EX-99.2 3 d20f2018recastex992.htm EXHIBIT 99.2

Consolidated Financial Statements and Reports of Independent Registered Public Accounting Firms for the years 2018, 2017, and 2016

Contents

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated balance sheets | F-3
Consolidated income statements | F-6
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, internal control over financial information and other information | F-12
2. | Principles of consolidation, accounting policies and measurement bases applied and recent IFRS pronouncements | F-16
3. | BBVA Group | F-63
4. | Shareholder remuneration system | F-66
5. | Earnings per share | F-69
6. | Operating segment reporting | F-70
7. | Risk management | F-73
8. | Fair Value of financial instruments | F-140
9. | Cash, cash balances at central banks and other demands deposits | F-153
10. | Financial assets and liabilities held for trading | F-154
11. | Non-trading financial assets mandatorily at fair value through profit or loss | F-160
12. | Financial assets and liabilities designated at fair value through profit or loss | F-160
13. | Financial assets at fair value through other comprehensive income | F-161
14. | Financial assets at amortized cost | F-168
15. | Hedging derivatives and fair value changes of the hedged items in portfolio hedges of interest rate risk | F-170
16. | Investments in joint ventures, associates | F-172
17. | Tangible assets | F-174
18. | Intangible assets | F-177
19. | Tax assets and liabilities | F-181
20. | Other assets and liabilities | F-185
21. | Non-current assets and disposal groups held for sale | F-186
22. | Financial liabilities at amortized cost | F-189
23. | Assets and Liabilities under insurance and reinsurance contracts | F-194
24. | Provisions | F-196
25. | Post-employment and other employee benefit commitments | F-198
26. | Common stock | F-207
27. | Share premium | F-210
28. | Retained earnings, revaluation reserves and other reserves | F-210
29. | Treasury shares | F-213
30. | Accumulated other comprehensive income (loss) | F-214
31. | Minority interest | F-215
32. | Capital base and capital management | F-216
33. | Commitments and guarantees given | F-219
34. | Other contingent assets and liabilities | F-219
35. | Purchase and sale commitments and future payment obligations | F-220
36. | Transactions on behalf of third parties | F-221
37. | Net interest income | F-222
38. | Dividend income | F-224
39. | Share of profit or loss of entities accounted for using the equity method | F-224
40. | Fee and commission income and expense | F-225
41. | Gains (losses) on financial assets and liabilities, net and Exchange differences | F-226
42. | Other operating income and expense | F-228
43. | Income and expense from insurance and reinsurance contracts | F-229
44. | Administration costs | F-230
45. | Depreciation and amortization | F-233
46. | Provisions or (reversal) of provisions | F-233
47. | Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss | F-234
48. | Impairment or (reversal) of impairment on non-financial assets | F-234
49. | Gains (losses) on derecognition of non - financial assets and subsidiaries, net | F-234
50. | Profit (loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | F-235
51. | Consolidated statements of cash flows | F-236
52. | Accountant fees and services | F-237
53. | Related-party transactions | F-238
54. | Remuneration and other benefits to the Board of Directors and to the members of the Bank’s Senior Management | F-240
55. | Other information | F-252
56. | Subsequent events | F-254

| APPENDICES |
| APPENDIX I Additional information on consolidated subsidiaries and consolidated structured entities composing the BBVA Group | F-256
| APPENDIX II Additional information on investments joint ventures and associates in the BBVA Group | F-264
| APPENDIX III Changes and notification of participations in the BBVA Group in 2018 | F-265
| APPENDIX IV Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2018 | F-268
| APPENDIX V BBVA Group’s structured entities. Securitization funds | F-269
| APPENDIX VI Details of the outstanding subordinated debt and preferred securities issued by the Bank or entities in the Group consolidated as of December 31, 2018, 2017 and 2016 | F-271
| APPENDIX VII Consolidated balance sheets held in foreign currency as of December 31, 2018, 2017 and 2016 | F-275
| APPENDIX VIII. Quantitative information on refinancing and restructuring operations and other requirement under Bank of Spain Circular 6/2012 | F-278
| APPENDIX IX Additional information on Risk Concentration | F-294

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Banco Bilbao Vizcaya Argentaria, S.A.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Banco Bilbao Vizcaya Argentaria, S.A. and subsidiaries (the Company) as of December 31, 2018 and 2017, the related consolidated statements of income, recognized income and expenses, changes in equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Changes in Accounting Principles

As discussed in Note 1.3 to the consolidated financial statements, in 2018 the Company has changed its method of accounting for financial instruments due to the adoption of International Financial Reporting Standard 9, Financial Instruments, and the Company has elected to change its method of accounting for hyperinflationary economies under International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG Auditores, S.L.

We have served as the Company’s auditor since 2017.

Madrid, Spain

March 28, 2019, except for Note 6 and ordinary earnings and ordinary income by operating segment disclosed in Note 55.2, as to which the date is June 25, 2019

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Banco Bilbao Vizcaya Argentaria, S.A.:

We have audited the accompanying consolidated balance sheet 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, 2016 and the related consolidated income statement, statement of recognized income and expenses, statement of changes in equity and statement of cash flows for the year then ended. These consolidated financial statements are the responsibility of the Group’s Directors. Our responsibility is to express an opinion on these financial statements 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 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 audit 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, 2016 and the consolidated results of their operations and their cash flows for the year then ended in conformity with the International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS – IASB”).

/s/ DELOITTE, S.L.

Madrid, Spain

March 31, 2017

F-2

Consolidated balance sheets as of December 31, 2018, 2017 and 2016

ASSETS (Millions of Euros)
| Notes | 2018 | 2017 | 2016
CASH, CASH BALANCES AT CENTRAL BANKS AND OTHER DEMAND DEPOSITS | 9 | 58,196 | 42,680 | 40,039
FINANCIAL ASSETS HELD FOR TRADING | 10 | 90,117 | 64,695 | 74,950
Derivatives |  | 30,536 | 35,265 | 42,955
Equity instruments |  | 5,254 | 6,801 | 4,675
Debt securities |  | 25,577 | 22,573 | 27,166
Loans and advances to central banks |  | 2,163 | - | -
Loans and advances to credit institutions |  | 14,566 | - | -
Loans and advances to customers |  | 12,021 | 56 | 154
NON-TRADING FINANCIAL ASSETS MANDATORILY AT FAIR VALUE THROUGH PROFIT OR LOSS | 11 | 5,135 |  |
Equity instruments |  | 3,095 |  |
Debt securities |  | 237 |  |
Loans and advances to central banks |  | - |  |
Loans and advances to credit institutions |  | - |  |
Loans and advances to customers |  | 1,803 |  |
FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | 12 | 1,313 | 2,709 | 2,062
Equity instruments |  | - | 1,888 | 1,920
Debt securities |  | 1,313 | 174 | 142
Loans and advances to central banks |  | - | - | -
Loans and advances to credit institutions |  | - | - | -
Loans and advances to customers |  | - | 648 | -
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME | 13 | 56,337 | 69,476 | 79,221
Equity instruments |  | 2,595 | 3,224 | 4,641
Debt securities |  | 53,709 | 66,251 | 74,580
Loans and advances to central banks |  | - | - | -
Loans and advances to credit institutions |  | 33 | - | -
Loans and advances to customers |  | - | - | -
FINANCIAL ASSETS AT AMORTIZED COST | 14 | 419,660 | 445,275 | 483,672
Debt securities |  | 32,530 | 24,093 | 28,905
Loans and advances to central banks |  | 3,941 | 7,300 | 8,894
Loans and advances to credit institutions |  | 9,163 | 26,261 | 31,373
Loans and advances to customers |  | 374,027 | 387,621 | 414,500
HEDGING DERIVATIVES | 15 | 2,892 | 2,485 | 2,833
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |  | (21) | (25) | 17
JOINT VENTURES AND ASSOCIATES | 16 | 1,578 | 1,588 | 765
Joint ventures |  | 173 | 256 | 229
Associates |  | 1,405 | 1,332 | 536
INSURANCE AND REINSURANCE ASSETS | 23 | 366 | 421 | 447
TANGIBLE ASSETS | 17 | 7,229 | 7,191 | 8,941
Property, plants and equipment |  | 7,066 | 6,996 | 8,250
For own use |  | 6,756 | 6,581 | 7,519
Other assets leased out under an operating lease |  | 310 | 415 | 732
Investment properties |  | 163 | 195 | 691
INTANGIBLE ASSETS | 18 | 8,314 | 8,464 | 9,786
Goodwill |  | 6,180 | 6,062 | 6,937
Other intangible assets |  | 2,134 | 2,402 | 2,849
TAX ASSETS | 19 | 18,100 | 16,888 | 18,245
Current |  | 2,784 | 2,163 | 1,853
Deferred |  | 15,316 | 14,725 | 16,391
OTHER ASSETS | 20 | 5,472 | 4,359 | 7,274
Insurance contracts linked to pensions |  | - | - | -
Inventories |  | 635 | 229 | 3,298
Other |  | 4,837 | 4,130 | 3,976
NON-CURRENT ASSETS AND DISPOSAL GROUPS HELD FOR SALE | 21 | 2,001 | 23,853 | 3,603
TOTAL ASSETS |  | 676,689 | 690,059 | 731,856

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-3

Consolidated balance sheets as of December 31, 2018, 2017 and 2016

LIABILITIES AND EQUITY (Millions of Euros)
| Notes | 2018 | 2017 | 2016
FINANCIAL LIABILITIES HELD FOR TRADING | 10 | 80,774 | 46,182 | 54,675
Trading derivatives |  | 31,815 | 36,169 | 43,118
Short positions |  | 11,025 | 10,013 | 11,556
Deposits from central banks |  | 10,511 | - | -
Deposits from credit institutions |  | 15,687 | - | -
Customer deposits |  | 11,736 | - | -
Debt certificates |  | - | - | -
Other financial liabilities |  | - | - | -
FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS | 12 | 6,993 | 2,222 | 2,338
Deposits from central banks |  | - | - | -
Deposits from credit institutions |  | - | - | -
Customer deposits |  | 976 | - | -
Debt certificates |  | 2,858 | - | -
Other financial liabilities |  | 3,159 | 2,222 | 2,338
Of which: Subordinated liabilities |  | - | - | -
FINANCIAL LIABILITIES AT AMORTIZED COST | 22 | 509,185 | 543,713 | 589,210
Deposits from central banks |  | 27,281 | 37,054 | 34,740
Deposits from credit institutions |  | 31,978 | 54,516 | 63,501
Customer Deposits |  | 375,970 | 376,379 | 401,465
Debt certificates |  | 61,112 | 63,915 | 76,375
Other financial liabilities |  | 12,844 | 11,850 | 13,129
Of which: Subordinated liabilities |  | 18,047 | 17,316 | 17,230
HEDGING DERIVATIVES | 15 | 2,680 | 2,880 | 2,347
FAIR VALUE CHANGES OF THE HEDGED ITEMS IN PORTFOLIO HEDGES OF INTEREST RATE RISK |  | - | (7) | -
LIABILITIES UNDER INSURANCE AND REINSURANCE CONTRACTS | 23 | 9,834 | 9,223 | 9,139
PROVISIONS | 24 | 6,772 | 7,477 | 9,071
Provisions for pensions and similar obligations |  | 4,787 | 5,407 | 6,025
Other long term employee benefits |  | 62 | 67 | 69
Provisions for taxes and other legal contingencies |  | 686 | 756 | 418
Provisions for contingent risks and commitments |  | 636 | 578 | 950
Other provisions |  | 601 | 669 | 1,609
TAX LIABILITIES | 19 | 3,276 | 3,298 | 4,668
Current |  | 1,230 | 1,114 | 1,276
Deferred |  | 2,046 | 2,184 | 3,392
OTHER LIABILITIES | 20 | 4,301 | 4,550 | 4,979
LIABILITIES INCLUDED IN DISPOSAL GROUPS CLASSIFIED AS HELD FOR SALE |  | - | 17,197 | -
TOTAL LIABILITIES |  | 623,814 | 636,736 | 676,428

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-4

Consolidated balance sheets as of December 31, 2018, 2017 and 2016

LIABILITIES AND EQUITY (Continued) (Millions of Euros)
| Notes | 2018 | 2017 | 2016
SHAREHOLDERS’ FUNDS |  | 54,326 | 53,283 | 50,985
Capital | 26 | 3,267 | 3,267 | 3,218
Paid up capital |  | 3,267 | 3,267 | 3,218
Unpaid capital which has been called up |  | - | - | -
Share premium | 27 | 23,992 | 23,992 | 23,992
Equity instruments issued other than capital |  | - | - | -
Other equity instruments |  | 50 | 54 | 54
Retained earnings | 28 | 23,018 | 23,612 | 21,844
Revaluation reserves | 28 | 3 | 12 | 20
Other reserves | 28 | (58) | (35) | (59)
Reserves or accumulated losses of investments in subsidiaries, joint ventures and associates |  | (58) | (35) | (59)
Other |  | - | - | -
Less: Treasury shares | 29 | (296) | (96) | (48)
Profit or loss attributable to owners of the parent |  | 5,324 | 3,519 | 3,475
Less: Interim dividends |  | (975) | (1,043) | (1,510)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 30 | (7,215) | (6,939) | (3,622)
Items that will not be reclassified to profit or loss |  | (1,284) | (1,183) | (1,095)
Actuarial gains or losses on defined benefit pension plans |  | (1,245) | (1,183) | (1,095)
Non-current assets and disposal groups classified as held for sale |  | - | - | -
Share of other recognized income and expense of investments in subsidiaries, joint ventures and associates |  | - | - | -
Fair value changes of equity instruments measured at fair value through other comprehensive income |  | (155) | - | -
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through other comprehensive income |  | - |  |
Fair value changes of equity instruments measured at fair value through other comprehensive income (hedged item) |  | - |  |
Fair value changes of equity instruments measured at fair value through other comprehensive income (hedging instrument) |  | - |  |
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk |  | 116 |  |
Items that may be reclassified to profit or loss |  | (5,932) | (5,755) | (2,527)
Hedge of net investments in foreign operations (effective portion) |  | (218) | 1 | (118)
Foreign currency translation |  | (6,643) | (7,297) | (3,341)
Hedging derivatives. Cash flow hedges (effective portion) |  | (6) | (34) | 16
Financial assets available for sale |  |  | 1,641 | 947
Fair value changes of debt instruments measured at fair value through other comprehensive income |  | 943 |  |
Hedging instruments (non-designated items) |  | - |  |
Non-current assets and disposal groups classified as held for sale |  | 1 | (26) | -
Share of other recognized income and expense of investments in subsidiaries, joint ventures and associates |  | (9) | (40) | (31)
MINORITY INTERESTS (NON-CONTROLLING INTEREST) | 31 | 5,764 | 6,979 | 8,064
Accumulated other comprehensive income (loss) |  | (3,236) | (2,550) | (1,430)
Other |  | 9,000 | 9,530 | 9,494
TOTAL EQUITY |  | 52,874 | 53,323 | 55,428
TOTAL EQUITY AND TOTAL LIABILITIES |  | 676,689 | 690,059 | 731,856
MEMORANDUM ITEM (OFF-BALANCE SHEET EXPOSURES) (Millions of Euros) |  |  |  |
0 | Notes | 2018 | 2017 | 2016
Loan commitments given | 33 | 118,959 | 94,268 | 107,254
Financial guarantees given | 33 | 16,454 | 16,545 | 18,267
Other commitments given | 33 | 35,098 | 45,738 | 42,592

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-5

Consolidated income statements for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED INCOME STATEMENTS (Millions of Euros)
| Notes | 2018 | 2017 | 2016
Interest and other income | 37.1 | 29,831 | 29,296 | 27,708
Interest expense | 37.2 | (12,239) | (11,537) | (10,648)
NET INTEREST INCOME |  | 17,591 | 17,758 | 17,059
Dividend income | 38 | 157 | 334 | 467
Share of profit or loss of entities accounted for using the equity method | 39 | (7) | 4 | 25
Fee and commission income | 40 | 7,132 | 7,150 | 6,804
Fee and commission expense | 40 | (2,253) | (2,229) | (2,086)
Gains (losses) on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 41 | 216 | 985 | 1,375
Gains (losses) on financial assets and liabilities held for trading, net | 41 | 707 | 218 | 248
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | 41 | 96 |  |
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net | 41 | 143 | (56) | 114
Gains (losses) from hedge accounting, net | 41 | 72 | (209) | (76)
Exchange differences, net | 41 | (9) | 1,030 | 472
Other operating income | 42 | 949 | 1,439 | 1,272
Other operating expense | 42 | (2,101) | (2,223) | (2,128)
Income from insurance and reinsurance contracts | 43 | 2,949 | 3,342 | 3,652
Expense from insurance and reinsurance contracts | 43 | (1,894) | (2,272) | (2,545)
GROSS INCOME |  | 23,747 | 25,270 | 24,653
Administration costs |  | (10,494) | (11,112) | (11,366)
Personnel expenses | 44.1 | (6,120) | (6,571) | (6,722)
Other administrative expenses | 44.2 | (4,374) | (4,541) | (4,644)
Depreciation and amortization | 45 | (1,208) | (1,387) | (1,426)
Provisions or reversal of provisions | 46 | (373) | (745) | (1,186)
Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss or net gains by modification | 47 | (3,981) | (4,803) | (3,801)
Financial assets measured at amortized cost |  | (3,980) | (3,676) | (3,598)
Financial assets at fair value through other comprehensive income |  | (1) | (1,127) | (202)
NET OPERATING INCOME |  | 7,691 | 7,222 | 6,874
Impairment or reversal of impairment of investments in subsidiaries, joint ventures and associates |  | - | - | -
Impairment or reversal of impairment on non-financial assets | 48 | (138) | (364) | (521)
Tangible assets |  | (5) | (42) | (143)
Intangible assets |  | (83) | (16) | (3)
Other assets |  | (51) | (306) | (375)
Gains (losses) on derecognition of non - financial assets and subsidiaries, net | 49 | 78 | 47 | 70
Negative goodwill recognized in profit or loss |  | - | - | -
Profit (loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations | 50 | 815 | 26 | (31)
PROFIT OR LOSS BEFORE TAX FROM CONTINUING OPERATIONS | 55.2 | 8,446 | 6,931 | 6,392
Tax expense or income related to profit or loss from continuing operations |  | (2,295) | (2,169) | (1,699)
PROFIT OR LOSS AFTER TAX FROM CONTINUING OPERATIONS |  | 6,151 | 4,762 | 4,693
Profit or loss after tax from discontinued operations, net |  | - | - | -
PROFIT FOR THE YEAR |  | 6,151 | 4,762 | 4,693
Attributable to minority interest [non-controlling interest] | 31 | 827 | 1,243 | 1,218
Attributable to owners of the parent | 55.2 | 5,324 | 3,519 | 3,475
|  | 2018 | 2017 | 2016
EARNINGS PER SHARE (Euros) |  | 0.76 | 0.48 | 0.49
Basic earnings per share from continued operations |  | 0.76 | 0.48 | 0.49
Diluted earnings per share from continued operations |  | 0.76 | 0.48 | 0.49
Basic earnings per share from discontinued operations |  | - | - | -
Diluted earnings per share from discontinued operations |  | - | - | -

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-6

Consolidated statements of recognized income and expenses for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED STATEMENTS OF RECOGNIZED INCOME AND EXPENSES (MILLIONS OF EUROS)
| 2018 | 2017 | 2016
PROFIT RECOGNIZED IN INCOME STATEMENT | 6,151 | 4,762 | 4,693
OTHER RECOGNIZED INCOME (EXPENSES) | (2,523) | (4,439) | (3,012)
ITEMS NOT SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT | (141) | (91) | (240)
Actuarial gains and losses from defined benefit pension plans | (79) | (96) | (303)
Non-current assets and disposal groups held for sale | - | - | -
Fair value changes of equity instruments measured at fair value through other comprehensive income | (172) |  |
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk | 166 |  |
Income tax related to items not subject to reclassification to income statement | (56) | 5 | 63
ITEMS SUBJECT TO RECLASSIFICATION TO INCOME STATEMENT | (2,382) | (4,348) | (2,772)
Hedge of net investments in foreign operations (effective portion) | (244) | 80 | 166
Valuation gains or losses taken to equity | (244) | 112 | 166
Transferred to profit or loss | - | - | -
Other reclassifications | - | (32) | -
Foreign currency translation | (1,537) | (5,080) | (2,157)
Valuation gains or losses taken to equity | (1,542) | (5,089) | (2,110)
Transferred to profit or loss | 5 | (22) | (47)
Other reclassifications | - | 31 | -
Cash flow hedges (effective portion) | 27 | (67) | 80
Valuation gains or losses taken to equity | (32) | (122) | 134
Transferred to profit or loss | 58 | 55 | (54)
Transferred to initial carrying amount of hedged items | - | - | -
Other reclassifications | - | - | -
Available-for-sale financial assets |  | 719 | (694)
Valuation gains or losses taken to equity |  | 384 | 438
Transferred to profit or loss |  | 347 | (1,248)
Other reclassifications |  | (12) | 116
Debt securities at fair value through other comprehensive income | (901) |  |
Valuation gains or losses taken to equity | (766) |  |
Transferred to profit or loss | (135) |  |
Other reclassifications | - |  |
Non-current assets and disposal groups held for sale | 20 | (20) | -
Valuation gains or losses taken to equity | - | - | -
Transferred to profit or loss | 20 | - | -
Other reclassifications | - | (20) | -
Entities accounted for using the equity method | 9 | (14) | (89)
Income tax relating to items subject to reclassification to income statements | 244 | 35 | (78)
TOTAL RECOGNIZED INCOME/EXPENSES | 3,628 | 323 | 1,681
Attributable to minority interest (non-controlling interests) | (420) | 127 | 305
Attributable to the parent company | 4,048 | 196 | 1,376

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-7

Consolidated statements of changes in equity for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (MILLIONS OF EUROS)
| Capital (Note 26) | Share Premium | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves (Note 28) | Other reserves (Note 28) | (-) Treasury shares | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (Note 30) | Non-controlling interest | Total
2018 | Valuation adjustments (Note 31) | Other (Note 31)
Balances as of January 1, 2018 | 3,267 | 23,992 | - | 54 | 25,474 | 12 | (44) | (96) | 3,519 | (1,043) | (8,792) | (3,378) | 10,358 | 53,323
Effect of changes in accounting policies ( Note 1.3) | - | - | - | - | (2,713) | - | 9 | - | - | - | 1,756 | 850 | (822) | (919)
Adjusted initial balance | 3,267 | 23,992 | - | 54 | 22,761 | 12 | (34) | (96) | 3,519 | (1,043) | (7,036) | (2,528) | 9,536 | 52,404
Total income/expense recognized | - | - | - | - | - | - | - | - | 5,324 | - | (1,276) | (1,247) | 827 | 3,628
Other changes in equity | - | - | - | (4) | 256 | (10) | (23) | (199) | (3,519) | 68 | 1,096 | 540 | (1,364) | (3,158)
Issuances of common shares | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Issuances of preferred shares | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Issuance of other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Settlement or maturity of other equity instruments issued | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Conversion of debt on equity | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Common Stock reduction | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Dividend distribution | - | - | - | - | (992) | - | (4) | - | - | (975) | - | - | (378) | (2,349)
Purchase of treasury shares | - | - | - | - | - | - | - | (1,684) | - | - | - | - | - | (1,684)
Sale or cancellation of treasury shares | - | - | - | - | (24) | - | - | 1,484 | - | - | - | - | - | 1,460
Reclassification of other equity instruments to financial liabilities | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Reclassification of financial liabilities to other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Transfers within total equity (see Note 2.2.20) | - | - | - | - | 1,408 | (10) | (19) | - | (3,519) | 1,043 | 1,096 | 540 | (540) | -
Increase/Reduction of equity due to business combinations | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Share based payments | - | - | - | (19) | - | - | - | - | - | - | - | - | - | (19)
Other increases or (-) decreases in equity | - | - | - | 15 | (135) | - | - | - | - | - | - | - | (446) | (566)
Balances as of December 31, 2018 | 3,267 | 23,992 | - | 50 | 23,018 | 3 | (58) | (296) | 5,324 | (975) | (7,215) | (3,236) | 9,000 | 52,874

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-8

Consolidated statements of changes in equity for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (MILLIONS OF EUROS)
| Capital (Note 26) | Share Premium | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves (Note 28) | Other reserves (Note 28) | (-) Treasury shares | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (Note 30) | Non-controlling interest | Total
2017 | Valuation adjustments (Note 31) | Other (Note 31)
Balances as of January 1, 2017 | 3,218 | 23,992 | - | 54 | 23,688 | 20 | (67) | (48) | 3,475 | (1,510) | (5,458) | (2,246) | 10,310 | 55,428
Effect of changes in accounting policies ( Note 1.3) | - | - | - | - | (1,843) | - | 7 | - | - | - | 1,836 | 817 | (817) | -
Adjusted initial balance | 3,218 | 23,992 | - | 54 | 21,845 | 20 | (60) | (48) | 3,475 | (1,510) | (3,622) | (1,429) | 9,493 | 55,428
Total income/expense recognized | - | - | - | - | - | - | - | - | 3,519 | - | (3,317) | (1,122) | 1,243 | 323
Other changes in equity | 50 | - | - | - | 1,768 | (8) | 25 | (48) | (3,475) | 467 | - | - | (1,207) | (2,428)
Issuances of common shares | 50 | - | - | - | (50) | - | - | - | - | - | - | - | - | -
Issuances of preferred shares | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Issuance of other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Settlement or maturity of other equity instruments issued | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Conversion of debt on equity | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Common Stock reduction | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Dividend distribution | - | - | - | - | 9 | - | (9) | - | - | (900) | - | - | (290) | (1,189)
Purchase of treasury shares | - | - | - | - | - | - | - | (1,674) | - | - | - | - | - | (1,674)
Sale or cancellation of treasury shares | - | - | - | - | 1 | - | - | 1,626 | - | - | - | - | - | 1,627
Reclassification of other equity instruments to financial liabilities | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Reclassification of financial liabilities to other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Transfers within total equity | - | - | - | - | 1,932 | (8) | 41 | - | (3,475) | 1,510 | - | - | - | -
Increase/Reduction of equity due to business combinations | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Share based payments | - | - | - | (22) | - | - | - | - | - | - | - | - | - | (22)
Other increases or (-) decreases in equity | - | - | - | 22 | (125) | - | (6) | - | - | (144) | - | - | (917) | (1,169)
Balances as of December 31, 2017 | 3,267 | 23,992 | - | 54 | 23,612 | 12 | (34) | (96) | 3,519 | (1,043) | (6,939) | (2,551) | 9,529 | 53,323

