debt		1,032		725		664		7,847		10,268
Deposits from customers		255,530		30,360		2,720		10,994		299,604
Capital lease obligations		—		—		—		—		—
Operating lease obligations		264		397		270		2,530		3,462
Purchase obligations		39		—		—		—		39
Post-employment benefits (1)		859		1,526		1,256		2,084		5,726
Insurance commitments		1,440		1,613		878		5,903		9,834
Total (2)		273,487		67,358		8,633		41,998		391,477

(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), 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 (see Note 23 to the Consolidated Financial Statements). The majority of the senior and subordinated debt was issued at variable rates. The financial cost of such issuances for 2013, 2012 and 2011 is detailed in Note 39.2 to the Consolidated Financial Statements.

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.

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Our Board of Directors has approved a report on corporate governance and a report on director’s remuneration for 2013, according to the forms set forth under Spanish regulation for listed companies.

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 (http://shareholdersandinvestors.bbva.com/TLBB/tlbb/bbvair/ing/governance/index.jsp) 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 management. Under the Board regulations, 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.

(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 item.

(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.

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

(ix) Fall within the cases described under items 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 item vii), 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 Appointments 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.

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.

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Pursuant to the provisions of these Board regulations, as in previous years, in 2013 the Board of Directors assessed the quality and efficiency of its own operation and 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.

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.

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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, re-election, their current positions and their present principal outside occupation and employment history.

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., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer.
Ángel Cano Fernández (1)	1961	President and Chief Operating Officer	September 29, 2009	March 15, 2013	President and Chief Operating Officer of BBVA, since September 2009. Director of Grupo Financiero BBVA Bancomer S.A. de C.V., BBVA Bancomer, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, and Türkiye Garanti Bankasi A.Ş. BBVA Director of Resources and Means from 2005 to 2009.
Tomás Alfaro Drake (2)(3)	1951	Independent Director	March 18, 2006	March 14, 2014	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.
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 Risk Committee since March 30, 2004; in 2001 was appointed Group General Manager until January 2003. Has been the 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.L., Chairman and Chief Operating Officer of La Piara S.A. and Chairman of Aneto Natural.
Belén Garijo López (2)	1960	Independent Director	March 16, 2012	Not applicable	President and CEO of Merck Serono and Chair of the International Executive Committee of PhRMA, ISEC (Pharmaceutical Research and Manufacturers of America) since 2011.
José Manuel González-Páramo Martínez-Murillo	1958	Executive Director	May 29, 2013	March 14, 2014	Executive Director of BBVA since May 29, 2013. Member of the European Central Bank (ECB) Governing Council and Executive Committee from 2004 to 2012. Chairman of European DataWarehouse GmbH since 2013. Head of BBVA Global Economics, Regulation and Public Affairs.
Carlos Loring Martínez de Irujo (2)(4)	1947	Independent Director	February 28, 2004	March 14, 2014	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.

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Name (*)	Birth Year	Current Position	Date Nominated	Date Re-elected	Present Principal Outside Occupation and Employment History (**)
Lourdes Máiz Carro	1959	Independent Director	March 14, 2014	Not applicable	Secretary of the Board of Directors and Director of the Legal Services at Iberia, Líneas Aéreas de España. Joined the Cuerpo de Abogados del Estado (Spanish State Counsel Corps) and from 1992 until 1993 she was Deputy to the Director in the Ministry of Public Administration. From 1993 to 2001 held various positions in the Public Administration.
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.
José Luis Palao García-Suelto (2)(5)	1944	Independent Director	February 1, 2011	March 14, 2014	Chairman of the Audit and Compliance Committee of BBVA since March 29, 2011. Senior Partner of the Financial Division in Spain of Arthur Andersen, from 1979 until 2002. Independent 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 (1)(3)(4)	1955	Independent Director	May 28, 2002	March 14, 2014	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.

(*) Juan Carlos Álvarez Mezquíriz ceased to be a member of the Board of Directors on March 14, 2014.

(**) 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., Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer.
Ángel Cano Fernández	President and Chief Operating Officer	President and Chief Operating Officer of BBVA, since September 2009. Director of Grupo Financiero BBVA Bancomer S.A. de C.V., BBVA Bancomer, S.A. Institución de Banca Múltiple, Grupo Financiero BBVA Bancomer, and Türkiye Garanti Bankasi A.Ş. BBVA Director of Resources and Means from 2005 to 2009.

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Name (*)	Current Position	Present Principal Outside Occupation and Employment History (**)
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 Business Lines & South America	Head of Global LOBS & South America of BBVA since March 2014. 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.
Ignacio Moliner Robredo	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.
Cristina de Parias Halcón	Head of Spain and Portugal	Head of Spain and Portugal since March 2014. Head of the Central Region in Spain from 2011 to 2014. She joined BBVA in 1998 and has held positions in digital business development, payment systems, Uno-e and consumer finance from 1998 to 2011.
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 Sáenz de Tejada Pulido	Head of Strategy and Finance	Head of Strategy and Finance since March 2014. Head of Spain and Portugal from 2012 to 2014. 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 Compass. Chairman and CEO of Laredo National Bank from 2005 to 2007.
Carlos Torres Vila	Head of Digital Banking	Head of Digital Banking since March 2014. BBVA Strategy & Corporate Development Director since January 2009 until March 2014. He entered in BBVA on September 2008. Corporate Director of Strategy and Chief Financial Officer at Endesa S.A. and Vice-Chairman of Endesa Chile from 2003 to 2008.

(*) Manuel González Cid ceased to be a member of the Management Committee on March 20, 2014.

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

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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 received in 2013

The cash remuneration paid to the non-executive members of the Board of Directors during 2013 is indicated below in thousands of euros. The figures are given individually for each non-executive director and itemized:

	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 (1)		129		167		—		—		41		—		336
Ramón Bustamante y de la Mora		129		—		71		107		—		—		307
José Antonio Fernández Rivero (2)		129		—		—		214		41		—		383
Ignacio Ferrero Jordi		129		167		—		—		—		43		338
Belén Garijo López		129		—		71		—		—		—		200
Carlos Loring Martínez de Irujo		129		—		71		—		—		107		307
José Maldonado Ramos		129		167		—		—		41		43		379
José Luis Palao García-Suelto		129		—		179		107		—		—		414
Juan Pi Llorens		129		—		—		107		—		43		278
Susana Rodríguez Vidarte (3)		129		42		54		—		41		43		308
Total (4)		1,416		542		518		534		265		278		3,553

(1) Juan Carlos Álvarez Mezquíriz ceased to be a director on March 14, 2014.

(2) In addition to the amounts listed in the table, José Antonio Fernández Rivero also received a total of €652 thousand in early retirement benefits as a former member of the BBVA management.

(3) Susana Rodríguez Vidarte was appointed member of the Executive Committee on September 25, 2013, ceasing as a member of the Audit and Compliance Committee on that same date.

(4) Enrique Medina Fernández, who ceased to be a director on May 29, 2013, received the total amount of €167 thousand as remuneration for his membership of the Board of Directors, the Executive Committee and the Risk Committee.

Moreover, in 2013, €132 thousand were paid in insurance premiums for non-executive members of the Board of Directors.

Remuneration of executive directors received in 2013

The remuneration paid to executive directors during 2013 is indicated below in thousands of euros. The figures are given individually for each executive director and itemized:

	Fixed Remuneration in cash		2012 Annual Variable Remuneration in cash (1)		Deferred Variable Remuneration in cash (2)		Total Cash		2012 Annual Variable Remuneration in BBVA shares		Deferred Variable Remuneration in BBVA shares (3)		Total Shares
Chairman and CEO		1,966		785		379		3,130		108,489		86,826		195,315
President and COO		1,748		478		244		2,470		66,098		62,963		129,061
José Manuel González-Páramo Martínez-Murillo (*)		469		—		—		469		—		—		—
Total		4,183		1,263		623		6,069		174,587		149,789		324,376

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(*) José Manuel González-Páramo Martínez-Murillo was appointed BBVA director under a Board of Directors resolution adopted on May 29, 2013, and ratified by the General Shareholders Meeting held on March 14, 2014.

(1) Amounts corresponding to 50% of the 2012 Annual Variable Remuneration in cash, received in 2013.

(2) Equivalent to the sum of the first deferred third of 50% of the 2011 Annual Variable Remuneration in cash, received in 2013; and the amount of the value adjustments in cash for the first deferred third of 50% of the 2011 Annual Variable Remuneration, and the first deferred third of 50% of the shares of the LTI 2010-2011 (as defined below), received in 2013.

(3) Equivalent to the sum of the first deferred third of 50% of the 2011 Annual Variable Remuneration, in shares, received in 2013 and of the first deferred third of 50% of the shares of the LTI 2010-2011, received in 2013.

The Annual Variable Remuneration of the executive directors comprises an ordinary variable remuneration in cash and a variable remuneration in shares based on the BBVA Group Management Team Incentive.

Moreover, during 2013 executive directors have received remuneration in kind and other remuneration amounting to a total aggregate amount of €37 thousand, of which €13 thousand correspond to the Chairman and CEO, €23 thousand to the President and COO and €1 thousand to José Manuel González-Páramo Martínez-Murillo.

During 2013, the executive directors have received the amount of the fixed remuneration corresponding to 2013 and, in the case of the Chairman and CEO and the President and COO, the variable remuneration for 2012 to which they are entitled under the settlement and payment system approved by the General Shareholders Meeting (the “Settlement & Payment System”), which determines that:

• At least 50% of the total Annual Variable Remuneration shall be paid in BBVA shares.

• The payment of 50% of the Annual Variable Remuneration shall be deferred in time, the deferred amount being paid in thirds over the three-year period following its settlement.

• Shares vested pursuant to the rules explained above (except for shares in an amount equal to the tax accruing on the vesting of such shares) may not be disposed of by their beneficiaries during a period of one year after they have vested.

• The payment of the deferred Annual Variable Remuneration payable may be limited or impeded in certain cases (malus clauses).

• The deferred parts of the Annual Variable Remuneration will be adjusted in the terms established by the Board of Directors.

During 2013 the Chairman and CEO and the President and COO have received the following variable remuneration:

Annual Variable Remuneration for year 2012

During 2013 the Chairman and CEO and the President and COO have received 50% of the Annual Variable Remuneration (received in cash and in shares) corresponding to 2012, as indicated in the table above.

The other 50% of the Annual Variable Remuneration for 2012 was deferred under the Settlement & Payment System to be paid, subject to the conditions described above, in thirds during the first quarter of each of 2014, 2015 and 2016. As a result, each of these years, the Chairman and CEO will receive €261,676 and 36,163 BBVA shares and the President and COO will receive €159,428 and 22,032 BBVA shares.

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Deferred parts of the variable remuneration from previous years:

In addition, during 2013 the Chairman and CEO and the President and COO, have received the following variable remuneration in application of the Settlement & Payment System:

- Annual Variable Remuneration for year 2011

During 2013 the Chairman and CEO and the President and COO, in application of the Settlement & Payment System, have received the first third of the 50% of their Annual Variable Remuneration, both in cash and in shares, corresponding to 2011, which was deferred to be paid during the first quarter of 2013. Under this item, after the corresponding adjustment, the Chairman and CEO received €364,519 and 51,826 shares and the President and COO received €231,847 and 32,963 shares.

The other two thirds of the 50% of the Annual Variable Remuneration corresponding to 2011 were deferred until the first quarter of 2014 and 2015, respectively, subject to the conditions mentioned above.

- Multi-Year Variable Share Remuneration Program for 2010-2011 (“LTI 2010-2011”)

Likewise, in application of the Settlement & Payment System for the LTI 2010-2011 approved by the General Shareholders Meeting of March 12, 2010, during 2013 the Chairman and CEO and the President and COO have received the first third of the 50% of the shares resulting from the settlement of the LTI 2010-2011 that were deferred, for which the Chairman and CEO received 35,000 shares and the President and COO received 30,000 shares; and the cash amount resulting from the adjustment for the updated value of these deferred shares, for which the Chairman and CEO received €14,595 and the President and COO received €12,510. The payments relating to the remaining two thirds resulting from the settlement of the LTI 2010-2011 were deferred until the first quarter of 2014 and 2015.

Annual Variable Remuneration of executive directors for year 2013

During the first quarter of 2014 the executive directors have received 50% of the Annual Variable Remuneration for 2013, i.e., €797,139 and 88,670 BBVA shares for the Chairman and CEO, €495,037 and 55,066 BBVA shares for the President and COO, and €47,683 and 5,304 BBVA shares for José Manuel González-Páramo Martínez-Murillo (who was appointed as a BBVA director on May 29, 2013). José Manuel González-Páramo Martínez-Murillo’s Annual Variable Remuneration for 2013 was calculated based on the number of months during which he has held his position as director.

The remaining 50% of the Annual Variable Remuneration for 2013 is deferred over a three-year period, such that during the first quarter of each of 2015, 2016 and 2017, the Chairman and CEO will receive the amount of €265,713 and 29,557 BBVA shares; the President and COO will receive €165,012 and 18,356 BBVA shares; and José Manuel González-Páramo Martínez-Murillo will receive €15,894 and 1,768 BBVA shares.

The payment of the deferred parts of the 2013 Annual Variable Remuneration will be subject to the conditions of the Settlement & Payment System, as approved by the General Shareholders Meeting.

Amounts expected to be paid on account of the Annual Variable Remuneration for 2013 have been recorded under the item “Other Liabilities—Accrued interest” of the consolidated balance sheet at December 31, 2013.

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Remuneration of the members of the Management Committee received in 2013

During 2013, the remuneration paid to the members of the BBVA Management Committee as a whole, excluding the executive directors, amounted to €9,122 thousand corresponding to fixed remuneration plus the variable remuneration indicated below, pursuant to the Settlement & Payment System described above:

Annual Variable Remuneration for year 2012

During 2013, members of the BBVA Management Committee as a whole, excluding the executive directors, received a total amount of €2,597 thousand and 344,460 BBVA shares corresponding to them under the Settlement & Payment System, corresponding to the Annual Variable Remuneration for 2012.

The remaining part of the Annual Variable Remuneration for 2012 was deferred to be paid, subject to the conditions described above, in thirds during the first quarter of 2014, 2015 and 2016, such that under this item, this group as a whole will receive the amount of €814 thousand (according to the average exchange rate in force at December 31, 2013) and 112,437 BBVA shares each year.

Deferred parts of the variable remuneration from previous years

- Annual Variable Remuneration for 2011

During 2013, payment was made of one third of the deferred part of the Annual Variable Remuneration corresponding to 2011 to the members of the Management Committee. As a consequence, the members of the Management Committee as a whole, excluding the executive directors, after the corresponding adjustments, received the amount of €1,046 thousand and 149,850 BBVA shares.

The remaining Annual Variable Remuneration corresponding to 2011 was deferred to be paid in thirds during the first quarter of 2014 and 2015, respectively, under the conditions described above.

- LTI 2010-2011

Moreover, in application of the Settlement & Payment System, in 2013 the members of the Management Committee as a whole have received the shares resulting from the settlement of the LTI 2010-2011 that were deferred for payment during 2013. These amounted to a total of 98,665 shares for the Management Committee as a whole, excluding the executive directors. A further €41 thousand was paid corresponding to the adjustment of these deferred vested shares.

The payment of the remaining two thirds of the deferred shares resulting from the settlement of the LTI 2010-2011 corresponding to the members of the Management Committee as a whole was deferred and will be paid in the first quarters of 2014 and 2015, under the conditions described above.

Finally, in 2013 members of the BBVA Management Committee as a whole, excluding executive directors, received remuneration in kind amounting to a total of €799 thousand.

Scheme for remuneration for non-executive directors with deferred distribution of shares

BBVA has implemented a remuneration system with deferred distribution of shares for its non-executive directors, that was approved by the General Shareholders Meeting on March 18, 2006 and renewed for an additional five-year period through a resolution of the General Shareholders Meeting 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 in cash received by each of them in the previous year. This is based on the average closing prices of the BBVA share during the sixty trading sessions prior to the Annual General Shareholders Meeting approving the corresponding financial statements for each year.

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

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The number of “theoretical shares” allocated in 2013 to the non-executive directors who were beneficiaries of the deferred share distribution system, corresponding to 20% of the total remuneration in cash received by said directors during 2012, are as follows:

	Theoretical Shares allocated in 2013		Accumulated Theoretical Shares as of December 31, 2013
Tomás Alfaro Drake		8,107		36,466
Juan Carlos Álvarez Mezquíriz (1)		9,028		66,562
Ramón Bustamante y de la Mora		8,245		62,705
José Antonio Fernández Rivero		10,292		60,516
Ignacio Ferrero Jordi		9,085		67,202
Belén Garijo López		3,520		3,520
Carlos Loring Martínez de Irujo		8,251		50,496
José Maldonado Ramos		10,178		27,866
José Luis Palao García-Suelto		11,122		20,477
Juan Pi Llorens		7,479		10,191
Susana Rodríguez Vidarte		7,618		47,102
Total (2)		92,925		453,103

(1) Juan Carlos Álvarez Mezquíriz ceased to be a director on March 14, 2014.

(2) Enrique Medina Fernández, who ceased to be a director on May 29, 2013, was also allocated 10,806 theoretical shares.

Pension Commitments

The provisions recorded at December 31, 2013 to cover pension commitments for executive directors amounted to €23,611 thousand in the case of the President and COO and €98 thousand in the case of José Manuel González-Páramo Martínez-Murillo. €1,070 thousand and €131 thousand were set aside in 2013 for each of the President and COO and for José Manuel González-Páramo Martínez-Murillo, respectively, to cover the contingencies of retirement, disability and death.

There are no other pension obligations in favor of other executive directors.

The provisions recorded at December 31, 2013 for pension commitments for the members of the Management Committee, excluding executive directors, amounted to €91,129 thousand, of which, €8,697 thousand were provisioned during 2013.

Extinction of contractual relationship

The Bank does not have any commitments to pay severance indemnity to executive directors other than the commitment in respect of José Manuel González-Páramo Martínez-Murillo who is contractually entitled to receive an indemnity equivalent to twice his fixed annual remuneration should he cease to hold his position on grounds other than his own will, death, retirement, disability or dereliction of duty.

The contractual conditions of the President and COO determine that should he cease to hold his position for any reason other than his own will, retirement, disability or dereliction of duty, he will be given early retirement with a pension payable, as he chooses, through a lifelong annuity pension, or by payment of a lump sum that will be 75% of his pensionable salary should this occur before he is 55, and 85% should it occur after he has reached said 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.

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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 three external directors being two of them independent, as follows:

Position	Name
Chairman	Mr. Francisco González Rodríguez
Members	Mr. Ángel Cano Fernández Mr. Ignacio Ferrero Jordi Mr. José Maldonado Ramos Mrs. Susana Rodríguez Vidarte

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.

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 2013, the Executive Committee met twenty-one (21) 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. 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.

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• 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.

• 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 2013, the Audit and Compliance Committee met twelve (12) times.

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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.

As of the date of this Annual Report, the members of the Appointments Committee were:

Position	Name
Chairman	Mr. Tomás Alfaro Drake
Members	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.

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• 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 2013, the Appointments Committee met five (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.

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 Compensation 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.

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• 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 2013, the Compensation Committee met six (6) times.

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. 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.

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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 2013, it held forty-three (43) meetings.

D. Employees

As of December 31, 2013, we, through our various affiliates, had 109,305 employees. Approximately 86% 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		26,953		46		3,377		30,376
United Kingdom		169		—		—		169
France		89		—		—		89
Italy		52		—		32		84
Germany		38		—		—		38
Switzerland		—		136		—		136
Portugal		—		831		—		831
Belgium		31		—		—		31
Russia		2		—		—		2
Ireland		—		5		—		5
Luxembourg		3		—		—		3
Turkey		18		—		—		18
Total Europe		27,355		1,018		3,409		31,782
United States		163		11,129		—		11,292
Panama		—		—		—		—
Puerto Rico		—		—		—		—
Argentina		—		5,426		—		5,426
Brazil		3		—		5		8
Colombia		—		6,019		—		6,019
Venezuela		—		5,326		—		5,326
Mexico		—		37,519		—		37,519
Uruguay		—		587		—		587
Paraguay		—		488		—		488
Bolivia		—		—		250		250
Chile		—		4,567		—		4,567
Cuba		1		—		—		1
Peru		—		5,819		—		5,819
Ecuador		—		—		—		—
Total Latin America		4		65,751		255		66,010
Hong Kong		142		—		—		142
Japan		9		—		—		9
China		9		—		18		27
Singapore		9		—		—		9
India		4		—		—		4
South Korea		19		—		—		19

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Country	BBVA		Banks		Companies		Total
United Arab Emirates		1		—		—		1
Taiwan		7		—		—		7
Total Asia		200		—		18		218
Australia		3		—		—		3
Total Oceania		3		—		—		3
Total		27,725		77,898		3,682		109,305

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.

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
Puerto Rico		—		—		—		—
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

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Country	BBVA		Banks		Companies		Total
Australia		2		—		—		2
Total Oceania		2		—		—		2
Total		26,693		85,589		3,570		115,852

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

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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. 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, 2013, 2012 and 2011, we had 1,014, 1,145 and 1,689 temporary employees in our Spanish offices, respectively.

E. Share Ownership

As of April 25, 2014, 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
Francisco González Rodríguez		1,785,832		1,538,481		3,324,313		0.056
Ángel Cano Fernández		787,920		—		787,920		0.013
Tomás Alfaro Drake		15,509		—		15,509		0.000
Ramón Bustamante y de la Mora		13,939		2,747		16,686		0.000
José Antonio Fernández Rivero		68,754		—		68,754		0.001
Ignacio Ferrero Jordi		4,370		82,613		86,983		0.001
Belén Garijo López		—		—		—		—
José Manuel González-Páramo Martínez-Murillo		6,439		—		6,439		0.000
Carlos Loring Martínez de Irujo		53,836		—		53,836		0.001
Lourdes Máiz Carro		—		—		—		—
José Maldonado Ramos		73,264		—		73,264		0.001
José Luis Palao García-Suelto		10,091		—		10,091		0.000
Juan Pi Llorens		26,690		—		26,690		0.000
Susana Rodríguez Vidarte		24,352		896		25,248		0.000
TOTAL(*)		2,870,996		1,624,737		4,495,733		0.076

(*) In addition to the amounts listed in the table, Juan Carlos Álvarez Mezquíriz, who ceased to be a director on March 14, 2014, directly owned 189,069 shares on that same date.