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-9

Consolidated statements of changes in equity for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (MILLIONS OF EUROS)
| Capital (Note 26) | Share Premium | Equity instruments issued other than capital | Other Equity | Retained earnings (Note 28) | Revaluation reserves (Note 28) | Other reserves (Note 28) | (-) Treasury shares | Profit or loss attributable to owners of the parent | (-) Interim dividends (Note 4) | Accumulated other comprehensive income (Note 30) | Non-controlling interest | Total
2016 | Valuation adjustments (Note 31) | Other (Note 31)
Balances as of January 1, 2016 | 3,120 | 23,992 | - | 35 | 22,588 | 22 | (98) | (309) | 2,642 | (1,352) | (3,349) | (1,333) | 9,325 | 55,281
Effect of changes in accounting policies ( Note 1.3) | - | - | - | - | (1,834) | - | 7 | - | - | - | 1,826 | 816 | (816) | -
Adjusted initial balance | 3,120 | 23,992 | - | 35 | 20,754 | 22 | (91) | (309) | 2,642 | (1,352) | (1,523) | (517) | 8,509 | 55,282
Total income/expense recognized | - | - | - | - | - | - | - | - | 3,475 | - | (2,099) | (913) | 1,218 | 1,681
Other changes in equity | 98 | - | - | 19 | 1,090 | (2) | 31 | 260 | (2,642) | (158) | - | - | (233) | (1,535)
Issuances of common shares | 98 | - | - | - | (98) | - | - | - | - | - | - | - | - | -
Issuances of preferred shares | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Issuance of other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Settlement or maturity of other equity instruments issued | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Conversion of debt on equity | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Common Stock reduction | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Dividend distribution | - | - | - | - | 93 | - | (93) | - | - | (1,301) | - | - | (234) | (1,535)
Purchase of treasury shares | - | - | - | - | - | - | - | (2,004) | - | - | - | - | - | (2,004)
Sale or cancellation of treasury shares | - | - | - | - | (30) | - | - | 2,264 | - | - | - | - | - | 2,234
Reclassification of other equity instruments to financial liabilities | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Reclassification of financial liabilities to other equity instruments | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Transfers within total equity | - | - | - | - | 1,166 | (2) | 126 | - | (2,642) | 1,352 | - | - | - | -
Increase/Reduction of equity due to business combinations | - | - | - | - | - | - | - | - | - | - | - | - | - | -
Share based payments | - | - | - | (16) | 3 | - | - | - | - | - | - | - | - | (12)
Other increases or (-) decreases in equity | - | - | - | 35 | (44) | - | (2) | - | - | (210) | - | - | 2 | (219)
Balances as of December 31, 2016 | 3,218 | 23,992 | - | 54 | 21,845 | 20 | (60) | (48) | 3,475 | (1,510) | (3,622) | (1,429) | 9,494 | 55,428

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-10

Consolidated statements of cash flows for the years ended December 31, 2018, 2017 and 2016

CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS (MILLIONS OF EUROS)
| Notes | 2018 | 2017 | 2016
A) CASH FLOWS FROM OPERATING ACTIVITIES (1 + 2 + 3 + 4 + 5) | 51 | 8,664 | 2,055 | 6,623
1. Profit for the year |  | 6,151 | 4,762 | 4,693
2. Adjustments to obtain the cash flow from operating activities: |  | 7,695 | 8,526 | 6,784
Depreciation and amortization |  | 1,208 | 1,387 | 1,426
Other adjustments |  | 6,487 | 7,139 | 5,358
3. Net increase/decrease in operating assets |  | (12,679) | (4,894) | (4,428)
Financial assets held for trading |  | 1,379 | 5,662 | 1,289
Non-trading financial assets mandatorily at fair value through profit or loss |  | (643) |  |
Other financial assets designated at fair value through profit or loss |  | 349 | (783) | (2)
Financial assets at fair value through other comprehensive income |  | (206) | 5,032 | 14,445
Loans and receivables |  | (12,652) | (14,503) | (21,075)
Other operating assets |  | (906) | (302) | 915
4. Net increase/decrease in operating liabilities |  | 10,286 | (3,916) | 1,273
Financial liabilities held for trading |  | (466) | (6,057) | 361
Other financial liabilities designated at fair value through profit or loss |  | 1,338 | 19 | (53)
Financial liabilities at amortized cost |  | 10,481 | 2,111 | (7)
Other operating liabilities |  | (1,067) | 11 | 972
5. Collection/Payments for income tax |  | (2,789) | (2,423) | (1,699)
B) CASH FLOWS FROM INVESTING ACTIVITIES (1 + 2) | 51 | 7,516 | 2,902 | (560)
1. Investment |  | (2,154) | (2,339) | (3,978)
Tangible assets |  | (943) | (777) | (1,312)
Intangible assets |  | (552) | (564) | (645)
Investments in joint ventures and associates |  | (150) | (101) | (76)
Subsidiaries and other business units |  | (20) | (897) | (95)
Non-current assets held for sale and associated liabilities |  | (489) | - | -
Held-to-maturity investments |  |  | - | (1,850)
Other settlements related to investing activities |  | - | - | -
2. Divestments |  | 9,670 | 5,241 | 3,418
Tangible assets |  | 731 | 518 | 795
Intangible assets |  | - | 47 | 20
Investments in joint ventures and associates |  | 558 | 18 | 322
Subsidiaries and other business units |  | 4,268 | 936 | 73
Non-current assets held for sale and associated liabilities |  | 3,917 | 1,002 | 900
Held-to-maturity investments |  |  | 2,711 | 1,215
Other collections related to investing activities |  | 196 | 9 | 93
C) CASH FLOWS FROM FINANCING ACTIVITIES (1 + 2) | 51 | (5,092) | (98) | (1,113)
1. Payments |  | (8,995) | (5,763) | (4,335)
Dividends |  | (2,107) | (1,698) | (1,599)
Subordinated liabilities |  | (4,825) | (2,098) | (502)
Treasury stock amortization |  | - | - | -
Treasury stock acquisition |  | (1,686) | (1,674) | (2,004)
Other items relating to financing activities |  | (377) | (293) | (230)
2. Collections |  | 3,903 | 5,665 | 3,222
Subordinated liabilities |  | 2,451 | 4,038 | 1,000
Treasury shares increase |  | - | - | -
Treasury shares disposal |  | 1,452 | 1,627 | 2,222
Other items relating to financing activities |  | - | - | -
D) EFFECT OF EXCHANGE RATE CHANGES |  | (2,498) | (4,266) | (3,463)
E) NET INCREASE/DECREASE IN CASH OR CASH EQUIVALENTS (A+B+C+D) |  | 8,590 | 594 | 1,489
F) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR |  | 45,549 | 44,955 | 43,466
G) CASH AND CASH EQUIVALENTS AT END OF THE YEAR (E+F) | 51 | 54,138 | 45,549 | 44,955
COMPONENTS OF CASH AND EQUIVALENT AT END OF THE YEAR (Millions of Euros) |  |  |  |
|  | 2018 | 2017 | 2016
Cash |  | 6,346 | 6,416 | 7,413
Balance of cash equivalent in central banks |  | 47,792 | 39,132 | 37,542
Other financial assets |  | - | - | -
Less: Bank overdraft refundable on demand |  | - | - | -
TOTAL CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 51 | 54,138 | 45,549 | 44,955

The accompanying Notes 1 to 56 are an integral part of the consolidated financial statements.

F-11

Notes to the Consolidated Financial Statements

1. Introduction, basis for the presentation of the Consolidated Financial Statements, internal control over financial reporting and other 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) as noted on its web site (www.bbva.com).

In addition to the activities it carries out directly, the Bank heads a group of subsidiaries, joint ventures and associates 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 required to prepare Consolidated Financial Statements comprising all consolidated subsidiaries of the Group.

As of December 31, 2018, the BBVA Group had 297 consolidated entities and 66 entities accounted for using the equity method (see Notes 3 and 16 and Appendix I to V).

The Consolidated Financial Statements of the BBVA Group for the year ended December 31, 2018 have been authorized for issue on March 28, 2019.

1.2 Basis for the presentation of the Consolidated Financial Statements

The BBVA Group’s Consolidated Financial Statements are presented in compliance with IFRS-IASB (International Financial Reporting Standards as issued by the International Accounting Standards Board), as well as in accordance with the International Financial Reporting Standards endorsed by the European Union (hereinafter, “EU-IFRS”) applicable as of December 31, 2018, considering the Bank of Spain Circular 4/2017, and with any other legislation governing financial reporting applicable to the Group in Spain.

The BBVA Group’s accompanying Consolidated Financial Statements for the year ended December 31, 2018 were prepared by the Group’s Directors (through the Board of Directors meeting held on February 11, 2019) by applying the principles of consolidation, accounting policies and valuation criteria described in Note 2, so that they present fairly the Group’s total consolidated equity and financial position as of December 31, 2018, together with the consolidated results of its operations and cash flows generated during the year ended December 31, 2018.

These Consolidated Financial Statements were prepared on the basis of the accounting records kept by the Bank and each of the other entities in the Group. Moreover, they include the adjustments and reclassifications required to harmonize the accounting policies and valuation criteria used by the Group (see Note 2.2).

All effective accounting standards and valuation criteria with a significant effect in the Consolidated Financial Statements were applied in their preparation.

F-12

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 balance in these Consolidated Financial Statements are due to how the units are expressed. 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.

1.3 Comparative information

Changes in accounting policies

Application of IFRS 9

As of January 1, 2018, IFRS 9 “Financial instruments” replaced IAS 39 “Financial Instruments: Recognition and Measurement” and includes changes in the requirements for the classification and measurement of financial assets and financial liabilities, the impairment of financial assets and hedge accounting (see Note 2.2.1). As permitted by the standard, IFRS 9 has not been applied retrospectively for previous years. The impact of the first application of IFRS 9 is presented in Note 2.4.

As a consequence of the application of IFRS 9, the comparative information for the financial years 2017 and 2016 included in these Consolidated Financial Statements has been subject to some non-significant modifications in order to improve the comparability with the figures of the financial year 2018.

Hyperinflationary economies

The Group’s experience applying IAS 29 "Financial information in hyperinflationary economies" in its subsidiaries in Venezuela allows us to confirm the complexity of applying the accounting mechanism of inflation together with the historical movements of the exchange rates in a way that results are economically understandable, especially when there is not a consistent evolution between inflation and exchange rate in each period.

In this context, with the aim of improving the faithful representation of the financial statements, during 2018 the Group made an accounting policy change which involves recording in a single account of "Shareholders’ funds – retained earnings", both the revaluation of non-monetary items due to the effect of hyperinflation and the differences generated when translating the restated financial statements of the subsidiaries in hyperinflationary economies into euros. Translation differences, prior to the accounting policy change were recorded in the item “Accumulated other comprehensive income – items that may be reclassified to profit or loss – foreign currency translation” (see Notes 2.2.16 and 2.2.20). The accounting policy change, in accordance with IAS 8, offers and provides more reliable and relevant information of operations in hyperinflationary economies.

In order to make the information comparable, we have restated the information of the previous years, in such a way that €1,853, €1,836 and €1,826 million have been reclassified from "Accumulated other comprehensive income – items that may be reclassified to profit or loss – foreign currency translation" to "Shareholders’ funds – retained earnings" as of December 31, 2017, December 31, 2016 and January 1, 2016, respectively, relating to the Group companies registered in Venezuela (an economy that was also considered hyperinflationary in 2017 and 2016). Additionally, €828, €817 and €816 million have been reclassified from “Non-controlling interest –Accumulated other comprehensive income” to “Non-controlling interest – other” as of December 31, 2017, December 31, 2016 and January 1, 2016, respectively.

F-13

The reclassification corresponding to January 1, 2018, 2017 and 2016 is recorded as "Effects of changes in accounting policies" in the Consolidated Statement of Changes in Equity corresponding to the years ended December 31, 2018, 2017 and 2016. In the consolidated balance sheet as of December 31, 2018, 2017 and 2016, the heading " Shareholders’ funds – retained earnings” includes both the translation differences and the effects of restatement for inflation.

Operating segments

During 2018, there were no significant changes to the existing structure of the BBVA Group’s operating segments in comparison to 2017 (see Note 6). Certain prior year balances have been reclassified to conform to current year presentation.

1.4 Seasonal nature of income and expenses

The nature of the most significant activities carried out by the BBVA Group’s entities is mainly related to typical activities carried out by financial institutions, which are not significantly affected by seasonal factors within the same year.

1.5 Responsibility for the information and for the estimates made

The information contained in the BBVA Group’s Consolidated Financial Statements is the responsibility of the Group’s Directors.

Estimates were required to be made at times when preparing these Consolidated Financial Statements in order to calculate the recorded or disclosed amount of some assets, liabilities, income, expenses and commitments. These estimates relate mainly to the following:

· Impairment on certain financial assets (see Notes 7, 13, 14 and 16).

· The assumptions used to quantify certain provisions (see Note 24) and for the actuarial calculation of post-employment benefit liabilities and commitments (see Note 25).

· The useful life and impairment losses of tangible and intangible assets (see Notes 17, 18, 20 and 21).

· The valuation of goodwill and price allocation of business combinations (see Note 18).

· The fair value of certain unlisted financial assets and liabilities (see Notes 7, 8, 10, 11, 12 and 13).

· The recoverability of deferred tax assets (See Note 19).

Although these estimates were made on the basis of the best information available as of the end of the reporting period, 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.

During 2018, 2017 and 2016 there were no significant changes to the assumptions and estimations, except as indicated in these Consolidated Financial Statements.

1.6 BBVA Group’s Internal Control over Financial Reporting

BBVA Group’s Consolidated Financial Statements are prepared under an Internal Control over Financial Reporting Model (hereinafter “ICFR"). It provides reasonable assurance with respect to the reliability and the integrity of the consolidated financial statements. It is also aimed to ensure that the transactions are processed in accordance with the applicable laws and regulations.

F-14

The ICFR is in accordance with the control framework established in 2013 by the “Committee of Sponsoring Organizations of the Treadway Commission” (hereinafter, "COSO"). The COSO 2013 framework sets five components that constitute the basis of the effectiveness and efficiency of the internal control systems:

· The establishment of an appropriate control framework.

· The assessment of the risks that could arise during the preparation of the financial information.

· The design of the necessary controls to mitigate the identified risks.

· The establishment of an appropriate system of information to detect and report system weaknesses.

· The monitoring activities over the controls to ensure they perform correctly and are effective over time.

The ICFR is a dynamic model that evolves continuously over time to reflect the reality of the BBVA Group’s businesses and processes, as well as the risks and controls designed to mitigate them. It is subject to a continuous evaluation by the internal control units located in the different entities of BBVA Group.

These internal control units are integrated within the BBVA internal control model which is based in two pillars:

· A control system organized into three lines of defense:

- The first line is located within the business and support units, which are responsible for identifying risks associated with their processes and to execute the controls established to mitigate them.

- The second line comprises the specialized control units (Compliance, Internal Financial Control, Internal Risk Control, Engineering Risk, Fraud & Security, and Operations Control among others). This second line defines the models and controls under their areas of responsibility and monitors the design, correct implementation and effectiveness of the controls

- The third line is the Internal Audit unit, which conducts an independent review of the model, verifying the compliance and effectiveness of the model.

· A set of committees called Corporate Assurance that helps to escalate the internal control issues to the management at a Group level and also in each of the countries where the Group operates.

The internal control units comply with a common and standard methodology established at Group level, as set out in the following diagram:

The ICFR Model is subject to annual evaluations by the Group’s Internal Audit Unit. It is also supervised by the Audit and Compliance Committee of the Bank’s Board of Directors.

The BBVA Group is also required to comply with Sarbanes-Oxley Act (hereafter “SOX”) for Consolidated Financial Statements as a listed company with the U.S. Securities and Exchange Commission (“SEC”). The main senior executives of the Group are involved in the design, compliance and implementation of the internal control model to make it effective and to ensure the quality and accuracy of the financial information.

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, in accordance with the criteria established by IFRS, the BBVA Group is made up of four types of entities: subsidiaries, joint ventures, associates and structured entities, defined as follows:

· Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are fully consolidated with those of the Bank. The share of non-controlling interests from subsidiaries in the Group’s consolidated total equity is presented under the heading “Minority interests (Non-controlling interests)” in the consolidated balance sheet. Their share in the profit or loss for the period or year is presented under the heading “Attributable to minority interest (non-controlling interests)” in the accompanying consolidated income statement (see Note 31).

Note 3 includes information related to the main subsidiaries in the Group as of December 31, 2018. 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 with third parties other than the Group (for definitions of joint arrangement, joint control and joint venture, refer to Glossary).

The investments in joint ventures are accounted for using the equity method (see Note 16). Appendix II shows the main figures for joint ventures accounted for using the equity method.

· Associates

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 “Financial assets at fair value through other comprehensive income”.

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. As of December 31, 2018, 2017 and 2016 these entities are not significant in the Group.

Appendix II shows the most significant information related to the associates (see Note 16), which are accounted for using the equity method.

· Structured Entities

A structured entity 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 (see Glossary).

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, to transfer 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.

F-16

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 is controlled by the Group, 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 is performed and, among others, the following factors will be considered:

- Evidence of the current ability to manage the relevant activities of the investee according to the specific business needs (including any decisions that may arise only in particular circumstances).

- Potential existence of a special relationship with the investee.

- Implicit or explicit Group commitments to support the investee.

- The ability to use the Group´s power over the investee to affect the amount of the Group’s returns.

There are cases where the Group has a high exposure to variable returns and retains decision-making power over the investee, either directly or through an agent.

The main structured entities of the Group are the asset securitization funds, to which the BBVA Group transfers loans and receivables portfolios, and other vehicles, which allow the Group’s customers to gain access to certain investments or to allow for the transfer of risks or for other purposes (see Appendices I and V). The BBVA Group maintains the decision-making power over the relevant activities of these vehicles and financial support through securitized market standard contracts. The most common ones are: investment positions in equity note tranches, funding through subordinated debt, credit enhancements through derivative instruments or liquidity lines, management rights of defaulted securitized assets, “clean-up” call derivatives, and asset repurchase clauses by the grantor.

For these reasons, the loans and receivable portfolios related to the vast majority of the securitizations carried out by the Bank or Group subsidiaries are not derecognized in the books of said entity and the issuances of the related debt securities are recorded as liabilities within the Group’s consolidated balance sheet.

· Non-consolidated structured entities

The Group owns other vehicles also for the purpose of allowing customers access to certain investments, to transfer risks, and for other purposes, but without the Group having control of the vehicles, which are not consolidated in accordance with “IFRS 10 - Consolidated Financial Statements”. 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, 2018, 2017 and 2016 there was no material financial support from the Bank or its subsidiaries to unconsolidated structured entities.

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The Group does not consolidate any of the mutual funds it manages since the necessary control conditions are not met (see definition of control in the Glossary). Particularly, the BBVA Group does not act as arranger but as agent since it operates the mutual funds on behalf and for the benefit of investors or parties (arranger or arrangers) and, for this reason it does not control the mutual funds when exercising its authority for decision making.

The mutual funds managed by the Group are not considered structured entities (generally, retail funds without corporate identity over which investors have participations which gives them ownership of said managed equity). These funds are not dependent on a capital structure that could prevent them from carry out activities without additional financial support, being in any case insufficient as far as the activities themselves are concerned. Additionally, the risk of the investment is absorbed by the fund participants, and the Group is only exposed when it becomes a participant, and as such, there is no other risk for the Group.

In all cases, the operating results of equity method investees acquired by the BBVA Group in a particular period only include the period from the date of acquisition to the financial statements date. Similarly, the results of entities disposed of during any only include year the period from the start of the year to the date of disposal.

The consolidated financial statements of subsidiaries, associates and joint ventures used in the preparation of the Consolidated Financial Statements of the Group have the same presentation date as 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 adjusted to take into account the most significant transactions. As of December 31, 2018, except for the case of the consolidated financial statements of two subsidiaries and six associates and joint-ventures deemed non-significant for which financial statements as of November 30, 2018 were used, the December 31, 2018 financial statements for of all Group entities were utilized.

BBVA banking subsidiaries, associates and joint ventures worldwide, 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 regulators or other public administrations could discourage or delay the transfer of funds to the Group in the form of cash, dividends, loans or advances for prudential reasons.

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 made in the consolidation process to standardize these principles and criteria and comply with the IFRS-IASB.

The accounting standards and policies and valuation criteria used in preparing the accompanying Consolidated Financial Statements are as follows:

2.2.1 Financial instruments

As mentioned in Note 1.3, IFRS 9 became effective as of January 1, 2018 and replaced IAS 39 regarding the classification and measurement of financial assets and liabilities, the impairment of financial assets and hedge accounting.

The disclosures related to the financial years 2017 and 2016 are based on the accounting policies and valuation criteria applicable under IAS 39.

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Classification and measurement of financial assets under IFRS 9

Classification of financial assets

IFRS 9 contains three main categories for financial assets classification: measured at amortized cost, measured at fair value with changes through other comprehensive income, and measured at fair value through profit or loss.

The classification of financial assets measured at amortized cost or fair value must be carried out on the basis of two tests: the entity's business model and the assessment of the contractual cash flow, commonly known as the "solely payments of principle and interest" criterion (hereinafter, the SPPI).

A debt instrument will be classified in the amortized cost portfolio if the two following conditions are fulfilled:

· The financial asset is managed within a business model whose purpose is to maintain the financial assets to receive contractual cash flows; and

· In accordance with the contractual characteristics of the instrument its cash flows only represent the return of the principal and interest, basically understood as consideration for the time value of money and the debtor's credit risk.

A debt instrument will be classified in the portfolio of financial assets at fair value with changes through other comprehensive income if the two following conditions are fulfilled:

· The financial asset is managed with a business model whose purpose combines collection of the contractual cash flows and sale of the assets, and

· The contractual characteristics of the instrument generate, at specific dates, cash flows which only represent the return of the principal and interest.

A debt instrument will be classified at fair value with changes in profit and loss provided that the entity's business model for their management or the contractual characteristics of its cash flows do not require classification into one of the portfolios described above.

In general, equity instruments will be measured at fair value through profit or loss. However the Group may make an irrevocable election at initial recognition to present subsequent changes in the fair value through other comprehensive income.

Financial assets will only be reclassified when BBVA Group decides to change the business model. In this case, all of the financial assets assigned to this business model will be reclassified. The change of the objective of the business model should occur before the date of the reclassification.

Valuation of financial assets

All financial instruments are initially recognized at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the instrument.

Excluding all trading derivatives not considered as accounting or economic hedges, all the changes in the fair value of the financial instruments arising from the accrual of interest and similar items are recognized under the headings “Interest and other income” or “Interest expense”, as appropriate, in the accompanying consolidated income statement in the period in which the change occurred (see Note 37). 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.

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“Financial assets held for trading”, “Non-trading financial assets mandatorily at fair value through profit and loss” and “Financial assets designated at fair value through profit or loss”

Financial assets are recorded under the heading “Financial assets held for trading” if the objective of the business model is to generate gains by buying and selling these financial instruments or generate short-term results. The financial assets recorded in the heading “Non-trading financial assets mandatorily at fair value through profit and loss” are assigned to a business model which objective is to obtain the contractual cash flows and / or to sell those instruments but its contractual cash flows do not comply with the requirements of the SPPI test. In “Financial assets designated at fair value through profit or loss” the Group classifies financial assets only if it eliminates or significantly reduces a measurement or recognition inconsistency (an ‘accounting mismatch’) that would otherwise arise from measuring financial assets or financial liabilities, or recognizing gains or losses on them, on different bases.

The assets recognized under these headings of the consolidated balance sheets are measured upon acquisition at fair value and changes in the fair value (gains or losses) are recognized as their net value under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (see Note 41). Interests from derivatives designated as economic hedges on interest rate are recognized in “Interest and other income” or “Interest expense” (see Note 37), depending on the result of the hedging instrument. However, changes in fair value resulting from variations in foreign exchange rates are recognized under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (Note 41).

”Financial assets at fair value through other comprehensive income”

· Debt instruments

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 net of tax effect, under the heading “Accumulated other comprehensive income- Items that may be reclassified to profit or loss - Fair value changes of debt instruments measured at fair value through other comprehensive income” in the consolidated balance sheets (see Note 30).

The amounts recognized under the headings “Accumulated other comprehensive income- Items that may be reclassified to profit or loss - Fair value changes of financial assets measured at fair value through other comprehensive income” and “Accumulated other comprehensive income- Items that may be reclassified to profit or loss - 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 on the corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the headings “Gains (losses) on financial assets and liabilities, net” or “Exchange differences, net", as appropriate, in the consolidated income statement for the year in which they are derecognized (see Note 41).

The net impairment losses in “Financial assets at fair value through other comprehensive income” over the year are recognized under the heading “Impairment losses on financial assets, net – Financial assets at fair value through other comprehensive income” (see Note 47) in the consolidated income statements for that period.

Changes in foreign exchange rates which affect monetary items are recognized under the heading “Exchange differences, net" in the accompanying consolidated income statements (see Note 41).

· Equity instruments

The BBVA Group, at the time of the initial recognition, may elect to present changes in the fair value in other comprehensive income of an investment in an equity instrument that is not held for trading. The election is irrevocable and can be made on an instrument-by-instrument basis. Subsequent changes in fair value (gains or losses) are recognized, under the heading “Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of equity instruments measured at fair value through other comprehensive income”.

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“Financial assets at amortized cost”

A financial asset is classified as subsequently measured at amortized cost if it is held within a business model whose objective is to hold financial assets in order to collect and it meets the SPPI Criterion.

The assets under this category are subsequently measured at amortized cost, using the effective interest rate method.

Net impairment losses of assets recorded under these headings arising in each period are recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss – financial assets measured at cost” (see Note 47) in the consolidated income statement for that period.

Classification and measurement of financial liabilities under IFRS 9

Classification of financial liabilities

Under IFRS 9, financial liabilities are classified in the following categories:

· Financial liabilities at amortized cost;

· Financial liabilities that are held for trading including derivatives are financial instruments which are recorded in this category when the Group’s objective is to generate gains by buying and selling these financial instruments;

· Financial liabilities that are designated at fair value through profit or loss on initial recognition under the Fair Value Option. The Group has the option to designate irrevocably on initial recognition a financial liability as at fair value through profit or loss provided that doing so results in the elimination or significant reduction of measurement or recognition inconsistency, or if a group of financial liabilities, or a group of financial assets and financial liabilities, has to be managed, and its performance evaluated, on a fair value basis in accordance with a documented risk management or investment strategy.

Valuation of financial liabilities

All financial instruments are initially recognized at fair value plus, in the case of a financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial liability. Unless there is evidence to the contrary, the best evidence of the fair value of a financial instrument at initial recognition shall be the transaction price.

Excluding all trading derivatives not considered as accounting or economic hedges, all the changes in the fair value of the financial instruments arising from the accrual of interest and similar items are recognized under the headings “Interest and other income” or “Interest expense”, as appropriate, in the accompanying consolidated income statement in the period in which the change occurred (see Note 37).

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 liabilities.

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“Financial liabilities held for trading” and “Financial liabilities designated at fair value through profit or loss“

The subsequent changes in the fair value (gains or losses) of the liabilities recognized under these headings of the consolidated balance sheets are recognized as their net value under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (see Note 41), except for the financial liabilities designated at fair value through profit and loss under the fair value option for which the amount of change in the fair value that is attributable to changes in the own credit risk which is presented in under the heading “Accumulated other comprehensive income (loss) – Items that will not be reclassified to profit or loss – Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk”. Interests from derivatives designated as economic hedges on interest rate are recognized in “Interest and other income” or “Interest expense” (Note 37), depending on the result of the hedging instrument. However, changes in fair value resulting from variations in foreign exchange rates are recognized under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (Note 41).

“Financial liabilities at amortized cost”

The liabilities under this category are subsequently measured at amortized cost, using the effective interest rate method.

Measurement of financial assets and liabilities under IAS 39 applicable in the financial years 2017 and 2016

Measurement of financial instruments and recognition of changes in subsequent fair value

All financial instruments are initially accounted for at fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Unless there is evidence to the contrary, the best evidence of the fair value of a financial instrument at initial recognition shall be the transaction price.

Excluding all trading derivatives not considered as accounting or economic hedges, all the changes in the fair value of the financial instruments arising from the accrual of interest and similar items are recognized under the headings “Interest and other income” or “Interest expense”, as appropriate, in the accompanying consolidated income statement the year in which the change occurred (see Note 37). The dividends received from other entities, other than associated entities and joint venture entities, are recognized under the heading “Dividend income” in the accompanying consolidated income statement in the year in which the right to receive them arises (see Note 38).

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 and liabilities held for trading” and “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 upon acquisition at fair value and changes in the fair value (gains or losses) are recognized as their net value under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (see Note 41). Interests from derivatives designated as economic or accounting hedges on interest rate are recognized under the heading “Interest and other income” or “Interest expense” (Note 37), depending on the result of the hedging instrument. Changes in fair value resulting from variations in foreign exchange rates are recognized under the heading “Gains (losses) on financial assets and liabilities, net” in the accompanying consolidated income statements (Note 41).

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“Financial assets at fair value through other comprehensive income”

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 net of tax effect, under the heading “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Financial assets at fair value through other comprehensive income” in the consolidated balance sheets (see Note 30).

The amounts recognized under the headings “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Financial assets at fair value through other comprehensive income” and “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - 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 on the corresponding financial instrument. If these assets are sold, these amounts are derecognized and included under the headings “Gains (losses) on financial assets and liabilities, net” or “Exchange differences, net", as appropriate, in the consolidated income statement for the year in which they are derecognized (see Note 41).

The net impairment losses in “Financial assets at fair value through other comprehensive income” 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 47) in the consolidated income statements for that year.

Changes in the value of non-monetary items resulting from changes in foreign exchange rates are recognized temporarily under the heading “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences” in the accompanying consolidated balance sheets. Changes in foreign exchange rates which affect monetary items are recognized under the heading “Exchange differences, net" in the accompanying consolidated income statements (see Note 41).

“Financial assets and liabilities at amortized cost”

Assets and liabilities recognized under these headings in the accompanying consolidated balance sheets are subsequently measured at “amortized cost” using the “effective interest rate” method. This is because the consolidated entities generally intend to hold such financial instruments to maturity.

Net impairment losses of assets recognized under these headings arising in each year are recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss – financial assets measured at cost” (see Note 47) in the consolidated income statement for that year.

“Derivatives-Hedge Accounting” and “Fair value changes of the hedged items in portfolio hedges of interest-rate risk” applicable in the financial years 2018, 2017 and 2016

Assets and liabilities recognized under these headings in the accompanying consolidated balance sheets are measured at fair value.

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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 “Gains or losses from hedge accounting, net” in the consolidated income statement, with a corresponding offset under the headings where hedging items ("Hedging derivatives") and the hedged items are recognized, as applicable. 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 other income” or “Interest expense”, as appropriate, in the accompanying consolidated income statement (see Note 37).

· 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 also recognized in the consolidated income statement (in both cases under the heading “Gains or losses from hedge accounting, net”, 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 ”Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Hedging derivatives. Cash flow hedges” in the consolidated balance sheets, with a balancing entry under the heading “Hedging derivatives” of the Assets or Liabilities of the consolidated balance sheets as applicable. These differences are recognized in the accompanying consolidated income statement under the headings “Interest and other income” or “Interest expense” 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 (see Note 37).

· Differences in the measurement of the hedging items corresponding to the ineffective portions of cash flow hedges are recognized directly in the heading “Gains or losses from hedge accounting, net” in the consolidated income statement (see Note 41).

· 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 "Accumulated other comprehensive income - Items that may be reclassified to profit or loss – Hedging of net investments in foreign transactions" in the consolidated balance sheets with a balancing entry under the heading “Hedging derivatives” of the Assets or Liabilities of the consolidated balance sheets as applicable. 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 (see Note 41).

Other financial instruments under IAS 39 applicable in the financial years 2017 and 2016

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 are recorded in the consolidated balance sheet at acquisition cost; this may be adjusted, where appropriate, for any impairment loss (see Note 8).

· Accumulated other comprehensive income arising from financial instruments classified at the consolidated balance sheet date as “Non-current assets and disposal groups classified as held for sale” are recognized with the corresponding entry under the heading “Accumulated other comprehensive income- Items that may be reclassified to profit or loss – Non-current assets and disposal groups classified as held for sale” in the accompanying consolidated balance sheets (see note 30).

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Impairment losses on financial assets

Definition of impaired financial assets under IFRS 9

IFRS 9 replaced the "incurred loss" model in IAS 39 with one of "expected credit loss". The IFRS 9 impairment model is applied to financial assets valued at amortized cost and to financial assets valued at fair value with changes in accumulated other comprehensive income, except for investments in equity instruments and contracts for financial guarantees and loan commitments unilaterally revocable by BBVA. Likewise, all the financial instruments valued at fair value with change through profit and loss are excluded from the impairment model.

The new standard classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of initial recognition. The first category includes the transactions when they are initially recognized (Stage 1); the second comprises the financial assets for which a significant increase in credit risk has been identified since its initial recognition (Stage 2) and the third one, the impaired financial assets (Stage 3).

The calculation of the provisions for credit risk in each of these three categories must be done differently. In this way, expected loss up to 12 months for the financial assets classified in the first of the aforementioned categories must be recorded, while expected losses estimated for the remaining life of the financial assets classified in the other two categories must be recorded. Thus, IFRS 9 differentiates between the following concepts of expected loss:

· Expected loss at 12 months: expected credit loss that arises from possible default events within 12 months following the presentation date of the financial statements; and

· Expected loss during the life of the transaction: this is the expected credit loss that arises from all possible default events over the remaining life of the financial instrument.

All this requires considerable judgment, both in the modeling for the estimation of the expected losses and in the forecasts, on how the economic factors affect such losses, which must be carried out on a weighted probability basis.

The BBVA Group has applied the following definitions in accordance with IFRS 9:

Default

BBVA has applied a definition of default for financial instruments that is consistent with that used in internal credit risk management, as well as the indicators under applicable regulation at the date of implementation of IFRS 9. Both qualitative and quantitative indicators have been considered.

The Group has considered there is a default when one of the following situations occurs:

· Payment past-due for more than 90 days; or

· There are reasonable doubts regarding the full reimbursement of the instrument.

In accordance with IFRS 9, the 90-day past-due stipulation may be waived in cases where the entity considers it appropriate, based on reasonable and documented information that it is appropriate to use a longer term. As of December 31, 2018, the Group has not considered periods higher than 90 days for any of the significant portfolios.

Credit impaired asset

An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a detrimental impact on the estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the following events:

· Significant financial difficulty of the issuer or the borrower.

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· A breach of contract (e.g. a default or past due event).

· A lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s financial difficulty – that the lender would not otherwise consider.

· It becoming probable that the borrower will enter bankruptcy or other financial reorganization.

· The disappearance of an active market for that financial asset because of financial difficulties.

· The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event. Instead, the combined effect of several events may cause financial assets to become credit-impaired.

The definition of impaired financial assets in the Group is aligned with the definition of default explained in the above paragraphs.

Significant increase in credit risk

The objective of the impairment requirements is to recognize lifetime expected credit losses for financial instruments for which there have been significant increases in credit risk since initial recognition considering all reasonable and supportable information, including that which is forward-looking.

The model developed by the Group for assessing the significant increase in credit risk has a two-prong approach that is applied globally, although the specific characteristics of each geographic area are respected:

· Quantitative criterion: the Group uses a quantitative analysis based on comparing the current expected probability of default over the life of the transaction with the original adjusted expected probability of default, so that both values are comparable in terms of expected default probability for their residual life. The thresholds used for considering a significant increase in risk take into account special cases according to geographic areas and portfolios. Depending on how old current transactions are at the time implementation of the standard, some simplifications were made to compare the probabilities of default between the current and the initial moment, based on the best information available at that moment.

· Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through rating/scoring systems or macroeconomic scenarios, so the quantitative analysis covers the majority of circumstances. The Group will use additional qualitative criteria when it considers it necessary to include circumstances that are not reflected in the rating/score systems or macroeconomic scenarios used.

Additionally, instruments under one of the following circumstances are considered Stage 2:

· More than 30 days past due. According to IFRS 9, default of more than 30 days is a presumption that can be rebutted in those cases in which the entity considers, based on reasonable and documented information, that such non-payment does not represent a significant increase in risk. As of December 31, 2018, the Group has not considered periods higher than 30 days for any of the significant portfolios.

· Watch list: They are subject to special watch by the Risks units because they show negative signs in their credit quality, even though there may be no objective evidence of impairment.

· Refinance or restructuring that does not show evidence of impairment.

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Although the standard introduces a series of operational simplifications or practical solutions for analyzing the increase in significant risk, the Group does not use them as a general rule. However, for high-quality assets, mainly related to certain government institutions and bodies, the standard allows for considering that their credit risk has not increased significantly because they have a low credit risk at the presentation date.

Thus the classification of financial instruments subject to impairment under the new IFRS 9 is as follows:

· Stage 1– without significant increase in credit risk

Financial assets which are not considered to have significantly increased in credit risk have loss allowances measured at an amount equal to 12 months expected credit losses.

· Stage 2– significant increases in credit risk

When the credit risk of a financial asset has increased significantly since the initial recognition, the impairment losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.

· Stage 3 – Impaired

When there is objective evidence that the instrument is credit impaired, the financial asset is transferred to this category in which the provision for losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.

Definition of impaired financial assets under IAS 39 applicable in the financial years 2017 and 2016

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 instruments were acquired. 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 year 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 at fair value through other comprehensive income is not recognized in the consolidated income statement, but under the heading " Accumulated other comprehensive income - Items that may be reclassified to profit or loss - financial assets at fair value through other comprehensive income" in the consolidated balance sheet (see Note 30).

In general, amounts collected on 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, such 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.

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Method for calculating expected credit loss under IFRS 9

Method for calculating expected loss

In accordance with IFRS 9, the measurement of expected losses must reflect:

· A considered and unbiased amount, determined by evaluating a range of possible results.

· The time value of money.

· Reasonable and supportable information that is available without undue cost or effort and that reflects current conditions and forecasts of future economic conditions.

The Group measures the expected losses both individually and collectively. The purpose of the Group's individual measurement is to estimate expected losses for significant impaired instruments, or instruments classified in Stage 2. In these cases, the amount of credit losses is calculated as the difference between expected discounted cash flows at the effective interest rate of the transaction and the carrying amount of the instrument.

For the collective measurement of expected losses the instruments are grouped into groups of assets based on their risk characteristics. Exposure within each group is segmented according to the common credit risk characteristics, similar characteristics of the credit risk, indicative of the payment capacity of the borrower in accordance with their contractual conditions. These risk characteristics have to be relevant in estimating the future flows of each group. The characteristics of credit risk may consider, among others, the following factors:

· Type of instrument.

· Rating or scoring tools.

· Credit risk scoring or rating.

· Type of collateral.

· Amount of time at default for stage 3.

· Segment.

· Qualitative criteria which can have a significant increase in risk.

· Collateral value if it has an impact on the probability of a default event.

The estimated losses are derived from the following parameters:

· PD: estimate of the probability of default in each period.

· EAD: estimate of the exposure in case of default at each future period, taking into account the changes in exposure after the presentation date of the financial statements.

· LGD: estimate of the loss in case of default, calculated as the difference between the contractual cash flows and receivables, including guarantees.

In the case of debt securities, the Group supervises the changes in credit risk through monitoring the external published credit ratings.

To determine whether there is a significant increase in credit risk that is not reflected in the published ratings, the Group also revises the changes in bond yields, and when they are available, the prices of CDS, together with the news and regulatory information available on the issuers.

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Use of present, past and future information

IFRS 9 requires incorporation of present, past and future information to detect any significant increase in risk and measure expected loss.

The standard does not require identification of all possible scenarios for measuring expected loss. However, the probability of a loss event occurring and the probability it will not occur have to be considered, even though the possibility of a loss may be very small. Also, when there is no linear relation between the different future economic scenarios and their associated expected losses, more than one future economic scenario must be used for the measurement.

The approach used by the Group consists of using first the most probable scenario (baseline scenario) consistent with that used in the Group's internal management processes, and then applying an additional adjustment, calculated by considering the weighted average of expected losses in other economic scenarios (one more positive and the other more negative). The main macroeconomic variables that are valued in each of the scenarios for each of the geographies in which the Group operates are Gross Domestic Product (GDP), tax rates, unemployment rate and loan to value (LTV).

Method for calculating the impairment on financial assets under IAS 39 applicable in the financial years 2017 and 2016

The impairment on financial assets is determined by type of instrument and other circumstances that could affect it, taking into account the guarantees received 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 instruments measured at amortized cost

With regard to impairment losses arising from insolvency risk of the obligors (credit risk), a debt instrument, mainly Loans and receivables, is impaired due to insolvency when a deterioration in the ability to pay by the obligor is evidenced, either due to past due status or for other reasons.

The BBVA Group has developed policies, methods and procedures to estimate incurred losses on outstanding credit risk. These policies, methods and procedures are applied in the due diligence, approval and execution of debt instruments and commitments and guarantees given; as well as in identifying the impairment and, where appropriate, in calculating the amounts necessary to cover estimated losses.

The amount of impairment losses on debt instruments measured at amortized cost is calculated based on whether the impairment losses are determined individually or collectively. First it is determined whether there is objective evidence of impairment individually for individually significant debt instrument, and collectively for debt instrument that are not individually significant. If the Group determines that there is no objective evidence of impairment, the assets are classified in groups of debt instrument based on similar risk characteristics and impairment is assessed collectively.

In determining whether there is objective evidence of impairment the Group uses observable data in the following aspects:

· Significant financial difficulties of the obligors.

· Ongoing delays in the payment of interest or principal.

· Refinancing of credit due to financial difficulties by the counterparty.

· Bankruptcy or reorganization / liquidation are considered likely.

· Disappearance of the active market for a financial asset because of financial difficulties.

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· Observable data indicating a reduction in future cash flows from the initial recognition such as adverse changes in the payment status of the counterparty (delays in payments, reaching credit cards limits, etc.).

· National or local economic conditions that are linked to "defaults" in the financial assets (unemployment rate, falling property prices, etc.).

Impairment losses on financial assets individually evaluated for impairment

The amount of the impairment losses incurred on financial assets represents the excess of their respective carrying amounts over the present values of their expected future cash flows. These cash flows are discounted using the original effective interest rate. If a financial asset 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 expected future cash flows.

The following is to be taken into consideration when estimating the future cash flows of debt instruments:

· All amounts that are expected to be recovered over the remaining life of the debt instrument; including, where appropriate, those which may result from the collateral and other credit enhancements provided for the debt 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 debt instrument is subject.

· The circumstances in which collections will foreseeably be made.

Impairment losses on financial assets collectively evaluated for impairment

With regard to the collective impairment analysis, financial assets are grouped by risk type considering the debtor's capacity to pay based on the contractual terms. As part of this analysis, the BBVA Group estimates the impairment loan losses that are not individually significant, distinguishing between those that show objective evidence of impairment, and those that do not show objective evidence of impairment, as well as the impairment of significant loans that the BBVA Group has deemed as not showing an objective evidence of impairment.

With respect to financial assets that have no objective evidence of impairment, the Group applies statistical methods using historical experience and other specific information to estimate the losses that the Group has incurred as a result of events that have occurred as of the date of preparation of the Consolidated Financial Statements but have not been known and will be apparent, individually after the date of submission of the information. This calculation is an intermediate step until these losses are identified on an individual level, at which time these financial instruments will be segregated from the portfolio of financial assets without objective evidence of impairment.

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.

· 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 whole amount expected to be obtained over the remaining life of the financial asset. The recoverable amount from executable secured

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collateral is estimated based on the property valuation, discounting the necessary adjustments to adequately account for the potential fall in value until its execution and sale, as well as execution costs, maintenance costs and sale costs.

In addition, to identify the possible incurred but not reported losses (IBNR) in the unimpaired portfolio, an additional parameter called "LIP" (loss identification period) has to be introduced. The LIP parameter is the period between the time at which the event that generates a given loss occurs and the time when the loss is identified at an individual level.

When the property right is contractually acquired at the end of the foreclosure process or when the assets of distressed borrowers are purchased, the asset is recognized in the consolidated balance sheets (see Note 2.2.4).

Impairment of other debt instruments classified as financial assets available for sale

The impairment losses on other debt instruments 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 debt instruments are due to impairment, they are no longer considered as “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - financial assets at fair value through other comprehensive income” 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, up to the amount previously recognized in the income statement.

Impairment of equity instruments

The amount of the impairment in the equity instruments is determined by the category where they are recognized:

· Equity instruments classified at available for sale at fair value:

When there is objective evidence that the negative differences arising on measurement of these equity instruments are due to impairment, they are no longer recorded as “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Financial assets available for sale” 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 equity instrument to determine whether it is a percentage that can be recovered through its sale in the market; other different thresholds may exist for certain equity instruments or specific sectors.

In addition, for individually significant investments, the Group compares the valuation of the most significant equity instruments against valuations performed by independent experts.

Any recovery of previously recognized impairment losses for an investment in an equity instrument classified at fair value through other comprehensive income is not recognized in the consolidated income statement, but under the heading " Accumulated other comprehensive income - Items that may be reclassified to profit or loss - financial assets available for sale" in the consolidated balance sheet (see Note 30).

· 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, unless there is better evidence, an assessment of the equity of the investee is carried out (excluding Accumulated other comprehensive

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income 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 in the year in which they arise as a direct reduction of the cost of the instrument. These impairment losses may only be recovered 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, when their implicit risks and benefits have been substantially transferred to third parties or when the control of financial asset is transferred even in case of no physical transfer or substantial retention of such assets. 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 or fair value with changes in the income statement, whichever the case.

· 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, bank guarantee, insurance contract or credit derivative, among others.

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.

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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 24). These provisions are recognized and reversed with a charge or credit, respectively; to “Provisions or reversal of provision” in the consolidated income statements (see Note 46).

Income from financial guarantees 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 40).

2.2.4 Non-current assets and disposal groups held for sale and liabilities included in disposal groups classified as held for sale and Liabilities included in disposal groups classified as held for sale

The headings “Non-current assets and disposal groups held for sale” and “Liabilities included in disposal groups classified as 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 21).

These headings include 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 heading “Non-current assets and disposal groups held for sale” include the assets received by the subsidiaries from their debtors, in full or partial settlement of the debtors’ payment obligations (assets foreclosed or received in payment 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 included in disposal groups classified as held for sale” in the consolidated balance sheets reflects the balances payable arising from disposal groups and discontinued operations.

Non-current assets and disposal groups classified as 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.

In the case of real estate assets foreclosed or received in payment of debts, they are initially recognized at the lower of: the restated carrying amount of the financial asset and the fair value at the time of the foreclosure or receipt of the asset less estimated sales costs. The carrying amount of the financial asset is updated at the time of the foreclosure, treating the real property received as a secured collateral and taking into account the credit risk coverage that would correspond to it according to its classification prior to the delivery. For these purposes, the collateral will be valued at its current fair value (less sale costs) at the time of foreclosure. This carrying amount will be compared with the previous carrying amount and the difference will be recognized as a provision increase, if applicable. On the other hand, the fair value of the foreclosed asset is obtained by appraisal, evaluating the need to apply a discount on the asset derived from the specific conditions of the asset or the market situation for these assets, and in any case, deducting the company’s estimated sale costs.

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At the time of the initial recognition, these real estate assets foreclosed or received in payment of debts, classified as “Non-current assets and disposal groups held for sale” and “Liabilities included in disposal groups classified as held for sale” are valued at the lower of: their restated fair value less estimated sale costs and their carrying amount; a deterioration or impairment reversal can be recognized for the difference if applicable.

Non-current assets and disposal groups held for sale groups classified as held for sale are not depreciated while included under the heading “Non-current assets and disposal groups held for sale”.

Fair value of non-current assets held for sale from foreclosures or recoveries is based, mainly, in appraisals or valuations made by independent experts on an annual basis or more frequently, should there be indicators of impairment.

Gains and losses generated on the disposal of assets and liabilities classified as non-current held for sale, and liabilities included in disposal groups classified as held for sale as well as impairment losses and, where pertinent, the related recoveries, are recognized in “Profit or loss from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations” in the consolidated income statement (see Note 50). 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 consolidated balance sheet or is derecognized from the consolidated balance sheet. As long as an asset remains in this category, it will not be amortized. This heading includes the earnings from their sale or other disposal.

2.2.5 Tangible assets

Property, plant and equipment for own use

This heading includes the assets under ownership or acquired under finance lease, 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 (see Note 17).

Depreciation is calculated using the straight-line method, on the basis of the acquisition cost of the assets less their residual value; the land 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 45) 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):

Depreciation 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%

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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 Group 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 is now recoverable, 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 recognized 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.

In the BBVA Group, most of the buildings held for own use are assigned to the different Cash-Generating-Units (CGU) to which they belong. The corresponding impairment analysis are performed for these CGUs to check whether sufficient cash flows are generated to support the value of the assets comprised within.

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 - Other administrative expenses - Property, fixtures and equipment" (see Note 44.2).

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 17).

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 determines periodically the fair value of its investment properties in such a way that, at the end of the financial year, the fair value reflects the market conditions of investment property assets’ market at this date. This fair value will be determined taking as references the valuations performed by independent experts.

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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 20).

The cost of inventories includes those costs incurred in 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, the cost 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. Financing cost incurred during the year form part of cost, provided that the inventories require more than a year to be in a condition to be sold.

Properties purchased from customers in distress, which the Group manages for sale, 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 carrying amount at acquisition date of these properties is defined as the balance pending collection on those assets that originated said purchases (net of provisions).

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 recognized under the heading "Impairment or reversal of impairment on non-financial assets” in the accompanying consolidated income statements (see Note 48) for the year in which they are incurred.

In the case of the above mentioned real-estate assets, if the fair value less costs to sell is lower than the carrying amount of the loan recognized in the consolidated balance sheet, a loss is recognized under the heading "Impairment or reversal of impairment on non-financial assets" in the consolidated income statement for the year. 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.

Inventory sales

In sale transactions, the carrying amount of inventories is derecognized from the consolidated balance sheet and recognized as an expense under the income statement 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 42).

2.2.7 Business combinations

A business combination is a transaction, or any other deal, by which the Group obtains 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, as well as the recognition of any non-controlling participation (minority interests) that may arise from the transaction.

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In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss under the heading “Gains (losses) on derecognition of non-financial assets and subsidiaries, net” of the consolidated income statements. In prior reporting periods, the acquirer may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income shall be recognized on the same basis as would be required if the acquirer had disposed directly of the previously held equity interest.

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:

· 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 net fair value of the assets acquired and liabilities assumed.

If this difference is negative, it shall be recognized directly in the income statement under the heading “Negative goodwill recognized in profit or loss”.

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. BBVA Group has always elected for the second method.

2.2.8 Intangible assets

Goodwill

Goodwill represents a portion of consideration transferred in advance by the acquiring entity for the future economic benefits from assets that cannot be individually identified and separately recognized. Goodwill is never amortized. It is subject periodically to an impairment analysis, and is written off if there has been impairment (see Note 18).

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 an 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.

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The recoverable amount of a cash-generating unit is equal to the fair value less sale costs or 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.

Goodwill impairment losses are recognized under the heading "Impairment or reversal of impairment on non-financial assets – Intangible assets” in the consolidated income statements (see Note 48).

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 (see Note 18).

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 defined useful life intangible asset is made up mainly of IT applications acquisition costs which have a useful life of 3 to 5 years. The depreciation charge of these assets is recognized in the accompanying consolidated income statements under the heading "Depreciation and amortization" (see Note 45).

The consolidated entities recognize any impairment loss on the carrying amount of these assets with charge to the heading “Impairment or reversal of impairment on non - financial assets- Intangible assets” in the accompanying consolidated income statements (see Note 48). 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 and liabilities 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 “Insurance and reinsurance assets” in the accompanying consolidated balance sheets includes the amounts that the consolidated insurance subsidiaries are entitled to receive under the reinsurance contracts entered into by them with third parties and, more specifically, the reinsurer´s share of the technical provisions recognized by the consolidated insurance subsidiaries.

The heading “Liabilities under insurance and reinsurance contracts” in the accompanying consolidated balance sheets includes the technical provisions for direct insurance and inward reinsurance recognized by the consolidated insurance subsidiaries to cover claims arising from insurance contracts open at period-end (see Note 23).

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The income or expenses reported by the BBVA Group’s consolidated insurance subsidiaries on their insurance activities is recognized, in accordance with their 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 and a charge for the estimated cost of the claims that will be incurred at their final settlement to their consolidated income statements. At the close of each year the amounts collected and unearned, as well as the costs incurred and unpaid, are accrued.

The most significant provisions recorded by consolidated insurance entities with respect to insurance policies issued by them are set out by their nature in Note 23.

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 received until the closing date that has to be allocated to the period from year-end 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 received until the closing date 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 consolidated insurance subsidiaries in the policy period not elapsed at year-end.

Provision for claims:

This reflects the total amount of the outstanding obligations arising from claims incurred prior to year-end. Insurance subsidiaries 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 open reinsurance contracts.

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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 subsidiaries 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 as per the tax base for the year (after deducting the tax credits or discounts 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 or discount carry forwards (see Note 19).

The "Tax Assets" line item in the accompanying consolidated balance sheets includes the amount of all the assets of a tax nature, broken down into: "Current” (amounts of tax recoverable in the next twelve months) and "Deferred" (which includes the amount of tax to be recovered in future years, including those arising from tax losses or credits for deductions or rebates that can be compensated). 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" (the amount of corporate tax 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 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 still qualify as deferred tax assets and liabilities, and the appropriate adjustments are made on the basis of the findings of the analyses performed. In those circumstances in which it is unclear how a specific requirement of the tax law applies to a particular transaction or circumstance, and the acceptability of the definitive tax treatment depends on the decisions taken by the relevant taxation authority in future, the entity recognizes current and deferred tax liabilities and assets considering whether it is probable or not that a taxation authority will accept an uncertain tax treatment.

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Thus, if the entity concludes that it is not probable that the taxation authority will accept an uncertain tax treatment, the entity uses the amount expected to be paid to (recovered from) the taxation authorities.

The income and expenses directly recognized in consolidated 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 24). 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 of 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.

· 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 Note 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 will be disclosed, should they exist, in the Notes to the Consolidated Financial Statements, provided that it is probable will give rise to an increase in resources embodying economic benefits.

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 Group. They also include the existing obligations of the Group 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.

Contingent liabilities are not recognized in the consolidated balance sheet or the income statement (excluding contingent liabilities from business combination) but are disclosed in the Notes to the Consolidated Financial Statements, unless the possibility of an outflow of resources embodying economic benefits is remote.

2.2.12 Pensions and other post-employment commitments

Below we provide a description of the most significant accounting policies relating to post-employment and other employee benefit commitments assumed by BBVA Group entities (see Note 25).

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Short-term employee benefits

Benefits for current active employees which are accrued and settled during the year and for which a provision is not required in the entity´s accounts. These include wages and salaries, social security charges and other personnel expenses.

Costs are charged and recognized under the heading “Administration costs – Personnel expenses – Other personnel expenses” of the consolidated income statement (see Note 44.1).

Post-employment benefits – Defined-contribution plans

The Group sponsors defined-contribution plans for the majority of its active employees. The amount of these benefits is established as a percentage of remuneration and/or as a fixed amount.

The contributions made to these plans in each year by BBVA Group entities are charged and recognized under the heading “Administration costs – Personnel expenses – Defined-contribution plan expense” of the consolidated income statement (see Note 44.1).

Post-employment benefits – Defined-benefit plans

Some Group entities maintain pension commitments with employees who have already retired or taken early retirement, certain closed groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. These commitments are covered by insurance contracts, pension funds and internal provisions.

In addition, some of the Spanish entities have offered certain employees the option to retire before their normal retirement age, recognizing the necessary provisions to cover the costs of the associated benefit commitments, which include both the liability for the benefit payments due as well as the contributions payable to external pension funds during the early retirement period.

Furthermore, certain Group entities provide welfare and medical benefits which extend beyond the date of retirement of the employees entitled to the benefits.

All of these commitments are quantified based on actuarial valuations, with the amounts recorded under the heading “Provisions – Provisions for pensions and similar obligations” in the consolidated balance sheet and determined as the difference between the value of the defined-benefit commitments and the fair value of plan assets at the date of the Consolidated Financial Statements (see Note 25).

Current service cost are charged and recognized under the heading “Administration costs – Personnel expenses – Defined-benefit plan expense” of the consolidated income statement (see Note 44.1).

Interest credits/charges relating to these commitments are charged and recognized under the headings “Interest and other income” and “Interest expense” of the consolidated income statement (see Note 37).