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 LTI 2010-2011, is provided under “Compensation”.

As of April 25, 2014, the Management Committee (excluding executive directors) and their families owned 2,086,409 shares (including in the form of ADSs). None of the members of our Management Committee held 1% or more of BBVA’s shares as of such date.

As of April 25, 2014 a total of 22,702 employees (excluding the members of the Management Committee and executive directors) owned 57,877,173 shares, which represents 0.98% of our capital stock.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of April 25, 2014, 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

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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 April 25, 2014, there were 970,112 registered holders of BBVA’s shares, with an aggregate of 5,887,168,710 shares, of which 455 shareholders with registered addresses in the United States held a total of 1,617,434,139 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, 2013, the amount disposed of the loans granted by the Group’s entities to the members of the Board of Directors was €141 thousand. 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. As of December 31, 2013, 2012 and 2011, the amount disposed of the loans granted by the Group’s entities to the members of the Management Committee (excluding the executive directors) amounted to €6,076 thousand, €7,401 thousand and €6,540 thousand, respectively.

As of December 31, 2013, 2012 and 2011 the amount disposed of the loans granted to parties related to the members of the Bank’s Board of Directors amounted to €6,939 thousand, €13,152 thousand and €20,593 thousand, respectively. As of these dates, there were no loans granted to parties linked to members of the Bank’s Management Committee.

As of December 31, 2013, 2012 and 2011 no guarantees had been granted to any member of the Board of Directors.

As of December 31, 2013 and 2012, no guarantees had been granted to any member of the Management Committee. As of December 31, 2011 guarantees totaling €9 thousand had been granted to any member of the Management Committee.

As of December 31, 2013, 2012 and 2011, the amount disposed under guarantees and commercial loan transactions arranged with parties related to the members of the Bank’s Board of Directors and Management Committee totaled €5,192 thousand, €3,327 thousand and €10,825 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;

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• 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.

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 2009 to 2013. 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
	€		$		€			$			€		$		€			$			€		$
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	$	0.358
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
2013	€	0.100	$	0.138			(*)			(*)		—		—			(*)		(	*)	€	0.100	$	0.138

(*) In execution of the 2011, 2012, 2013 and 2014 “Dividend Option” 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 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. 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. 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 in the future, the payment of dividends will depend upon our earnings, financial condition, governmental regulations and policies or possible recommendations on dividend payouts that may be adopted by the Bank of Spain or any other domestic or European regulatory body or authority 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 14, 2014 passed four resolutions adopting a new scrip dividend scheme called “Dividend Option” on similar terms as 2013, 2012 and 2011 “Dividend

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Option” schemes. Accordingly, the “Dividend Option” 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.

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 American Depositary Receipts (“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 and its recommendations on payment dividends, and any other required authorization. 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, 2013, BBVA had approximately €18 billion of reserves in excess of applicable capital and reserve requirements, which were not restricted as to the payment of dividends.

Legal Proceedings

As mentioned in “Item 3. Key Information—Risk Factors—Risks Relating to Us and Our Business—We are party to lawsuits, tax claims and other legal proceedings”, we operate in an increasingly regulated and litigious environment with a potential exposure to liability and other costs, which may not be easy to estimate. In this environment, the entities of the Group are party to legal actions, arising from the ordinary course of business, in a number of jurisdictions (including, among others, Spain, Mexico and the United States). While we cannot predict the outcome of these proceedings, according to the procedural status of these proceedings and the criteria of legal counsel, BBVA considers that currently (i) none of such actions is material, individually or in the aggregate, and none 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 and (ii) adequate provisions have been made in respect of such legal proceedings and considers that the possible contingencies that may arise from such on-going lawsuits are not significant enough to require disclosure to the markets.

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.

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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.

	Euro per Share
	High		Low
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
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
Fiscal year ended December 31, 2013
Annual		9.33		6.24
First Quarter		7.82		6.76
Second Quarter		7.56		6.27
Third Quarter		8.43		6.24
Fourth Quarter		9.33		8.21
Month ended October 31, 2013		9.33		8.43
Month ended November 30, 2013		8.86		8.35
Month ended December 31, 2013		8.97		8.21
Fiscal year ended December 31, 2014
Month ended January 31, 2014		9.93		8.65
Month ended February 28, 2014		9.17		8.56
Month ended March 31, 2014		9.20		8.60
Month ended April 30, 2014 (through April 28)		9.28		8.72

From January 1, 2013 through December 31, 2013 the percentage of outstanding shares held by BBVA and its affiliates ranged between 0.000% and 0.718%, calculated on a daily basis. As of April 3, 2014, the percentage of outstanding shares held by BBVA and its affiliates was 0.176%.

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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.

	U.S. Dollars per ADS
	High		Low
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
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
Fiscal year ended December 31, 2013
Annual		12.78		8.22
First Quarter		10.54		8.71
Second Quarter		9.96		8.25
Third Quarter		11.29		8.22
Fourth Quarter		12.78		11.13
Month ended October 31, 2013		12.78		11.39
Month ended November 30, 2013		11.89		11.13
Month ended December 31, 2013		12.39		11.25
Fiscal year ended December 31, 2014
Month ended January 31, 2014		13.48		11.74
Month ended February 28, 2014		12.51		11.39
Month ended March 31, 2014		12.76		11.73
Month ended April 30, 2014 (through April 28)		12.73		12.15

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 2013, 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.

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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 €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 are 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.

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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 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).

Ministerial Order ECC/680/2013 further amended Iberclear’s Regulation, imposing on members of the Spanish Stock Exchanges who do not want to hold Iberclear membership, the need to appoint an Iberclear participant who will be responsible for the clearing and settlement of their trades.

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;

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• 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 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

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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.

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

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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.

Ministerial Order EHA/421/2009 was modified by ministerial Order ECC/461/2013 which imposed on securities issuers the duty of publishing notices of significant information through their websites.

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.

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.

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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. Pursuant to Royal Decree 1245/1995, of July 14, on the creation of banks, cross-border activity and other matters relating to the legal regime of financial institutions, certain amendments of the bylaws of a bank are subject to the prior authorization of the Bank of Spain.

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 any kind of holdings in any company or enterprise, and (iii) make public offers for the acquisition and sale of securities. 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 limit a director’s right to vote on a proposal, arrangement or contract in which the director is materially interested and 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”.

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.

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. For more information regarding dividends see “Item 4. Information on the Company – Business Overview—Supervision and Regulation—Dividends”.

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.

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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.

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.

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Additionally, our bylaws state that, in order to adopt resolutions regarding a change in corporate purpose, transformation, the total liquidation or dissolution of BBVA and the amendment of such article of our bylaws, 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. Investments in shares of Spanish companies by foreign entities or individuals may be freely executed but require the notification to the Spanish Foreign Investment Authorities for administrative statistical and economical purposes. See “—Exchange Controls”. In addition, they are subject to certain restrictions and requirements which are also applicable to investments by domestic entities or individuals.

Current Spanish regulations provide that foreign investors may freely transfer out of Spain any amounts of invested capital, capital gains and dividends subject to applicable taxes. See “—Exchange Controls”.

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 AŞ. (“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 provided for rights of first offer, tag-along rights and a lock-up period in respect of Garanti shares owned by BBVA and Doğuş which ended on 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, 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 on the Applicable rules to Foreign Investments, foreign investors may freely invest in shares of Spanish companies except in the case of certain strategic industries.

Notwithstanding this, Royal Decree 664/1999 and Law 19/2003, on exchange controls and foreign transactions, require notification of all foreign investments in Spain and liquidations of such investments upon completion of such investments to the Investments Registry of the Ministry of Economy and Competitiveness for administrative statistical and economical purposes. Shares in listed Spanish companies acquired or 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 regarding significant stakes, notice must be given directly by the foreign investor to the relevant authorities.

Moreover, investments by foreigners domiciled in enumerated tax haven jurisdictions, under Royal Decree 1080/1991, are subject to special reporting requirements.

In certain circumstances and following a specific procedure, the Council of Ministers may agree to suspend the application of Royal Decree 664/1999, if the investments, due to their nature, form or condition, affect or may potentially affect activities relating to the exercise of public powers, national security or public health. Law 19/2003 authorizes the Spanish Government to take measures to impose specific limits or prohibitions, related to third countries, when such measures have been previously approved by the European Union or by an international organization to which Spain is member. Should such regimes be suspended, the affected investor shall obtain prior administrative authorization.

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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.

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. For more information see “Item 9. The Offer and Listing—Offer and Listing Details—Reporting Requirements”

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.

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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 U.S. 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.

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, 2013 and 2014 (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, 2013 and 2014), 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.

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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—Scrip Dividend”, the BBVA annual shareholders’ general meeting held on March 14, 2014, passed a resolution adopting four different free-of-charge capital increases for the implementation of a new “Dividend Option” scheme for this year, the first of which relates to the dividend traditionally paid in April and which execution we expect to complete in April 2014. This dividend scheme lets the shareholders choose how they would like to receive their dividends: in cash or in new free-of-charge shares.

Pursuant to the terms of the “Dividend Option” 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 “Dividend Option” 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 of Directors’ 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 “Dividend Option” scheme is executed, the shareholders of BBVA will be able to freely choose among:

(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) Selling 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) Using 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

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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 tax (currently, at a 21% rate).

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.

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, 2013 and 2014 (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.

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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, 2013 and 2014 (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 U.S. 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.

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 that are eligible for the benefits of the Treaty (in each case, as defined under “Spanish Tax Considerations” above) 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.

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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 released before shares are delivered to the depositary, or intermediaries in the chain of ownership between holders and the issuer of the security underlying the American depositary shares, 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.

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 BBVA’s 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 as “qualified dividend income” and therefore 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 receipt.

A scrip dividend (such as a dividend distributed under the “Dividend Option” program, described in “Item 4. Information on the Company—Business Overview—Supervision and Regulation—Scrip Dividend”) 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.

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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 income tax purposes for our 2013 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 owned our shares, the U.S. Holder would generally be required to file IRS Form 8621 with their annual U.S. federal income tax returns, subject to certain exceptions.

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.

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F. Dividends and Paying Agents

Not Applicable.

G. Statement by Experts

Not Applicable.

H. Documents on Display

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.

I. Subsidiary Information

Not Applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Management

Market Risk in Trading Portfolio in 2013

We mainly use Value at Risk (VaR) to measure and manage market risk.

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 estimate daily VaR estimates using the “historical 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.

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• 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.

Trading portfolio

The activity of each of the Group’s Global Markets trading units is controlled and monitored by the risk unit. Measurement procedures are established in terms of the possible impact of negative market conditions on the trading portfolio of the Group’s Global Markets units, both under ordinary circumstances and in situations of heightened risk factors.

The measurement model used to assess market risk is Value at Risk (VaR), which provides a forecast with a 99% probability of the maximum loss that can be incurred by the market positions of trading portfolios in a one-day horizon, stemming from fluctuations in equity prices, interest rates, foreign-exchange rates and commodity prices. In addition, for some positions, other risks also need to be considered, such as credit spread risk, basis risk, volatility and correlation risk.

BBVA and BBVA Bancomer have received approval from the Bank of Spain to use a model developed by the BBVA Group to calculate bank capital requirements for market risk. This model estimates VaR in accordance with the “historical simulation” methodology, which involves 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, it infers the maximum foreseeable loss in the current portfolio with a given level of confidence. This model has the advantage of precisely reflecting the historical distribution of the market variables and not requiring any assumption of 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 to meet 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 downgrading of credit ratings of bonds and credit portfolio derivatives.

The limits structure of the BBVA Group’s market risk determines a system of VaR and economic capital limits by market risk for each operating segment, 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 positions assessed with a certain level of probability (backtesting), as well as measurements of the impact of extreme market events on risk positions (stress testing). As an additional control measure, backtesting is conducted at trading desk level in order to enable more specific monitoring of the validity of the measurement models.

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Trends in market risk

The changes in the BBVA Group’s market risk in 2013, measured as VaR without smoothing, with a 99% confidence level and a 1-day horizon, were as follows:

By geographical area, and as an annual average in 2013, 49.2% of the market risk corresponded to Global Markets (GM) Europe and GM Compass and 50.8% to the Group’s subsidiaries in Latin America, of which 35.0% related to GM BBVA Bancomer.

The average VaR in 2013 stood at €23 million, compared with €22 million in 2012 and €24 million in 2011. The number of risk factors currently used to measure portfolio risk is around 3,600. This number is dynamic and varies according to the possibility of doing business in other underlying assets and markets.

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As of December 31, 2013, 2012 and 2011 VaR amounted to €22 million, €30 million and €18 million, respectively. These figures can be broken down as follows:

Risk	December 31, 2013			December 31, 2012			December 31, 2011
	(In Millions of Euros)
Interest/Spread risk		22			35			27
Currency risk		4			3			3
Stock-market risk		3			3			7
Vega/Correlation risk		11			9			4
Diversification effect(*)		(18	)		(19	)		(23	)
Total		22			30			18
VaR average in the period		23			22			24
VaR max in the period		34			31			36
VaR min in the period		17			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). For more information see Note 7 to the Consolidated Financial Statements.

By type of market risk assumed by the Group’s trading portfolio, as of December 31, 2013, the main risks were interest rate and credit spread risks, which declined by €13 million since December 31, 2012. Currency risk increased by €1 million and volatility and correlation risk increased by €2 million since December 31, 2012. Equity risk remained without significant changes with respect to the close of 2012.

The change in average daily VaR in 2013 compared with 2012 is basically due to GM Bancomer and GM South America increasing their average risk by 57% and 7% respectively in 2013 (with an average daily VaR of €8 million and €4 million, respectively). GM Europe reduced its average risk by 18% year-on-year (with an average daily VaR in 2013 of €11 million).

Model validation

The internal market risk model is validated periodically by backtesting, both in BBVA and in BBVA Bancomer.

The aim of backtesting is to validate the quality and precision of the internal model used by the BBVA Group to estimate the maximum daily loss of a portfolio, at a 99% level of confidence and a 250-day time horizon, by comparing the Group’s results and the measurements of risk generated by the model. The tests performed in 2013 (which are described in greater detail below) showed that the internal market risk model used by BBVA and BBVA Bancomer was adequate and precise.

Two types of backtesting were carried out in 2013:

1. Hypothetical backtesting: the daily VaR is compared with the results obtained, not taking into account the intraday results or the changes in the portfolio positions. This validates the appropriateness of the market risk metrics for the end-of-day positions.

2. Real backtesting: the daily VaR is compared with the total results, including intraday transactions, but discounting the possible minimum charges or fees involved. This type of backtesting includes the intraday risk in portfolios.

In addition, each of these two types of backtesting was carried out for each risk factor or business type, thus allowing for a deeper analysis of the results with respect to risk measurements.

Backtesting in BBVA did not reveal any exception in 2013. The sovereign debt and Spanish corporate credit spreads continued to narrow during the year and the equity markets have in general evolved positively. The backtesting carried out in 2013, both at the global group level and at the level of each risk factor, did not detect any type of anomaly in the VaR calculation model.

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In 2013, BBVA Bancomer carried out backtesting of the internal calculation model of VaR, comparing the daily results obtained with the estimated results obtained by the VaR calculation model. At the end of the year the comparison showed the model was functioning correctly, within the “green” zone (0-4 exceptions), thus validating the model. Portfolio losses only exceeded the daily VaR on one occasion, thus also validating the correct operation of the model according to Basel criteria.

Stress test analysis

A number of stress tests are carried out on the BBVA Group’s trading portfolios. First, global and local historical scenarios are used that replicate the behavior of an extreme past event, such as for example the collapse of Lehman Brothers or the Tequila crisis. These stress tests are complemented with simulated scenarios, where the aim is to generate scenarios that have a significant impact on the different portfolios, but without being anchored to any specific historical scenario. Finally, for some portfolios or positions, fixed stress tests are also carried out that have a significant impact on the market variables affecting these positions.

Historical scenarios

The historical benchmark stress scenario for the BBVA Group is Lehman Brothers, whose sudden collapse in September 2008 led to a significant impact on the behavior of financial markets at a global level. The following are the most relevant effects of this historical scenario:

– Credit shock: reflected mainly in the increase of credit spreads and downgrades in credit ratings.

– Increased volatility in most of the financial markets (giving rise to a great deal of variation in the prices of different assets (currency, equity, debt).

– Liquidity shock in the financial systems, reflected by a major movement in interbank curves, particularly in the shortest sections of the euro and dollar curves.

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Simulated scenarios

Unlike the historical scenarios, which are fixed and thus do not adapt to the composition of portfolio risks at any one time, the scenario used to carry out the economic stress tests are based on a resampling methodology. This methodology uses dynamic scenarios that are recalculated regularly according to the main risks in the trading portfolios at any time. A simulation exercise is carried out on a window of data that is sufficiently extensive to include different periods of stress (data are taken from January 1, 2008 through to today), using a resampling of the historical observations. This generates a distribution of losses and gains that provides an analysis of the most extreme events occurred within the selected historical window. The advantage of this methodology is that the stress period is not pre-established, but rather a function of the portfolio held at any time. As it makes a high number of simulations (10,000) it can analyze the expected shortfall with greater richness of information than that available in the scenarios included in the VaR calculation.

The main advantages of this methodology are the following:

– The simulations generated in this stress test methodology maintain the market risk factor correlation structure.

– High adaptability to the inclusion of new risk factors.

– It allows a great deal of variability to be introduced into the simulations (desirable for considering extreme events).

Market Risk in Non–Trading Portfolio in 2013

Structural risk

Structural interest rate risk

The aim of on-balance sheet interest rate risk management is to maintain the BBVA Group’s exposure to market interest rate fluctuations at levels in keeping with its risk strategy and profile. In pursuance of this, the BBVA Group undertakes active balance sheet management through operations intended to optimize the levels of risk assumed against expected earnings and respect the maximum levels of accepted risk. The Asset and Liabilities Committee (ALCO) is the body that makes the decisions to act according to the proposals of the Balance Sheet Management unit, which designs and executes the strategies to be implemented, using internal risk metrics in accordance with the corporate model.

The Corporate Risk Management (“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. In addition, it monitors the level of compliance with the risk limits established by the Executive Committee, reporting regularly to the Risk Management Committee (“RMC”), the Board’s Risk Committee and the Executive Committee, in particular in case of significant levels of risk assumed, in accordance with current corporate policy.

The interest rate risk metrics designed by the CRM area periodically quantify the impact that a variation of 100 basis points in market interest rates would have on the BBVA Group’s net interest income and economic value. This is complemented with metrics in probabilistic terms: “economic capital” (maximum estimated loss in economic value) and the “risk margin” (the maximum estimated loss in net interest income). In all cases, the metrics are calculated as originated by the structural interest rate risk of banking activity (excluding trading floor activity), based on simulation models of interest rate curves. With the same frequency, the Group performs stress tests and scenario analyses to complement its assessment of its interest rate risk profile.

The BBVA Group’s corporate risk model allows hypotheses to be established on the behavior of certain products, particularly those without explicit or contractual expiry. These assumptions are based on studies that calculate the relationship between the return on these products and market rates. They enable specific balances to be disaggregated into “trend-based” (long-term) and “seasonal or volatile” (short-term residual maturity) balances.

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In 2013, the weakness of the economic recovery, together with the fiscal adjustments and risks of deflation, have maintained interest rates in Europe and the U.S. at all-time lows. At the same time, the growth of emerging markets has slowed as a result of the fall in commodity prices and tougher financing conditions, leading to more expansive policies by central banks. In this interest rate situation, the BBVA Group’s structural interest rate risk has remained under control, within the limits established by the Executive Committee. The current levels of the euro and U.S. dollar, which are exceptionally low, also constitute a barrier to the Group’s exposure, which has a favorable position with respect to rises in market rates.

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, 2013.

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, 2013.

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Below are the average interest rate risk exposure levels in terms of sensitivity of the main geographical areas of the BBVA Group in 2013:

	Impact on Net Interest Income (*)						Impact on Economic Value (**)
	100 Basis-Point Increase			100 Basis-Point Decrease			100 Basis-Point Increase			100 Basis-Point Decrease
Europe		6.41	%		(7.80	)%		1.58	%		(1.92	)%
Mexico		2.27	%		(2.27	)%		(1.39	)%		1.59	%
USA		6.27	%		(8.11	)%		1.60	%		(6.51	)%
South America		1.53	%		(1.39	)%		(2.93	)%		3.01	%
BBVA Group		3.42	%		(3.90	)%		0.80	%		(1.66	)%

(*) Percentage of “1 year” net interest income forecast for each geographical area.

(**) Percentage of core capital for each geographical area.

Structural currency risk

Structural currency risk is basically caused by exposure to variations in foreign currency exchange rates that arise in the BBVA Group’s foreign subsidiaries and foreign branches financed in a different currency to that of the investment.

Structural exchange rate risk management in BBVA aims to minimize the potential negative impact from fluctuations in exchange rates on the capital ratios and on the contribution to earnings of international investments maintained on a long-term basis by the Group.

The Asset and Liabilities Committee (ALCO) is the body that makes the decisions to act according to the proposals of the Balance Sheet Management unit, which designs and executes the strategies to be implemented, using internal risk metrics in accordance with the corporate model.

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The Corporate Risk Management (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. In addition, it monitors the level of compliance with the risk limits established by the Executive Committee, reporting regularly to the Risk Management Committee (RMC), the Board’s Risk Committee and the Executive Committee, in particular in case of significant levels of risk assumed, in accordance with current corporate policy.

The corporate measurement model is based on the simulation of exchange rate scenarios, using their historical change and evaluating impacts in three core management areas: capital ratio, equity and the Group’s income statement. The risk mitigation measures aimed at reducing exchange rate risk exposures are considered in calculating risk estimates. The diversification resulting from investment in different geographical areas is also taken into account. In addition, in order to complement the metrics in the three core management areas, the risk measurements are complemented with analyses of scenarios, stress testing and backtesting, thus giving a more complete overview of the Group’s exposure.