Past service costs arising from benefit plan changes as well as early retirements granted during the year are recognized under the heading “Provisions or reversals of provisions” of the consolidated income statement (see Note 46).

Other long-term employee benefits

In addition to the above commitments, certain Group entities provide long-term service awards to their employees, consisting of monetary amounts or periods of vacation granted upon completion of a number of years of qualifying service.

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These commitments are quantified based on actuarial valuations and the amounts recorded under the heading “Provisions – Other long-term employee benefits” of the consolidated balance sheet (see Note 24).

Valuation of commitments: actuarial assumptions and recognition of gains/losses

The present value of these commitments is determined based on individual member data. Active employee costs are determined using the “projected unit credit” method, which treats each period of service as giving rise to an additional unit of benefit and values each unit separately.

In establishing the actuarial assumptions we take into account that:

· They should be unbiased, i.e. neither unduly optimistic nor excessively conservative.

· Each assumption does not contradict the others and adequately reflect the existing relationship between economic variables such as price inflation, expected wage increases, discount rates and the expected return on plan assets, etc. Future wage and benefit levels should be based on market expectations, at the balance sheet date, for the period over which the obligations are to be settled.

· The interest rate used to discount benefit commitments is determined by reference to market yields, at the balance sheet date, on high quality bonds.

The BBVA Group recognizes actuarial gains/losses relating to early retirement benefits, long service awards and other similar items under the heading “Provisions or reversal of provisions” of the consolidated income statement for the period in which they arise (see Note 46). Actuarial gains/losses relating to pension and medical benefits are directly charged and recognized under the heading "Accumulated other comprehensive income – Items that will not be reclassified to profit or loss – Actuarial gains or losses on defined benefit pension plans" of equity in the consolidated balance sheet (see Note 30).

2.2.13 Equity-settled share-based payment transactions

Provided they constitute the delivery of such equity instruments 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 “Shareholders’ funds – Other equity instruments” in the consolidated balance sheet. These services are measured at fair value for the employees services received, unless such fair value cannot be calculated reliably. In such case, they are measured by reference to the fair value of the equity instruments granted, taking into account the date on which the commitments were granted 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 equity instruments, but they are taken into account when determining the number of equity instruments to be issued. This will be recognized on the consolidated income statement with the corresponding increase in total consolidated equity.

2.2.14 Termination benefits

Termination benefits are recognized in the financial statements when the BBVA Group agrees to terminate employment contracts with its employees and has established a detailed plan.

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2.2.15 Treasury shares

The value of common stock 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 as a decrease to net equity, under the heading "Shareholders’ funds - Treasury stock" in the consolidated balance sheets (see Note 29).

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 “Shareholders’ funds - Retained earnings” in the consolidated balance sheets (see Note 28).

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. As such, 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 entity’s 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 entity’s functional currency

Transactions denominated in foreign currencies carried out by the consolidated entities (or entities accounted for using the equity method) 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 applicable 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 year. When applying this criterion the BBVA Group considers whether significant variations have taken place in exchange rates during the year which, owing to their impact on the statements as a whole, may 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 are generally recognized under the heading "Exchange differences, net" in the consolidated income statements (see Note 41). However, the exchange differences in non-monetary items, measured at fair value, are recognized temporarily in consolidated equity under the heading “Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Exchange differences” in the consolidated balance sheets (see Note 30).

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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 closing spot exchange rates as of the date of each of the consolidated balance sheets.

· Income and expenses and cash flows are converted by applying the exchange rate applicable 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 “Accumulated other comprehensive income – Items that may be reclassified to profit or loss - Exchange differences” in the consolidated balance sheets (Notes 30 and 31 respectively). 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 " Accumulated other comprehensive income - Items that may be reclassified to profit or loss - Entities accounted for using the equity method" (Note 30) until the item to which they relate is derecognized, at which time they are recognized in the income statement.

The financial statements of companies of hyperinflationary economies are restated for the effects of changes in prices before their conversion to euros following the provisions of IAS 29 "Financial information in hyperinflationary economies" (see note 2.2.20). Both these adjustments for inflation and the exchange differences that arise when converting the financial statements of companies into hyperinflationary economies are accounted for in Reserves.

The breakdown of the main consolidated balances in foreign currencies, with reference to the most significant foreign currencies, is set forth in Appendix VII.

Venezuela

Local financial statements of the Group subsidiaries in Venezuela are expressed in Venezuelan Bolivar, and converted into euros for the consolidated financial statements. As Venezuela is a country with strong exchange restrictions and has different rates officially published, since December 31, 2015, the Board of Directors considers that the use of the Venezuelan official exchanges rates for converting bolivars into euros in preparing the Consolidated Financial Statements does not reflect the true picture of the financial statements of the Group and the financial position of the Group subsidiaries in Venezuela. Therefore, since the year ended December 31, 2015, the exchange rate for converting bolivars into euros is an estimation taking into account the lack of official data and the evolution of the estimated inflation in Venezuela.

As of December 31, 2018, 2017 and 2016, the impact on the financial statements that would have resulted by applying the last published official exchange rate instead of the exchange rate estimated by BBVA Group was not significant.

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2.2.17 Recognition of income and expenses

The most significant policies 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.

They shall be recognized within the consolidated income statement according to the following criteria, independently from the financial instruments’ portfolio which generates the income or expenses:

· The interest income past-due before the initial recognition and pending to be received will form part of the gross carrying amount of the debt instrument.

· The interest income accrued after the initial recognition will form part of the gross carrying amount of the debt instrument until it will be received.

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. From that amount, the transaction costs identified as directly attributable to the arrangement of the loans and advances will be deducted. These fees are part of the effective interest rate for the loans and advances.

Once a debt instrument has been impaired, interest income is recognized applying the effective interest rate used to discount the estimated recoverable cash flows on the carrying amount of the asset.

Income from dividends received:

Dividends shall be recognized within the consolidated income statement according to the following criteria, independently from the financial instruments’ portfolio which generates this income:

· When the right to receive payment has been declared before the initial recognition and when the payment is pending to be received, the dividends will not form part of the gross carrying amount of the equity instrument and will not be recognized as income. Those dividends are accounted for as financial assets separately from the net equity instrument.

· If the right to receive payment is received after the initial recognition, the dividends from the net equity instruments will be recognized within the consolidated income statement. If the dividends correspond indubitable to the profits of the issuer before the date of initial recognition, they will not be recognized as income but as reduction of the gross carrying amount of the equity instrument because it represents a partly recuperation of the investment. Amongst other circumstances, the generation date can be considered to be prior to the date of initial recognition if the amounts distributed by the issuer as from the initial recognition are higher than its profits during the same period.

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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 a singular transaction, which are recognized when this singular transaction 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 of assets and income from the provision of non-financial services

The heading “Other operating income” in the consolidated income statements includes the proceeds 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 42).

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 under 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 (see Note 14).

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 17). 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" (see Note 42).

If a fair value sale and leaseback results in an operating lease, the profit or loss generated from 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 accrued over the lease period.

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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 in consolidation and the corresponding depreciation is recognized.

2.2.20 Entities and branches located in countries with hyperinflationary economies

In accordance with the IFRS criteria, to determine whether an economy has a high inflation rate, the country's economic situation is examined, analyzing whether certain circumstances are fulfilled, such as whether the population prefers to keep its wealth or savings in non-monetary assets or in a relatively stable foreign currency, whether prices can be set in that currency, whether interest rates, wages and prices are pegged to a price index or whether the accumulated inflation rate over three years reaches or exceeds 100%. The fact that any of these circumstances is fulfilled will not be a decisive factor in considering an economy hyperinflationary, but it does provide some reasons to consider it as such.

Argentina

In 2018, the Argentinian economy was considered to be hyperinflationary as defined by the aforementioned criteria. Accordingly, as of December 31, 2018, it was necessary to adjust the financial statements of the Group's subsidiaries based in Argentina to correct for the effect of inflation.

Pursuant to the requirements of IAS 29, the monetary headings (mainly loans and deposits) have not been re-expressed, while the non-monetary headings (mainly tangible fixed assets and equity) have been re- expressed in accordance with the change in the country's Consumer Price Index.

The accumulated historical differences between the re-expressed costs and the previous costs in the non-monetary headings as of December 31, 2017 were credited to “Equity” in the balance sheet, effective on January 1, 2018, while the differences corresponding to 2018, and the re-expression of results were recognized in the consolidated income statement for 2018 in accordance with the nature of the income and expenses.

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During the year ended December 31, 2018 there was a reclassification in “Transfers within total equity” of the Consolidated Statements of Changes in Equity between “Accumulated other comprehensive income” and “Shareholders’ funds – Retained earnings” for €1,096 million, and from “Non-controlling interest – Accumulated other comprehensive income (loss)” to “Non-controlling interest – Other” for €540 million in accordance with IAS 29 and the accounting policy approved by the Group in relation to the hyperinflation (see Note 1.3).

During 2018, the increase in the reserves of Group entities located in Argentina derived from the re-expression for hyperinflation (IAS 29) amounted to €703 million, of which €463 million have been recorded within “Shareholders’ funds - Retained earnings” and €240 million within “Minority interests – Other”. Furthermore, during 2018 the decrease in the reserves of Group entities located in Argentina derived from conversion (IAS 21) amounts to €-773 million, of which €-515 million have been recorded within “Shareholders’ funds - Retained earnings”, and €-258 million within “Minority interests – Other”. The net impact of both effects is presented under the caption “Other increases or (-) decreases in equity” in the consolidated Statement of Changes in Equity for the year ended December 31, 2018. The net loss in the profit attributable to the parent company of the Group in 2018 derived from the application of IAS 29 amounted to €209 million. In addition, there is a net loss in the profit attributable to the parent company of the Group in 2018 derived from the application of IAS 21 which amounted to €57 million.

The breakdown of the General Price Index (“GPI”) and the inflation index used as of December 31, 2018 for the inflation restatement of the financial statements of the Group companies located in Argentina is as follows:

General Price Index
| 2018
GPI | 184
Average GPI | 152
Inflation of the period | 48%

Venezuela

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 have therefore been adjusted to correct for the effects of inflation in accordance with IAS 29 “Financial Reporting in Hyperinflationary Economies“. As stated in Note 1.3, BBVA has restated prior year information in relation to a change in the accounting policy for applying IAS 29.

The losses recognized under the heading “Profit attributable to the parent company” in the accompanying consolidated income statement as a result of the adjustment for inflation on net monetary position of the Group entities in Venezuela amounted to €12, €13 and €28 million in 2018, 2017 and 2016 respectively (see Note 2.2.16).

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2.3 Recent IFRS pronouncements

Changes introduced in 2018

The following amendments to the IFRS standards or their interpretations (hereinafter “IFRIC”) became effective on or after January 1, 2018.

IFRS 9 - “Financial instruments”

IFRS 9 replaced IAS 39 for financial statements from January 1, 2018 onwards and includes new classification and measurement requirements for financial assets and liabilities and impairment requirements for financial assets (see Note 2.2.1).

Regarding the hedge accounting, the Group has elected to continue applying IAS 39 to its hedge accounting as permitted by IFRS 9.

Amended IFRS 9 – Prepayment Features with Negative Compensation

The amendments to IFRS 9 allow entities to measure certain prepayable financial assets with negative compensation at amortized cost or at fair value through other comprehensive income if a specified condition is met, instead of at fair value through profit or loss. The condition is that the financial asset would otherwise meet the criteria of having contractual cash flows that are solely payments of principal and interest but do not meet that condition only as a result of that prepayment feature.

The amendments should be applied to the accounting periods beginning on or after January 1, 2019, although early application is permitted. The Group has applied this amendment to the accounting period beginning on January 1, 2018 and it has not had a significant impact on the Group´s financial statements.

Amended IFRS 7 - “Financial instruments: Disclosures”

The IASB modified IFRS 7 in December 2011 to include new disclosures on financial instruments that entities have to provide in the period that they apply IFRS 9 for the first time.

IFRS 15 - “Revenue from contracts with customers”

IFRS 15 contains the principles that an entity shall apply to account for revenue and cash flows arising from a contract with a customer (see Note 2.2.17).

The core principle of IFRS 15 is that a company should recognize revenue to depict the transfer of promised goods or services to the customer in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services, in accordance with contractual agreements (either over time or at a certain time). It is considered that the good or service is transferred when the customer obtains control over it.

The new Standard replaces IAS 18 – Revenue, IAS 11 - Construction Contracts, IFRIC 13 - Customer Loyalty Programmes, IFRIC 15 - Agreements for the Construction of Real Estate, IFRIC 18 - Transfers of Assets from Customers and SIC 31 – Revenue-Transactions Involving Advertising Services.

This standard has not had a significant impact on the Group's Consolidated Financial Statements.

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IFRS 2 – “Classification and Measurement of Share-based Payment Transactions”

The amendments made to IFRS 2 provide requirements on three different aspects:

· When measuring the fair value of a cash-settled share-based payment vesting conditions, other than market conditions, the conditions for the irrevocability shall be taken into account by adjusting the number of awards included in the measurement of the liability arising from the transaction.

· A transaction in which an entity settles a share-base payment arrangement net by withholding a specified portion of the equity instruments to meet a statutory tax withholding obligation will be classified as equity settled in its entirety if, without the net settlement feature, the entire share-based payment would otherwise be classified as equity-settled.

· In case of modification of a share-based payment from cash-settled to equity-settled, the modification will be accounted for derecognizing the original liability and recognizing in equity the fair value of the equity instruments granted to the extent that services have been rendered up to the modification date; any difference will be recognized immediately in profit or loss.

This standard has not had a significant impact on the Group's Consolidated Financial Statements.

Amended IFRS 4 – “Insurance Contracts”

The amendments made to IFRS 4 address the temporary accounting consequences of the different effective dates of IFRS 9 and the forthcoming insurance contracts standard, by introducing two optional solutions:

· The deferral approach or temporary exemption, that gives entities whose predominant activities are connected with insurance the option to defer the application of IFRS 9 and continue applying IAS 39 until 2021.

· The overlay approach, that gives all issuers of insurance contracts the option to recognize in other comprehensive income, rather than profit or loss, the additional accounting volatility that may arise from applying IFRS 9 compared to applying IAS 39 before applying the forthcoming insurance contracts standard.

This standard has not had a significant impact on the Group's Consolidated Financial Statements.

Annual improvements cycle to IFRSs 2014-2016 – Minor amendments to IFRS 1 and IAS 28

The annual improvements cycle to IFRSs 2014-2016 includes minor changes and clarifications to IFRS 1- First-time Adoption of International Financial Reporting Standards and IAS 28 – Investments in Associates and Joint Ventures, which should be applied to the accounting periods beginning on or after January 1, 2018, although early application was permitted for modifications to IAS 28.

This standard has not had a significant impact on the Group's Consolidated Financial Statements.

IFRIC 22 – Foreign Currency Transactions and Advance Consideration

The Interpretation addresses how to determine the date of the transaction, and thus, the exchange rate to use to translate the related asset, expense or income on initial recognition, in circumstances in which a non-monetary prepayment asset or a non-monetary deferred income liability arising from the payment or receipt of advance consideration is recognized in advance of the related asset, income or expense. It requires that the date of the transaction will be the date on which an entity initially recognizes the non-monetary asset or non-monetary liability.

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If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration.

This standard has not had a significant impact on the Group's consolidated financial statements.

Amended IAS 40 – Investment Property

The amendment states that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property.

This standard has not had a significant impact on the Group's financial statements.

Standards and interpretations issued but not yet effective as of December 31, 2018

The following 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 mandatory as of December 31, 2018. Although in some cases the IASB allows early adoption before their effective date, the BBVA Group has not proceeded with this option for any such new standards.

Amended IFRS 10 – “Consolidated financial statements” and IAS 28 amended

The amendments to IFRS 10 and IAS 28 establish that when an entity sells or transfers assets which are considered a business (including its consolidated subsidiaries) to an associate or joint venture of the entity, the latter will have to recognize any gains or losses derived from such transaction in its entirety. Notwithstanding, if the assets sold or transferred are not considered a business, the entity will have to recognize the gains or losses derived only to the extent of the interests in the associate or joint venture with unrelated investors.

These changes will be applicable to accounting periods beginning on the effective date, still to be determined, although early adoption is allowed.

IFRS 16 – “Leases”

On January 13, 2016, the IASB issued IFRS 16 which will replace IAS 17 “Leases” for financial statements from January 1, 2019 onwards. The new standard introduces a single lessee accounting model and will require a lessee to recognize assets and liabilities for all leases. The only exceptions are short-term contracts and those in which the underlying assets have low value. A lessee will be required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

With regard to lessor accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor will continue to classify its leases as operating leases or finance leases, and account for those two types of leases differently.

During the financial years 2017 and 2018 the Group has carried out a project to implement IFRS 16 with the participation of all affected areas. The standard will mainly affect the accounting of operating leases of the Group.

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With regard to the estimated impact on the Consolidated Financial Statements, at the transition date, the Group has decided to apply the modified retrospective approach which requires recognition of a lease liability equal to the present value of the future payments committed on January 1, 2019. Regarding the measurement of the right-of-use asset, the Group has elected to record an amount equal to the lease liability. As a result of this approach, the Group expects to recognize assets for the right-of-use and lease liabilities for an approximate amount of 3,600 million euros mainly coming from the Group’s activity in Spain as well as from bank branches leases. The estimated impact in terms of capital (CET1) for the Group amounts to -12 basis points.

The final impact of adopting the standard as of January 1, 2019 may change because:

· the Group has not concluded the tests;

· the new accounting policies, methodologies and parameters may be subject to changes until the Group presents its financial statements that include the final impact as of the date of initial application.

IFRS 17 – Insurance Contracts

IFRS 17 establishes the principles for the accounting for insurance contracts and supersedes IFRS 4. The new standard introduces a single accounting model for all insurance contracts and requires the entities to use updated assumptions.

An entity shall divide the contracts into groups and recognize and measure groups of insurance contracts at the total of:

· the fulfilment cash flows, that comprises the estimate of future cash flows, an adjustment to reflect the time value of money and the financial risk associated with the future cash flows and a risk adjustment for non-financial risk; and

· the contractual service margin that represents the unearned profit.

The amounts recognized in the consolidated income statement shall be disaggregated into insurance revenue, insurance service expenses and insurance finance income or expenses. Insurance revenue and insurance service expenses shall exclude any investment components. Insurance revenue shall be recognized over the period the entity provides insurance coverage and in proportion to the value of the provision of coverage that the insurer provides in the period.

This Standard will be applied to the accounting years starting on or after January 1, 2021.

IFRIC 23 - Uncertainty over Income Tax Treatments

IFRIC 23 provides guidance on how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments.

If the entity considers that it is probable that the taxation authority will accept an uncertain tax treatment, the Interpretation requires the entity to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings.

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If the entity considers that it is not probable that the taxation authority will accept an uncertain tax treatment, the Interpretation requires the entity to use the most likely amount or the expected value (sum of the probability. weighted amounts in a range of possible outcomes) in determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The method used should be the method that the entity expects to provide the better prediction of the resolution of the uncertainty.

The interpretation will be applied to the accounting periods beginning on or after January 1, 2019.

Amended IAS 28 – Long-term Interests in Associates and Joint Ventures

The amendments to IAS 28 clarify that an entity is required to apply IFRS 9 to long term interests in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture but to which the equity method is not applied.

The amendments will be applied to the accounting periods beginning on or after January 1, 2019.

Annual improvements cycle to IFRSs 2015-2017

The annual improvements cycle to IFRSs 2015-2017 includes minor changes and clarifications to IFRS 3- Business Combinations, IFRS 11 – Joint Arrangements, IAS 12 – Income Taxes and IAS 23 – Borrowing Costs, which will be applied to the accounting periods beginning on or after January 1, 2019, although early application is permitted.

Amended IAS 19 – Plan Amendment, Curtailment or Settlement

The small amendments in IAS 19 concern the cases if a plan is amended, curtailed or settled during the period. In these cases, an entity should ensure that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

The amendments will be applied to the accounting periods beginning on or after January 1, 2019.

Amended IFRS 3 – Definition of a business

The amendments clarify the difference between the acquisition of a business or the acquisition of a set of assets. To determine whether a transaction is an acquisition of a business, an entity should evaluate and conclude if the two following conditions are fulfilled:

· the fair value of the acquired assets is not concentrated in one single asset or group of similar assets.

· the entirety of acquired activities and assets includes, as a minimum, an input and a substantial process which, together, contribute to the capacity to create products.

The amendments will be applied to the accounting periods beginning on or after January 1, 2020, although early application is permitted.

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Amended IAS 1 and IAS 8 – Definition of material

The amendments clarify the definition of material in the elaboration of the financial statements by aligning the definition of the conceptual framework, IAS 1 and IAS 8 (which, before the amendments, included similar but not identical definitions). The new definition of material is the following: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity”.

The amendments will be applied to the accounting periods beginning on or after January 1, 2020, although early application is permitted.

2.4 Transition to IFRS 9 and condensed consolidated opening balance sheet as of January 1, 2018

2.4.1 Transition to IFRS 9

As mentioned in the Notes 1.3, 2.2.1 and 2.3, IFRS 9 replaced IAS 39 for financial statements from January 1, 2018 onwards and includes new classification and measurement requirements for financial assets and liabilities, impairment requirements for financial assets and hedge accounting policy.

The application of this standard on January 1, 2018, had a significant impact on the consolidated financial statements of the Group at that date.

Classification and measurement of financial instruments

Financial assets

IFRS 9 has a new approach to classification and measurement of financial assets which is a mirror of the business model used for asset management purposes and its cash flow characteristics.

IFRS 9 contains three main categories for financial assets classification: valued at amortized cost, valued at fair value with changes in other accumulated comprehensive income, and valued at fair value through profit or loss. The standard eliminates the IAS 39 categories of held-to-maturity investments, loans and receivables, and available-for-sale financial assets.

The classification of financial instruments measured at amortized cost or fair value must be carried out on the basis of: the entity's business model and the assessment of the contractual cash flow, commonly known as the "solely payments of principle and interest" criterion (hereinafter, the SPPI). The purpose of the SPPI test is to determine whether in accordance with the contractual characteristics of the instrument its cash flows only represent the return of the principal and interest, basically understood as consideration for the time value of money and the debtor's credit risk.

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A financial instrument will be classified in the amortized cost portfolio when it is managed with a business model whose purpose is to maintain the financial assets to receive contractual cash flows, and passes the SPPI test. They will be classified in the portfolio of financial assets at fair value with changes in other comprehensive income if they are managed with a business model whose purpose combines collection of the contractual cash flows and sale of the assets, and meets the SPPI test. They will be classified at fair value with changes in profit and loss provided that the entity's business model for their management or the contractual characteristics of its cash flows do not require classification into one of the portfolios described above.

The Group reviewed the existing business models in the geographic areas where it operates to establish classification in accordance with IFRS 9, taking into account the special characteristics of the local structures and organizations, as well as the type of products.

The Group has defined criteria to determine the acceptable frequency and reasons for sales so that the instrument can remain in the category of held to collect contractual cash flows.

Regardless of the frequency and importance of the sales, some types of sales are not incompatible with the category of held to collect contractual flows: sales due to reduction in credit quality; sales close to the maturity of transactions so that variations in market prices will not have a significant effect on the cash flows of the financial asset; sales in response to a change in regulations or in taxation; sales in response to an internal restructuring or significant business combination; sales derived from the execution of a liquidity crisis plan when the crisis event is not reasonably foreseeable.

The Group segmented the portfolio of instruments for carrying out the SPPI test by differentiating products with standard contracts (all the instruments have identical contractual characteristics and are broadly used), for which the Group has carried out the SPPI test by reviewing the standard framework contract. For those products with similar, but not identical characteristics compliance has been assessed through a sampling exercise of contracts. All the financial instruments with specific contractual characteristics have been analyzed individually.

As a result of the analyses carried out on both the business model and the contractual characteristics, certain accounting reclassifications resulted affecting both financial assets and, as the case may be, financial liabilities related to those assets. In general, there is a greater volume of assets valued at fair value with changes in the income statement and the valuation method of some instruments has also been changed according to the one that best reflects the business model to which they belong. Changes in the valuation model to avoid exceeding the criterion of solely payment of principal and interest are not significant.

As of December 31, 2017, the Group had certain investments in financial instruments classified as available-for-sale which, in accordance with IFRS 9, the Group designated as financial assets at fair value through other comprehensive income. As a result, all the gains and losses at fair value of these instruments are now reported in accumulated other comprehensive income. Impairment losses would not be recognized to profit and loss, and gains or losses would not be reclassified to the income statement in the case of divestment. The remaining investments held by the Group as of December 31, 2017 in equity instruments classified as available-for-sale are now accounted for as fair value through changes in profit or loss.

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Financial liabilities

IFRS 9 largely maintains the requirements under IAS 39 for classifying financial liabilities. However, a new aspect introduced by IFRS 9 is the recognition of changes in the fair value of the financial liabilities to which the fair value option is applied. In this case, the changes in the fair value attributable to the credit risk itself are recognized as other comprehensive income, while the rest of the variation is recognized in the income statement. In any case, the variation of credit risk itself may be recognized in the income statement if the treatment described above generates accounting asymmetry.

Financial assets impairments

IFRS 9 replaced the "incurred loss" model in IAS 39 with one of "expected credit loss". The IFRS 9 impairment model is applied to financial assets valued at amortized cost and to financial assets valued at fair value through other comprehensive income, except for investments in equity instruments and contracts for financial guarantees and loan commitments unilaterally revocable by BBVA. Likewise, all the financial instruments valued at fair value with change through profit and loss are excluded from the impairment model.

The new standard classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of initial recognition. The first category includes the transactions when they are initially recognized (Stage 1); the second comprises the financial assets for which a significant increase in credit risk has been identified since its initial recognition (Stage 2) and the third one, the impaired financial assets (Stage 3).

The calculation of the provisions for credit risk in each of these three categories must be done differently. In this way, expected loss up to 12 months for the financial assets classified in the first of the aforementioned categories must be recorded, while expected losses estimated for the remaining life of the financial assets classified in the other two categories must be recorded. Thus, IFRS 9 differentiates between the following concepts of expected loss:

· Expected loss at 12 months: expected credit loss that arises from possible default events within 12 months following the presentation date of the financial statements; and

· Expected loss during the life of the transaction: this is the expected credit loss that arises from all possible default events over the remaining life of the financial instrument.

All this requires considerable judgment, both in the modeling for the estimation of the expected losses and in the forecasts, on how the economic factors affect such losses, which must be carried out on a weighted probability basis.

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The BBVA Group has applied the following definitions in accordance with IFRS 9:

· Default

BBVA has applied a definition of default for financial instruments that is consistent with that used in internal credit risk management, as well as the indicators under applicable regulation at the date of implementation of IFRS 9. Both qualitative and quantitative indicators have been considered.

The Group has considered there is a default when one of the following situations occurs:

- payment past-due for more than 90 days; or

- there are reasonable doubts regarding the full reimbursement of the instrument.

In accordance with IFRS 9, the 90-day past-due stipulation may be waived in cases where the entity considers it appropriate, based on reasonable and documented information that it is appropriate to use a longer term. As of December 31, 2018, the Group has not considered periods higher than 90 days for any of the significant portfolios.

· Credit impaired asset

An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a detrimental impact on the estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the following events:

- Significant financial difficulty of the issuer or the borrower.

- A breach of contract (e.g. a default or past due event).

- A lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s financial difficulty – that the lender would not otherwise consider.

- It becoming probable that the borrower will enter bankruptcy or other financial reorganization.

- The disappearance of an active market for that financial asset because of financial difficulties.

- The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event. Instead, the combined effect of several events may cause financial assets to become credit-impaired.

The definition of impaired financial assets in the Group is aligned with the definition of default explained in the above paragraphs.