In 2013, in an environment characterized by uncertainty and volatility in currency markets, the risk mitigation level of the carrying value of the BBVA Group’s holdings in foreign currency remained at 39%. The estimated exposure coverage of 2013 earnings in foreign currency has been 43%.

In 2013, the average asset exposure sensitivity to a 1% depreciation in exchange rates against the euro in the main currencies to which BBVA is exposed stood at €200 million, with 34% relating to the Mexican peso, 26% relating to South American currencies, 23% relating to Asian and Turkish currencies, and 15% relating to the US dollar.

Structural equity risk

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 their underlying assets, used to limit portfolio sensitivity to potential falls in prices.

The Corporate Risk Management (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. In addition, it monitors the level of compliance with the risk limits established by the Executive Committee, reporting regularly to the Risk Management Committee (RMC), the Board’s Risk Committee and the Executive Committee, in particular in case of significant levels of risk assumed, in accordance with current corporate policy.

The structural equity risk metrics designed by CRM according to the corporate model contribute to the effective monitoring of risk by estimating the sensitivity figures and the capital necessary to cover possible unexpected losses due to variations in the value of the companies making up the Group’s equity portfolio, at a confidence level that corresponds to the institution’s target rating, and taking into account the liquidity of the positions and the statistical performance of the assets under consideration. These figures are supplemented by periodic stress tests, backtesting and scenario analyses.

The aggregate sensitivity of the BBVA Group’s consolidated equity to a 1% fall in the price of shares of the companies making up the equity portfolio stood at €31 million as of December 31, 2013, and the sensitivity of pre-tax profit is estimated at €1 million. These figures are estimated taking into account the exposure in shares valued at market prices, or if not applicable, at fair value (except for the positions in the Treasury Area portfolios) and the net delta-equivalent positions in options on their underlyings.

See Note 7 of the Consolidated Financial Statements for additional information on risks faced by BBVA.

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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 •       stock transfer or other taxes (including Spanish income taxes) and other governmental charges; •       cable, telex and facsimile transmission and delivery charges incurred at request of holder of ADS or person depositing shares for the issuance of ADSs; •       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; •       reasonable and customary expenses of the depositary in connection with the conversion of foreign currency into U.S. dollars	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

173

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, 2013, the Depositary reimbursed us $825 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 2013.

Category of Expenses	Amount Reimbursed in the Year Ended December 31, 2013
	(In Thousands of Dollars)
NYSE Listing Fees		122
Investor Relations Marketing		485
Professional Services		149
Annual Shareholders’ General Meeting Expenses		64
Other		5

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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, 2013, 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.

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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.

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— 1992 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, 2013, our internal control over financial reporting was effective based on those criteria.

In May 2013, COSO published an updated version of its Internal Control Integrated – Framework. This new framework provides broader guidelines and clarifies the requirements for determining what constitutes effective internal control. While BBVA is in the process of analyzing the updated version, no significant changes are expected in the current internal control model.

Our internal control over financial reporting as of December 31, 2013 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, 2013, based on criteria established in Internal Control—Integrated Framework (1992) 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.

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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.

In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the criteria established in Internal Control — Integrated Framework (1992) 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, 2013 of the Group and our report dated April 30, 2014 expressed an unqualified opinion on those financial statements.

DELOITTE, S.L.

Madrid—Spain

April 30, 2014

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 2013. BBVA’s Code of Ethics and Conduct can be found on its website at www.bbva.com.

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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	2013		2012
	(In Millions of Euros)
Audit Fees (1)		20.4		19.3
Audit-Related Fees (2)		2.8		2.6
Tax Fees (3)		1.7		2.2
All Other Fees (4)		2.2		2.2
Total		27.1		26.3

(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.

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ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

2013	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		53,137,273	€	7.56		—		—
February 1 to February 28		55,280,230	€	7.34		—		—
March 1 to March 31		104,345,907	€	7.43		—		—
April 1 to April 30		47,240,937	€	6.81		—		—
May 1 to May 31		26,292,714	€	7.32		—		—
June 1 to June 30		42,419,779	€	6.73		—		—
July 1 to July 31		43,123,802	€	6.47		—		—
August 1 to August 31		31,369,056	€	7.21		—		—
September 1 to September 30		10,835,087	€	7.80		—		—
October 1 to October 31		27,216,906	€	8.78		—		—
November 1 to November 30		16,294,748	€	8.53		—		—
December 1 to December 31		31,429,074	€	8.40		—		—
Total		488,985,513	€	7.39		—		—

During 2013, we sold a total of 497,571,679 shares for an average price of €7.44 per share.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

During the years ended December 31, 2013, 2012 and 2011 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, 2013, 2012 and 2011, Deloitte S.L. has not expressed reliance on another accountant or accounting firm in its report on our audited annual accounts for such periods.

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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 Board 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 currently contain any requirement that members of the board of directors or the committees thereof be independent, nor does Spanish law provide a definition of what constitutes independence for the purpose of board or committee membership. Regarding the definition of what constitutes independence, the Ministerial Order ECC/461/2013, of March 20, 2013, has introduced, among other matters, a definition of what constitutes independence of a board membership for the purposes of fulfilling the Annual Corporate Governance Report. Notwithstanding this, it is likely that this same definition will be included in a near future reform of the Spanish Corporate Enterprises Act.

In addition, according to the Securities Market Act, listed companies should have an Audit Committee which should be composed of a majority of non-executive directors being at least one of its members an independent director.

With respect to board committees, pursuant to Notice 3/2008, May 22, 2008, 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.

Moreover, pursuant to corporate governance non-binding recommendations applicable to listed companies in Spain, under the comply or explain principle, the Audit and Compliance Committee, the Compensation Committee and the Appointments Committee of such companies should be composed exclusively of non-executive directors and chaired by an independent director.

Likewise, the proposed draft law on supervision and solvency of financial institutions, approved by the Spanish Ministry of Economy and Competitiveness on February 7, 2014, which is intended to complete the transposition of CRD IV into Spanish legislation, includes, among others, rules on corporate governance as regards board committees and their 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:

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.

iii. 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.

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iv. 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.

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

vi. 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.

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

viii. 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.

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

x. 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.

xi. Have not been proposed by the Appointments Committee for appointment or renewal.

xii. Fall within the cases described under items 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 item vii), 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 ten 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 their 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 16 B. Code of Ethics”.

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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

Please see pages F-1 through F-181.

ITEM 19. EXHIBITS

Exhibit Number	Description
1.1	Amended and Restated Bylaws (Estatutos) of the Registrant (English translation).
8.1	Consolidated Companies Composing Registrant (see Appendix I to X 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 and Information Management 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.

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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:	Global Head of Group Accounting and Information Management

Date: April 30, 2014

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Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet	F-2
Consolidated income statement	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-39
4.          Shareholder remuneration system and allocation of earnings	F-44
5.          Earnings per share	F-45
6.          Operating segment reporting	F-46
7.          Risk management	F-48
8.          Fair value of financial instruments	F-93
9.          Cash and balances with central banks	F-99
10.        Financial assets and liabilities held for trading	F-100
11.        Other financial assets and liabilities at fair value through profit or loss	F-103
12.        Available-for-sale financial assets	F-103
13.        Loans and receivables	F-109
14.        Held-to-maturity investments	F-112
15.         Hedging derivatives (receivable and payable) and Fair-value changes of the hedged items in portfolio hedges of interest-rate risk	F-112
16.         Non-current assets held for sale and liabilities associated with non-current assets held for sale	F-116
17.        Investments in entities accounted for using the equity method	F-118
18.        Insurance and reinsurance contracts	F-122
19.        Tangible assets	F-124
20.        Intangible assets	F-126
21.        Tax assets and liabilities	F-128
22.        Other assets and liabilities	F-131

23.	Financial liabilities at amortized cost	F-131
24.	Liabilities under insurance contracts	F-138
25.	Provisions	F-138
26.	Pensions and other post-employment commitments	F-140
27.	Common stock	F-145
28.	Share premium	F-148
29.	Reserves	F-148
30.	Treasury stock	F-151
31.	Valuation adjustments	F-152
32.	Non-controlling interests	F-152
33.	Capital base and capital management	F-153
34.	Contingent risks and commitments	F-155
35.	Assets assigned to other own and third-party obligations	F-155
36.	Other contingent assets and liabilities	F-155
37.	Purchase and sale commitments and future payment obligations	F-156
38.	Transactions on behalf of third parties	F-156
39.	Interest income and expense and similar items	F-157
40.	Income from equity instruments	F-159
41.	Share of profit or loss of entities accounted for using the equity method	F-160
42.	Fee and commission income	F-161
43.	Fee and commission expenses	F-161
44.	Net gains (losses) on financial assets and liabilities (net)	F-162
45.	Other operating income and expenses	F-163
46.	Administration costs	F-163
47.	Depreciation and amortization	F-167
48.	Provisions (net)	F-167
49.	Impairment losses on financial assets (net)	F-168
50.	Impairment losses on other assets (net)	F-168
51.	Gains (losses) on derecognized assets not classified as non-current assets held for sale	F-169
52.	Gains (losses) on non-current assets held for sale	F-169
53.	Consolidated statements of cash flows	F-170
54.	Accountant fees and services	F-172
55.	Related-party transactions	F-172

56.         Remuneration and other benefits of the Board of Directors and Members of the Bank’s Management Committee	F-174
57.        Detail of the Directors’ holdings in companies with similar business activities	F-178
58.        Other information	F-178
59.        Subsequent events	F-181
APPENDICES	A-1
APPENDIX I       Additional information on consolidated subsidiaries and consolidated structured entities composing the BBVA Group	A-2
APPENDIX II           Additional information on investments in associate and joint ventures entities accounted for under the equity method in the BBVA Group	A-10
APPENDIX III     Changes and notification of investments and divestments in the BBVA Group in 2013	A-11
APPENDIX IV          Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2013	A-15
APPENDIX V     BBVA Group’s structured entities. Securitization funds	A-16
APPENDIX VI          Details of the outstanding subordinated debt and preferred securities issued by the Bank or entities in the Group consolidated as of as of December 31, 2013 and December 31, 2012	A-17
APPENDIX VII        Consolidated balance sheets held in foreign currency as of December  31, 2013 and December 31, 2012	A-20
APPENDIX VIII       Other requirement under Bank of Spain Circular 6/2012	A-21
APPENDIX IX         Additional disclosure required by the Regulation S-X	A-23
APPENDIX X     Reconciliation between operating segments and Group’s income statement	A-26
GLOSSARY	A-29

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, 2013, 2012 and 2011, 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, 2013. 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, 2013, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, 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, 2013, based on the criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 30, 2014 expressed an unqualified opinion on the Group’s internal control over financial reporting.

DELOITTE, S.L.

Madrid- Spain

April 30, 2014

Consolidated balance sheets as of December 31, 2013, 2012 and 2011.

		Millions of Euros
ASSETS	Notes	2013	2012	2011
CASH AND BALANCES WITH CENTRAL BANKS	9	34,903	35,494	29,841
FINANCIAL ASSETS HELD FOR TRADING	10	72,112	79,829	70,471
Loans and advances to credit institutions		-	-	-
Loans and advances to customers		106	244	-
Debt securities		29,602	28,020	20,946
Equity instruments		4,766	2,915	2,192
Trading derivatives		37,638	48,650	47,333
OTHER FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	11	2,413	2,530	2,773
Loans and advances to credit institutions		-	-	-
Loans and advances to customers		-	-	-
Debt securities		663	753	708
Equity instruments		1,750	1,777	2,065
AVAILABLE-FOR-SALE FINANCIAL ASSETS	12	77,774	67,500	54,641
Debt securities		71,806	63,548	49,416
Equity instruments		5,968	3,952	5,225
LOANS AND RECEIVABLES	13	350,945	371,347	369,916
Loans and advances to credit institutions		22,862	25,448	24,503
Loans and advances to customers		323,607	342,163	342,543
Debt securities		4,476	3,736	2,870
HELD-TO-MATURITY INVESTMENTS	14	-	10,162	10,955
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	15	98	226	146
HEDGING DERIVATIVES	15	2,530	4,894	4,538
NON-CURRENT ASSETS HELD FOR SALE	16	2,880	4,229	2,075
INVESTMENTS IN ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD	17	4,742	10,782	9,299
Associates		1,272	6,469	5,567
Jointly ventures		3,470	4,313	3,732
INSURANCE CONTRACTS LINKED TO PENSIONS		-	7	-
REINSURANCE ASSETS	18	619	50	26
TANGIBLE ASSETS	19	7,534	7,572	7,126
Property, plants and equipment		5,841	5,702	5,536
For own use		5,373	5,177	4,701
Other assets leased out under an operating lease		468	525	835
Investment properties		1,693	1,870	1,590
INTANGIBLE ASSETS	20	6,759	7,132	6,880
Goodwill		5,069	5,430	5,536
Other intangible assets		1,690	1,702	1,344
TAX ASSETS	21	11,582	11,650	7,727
Current		2,502	1,851	1,460
Deferred		9,080	9,799	6,267
OTHER ASSETS	22	7,684	7,668	6,424
Inventories		4,636	4,223	3,994
Rest		3,048	3,445	2,430
TOTAL ASSETS		582,575	621,072	582,838

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated balance sheet as of December 31, 2013.

F-2

 

Consolidated balance sheets as of December 31, 2013, 2012 and 2011.

		Millions of Euros
LIABILITIES AND EQUITY	Notes	2013	2012	2011
FINANCIAL LIABILITIES HELD FOR TRADING	10	45,648	55,834	51,178
Deposits from central banks		-	-	-
Deposits from credit institutions		-	-	-
Customer deposits		-	-	-
Debt certificates		-	-	-
Trading derivatives		38,119	49,254	46,567
Short positions		7,529	6,580	4,611
Other financial liabilities		-	-	-
OTHER FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS	11	2,467	2,216	1,621
Deposits from central banks		-	-	-
Deposits from credit institutions		-	-	-
Customer deposits		-	-	-
Debt certificates		-	-	-
Subordinated liabilities		-	-	-
Other financial liabilities		2,467	2,216	1,621
FINANCIAL LIABILITIES AT AMORTIZED COST	23	464,141	490,605	465,717
Deposits from central banks		30,893	46,475	32,877
Deposits from credit institutions		52,423	55,675	56,601
Customer deposits		300,490	282,795	272,402
Debt certificates		64,120	86,255	81,124
Subordinated liabilities		10,556	11,815	15,303
Other financial liabilities		5,659	7,590	7,410
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK	15	-	-	-
HEDGING DERIVATIVES	15	1,792	2,968	2,709
LIABILITIES ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE	16	-	387	-
LIABILITIES UNDER INSURANCE CONTRACTS	18-24	9,834	9,020	7,729
PROVISIONS	25	6,853	7,834	7,471
Provisions for pensions and similar obligations	26	5,512	5,777	5,577
Provisions for taxes and other legal contingencies		208	406	349
Provisions for contingent risks and commitments		346	322	266
Other provisions		787	1,329	1,279
TAX LIABILITIES	21	2,530	3,820	2,147
Current		993	1,058	727
Deferred		1,537	2,762	1,420
OTHER LIABILITIES	22	4,460	4,586	4,208
TOTAL LIABILITIES		537,725	577,270	542,780

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated balance sheet as of December 31, 2013.

F-3

 

Consolidated balance sheets as of December 31, 2013, 2012 and 2011.

		Millions of Euros
LIABILITIES AND EQUITY (Continued)	Notes	2013	2012	2011
STOCKHOLDERS’ FUNDS		46,310	43,614	40,952
Common Stock	27	2,835	2,670	2,403
Issued		2,835	2,670	2,403
Unpaid and uncalled (-)		-	-	-
Share premium	28	22,111	20,968	18,970
Reserves	29	19,908	19,672	17,940
Accumulated reserves (losses)		19,458	18,721	17,580
Reserves (losses) of entities accounted for using the equity method		450	951	360
Other equity instruments	46.1.1	59	62	51
Equity component of compound financial instruments		-	-	-
Other equity instruments		59	62	51
Less: Treasury stock	30	(66)	(111)	(300)
Income attributed to the parent company		2,228	1,676	3,004
Less: Dividends and remuneration		(765)	(1,323)	(1,116)
VALUATION ADJUSTMENTS	31	(3,831)	(2,184)	(2,787)
Available-for-sale financial assets		851	(238)	(628)
Cash flow hedging		8	36	30
Hedging of net investment in foreign transactions		(100)	(243)	(159)
Exchange differences		(3,023)	(1,164)	(1,623)
Non-current assets held-for-sale		3	(104)	-
Entities accounted for using the equity method		(1,130)	(24)	(179)
Other valuation adjustments		(440)	(447)	(228)
NON-CONTROLLING INTEREST	32	2,371	2,372	1,893
Valuation adjustments		70	188	36
Rest		2,301	2,184	1,857
TOTAL EQUITY		44,850	43,802	40,058
TOTAL LIABILITIES AND EQUITY		582,575	621,072	582,838
		Millions of Euros
MEMORANDUM ITEM	Notes	2013	2012	2011
CONTINGENT RISKS	34	33,543	37,019	37,629
CONTINGENT COMMITMENTS	34	94,170	90,142	90,688

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated balance sheet as of December 31, 2013.

F-4

 

Consolidated income statements for the years ended December 31, 2013, 2012 and 2011.

		Millions of Euros
	Notes	2013		2012		2011
INTEREST AND SIMILAR INCOME	39		23,512		24,815		23,229
INTEREST AND SIMILAR EXPENSES	39		(9,612)		(10,341)		(10,505)
NET INTEREST INCOME			13,900		14,474		12,724
DIVIDEND INCOME	40		235		390		562
SHARE OF PROFIT OR LOSS OF ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD	41		694		1,039		787
FEE AND COMMISSION INCOME	42		5,478		5,290		4,874
FEE AND COMMISSION EXPENSES	43		(1,228)		(1,134)		(980)
NET GAINS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES	44		1,608		1,636		1,070
Financial instruments held for trading			540		653		1,003
Other financial instruments at fair value through profit or loss			49		69		17
Other financial instruments not at fair value through profit or loss			1,019		914		50
Rest			-		-		-
EXCHANGE DIFFERENCES (NET)			903		69		410
OTHER OPERATING INCOME	45		4,995		4,765		4,212
Income on insurance and reinsurance contracts			3,761		3,631		3,299
Financial income from non-financial services			851		807		643
Rest of other operating income			383		327		270
OTHER OPERATING EXPENSES	45		(5,627)		(4,705)		(4,019)
Expenses on insurance and reinsurance contracts			(2,831)		(2,646)		(2,425)
Changes in inventories			(495)		(406)		(298)
Rest of other operating expenses			(2,301)		(1,653)		(1,296)
GROSS INCOME			20,958		21,824		19,640
ADMINISTRATION COSTS	46		(9,701)		(9,396)		(8,634)
Personnel expenses			(5,588)		(5,467)		(5,053)
General and administrative expenses			(4,113)		(3,929)		(3,581)
DEPRECIATION AND AMORTIZATION	47		(1,095)		(978)		(810)
PROVISIONS (NET)	48		(609)		(641)		(503)
IMPAIRMENT LOSSES ON FINANCIAL ASSETS (NET)	49		(5,612)		(7,859)		(4,185)
Loans and receivables			(5,577)		(7,817)		(4,163)
Other financial instruments not at fair value through profit or loss			(35)		(42)		(22)
NET OPERATING INCOME			3,941		2,950		5,508

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated income statement for the year ended December 31, 2013.

F-5

 

Consolidated income statements for the years ended 2013, 2012 and 2011.

		Millions of Euros
(Continued)	Notes		2013	2012	2011
NET OPERATING INCOME			3,941	2,950	5,508
IMPAIRMENT LOSSES ON OTHER ASSETS (NET)	50		(467)	(1,123)	(1,883)
Goodwill and other intangible assets			(14)	(54)	(1,444)
Other assets			(453)	(1,069)	(439)
GAINS (LOSSES) ON DERECOGNIZED ASSETS NOT
CLASSIFIED AS NON-CURRENT ASSETS HELD FOR SALE	51		(1,915)	3	44
NEGATIVE GOODWILL	20		-	376	-
GAINS (LOSSES) IN NON-CURRENT ASSETS HELD FOR SALE
NOT CLASSIFIED AS DISCONTINUED OPERATIONS	52		(399)	(624)	(271)
OPERATING PROFIT BEFORE TAX			1,160	1,582	3,398
INCOME TAX	21		(46)	352	(158)
PROFIT FROM CONTINUING OPERATIONS			1,114	1,934	3,240
PROFIT FROM DISCONTINUED OPERATIONS (NET)	52		1,866	393	245
PROFIT			2,981	2,327	3,485
Profit attributable to parent company			2,228	1,676	3,004
Profit attributable to non-controlling interests	32		753	651	481
		Euros
	Note		2013	2012	2011
EARNINGS PER SHARE	5
Basic earnings per share			0.40	0.32	0.62
Diluted earnings per share			0.39	0.32	0.62

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated income statement for the year ended December 31, 2013.

F-6

 

Consolidated statements of recognized income and expenses for the years ended December 31, 2013, 2012 and 2011.