· Significant increase in credit risk

The objective of the impairment requirements is to recognize lifetime expected credit losses for financial instruments for which there have been significant increases in credit risk since initial recognition considering all reasonable and supportable information, including that which is forward-looking.

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The model developed by the Group for assessing the significant increase in credit risk has a two-prong approach that is applied globally, although the specific characteristics of each geographic area are respected:

- Quantitative criterion: the Group uses a quantitative analysis based on comparing the current expected probability of default over the life of the transaction with the original adjusted expected probability of default, so that both values are comparable in terms of expected default probability for their residual life. The thresholds used for considering a significant increase in risk take into account special cases according to geographic areas and portfolios. Depending on how old current financial assets are, at the time implementation of the standard, some simplification has been made to compare the probabilities of default between the current and the original moment, based on the best information available at that moment.

- Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through rating/scoring systems or macroeconomic scenarios, so quantitative analysis covers the majority of circumstances. The Group will use additional qualitative criteria when it considers it necessary to include circumstances that are not reflected in the rating/score systems or macroeconomic scenarios used.

Additionally, instruments under one of the following circumstances are considered Stage 2:

- More than 30 days past due. According to IFRS 9, default of more than 30 days is a presumption that can be rebutted in those cases in which the entity considers, based on reasonable and documented information, that such non-payment does not represent a significant increase in risk. As of December 31, 2018, the Group has not considered periods superior to 30 days for any of the significant portfolios.

- Watch list: They are subject to special watch by the Risks units because they show negative signs in their credit quality, even though there may be no objective evidence of impairment.

- Refinance or restructuring that does not show evidence of impairment.

Although the standard introduces a series of operational simplifications or practical solutions for analyzing the increase in significant risk, the Group does not expect to use them as a general rule. However, for high-quality assets, mainly related to certain government institutions and bodies, the standard allows for considering that their credit risk has not increased significantly because they have a low credit risk at the presentation date.

Thus the classification of financial instruments subject to impairment under the new IFRS 9 is as follows:

· Stage 1– without significant increase in credit risk

Financial assets which are not considered to have significantly increased in credit risk have loss allowances measured at an amount equal to 12 months expected credit losses.

· Stage 2– significant increases in credit risk

When the credit risk of a financial asset has increased significantly since the initial recognition, the impairment losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.

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· Stage 3 - Impaired

When there is objective evidence that the instrument is credit impaired, the financial asset is transferred to this category in which the provision for losses of that financial instrument is calculated as the expected credit loss during the entire life of the asset.

Method for calculating expected loss

In accordance with IFRS 9, the measurement of expected losses must reflect:

· A considered and unbiased amount, determined by evaluating a range of possible results.

· The time value of money.

· Reasonable and supportable information that is available without undue cost or effort and that reflects current conditions and forecasts of future economic conditions.

The Group measures the expected losses both individually and collectively. The purpose of the Group's individual measurement is to estimate expected losses for significant impaired instruments, or instruments classified in Stage 2. In these cases, the amount of credit losses is calculated as the difference between expected discounted cash flows at the effective interest rate of the transaction and the carrying amount of the instrument.

For the collective measurement of expected losses the instruments are grouped into groups of assets based on their risk characteristics. Exposure within each group is segmented according to the common credit risk characteristics, similar characteristics of the credit risk, indicative of the payment capacity of the borrower in accordance with their contractual conditions. These risk characteristics have to be relevant in estimating the future flows of each group. The characteristics of credit risk may consider, among others, the following factors:

· Type of instrument.

· Rating or scoring tools.

· Credit risk scoring or rating.

· Type of collateral.

· Amount of time at default for stage 3.

· Segment.

· Qualitative criteria which can have a significant increase in risk.

Collateral value if it has an impact on the probability of a default event.

· The estimated losses are derived from the following parameters:

· PD: estimate of the probability of default in each period.

· EAD: estimate of the exposure in case of default at each future period, taking into account the changes in exposure after the presentation date of the financial statements.

· LGD: estimate of the loss in case of default, calculated as the difference between the contractual cash flows and receivables, including guarantees.

In the case of debt securities, the Group supervises the changes in credit risk through monitoring the external published credit ratings.

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To determine whether there is a significant increase in credit risk that is not reflected in the published ratings, the Group has also revised the changes in bond yields, and when they are available, the prices of CDS, together with the news and regulatory information available on the issuers.

Use of present, past and future information

IFRS 9 requires incorporation of present, past and future information to detect any significant increase in risk and measure expected loss.

The standard does not require identification of all possible scenarios for measuring expected loss. However, the probability of a loss event occurring and the probability it will not occur will also have to be considered, even though the possibility of a loss may be very small. Also, when there is no linear relation between the different future economic scenarios and their associated expected losses, more than one future economic scenario must be used for the measurement.

The approach used by the Group consists of using first the most probable scenario (baseline scenario) consistent with that used in the Group's internal management processes, and then applying an additional adjustment, calculated by considering the weighted average of expected losses in other economic scenarios (one more positive and the other more negative). The main macroeconomic variables that are valued in each of the scenarios for each of the geographies in which the Group operates are GDP, tax rates, unemployment rate and LTV.

2.4.2 Condensed consolidated opening balance sheet as of January 1, 2018

Condensed Consolidated balance sheets (Millions of Euros) |  |  |  |
ASSETS | December 2017 IAS 39 | Classification and measurement of financial instruments | Impairment | Opening balance sheet 2018
Cash, cash balances at central banks and other demand deposits | 42,680 | - | - | 42,680
Financial assets held for trading | 64,695 | 27,159 | - | 91,854
Derivatives | 35,265 | - | - | 35,265
Equity instruments | 6,801 | 48 | - | 6,849
Debt securities | 22,573 | - | - | 22,573
Loans and advances to central banks | - | 245 | - | 245
Loans and advances to credit institutions | - | 14,895 | - | 14,895
Loans and advances to customers | 56 | 11,970 | - | 12,026
Non-trading financial assets mandatorily at fair value through profit or loss |  | 4,451 | - | 4,451
Financial assets designated at fair value through profit or loss | 2,709 | (1,690) | - | 1,019
Financial assets at fair value through other comprehensive income |  | 62,107 | 8 | 62,115
Equity instruments |  | 2,761 | - | 2,761
Debt securities |  | 59,293 | 8 | 59,301
Loans and advances |  | 140 | - | 140
Available for sale financial assets | 69,476 | (69,476) | - |
Financial assets at amortized cost | 431,521 | (8,680) | (1,158) | 421,685
Debt securities | 10,339 | 19,623 | (3) | 29,959
Loans and advances to central banks | 7,300 | (245) | - | 7,055
Loans and advances to credit institutions | 26,261 | (15,622) | 22 | 10,661
Loans and advances to customers | 387,621 | (12,435) | (1,177) | 374,009
Held to maturity investments | 13,754 | (13,754) | - |
Hedging derivatives | 2,485 | - | - | 2,485
Fair value changes of the hedged items in portfolio hedges of interest rate risk | (25) | - | - | (25)
Joint ventures, associates and unconsolidated subsidiaries | 1,588 | 1 | - | 1,589
Insurance and reinsurance assets | 421 | - | - | 421
Tangible assets | 7,191 | - | - | 7,191
Intangible assets | 8,464 | - | - | 8,464
Tax assets | 16,888 | 8 | 400 | 17,296
Other assets | 4,359 | - | - | 4,359
Non-current assets and disposal groups held for sale | 23,853 | (1) | (21) | 23,832
TOTAL ASSETS | 690,059 | 125 | (770) | 689,414

The change registered in the heading “Financial assets held for trading” is mainly due to financial assets affected by the activity of Global Markets, which are reclassified from "Financial assets at amortized cost".

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The change registered in the heading "Available for sale financial assets" are mainly due to the reclassification to the new heading "Financial assets at fair value through other comprehensive income".

The change registered in the heading “Financial assets at amortized cost” is mainly due to the reclassification to the item "Financial assets held for trading".

LIABILITIES AND EQUITY | December 2017 IAS 39 | Classification and measurement of financial instruments | Impairment | Opening balance sheet 2018
Financial liabilities held for trading | 46,182 | 34,601 | - | 80,783
Financial liabilities designated at fair value through profit or loss | 2,222 | 3,273 | - | 5,495
Financial liabilities at amortized cost | 543,713 | (37,595) | - | 506,118
Deposits from central banks | 37,054 | (3,261) | - | 33,793
Deposits from credit institutions | 54,516 | (19,381) | - | 35,135
Customer Deposits | 376,379 | (12,690) | - | 363,689
Debt certificates | 63,915 | (2,266) | - | 61,649
Other financial liabilities | 11,850 | 1 | - | 11,851
Hedging derivatives | 2,880 | (112) | - | 2,768
Fair value changes of the hedged items in portfolio hedges of interest rate risk | (7) | - | - | (7)
Liabilities under insurance and reinsurance contracts | 9,223 | - | - | 9,223
Provisions | 7,477 | - | 125 | 7,602
Tax liabilities | 3,298 | (24) | 17 | 3,291
Share capital repayable on demand | - | - | - | -
Other liabilities | 4,550 | - | - | 4,550
Liabilities included in disposal groups classified as held for sale | 17,197 | 1 | (10) | 17,188
TOTAL LIABILITIES | 636,736 | 142 | 132 | 637,010
SHAREHOLDERS’ FUNDS | 53,283 | 71 | (923) | 52,432
Capital | 3,267 | - | - | 3,267
Share premium | 23,992 | - | - | 23,992
Equity instruments issued other than capital | - | - | - | -
Other equity | 54 | - | - | 54
Retained earnings | 23,612 | 71 | (923) | 22,760
Revaluation reserves | 12 | - | - | 12
Other reserves | (35) | - | - | (35)
Less: Treasury shares | (96) | - | - | (96)
Profit or loss attributable to owners of the parent | 3,519 | - | - | 3,519
Less: Interim dividends | (1,043) | - | - | (1,043)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | (6,939) | (109) | 13 | (7,036)
MINORITY INTERESTS (NON-CONTROLLING INTEREST) | 6,979 | 21 | 8 | 7,008
TOTAL EQUITY | 53,323 | (17) | (902) | 52,404
TOTAL EQUITY AND TOTAL LIABILITIES | 690,059 | 125 | (770) | 689,414

The change registered in the heading “Financial liabilities held for trading” is mainly due to financial liabilities affected by the activity of Global Markets, which are reclassified from "Financial liabilities at amortized cost".

The change registered in the heading “Financial liabilities at amortized cost” is mainly due to the reclassification to "Liabilities held for trading".

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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.

The following information is detailed in the Appendices of the Consolidated Financial Statements of the Group:

· Appendix I shows relevant information related to the consolidated subsidiaries and structured entities.

· Appendix II shows relevant information related to investments in subsidiaries, joint ventures and associates accounted for using the equity method.

· Appendix III shows the main changes and notification of investments and divestments in the BBVA Group.

· Appendix IV shows fully consolidated subsidiaries with more than 10% owned by non-Group shareholders.

The following table sets forth information related to the Group’s total assets as of December 31, 2018, 2017 and 2016, broken down by the Group’s entities according to their activity:

Contribution to Consolidated Group Total Assets. Entities by Main Activities (Millions of euros)
|  | 2018 | 2017 | 2016
Banks and other financial services |  | 647,164 | 659,414 | 699,592
Insurance and pension fund managing companies |  | 26,732 | 26,134 | 26,831
Other non-financial services |  | 2,793 | 4,511 | 5,433
Total |  | 676,689 | 690,059 | 731,856

The total assets and results of operations 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, the United States and

Turkey, with 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.

· México

The BBVA Group operates in Mexico, not only in the banking sector, but also in the insurance sector through Grupo Financiero Bancomer.

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· South America

The BBVA Group’s activities in South America are mainly focused on the banking, financial 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, 2018, are consolidated (see Note 2.1).

· The 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, as well as, the New York BBVA branch and a representative office in Silicon Valley (California).

· Turkey

The Group’s activity in Turkey is mainly carried out through the Garanti Group.

· Rest of Europe

The Group’s activity in Europe is carried out through banks and financial institutions in Ireland, Switzerland, Italy, Netherlands, Finland and Romania, branches in Germany, Belgium, France, Italy Portugal and the United Kingdom, and a representative office in Moscow.

· Asia-Pacific

The Group’s activity in this region is carried out through branches (in Taipei, Tokyo, Hong Kong Singapore and Shanghai) and representative offices (in Beijing, Seoul, Mumbai, Abu Dhabi and Jakarta).

Main transactions in the Group in 2018

Divestitures

Sale of BBVA’s stake in BBVA Chile

On November 28, 2017, BBVA received a binding offer (the “Offer”) from The Bank of Nova Scotia group (“Scotiabank”) for the acquisition of BBVA’s stake in Banco Bilbao Vizcaya Argentaria Chile, S.A. (“BBVA Chile”) as well as in other companies of the Group in Chile with operations that are complementary to the banking business (amongst them, BBVA Seguros Vida, S.A.). BBVA owned approximately, directly and indirectly, 68.19% of BBVA Chile share capital. On December 5, 2017, BBVA accepted the Offer and entered into a sale and purchase agreement and the sale was completed on July 6, 2018.

The consideration received in cash by BBVA as consequence of the referred sale amounts to, approximately, USD 2,200 million. The transaction results in a capital gain, net of taxes, of €633 million, which was recognized in 2018.

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Agreement for the creation of a joint-venture and transfer of the Real - Estate business in Spain

On November 29, 2017, BBVA reached an agreement with a subsidiary of Cerberus Capital Management, L.P. (“Cerberus”) for the creation of a “joint venture” to which an important part of the real estate business of BBVA in Spain is transferred (the “Business”).

The Business comprises: (i) foreclosed real estate assets (the “REOs”), with a gross book value of approximately €13,000 million, taking as starting point the position of the REOs as of June 26, 2017; and (ii) the necessary assets and employees to manage the Business in an autonomous manner. For the purpose of the agreement with Cerberus, the whole Business was valued at approximately €5,000 million.

On October 10, 2018, after obtaining all required authorizations, BBVA completed the transfer of the real estate business in Spain. Closing of the transaction has resulted in the sale of 80% of the share capital of the company Divarian Propiedad, S.A. to an entity managed by Cerberus.

Divarian is the company to which the BBVA Group has contributed the Business provided that the effective transfer of several real estate assets (REO´s) remains subject to the fulfilment of certain conditions precedent. The final price payable by Cerberus will be adjusted depending on the volume of REO´s effectively contributed.

As of December 31, 2018, the transaction did not have a significant impact on BBVA Group’s attributable profit or the Common Equity Tier 1 (fully loaded).

Main transactions in the Group in 2017

Investments

On February 21, 2017, BBVA Group entered into an agreement for the acquisition from Dogus Holding A.S. and Dogus Arastirma Gelistirme ve Musavirlik Hizmetleri A.S of 41,790,000,000 shares of Turkiye Garanti Bankasi, A.S. (“Garanti Bank”), amounting to 9.95% of the total issued share capital of Garanti Bank. On March 22, 2017, the sale and purchase agreement was completed, and therefore BBVA´s total stake in Garanti Bank as of December 31, 2017 amounts to 49.85% (See Note 31).

Main transactions in the Group in 2016

Mergers

The BBVA Group, at its Board of Directors meeting held on March 31, 2016, adopted a resolution to begin a merger process of BBVA S.A. (absorbing company), Catalunya Banc, S.A., Banco Depositario BBVA, S.A. y Unoe Bank, S.A.

This transaction was part of the corporate reorganization of its banking subsidiaries in Spain, was successfully completed throughout 2016 and has no impact in the Consolidated Financial Statements both from the accounting and the solvency stand points.

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4. Shareholder remuneration system

BBVA’s shareholder remuneration policy communicated in October 2013 established the distribution of an annual pay-out of between 35% and 40% of the profits earned in each year and the progressive reduction of the remuneration via “Dividend Options”, so that the shareholders’ remuneration would ultimately be fully in cash. As announced on February 1, 2017, BBVA’s Board of Directors executed a capital increase to be charged to voluntary reserves for the instrumentation of the last “Dividend Option”, being the subsequent shareholders’ remunerations fully in cash, dated March 29, 2017.

This fully – in - cash shareholders’ remuneration policy would be composed, for each year, of a distribution on account of the dividend of such year (expected to be paid in October) and a final dividend (which would be paid once the year has ended and the profit allocation has been approved, expected for April), subject to the applicable authorizations by the competent governing bodies.

Shareholder remuneration scheme “Dividend Option”

During 2012, 2013, 2014, 2015, 2016 and 2017, the Group implemented a shareholder remuneration system referred to as “Dividend Option”.

Under such remuneration scheme, BBVA offered its shareholders the possibility to receive all or part of their remuneration in the form of newly-issued BBVA ordinary shares, whilst maintaining the possibility for BBVA shareholders to receive their entire remuneration in cash by selling the rights of free allocation assigned either to BBVA (in execution of the commitment assumed by BBVA to acquire the rights of free allocation at a guaranteed fixed price) or by selling the rights of free allocation on the market at the prevailing market price at that time. However, the execution of the commitment assumed by BBVA was only available to whoever had been originally assigned such rights of free allocation and only in connection with the rights of free allocation initially allocated at such time.

On March 29, 2017, BBVA’s Board of Directors resolved to execute the capital increase to be charged to voluntary reserves approved by the Annual General Meeting (“AGM”) held on March 17, 2017, under agenda item three, to implement a “Dividend Option” this year. As a result of this increase, the Bank’s share capital increased by €49,622,955.62 through the issuance of 101,271,338 newly-issued BBVA ordinary shares at 0.49 euros par value, given that 83.28% of owners of the rights of free allocation opted to receive newly issued BBVA ordinary shares. The remaining 16.72% of the owners of the rights of free allocation exercised the commitment assumed by BBVA, and as a result, BBVA acquired 1,097,962,903 rights (at a gross price of €0.131 each) for a total amount of €143,833,140.29. This amount is recorded in “Total Equity-Dividends and Remuneration” of the consolidated balance sheet as of December 31, 2017 (see Note 26).

On September, 28 2016, BBVA’s Board of Directors resolved to execute the second of the share capital increases to be charged to voluntary reserves, as agreed by the AGM held on March 11, 2016. As a result of this increase, the Bank’s share capital increased by €42,266,085.33 through the issuance of 86,257,317 newly-issued BBVA ordinary shares at 0.49 euros par value, given that 87.85% of owners of the rights of free allocation opted to receive newly-issued BBVA ordinary shares. The remaining 12.15% of the owners of the rights of free allocation exercised the commitment assumed by BBVA, and as a result, BBVA acquired 787,374,942 rights (at a gross price of €0.08 each) for a total amount of €62,989,995.36. This amount is recorded in “Total Equity-Dividends and Remuneration” of the consolidated balance sheet as of December 31, 2016 (see Note 26).

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On March 31, 2016, BBVA’s Board of Directors resolved to execute the first of the share capital increases to be charged to voluntary reserves, as agreed by the AGM held on March 11, 2016 for the implementation of the shareholder remuneration system called the “Dividend Option”. As a result of this increase, the Bank’s share capital increased by €55,702,125.43 through the issuance of 113,677,807 newly-issued BBVA ordinary shares at a €0.49 par value, given that 82.13% of owners of the rights of free allocation opted to receive newly-issued BBVA ordinary shares. The remaining 17.87% of the owners of the rights of free allocation exercised the commitment assumed by BBVA, and as a result, BBVA acquired 1,137,500,965 rights (at a gross price of €0.129 each) for a total amount of €146,737,624.49. This amount is recorded in “Total Equity- Dividends and Remuneration” of the consolidated balance sheet as of December 31, 2016 (see Note 26).

Cash Dividends

Throughout 2016, 2017 and 2018, BBVA’s Board of Directors approved the payment of the following dividends (interim or final dividends) fully in cash, recorded in “Total Equity- Interim Dividends” of the consolidated balance sheet of the relevant year:

1. The Board of Directors, at its meeting held on June 22, 2016, approved the payment in cash of €0.08 (€0.0648 net of withholding tax) per BBVA share as the first gross interim dividend against 2016 results. The total amount paid to shareholders on July 11, 2016, after deducting treasury shares held by the Group's companies, amounted to €517 million and is recognized under the headings “Total Equity- Interim Dividends” of the consolidated balance sheet as of December 31, 2016.

2. The Board of Directors, at its meeting held on December 21, 2016, approved the payment in cash of €0.08 (€0.0648 withholding tax) per BBVA share, as the second gross interim dividend against 2016 results. The total amount paid to shareholders on January 12, 2017, after deducting treasury shares held by the Group’s Companies, amounted to €525 million and is recognized under the heading “Total Equity- Interim Dividends” of the consolidated balance sheet as of December 31, 2016.

3. The Board of Directors, at its meeting held on September 27, 2017, approved the payment in cash of €0.09 (€0.0729 net of withholding tax) per BBVA share, as the first gross interim dividend against 2017 results. The total amount paid to shareholders on October 10, 2017, after deducting treasury shares held by the Group's companies, amounted to €599 million and is recognized under the heading “Total Equity- Interim Dividends” of the consolidated balance sheet as of December 31, 2017.

4. The Annual General Meeting of BBVA held on March 16, 2018 approved, under item 1 of the Agenda, the payment of a final dividend for 2017, in addition to other dividends previously paid, in cash for an amount equal to €0.15 (€0.1215 net of withholding tax) per BBVA share. The total amount paid to shareholders on April 10, 2018, after deducting treasury shares held by the Group’s companies, amounted €996 million and is recognized under heading “Total Equity- Final Dividends” of the consolidated balance sheet as of December 31, 2018.

5. The Board of Directors, at its meeting held on September 26, 2018, approved the payment in cash of €0.10 (€0.081 net of withholding tax rate of 19%) per BBVA share, as gross interim dividend based on 2018 results. The total amount paid to shareholders on October 10, 2018, after deducting treasury shares held by the Group´s companies, amounted €663 million and is recognized under heading “Total Equity- Interim Dividends” of the consolidated balance sheet as of December 31, 2018.

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The interim accounting statements prepared in accordance with legal requirements evidencing the existence of sufficient liquidity for the distribution of the amounts agreed on September 26, 2018, mentioned above are as follows:

Available Amount for Interim Dividend Payments (Millions of euros)
| August, 31, 2018
Profit of BBVA, S.A., after the provision for income tax | 2,462
Additional Tier I capital instruments remuneration | 236
Maximum amount distributable | 2,226
Amount of proposed interim dividend | 667
BBVA cash balance available to the date | 4,577

Proposal on allocation of earnings for 2018

The allocation of earnings for 2018 subject to the approval of the Board of Directors at the Annual Shareholders Meeting is presented below:

Allocation of Earnings (Millions of euros)
| December 2018
Profit for year (*) | 2,316
Distribution: |
Interim dividends | 667
Final dividend | 1,067
Additional Tier 1 securities | 313
Voluntary reserves | 269

(*) Net income of BBVA, S.A.

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5. Earnings per share

Basic and diluted earnings per share are calculated in accordance with the criteria established by IAS 33. For more information see Glossary of terms.

The calculation of earnings per share is as follows:

Basic and Diluted Earnings per Share
| 2018 | 2017 | 2016
Numerator for basic and diluted earnings per share (millions of euros) |  |  |
Profit attributable to parent company | 5,324 | 3,519 | 3,475
Adjustment: Additional Tier 1 securities (1) | (313) | (301) | (260)
Profit adjusted (millions of euros) (A) | 5,011 | 3,218 | 3,215
Profit from discontinued operations (net of non-controlling interest) (B) | - | - | -
Denominator for basic earnings per share (number of shares outstanding) | - | - | -
Weighted average number of shares outstanding (2) | 6,668 | 6,642 | 6,468
Weighted average number of shares outstanding x corrective factor (3) | 6,668 | 6,642 | 6,592
Adjusted number of shares - Basic earning per share (C) | 6,636 | 6,642 | 6,592
Adjusted number of shares - diluted earning per share (D) | 6,636 | 6,642 | 6,592
Earnings per share (*) | 0.76 | 0.48 | 0.49
Basic earnings per share from continued operations (Euros per share)A-B/C | 0.76 | 0.48 | 0.49
Diluted earnings per share from continued operations (Euros per share)A-B/D | 0.76 | 0.48 | 0.49
Basic earnings per share from discontinued operations (Euros per share)B/C | - | - | -
Diluted earnings per share from discontinued operations (Euros per share)B/D | - | - | -

(1) Remuneration in the year related to contingent convertible securities, recognized in equity (see Note 22.4).

(2) Weighted average number of shares outstanding (millions of euros), excluding 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.

(*) As of December 31, 2018 the weighted average number of shares outstanding was 6,668 million (6,642 and 6,468 million as of December 31, 2017 and 2016, respectively) and the adjustment of additional Tier 1 securities amounted to €313 million (€301 and €260 million as of December 31, 2017 and 2016, respectively).

As of December 31, 2018, 2017 and 2016, there were no other financial instruments or share option commitments to employees that could potentially affect the calculation of the diluted earnings per share for the years presented. For this reason, basic and diluted earnings per share are the same.

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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 disaggregated business activities. These business activities are then aggregated in accordance with the organizational structure determined by the BBVA Group and, ultimately, into the reportable operating segments themselves.

As of June 30, 2019, the reporting structure of the BBVA Group’s business areas differs from the one presented at the end of the year 2018, as a result of the integration of the Non-Core Real Estate business area into Banking Activity in Spain, and the subsequent change of the segment name to Spain. Additionally, balance sheet intra-group adjustments between the Corporate Center and the operating segments have been reallocated to the corresponding operating segments as of and for the years ended December 31, 2018, 2017 and 2016. In addition, certain expenses related to global projects and activities between the Corporate Center and the operating segments have been reallocated as of and for the years ended December 31, 2018, 2017 and 2016. In order to make the information comparable, as required by IFRS 8 “Information by business segments”, we have recast our segment financial information as of and for the years ended December 31, 2018, 2017 and 2016. The BBVA Group’s business areas are summarized below:

· Spain

Includes mainly the banking and insurance business that the Group carries out in Spain.

· The United States

Includes the Group’s business activity in the country through the BBVA Compass Group and the BBVA New York branch.

· Mexico

Includes the Group´s banking and insurance businesses in this country as well as the activity of the BBVA Bancomer branch in Houston.

· Turkey

Reports the activity of the Garanti group that is mainly carried out in this country and, to a lesser extent, in Romania and the Netherlands.

· South America

Includes the Group´s banking and insurance businesses in the region.

· Rest of Eurasia

Includes the banking business activity carried out by the Group in Asia and Europe, excluding Spain.

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Lastly, the Corporate Center contains the Group’s holding function, including: the costs of the head offices with a corporate function; management of structural exchange rate positions; certain equity instruments issuances to ensure an adequate management of the Group's global solvency. It also includes portfolios whose management is not linked to customer relationships, such as industrial holdings; certain tax assets and liabilities; funds due to commitments to employees; goodwill and other intangible assets. As of December 31, 2018, it contains the 20% stake of BBVA in Divarian´s share capital (see Note 3).

The breakdown of the BBVA Group’s total assets by operating segments as of December 31, 2018, 2017 and 2016, is as follows:

Total Assets by Operating Segments (Millions of euros)
| 2018 | 2017 | 2016
Spain | 354,901 | 350,520 | 368,398
United States | 82,057 | 75,775 | 84,726
Mexico | 97,432 | 90,214 | 94,229
Turkey | 66,250 | 78,789 | 84,990
South America | 54,373 | 75,320 | 77,989
Rest of Eurasia | 18,834 | 17,265 | 19,586
Subtotal Assets by Operating Segments | 673,848 | 687,884 | 729,918
Corporate Center and other adjustments | 2,841 | 2,175 | 1,938
Total Assets BBVA Group | 676,689 | 690,059 | 731,856

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The attributable profit and main earning figures in the consolidated income statements for the years ended December 31, 2018, 2017 and 2016 by operating segments are as follows:

Main Margins and Profits by Operating Segments (Millions of euros)
|  | Operating Segments
|  | BBVA Group | Spain | United States | Mexico | Turkey | South America | Rest of Eurasia | Corporate Center
2018 | Notes |  |  |  |  |  |  |  |
Net interest income |  | 17,591 | 3,698 | 2,276 | 5,568 | 3,135 | 3,009 | 175 | (269)
Gross income |  | 23,747 | 5,968 | 2,989 | 7,193 | 3,901 | 3,701 | 414 | (420)
Operating profit /(loss) before tax |  | 7,580 | 1,840 | 920 | 3,269 | 1,444 | 1,288 | 148 | (1,329)
Profit | 55.2 | 5,324 | 1,400 | 736 | 2,367 | 567 | 578 | 96 | (419)
2017 |  |  |  |  |  |  |  |  |
Net interest income |  | 17,758 | 3,810 | 2,119 | 5,476 | 3,331 | 3,200 | 180 | (357)
Gross income |  | 25,270 | 6,162 | 2,876 | 7,122 | 4,115 | 4,451 | 468 | 74
Operating profit /(loss) before tax |  | 6,931 | 1,189 | 749 | 2,960 | 2,143 | 1,671 | 181 | (1,962)
Profit | 55.2 | 3,519 | 877 | 486 | 2,170 | 823 | 847 | 128 | (1,812)
2016 |  |  |  |  |  |  |  |  |
Net interest income |  | 17,059 | 3,937 | 1,923 | 5,155 | 3,404 | 2,930 | 166 | (456)
Gross income |  | 24,653 | 6,410 | 2,673 | 6,799 | 4,257 | 4,054 | 491 | (31)
Operating profit /(loss) before tax |  | 6,392 | 519 | 589 | 2,678 | 1,902 | 1,533 | 207 | (1,035)
Profit | 55.2 | 3,475 | 305 | 442 | 1,980 | 596 | 757 | 154 | (760)

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7. Risk management

|  | PAGE
7.1 | General risk management and control model | F-74
7.1.1 | Governance and organization | F-74
7.1.2 | Risk Appetite Framework | F-78
7.1.3 | Decisions and processes | F-80
7.1.4 | Assessment, monitoring and reporting | F-82
7.1.5 | Infrastructure | F-82
7.1.6 | Risk culture | F-83
7.2 | Risk factors | F-84
7.3 | Credit risk | F-86
7.3.1 | Measurement Expected Credit Loss (ECL) | F-87
7.3.2 | Credit risk exposure | F-89
7.3.3 | Mitigation of credit risk, collateralized credit risk and other credit enhancements | F-94
7.3.4 | Credit quality of financial assets that are neither past due nor impaired | F-95
7.3.5 | Past due but not impaired and impaired secured loans risks | F-97
7.3.6 | Impairment losses | F-104
7.3.7 | Refinancing and restructuring operations | F-110
7.4 | Market risk | F-112
7.4.1 | Market risk trading portfolios | F-112
7.4.2 | Structural risk | F-118
7.4.3 | Financial Instruments offset | F-121
7.5 | Liquidity risk | F-123
7.5.1 | Liquidity risk management | F-123
7.5.2 | Asset encumbrance | F-131
7.6 | Operational Risk | F-134
7.7 | Risk concentration | F-137

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7.1 General risk management and control model

The BBVA Group has an overall risk management and control model (hereinafter 'the model') tailored to its business model, its organization and the geographies in which it operates, This model allows BBVA Group to develop its activity in accordance with the risk strategy and risk controls and management policies defined by the governing bodies of the Bank and to adapt to a changing economic and regulatory environment, tackling risk management globally and adapted to the circumstances at all times. The model establishes a system of appropriate risk management regarding risk profile and strategy of the Group.

This model is applied comprehensively in the Group and consists of the basic elements listed below:

· Governance and organization.

· Risk Appetite Framework.

· Decisions and processes.

· Assessment, monitoring and reporting.

· Infrastructure.

The Group promotes the development of a risk culture which aims to ensure consistent application of the risk management and control model in the Group, so that the risk function is understood and assimilated at all levels of the organization.

7.1.1 Governance and organization

BBVA Group´s risk governance model is characterized by a special involvement of its corporate bodies, both in setting the risk strategy and in the ongoing monitoring and supervision of its implementation.

Thus, as developed below, the corporate bodies are the ones that approve this risk strategy and corporate policies for the different types of risk. The risk function is responsible at management level for their implementation and development, and reporting to the governing bodies.

The responsibility for the daily management of the risks lies on the businesses which abide in the development of their activity to meet the policies, rules, procedures, infrastructures and controls, which are defined by the function risk on the basis of the framework set by the governing bodies.

To perform this task properly, the risk function in the BBVA Group is configured as a single, global function with an independent role from commercial areas.

Corporate bodies

The BBVA Board of Directors (hereinafter also referred to as "the Board") approves the risk strategy and oversees the internal management and control systems. Specifically, in relation to the risk strategy, the Board approves the Group's risk appetite statement, the core metrics (and their statements) and the main metrics by type of risk, as well as the general risk management and control model.

The Board of Directors is also responsible for approving and monitoring the strategic and business plan, the annual budget and management goals, as well as the investment and funding policy, in a consistent way and in line with the approved Risk Appetite Framework. For this reason, the processes for defining the Risk Appetite Framework proposals and the strategic and budgetary planning at Group level are coordinated by the executive areas for submission to the Board.

With the aim of integrating the Risk Appetite Framework into management, on the basis established by the Board of Directors, the Executive Committee approves the metrics by type of risk in relation to profitability and income recurrence and the Group's basic structure of limits by geographical area, risk type, asset type and portfolio level. This committee also approves specific corporate policies for each type of risk.

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Lastly, the Board has set up a Board committee specialized in risks, the Risk Committee, that assists the Board and the Executive Committee in determining the Group's risk strategy and the risk limits and policies, respectively, analyzing and assessing beforehand the proposals submitted to those bodies. The Board of Directors has the exclusive authority to amend the Group’s risk strategy and its elements, including the Risk Appetite Framework metrics within its scope of decision, while the Executive Committee is responsible for amending the metrics by type of risk within its scope of decision and the Group's basic structure of limits (core limits), when applicable. In both cases, the amendments follow the same decision-making process described above, so the proposals for amendment are submitted by the executive area (Chief Risk Officer, “CRO”) and analyzed by the Risk Committee, for later submission to the Board of Directors or to the Executive Committee, as appropriate.

Moreover, the Risk Committee, the Executive Committee and the Board itself conduct adequate monitoring of the risk strategy implementation and of the Group's risk profile. The risk function regularly reports on the development of the Group's Risk Appetite Framework metrics to the Board and to the Executive Committee, after the analysis by the Risk Committee, whose role in this monitoring and control work is particularly relevant.

Risk Function: CRO. Organizational structure and committees

The head of the risk function at executive level is the Group’s CRO, who carries out his functions independently and with the necessary authority, rank, experience, knowledge and resources. He is appointed by the Board as a member of its senior management and has direct access to its corporate bodies (Board, Executive Standing Committee and Risk Committee), to whom he reports regularly on the status of risks in the Group.

The CRO is supported in the exercise of his functions by a structure consisting of cross-sectional risk units in the corporate area and the specific risk units in the geographical and/or business areas of the Group. Each of the latter units is headed by a Chief Risk Officer for the geographical and/or business area who, within his/her area of responsibility, carries out risk management and control functions and is responsible for applying the corporate policies and rules approved at Group level in a consistent manner, adapting them if necessary to local requirements and reporting to the local corporate bodies.

The Chief Risk Officers of the geographical and/or business areas report both to the Group's CRO and to the head of their geographical and/or business area. The aim of this dual reporting system is that the local risk management function is independent from the operating functions and enable its alignment with the Group's corporate risk policies and goals.

As explained above, the risk management function consists of risk units from the corporate area, which carry out cross-sectional functions, and risk units from the geographical and/or business areas.

· The corporate area's risk units develop and submit to the Group CRO the proposal for the Group's Risk Appetite Framework, the corporate policies, rules and global procedures and infrastructures within the framework approved by the corporate bodies; they monitor their application and report either directly or through the CRO to the Bank's corporate bodies. Their functions include:

- Management of the different types of risks at Group level in accordance with the strategy defined by the corporate bodies.

- Risk planning aligned with the risk appetite framework principles defined by the Group.

- Monitoring and control of the Group's risk profile in relation to the risk appetite framework approved by the Bank's corporate bodies, providing accurate and reliable information with the required frequency and in the necessary format.

- Prospective analyses to enable an evaluation of compliance with the risk appetite framework in stress scenarios and the analysis of risk mitigation mechanisms.

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- Management of the technological and methodological developments required for implementing the Model in the Group.

- Design of the Group's Internal Control model and definition of the methodology, corporate criteria and procedures for identifying and prioritizing the risk inherent in each unit's activities and processes.

- Validation of the models used and the results obtained by them in order to verify their adaptation to the different uses to which they are applied.

· The risk units in the business units develop and present to the Chief Risk Officer of the geographical and/or business area the risk appetite framework proposal applicable in each geographical and/or business area, independently and always within the Group's strategy/Risk Appetite Framework. They also monitor that the corporate policies and rules are approved and applied consistently at a Group level, adapting them if necessary to local requirements; that they are provided with appropriate infrastructures for management and control of their risks, within the global risk infrastructure framework defined by the corporate areas; and that they report to their corporate bodies and/or to senior management, as appropriate.

The local risk units thus work with the corporate area risk units in order to adapt to the risk strategy at Group level and share all the information necessary for monitoring the development of their risks.

The risk function has a decision-making process to perform its functions, underpinned by a structure of committees, where the Global Risk Management Committee (GRMC) acts as the top-level committee within the risk function. It proposes, examines and, where applicable, approves, among others, the internal risk regulatory framework and the procedures and infrastructures needed to identify, assess, measure and manage the material risks faced by the Group in carrying out its business, and the determination of risk limits by portfolio. The members of this Committee are the Group's CRO, the Heads of the main Areas of the GRM Front, the Heads of GRM Corporate Discipline Units and the Head of Risk Management Group of GRM.

The GRMC carries out its functions assisted by various support committees which include:

· Global Credit Risk Management Committee: It is responsible for analyzing and decision-making related to wholesale credit risk admission.

· Wholesale Credit Risk Management Committee: its purpose is the analysis and decision-making regarding the admission of wholesale credit risk of certain customer segments of the BBVA Group.

· Work Out Committee: its purpose is to be informed about decisions taken under the delegation framework regarding risk proposals concerning clients on Watch List and clients classified as NPL of certain customer segments of the BBVA Group, as well the sanction of proposals regarding entries, exits and changes of Watch List, entries and exits in non-performing unlikely to pay and turns to written off.

· Asset Allocation Committee: The executive authority responsible for analyzing and deciding on credit risk issues related to processes aimed at achieving a portfolios combination and composition that, under the restrictions imposed by the Risk Appetite framework, allows to maximize the risk adjusted return on equity.

· Risk Models Management Committee: It ensures an appropriate decision-making process regarding the planning, development, implementation, use, validation and monitoring of the models required to achieve an appropriate management of the Model Risk in the BBVA Group.

· Global Markets Risk Unit Global Committee: It is responsible for formalizing, supervising and communicating the monitoring of trading desk risk in all the Global Markets business units, as well as coordinating and approving GMRU key decisions activity, and developing and proposing to GRMC the corporate regulation of the unit.

· Operational Risk and Product Governance Corporate Admission Committee: It identifies, analyzes and assesses the operational risks associated initiatives related with new business, products or

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services, outsourcing, process transformation and new systems, prior to its launch. As well, it will verify that Product Governance normative requirements are met and will decide about the insurance scheme (global policies).

· Retail Credit Risk Committee: It provides for the analysis, discussion and decision support on all issues regarding the retail credit risk management that impact or potentially do in the practices, processes and corporate metrics established in the Policies, Rules and Operating Frameworks.

· Asset Management Global Risk Steering Committee: its purpose is to develop and coordinate the strategies, policies, procedures, and infrastructure necessary to identify, assess, measure and manage the material risks facing the bank in the operation of businesses linked to BBVA Asset Management.

· Global Insurance Risk Committee: its purpose is to monitor and promote the alignment and the communication between all the Insurance Risk Units in the BBVA Group. It will do this by promoting the application of standardized principles, policies, tools and risk metrics in the different regions with the aim of maintaining proper integration of insurance risk management in the Group.

· COPOR: its purpose is to analyze and make decision in relation to the operations of the various geographies in which Global Markets is present.

Each geographical and/or business area has its own risk management committee (or committees), with objectives and contents similar to those of the corporate area, which perform their duties consistently and in line with corporate risk policies and rules, whose decisions are reflected in the corresponding minutes.

Under this organizational scheme, the risk management function monitors that the risk strategy, the regulatory framework, and standardized risk infrastructures and controls are integrated and applied across the entire Group. It also benefits from the knowledge and proximity to customers in each geographical and/or business area, and transmits the corporate risk culture to the Group's different levels. Moreover, this organization enables the risks function to conduct and report to the corporate bodies integrated monitoring and control of the entire Group's risks.

Internal Risk Control and Internal Validation

The Group has a specific Internal Risk Control unit. Its main function is to manage that there is an adequate internal regulatory framework, a process and measures defined for each type of risk identified in the Group (and for those other types of risk that may potentially affect the Group). It controls their application and operation, as well as integrating the risk strategy into the Group's management. In this regard, the Internal Risk Control monitors verifies the performance of their duties by the units that develop the risk models, manage the processes and execute the controls. Its scope of action is global, from the geographical point of view and the type of risks.

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The Group's Head of Internal Risk Control is responsible for the function and reports on its activities and informs of its work plans to the CRO and to the Board's Risks Committee, assisting it in any matters where requested. For these purposes the Internal Risk Control department has a Technical Secretary's Office, which offers the Committee the technical support it needs to better perform its duties.

In addition, the Group has an Internal Validation unit, which reviews the performance of its duties by the units that develop the risk models and of those that use them in management. Its functions include review and independent validation at internal level of the models used for management and control of risks in the Group.

7.1.2 Risk Appetite Framework

The Group's Risk Appetite Framework, approved by the corporate bodies, determines the risks (and their level) that the Group is willing to assume to achieve its business objectives considering an organic evolution of its business. These are expressed in terms of solvency, profitability and liquidity and funding, which are reviewed periodically as well as in case of material changes to the entity’s business or relevant corporate transactions. The definition of the risk appetite has the following goals:

· To express the maximum levels of risk it is willing to assume, at both Group and geographical and/or business area level.

· To establish a set of guidelines for action and a management framework for the medium and long term that prevent actions from being taken (at both Group and geographical and/or business area level) that could compromise the future viability of the Group.

· To establish a framework for relations with the geographical and/or business areas that, while preserving their decision-making autonomy, monitors they act consistently, avoiding uneven behavior.

· To establish a common language throughout the organization and develop a compliance-oriented risk culture.

· Alignment with the new regulatory requirements, facilitating communication with regulators, investors and other stakeholders, thanks to an integrated and stable risk management framework.

Risk appetite framework is expressed through the following elements:

Risk Appetite Statement

It sets out the general principles of the Group's risk strategy and the target risk profile. The 2018 Group’s Risk appetite statement is as follows:

BBVA Group's Risk Policy is aimed to promote a multichannel and responsible universal banking model, based on principles, targeting sustainable growth, risk adjusted profitability and recurrent value creation. To achieve these objectives, the Risk Management Model is oriented to maintain a moderate risk profile that allows the Group to keep strong financial fundamentals in adverse environments preserving our strategic goals, maintaining a prudent management, an integral view of risks, and a portfolio diversification by geography, asset class and client segment, focusing on keeping a long term relationship with our customers.

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Core metrics

Based on the risk appetite statement, statements are established to set down the general risk management principles in terms of solvency, liquidity and funding, profitability and income recurrence.

· Solvency: a sound capital position, maintaining resilient capital buffer from regulatory and internal requirements that supports the regular development of banking activity even under stress situations. As a result, BBVA proactively manages its capital position, which is tested under different stress scenarios from a regular basis.

· Liquidity and funding: A sound balance-sheet structure to sustain the business model. Maintenance of an adequate volume of stable resources, a diversified wholesale funding structure, which limits the weight of short term funding and ensures the access to the different funding markets, optimizing the costs and preserving a cushion of liquid assets to overcome a liquidity survival period under stress scenarios.

· Profitability and income recurrence: A sound margin-generation capacity supported by a recurrent business model based on the diversification of assets, a stable funding and a customer focus; combined with a moderate risk profile that limits the credit losses even under stress situations; all focused on allowing income stability and maximizing the risk-adjusted profitability.

The core metrics define, in quantitative terms, the principles and the target risk profile set out in the risk appetite statement and are in line with the strategy of the Group. Each metric has three thresholds (traffic-light approach) ranging from a standard business management to higher deterioration levels: Management reference, Maximum appetite and Maximum capacity. The 2018 Group’s Core metrics are:

By type of risk metrics

Based on the core metrics, statements are established for each type of risk reflecting the main principles governing the management of that risk and several metrics are calibrated, compliance with which enables compliance with the core metrics and the risk appetite statement of the Group. The metrics by type of risk have a maximum appetite threshold.

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Basic limits structure (core limits)

The purpose of the basic limits structure or core limits is to shape the Risk Appetite Framework at geographical area risk type, asset type and portfolio level, ensuring that the management of risks on an ongoing basis is within the thresholds set forth for by type of risk.

In addition to this framework, there’s a level of management limits that is defined and managed by the risk function developing the core limits, in order to ensure that the anticipatory management of risks by subcategories or by subportfolios complies with that core limits and, in general, with the Risk Appetite Framework.

The following graphic summarizes the structure of BBVA’s Risk Appetite Framework:

The corporate risk area works with the various geographical and/or business areas to define their risk appetite framework, which will be coordinated with and integrated into the Group's risk appetite to ensure that its profile fits as defined.

The Risk Appetite Framework is integrated into the management and the processes for defining the Risk Appetite Framework proposals and strategic and budgetary planning at Group level are coordinates.

As explained above, the core metrics of BBVA Risk Appetite Framework measure Groups performance in terms of solvency, liquidity and funding, profitability and income recurrence; most of the core metrics are accounting related or regulatory metrics which are published regularly to the market in the BBVA Group annual report and in the quarterly financial reports. During 2018, the Group risk profile evolved in line with the Risk Appetite metrics.

7.1.3 Decisions and processes

The transfer of risk appetite framework to ordinary management is supported by three basic aspects:

· A standardized set of regulations.

· Risk planning.

· Comprehensive management of risks over their life cycle.

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Standardized regulatory framework

The corporate risk area is responsible for the definition and proposal of the corporate policies, specific rules, procedures and schemes of delegation based on which risk decisions should be taken within the Group.

This process aims for the following objectives:

· Hierarchy and structure: well-structured information through a clear and simple hierarchy creating relations between documents that depend on each other.

· Simplicity: an appropriate and sufficient number of documents.

· Standardization: a standardized name and content of document.

· Accessibility: ability to search for, and easy access to, documentation through the corporate risk management library.

The approval of corporate policies for all types of risks is the responsibility of the corporate bodies of the Bank, while the corporate risk area endorses the remaining regulations.

Risk units of geographical and / or business areas comply with this set of regulations and, where necessary, adapt it to local requirements for the purpose of having a decision process that is appropriate at local level and aligned with the Group policies. If such adaptation is necessary, the local risk area must inform the corporate area of GRM, who must ensure the consistency of the regulatory body at the Group level and, therefore, if necessary, give prior approval to the modifications proposed by the local risk areas.

Risk planning

Risk planning monitors that the risk appetite framework is integrated into management through a cascade process for establishing limits and profitability adjusted to the risk profile, in which the function of the corporate area risk units and the geographical and/or business areas is to guarantee the alignment of this process with the Group's Risk Appetite Framework in terms of solvency, liquidity and funding, profitability and income recurrence.

There are tools in place that allow the Risk Appetite Framework defined at aggregate level to be assigned and monitored by business areas, legal entities, types of risk, concentrations and any other level considered necessary.

The risk planning process is aligned and taken into consideration within the rest of the Group's planning framework so as to ensure consistency.

Comprehensive management

All risks must be managed comprehensively during their life cycle, and be treated differently depending on the type.

The risk management cycle is composed of five elements:

· Planning: with the aim of ensuring that the Group's activities are consistent with the target risk profile and guaranteeing solvency in the development of the strategy.

· Assessment: a process focused on identifying all the risks inherent to the activities carried out by the Group.

· Formalization: includes the risk origination, approval and formalization stages.

· Monitoring and reporting: continuous and structured monitoring of risks and preparation of reports for internal and/or external (market, investors, etc.) consumption.

· Active portfolio management: focused on identifying business opportunities in existing portfolios and new markets, businesses and products.

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7.1.4 Assessment, monitoring and reporting

Assessment, monitoring and reporting is a cross-cutting element that monitors that the Model has a dynamic and proactive vision to enable compliance with the risk appetite framework approved by the corporate bodies, even in adverse scenarios. The materialization of this process has the following objectives:

· Assess compliance with the risk appetite framework at the present time, through monitoring of the core metrics, metrics by type of risk and the basic structure of limits.

· Assess compliance with the risk appetite framework in the future, through the projection of the risk appetite framework variables, in both a baseline scenario determined by the budget and a risk scenario determined by the stress tests.

· Identify and assess the risk factors and scenarios that could compromise compliance with the risk appetite framework, through the development of a risk repository and an analysis of the impact of those risks.

· Act to mitigate the impact in the Group of the identified risk factors and scenarios, ensuring this impact remains within the target risk profile.

· Supervise the key variables that are not a direct part of the risk appetite framework, but that condition its compliance. These can be either external or internal.

This process is integrated in the activity of the risk units, both of the corporate area and in the business units, and it is carried out during the following phases:

· Identification of the risk factors that can compromise the performance of the Group or of the geographical and/or business areas in relation to the defined risk thresholds.

· Assessment of the impact of the materialization of the risk factors on the metrics that define the Risk Appetite Framework based on different scenarios, including stress scenarios.

· Response to unwanted situations and proposals for readjustment to enable a dynamic management of the situation, even before it takes place.

· Monitoring of the Group's risk profile and of the identified risk factors, through internal, competitor and market indicators, among others, to anticipate their future development.

· Reporting: Complete and reliable information on the development of risks for the corporate bodies and senior management, with the frequency and completeness appropriate to the nature, significance and complexity of the reported risks. The principle of transparency governs al reporting of risk information.

7.1.5 Infrastructure

The infrastructure is an element that must manage that the Group has the human and technological resources needed for effective management and supervision of risks in order to carry out the functions set out in the Group's risk Model and the achievement of their objectives.

With respect to human resources, the Group risk function has an adequate workforce, in terms of number, skills, knowledge and experience.

With regards to technology, the Group risk function manages the integrity of management information systems and the provision of the infrastructure needed for supporting risk management, including tools appropriate to the needs arising from the different types of risks for their admission, management, assessment and monitoring.

The principles that govern the Group risk technology are:

· Standardization: the criteria are consistent across the Group, thus ensuring that risk handling is standardized at geographical and/or business area level.

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· Integration in management: the tools incorporate the corporate risk policies and are applied in the Group's day-to-day management.

· Automation of the main processes making up the risk management cycle.

· Appropriateness: provision of adequate information at the right time.

Through the “Risk Analytics” function, the Group has a corporate framework in place for developing the measurement techniques and models. It covers all the types of risks and the different purposes and uses a standard language for all the activities and geographical/business areas and decentralized execution to make the most of the Group's global reach. The aim is to continually evolve the existing risk models and generate others that cover the new areas of the businesses that develop them, so as to reinforce the anticipation and proactiveness that characterize the Group's risk function.

Also the risk units of geographical and / or business areas have sufficient means from the point of view of resources, structures and tools to develop a risk management in line with the corporate model.

7.1.6 Risk culture

The BBVA Group promotes the development of a risk culture based on the observance and understanding of values, attitudes, and behaviors that allow the compliance with the regulations and frameworks that contribute to an appropriate risk management.

At BBVA the Risk Governance Model is characterized by a special involvement of social bodies, as they define the risk culture that permeates the rest of the organization and has the following main elements:

· Our Purpose which defines our reason to be and with our values and behaviors guide the performance of our organization and the people who are part of it.

· The Risk Appetite Framework which determines the risks and levels of risks that the Group is willing to assume in order to fulfill its goals.

· The Code of Conduct establishes the behavior guidelines that we must follow to adjust our behavior to the BBVA values.

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The Risk Culture at BBVA is based on these levers:

· Communication: The BBVA Group promotes the dissemination of the principles and values that should govern the conduct and risk management in a comprehensive and consistent manner. To do this, the most appropriate channels of communication are used, to allow for the Risk culture to be integrated into the business activities at all levels of the organization.

· Training: The BBVA Group favors the understanding of the values, risk management model, and the code of conduct in all scenarios, ensuring standards in skills and knowledge.

· Motivation: The BBVA Group aims to define incentives for BBVA employees that support the risk culture at all levels. Among these incentives, the role of the Compensation policy and incentive programs stand out, as well as implementation of risk culture control mechanisms, including the complaint channels and the disciplinary committees.

· Monitoring: The BBVA Group pursues at the highest levels of the organization a continuous evaluation and monitoring of the risk culture to guarantee its implementation and identification of areas for improvement.

7.2 Risk factors

As mentioned earlier, BBVA has processes in place for identifying risks and analyzing scenarios that enable the Group to manage risks in a dynamic and proactive way.

The risk identification processes are forward looking to ensure the identification of emerging risks and take into account the concerns of both the business areas, which are close to the reality of the different geographical areas, and the corporate areas and senior management.

Risks are captured and measured consistently using the methodologies deemed appropriate in each case. Their measurement includes the design and application of scenario analyses and stress testing and considers the controls to which the risks are subjected.

As part of this process, a forward projection of the risk appetite framework variables in stress scenarios is conducted in order to identify possible deviations from the established thresholds. If any such deviations are detected, appropriate measures are taken to keep the variables within the target risk profile.

To this extent, there are a number of emerging risks that could affect the Group’s business trends. These risks are described in the following main sections:

Macroeconomic and geopolitical risks

Global economic growth maintained robust in 2018 even if it slowed down more than expected during the second half of the year as a result of the worse development of the trade and the industrial sector as well as the strong increase in financial tensions, especially in developed economies due to the rise of uncertainties. To the worse economic development in Europe and in China, it has to be added the downturn in Asian countries and the deterioration in the expansive cycle of the United States. In this context, both the Federal Reserve (Fed) and the ECB have demonstrated to be more prudent and patient at the time of advancing with the normalization of their monetary policies and their future decisions will depend on the economic evolution. The main risk at sort-term continues to be protectionism not only for the direct effect on global trade, but also for the indirect impact of lower confidence and financial volatility. To this, it has to be added the concerns about the degree of the impact on the economic activities in the United States and China in the following quarters have to be added as well as the increased political uncertainty in Europe.

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In summary, the uncertainty related to the economic perspectives continues to be elevated due to the fear of a protectionist escalation and a higher perception of the risk related to the global economic growth.

Regulatory and reputational risks

· Financial institutions are exposed to a complex and ever-changing regulatory environment defined by governments and regulators. This can affect their ability to grow and the capacity of certain businesses to develop, and result in stricter liquidity and capital requirements with lower profitability ratios. The Group constantly monitors changes in the regulatory framework that allow for anticipation and adaptation to them in a timely manner, adopt industry practices and more efficient and rigorous criteria in its implementation.

· The financial sector is under ever closer scrutiny by regulators, governments and society itself. In the course of activities, situations which might cause relevant reputational damage to the entity could raise and might affect the regular course of business. The attitudes and behaviors of the Group and its members are governed by the principles of integrity, honesty, long-term vision and industry practices through, inter alia, internal control Model, the Code of Conduct, tax strategy and Responsible Business Strategy of the Group.