	Millions of Euros
	2013	2012	2011
PROFIT RECOGNIZED IN INCOME STATEMENT	2,981	2,327	3,485
OTHER RECOGNIZED INCOME (EXPENSES)	(1,765)	754	(1,894)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO P&L	8	(224)	(228)
Actuarial gains and losses from defined benefit pension plans	11	(316)	(266)
Non-current assets available for sale	-	-	-
Entities under the equity method of accounting	1	(5)	-
Income tax related to items not subject to reclassification to p&l	(4)	97	38
ITEMS SUBJECT TO RECLASSIFICATION TO P&L	(1,773)	978	(1,666)
Available-for-sale financial assets	1,659	679	(1,167)
Valuation gains/(losses)	1,737	541	(1,274)
Amounts removed to income statement	(140)	109	85
Reclassifications	62	29	22
Cash flow hedging	(32)	7	(41)
Valuation gains/(losses)	(31)	7	(69)
Amounts removed to income statement	-	-	29
Amounts removed to the initial carrying amount of the hedged items	-	-	-
Reclassifications	(1)	-	(1)
Hedging of net investment in foreign transactions	143	(84)	(1)
Valuation gains/(losses)	143	(84)	(1)
Amounts removed to income statement	-	-	-
Reclassifications	-	-	-
Exchange differences	(2,045)	601	(411)
Valuation gains/(losses)	(2,026)	601	(414)
Amounts removed to income statement	(19)	-	3
Reclassifications	-	-	-
Non-current assets held for sale	135	(103)	-
Valuation gains/(losses)	-	(103)	-
Amounts removed to income statement	135	-	-
Reclassifications	-	-	-
Entities accounted for using the equity method	(1,054)	238	(148)
Valuation gains/(losses)	(736)	238	(148)
Amounts removed to income statement	(260)	-	-
Reclassifications	(58)	-	-
Rest of recognized income and expenses	-	-	-
Income tax	(579)	(360)	102
TOTAL RECOGNIZED INCOME/EXPENSES	1,216	3,081	1,591
Attributable to the parent company	581	2,279	987
Attributable to non-controlling interest	635	802	604

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated statement of recognized income and expenses for the year ended December 31, 2013.

F-7

 

Consolidated statements of changes in equity for the years ended December 31, 2013, 2012 and 2011.

	Millions of Euros
	Total Equity Attributed to the Parent Company																						Non- controlling Interests (Note 32)		Total Equity
	Stockholders’ Funds																		Valuation Adjust- ments (Note 31)		Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)				Other Equity Instru- ments		Less: Treasury Stock (Note 30)		Profit Attributable to the Parent Company		Less: Dividends and Remu- nerations (Note 4)		Total Stock- holders’ Funds
2013					Accu- mulated Reserves (Losses)		Reserves (Losses) from Entities Accounted for Using the Equity Method
Balances as of January 1, 2013		2,670		20,968		18,721		951		62		(111)		1,676		(1,323)		43,614		(2,184)		41,430		2,372		43,802
Effect of changes in accounting policies		-		-		-		-		-		-		-		-		-		-		-		-		-
Effect of correction of errors		-		-		-		-		-		-		-		-		-		-		-		-		-
Adjusted initial balance		2,670		20,968		18,721		951		62		(111)		1,676		(1,323)		43,614		(2,184)		41,430		2,372		43,802
Total income/expense recognized		-		-		-		-		-		-		2,228		-		2,228		(1,647)		581		635		1,216
Other changes in equity		165		1,143		737		(501)		(3)		45		(1,676)		558		468		-		468		(636)		(168)
Common stock increase		71		-		(71)		-		-		-		-		-		-		-		-		-		-
Common stock reduction		-		-		-		-		-		-		-		-		-		-		-		-		-
Conversion of financial liabilities into capital		94		1,143		-		-		-		-		-		-		1,237		-		1,237		-		1,237
Increase of other equity instruments		-		-		-		-		33		-		-		-		33		-		33		-		33
Reclassification of financial liabilities to other equity instruments		-		-		-		-		-		-		-		-		-		-		-		-		-
Reclassification of other equity instruments to financial liabilities		-		-		-		-		-		-		-		-		-		-		-		-		-
Dividend distribution		-		-		-		-		-		-		-		(605)		(605)		-		(605)		(482)		(1,087)
Transactions including treasury stock and other equity instruments (net)		-		-		30		-		-		45		-		-		75		-		75		-		75
Transfers between total equity entries		-		-		853		(501)		-		-		(1,676)		1,324		-		-		-		-		-
Increase/Reduction due to business combinations		-		-		-		-		-		-		-		-		-		-		-		-		-
Payments with equity instruments		-		-		22		-		(36)		-		-		-		(14)		-		(14)		-		(14)
Rest of increases/reductions in total equity		-		-		(97)		-		-		-		-		(161)		(258)		-		(258)		(154)		(412)
Of which:		-		-		-		-		-		-		-		-		-		-		-		-		-
Acquisition of the free allotment rights		-		-		-		-		-		-		-		(161)		(161)		-		(161)		-		(161)
Balances as of December 31, 2013		2,835		22,111		19,458		450		59		(66)		2,228		(765)		46,310		(3,831)		42,479		2,371		44,850

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2013.

F-8

 

Consolidated statements of changes in equity for the years ended December 31, 2013, 2012 and 2011 (continued).

	Millions of Euros
	Total Equity Attributed to the Parent Company																						Non- controlling Interests (Note 32)		Total Equity
	Stockholders’ Funds																		Valuation Adjust- ments (Note 31)		Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)				Other Equity Instru- ments		Less: Treasury Stock (Note 30)		Profit Attributable to the Parent Company		Less: Dividends and Remu- nerations (Note 4)		Total Stock- holders’ Funds
2012					Accu- mulated 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		1,141		591		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		-		-		1,291		597		-		-		(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		-		-		(130)		(6)		-		-		-		(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		18,721		951		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 X are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2013.

F-9

 

Consolidated statements of changes in equity for the years ended December 31, 2013, 2012 and 2011 (continued).

	Millions of Euros
	Total Equity Attributed to the Parent Company																						Non- controlling Interests (Note 32)		Total Equity
	Stockholders’ Funds																		Valuation Adjust- ments (Note 31)		Total
	Common Stock (Note 27)		Share Premium (Note 28)		Reserves (Note 29)				Other Equity Instru- ments		Less: Treasury Stock (Note 30)		Profit Attributable to the Parent Company		Less: Dividends and Remu- nerations (Note 4)		Total Stock- holders’ Funds
2011					Accu- mulated 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)
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 X are an integral part of the consolidated statement of changes in equity for the year ended December 31, 2013.

F-10

 

Consolidated statements of cash flows for the years ended December 31, 2013, 2012 and 2011.

		Millions of Euros
	Notes	2013	2012	2011
CASH FLOW FROM OPERATING ACTIVITIES (1)	53	(500)	9,728	17,182
Profit for the year		2,981	2,327	3,485
Adjustments to obtain the cash flow from operating activities:		8,260	10,400	7,133
Depreciation and amortization		1,099	978	810
Other adjustments		7,161	9,422	6,323
Net increase/decrease in operating assets		25,613	(38,637)	(23,356)
Financial assets held for trading		7,717	(9,358)	(7,188)
Other financial assets designated at fair value through profit or loss		117	243	1
Available-for-sale financial assets		1,938	(12,463)	(1,604)
Loans and receivables		12,704	(12,073)	(10,898)
Other operating assets		3,137	(4,986)	(3,667)
Net increase/decrease in operating liabilities		(37,265)	35,990	29,761
Financial liabilities held for trading		(10,186)	4,656	13,966
Other financial liabilities designated at fair value through profit or loss		251	595	14
Financial liabilities at amortized cost		(24,660)	28,072	14,584
Other operating liabilities		(2,670)	2,666	1,197
Collection/Payments for income tax		(89)	(352)	158
CASH FLOWS FROM INVESTING ACTIVITIES (2)	53	3,021	(1,060)	(5,092)
Investment		(2,325)	(2,522)	(6,995)
Tangible assets		(1,252)	(1,685)	(1,293)
Intangible assets		(526)	(777)	(619)
Investments		(547)	-	(4,838)
Subsidiaries and other business units		-	-	(245)
Non-current assets held for sale and associated liabilities		-	-	-
Held-to-maturity investments		-	(60)	-
Other settlements related to investing activities		-	-	-
Divestments		5,346	1,462	1,903
Tangible assets		101	-	175
Intangible assets		-	-	1
Investments		944	19	-
Subsidiaries and other business units		3,299	-	19
Non-current assets held for sale and associated liabilities		571	590	870
Held-to-maturity investments		431	853	838
Other collections related to investing activities		-	-	-

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated statement of cash flows for the year ended December 31, 2013.

F-11

 

Consolidated statements of cash flows for the years ended December 31, 2013, 2012 and 2011.

		Millions of Euros
(Continued)	Notes	2013	2012	2011
CASH FLOWS FROM FINANCING ACTIVITIES (3)	53	(1,326)	(3,492)	(1,269)
Investment		(6,104)	(10,387)	(6,282)
Dividends		(1,275)	(1,269)	(1,031)
Subordinated liabilities		(697)	(3,930)	(230)
Common stock amortization		-	-	-
Treasury stock acquisition		(3,614)	(4,831)	(4,825)
Other items relating to financing activities		(518)	(357)	(196)
Divestments		4,778	6,895	5,013
Subordinated liabilities		1,088	1,793	-
Common stock increase		2	-	-
Treasury stock disposal		3,688	5,102	5,013
Other items relating to financing activities		-	-	-
EFFECT OF EXCHANGE RATE CHANGES (4)		(1,784)	471	(959)
NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (1+2+3+4)		(589)	5,647	9,862
CASH OR CASH EQUIVALENTS AT BEGINNING OF THE YEAR		35,476	29,829	19,967
CASH OR CASH EQUIVALENTS AT END OF THE YEAR		34,887	35,476	29,829
		Millions of Euros
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR	Notes	2013	2012	2011
Cash		5,533	5,155	4,496
Balance of cash equivalent in central banks		29,354	30,321	25,333
Other financial assets		-	-	-
Less: Bank overdraft refundable on demand		-	-	-
TOTAL CASH OR CASH EQUIVALENTS AT END OF THE YEAR	9	34,887	35,476	29,829
Of which:
Held by consolidated subsidiaries but not available for the Group		-	-	-

The accompanying Notes 1 to 59 and Appendices I to X are an integral part of the consolidated statement of cash flows for the year ended December 31, 2013.

F-12

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 inspection 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, joint venture 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 separate financial statements, the Bank is therefore required to prepare the Group’s consolidated financial statements.

As of December 31, 2013, the BBVA Group was made up of 301 consolidated entities and 127 entities accounted for using the equity method (see Notes 3 and 17 Appendices I to IV).

The BBVA Group’s consolidated financial statements for the years ended December 31, 2012 and 2011 were approved by the shareholders at the Bank’s Annual General Meetings (“AGM”) held on March 15, 2013 and March 16, 2012, respectively.

The consolidated financial statements of the BBVA Group and the separate financial statements of the Bank for the year ended December 31, 2013 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”) applicable as of December 31 2013 (see Note 1.3), considering the Bank of Spain Circular 4/2004, of 22 December (and as amended thereafter), and with any other legislation governing financial reporting applicable to the Group and in compliance with IFRS-IASB.

The BBVA Group’s accompanying consolidated financial statements for the year ended December 31, 2013 were prepared by the Group’s Directors (through the Board of Directors held January 30, 2014) 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, 2013, together with the consolidated results of its operations and cash flows generated during the year 2013.

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.

The amounts reflected in the accompanying consolidated financial statements are presented in millions of euros, unless it is more appropriate 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 totals 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.

F-13

1.3          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.

1.4          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 recorded 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 Note 20).

— The fair value of certain unlisted financial assets and liabilities (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, 2013 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, recognizing the effects of changes in the estimates in the corresponding consolidated income statement.

F-14

1.5          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 Financial Control” or “ICFR”). Its aim is to provide reasonable assurance with respect to its reliability and integrity, and to ensure that the transactions carried out and processed use the criteria established by the BBVA Group’s management and comply with applicable laws and regulations.

The ICFR was developed by the BBVA 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:

— Establishment of an appropriate control framework to monitor these activities.

— 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.

— Establishment of an appropriate system of information flows to detect and report system weaknesses or flaws.

— Monitoring of the controls to ensure they perform correctly and are effective over time.

In May 2013, COSO has released an updated version of its Integrated Internal Control Framework version. This update provides a broader framework than the previous guidance and clarifies the requirements for determining what constitutes effective internal control. Although BBVA Group is in the process of analyzing the current version, no significant changes are expected in the current internal model control.

The ICFR is a dynamic model that evolves continuously over time to reflect the reality of the BBVA 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 BBVA 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 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.

F-15

2. Principles of consolidation, accounting policies and measurement bases applied and recent IFRS pronouncements

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, accordance with the criteria established by the new IFRS 10 and 11 applied by the Group from January 1, 2013, the BBVA Group is made up of four types of entities: subsidiaries, joint ventures, associates and structured entities, define as follows:

— Subsidiaries

Subsidiaries are entities controlled by the Group (for definition of the criterion for control, see Glossary).

The financial statements of the subsidiaries are consolidated with those of the Bank using the global integration method.

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, 2013. Appendix I includes other significant information on these entities.

— Joint ventures

Joint ventures are those entities over which there is a joint arrangement to joint control (for definitions of joint arrangement, joint control and joint venture, refer to Glossary).

The investments in joint ventures are valued using the equity method (see Note 17). Appendix II shows the main figures for joint ventures accounted for using the equity method.

— Associate entities

Associates are entities in which the Group is able to exercise significant influence (for definition of significant influence, see Glossary). Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly, unless it can be clearly demonstrated that this is not the case.

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”. Those entities are not material.

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 II shows the most significant information related to the associates (see Note 17), which are accounted for using the equity method.

— Structured Entities

A structured entity (see Glossary) is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when the voting rights relate to administrative matters only and the relevant activities are directed by means of contractual arrangements.

F-16

In those cases where the Group sets up entities, or has a holding in such entities, 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 and therefore whether it should be subject to consolidation.

Such methods and procedures determine whether there is control by the Group, considering how the decisions are made about the relevant activities, assesses whether the Group has all power over the relevant elements, exposure, or rights, to variable returns from involvement with the investee; and the ability to use power over the investee to affect the amount of the investor’s returns.

- Structured entities subject to consolidation

To determine if a structured entity controls the investee, and therefore should be consolidated into the Group, the existing contractual rights (different from the voting rights) are analyzed. For this reason, an analysis of the structure and purpose of each investee will be performed and, among others, the following factors will be considered:

- Evidence of the current ability to manage the relevant activities of the entity according to the specific business needs (including any decisions that may arise only in particular circumstances).

- Potential existence of a special relationship with the entity.

- Implicit or explicit Group commitments to support the entity.

- The ability to use the Group’s power over the investee to affect the amount of the investor’s returns.

There are cases where the Group has a high exposure to variable returns and maintains existing decision-making power over the entity, either directly or through an agent. For instance, the so-called asset securitization funds, to which the BBVA Group transferred loan portfolios, and other vehicles, which allow the Group’s customers to gain access to certain investments or to allow for the transfer of risks and other purposes (See Appendix I and V).

As of December 31, 2013 there was no significant financial agreement support, additional to contractually establish, from the parent or other subsidiaries to the consolidated structured entities.

- Non-consolidated structured entities

The Group owns other vehicles also for the purpose of allowing access to customers to certain investment, transfer risks, and other purposes, but without the control of these and which are considered non-consolidated in accordance with IFRS 10. The balance of assets and liabilities of these vehicles is not material in relation to the Group’s consolidated financial statements.

As of December 31, 2013 there was no significant financial support from the parent or subsidiaries to unconsolidated structured entities.

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 entities disposed of during any year are included taking into account only the period from the start of the year to the date of disposal.

The financial statements of subsidiaries, associates and joint ventures used in the preparation of the consolidated financial statements of the Group relate to the same date of presentation than the consolidated financial statements. If financial statements at those same dates are not available, the most recent will be used, as long as these are not older than three months, and adjusting to take into account the most significant transactions. As of December 31, 2013, all of the financial statements of all Group entities were available, save for the case of the financial statements of six non-material associates for which the financial statements were as of November 30, 2013.

Our banking subsidiaries, associates and joint venture around the world, are subject to supervision and regulation from a variety of regulatory bodies in relation to, among other aspects, the satisfaction of minimum capital requirements. The obligation to satisfy such capital requirements may affect the ability of such entities to transfer funds in the form of cash dividends, loans or advances. In addition, under the laws of the various jurisdictions where such entities are incorporated, dividends may only be paid out through funds legally available for such purpose. Even when the minimum capital requirements are met and funds are legally available, the relevant regulator could discourage the transfer of funds to the Group in the form of cash, dividends, loans or advances for prudential reasons.

F-17

Separate financial statements

The separate financial statements of the parent company of the Group (Banco Bilbao Vizcaya Argentaria, S.A.) are prepared under Spanish regulations (Circular 4/2004 of the Bank of Spain, and subsequent amendments). The Bank uses the cost method to account in its financial statements for investment in subsidiaries, associates and joint venture entities, which is consistent with the requirements of IAS 27.

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.

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 change occurred (see Note 39). The dividends received from other entities 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).

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.

F-18

“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.

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.

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).

F-19

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 (See Note 44).

— 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 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 advances and debt securities), reduce the future cash flows that were estimated at the time the transaction was entered into. So they are considered impaired when there are reasonable doubts that the carrying amounts 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 assets 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).

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 unpaid principal.

When the recovery of any recognized amount is considered 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 to be charged off 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.

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According to the Group’s established policy, the recovery of a recognized amount is considered remote and, therefore, derecognized from the consolidated balance sheet in the following cases:

— Any loan (except for those carrying an effective guarantee) of an entity 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 and advances classified as impaired secured 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.

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 financial assets. The BBVA Group recognizes impairment charges directly against the impaired financial asset when the likelihood of recovery is deemed remote, and uses an offsetting or allowance account when it recognizes 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 on financial assets individually evaluated for impairment

The amount of the impairment losses incurred on these instruments represents the excess of their respective carrying amounts over 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.

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 on financial assets collectively evaluated for impairment

Impairment losses on financial assets collectively evaluated for impairment are calculated by using statistical procedures, and they are deemed equivalent to the portion of losses incurred on the date that the accompanying

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consolidated financial statements are prepared that has yet to be allocated to specific asset. The BBVA group estimates losses through statistical processes that apply historical data and other specific parameters that, although having been generated as of closing date for these consolidated financial statements, have arisen on an individual basis following the reporting date.

The incurred loss is calculated taking into account three key 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. In addition, the PD calculation includes the following parameters:

– 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 when objective evidence of impairment becomes apparent on an individual basis; in other words, the time lag period between the loss event and the date an entity identified its occurrence. The analysis of LIPs is performed on a homogenous portfolio basis.

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The LIPs BBVA uses are set forth in the table below:

Portfolio		Average of LIPs Used as of December 31, 2013
Sovereign and Public Institutions		12 months
Corporates	Real estate developers Large corporates	From 6 months to 12 months
	Others corporates SMEs	From 6 months to 12 months
Retail	Mortgage loans Consumer loans	From 3 months to 9 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.

A PD of 100% is assigned when a loan is considered impaired. 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).

— 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 asset.

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 is recognized in the financial statements. 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 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, 2013, 2012 and 2011, 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 other debt securities included in the “Available-for-sale financial asset” portfolio are equal to the excess of their acquisition cost (net of any principal repayment), after deducting any impairment loss previously recognized in the consolidated income statement over 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.

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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. In general, 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 excess of their carrying amount over the present value of expected future cash flows discounted at the market rate of return for similar equity instruments. In order to determine these impairment losses, save for better evidence, an assessment of the equity of the investee is carried out (excluding valuation adjustments due to cash flow hedges) based on the last approved (consolidated) balance sheet, adjusted by the unrealized gains at 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 financial 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 financial 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.

— Both the income generated on the transferred (but not derecognized) financial asset and the expenses of the new financial liability continue to be recognized.

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 financial 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.

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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 financial guarantee contracts 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 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 operating segment 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 the acquisition date and at any later date deemed necessary, at either their carrying amount or the fair value of the property (less costs to sell), whichever is lower. The book value at acquisition date of the non-current assets held for sale from foreclosures or recoveries is defined as the balance pending collection on those loans/credits that originated said purchases (net of provisions). Non-current assets held for sale are not depreciated while included under this heading.

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 Note 52.2).

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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% - 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 buildings for own use, is based on 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, recording 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.

Running 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 recognize the impairment losses on them, are the same as those described in relation to tangible assets for own use.

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).

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The criteria used to recognize the acquisition cost of investment properties, calculate their depreciation and their respective estimated useful lives and recognize 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 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 entities hold for development and sale as part of their real estate development activities (see Note 22).

The cost of inventories includes those costs incurred in during their acquisition and development, as well as other direct and indirect costs incurred in getting them to their current condition and location.

In the case of, the cost 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 costs to sell), whichever is lower. The book value at acquisition date of these real-estate assets is defined as the balance pending collection on those loans/credits that originated said purchases (net of provisions).

Impairment

If the fair value less costs to sell is lower than the loan amount registered in the balance sheet, a loss is recognized under the heading “Impairment losses on other assets (net) – Other assets” in the income statement for the period (see Note 50). 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 subsequent adjustment due to inventory valuation 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).

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 acquirer shall recognize an asset in the consolidated balance sheet under the heading “Intangible asset - Goodwill” if on the acquisition date there is a positive difference between:

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— 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 “Gain on Bargain Purchase 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 operating 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 cash-generating 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.

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 remainder 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).

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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 subsidiaries are recognized according to their nature under the corresponding headings of the consolidated balance sheets and the initial recognition 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 entities 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.

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 entities 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 entities in the policy period not elapsed at year-end.

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— Provision for claims:

This reflects the total amount of the outstanding obligations arising from claims incurred prior to year-end. Insurance entities 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 entities 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 entities 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 corporate income tax applicable to the BBVA Group’s Spanish entities and on similar income taxes applicable to consolidated foreign entities 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 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 calculated by applying to each temporary difference the income tax rate that is expected to be applied 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).

The “Tax Liabilities” line item in 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 attributable to taxable temporary differences associated with investments in subsidiaries, associates or joint venture 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.

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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 entities 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 in section 2.2.12), as well as provisions for tax and legal litigation.

Contingent assets are possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by, the occurrence or non-occurrence of events beyond the control of the Group. Contingent assets are not recognized in the consolidated balance sheet or in the consolidated income statement; however, they are disclosed in the Notes to the financial statements, provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits (see Note 36).

Contingent liabilities are possible obligations of the Group that arise from past events and whose existence is conditional on the occurrence or non-occurrence of one or more future events beyond the control of the entity. They also include the existing obligations of the entity when it is not probable that an outflow of resources embodying economic benefits will be required to settle them; or when, in extremely rare cases, their amount cannot be measured with sufficient reliability.

2.2.12      Pensions and other post-employment commitments

Below is a description of the most significant accounting criteria relating to the commitments to employees, in terms of post-employment benefits and other long-term commitments, of certain BBVA Group entities in Spain and abroad (see Note 26 ).