Business, operational and legal risks

· New technologies and forms of customer relationships: Developments in the digital world and in information technologies pose significant challenges for financial institutions, entailing threats (new competitors, disintermediation…) but also opportunities (new framework of relations with customers, greater ability to adapt to their needs, new products and distribution channels...). Digital transformation is a priority for the Group as it aims to lead digital banking of the future as one of its objectives.

· Technological risks and security breaches: The Group is exposed to new threats such as cyber-attacks, theft of internal and customer databases, fraud in payment systems, etc. that require major investments in security from both the technological and human point of view. The Group gives great importance to the active operational and technological risk management and control. One example was the early adoption of advanced models for management of these risks (AMA - Advanced Measurement Approach).

· The financial sector is exposed to increasing litigiousness, such that financial institutions face a large number of proceedings of every kind -civil, criminal, administrative and otherwise-, as well as supervisory investigations, in multiple jurisdictions, the consequences of which are difficult to determine (including those proceedings where an undetermined number of claimants is involved, where damages claimed are not easy to estimate, where exorbitant amounts are claimed, where novel legal questions are introduced using new, creative legal theories and where proceedings are at a very early stage).

In Spain, in many current proceedings claimants seek, both at Spanish courts and through preliminary rulings sought from the European Union Court of Justice, that various clauses typically included within mortgage loan agreements with credit institutions be declared abusive (including clauses related to mortgage fees, early termination rights, reference interest rates and arrangement fees). Unfavorable resolutions of such proceedings against the Group or against other banking entities may directly or indirectly affect the Group.

The BBVA Group is under regulatory investigations in several countries which may give rise to sanctions and claims for damages by third parties.

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The Group may likewise be subject to investigations by legal authorities, of which we have not heretofore received formal notice to such effect, in relation with the contracting of supposedly irregular services, that may have a negative reputational or economic impact on the Bank. The Bank is undertaking a forensic investigation, led by PwC, through the Bank’s external legal counsel Garrigues, together with Uría, the scope or duration of which it is not currently possible to predict, nor is it possible to predict the outcome or implications for the Group of any such investigation by the legal authorities.

The BBVA Group undertakes constant management and monitoring of legal and regulatory investigations, proceedings and actions where its interests may be defended, and allocates (on the basis of the number of disputes, rulings and the state of proceedings or actions) what we believe are the appropriate provisions where necessary. Nevertheless, the results of judicial or regulatory investigations, proceedings or actions, whether to which the Bank is currently party, to which it may be party in the future, or to which other banking entities are party, are difficult to predict, and if jurisprudential criteria are modified or unexpected results occur, such allocated provisions may prove insufficient.

7.3 Credit risk

Credit risk 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.

It is the most important risk for the Group and includes counterparty risk, issuer risk, settlement risk and country risk management.

The principles underpinning credit risk management in BBVA are as follows:

· Availability of basic information for the study and proposal of risk, and supporting documentation for approval, which sets out the conditions required by the internal relevant body.

· Sufficient generation of funds and asset solvency of the customer to assume principal and interest repayments of loans owed.

· Establishment of adequate and sufficient guarantees that allow effective recovery of the transaction, this being considered a secondary and exceptional method of recovery when the first has failed.

Credit risk management in the Group has an integrated structure for all its functions, allowing decisions to be taken objectively and independently throughout the life cycle of the risk.

· At Group level: frameworks for action and standard rules of conduct are defined for handling risk, specifically, the circuits, procedures, structure and supervision.

· At the business area level: they are responsible for adapting the Group's criteria to the local realities of each geographical area and for direct management of risk according to the decision-making circuit:

- Retail risks: in general, the decisions are formalized according to the scoring tools, within the general framework for action of each business area with regard to risks. The changes in weighting and variables of these tools must be validated by the GRM area.

- Wholesale risks: in general, the decisions are formalized by each business area within its general framework for action with regard to risks, which incorporates the delegation rule and the Group's corporate policies.

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### 7.3.1 Measurement Expected Credit Loss (ECL)

IFRS 9 requires determining the expected credit loss of a financial instrument in a way that reflects an unbiased estimation removing any conservatism or optimism, the time value of money and a forward looking perspective (including the economic forecast).

Therefore the recognition and measurement of expected credit losses (ECL) is highly complex and involves the use of significant analysis and estimation including formulation and incorporation of forward-looking economic conditions into ECL.

Risk Parameters Adjusted by Macroeconomic Scenarios

Expected Credit Loss must include forward looking information, in accordance with IFRS 9, which states that the comprehensive credit risk information must incorporate not only historical information but also all relevant credit information, including forward-looking macroeconomic information. BBVA uses the classical credit risk parameters PD, LGD and EAD in order to calculate the ECL for the credit portfolios.

BBVA´s methodological approach in order to incorporate the forward looking information aims to determine the relation between macroeconomic variables and risk parameters following three main steps:

· Step 1: Analysis and transformation of time series data.

· Step 2: For each dependent variable find conditional forecasting models that are economically consistent.

· Step 3: Select the best conditional forecasting model from the set of candidates defined in Step 2, based on their out of sample forecasting performance.

How economic scenarios are reflected in calculation of ECL

The forward looking component is added through the introduction of macroeconomic scenarios as an input. Inputs would highly depend on the particular combination of region and portfolio, so inputs are adapted to available data.

Based on economic theory and analysis, the macroeconomic variables most directly relevant for explaining and forecasting the selected risk parameters (PD, LGD) are:

· a) The net income of families, corporates or public administrations.

· b) The payment amounts on the principal and interest on the outstanding loans.

· c) The value of the collateral assets pledge to the loan.

BBVA Group approximates these variables by using a proxy indicator from the set included in the macroeconomic scenarios provided by the economic research department.

Only a single specific indicator for each of the three categories can be used and only core macroeconomic indicators should be chosen as first choice: for a) using Real GDP Growth for the purpose of conditional forecasting can be seen as the single sufficient “factor” required for capturing the influence of all potentially relevant macro-financial scenario on internal PDs and LGD ; for b) using the most representative short term interest rate (typically the policy rate or the most liquid sovereign yield or interbank rate or EMBI) or exchange rates expressed in real terms and for c) using a comprehensive index of the price of real estate properties also expressed in real terms in the case of mortgage loans and a representative index of the price of the relevant commodity (in real terms) for corporate loan portfolios concentrated in exporters or producer of such commodity.

Real GDP growth is given priority over any other indicator not only because it is the most comprehensive indicator of income and economic activity but also because it is the central variable in the generation of macroeconomic scenarios.

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Multiple scenario approach under IFRS 9

IFRS 9 requires calculating an unbiased probability weighted measurement of expected credit losses (“ECL”) by evaluating a range of possible outcomes, including forecasts of future economic conditions.

The BBVA Research teams within the BBVA Group produce forecasts of the macroeconomic variables under the baseline scenario, which are used in the rest of the related processes of the bank, such as budgeting, ICAAP and risk appetite framework, stress testing, etc.

Additionally, the BBVA Research teams produced alternative scenarios to the baseline scenario so as to meet the requirements under the IFRS 9 standard.

Alternative macroeconomic scenarios

· For each of the macro-financial variables, BBVA Research produces three scenarios.

· Each of these scenarios corresponds to the expected value of a different area of the probabilistic distribution of the possible projections of the economic variables.

The approach in BBVA consists on using the scenario that is the most likely scenario, which is the baseline scenario, consistent with the rest of internal processes (ICAAP, Budgeting…) and then applying an overlay adjustment that is calculated by taking into account the weighted average of the ECL determined by each of the scenarios.

It is important to note that in general, it is expected that the effect of the overlay is to increase the ECL. It is possible to obtain an overlay that does not have that effect, whenever the relationship between macro scenarios and losses is linear. However, the overlay is not expected to reduce the ECL.

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### 7.3.2 Credit risk exposure

In accordance with IFRS 7 “Financial Instruments: Disclosures”, the BBVA Group’s maximum credit risk exposure (see definition below) by headings in the balance sheets as of December 31, 2018 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.

Maximum Credit Risk Exposure (Millions of euros)
| Notes | 2018 |  |  |
Financial assets held for trading |  | 59,581 |  |  |
Debt securities | 10 | 25,577 |  |  |
Equity instruments | 10 | 5,254 |  |  |
Loans and advances | 10 | 28,750 |  |  |
Non-trading financial assets mandatorily at fair value through profit or loss |  | 5,135 |  |  |
Loans and advances | 11 | 1,803 |  |  |
Debt securities | 11 | 237 |  |  |
Equity instruments | 11 | 3,095 |  |  |
Financial assets designated at fair value through profit or loss | 12 | 1,313 |  |  |
Derivatives (trading and hedging) |  | 38,249 | Stage 1 | Stage 2 | Stage 3
Financial assets at fair value through other comprehensive income |  | 56,332 | 56,329 | 3 | -
Debt securities | 13.1 | 53,737 | 53,734 | 3 | -
Equity instruments | 13.1 | 2,595 | 2,595 | - | -
Financial assets at amortized cost |  | 431,927 | 384,632 | 30,902 | 16,394
Loans and advances to central banks |  | 3,947 | 3,947 | - | -
Loans and advances to credit institutions |  | 9,175 | 9,131 | 34 | 10
Loans and advances to customers |  | 386,225 | 339,204 | 30,673 | 16,348
Debt securities |  | 32,580 | 32,350 | 195 | 35
Total financial assets risk |  | 592,538 | 440,960 | 30,905 | 16,394
Total loan commitments and financial guarantees | 33 | 170,511 | 161,404 | 8,120 | 987
Total maximum credit exposure |  | 763,049 |  |  |

There was no similar breakdown before the implementation of IFRS 9 on January 1, 2018 (see Note 2.1).

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The maximum credit exposure presented in 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 carrying amount (not including impairment losses), with the sole exception of derivatives 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 amount.

· The calculation of risk exposure for derivatives is based on the sum of two factors: the derivatives fair value and their potential risk (or "add-on").

- The first factor, fair value, reflects the difference between original commitments and fair values on the reporting date (mark-to-market).

- The second factor, potential risk (‘add-on’), is an estimate of the maximum increase to be expected on risk exposure over a derivative fair 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.

The breakdown by counterparty and product of loans and advances, net of impairment losses, as well as the gross carrying amount by type of product, classified in the different headings of the assets, as of December 31, 2018, 2017 and 2016 is shown below:

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December 2018 (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | Provisions | Gross carrying amount
By product |  |  |  |  |  |  |  |  |
On demand and short notice | - | 10 | - | 151 | 2,833 | 648 | 3,641 | (193) | 3,834
Credit card debt | - | 8 | 1 | 2 | 2,328 | 13,108 | 15,446 | (1,048) | 16,495
Trade receivables |  | 948 | - | 195 | 16,190 | 103 | 17,436 | (280) | 17,716
Finance leases | - | 226 | - | 3 | 8,014 | 406 | 8,650 | (427) | 9,077
Reverse repurchase loans | - | 293 | 477 | - | - | - | 770 | (1) | 772
Other term loans | 3,911 | 26,839 | 2,947 | 7,030 | 133,573 | 157,760 | 332,060 | (10,204) | 342,264
Advances that are not loans | 29 | 1,592 | 5,771 | 2,088 | 984 | 498 | 10,962 | (63) | 11,025
Loans and advances | 3,941 | 29,917 | 9,196 | 9,468 | 163,922 | 172,522 | 388,966 | (12,217) | 401,183
By secured loans |  |  |  |  |  |  |  |  |
of which: mortgage loans collateralized by immovable property |  | 1,056 | 15 | 219 | 26,784 | 111,809 | 139,883 | (4,122) | 144,005
of which: other collateralized loans | - | 7,179 | 285 | 1,389 | 31,393 | 6,835 | 47,081 | (774) | 47,855
By purpose of the loan |  |  |  |  |  |  |  |  |
of which: credit for consumption |  |  |  |  |  | 40,124 | 40,124 | (2,613) | 42,736
of which: lending for house purchase |  |  |  |  |  | 111,007 | 111,007 | (1,945) | 112,952
By subordination |  |  |  |  |  |  |  |  |
of which: project finance loans |  |  |  |  | 13,973 |  | 13,973 | (312) | 14,286

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December 2017 (Millions of euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total
On demand and short notice | - | 222 | - | 270 | 7,663 | 2,405 | 10,560
Credit card debt | - | 6 | - | 3 | 1,862 | 13,964 | 15,835
Trade receivables |  | 1,624 | - | 497 | 20,385 | 198 | 22,705
Finance leases | - | 205 | - | 36 | 8,040 | 361 | 8,642
Reverse repurchase loans | 305 | 1,290 | 13,793 | 10,912 | - | - | 26,300
Other term loans | 6,993 | 26,983 | 4,463 | 5,763 | 125,228 | 155,418 | 324,848
Advances that are not loans | 2 | 1,964 | 8,005 | 1,044 | 1,459 | 522 | 12,995
Loans and advances | 7,301 | 32,294 | 26,261 | 18,525 | 164,637 | 172,868 | 421,886
of which: mortgage loans (Loans collateralized by immovable property) |  | 998 | - | 308 | 37,353 | 116,938 | 155,597
of which: other collateralized loans |  | 7,167 | 13,501 | 12,907 | 24,100 | 9,092 | 66,767
of which: credit for consumption |  |  |  |  |  | 40,705 | 40,705
of which: lending for house purchase |  |  |  |  |  | 114,709 | 114,709
of which: project finance loans |  |  |  |  | 16,412 |  | 16,412

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December 2016 (Millions of euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total
On demand and short notice | - | 373 | - | 246 | 8,125 | 2,507 | 11,251
Credit card debt | - | 1 | - | 1 | 1,875 | 14,719 | 16,596
Trade receivables |  | 2,091 | - | 998 | 20,246 | 418 | 23,753
Finance leases | - | 261 | - | 57 | 8,647 | 477 | 9,442
Reverse repurchase loans | 81 | 544 | 15,597 | 6,746 | - | - | 22,968
Other term loans | 8,814 | 29,140 | 7,694 | 6,878 | 136,105 | 167,892 | 356,524
Advances that are not loans | - | 2,410 | 8,083 | 2,082 | 1,194 | 620 | 14,389
Loans and advances | 8,894 | 34,820 | 31,373 | 17,009 | 176,192 | 186,633 | 454,921
of which: mortgage loans [Loans collateralized by immovable property] |  | 4,722 | 112 | 690 | 44,406 | 132,398 | 182,328
of which: other collateralized loans |  | 3,700 | 15,191 | 8,164 | 21,863 | 6,061 | 54,979
of which: credit for consumption |  |  |  |  |  | 44,504 | 44,504
of which: lending for house purchase |  |  |  |  |  | 127,606 | 127,606
of which: project finance loans |  |  |  |  | 19,269 |  | 19,269

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### 7.3.3 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 transaction, 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 collateral are set out in the Corporate Policies (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 received must be correctly assigned 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.

· Derivatives 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 and collaterals, depending on counterparty solvency and the nature of the transaction.

· The summary of the compensation effect (via netting and collateral) for derivatives and securities operations is presented in Note 7.4.3.

· Other financial assets designated at fair value through profit or loss and financial assets at fair value through other comprehensive income: The guarantees or credit enhancements obtained directly from the issuer or counterparty are inherent to the structure of the instrument.

· At December 31, 2018, BBVA Group had no credit risk exposure of impaired financial assets at fair value through other comprehensive income at December 31, 2018 (see Note 7.3.2).

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· Financial assets at amortized cost:

- Loans and advances to credit institutions: These usually only have the counterparty’s personal guarantee.

- Loans and advances to customers: Most of these loans and advances are backed by personal guarantees extended by the customer. There may also be collateral to secure loans and advances to customers (such as mortgages, cash collaterals, 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.

The disclosure of impaired financial assets at amortized cost covered by collateral (see Note 7.3.2), by type of collateral, at December 31, 2018, is the following:

December 2018 (Millions of Euros)
| Maximum exposure to credit risk | Of which secured by collateral
| Residential properties | Commercial properties | Cash | Others | Financial
Impaired financial assets at amortized cost | 16,394 | 3,484 | 1,255 | 13 | 317 | 502
Total | 16,394 | 3,484 | 1,255 | 13 | 317 | 502

· Financial guarantees, other contingent risks and drawable by third parties: These have the counterparty’s personal guarantee.

The maximum credit risk exposure of impaired financial guarantees and other commitments at December 31, 2018 amounts to €987 million (see Note 7.3.2).

### 7.3.4 Credit quality of financial assets that are neither past due nor impaired

The BBVA Group has tools (“scoring” and “rating”) that enable it to rank the credit quality of its transactions and customers based on an assessment and its correspondence with the probability of default (“PD”) scales. To analyze the performance of PD, the Group has a series of tracking tools and historical databases that collect the pertinent internally generated information. These tools can be grouped together into scoring and rating models.

Scoring

Scoring is a decision-making model that contributes to both the arrangement and management of retail loans: consumer loans, mortgages, credit cards for individuals, etc. Scoring is the tool used to decide to originate a loan, what amount should be originated and what strategies can help establish the price, because it is an algorithm that sorts transactions by their credit quality. This algorithm enables the BBVA Group to assign a score to each transaction requested by a customer, on the basis of a series of objective characteristics that have statistically been shown to discriminate between the quality and risk of this type of transactions. The advantage of scoring lies in its simplicity and homogeneity: all that is needed is a series of objective data for each customer, and this data is analyzed automatically using an algorithm.

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There are three types of scoring, based on the information used and on its purpose:

· Reactive scoring: measures the risk of a transaction requested by an individual using variables relating to the requested transaction and to the customer’s socio-economic data available at the time of the request. The new transaction is approved or rejected depending on the score.

· Behavioral scoring: scores transactions for a given product in an outstanding risk portfolio of the entity, enabling the credit rating to be tracked and the customer’s needs to be anticipated. It uses transaction and customer variables available internally. Specifically, variables that refer to the behavior of both the product and the customer.

· Proactive scoring: gives a score at customer level using variables related to the individual’s general behavior with the entity, and to his/her payment behavior in all the contracted products. The purpose is to track the customer’s credit quality and it is used to pre-approved new transactions.

Rating

Rating tools, as opposed to scoring tools, do not assess transactions but focus on the rating of customers instead: companies, corporations, SMEs, general governments, etc. A rating tool is an instrument that, based on a detailed financial study, helps determine a customer’s ability to meet his/her financial obligations. The final rating is usually a combination of various factors: on one hand, quantitative factors, and on the other hand, qualitative factors. It is a middle road between an individual analysis and a statistical analysis.

The main difference between ratings and scorings is that the latter are used to assess retail products, while ratings use a wholesale banking customer approach. Moreover, scorings only include objective variables, while ratings add qualitative information. And although both are based on statistical studies, adding a business view, rating tools give more weight to the business criterion compared to scoring tools.

For portfolios where the number of defaults is low (sovereign risk, corporates, financial entities, etc.) the internal information is supplemented by “benchmarking” of the external rating agencies (Moody’s, Standard & Poor’s and Fitch). To this end, each year the PDs compiled by the rating agencies at each level of risk rating are compared, and the measurements compiled by the various agencies are mapped against those of the BBVA master rating scale.

Once the probability of default of a transaction or customer has been calculated, a "business cycle adjustment" is carried out. This is a means of establishing a measure of risk that goes beyond the time of its calculation. The aim is to capture representative information of the behavior of portfolios over a complete economic cycle. This probability is linked to the Master Rating Scale prepared by the BBVA Group to enable uniform classification of the Group’s various asset risk portfolios.

The table below shows the abridged scale used to classify the BBVA Group’s outstanding risk as of December 31, 2018:

External rating | Internal rating | Probability of default (basis points)
Standard&Poor's List | Reduced List (22 groups) | Average | Minimum from >= | Maximum
AAA | AAA | 1 | - | 2
AA+ | AA+ | 2 | 2 | 3
AA | AA | 3 | 3 | 4
AA- | AA- | 4 | 4 | 5
A+ | A+ | 5 | 5 | 6
A | A | 8 | 6 | 9
A- | A- | 10 | 9 | 11
BBB+ | BBB+ | 14 | 11 | 17
BBB | BBB | 20 | 17 | 24
BBB- | BBB- | 31 | 24 | 39
BB+ | BB+ | 51 | 39 | 67
BB | BB | 88 | 67 | 116
BB- | BB- | 150 | 116 | 194
B+ | B+ | 255 | 194 | 335
B | B | 441 | 335 | 581
B- | B- | 785 | 581 | 1,061
CCC+ | CCC+ | 1,191 | 1,061 | 1,336
CCC | CCC | 1,500 | 1,336 | 1,684
CCC- | CCC- | 1,890 | 1,684 | 2,121
CC+ | CC+ | 2,381 | 2,121 | 2,673
CC | CC | 3,000 | 2,673 | 3,367
CC- | CC- | 3,780 | 3,367 | 4,243

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These different levels and their probability of default were calculated by using as a reference the rating scales and default rates provided by the external agencies Standard & Poor’s and Moody’s. These calculations establish the levels of probability of default for the BBVA Group’s Master Rating Scale. Although this scale is common to the entire Group, the calibrations (mapping scores to PD sections/Master Rating Scale levels) are carried out at tool level for each country in which the Group has tools available.

The table below outlines the distribution by probability of default within 12 months and stages of the gross carrying amount of loans and advances to customers in percentage of BBVA Group as of December 31, 2018 is shown below:

| December 2018
| Subject to 12 month ECL (Stage 1) | Subject to lifetime ECL (Stage 2)
Probability of default (basis points) | % | %
0 to 2 | 9.6 | 0.0
2 to 5 | 10.8 | 0.1
5 to 11 | 6.3 | 0.0
11 to 39 | 20.9 | 0.4
39 to 194 | 30.1 | 1.8
194 to 1,061 | 12.2 | 3.6
1,061 to 2,121 | 1.6 | 1.2
> 2,021 | 0.2 | 1.2
Total | 91.7 | 8.3

There was no similar breakdown before the implementation of IFRS 9 on January 1, 2018 (see Note 2.1).

### 7.3.5 Past due but not impaired and impaired secured loans risks

The tables below provides details by counterpart and by product of past due risks but not considered to be impaired, as of December 31, 2018, 2017 and 2016, listed by their first past-due date; as well as the breakdown of the debt securities and loans and advances individually and collectively estimated (see Note 2.2.1):

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December 2018 (Millions of euros)
| Assets without significant increase in credit risk since initial recognition (Stage 1) | Assets with significant increase in credit risk since initial recognition but not credit-impaired (Stage 2) | Credit-impaired assets (Stage 3)
| <= 30 days | > 30 days <= 90 days | > 90 days | <= 30 days | > 30 days <= 90 days | > 90 days | <= 30 days | > 30 days <= 90 days | > 90 days
Debt securities | - | - | - | - | - | - | - | - | 5
Loans and advances | 4,191 | 454 | - | 4,261 | 3,228 | - | 407 | 900 | 2,769
Central banks | - | - | - | - | - | - | - | - | -
General governments | 95 | 7 | - | 5 | 1 | - | 5 | 5 | 26
Credit institutions | 3 | - | - | - | - | - | - | - | -
Other financial corporations | 117 | 224 | - | 2 | - | - | - | - | 5
Non-financial corporations | 1,140 | 158 | - | 1,282 | 1,180 | - | 149 | 276 | 1,333
Households | 2,835 | 64 | - | 2,971 | 2,047 | - | 254 | 618 | 1,404
TOTAL | 4,191 | 454 | - | 4,261 | 3,228 | - | 407 | 900 | 2,774
Loans and advances by product, by collateral and by subordination |  |  |  |  |  |  |  |  |
On demand (call) and short notice (current account) | 127 | - | - | 25 | 47 | - | 3 | 4 | 52
Credit card debt | 182 | 10 | - | 598 | 102 | - | 24 | 25 | 120
Trade receivables | 46 | 12 | - | 20 | 106 | - | 2 | 11 | 50
Finance leases | 307 | 16 | - | 43 | 102 | - | 10 | 20 | 110
Reverse repurchase loans | - | - | - | - | - | - | - | - | -
Other term loans | 3,421 | 325 | - | 3,575 | 2,869 | - | 369 | 840 | 2,433
Advances that are not loans | 108 | 89 | - | - | 1 | - | - | - | 4
of which: mortgage loans collateralized by immovable property | 1,681 | 38 | - | 1,598 | 1,745 | - | 251 | 712 | 1,365
of which: other collateralized loans | 255 | 14 | - | 742 | 99 | - | 22 | 21 | 103
of which: credit for consumption | 910 | 27 | - | 1,278 | 424 | - | 49 | 49 | 281
of which: lending for house purchase | 1,365 | 24 | - | 1,394 | 1,404 | - | 170 | 507 | 839
of which: project finance loans | 1 | - | - | - | 382 | - | - | - | 71

F-98

December 2017 (Millions of euros) (*)
| Past due but not impaired | Impaired assets | Carrying amount of the impaired assets | Specific allowances for financial assets, individually and collectively estimated | Collective allowances for incurred but not reported losses | Accumulated write-offs
| ≤ 30 days | > 30 days ≤ 60 days | > 60 days ≤ 90 days
Debt securities | - | - | - | 66 | 38 | (28) | (21) | -
Loans and advances | 3,432 | 759 | 503 | 19,401 | 10,726 | (8,675) | (4,109) | (29,938)
Central banks | - | - | - | - | - | - | - | -
General governments | 75 | 3 | 13 | 171 | 129 | (42) | (69) | (27)
Credit institutions | - | - | - | 11 | 5 | (6) | (30) | (5)
Other financial corporations | 2 | - | - | 12 | 6 | (7) | (19) | (5)
Non-financial corporations | 843 | 153 | 170 | 10,791 | 5,192 | (5,599) | (1,939) | (18,988)
Households | 2,512 | 603 | 319 | 8,417 | 5,395 | (3,022) | (2,052) | (10,913)
TOTAL | 3,432 | 759 | 503 | 19,467 | 10,764 | (8,703) | (4,130) | (29,938)
Loans and advances by product, by collateral and by subordination |  |  |  |  |  |  |  |
On demand (call) and short notice (current account) | 77 | 12 | 11 | 389 | 151 | (238) |  |
Credit card debt | 397 | 66 | 118 | 629 | 190 | (439) |  |
Trade receivables | 115 | 8 | 9 | 515 | 179 | (336) |  |
Finance leases | 138 | 66 | 47 | 431 | 155 | (276) |  |
Reverse repurchase loans | - | - | - | - | - | - |  |
Other term loans | 2,705 | 606 | 317 | 17,417 | 10,047 | (7,370) |  |
Advances that are not loans | 1 | - | 1 | 20 | 3 | (16) |  |
of which: mortgage loans (Loans collateralized by immovable property) | 1,345 | 360 | 164 | 11,388 | 7,630 | (3,757) |  |
of which: other collateralized loans | 592 | 137 | 43 | 803 | 493 | (310) |  |
of which: credit for consumption | 1,260 | 248 | 207 | 1,551 | 457 | (1,093) |  |
of which: lending for house purchase | 1,034 | 307 | 107 | 5,730 | 4,444 | (1,286) |  |
of which: project finance loans | 13 | - | 25 | 1,165 | 895 | (271) |  |

(*) Figures originally reported in the year 2017 in accordance to the applicable regulation, without restatements.