Commitments valuation: assumptions and actuarial gains/losses recognition

The present values of the commitments are quantified based on an individual basis. For current employees costs are calculated using the projected unit credit method, which sees each period of service as giving rise to an additional unit of benefit/commitment and measures each unit separately to build up the final obligation.

The actuarial assumptions should take into account that:

— They are unbiased, in that they are not unduly aggressive nor excessively conservative.

— They are compatible with each other and adequately reflect the existing economic relations between factors such as inflation, foreseeable wage increases, discount rates and the expected return on plan assets, etc. The future levels of wages and benefits are based on market expectations at the consolidated balance sheet date for the period over which the obligations are to be settled.

— The rate used to discount the commitments is determined by reference to market yields at the date referred to by the consolidated financial statements on high quality bonds.

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The BBVA Group recognizes actuarial differences originating in the commitments assumed with staff taking early retirement, benefits awarded for seniority and other similar items under the heading “Provisions (net)” of the consolidated income statement for the period (see Note 48) in which these differences occur. The BBVA Group recognizes the actuarial gains or losses arising on all other defined-benefit post-employment commitments directly under the heading “Valuation adjustments” of equity in the accompanying consolidated balance sheets (see Note 31).

Post-employment benefit commitments

Pensions

The BBVA Group’s post-employment benefit commitments are either defined-contribution or defined-benefit.

— Defined-contribution commitments: The amounts of these commitments are established as a percentage of certain remuneration items and/or as a fixed pre-established amount. The contributions made in each period by the BBVA Group’s entities for these commitments are recognized with a charge to the heading “Personnel expenses - Defined-contribution plan expense” in the consolidated income statements (see Note 46.1).

— Defined-benefit commitments: Some of the BBVA Group’s entities have defined-benefit commitments for the permanent disability and death of certain current employees and early retirees, as well as defined-benefit retirement commitments applicable only to certain groups of current employees, or employees taking early retirement and retired employees. These commitments are either funded by insurance contracts or recognized as internal provisions.

The amounts recognized under the heading “Provisions – Provisions for pensions and similar obligations” (see Note 25) are the differences, at the date of the consolidated financial statements, between the present values of the commitments for defined-benefit commitments, adjusted by the past service cost, and the fair value of plan assets.

The current contributions made by the Group’s entities for defined-benefit commitments covering current employees are charged to the heading “Administration cost - Personnel expenses” in the accompanying consolidated income statements (see Note 46.1).

Early retirement

The BBVA Group has offered certain employees in Spain the option of taking early retirement (that is earlier than the age stipulated in the collective labor agreement in force) and has recognized the corresponding provisions to cover the cost of the commitments acquired for this item. The present values of early retirement obligations are quantified based on an individual member data and are recognized under the heading “Provisions – Provisions for pensions and similar obligations” in the accompanying consolidated balance sheets (see Note 25).

The early retirement commitments in Spain include the compensation and indemnities and contributions to external pension funds payable during the period of early retirement. The commitments relating to this group of employees after they have reached normal retirement age are dealt with in the same way as pensions.

Other post-employment welfare benefits

Some of the BBVA Group’s entities have welfare benefit commitments whose effects extend beyond the retirement of the employees entitled to the benefits. These commitments relate to certain current employees and retirees, depending upon the employee group to which they belong.

The present values of post-employment welfare benefits are quantified based on an individual member data and are recognized under the heading “Provisions – Provisions for pensions and similar obligations” in the consolidated balance sheets (see Note 25).

Other long-term commitments to employees

Some of the BBVA Group’s entities are obliged to deliver goods and services to groups of employees. The most significant of these, in terms of the type of compensation and the event giving rise to the commitments, are as follows: loans to employees, life insurance, study assistance and long-service awards.

Some of these commitments are measured using actuarial studies, so that the present values of the vested obligations for commitments with personnel are quantified based on an individual member data. They are recognized under the heading “Provisions – Other provisions” in the accompanying consolidated balance sheets (see Note 25).

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The cost of these benefits provided by Spanish entities in the BBVA Group to active employees are recognized under the heading “Personnel expenses - Other personnel expenses” in the consolidated income statements (see Note 46.1).

Other commitments for current employees accrue and are settled on a yearly basis, so it is not necessary to register a provision in this regard.

2.2.13     Equity-settled share-based payment transactions

Provided they constitute the delivery of such payments following the completion of a specific period of services, equity-settled share-based payment transactions are recognized as an expense for services being provided by employees, by way of a balancing entry under the heading “Stockholders’ equity – Other equity instruments” in the consolidated balance sheet. These services are measured at fair value, unless such fair value cannot be calculated reliably. In such case, they are measured by reference to the fair value of the equity instruments committed, taking into account the date on which the commitments were made and the terms and other conditions included in the commitments.

When the initial compensation agreement includes what may be considered market conditions among its terms, any changes in these conditions will not be reflected in the consolidated income statement, as these have already been accounted for in calculating the initial fair value of the equity instruments. Non-market vesting conditions are not taken into account when estimating the initial fair value of instruments, but they are taken into account when determining the number of instruments to be granted. This will be recognized on the consolidated income statement with the corresponding increase in equity.

2.2.14     Termination benefits

Termination benefits are recognized in the accounts when the BBVA Group agrees to terminate employment contracts with its employees and has established a detailed plan.

2.2.15     Treasury stock

The value of equity instruments issued by the BBVA Group’s entities and held by them - basically, shares and derivatives on the Bank’s shares held by some consolidated entities that comply with the requirements to be recognized as equity instruments - are recognized under the heading “Stockholders’ funds - Treasury stock” in the consolidated balance sheets (see Note 30).

These financial assets are recognized at acquisition cost, and the gains or losses arising on their disposal are credited or debited, as appropriate, to the heading “Stockholders’ funds - Reserves” in the consolidated balance sheets (see Note 29).

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2.2.16     Foreign-currency transactions and exchange differences

The BBVA Group’s functional currency, and thus the currency in which the consolidated financial statements are presented, is the euro. All balances and transactions denominated in currencies other than the euro are deemed to be denominated in “foreign currency”.

Conversion to euros of the balances held in foreign currency is performed in two consecutive stages:

— Conversion of the foreign currency to the functional currency (currency of the main economic environment in which the entity operates); and

— Conversion to euros of the balances held in the functional currencies of the entities whose functional currency is not the euro.

Conversion of the foreign currency to the functional currency

Transactions denominated in foreign currencies carried out by the consolidated entities (or accounted for using the equity method) not based in European Monetary Union countries are initially accounted for in their respective currencies. Subsequently, the monetary balances in foreign currencies are converted to their respective functional currencies using the exchange rate at the close of the financial year.

In addition,

— Non-monetary items valued at their historical cost are converted to the functional currency at the exchange rate in force on the purchase date.

— Non-monetary items valued at their fair value are converted at the exchange rate in force on the date on which such fair value was determined.

— Income and expenses are converted at the period’s average exchange rates for all the operations carried out during the period. When applying this criterion the BBVA Group considers whether significant variations have taken place in exchange rates during the financial year which, owing to their impact on the statements as a whole, require the application of exchange rates as of the date of the transaction instead of such average exchange rates.

The exchange differences produced when converting the balances in foreign currency to the functional currency of the consolidated entities and their subsidiaries are generally recognized under the heading “Exchange differences (net)” in the consolidated income statements. However, the exchange differences in non-monetary items, measured at fair value, are recognized temporarily in equity under the heading “Valuation adjustments - Exchange differences” in the consolidated balance sheets.

Conversion of functional currencies to euros

The balances in the financial statements of consolidated entities whose functional currency is not the euro are converted to euros as follows:

— Assets and liabilities: at the average spot exchange rates as of the date of each of the consolidated financial statements.

— Income and expenses and cash flows are converted by applying the exchange rate in force on the date of the transaction, and the average exchange rate for the financial year may be used, unless it has undergone significant variations.

— Equity items: at the historical exchange rates.

The exchange differences arising from the conversion to euros of balances in the functional currencies of the consolidated entities whose functional currency is not the euro are recognized under the heading “Valuation adjustments – Exchange differences” in the consolidated balance sheets. Meanwhile, the differences arising from the conversion to euros of the financial statements of entities accounted for by the equity method are recognized under the heading “Valuation adjustments - Entities accounted for using the equity method” until the item to which they relate is derecognized, at which time they are recognized in the income statement.

The breakdown of the main consolidated balances in foreign currencies as of December 31, 2013, 2012 and 2011, with reference to the most significant foreign currencies, is set forth in Appendix VII.

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2.2.17     Recognition of income and expenses

The most significant criteria used by the BBVA Group to recognize its income and expenses are as follows.

— Interest income and expenses and similar items:

As a general rule, interest income and expenses and similar items are recognized on the basis of their period of accrual using the effective interest rate method. The financial fees and commissions that arise on the arrangement of loans and advances (basically origination and analysis fees) are deferred and recognized in the income statement over the expected life of the loan. The direct costs incurred in originating these loans and advances can be deducted from the amount thus recognized. These fees are part of the effective rate for loans. Also dividends received from other entities are recognized as income when the consolidated entities’ right to receive them arises.

However, when a debt instrument is deemed to be impaired individually or is included in the category of instruments that are impaired because their recovery is considered to be remote, the recognition of accrued interest in the consolidated income statement is discontinued. This interest is recognized for accounting purposes as income, as soon as it is received.

— Commissions, fees and similar items:

Income and expenses relating to commissions and similar fees are recognized in the consolidated income statement using criteria that vary according to the nature of such items. The most significant items in this connection are:

- Those relating to financial assets and liabilities measured at fair value through profit or loss, which are recognized when collected/paid.

- Those arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services.

- Those relating to single acts, which are recognized when this single act is carried out.

— Non-financial income and expenses:

These are recognized for accounting purposes on an accrual basis.

— Deferred collections and payments:

These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.

2.2.18     Sales and income from the provision of non-financial services

The heading “Other operating income - Financial income from non-financial services” in the consolidated income statements includes the carrying amount of the sales of assets and income from the services provided by the Group entities that are not financial institutions. In the case of the Group, these entities are mainly real estate and service entities (see Note 45).

2.2.19     Leases

Lease contracts are classified as finance leases from the inception of the transaction, if they substantially transfer all the risks and rewards incidental to ownership of the asset forming the subject-matter of the contract. Leases other than finance leases are classified as operating leases.

When the consolidated entities act as the lessor of an asset in finance leases, the aggregate present values of the lease payments receivable from the lessee plus the guaranteed residual value (normally the exercise price of the lessee’s purchase option on expiration of the lease agreement) are recognized as financing provided to third parties and, therefore, are included under the heading “Loans and receivables” in the accompanying consolidated balance sheets.

When the consolidated entities act as lessors of an asset in operating leases, the acquisition cost of the leased assets is recognized under “Tangible assets – Property, plant and equipment – Other assets leased out under an operating lease” in the consolidated balance sheets (see Note 19). These assets are depreciated in line with the criteria adopted for items of tangible assets for own use, while the income arising from the lease arrangements is recognized in the consolidated income statements on a straight-line basis within “Other operating expenses - Other of other operating expenses” (see Note 45).

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If a fair value sale and leaseback results in an operating lease, the profit or loss generated by the sale is recognized in the consolidated income statement at the time of sale. If such a transaction gives rise to a finance lease, the corresponding gains or losses are amortized over the lease period.

The assets leased out under operating lease contracts to other entities in the Group are treated in the consolidated financial statements as for own use, and thus rental expense and income is eliminated and the corresponding depreciation is recognize.

2.2.20     Entities and branches located in countries with hyperinflationary economies

In order to assess whether an economy is under hyperinflation, the country’s economic environment is evaluated, analyzing whether certain circumstances exist, such as:

— The country’s population prefers to keep its wealth or savings in non-monetary assets or in a relatively stable foreign currency;

— Prices may be quoted in that currency;

— Interest rates, wages and prices are linked to a price index;

— The cumulative inflation rate over three years is approaching, or exceeds, 100%.

The fact that any of these circumstances is present will not be a decisive factor in considering an economy hyperinflationary, but it does provide some reasons to consider it as such.

Since 2009, the economy of Venezuela can be considered hyperinflationary under the above criteria. As a result, the financial statements of the BBVA Group’s entities located in Venezuela (see Note 3) have therefore been adjusted to correct for the effects of inflation.

2.3          Recent IFRS pronouncements

Changes introduced in 2013

The following modifications to the IFRS standards or their interpretations (hereinafter “IFRIC”) came into force on January 1, 2013.

IFRS 10 – “Consolidated Financial Statements”, IFRS 11 - “Joint arrangements” and IFRS 12 - “Disclosure of interests in other entities”.

IFRS 10 establishes a single consolidation model based on the principle of control, and applicable to all types of entities. Likewise, it introduces a definition of control, according to which a reporting entity controls another entity when it is exposed or has rights to variable returns from its involvement with the entity and has the ability to affect the amount of returns through its power over the entity.

IFRS 10 modifies IAS 27 - “Consolidated and separate financial statements” (which will remain in effect solely for its guidance on separate financial statements) and will replace SIC 12 - “Consolidation - Special Purpose Entities” and is effective beginning on January 1, 2013.

IFRS 11 introduces new consolidation principles applicable to all joint arrangements and replaces SIC 13 - “Jointly Controlled Entities” and IAS 31 - “Interests in Joint Ventures”. The new standard will modify IAS 28 “Investments in Associates and Joint Ventures”, which will remain effective for associate and joint venture entities.

IFRS 11 defines joint arrangements and establishes that they shall be classified as joint operations or as joint ventures based on the rights and obligations arising from the arrangement. A joint operation is defined as an operation where the parties who have joint control have rights to the assets of the arrangement and obligations to the liabilities of the arrangement. A joint venture is defined as a venture where the parties who have joint control have rights to the net assets of the arrangement.

Joint operations shall be accounted for by including in the financial statements of the controlling entities the assets, liabilities, income and expenses corresponding to them according to the contractual agreement. Joint ventures shall be accounted for in the consolidated financial statements using the equity method. They can no longer be accounted for by the proportionate consolidation method.

IFRS 12 is a new standard on the disclosure requirements for all types of holdings in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities.

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IFRS 10, 11 and 12 will be applied beginning on January 1, 2013. The adoption of these standards by the European Union allows for its application by January 1, 2014 at the latest. However, early adoption is permitted. In this case it must be applied all together. ).

IFRS 13 - “Fair value measurement”

IFRS 13 provides guidelines for fair value measurement and disclosure requirements. Under the new definition, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The requirements do not modify the existing criteria to recognize an asset or liability at fair value. However, they do provide a guide about how fair value should be measured when its use is required or permitted by other standards. The main impact of IFRS 13 for the BBVA Group is related to credit risk valuation of derivative positions; both asset “Credit Valuation Adjustment” (CVA) and liability “Debit Valuation Adjustment” (DVA). The impact in the Group’s Income Statement as of December 31, 2013 is not material.

Amended IAS 1 – “Presentation of financial statements”

The modifications made to IAS 1 include improvements and clarifications regarding the presentation of “Other comprehensive income” (valuation adjustments). The main change introduced is that the presentation of the items must distinguish those that can be reclassified to earnings in the future from those that cannot.

Pursuant to this standard, the consolidated statement of recognized income and expenses has been modified.

Amended IAS 19 – “Employee benefits”

The amended IAS 19 introduces modifications to the accounting of post-employment benefit liabilities and commitments.

— All changes in the fair value of assets from post-employment plans and obligations in the defined benefit plans shall be recognized in the period in which they occur; they shall be recognized as valuation adjustments in equity and shall not be considered as earnings in future years.

— The presentation of fair value changes in assets in plans and changes in post-employment benefit obligations of defined-benefit plans has been clarified.

— Greater disclosure of information is required.

The application of IAS 19 by the BBVA Group has had no significant impact on the accompanying financial statements as of December 31, 2013. The disclosures have been adapted to the new requirements.

Fourth annual improvements project for various IFRS

Fourth IFRS Annual Improvements project introduces small modifications and clarifications to IAS 1 - Presentation of financial statements, IAS 16 – Property, plant and equipment, IAS 32 – Financial instruments: presentation and IAS 34 - Interim financial reporting.

Amended IFRS 7 – “Financial Instruments: Information to be disclosed”

The changes made to IFRS 7 introduce new disclosures of information on asset and liability offsetting. Entities must submit a breakdown of information on the gross and net amounts of those financial assets that have been or may be offset, and for all recognized financial instruments included in some type of master offset agreement, regardless of whether they have been netted or not.

Standards and interpretations issued but not yet effective as of December 31, 2013

New International Financial Reporting Standards together with their interpretations had been published at the date of preparation of the accompanying consolidated financial statements, but are not obligatory as of December 31, 2013. Although in some cases the IASB permits early adoption before they come into force, the BBVA Group has not done so as of this date, as it is still analyzing the effects that will result from them.

IFRS 9 - “Financial instruments”

IFRS 9 will replace IAS 39. At present, chapters related to classification, valuation and hedging have been issued (pending chapters of impairment), There new standard introduces significant differences with respect to the current regulation with regards to financial assets; among others, the approval of a new classification model

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based on two single categories of amortized cost and fair value, the elimination of the current “Held-to-maturity-investments” and “Available-for-sale financial assets” categories, impairment analyses only for assets measured at amortized cost and non-separation of embedded derivatives in contracts of financial assets.

With regard to financial liabilities, the classification categories proposed by IFRS 9 are similar to those currently contained in IAS 39, so there should not be very significant differences save for the requirement to recognize changes in fair value related to own credit risk as a component of equity, in the case of financial liabilities designated at fair value through profit or loss. Hedge accounting requirements also differs from the current IAS 39 due to the new focus on the economic risk management.

Amended IAS 32 – “Financial Instruments: Presentation”

The changes made to IAS 32 clarify the following aspects on asset and liability offsetting:

— The legal right to net recognized amounts must not depend on a future event and must be legally enforceable under all circumstances, including cases of default or insolvency of either party.

— Settlements in which the following conditions are met shall be accepted as equivalent to “settlements for net amount”: all, or practically all of the credit and liquidity risk is eliminated; and the settlement of the assets and liabilities is carried out in a single settlement process.

These modifications will be applied to the accounting years starting on or after January 1, 2014, although early adoption is permitted.

Amended IFRS 10 - “Consolidated Financial Statements”, Amended IFRS 12 – “Disclosure of interests in other entities” and Amended IAS 27 – “Consolidated and separate financial statements”

The changes to IFRS 10, IFRS 12 and IAS 27 define investment entities and provide an exception to the consolidation requirements requiring investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them as per IFRS 9.

However, the parent company of an investment entity must consolidate all entities under its control, including those controlled through an investment entity, unless the parent company is also an investment entity.

Furthermore, these amendments include new disclosures that will allow the users of such information to evaluate the nature and financial impact of these investments made through investment entities.

These modifications will be applied to the accounting years starting on or after January 1, 2014, although early adoption is permitted.

IFRIC 21 “Levies”

This Interpretation addresses the accounting for a liability to pay a levy if that liability is within the scope of IAS 37. It also addresses the accounting for a liability to pay a levy whose timing and amount is certain.

Consequently, the obligating event will be recognized when the obligation to pay the levy is triggered. If the obligating event is the reaching of a minimum activity threshold, such as a minimum amount of revenue or sales generated or outputs produced, the corresponding liability is recognized when that minimum activity threshold is reached.

This interpretation does not affect the treatment of those taxes ruled by other IAS standards (for example, Income Tax) nor penalties or sanctions due to other regulatory breaches.

These modifications will be applied to the accounting years starting on or after January 1, 2014, although early adoption is permitted.

Amended IAS 36 - “Impairment of Assets”

The changes made to IAS 36 remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives, and, on the other hand, require that entities disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognized or reversed an impairment loss during the reporting period. Furthermore, additional disclosures of information will be required when the recoverable amount is the same as the fair value less costs of disposal.

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These modifications will be applied to the accounting years starting on or after January 1, 2014, although early adoption is permitted.

Amended IAS 39 - “Financial Instruments: Recognition and measurement. Novation of Derivatives and Continuation of Hedge Accounting”

The new IAS 39 introduces an exception to the requirement to discontinue hedge accounting for those novations that, as a consequence of a change in law or regulation, replace the original counterparty of the hedging element for a central counterparty of another entity, such as the clearing house, as long as the change does not result in changes to the terms of the original derivative other than changes directly attributable to the change in counterparty.

These modifications will be applied to the accounting years starting on or after January 1, 2014, although early adoption is permitted.

Amended IAS 19 - “Employee Benefits. Defined Benefit Plans: Employee Contributions”

The new IAS 19 amends the accounting requirements for contributions to defined benefit plans to permit to recognize these contributions as a reduction in the service cost in the same period where they are paid if they meet certain requirements, without the need for calculations to attribute the contributions to the periods of service.

These modifications will be applied to the accounting years starting on or after July 1, 2014, although early adoption is permitted.

Annual Improvements to IFRSs 2010-2012 Cycle

Annual Improvements to IFRSs 2010-2012 Cycle introduces small modifications and clarifications to IFRS 2 - Share-based Payment, IFRS 3 - Business Combinations, IFRS 8 - Operating Segments, IFRS 13 - Fair Value Measurement, IAS 16 - Property, Plant and Equipment, IAS 24 – Related Party Disclosures and IAS 38 - Intangible Assets.

These modifications will be applied to the accounting years starting on or after July 1, 2014, although early adoption is permitted.

Annual Improvements to IFRSs 2011-2013 Cycle

Annual Improvements to IFRSs 2011-2013 Cycle introduces small modifications and clarifications to IFRS 1 - First-time Adoption of IFRSs, IFRS 3 - Business Combinations, IFRS 13 - Fair Value Measurement and IAS 40 - Investment Property.

These modifications will be applied to the accounting years starting on or after July 1, 2014, although early adoption is permitted.

3. BBVA Group

The BBVA Group is an international diversified financial group with a significant presence in retail banking, wholesale banking, asset management and private banking. The Group also operates in other sectors such as insurance, real estate, operational leasing, etc.

Appendices I and II provide relevant information as of December 31, 2013 on the Group’s subsidiaries, consolidated structured entities, and investments and joint venture entities accounted for by the equity method. Appendix III shows the main changes in investments for the year ended December 31, 2013, and Appendix IV gives details of the subsidiaries under the full consolidation method and which, based on the information available, are more than 10% owned by non-Group shareholders as of December 31, 2013.

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The following table sets forth information related to the Group’s total assets as of December 31, 2013, 2012 and 2011, broken down by the Group’s entities according to their activity:

	Millions of Euros
	Total Assets Contributed to   the Group
Contribution to Consolidated Group. Entities by Main Activities	2013	2012	2011
Banks and other financial services	556,294	593,824	563,260
Insurance and pension fund managing companie	20,023	20,481	17,033
Other non-financial services	6,258	6,766	2,545
Total	582,575	621,072	582,838

The total assets and earnings as of December 31, 2013, 2012 and 2011 broken down by the geographical areas in which the BBVA Group operates, are included in Note 6.

The BBVA Group’s activities are mainly located in Spain, Mexico, South America and the United States, with an active presence in other countries, as shown below:

— Spain

The Group’s activity in Spain is mainly through Banco Bilbao Vizcaya Argentaria, S.A., which is the parent company of the BBVA Group. The Group also has other entities that operate in Spain’s banking sector, insurance sector, real estate sector, services and as operational leasing entities.

— Mexico

The BBVA Group operates in Mexico, not only in the banking sector, but also in the insurance sector through Grupo Financiero Bancomer.

— South America

The BBVA Group’s activities in South America are mainly focused on the banking and insurance sectors, in the following countries: Argentina, Chile, Colombia, Peru, Paraguay, Uruguay and Venezuela. It has a representative office in Sao Paulo (Brazil).

The Group owns more than 50% of most of the entities based in these countries. Appendix I shows a list of the entities which, although less than 50% owned by the BBVA Group as of December 31, 2013, are fully consolidated (see Note 2.1).

— United States

The Group’s activity in the United States is mainly carried out through a group of entities with BBVA Compass Bancshares, Inc. at their head, the New York branch and a representative office in Silicon Valley (California).

— Turkey

In March 2011, the BBVA Group acquired 25.01% of the share capital of the Turkish bank Turkiye Garanti Bankasi, AS (hereinafter, “Garanti”, see Note 17). Garanti heads up a group of banking and financial institutions that operate in Turkey, Holland and some countries in Eastern Europe. BBVA also has a representative office in Istanbul.

— Rest of Europe

The Group’s activity in Europe is carried out through banks and financial institutions in Ireland, Switzerland, Italy and Portugal, operational branches in Germany, Belgium, France, Italy and the United Kingdom, and a representative office in Moscow.

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— Asia-Pacific

The Group’s activity in this region is carried out through operational branches (in Taipei, Seoul, Tokyo, Hong Kong and Singapore) and representative offices (in Beijing, Shanghai, Mumbai, Abu Dhabi and Sydney). In addition, the BBVA Group holds a stake in CITIC Group (hereinafter, “CITIC”) that includes investments in Citic International Financial Holdings Limited (hereinafter, “CIFH”) (see Note 17).

Changes in the Group in 2013

Purchase of Unnim Vida

On February 1, 2013, Unnim Banc, S.A. reached an agreement with Aegon Spain Holding B.V. to acquire the 50% of Unnim Vida, Inc. Insurance and Reinsurance (“Unnim Vida”) for a price of €352 million. Thus, the BBVA Group owned 100% of the stake of “Unnim Vida.

Sale of BBVA Panama

On July 20, 2013, BBVA announced that it had reached an agreement with the entity Leasing Bogotá S.A., Panamá, a subsidiary of Grupo Aval Acciones y Valores, S.A., for the sale of the direct and indirect ownership interest (98.92%) in Banco Bilbao Vizcaya Argentaria (Panamá), S.A. (“BBVA Panamá”).

On December 19, 2013, after having obtained the necessary approvals, BBVA completed the sale.

The total consideration that BBVA received pursuant to this sale amounted to approximately $645 million, €505 million as sale price and €140 million as distribution of dividends by BBVA Panamá from June 1, 2013.

BBVA received part of the consideration through the distribution of dividends from BBVA Panamá amounting to $140 million prior to closing (such amount has consequently reduced the purchase price to be paid to BBVA on closing).

After deducing such distribution of dividends the capital gain gross of taxes amounted to approximately €230 million which was recognized under the heading “Gains (losses) on non-current assets held for sale not classified as discontinued operations” in the consolidated income statement in 2013 (see Note 52.1).

Sale of pension businesses in Latin America

On May 24, 2012 BBVA 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.

On October 2, 2013, with the sale of “AFP Provida” (Administradora de Fondos de Pensiones AFP Provida de Chile), BBVA finalized the process. Below there is a description of each of the operations that have been carried out during this process:

Sale of AFP Provida (Chile)

On February 1, 2013, BBVA reached an agreement with MetLife, Inc., for the sale of the 64.3% stake that BBVA held direct and indirectly in the Chilean Pension Fund manager Administradora de Fondos de Pensiones Provida SA (“AFP Provida”).

On October 2, 2013, BBVA completed the sale. The total amount in cash received by BBVA was approximately 1,540 million U.S. dollars (“USD”), taking into account the purchase price amounting to roughly 1,310 million USD as well as the dividends paid by AFP Provida since February 1, 2013 amounting to roughly 230 million USD. The gain on disposal, attributable to the Parent company net of taxes, amounted to approximately €500 million which was recognized under the heading “Profit from discontinued operations (Net)” in the consolidated income statement in 2013 (see Note 52.2).

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Sale of BBVA AFP Horizonte S.A. (Peru)

On April 23, 2013, BBVA sold a wholly owned Peruvian subsidiary “AFP Horizonte SA” to “AFP Integra SA” and “Profuturo AFP, SA” who have each acquired 50% of said company.

The total consideration paid for the shares is approximately US$ 544 million. This consideration is composed by a price of approximately US$ 516 million and a dividend distributed prior to the closing of approximately US$ 28 million.

The gain on disposal, attributable to parent company net of taxes, amounted to approximately €206 million at the moment of the sale and such gain was recognized under the heading “Profit from discontinued operations (Net)” in the consolidated income statement in 2013 (see Note 52.2).

Sale of BBVA AFP Horizonte S.A. (Colombia)

On December 24, 2012, BBVA 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 BBVA held directly or indirectly in the Colombian company BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A.

On April 18, 2013, after having obtained the necessary approvals, BBVA completed the sale. The adjusted total price was US$ 541.4 million. The gain on disposal, attributable to parent company net of taxes, amounted to approximately €255 million at the moment of the sale, and was recognized under the heading “Profit from discontinued operations (Net)” in the consolidated income statement in 2013 (see Note 52.2).

Sale of Afore Bancomer (Mexico)

On November 27, 2012, BBVA reached an agreement to sell to Afore XXI Banorte, S.A. de C.V. its entire stake directly or indirectly held in the Mexican subsidiary Administradora de Fondos para el Retiro Bancomer, S.A. de C.V.

Once the corresponding authorization had been obtained from the competent authorities, the sale was closed on January 9, 2013, at which point the BBVA Group no longer had control over the subsidiary sold.

The total sale price was USD 1,735 million (approximately €1,327 million). The gain on disposal, attributable to parent company net of taxes, was approximately €771 million. (see Note 52.2).

New agreement with Citic Group

As of October 21, 2013, BBVA reached a new agreement with the Citic Group that included among other aspects the sale of its 5.1% stake in China Citic Bank Corporation Limited (CNCB) to Citic Limited for an amount of approximately €944 million, after this sale, the stake of BBVA in CNCB was reduced to the 9.9%.

Simultaneously, BBVA and the Citic Group agreed to adapt their strategic cooperation agreement to the new situation, removing the exclusivity obligations that affected the activities of BBVA in the PRC, and agreeing to negotiate new areas of cooperation among both banks, as BBVA’s current intention is to remain a key long term investor in CNCB.

In accordance with IFRS 11, the new situation implies a change in the accounting criteria applied to the participation of BBVA in CNCB, being now a no material financial participation recognized under the heading “Available-for-sale financial assets” (see Note 12).

As a result of this change in the accounting criteria and the mentioned sale, the loss attributable to the BBVA Group at the time of the sale amounted to approximately €2,600 million which was recognized under the heading “Gains (losses) on derecognized assets not classified as non-current assets held for sale” in the consolidated income statement in 2013 (see Note 51).

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Changes in the Group in 2012

Acquisition of Unnim

On March 7, 2012, the Governing Board of the Fund for Orderly Bank Restructuring (FROB) awarded BBVA Unnim Banc, S.A. (hereinafter “Unnim”).

This was done through a share sale purchase agreement between FROB, the Credit Institution Deposit Guarantee Fund (hereinafter “FGD”) and BBVA, under which BBVA was to purchase 100% of the shares of Unnim for €1.

A Protocol of Financial Support Measures was also concluded for the restructuring of Unnim. This regulates an asset protection scheme (EPA) whereby the FGD will assume 80% of the losses that may be incurred on a portfolio of predetermined Unnim assets for the next 10 years.

On July 27 2012, following the completion of the transaction, Unnim became a wholly owned subsidiary of BBVA.

Sale of the business in Puerto Rico

On June 28, 2012, BBVA reached an agreement to sell its business in Puerto Rico to Oriental Financial Group Inc.

This agreement included the sale of 100% of the common stock of BBVA Securities of Puerto Rico, Inc. and BBVA PR Holding Corporation, which in turn owned 100% of the common stock of Banco Bilbao Vizcaya Argentaria Puerto Rico and of BBVA Seguros Inc.

Once the corresponding authorization had been obtained from the competent authorities, the sale closed on December 18, 2012, at which point the BBVA Group no longer had control over the businesses.

The sale price was USD 500 million (around €385 million at the exchange rate on the transaction date). Gross losses from the sale were around €15 million (taking into account the exchange rate at the transaction date and the earnings of these entities up to December 18, 2012). These capital losses are recognized under the heading “Gains (losses) on non-current assets held for sale not classified as discontinued operations” in the consolidated income statement for 2012 (see Note 51).

Changes in the Group in 2011

Acquisition of a capital holding in the bank Garanti

On March 22, 2011, BBVA bought 24.89% of the capital stock of Turkiye Garanti Bankasi, AS (Garanti) from the Dogus Group. It subsequently bought from the open market an additional 0.12% , increasing the BBVA Group’s total stake in the common stock of Garanti to 25.01%. The total price of both acquisitions amounted to USD 5,876 million (€4,140 million, taking into account the hedging derivatives contracted to hedge the deal’s euro/dollar exchange-rate risk).The agreements with the Dogus group include an arrangement for the joint management of Garanti 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 Bank five years after the initial purchase. Beginning January 1, 2013, 25,01% participation in Garanti accounted into the BBVA Group via the equity method (see Note 17), in accordance with the new IFRS 10 and IFRS 11.

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4. Shareholder remuneration system and allocation of earnings

Shareholder remuneration system

A shareholder remuneration system called the “Dividend Option” was implemented in 2011 and 2012. The Bank’s Shareholders’ Annual General Meeting held on March 15, 2013 once more approved the establishment of the “Dividend Option” program for 2013, through two share capital increases charged to voluntary reserves, under similar conditions to those established in 2011 and 2012. Under this remuneration scheme, BBVA offers its shareholders the chance to receive part of their remuneration in the form of free shares; however, they can still choose to receive it in cash by selling the rights assigned to them in each capital increase either to BBVA (by the Bank exercising its commitment to purchase the free assignment rights) or on the market.

In April 2013, the Executive Committee approved the execution of the first of the capital increases charged to reserves as agreed by the AGM held on March 15, 2013 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €40,862,919.86, (83,393,714 shares at a €0.49 par value each). 85.71% of shareholders opted to receive their remuneration in the form of shares (see Note 27). The other 14.29% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 778,801,510 rights for a total amount of €94,234,982.71; said shareholders were rewarded in cash form.

In October 2013, the Executive Committee approved the execution of the second of the capital increases charged to reserves as approved during the AGM held on March 15, 2013 to implement the Dividend Option. As a result of this increase, the Bank’s common stock increased by €30,197,696.48, (61,627,952 shares at a €0.49 par value each). 88.28% of shareholders opted to receive their remuneration in the form of shares (see Note 27). The other 11.72% of the right owners opted to sell the rights assigned to them to BBVA, and as a result, BBVA acquired 670,834,333 rights for a total amount of €66,412,598.97; said shareholders were rewarded in cash form.

Dividends

At its meeting of June 24, 2013, the Board of Directors of BBVA approved the payment of an interim dividend against 2013 earnings of €0.10 gross (€0.079 net) per outstanding share to be paid on July 10, 2013.

The expected financial statements prepared in accordance with legal requirements evidenced the existence of sufficient liquidity for the distribution of the amounts to the interim dividend, as follows:

	Millions of Euros
Available amount for interim dividend payments	May 31,         2013
Profit of BBVA, S.A. at each of the dates indicated, after the provision for income tax	1,639
Less -
Estimated provision for Legal Reserve	(8)
Acquisition by the bank of the free allotment rights in 2013 capital increase	(94)
Maximum amount distributable	1,537
Amount of proposed interim dividend	553
BBVA cash balance available to the date	1,129

The first amount interim dividend which was paid to the shareholders on January 10, 2013, including the new shares issued on July 3 through the capital increase described in Note 27 and after deducting the treasury shares held by the Group’s entities, amounted to €570 million

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The allocation of earnings for 2013 subject to the approval of the Board of Directors at the Annual Shareholders Meeting is presented below:

	Millions of Euros
Allocation of Earnings	2013
Profit for year (*)	1,406
Distribution:
Interim dividends	572
Acquisition by the bank of the free allotment rights(**)	161
Additional Tier 1 securities	35
Legal reserve	33
Voluntary reserves	605

(*) Net Income of BBVA S.A. (Appendix X).

(**) Concerning to the remuneration to shareholders who choose to be paid in cash through the “Dividend Option”

5. Earnings per share

In accordance with the criteria established by IAS 33:

— Basic earnings per share are determined by dividing the “Profit attributable to Parent Company” by the weighted average number of shares outstanding throughout the year (i.e., excluding the average number of treasury shares held over the year).

— Diluted earnings per share are calculated by using a method similar to that used to calculate basic earnings per share; the weighted average number of shares outstanding, and the profit attributable to the parent company, if appropriate, is adjusted to take into account the potential dilutive effect of certain financial instruments that could generate the issue of new Bank shares (share option commitments with employees, warrants on parent company shares, convertible debt instruments, etc.).

The following transactions were carried out in 2013 with an impact on the calculation of basic and diluted earnings per share:

— The Bank issued additional share capital in 2013 (see Note 27). In accordance with IAS 33, when calculating the basic and diluted earnings per share, all years prior to the exercise of the rights must be taken into account, and a corrective factor applied to the denominator (the weighted average number of shares outstanding) only in the case of capital increases other than those for the conversion of securities into shares. This corrective factor is the result of dividing the fair value per share immediately before the exercise of rights by the theoretical ex-rights fair value per share. The basic and diluted earnings per share for 2012 and 2011 were recalculated on this basis.

— In 2013, the Bank agreed issued contingently convertible perpetual securities into ordinary shares of BBVA, without pre-emption rights, for a total amount of USD1.5 billion. Since the conversion of these perpetual securities will occur only if certain conditions are met, these shares are considered outstanding for purposes of basic earnings per share calculations only after all applicable conditions have been met. Until that point, they will be considered only for purposes of diluted earnings per share calculations.

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The calculation of earnings per share is as follows:

Basic and Diluted Earnings per Share	2013		2012 (*)		2011 (*)
Numerator for basic and diluted earnings per share (millions of euros)
Profit attributable to parent company		2,228		1,676		3,004
Adjustment: Mandatory convertible bonds interest expenses (1)		-		95		38
Profit adjusted (millions of euros) (A)		2,228		1,771		3,042
Profit from discontinued operations (net of non-controlling interest) (B)		1,819		319		197
Denominator for basic earnings per share (number of shares outstanding)
Weighted average number of shares outstanding (2)		5,597		5,148		4,635
Weighted average number of shares outstanding x corrective factor (3)		5,597		5,307		4,959
Adjustment: Average number of estimated shares to be converted		-		315		134
Adjusted number of shares - Basic earning per share (C)		5,597		5,622		5,093
Adjustment: Average number of estimated shares to be converted due to perpetual securities		95		-		-
Adjusted number of shares - diluted earning per share (D)		5,692		5,622		5,093
Basic earnings per share from continued operations (Euros per share)A-B/C		0.07		0.27		0.58
Diluted earnings per share from continued operations (Euros per share)A-B/D		0.07		0.27		0.58
Basic earnings per share from discontinued operations (Euros per share)B/C		0.33		0.06		0.04
Diluted earnings per share from discontinued operations (Euros per share)B/D		0.32		0.06		0.04

(1) Financial costs of convertible bonds that have been converted in June 2013.

(2) Weighted average number of shares outstanding (millions of euros), excluded weighted average of treasury shares during the period.

(3) Corrective factor, due to the capital increase with pre-emptive subscription right, applied for the previous years.

(*) Data recalculated due to the mentioned corrective factor.

As of December 31, 2013, 2012 and 2011, except for the aforementioned contingently convertible perpetual securities, there were no other financial instruments or share option commitments with employees that could potentially affect the calculation of the diluted earnings per share for the years presented.

6. Operating segment reporting

Operating segment reporting represents a basic tool in the oversight and management of the BBVA Group’s various activities. The BBVA Group compiles reporting information on as disaggregated level as possible, and all data relating to the businesses these units manage is recognized in full. These minimum level units are then aggregated in accordance with the organizational structure determined by the BBVA Group management into higher level units and, ultimately, the reporting segments themselves.

Once the composition of each of the operating segments in the BBVA Group has been defined, certain management criteria are applied, noteworthy among which are the following:

- Internal transfer prices: The calculation of the net interest income of each business is performed by applying the internal transfer rates to both the asset and liability entries. These rates are composed of a market rate that depends on the revision period of the operation, and a liquidity premium that aims to reflect the conditions and outlook of the financial markets. Earnings are distributed across revenue-generating and distribution units (e.g., in asset management products) at market prices.

- Allocation of operating expenses: Both direct and indirect expenses are allocated to the operating segments, except for those items for which there is no clearly defined or close link with the businesses, as they represent corporate or institutional expenses incurred on behalf of the Group as a whole.

- Cross-selling: On certain occasions, adjustments are made to eliminate overlap accounted for in the results of two or more units as a result of encouraging cross-selling between businesses.

During 2013, progress was made in the structure of reporting by geography within the different business segments of the BBVA Group. In particular, Spain includes those portfolios, funding and structural positions of the Euro balance sheet that are managed by COAP, which were previously included in Corporate Activities. Additionally, given the peculiarity of its management, assets and income statement information related to the Spanish real estate business are presented separately, both in the case of real estate developers and foreclosed assets, previously included in Corporate Activities. As a result, the composition of the operating segments in 2013 is different from that presented in 2012 and 2011, and is now as follows:

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— Banking activity in Spain (from now on, Spain) which as in previous years includes).

- The Retail network, with the segments of individual customers, private banking, and small businesses

- Corporate and Business Banking (CBB), which handles the SMEs, corporations and public sector in the country.

- Corporate & Investment Banking (CIB), which includes business with large corporations and multinational groups and the trading floor and distribution business in the same geographical area

- Other units, among them BBVA Seguros and Asset Management (management of mutual and pension funds in Spain

- In addition, starting in 2013 it also includes the portfolios, finance and structural interest-rate positions of the euro balance sheet.

— Real estate activity in Spain

This new operating segment has been set up with the aim of providing specialized and structured management of the assets of the real-estate area accumulated by the Group as a result of the crisis in Spain. It therefore mainly combines loans to real-estate developers (previously reported in Spain) and foreclosed real estate assets (previously reported in Corporate Activities).

— Eurasia

As in 2012 includes the business carried out in the rest of Europe and Asia, i.e. the retail and wholesale businesses of the BBVA Group in the area. It also includes BBVA’s stakes in the Turkish bank Garanti and the Chinese banks CNCB and CIFH.

— Mexico

Comprising of the banking and insurance businesses. The banking business includes retail business through its Commercial Banking, Consumer Finance and Corporate and Institutional Banking units; and wholesale banking through CIB.

— The United States

Encompasses the Group’s businesses in the United States. Historical data in this area has been reconstructed to exclude the business in Puerto Rico, which was sold in December 2012, and include it in the Corporate Center.

— South America

Includes the banking and insurance businesses that BBVA carries out in the region.

Finally, Corporate Center is an aggregate that contains the remainder of the items that have not been allocated to the operating segments, as it basically corresponds to the Group’s holding function. It groups together the costs of the headquarters that have a corporate function; management of structural exchange-rate positions, carried out by the Financial Planning unit; specific issues of capital instruments to ensure adequate management of the Group’s global solvency; portfolios and their corresponding results, whose management is not linked to customer relations, such as industrial holdings; certain tax assets and liabilities; funds due to commitments with pensioners; goodwill and other intangibles. Additionally includes the result of certain corporate transactions:

- The sale of pension business of Mexico, Colombia, Peru and Chile.

- The sale of BBVA Panama.

- The signing of a new agreement with the CITIC Group, which includes the sale of 5.1% of CNBC.

- And BBVA Puerto Rico until its sale in December 2012.

The figures corresponding to 2012 and 2011 have been restated in accordance with the same criteria and the same structure of operating segments as explained above and also in Note 3 (sale of pensions business in Latin America). This will allow for homogeneous year-on-year comparisons.

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The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2013, 2012 and 2011, is as follows:

	Millions of Euros
Total Assets by Operating Segments	2013	2012	2011
Spain	315,561	345,362	323,249
Real Estate	20,563	21,923	22,558
Eurasia	41,223	48,324	53,439
Mexico	82,171	81,723	72,156
South America	78,141	77,474	62,651
United States	53,042	53,892	53,090
Subtotal Assets by Operating Segments	590,700	628,698	587,143
Corporate Center and other adjustments (*)	(8,125)	(7,625)	(4,305)
Total Assets BBVA Group	582,575	621,072	582,838

(*) Includes adjustments due to Garanti Group accounted for using the equity method (See Note 2) and other inter-areas adjustments. For more information see Appendix X.

The profit and main earning figures in the consolidated income statements for the year ended December 31, 2013, 2012 and 2011 by operating segments are as follows:

	Millions of Euros
			Operating Segments
Main Margins and Profits by Operating Segments		BBVA Group	Spain	Real Estate	Eurasia	Mexico	South America	United States	Corporate Center	Adjusments (**)
2013
Net interest income		13,900	3,830	(3)	911	4,484	4,703	1,407	(719)	(713)
Gross income		20,958	6,095	(38)	1,721	6,201	5,630	2,101	(314)	(439)
Net operating income (*)		10,162	3,081	(190)	987	3,865	3,244	627	(1,419)	(34)
Operating profit /(loss) before tax		1,160	222	(1,840)	593	2,362	2,387	534	(1,507)	(1,590)
Profit		2,228	583	(1,254)	454	1,805	1,249	390	(999)
2012
Net interest income		14,474	4,748	(20)	851	4,178	4,288	1,551	(473)	(648)
Gross income		21,824	6,665	(84)	1,665	5,756	5,360	2,243	288	(68)
Net operating income (*)		11,450	3,778	(211)	886	3,590	3,066	737	(741)	344
Operating profit /(loss) before tax		1,582	1,652	(5,705)	508	2,229	2,271	619	(826)	833
Profit		1,676	1,162	(4,044)	404	1,689	1,199	443	823
2011
Net interest income		12,724	4,248	104	806	3,782	3,159	1,518	(465)	(428)
Gross income		19,640	6,246	124	1,467	5,323	4,099	2,182	88	112
Net operating income (*)		10,196	3,408	23	821	3,392	2,215	762	(830)	405
Operating profit /(loss) before tax		3,398	1,515	(1,216)	722	2,153	1,677	(1,053)	(852)	452
Profit		3,004	1,075	(809)	563	1,638	898	(713)	351

(*) Gross Income less Administrative Cost and Amortization

(**) Includes adjustments due to Garanti Group accounted for using the equity method and other inter-areas adjustments. For more information see Appendix X.

7. Risk management

The BBVA Group understands the risk management function as one of the essential and differentiating elements of its competitive strategy. In this context, the aim of the Global Risk Management (GRM) Corporate Area is to preserve the BBVA Group’s solvency, help define its strategy with respect to risk and assume and facilitate the development of its businesses. Its activity is governed by the following principles:

— The risk management function is single, independent and global.

— The risks assumed by the BBVA Group must be compatible with the capital adequacy target and must be identified, measured and assessed. Risk monitoring and management procedures and sound mechanisms of control and mitigation systems must likewise be in place.

— All risks must be managed integrally during their life cycle, and be treated differently depending on their nature and with active portfolio management based on a common measure (economic capital).

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— It is each operating segment’s responsibility to propose and maintain its own risk profile, within its autonomy in the corporate action framework (defined as the set of risk control policies and procedures defined by the BBVA Group), using an appropriate risk infrastructure to control their risks.

— The infrastructures created for risk control must be equipped with means (in terms of people, tools, databases, information systems and procedures) that are sufficient for their purpose, so that there is a clear definition of roles and responsibilities, thus ensuring efficient allocation of resources among the corporate area and the risk units in operating segments.

In light of these principles, integrated risk management is structured around five main components:

— A governance and organizational system for the risk function, which considers:

- Definition of roles and responsibilities for different functions and areas

- Organizational structure of the GRM Corporate Area and Risk Units of the operating segments, including relationship and codependency mechanisms

- Committee Schemes at a Corporate and operating segment levels

- Structure delegation of functions and risks

- Internal control system in line with the nature and volume of risk exposure

— A general risk framework, where the Group’s risk profile objective is defined and where the tolerance levels that the Group is willing to assume is clearly defined in order to carry out its strategic plan without relevant deviations, even in stress situations.

— A risk management corporate governance scheme which includes:

- a regulatory body of policies and procedures, tolerances and corrective actions

- Annual risk planning scheme whereby Risk Appetite is incorporated into the Group’s business decision making process

- ongoing management of financial and non-financial risks

— A Framework for Identification, Assessment, Monitoring and Reporting of risks assumed in base and stress scenarios, allowing prospective and dynamic risk assessment

— An infrastructure that encompasses the set of tools, methodologies and risk culture that is the basis on which the differentiated risk management scheme is founded.

Corporate governance system

The BBVA Group has developed a corporate governance system in line with the best international practices, which adapts to the regulatory requirements of the countries where its operating segments carry out their business.

The Board of Directors is, in accordance with the Regulations of the Board, the body responsible for approving the policy control and risk management, as well as performing the periodic monitoring of internal information and control systems. Based on the general policies established by the Board of Directors, the Executive Committee (EC) sets corporate policies that previously been approved by the Board of Directors and the Group’s risk limits by geographies, sectors and portfolios composing all the corporate action framework on risk. In this context, and for the adequate performance of its functions, the EC has a key role in developing the Risk Committee of the Board which, among other functions, analyzes and evaluates proposals on these issues that are risen to the EC for approval, performing a continuous monitoring of risk evolution and approving transactions that are considered relevant for qualitative or quantitative reasons.

Risk management in the BBVA Group from a corporate action framework set by the governing bodies of the Bank is carried out by corporate risk management units and the operating segments themselves. Thus, the risk function in the Group (Global Risk Management, hereinafter GRM), is distributed among the risk units of the operating segments and the GRM corporate area, the latter being responsible for ensuring compliance with policies and global strategies. The risk units of the operating segments advise and manage risk profiles within their autonomy, though they always respect the corporate framework for action.

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The Corporate GRM Area combines a vision by risk type with a global vision. It is divided into six units, as follows:

— Corporate Risk Management and Risk Portfolio Management: Responsible for management and control of the BBVA Group’s financial risks. In addition, this area focuses on fiduciary risk management, insurance, Asset Management and monitors the retail banking business from a cross functional point of view.

— Operational and Control Risk: Manages operational risk, internal risk area control and the internal validation of the measurement models and the acceptance of new risks.

— Technology & Methodologies: Responsible for the management of the technological and methodological developments required for risk management in the Group.

— Technical Secretariat: Undertakes the contrast of the proposals made to the Risk Management Committee and the Risk Committee.

— Planning, Monitoring & Reporting: Responsible for the development of the ERM framework and the definition and monitoring of risk appetite. It also prepares reporting requirements, both internal and regulatory, for those risks the Group is exposed to.

— GRM South America: Responsible for credit risk management and monitoring in South America.

The head of the GRM Department is the Chief Risk Officer, and, among his responsibilities, ensures that the Group’s risks are managed according to the defined policy, relying on the GRM corporate area units and the risk units of the operating segments. In turn, the risk managers of the operating segments maintain a hierarchical reporting line with the head of their operating segment and a functional reporting to the Group Chief Risk Officer. This structure ensures the independence of the role of local risk and alignment with the policies and objectives of the Group. This structure gives the Corporate GRM Area reasonable comfort with respect to:

— integration, control and management of all the Group’s risks;

— the application throughout the Group of standard principles, policies and metrics; and

— the necessary knowledge of each geographical area and each business.

This organizational scheme is complemented by various committees, which include the following:

— The Global Risk Management Committee: This committee is made up of the risk managers from the risk units located in the operating segments and the managers of the GRM Corporate Area units. This committee meets on a monthly basis and among its responsibilities are the following:

- establishing the Group’s risk strategy and presenting its proposal to the appropriate governing bodies, and in particular to the Board of Directors, for their approval,

- monitoring the management and control of risks in the Group, and

- adopting any necessary actions.

— The Risk Management Committee: Its permanent members are the Global Risk Management director, the Corporate Risk Management director and the Technical Secretariat. The other committee members propose the operations that are analyzed in its working sessions. The committee analyzes and, if appropriate, authorizes financial programs and operations within its scope and submits the proposals whose amounts exceed the set limits to the Risks Committee, when its opinion on them is favorable.

— The Assets and Liabilities Committee (ALCO): The committee is responsible for actively managing structural interest rate and foreign exchange risk positions, global liquidity and the Group’s capital base.

— The Technology and Methodologies Committee: The committee decides on the effectiveness of the models and infrastructures developed to manage and control risks that are integrated in the operating segments, within the framework of the operational model of Global Risk Management.

— The New Businesses and Products Committees: Their functions are to analyze and, where appropriate, give technical approval to and implement new businesses, products and services prior to their marketing: to undertake subsequent control and monitoring of new authorized products; and to foster orderly business operations to ensure they develop in a controlled environment.

— The Global Corporate Assurance Committee: Its task is to undertake a review at both Group and operating segment level of the control environment and the effectiveness of the operational risk internal control and management systems, as well as to monitor and analyze the main operational risks the Group is subject to, including those that are cross-cutting in nature.

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Internal control system

The BBVA Group’s internal control system is based on the best practices developed in “Enterprise Risk Management – Integrated Framework” by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as well as in “Framework for Internal Control Systems in Banking Organizations” by the Bank for International Settlements (BIS). The Group’s system for internal control is therefore part of the Integral Risk Management Framework.

The system of internal control of the Group reaches all areas of the organization and is designed to identify and manage the risks that the Group companies are facing and ensuring that the corporate objectives are met.

The control model has a three-line defense system:

— The first line is formed by the Group’s operating segments, which are responsible for the control within their scope and implementation of the measures set by higher authorities.

— The second line are the specialists control units (Compliance, Global Accounting & Informational Management / Financial Internal Control, Risk Internal Control, IT Risk, Fraud & Security, Operational Control and production director support units, such as Human Resources, Legal, etc. …). This line supervises the control of the different units from a horizontal hierarchy stand point. Also, reporting to this line is the operational risk corporate management unit, which provides a common methodology and management tools.

— The third line is the Internal Audit unit, which conducts an independent review of the model, verifying compliance and effectiveness of corporate policies and providing independent information on the control model.

Find following list shows the main principles that support the internal control system:

- Its core element is the “process.”

- The form in which the risks are identified, assessed and mitigated must be unique for each process; and the systems, tools and information flows that support the internal control and operational risk activities must be unique, or at least be administered fully by a single unit.

- The responsibility for internal control lies with the BBVA Group’s operating segments. These units, along with the specialized units mentioned above, are responsible for the implementation of the system of control within its scope of responsibility and managing the existing risk by proposing any improvements to processes it considers appropriate.

- Given that some operating segments have a global scope of responsibility, there are cross-cutting control functions which supplement the control mechanisms mentioned earlier.

- The Operational Risk Management Committee in each operating segment is responsible for approving suitable mitigation plans for each existing risk or weakness. This committee structure culminates at the Group’s Global Corporate Assurance Committee.

Within the GRM area, the Group has set up a unit of Internal Risk Control and Risk Validation that is independent from the units that develop models, manage processes and execute controls, and provide expert resources for the management of the different types of risks. Its objectives are:

— Ensure that there is a policy, process and measures identified for each risk relevant to the group.

— Ensure that these are implemented and applied in the manner in which they were defined.

— Control and communication any identified deficiencies and setting goals for improvement.

— Internal validation of models, independent from the model development process.

Both units report their activities and report their working plans to the Risk Committee of the Board.

The Internal Risk Control is built into the second line of defense. It has a global scope, both geographically and in terms of type of risk, reaching to all those risk types managed by the Corporate Risk Area. For the development of its function, the unit has a team structure at the corporate level and at the geography level in the case of the most important geographies in which the Group operates. As in the Corporate Area, the local units are maintained independent from the operating segment processes and from those units that execute controls. It maintains however a functional dependency to the Internal Risk control unit. The lines of action of this unit are set at a Group level, adapting and executing at a local level as well as reporting the most relevant aspects.

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Risk Appetite Framework

The Group Risk policy is aimed towards a moderate risk profile through conservative management and a global banking business model diversified by geographical area, type of assets, portfolios and customers. The Group has a large international presence, both in emerging and developed countries, maintaining a medium/low risk profile in each geography while seeking sustainable growth over time.

In order to achieve the above, a number of key metrics have been established that characterize the objective of the entity behavior and are enforced across the organization. These metrics are related to the solvency, liquidity and recurrence of results; and depending on the circumstances prevailing in each case, determine the risk in the Group and allow to reach the desired objectives.

Tolerance levels for key metrics are proposed by the GRM and approved by the Executive Committee. These metrics define the risks that the group is willing to assume. They defined the Group’s Risk Appetite and therefore are considered permanent save for exceptions.

Also, on an annual basis, the Executive Committee establishes, after a proposal from GRM and favorable report of the Risk Committee, limits for the main types of risks present in the Group, such as credit, liquidity, funding and market. The compliance with these limits is monitored periodically through Risk committees. For credit risk, limits are defined at portfolio and/or sector level for each operating segment. In credit risk limits defined portfolio level and / or sector and for each operating segment. These thresholds are the maximum exposure to lending for the BBVA Group for a time horizon of one year.

The Group’s objective is not to eliminate all risks, but to take a prudent level of risk that will generate results while maintaining adequate levels of capital and funding in order to generate recurring profits.

Corporate Scheme of Risk Management

Corporate Scheme of Risk Management includes macro processes as detailed below:

— Regulatory enhancement process for the Risk area. GRM has established a set of principles, policies and procedures that serve as foundation to the regulatory structure of the risk function. The objectives are:

- Consistency of all policies of the Group, Holding and local level, with the guiding principles of risk appetite and within themselves.

- Uniformity between the operating segments in the implementation of risk policies, avoiding disparities in the risks taken based on the operating segment.

- Framework of action, establishing the general lines of action for the operating segments, respecting the autonomy of these units.

— Annual Planning Process: Planning is done taking into account the risk appetite and establishes a series of limits by type of asset that ensure consistency with the global objective profile of the Group’s risk.

— Management of the main risks which are faced by the Group are the following:

- Credit risk:

This arises from the probability that one party to a financial instrument will fail to meet its contractual obligations for reasons of insolvency or inability to pay and cause a financial loss for the other party. This includes management of counterparty risk, issuer credit risk, liquidation risk and country risk.

Management of credit risk covers the analytic process before decisions have been taken, decision making, instrumentation, monitoring formalized and recovery operations, as well as the entire process of control and reporting at customer level, segment, industry, operating segment or subsidiary. The main principles on which decision-making should be supported within credit risk are: a sufficient customer generation of resources and capital solvency and the existence of adequate and effective collateral. The management of credit risk in the Group has a comprehensive structure that allows all functions making decisions objectively and independently throughout the life cycle risk.

- Market risk:

This is originated by the likelihood of losses in the value of the positions held as a result of changes in the market prices of financial instruments. The BBVA Group manages this risk in terms of probability of VaR (Value at Risk). It includes three types of risks:

- Interest-rate risk: This arises from variations in market interest rates.

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- Exchange Rate risk: This is the risk resulting from variations in foreign-currency exchange rates.

- Price risk: This is the 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

Control, monitoring and management of liquidity risk and funding aims in the short term, ensuring compliance with payment obligations of the BBVA Group in the time and manner provided, without the need to obtain funds under unfavorable conditions. In the mid-term it aims to ensure the adequacy of the Group’s financial structure and its evolution in the context of the economic, market and regulatory changes.

- Structural risk, includes the following:

- Interest rate structural risk: The management of this kind of risk seeks to maintain exposure levels for the BBVA Group in line with its strategy and risk profile to address changes in market interest rates. For this aim, ALCO carries out an active balance sheet management through operations intended to optimize the level of risk in relation to the expected results and with respect to the maximum tolerable risk levels. The activity of the ALCO uses the interest rate risk measurements performed by the Corporate Area GRM.

- Exchange rate structural risk: This risk arises primarily from exposure to changes in exchange rates arising from foreign companies to the BBVA Group and endowment funds to branches abroad financed in a different currency the investment. Managing this risk is based on a simulation model of scenarios to quantify the changes in value that can be produced with a given confidence level and a horizon predetermined, and ALCO is the responsible for arranging hedging transactions, to restrict the equity impact due to the changes in exchange rates according to their projected trend.

- Structural equity risk: This risk arises due to the possible negative impact due to the impairment value of its investments in Industrial and Financial entities with medium and long horizons. The Corporate area GRM is responsible for measurement and effective monitoring of the structural risk of equity, estimating for this reason the sensitivity and the capital required to cover any unexpected losses arising from changes in value of the companies comprising the investment portfolio of the Group, with a confidence level in accordance with the target entity rating, taking into account liquidity positions and the statistical behavior of the assets under consideration.

- Operational risk:

This arises from the possibility of human error, inadequate or faulty internal processes, system failures or external events. This definition includes the legal risk and excludes strategic and/or business risk and reputational risk The operational risk management in the Group is based on the levers of value that generates advanced AMA (advanced measurement approach): knowledge, identification, prioritization and management of potential and actual risks, supported by indicators to analyze the evolution, define alerts and check the controls.

Framework for identifying, analyzing and monitoring risk

The process of identification, assessment and monitoring / reporting have the following objectives:

— Evaluate the performance of risk appetite in the present moment.

— Identified and evaluate risk situation that may compromise the performance of the risk appetite.

— Evaluate the performance of risk appetite to future under basis and stress scenario.

Infrastructure: Technology, Culture and Risk Methodologies

— Technology: assessing the adequacy of information systems and technology necessary for the performance of the functions within the framework of integrated risk management of the Group.

— The BBVA Group’s main activities with respect to the management and control of its risks are as follows:

- Calculation of exposure to risks of the different portfolios, taking into account any possible mitigating factors (guarantees, balance netting, collaterals, etc.).

- Calculation of the probabilities of default (hereinafter, “PD”).

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- Estimation of the foreseeable losses in each portfolio, assigning a PD to new operations (rating and scoring).

- Measurement of the risk values of the portfolios in different scenarios through historical simulations.

- Establishment of limits to potential losses according to the different risks incurred.

- Determination of the possible impacts of structural risks on the BBVA Group’s consolidated income statement.

- Identification and quantification of operational risks, by operating segments, to facilitate mitigation through appropriate corrective actions.

— Risk Culture

In accordance with best practice and in line with recent regulatory recommendations, BBVA has implemented a robust risk culture that spreads all levels of the organization so that principles of risk management could be unique, and known throughout the group.

Global Risk Management Risk Culture diffuses as a value and as a fundamental part of its management model, with the aim to strengthening the direction of the risk management, emphasizing that this culture could be communicated, understood, accepted and controlled throughout the organization.

Risk Culture has opted for three different areas:

- Communication, which aims to spread understanding of the Risk Management Framework of the Group consistently and integrated throughout the organization through the most appropriate channels of communication.

- Training, in which specific formats have been developed to raise awareness of risks in the organization and ensure certain standards in skills and knowledge of Risk Management

- Compensation, area where it is intended that the financial and non-financial incentives could support the values and culture of risk at all levels and for which they have been established mechanisms based on the risk management, in accordance with the objectives established by the Group.

It has been established continuously monitored to verify proper implementation of these areas and their development.

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7.1 Credit risk

7.1.1      Credit risk exposure

In accordance with IFRS 7, the BBVA Group’s maximum credit risk exposure (see definition below) by headings in the balance sheet as of December 31, 2013, 2012 and 2011 is provided below. It does not consider the availability of collateral or other credit enhancements to guarantee compliance with payment obligations. The details are broken down by financial instruments and counterparties.

		Millions of Euros
Maximum Credit Risk Exposure	Notes	2013	2012	2011
Financial assets held for trading		29,708	28,265	20,946
Debt securities	10	29,602	28,020	20,946
Government		24,696	23,370	17,955
Credit institutions		2,734	2,545	1,889
Other sectors		2,172	2,106	1,102
Customer lending		106	244	-
Other financial assets designated at fair value through profit or loss		664	753	708
Debt securities	11	664	753	708
Government		142	174	129
Credit institutions		16	45	44
Other sectors		506	534	535
Available-for-sale financial assets		71,439	62,615	48,507
Debt securities	12	71,439	62,615	48,507
Government		48,728	38,926	32,476
Credit institutions		10,431	13,157	7,067
Other sectors		12,280	10,532	8,964
Loans and receivables		364,030	384,097	377,519
Loans and advances to credit institutions	13.1	22,792	25,372	24,400
Loans and advances to customers	13.2	336,759	354,973	350,239
Government		32,400	34,917	34,941
Agriculture		4,982	4,738	4,697
Industry		28,679	30,731	34,834
Real estate and construction		40,486	47,223	49,418
Trade and finance		47,169	51,912	54,736
Loans to individuals		149,891	151,244	137,437
Other		33,151	34,208	34,176
Debt securities	13.3	4,481	3,751	2,880
Government		3,175	2,375	2,128
Credit institutions		297	453	461
Other sectors		1,009	923	291
Held-to-maturity investments	14	-	10,163	10,955
Government		-	9,210	9,896
Credit institutions		-	393	451
Other sectors		-	560	608
Derivatives (trading and hedging)		41,294	49,208	53,561
Subtotal		507,135	535,101	512,196
Valuation adjustments		1,068	338	530
Total Financial Assets Risk		508,203	535,439	512,726
Financial guarantees (Bank guarantees, letter of credits,)		33,543	37,019	37,629
Drawable by third parties		87,542	83,519	86,375
Government		4,354	1,360	3,143
Credit institutions		1,583	1,946	2,417
Other sectors		81,605	80,213	80,815
Other contingent commitments		6,628	6,624	4,313
Total Contingent Risks and Commitments	34	127,713	127,161	128,317
Total Maximum Credit Exposure		635,916	662,601	641,043

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The maximum credit exposure of the table above is determined by type of financial asset as explained below:

— In the case of financial assets recognized in the consolidated balance sheets, exposure to credit risk is considered equal to its gross accounting value, not including certain valuation adjustments (impairment losses, derivatives and others), with the sole exception of trading and hedging derivatives.

— The maximum credit risk exposure on financial guarantees granted is the maximum that the Group would be liable for if these guarantees were called in, and that is 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”).

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 in accordance with IAS 39.

The second factor, potential risk (‘add-on’), is an estimate (using 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 the fair value over the remaining term of the derivatives.

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 BBVA Group has to consider not only the credit exposure of the derivatives on the reporting date, but also the potential changes in exposure during the life of the contract. This is especially important for derivatives, whose valuation changes substantially throughout their terms, depending on the fluctuation of market prices.

7.1.2     Mitigation of credit risk, collateralized credit risk and other credit enhancements

In most cases, maximum credit risk exposure is reduced by collateral, credit enhancements and other actions which mitigate the Group’s exposure. The BBVA Group applies 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, as the assumption of risks by the Group requires prior evaluation of the debtor’s capacity for repayment, or that the debtor can generate sufficient resources to allow 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 constitution of guarantees that are adequate, or at any rate generally accepted, for the risk assumed, in any of the generally accepted forms: monetary, secured, personal or hedge guarantees; and finally,

— 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 and Procedures (retail and wholesale), which establish the basic principles for credit risk management, including the management of collaterals assigned in transactions with customers.

The methods used to value the collateral are in line with the best market practices and imply the use of appraisal of real-estate collateral, the market price in market securities, the trading price of shares in mutual funds, etc. All the collaterals assigned must be properly drawn up 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 types of collateral for each financial instrument class:

— Financial instruments 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.

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The Group uses credit derivatives to mitigate credit risk in its loan portfolio and other cash positions and to hedge risks assumed in market transactions with other clients and counterparties. 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 €25,475 million as of December 31, 2013, €32,586 million as of December 31, 2012 and €34,770 million as of December 31, 2011.

Derivatives may follow different settlement and netting agreements, under the rules of the International Swaps and Derivatives Association (ISDA). The most common types of settlement triggers include bankruptcy of the reference credit institution, acceleration of indebtedness, failure to pay, restructuring, repudiation and dissolution of the entity. Since the Group typically confirms over 99% of the credit derivative transactions in the Depository Trust & Clearing Corporation (DTCC), substantially the entire credit derivatives portfolio is registered and matched against BBVA’s counterparties.

— Other financial assets 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 to the structure of the instrument.

— Loans and receivables:

- Loans and advances to credit institutions: These usually only have the counterparty’s personal guarantee.

- Loans and advances 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: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the structure of the instrument.

Collateralized loans granted by the Group as of December 31, 2013, 2012 and 2011, excluding balances deemed impaired, is broken down in the table below:

	Millions of Euros
Collateralized Credit Risk	2013	2012	2011
Mortgage loans	125,564	137,870	129,536
Operating assets mortgage loans	3,778	3,897	3,574
Home mortgages	108,745	119,235	108,190
Rest of mortgages (1)	13,041	14,739	17,772
Secured loans, except mortgage	23,660	23,125	23,915
Cash guarantees	300	377	286
Secured loan (pledged securities)	570	997	589
Rest of secured loans (2)	22,790	21,751	23,041
Total	149,224	160,995	153,451

(1) Loans with mortgage collateral (other than residential mortgage) for property purchase or construction.

(2) Includes loans with cash collateral, other financial assets with partial collateral.

— Financial guarantees, other contingent risks and drawable by third parties: These have the counterparty’s personal guarantee.

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7.1.3        Policies 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, the BBVA Group maintains maximum permitted risk concentration indices updated at individual and portfolio sector levels tied to the various observable variables within the field of credit risk management. The limit on the Group’s exposure or financial commitment to a specific customer therefore 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:

– The aim is, as far as possible, 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 account (relationship between risks with a customer and the capital of the entity that assumes them), the markets, the macroeconomic situation, etc.

– To properly management risk exposures of transactions over 2.5% of the Group’s Net Equity any transactions over this threshold will be authorized by the Risk Committee of the Bank’s Board of Directors.

Risk concentrations by geography

Below is a breakdown of the balances of financial instruments registered in the accompanying consolidated balance sheets by their concentration in geographical areas and according to the residence of the customer or counterparty. It does not take into account valuation adjustments, impairment losses or loan-loss provisions:

	Millions of Euros
Risks by Geographical Areas 2013	Spain	Europe,   Excluding   Spain	Mexico	USA	South   America	Rest	Total
Financial assets -
Financial assets held for trading	14,882	33,091	15,707	2,677	3,412	2,345	72,114
Loans and advances to customers	-	-	-	107	-	-	107
Debt securities	6,320	5,838	13,410	424	2,608	1,002	29,602
Equity instruments	2,752	953	632	118	148	163	4,766
Derivatives	5,810	26,300	1,665	2,028	656	1,180	37,639
Other financial assets designated at fair value through profit or loss	211	106	1,591	503	2	-	2,413
Loans and advances to credit institutions	-	-	-	-	-	-	-
Debt securities	107	54	5	497	-	-	663
Equity instruments	104	52	1,586	6	2	-	1,750
Available-for-sale portfolio	42,074	8,587	10,380	7,729	5,626	3,011	77,407
Debt securities	38,732	8,453	10,329	7,247	5,535	1,143	71,439
Equity instruments	3,342	134	51	482	91	1,868	5,968
Loans and receivables	194,383	26,712	44,414	39,650	53,886	4,984	364,031
Loans and advances to credit institutions	5,224	9,171	2,366	2,707	1,909	1,415	22,792
Loans and advances to customers	187,400	17,519	42,048	36,047	50,173	3,569	336,759
Debt securities	1,759	22	-	896	1,804	-	4,481
Held-to-maturity investments	-	-	-	-	-	-	-
Hedging derivatives	434	2,113	8	60	10	4	2,629
Total Risk in Financial Assets	251,984	70,609	72,100	50,618	62,935	10,344	518,591
Contingent risks and liabilities
Contingent risks	15,172	9,038	767	2,344	5,292	929	33,542
Contingent liabilities	28,096	17,675	16,109	24,485	7,002	803	94,170
Total Contingent Risk	43,268	26,713	16,876	26,829	12,294	1,732	127,712
Total Risks in Financial Instruments	295,252	97,322	88,976	77,447	75,229	12,076	646,303

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	Millions of Euros
Risks by Geographical Areas 2012	Spain	Europe,   Excluding   Spain	Mexico	USA	South   America	Rest	Total
Financial assets -
Financial assets held for trading	13,768	39,360	15,035	4,751	3,643	3,272	79,830
Loans and advances to customers	-	-	-	244	-	-	244
Debt securities	5,726	5,155	12,960	577	2,805	796	28,020
Equity instruments	1,270	519	101	543	239	243	2,915
Derivatives	6,772	33,686	1,973	3,387	599	2,233	48,651
Other financial assets designated at fair value through profit or loss	296	87	13	2,134	-	-	2,531
Loans and advances to credit institutions	-	-	-	-	-	-	-
Debt securities	190	42	9	512	-	-	753
Equity instruments	106	45	4	1,622	-	-	1,777
Available-for-sale portfolio	36,109	6,480	9,601	7,163	6,128	1,085	66,567
Debt securities	33,107	6,267	9,035	7,112	6,053	1,040	62,615
Equity instruments	3,002	213	566	51	75	45	3,952
Loans and receivables	209,786	31,375	46,384	40,259	51,978	4,314	384,096
Loans and advances to credit institutions	3,220	11,042	4,549	3,338	2,065	1,157	25,372
Loans and advances to customers	205,216	19,979	41,835	36,040	48,753	3,151	354,973
Debt securities	1,350	354	-	880	1,160	6	3,751
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	268,151	83,984	71,192	54,532	61,754	8,691	548,305
Contingent risks and liabilities
Contingent risks	16,164	10,074	872	3,159	5,858	891	37,019
Contingent liabilities	26,514	19,678	13,564	22,027	7,097	1,264	90,142
Total Contingent Risk	42,678	29,752	14,435	25,186	12,955	2,155	127,161
Total Risks in Financial Instruments	310,829	113,736	85,627	79,718	74,709	10,846	675,466
	Millions of Euros
Risks by Geographical Areas 2011	Spain	Europe,   Excluding   Spain	Mexico	EE.UU.	South   America	Rest	Total
Financial assets -
Financial assets held for trading	12,955	33,187	11,676	4,664	5,452	2,538	70,472
Debt securities	5,075	2,039	10,933	565	2,030	304	20,946
Equity instruments	662	357	741	69	125	238	2,192
Derivatives	7,218	30,791	2	4,030	3,297	1,996	47,334
Other financial assets designated at fair value through profit or loss	234	107	1,470	509	454	-	2,774
Debt securities	117	77	6	508	1	-	709
Equity instruments	117	30	1,464	1	453	-	2,065
Available-for-sale portfolio	26,546	5,390	7,825	8,151	5,164	654	53,730
Debt securities	22,371	5,184	7,764	7,518	5,068	601	48,506
Equity instruments	4,175	206	61	633	96	53	5,224
Loans and receivables	207,858	32,598	42,489	42,646	44,535	7,397	377,523
Loans and advances to credit institutions	3,034	10,079	4,877	2,570	2,195	1,647	24,402
Loans and advances to customers	203,459	22,392	37,612	39,384	41,650	5,744	350,241
Debt securities	1,365	127	-	692	690	6	2,880
Held-to-maturity investments	7,374	3,582	-	-	-	-	10,956
Debt securities	395	3,489	485	244	16	56	4,685
Total Risk in Financial Assets	255,362	78,353	63,945	56,214	55,621	10,645	520,140
Contingent risks and liabilities
Contingent risks	16,149	10,169	1,098	3,986	4,733	1,494	37,629
Contingent liabilities	30,848	18,429	11,929	22,002	6,192	1,288	90,688
Total Contingent Risk	46,997	28,598	13,027	25,988	10,925	2,782	128,317
Total Risks in Financial Instruments	302,359	106,951	76,972	82,202	66,546	13,427	648,457

The breakdown of the main figures in the most significant foreign currencies in the accompanying consolidated balance sheets is set forth in Appendix VII.

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Sovereign risk concentration

Sovereign risk management

The risk associated with the transactions involving sovereign risk is identified, measured, controlled and tracked by a centralized unit integrated in the BBVA Group’s Risk Area. Its basic functions involve the preparation of reports in the countries where sovereign risk exists (called “financial programs”), tracking such risks, assigning ratings to these countries and, in general, supporting the Group in terms of reporting requirements for any transactions involving sovereign risk. The risk policies established in the financial programs are approved by the relevant risk committees.

The country risk unit tracks the evolution of the risks associated with the various countries to which the Group are exposed (including sovereign risk) on an ongoing basis in order to adapt its risk and mitigation policies to any macroeconomic and political changes that may occur. Moreover, it regularly updates its internal ratings and forecasts for these countries. The internal rating assignment methodology is based on the assessment of quantitative and qualitative parameters which are in line with those used by certain multilateral organizations such as the International Monetary Fund (IMF) and the World Bank (WB), rating agencies and export credit organizations.

Sovereign risk exposure

The table below provides a breakdown of exposure to financial instruments, as of December 31, 2013, 2012 and 2011, by type of counterparty and the country of residence of such counterparty. The below figures do not take into account valuation adjustments, impairment losses or loan-loss provisions:

	Millions of Euros
	2013
Risk Exposure by countries	Sovereign   Risk (*)	Financial   Institutions	Other   Sectors	Total	%
Spain	59,114	11,870	166,677	237,661	51.1%
United Kingdom	3	5,405	4,377	9,785	2.1%
Italy	3,888	422	2,617	6,927	1.5%
France	942	2,640	2,316	5,898	1.3%
Portugal	385	238	5,179	5,802	1.2%
Germany	1,081	1,338	1,206	3,625	0.8%
Ireland	-	221	487	708	0.2%
Turkey	10	65	163	238	0.1%
Greece	-	-	72	72	0.0%
Rest of Europe	2,608	2,552	4,239	9,399	2.0%
Europe	68,031	24,751	187,333	280,115	60.2%
Mexico	26,629	2,810	38,312	67,751	14.6%
The United States	5,224	3,203	41,872	50,299	10.8%
Rest of countries	7,790	5,480	53,649	66,919	14.4%
Total Rest of Countries	39,643	11,493	133,833	184,969	39.8%
Total Exposure to Financial Instruments	107,674	36,244	321,166	465,084	100.0%

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	Millions of Euros
	2012
Risk Exposure by countries	Sovereign   Risk (*)	Financial   Institutions	Other   Sectors	Total	%
Spain	62,558	11,839	182,785	257,182	52.9%
Turkey	13	159	400	572	0.1%
United Kingdom	2	7,095	2,336	9,433	1.9%
Italy	4,203	405	3,288	7,896	1.6%
Portugal	443	590	5,763	6,796	1.4%
France	1,739	3,291	2,631	7,661	1.6%
Germany	1,298	1,025	734	3,057	0.6%
Ireland	-	280	456	736	0.2%
Greece	-	-	99	99	0.0%
Rest of Europe	1,664	2,484	5,256	9,404	1.9%
Europe	71,920	27,168	203,748	302,836	62.3%
Mexico	25,059	5,492	36,133	66,684	13.7%
The United States	3,942	3,768	42,157	49,867	10.3%
Rest of countries	7,521	5,484	53,481	66,486	13.7%
Total Rest of Countries	36,523	14,744	131,771	183,037	37.7%
Total Exposure to Financial Instruments	108,443	41,912	335,519	485,873	100.0%
	Millions of Euros
	2011
Risk Exposure by countries	Sovereign   Risk (*)	Financial   Institutions	Other   Sectors	Total	%
Spain	56,473	6,883	178,065	241,420	52.7%
United Kingdom	120	6,547	3,498	10,164	2.2%
Italy	4,301	487	4,704	9,493	2.1%
Portugal	279	829	6,715	7,824	1.7%
France	619	1,653	3,038	5,310	1.2%
Germany	582	902	908	2,392	0.5%
Ireland	0	182	212	394	0.1%
Turkey	17	42	291	350	0.1%
Greece	109	0	32	141	0.0%
Rest of Europe	647	4,319	5,549	10,515	2.3%
Europe	63,147	21,844	203,011	288,002	62.8%
Mexico	22,875	5,508	31,110	59,493	13.0%
The United States	3,501	3,254	42,550	49,305	10.8%
Rest of countries	7,281	3,800	50,386	61,467	13.4%
Total Rest of Countries	33,657	12,562	124,046	170,266	37.2%
Total Exposure to Financial Instruments	96,805	34,405	327,058	458,268	100.0%

(*) In addition, as of December 31, 2013, 2012 and 2011, undrawn lines of credit, granted mainly to the Spanish government or government agencies and amounted to €1,942 million, €1,613 million and €3,525 million, respectively.

The exposure to sovereign risk set out in the above table includes positions held in government debt securities in countries where the Group operates. They are used for ALCO’s management of the interest-rate risk on the balance sheets of the Group’s entities in these countries, as well as for hedging of pension and insurance commitments by insurance entities within the BBVA Group.

Sovereign risk exposure in Europe

In December 2013, sovereign risk exposure in Europe data was published by Group’s credit entities as of June 30, 2013 and December 31, 2012. This publication was made under the European Banking Authority (hereinafter “EBA” acronym for “European Banking Authority”) scheme.

F-61

The table below provides a breakdown of the exposure of the Group’s credit institutions to European sovereign risk as of December 31, 2013, 2012 and 2011, by type of financial instrument and the country of residence of the counterparty, under EBA requirements:

	Millions of Euros
	2013
	Debt securities						Loans and Receivables		Derivatives (2)				Total (2)		Contingent risks and commitments		%
Exposure to Sovereign Risk by European Union Countries (1)	Financial Assets Held- for-Trading		Available- for-Sale Financial Assets		Held-to- Maturity Investments				Direct Exposure		Indirect Exposure
Spain		5,251		24,339		-		23,430		258		(25)		53,253		1,924	82.8%
Italy		733		2,691		-		90		-		(6)		3,508		-	5.5%
France		874		-		-		-		-		(1)		873		-	1.4%
Germany		1,064		-		-		-		-		(1)		1,063		-	1.7%
Portugal		64		19		-		302		-		-		385		17	0.6%
United Kingdom		-		-		-		-		(13)		3		(10)		1	-
Greece		-		-		-		-		-		-		-		-	-
Hungary		-		65		-		-		-		-		65		-	0.1%
Ireland		-		-		-		-		-		-		-		-	-
Rest of European Union		2,100		3,038		-		38		-		10		5,186		-	8.1%
Total Exposure to Sovereign Counterparties (European Union)		10,086		30,152		-		23,860		245		(20)		64,323		1,942	100.0%

(1) This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€11.093 million as of December 31, 2013) is not included.

(2) Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

	Millions of Euros
	2012
	Debt securities						Loans and Receivables		Derivatives (2)				Total		Contingent risks and commitments		%
Exposure to Sovereign Risk by European Union Countries (1)	Financial Assets Held- for-Trading		Available- for-Sale Financial Assets		Held-to- Maturity Investments				Direct Exposure		Indirect Exposure
Spain		5,022		19,751		6,469		26,624		285		5		58,156		1,595		86.6%
Italy		610		811		2,448		97		-		(3)		3,963		-		5.9%
France		1,445		-		254		-		-		(2)		1,697		-		2.5%
Germany		1,291		-		-		-		(4)		(1)		1,286		-		1.9%
Portugal		51		18		15		359		-		-		443		17		0.7%
United Kingdom		-		-		-		-		(19)		-		(19)		1		0.0%
Greece		-		-		-		-		-		-		-		-		0.0%
Hungary		-		66		-		-		-		-		66		-		0.1%
Ireland		-		-		-		-		-		-		-		-		0.0%
Rest of European Union		1,066		379		24		78		-		1		1,548		-		2.3%
Total Exposure to Sovereign Counterparties (European Union)		9,485		21,025		9,210		27,158		262		-		67,140		1,613		100.0%

(1) This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€5,093 million as of December 31, 2012) is not included.

(2) Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

	Millions of Euros
	2011
	Debt securities						Loans and Receivables		Derivatives (2)				Total		Contingent risks and commitments		%
Exposure to Sovereign Risk by European Union Countries (1)	Financial Assets Held- for Trading		Available- for-Sale Financial Assets		Held-to- Maturity Investments				Direct Exposure		Indirect Exposure
Spain		4,366		15,225		6,520		26,637		96		-		52,844		3,455		89.1%
Italy		350		634		2,956		184		-		(23)		4,101		-		6.9%
Germany		513		6		69		-		(3)		(2)		583		-		1.0%
France		338		12		254		-		-		(3)		601		-		1.0%
Portugal		39		11		13		216		-		(1)		278		65		0.5%
United Kingdom		-		120		-		-		(3)		-		117		1		0.2%
Greece		-		10		84		15		-		(8)		101		-		0.2%
Hungary		-		53		-		-		-		-		53		-		0.1%
Ireland		-		7		-		-		-		1		8		-		0.0%
Rest of European Union		155		351		-		130		-		2		638		4		1.1%
Total Exposure to Sovereign Counterparties (European Union)		5,761		16,429		9,896		27,182		89		(34)		59,323		3,525		100.0%

(1) This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€3,972 million as of December 31, 2013) is not included.

(2) Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

F-62

The following table provides a breakdown of the notional value of the CDS in which the Group’s credit institutions act as sellers or buyers of protection against the sovereign risk of European countries:

	Millions of Euros
	2013
	Credit derivatives (CDS) and other   contracts in which the Group act as a   protection seller		Credit derivatives (CDS) and other   contracts in which the Group act as a   protection buyer
Exposure to Sovereign Risk by European Countries	Notional value	Fair value	Notional value	Fair value
Spain	14	-	62	(25)
Italy	622	(15)	595	9
Germany	205	-	200	(1)
France	204	-	149	(1)
Portugal	75	(3)	75	3
Poland	-	-	-	-
Belgium	-	-	-	-
United Kingdom	135	3	126	-
Greece	14	-	14	-
Hungary	1	-	-	-
Ireland	21	-	21	-
Rest of European Union	591	12	478	(2)
Total exposure to Sovereign Counterparties	1,882	(3)	1,720	(17)

	Millions of Euros
	2012
	Credit derivatives (CDS) and other   contracts in which the Group act as a   protection seller		Credit derivatives (CDS) and other   contracts in which the Group act as a   protection buyer
Exposure to Sovereign Risk by European Countries	Notional value	Fair value	Notional value	Fair value
Spain	68	14	97	(9)
Italy	518	(22)	444	19
Germany	216	(1)	219	-
France	196	(1)	134	(1)
Portugal	91	(6)	89	6
Poland	-	-	-	-
Belgium	281	(4)	232	5
United Kingdom	56	1	64	(1)
Greece	18	-	18	-
Hungary	2	-	-	-
Ireland	82	-	82	-
Rest of European Union	149	2	155	(2)
Total exposure to Sovereign Counterparties	1,677	(17)	1,534	17

F-63

	Millions of Euros
	2011
	Credit derivatives (CDS) and other   contracts in which the Group act as a   protection seller		Credit derivatives (CDS) and other   contracts in which the Group act as a   protection buyer
Exposure to Sovereign Risk by European Countries	Notional value	Fair value	Notional value	Fair value
Spain	20	2	20	(2)
Italy	283	38	465	(61)
Germany	182	4	184	(6)
France	102	3	123	(6)
Portugal	85	21	93	(22)
Poland	-	-	-	-
Belgium	-	-	-	-
United Kingdom	20	2	20	(2)
Greece	53	25	66	(33)
Hungary	-	-	2	-
Ireland	82	10	82	(9)
Rest of European Union	294	31	329	(29)
Total exposure to Sovereign Counterparties	1,119	136	1,382	(170)

The main counterparties of these CDS are credit institutions with a high credit quality. The CDS contracts are standard in the market, with the usual clauses covering the events that would trigger payouts.

As it can be seen in the above tables, exposure to sovereign risk in Europe is concentrated in Spain. As of December 31, 2013, 2012 and 2011, the breakdown of total exposure faced by the Group’s credit institutions to Spain and other countries, by maturity of the financial instruments, is as follows:

	Millions of Euros
	2013
	Debt securities						Loans and Receivables		Derivatives (2)				Total		%
Maturities of sovereign risks European Union	Financial Assets Held- for-Trading		Available- for-Sale Financial Assets		Held-to- Maturity Investments				Direct Exposure		Indirect Exposure
Spain
Up to 1 Year		1,935		846		-		5,627		8		-		8,416	13.1%
1 to 5 Years		1,531		15,523	&n