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December 2016 (Millions of euros) (*)
| Past due but not impaired | Impaired assets | Carrying amount of the impaired assets | Specific allowances for financial assets, individually and collectively estimated | Collective allowances for incurred but not reported losses | Accumulated write-offs
| <= 30 days | > 30 days <= 60 days | > 60 days <= 90 days
Debt securities | - | - | - | 272 | 128 | (144) | (46) | (1)
Loans and advances | 3,384 | 696 | 735 | 22,925 | 12,133 | (10,793) | (5,224) | (29,346)
Central banks | - | - | - | - | - | - | - | -
General governments | 66 | - | 2 | 295 | 256 | (39) | (13) | (13)
Credit institutions | 3 | - | 82 | 10 | 3 | (7) | (36) | (5)
Other financial corporations | 4 | 7 | 21 | 34 | 8 | (25) | (57) | (6)
Non-financial corporations | 968 | 209 | 204 | 13,786 | 6,383 | (7,402) | (2,789) | (18,020)
Households | 2,343 | 479 | 426 | 8,801 | 5,483 | (3,319) | (2,329) | (11,303)
TOTAL | 3,384 | 696 | 735 | 23,197 | 12,261 | (10,937) | (5,270) | (29,347)
Loans and advances by product, by collateral and by subordination |  |  |  |  |  |  |  |
On demand (call) and short notice (current account) | 79 | 15 | 29 | 562 | 249 | (313) |  |
Credit card debt | 377 | 88 | 124 | 643 | 114 | (529) |  |
Trade receivables | 51 | 15 | 13 | 424 | 87 | (337) |  |
Finance leases | 188 | 107 | 59 | 516 | 252 | (264) |  |
Reverse repurchase loans | - | - | 82 | 1 | - | (1) |  |
Other term loans | 2,685 | 469 | 407 | 20,765 | 11,429 | (9,336) |  |
Advances that are not loans | 5 | - | 21 | 14 | 2 | (12) |  |
of which: mortgage loans (Loans collateralized by immovable property) | 1,202 | 265 | 254 | 16,526 | 9,008 | (5,850) |  |
of which: other collateralized loans | 593 | 124 | 47 | 1,129 | 656 | (275) |  |
of which: credit for consumption | 1,186 | 227 | 269 | 1,622 | 455 | (1,168) |  |
of which: lending for house purchase | 883 | 194 | 105 | 6,094 | 4,546 | (1,548) |  |
of which: project finance loans | 138 | - | - | 253 | 105 | (147) |  |

(*) Figures originally reported in the year 2016 in accordance to the applicable regulation, without restatements.

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The breakdown of loans and advances, within financial assets at amortized cost, impaired and accumulated impairment by sectors as of December 31, 2018, 2017 and 2016 is as follows:

December 2018 (Millions of euros) |  |  |
| Non-performing loans and advances | Accumulated impairment | Non-performing loans and advances as a % of the total
General governments | 128 | (84) | 0.4%
Credit institutions | 10 | (12) | 0.1%
Other financial corporations | 11 | (22) | 0.1%
Non-financial corporations | 8,372 | (6,260) | 4.9%
Agriculture, forestry and fishing | 122 | (107) | 3.3%
Mining and quarrying | 96 | (70) | 1.9%
Manufacturing | 1,695 | (1,134) | 4.6%
Electricity, gas, steam and air conditioning supply | 585 | (446) | 4.2%
Water supply | 19 | (15) | 1.8%
Construction | 1,488 | (1,007) | 12.5%
Wholesale and retail trade | 1,624 | (1,259) | 6.3%
Transport and storage | 459 | (374) | 4.7%
Accommodation and food service activities | 315 | (204) | 4.0%
Information and communication | 113 | (72) | 2.1%
Financial and insurance activities | 147 | (128) | 2.1%
Real estate activities | 834 | (624) | 4.8%
Professional, scientific and technical activities | 204 | (171) | 4.0%
Administrative and support service activities | 128 | (125) | 4.0%
Public administration and defense, compulsory social security | 5 | (7) | 1.6%
Education | 31 | (31) | 3.4%
Human health services and social work activities | 63 | (63) | 1.4%
Arts, entertainment and recreation | 59 | (41) | 4.5%
Other services | 386 | (382) | 3.9%
Households | 7,838 | (5,833) | 4.4%
LOANS AND ADVANCES | 16,359 | (12,211) | 4.1%

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December 2017 (Millions of euros)
| Non-performing loans and advances | Accumulated impairment or Accumulated changes in fair value due to credit risk | Non-performing loans and advances as a % of the total
General governments | 171 | (111) | 0.5%
Credit institutions | 11 | (36) | 0.3%
Other financial corporations | 12 | (26) | 0.1%
Non-financial corporations | 10,791 | (7,538) | 6.3%
Agriculture, forestry and fishing | 166 | (123) | 4.3%
Mining and quarrying | 177 | (123) | 3.7%
Manufacturing | 1,239 | (955) | 3.6%
Electricity, gas, steam and air conditioning supply | 213 | (289) | 1.8%
Water supply | 29 | (11) | 4.5%
Construction | 2,993 | (1,708) | 20.1%
Wholesale and retail trade | 1,706 | (1,230) | 5.9%
Transport and storage | 441 | (353) | 4.2%
Accommodation and food service activities | 362 | (222) | 4.3%
Information and communication | 984 | (256) | 17.0%
Real estate activities | 1,171 | (1,100) | 7.9%
Professional, scientific and technical activities | 252 | (183) | 3.8%
Administrative and support service activities | 188 | (130) | 6.3%
Public administration and defense, compulsory social security | 4 | (6) | 1.9%
Education | 31 | (25) | 3.4%
Human health services and social work activities | 75 | (68) | 1.7%
Arts, entertainment and recreation | 69 | (38) | 4.6%
Other services | 690 | (716) | 4.3%
Households | 8,417 | (5,073) | 4.7%
LOANS AND ADVANCES | 19,401 | (12,784) | 4.5%

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December 2016 (Millions of euros)
| Non-performing | Accumulated impairment or Accumulated changes in fair value due to credit risk | Non-performing loans and advances as a % of the total
General governments | 295 | (52) | 0.8%
Credit institutions | 10 | (42) | 0.0%
Other financial corporations | 34 | (82) | 0.2%
Non-financial corporations | 13,786 | (10,192) | 7.4%
Agriculture, forestry and fishing | 221 | (188) | 5.1%
Mining and quarrying | 126 | (83) | 3.3%
Manufacturing | 1,569 | (1,201) | 4.5%
Electricity, gas, steam and air conditioning supply | 569 | (402) | 3.2%
Water supply | 29 | (10) | 3.5%
Construction | 5,358 | (3,162) | 26.3%
Wholesale and retail trade | 1,857 | (1,418) | 6.2%
Transport and storage | 442 | (501) | 4.5%
Accommodation and food service activities | 499 | (273) | 5.9%
Information and communication | 112 | (110) | 2.2%
Real estate activities | 1,441 | (1,074) | 8.7%
Professional, scientific and technical activities | 442 | (380) | 6.0%
Administrative and support service activities | 182 | (107) | 7.3%
Public administration and defense, compulsory social security | 18 | (25) | 3.0%
Education | 58 | (31) | 5.4%
Human health services and social work activities | 89 | (88) | 1.8%
Arts, entertainment and recreation | 84 | (51) | 5.1%
Other services | 691 | (1,088) | 4.2%
Households | 8,801 | (5,648) | 4.6%
LOANS AND ADVANCES | 22,925 | (16,016) | 5.0%

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The changes during the years 2018, 2017 and 2016 of impaired financial assets and contingent risks are as follow:

Changes in Impaired Financial Assets and Contingent Risks (Millions of euros)
| 2018 | 2017 | 2016
Balance at the beginning | 20,590 | 23,877 | 26,103
Additions | 9,792 | 10,856 | 11,133
Decreases (*) | (6,909) | (7,771) | (7,633)
Net additions | 2,883 | 3,085 | 3,500
Amounts written-off | (5,076) | (5,758) | (5,592)
Exchange differences and other | (1,264) | (615) | (134)
Balance at the end | 17,134 | 20,590 | 23,877

(*) Reflects the total amount of impaired loans derecognized from the consolidated balance sheet throughout the year as a result of mortgage foreclosures and real estate assets received in lieu of payment as well as monetary recoveries (see Notes 19 and 20 to the Consolidated Financial Statement for additional information).

The changes during the years 2018, 2017 and 2016 in financial assets derecognized from the accompanying consolidated balance sheet as their recovery is considered unlikely (hereinafter "write-offs"), is shown below:

Changes in Impaired Financial Assets Written-Off from the Balance Sheet (Millions of Euros)
| Notes | 2018 | 2017 | 2016
Balance at the beginning |  | 30,139 | 29,347 | 26,143
Acquisition of subsidiaries in the year |  | - | - | -
Increase: |  | 6,164 | 5,986 | 5,699
Decrease: |  | (4,210) | (4,442) | (2,384)
Re-financing or restructuring |  | (10) | (9) | (32)
Cash recovery | 47 | (589) | (558) | (541)
Foreclosed assets |  | (625) | (149) | (210)
Sales of written-off |  | (1,805) | (2,284) | (45)
Debt forgiveness |  | (889) | (1,121) | (864)
Time-barred debt and other causes |  | (292) | (321) | (692)
Net exchange differences |  | 250 | (752) | (111)
Balance at the end |  | 32,343 | 30,139 | 29,347

As indicated in Note 2.2.1, although they have been derecognized from the consolidated balance sheet, the BBVA Group continues to attempt to collect on these written-off financial assets, until the rights to receive them are fully extinguished, either because it is time-barred financial asset, the financial asset is condoned, or other reasons.

### 7.3.6 Impairment losses

Below are the changes in the years ended December 31, 2018, 2017 and 2016, in the provisions recognized on the accompanying consolidated balance sheets to cover estimated impairment losses in loans and advances and debt securities measured at amortized cost and financial assets at fair value through other comprehensive income as well as the loan commitment and financial guarantees:

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Financial assets at amortized cost. December 2018 (Millions of Euros)
| Not credit-impaired | Credit-impaired | Total
| Stage 1 | Stage 2 | Credit-impaired (Stage 3) | Purchased/originated credit-impaired (Stage 3)
| Loss allowances | Loss allowances (collectively assessed) | Loss allowances (individually assessed) | Loss allowances | Loss allowances | Loss allowances
Opening balance (under IFRS 9) | (2,237) | (1,827) | (525) | (9,371) | - | (13,960)
Transfers of financial assets: | - | - | - | - | - | -
Transfers from Stage 1 to Stage 2 (not credit-impaired) | 208 | (930) | (218) | - | - | (940)
Transfers from Stage 2 (not credit - impaired) to Stage 1 | (125) | 619 | 50 | - | - | 544
Transfers to Stage 3 | 55 | 282 | 564 | (2,127) | - | (1,226)
Transfers from Stage 3 to Stage 1 or 2 | (7) | (126) | (68) | 333 | - | 132
Changes without transfers between Stages | 358 | (53) | (260) | (3,775) | - | (3,730)
New financial assets originated | (1,072) | (375) | (244) | - | - | (1,692)
Purchased | - | - | - | - | - | -
Disposals | 2 | 3 | - | 110 | - | 115
Repayments | 641 | 432 | 118 | 1,432 | - | 2,623
Write-offs | 13 | 14 | 2 | 4,433 | - | 4,461
Changes in model/ methodology | - | - | - | - | - | -
Foreign exchange | (84) | 72 | (93) | 343 | - | 239
Modifications that result in derecognition | 5 | 10 | 25 | 98 | - | 138
Modifications that do not result in derecognition | 3 | (8) | 1 | (362) | - | (366)
Other | 135 | 133 | 20 | 1,111 | - | 1,399
Closing balance | (2,106) | (1,753) | (628) | (7,777) | - | (12,264)

F-105

Financial assets at fair value through other comprehensive income. December 2018 (Millions of Euros)
| Not credit-impaired | Credit-impaired | Total
| Stage 1 | Stage 2 | Credit-impaired (Stage 3) | Purchased/originated credit-impaired (Stage 3)
| Loss allowances | Loss allowances (collectively assessed) | Loss allowances (individually assessed) | Loss allowances | Loss allowances | Loss allowances
Opening balance (under IFRS 9) | (20) | (1) | - | (14) | - | (35)
Transfers of financial assets: | - | - | - | - | - | -
Transfers from Stage 1 to Stage 2 (not credit-impaired) | - | - | - | - | - | -
Transfers from Stage 2 (not credit - impaired) to Stage 1 | - | - | - | - | - | -
Transfers to Stage 3 | - | - | - | - | - | -
Transfers from Stage 3 to Stage 1 or 2 | - | - | - | - | - | -
Changes without transfers between Stages | (7) | - | - | 16 | - | 9
New financial assets originated | (3) | - | - | - | - | (3)
Purchased | - | - | - | - | - | -
Disposals | - | - | - | - | - | -
Repayments | 5 | - | - | - | - | 5
Write-offs | - | - | - | - | - | -
Changes in model/ methodology | - | - | - | - | - | -
Foreign exchange | 2 | - | - | - | - | 2
Modifications that result in derecognition | - | - | - | - | - | -
Modifications that do not result in derecognition | - | - | - | (11) | - | (11)
Other | (5) | 1 | - | 8 | - | 4
Closing balance | (28) | - | - | - | - | (28)

F-106

Loan commitments and financial guarantees. December 2018 (Millions of Euros)
| Not credit-impaired | Credit-impaired | Total
| Stage 1 | Stage 2 | Credit-impaired (Stage 3) | Purchased/originated credit-impaired (Stage 3)
| Loss allowances | Loss allowances (collectively assessed) | Loss allowances (individually assessed) | Loss allowances | Loss allowances | Loss allowances
Opening balance (under IFRS 9) | (200) | (135) | (84) | (285) | - | (704)
Transfers of financial assets: | - | - | - | - | - | -
Transfers from Stage 1 to Stage 2 (not credit-impaired) | 14 | (84) | (11) | - | - | (81)
Transfers from Stage 2 (not credit - impaired) to Stage 1 | (8) | 65 | 1 | - | - | 58
Transfers to Stage 3 | 1 | 4 | 16 | (48) | - | (27)
Transfers from Stage 3 to Stage 1 or 2 | (3) | (3) | - | 20 | - | 14
Changes without transfers between Stages | 14 | 12 | 6 | 35 | - | 67
New financial assets originated | (102) | (32) | (20) | - | - | (154)
Purchased | - | - | - | - | - | -
Disposals | - | - | - | 1 | - | 1
Repayments | 47 | 58 | 24 | 73 | - | 202
Write-offs | - | - | - | - | - | -
Changes in model/ methodology | - | - | - | - | - | -
Foreign exchange | 11 | 1 | (2) | 6 | - | 16
Modifications that result in derecognition | - | - | - | - | - | -
Modifications that do not result in derecognition | - | - | - | (32) | - | (32)
Other | (6) | (13) | 10 | 13 | - | 4
Closing balance | (232) | (127) | (60) | (217) | - | (636)

F-107

December 2017 (Millions of euros) (*)
| Opening balance | Increases due to amounts set aside for estimated loan losses during the period | Decreases due to amounts reversed for estimated loan losses during the period | Decreases due to amounts taken against allowances | Transfers between allowances | Other adjustments | Closing balance | Recoveries recorded directly to the statement of profit or loss
Equity instruments |  |  |  |  |  |  |  |
Specific allowances for financial assets, individually and collectively estimated | (10,937) | (7,484) | 2,878 | 4,503 | 1,810 | 526 | (8,703) | 558
Debt securities | (144) | (26) | 6 | - | 123 | 13 | (28) | -
Central banks | - | - | - | - | - | - | - | -
General governments | - | - | - | - | - | - | - | -
Credit institutions | (15) | (5) | 4 | - | 16 | - | - | -
Other financial corporations | (26) | (4) | 2 | - | - | 13 | (16) | -
Non-financial corporations | (103) | (17) | - | - | 107 | - | (12) | -
Loans and advances | (10,793) | (7,458) | 2,872 | 4,503 | 1,687 | 513 | (8,675) | 558
Central banks | - | - | - | - | - | - | - | -
General governments | (39) | (70) | 37 | 14 | 1 | 15 | (42) | 1
Credit institutions | (7) | (2) | 2 | - | - | 1 | (6) | -
Other financial corporations | (25) | (287) | 3 | 38 | 227 | 38 | (7) | -
Non-financial corporations | (7,402) | (3,627) | 1,993 | 3,029 | (228) | 636 | (5,599) | 345
Households | (3,319) | (3,472) | 837 | 1,422 | 1,687 | (177) | (3,022) | 212
Collective allowances for incurred but not reported losses on financial assets | (5,270) | (1,783) | 2,159 | 1,537 | (1,328) | 557 | (4,130) | -
Debt securities | (46) | (8) | 30 | 1 | - | 3 | (21) | -
Loans and advances | (5,224) | (1,776) | 2,128 | 1,536 | (1,328) | 554 | (4,109) | -
Total | (16,206) | (9,267) | 5,037 | 6,038 | 482 | 1,083 | (12,833) | 558

(*) Figures originally reported in the year 2017 in accordance to the applicable regulation, without restatements.

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December 2016 (Millions of euros)
| Opening balance | Increases due to amounts set aside for estimated loan losses during the period | Decreases due to amounts reversed for estimated loan losses during the period | Decreases due to amounts taken against allowances | Transfers between allowances | Other adjustments | Closing balance | Recoveries recorded directly to the statement of profit or loss
Equity instruments |  |  |  |  |  |  |  |
Specific allowances for financial assets, individually and collectively estimated | (12,866) | (6,912) | 2,708 | 5,673 | (123) | 583 | (10,937) | 540
Debt securities | (35) | (167) | 6 | 64 | (10) | (2) | (144) | -
Central banks | - | - | - | - | - | - | - | -
General governments | - | - | - | - | - | - | - | -
Credit institutions | (20) | - | - | 5 | - | - | (15) | -
Other financial corporations | (15) | (29) | 3 | 26 | (10) | (1) | (26) | -
Non-financial corporations | - | (138) | 3 | 33 | - | (1) | (103) | -
Loans and advances | (12,831) | (6,745) | 2,702 | 5,610 | (113) | 585 | (10,793) | 540
Central banks | - | - | - | - | - | - | - | -
General governments | (37) | (2) | 20 | 6 | (27) | 2 | (39) | 1
Credit institutions | (17) | (2) | 3 | - | 10 | (3) | (7) | -
Other financial corporations | (38) | (34) | 9 | 22 | 10 | 6 | (25) | -
Non-financial corporations | (9,225) | (3,705) | 2,158 | 3,257 | (278) | 391 | (7,402) | 335
Households | (3,514) | (3,002) | 511 | 2,325 | 172 | 189 | (3,319) | 205
Collective allowances for incurred but not reported losses on financial assets | (6,024) | (1,558) | 1,463 | 88 | 775 | (15) | (5,270) | 1
Debt securities | (113) | (11) | 15 | 1 | 64 | - | (46) | -
Loans and advances | (5,911) | (1,546) | 1,449 | 87 | 711 | (15) | (5,224) | -
Total | (18,890) | (8,470) | 4,172 | 5,762 | 652 | 568 | (16,206) | 541

(*) Figures originally reported in the year 2016 in accordance to the applicable regulation, without restatements.

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### 7.3.7 Refinancing and restructuring operations

Group policies and principles with respect to refinancing and restructuring operations

Refinancing and restructuring transactions (see definition in the Glossary) are carried out with customers who have requested such an operation in order to meet their current loan payments if they are expected, or may be expected, to experience financial difficulty in making the payments in the future.

The basic aim of a refinancing and restructuring operation is to provide the customer with a situation of financial viability over time by adapting repayment of the loan incurred with the Group to the customer’s new situation of fund generation. The use of refinancing and restructuring for other purposes, such as to delay loss recognition, is contrary to BBVA Group policies.

The BBVA Group’s refinancing and restructuring policies are based on the following general principles:

· Refinancing and restructuring is authorized according to the capacity of customers to pay the new installments. This is done by first identifying the origin of the payment difficulties and then carrying out an analysis of the customers’ viability, including an updated analysis of their economic and financial situation and capacity to pay and generate funds. If the customer is a company, the analysis also covers the situation of the industry in which it operates.

· With the aim of increasing the solvency of the operation, new guarantees and/or guarantors of demonstrable solvency are obtained where possible. An essential part of this process is an analysis of the effectiveness of both the new and original guarantees.

· This analysis is carried out from the overall customer or group perspective.

· Refinancing and restructuring operations do not in general increase the amount of the customer’s loan, except for the expenses inherent to the operation itself.

· The capacity to refinance and restructure loan is not delegated to the branches, but decided on by the risk units.

· The decisions made are reviewed from time to time with the aim of evaluating full compliance with refinancing and restructuring policies.

These general principles are adapted in each case according to the conditions and circumstances of each geographical area in which the Group operates, and to the different types of customers involved.

In the case of retail customers (private individuals), the main aim of the BBVA Group’s policy on refinancing and restructuring loan is to avoid default arising from a customer’s temporary liquidity problems by implementing structural solutions that do not increase the balance of customer’s loan. The solution required is adapted to each case and the loan repayment is made easier, in accordance with the following principles:

· Analysis of the viability of operations based on the customer’s willingness and ability to pay, which may be reduced, but should nevertheless be present. The customer must therefore repay at least the interest on the operation in all cases. No arrangements may be concluded that involve a grace period for both principal and interest.

· Refinancing and restructuring of operations is only allowed on those loans in which the BBVA Group originally entered into.

· Customers subject to refinancing and restructuring operations are excluded from marketing campaigns of any kind.

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In the case of non-retail customers (mainly companies, enterprises and corporates), refinancing/restructuring is authorized according to an economic and financial viability plan based on:

· Forecasted future income, margins and cash flows to allow entities to implement cost adjustment measures (industrial restructuring) and a business development plan that can help reduce the level of leverage to sustainable levels (capacity to access the financial markets).

· Where appropriate, the existence of a divestment plan for assets and/or operating segments that can generate cash to assist the deleveraging process.

· The capacity of shareholders to contribute capital and/or guarantees that can support the viability of the plan.

In accordance with the Group’s policy, the conclusion of a loan refinancing and restructuring operation does not meet the loan is reclassified from "impaired" or "significant increase in credit risk" to outstanding risk. The reclassification to "significant increase in credit risk" or normal risk categories must be based on the analysis mentioned earlier of the viability, upon completion of the probationary periods described below.

The Group maintains the policy of including risks related to refinanced and restructured loans as either:

· "Impaired assets", as although the customer is up to date with payments, they are classified as unlikely to pay when there are significant doubts that the terms of their refinancing may not be met; or

· "Significant increase in credit risk" until the conditions established for their consideration as normal risk are met).

The conditions established for assets classified as “Significant increase in credit risk” to be reclassified out of this category are as follows:

· The customer must have paid past-due amounts (principal and interest) since the date of the renegotiation or restructuring of the loan or other objective criteria, demonstrating the borrower´s ability to pay, have been verified; none of its exposures is more than 30 days past-due; and

· At least two years must have elapsed since completion of the renegotiation or restructuring of the loan and regular payments must have been made during at least half of this probation period;

· It is unlikely that the customer will have financial difficulties and, therefore, it is expected that the customer will be able to meet its loan payment obligations (principal and interest) in a timely manner.

The BBVA Group’s refinancing and restructuring policy provides for the possibility of two modifications in a 24 month period for loans that are not in compliance with the payment schedule.

The internal models used to determine allowances for loan losses consider the restructuring and renegotiation of a loan, as well as re-defaults on such a loan, by assigning a lower internal rating to restructured and renegotiated loans than the average internal rating assigned to non-restructured/renegotiated loans. This downgrade results in an increase in the probability of default (PD) assigned to restructured/renegotiated loans (with the resulting PD being higher than the average PD of the non- renegotiated loans in the same portfolios).

For quantitative information on refinancing and restructuring operations see Appendix VIII.

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7.4 Market risk

### 7.4.1 Market risk trading portfolios

Market risk originates as a result of movements in the market variables that impact the valuation of traded financial products and assets. The main risks generated can be classified as follows:

· Interest-rate risk: This arises as a result of exposure to movements in the different interest-rate curves involved in trading. Although the typical products that generate sensitivity to the movements in interest rates are money-market products (deposits, interest-rate futures, call money swaps, etc.) and traditional interest-rate derivatives (swaps and interest-rate options such as caps, floors, swaptions, etc.), practically all the financial products are exposed to interest-rate movements due to the effect that such movements have on the valuation of the financial discount.

· Equity risk: This arises as a result of movements in share prices. This risk is generated in spot positions in shares or any derivative products whose underlying asset is a share or an equity index. Dividend risk is a sub-risk of equity risk, arising as an input for any equity option. Its variation may affect the valuation of positions and it is therefore a factor that generates risk on the books.

· Exchange-rate risk: This is caused by movements in the exchange rates of the different currencies in which a position is held. As in the case of equity risk, this risk is generated in spot currency positions, and in any derivative product whose underlying asset is an exchange rate. In addition, the quanto effect (operations where the underlying asset and the instrument itself are denominated in different currencies) means that in certain transactions in which the underlying asset is not a currency, an exchange-rate risk is generated that has to be measured and monitored.

· Credit-spread risk: Credit spread is an indicator of an issuer's credit quality. Spread risk occurs due to variations in the levels of spread of both corporate and government issues, and affects positions in bonds and credit derivatives.

· Volatility risk: This occurs as a result of changes in the levels of implied price volatility of the different market instruments on which derivatives are traded. This risk, unlike the others, is exclusively a component of trading in derivatives and is defined as a first-order convexity risk that is generated in all possible underlying assets in which there are products with options that require a volatility input for their valuation.

The metrics developed to control and monitor market risk in BBVA Group are aligned with market practices and are implemented consistently across all the local market risk units.

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 standard metric used to measure market risk is Value at Risk (“VaR”), which indicates the maximum loss that may occur in the portfolios at a given confidence level (99%) and time horizon (one day). This statistic value is widely used in the market and has the advantage of summing up in a single metric the risks inherent to trading activity, taking into account how they are related and providing a prediction of the loss that the trading book could sustain as a result of fluctuations in equity prices, interest rates, foreign exchange rates and credit spreads. The market risk analysis considers risks, such as credit spread, basis risk as well as volatility and correlation risk.

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Most of the headings on the Group's balance sheet subject to market risk are positions in the Group´s trading portfolio whose metric for measuring their market risk is VaR. This table shows the accounting lines of the consolidated balance sheet as of December 31, 2018, 2017 and 2016 in which there is a market risk in the Group´s trading and non-trading portfolios:

Headings of the balance sheet under market risk (Millions of euros)
| December 2018 | December 2017 | December 2016
| Main market risk metrics - VaR | Main market risk metrics - Others (*) | Main market risk metrics - VaR | Main market risk metrics - Others (*) | Main market risk metrics - VaR | Main market risk metrics - Others (*)
Assets subject to market risk |  |  |  |  |  |
Financial assets held for trading | 57,486 | 28,459 | 59,008 | 441 | 64,623 | 1,480
Financial assets at fair value through other comprehensive income | 5,652 | 19,125 | 5,661 | 24,083 | 7,119 | 28,771
Of which: Equity instruments | - | 2,046 | - | 2,404 | - | 3,559
Derivatives - Hedging accounting | 688 | 1,061 | 829 | 1,397 | 1,041 | 1,415
Liabilities subject to market risk |  |  |  |  |  |
Financial liabilities held for trading | 38,844 | 40,026 | 42,468 | 2,526 | 47,491 | 2,223
Derivatives - Hedging accounting | 550 | 910 | 1,157 | 638 | 1,305 | 689

(*) Includes mainly assets and liabilities managed by ALCO.

Although the prior table shows details of the financial positions subject to market risk, it should be noted that the data are for information purposes only and do not reflect how the risk is managed in trading activity, where it is not classified into assets and liabilities.

With respect to the risk measurement models used in BBVA Group, the Bank of Spain has authorized the use of the internal model to determine bank capital requirements deriving from risk positions on the BBVA S.A. and BBVA Bancomer trading book, which jointly account for around 76%, 70% and 66% of the Group’s trading-book market risk as of December 31, 2018, 2017 and 2016. For the rest of the geographical areas (mainly South America, Garanti and BBVA Compass), bank capital for the risk positions in the trading book is calculated using the standard model.

The current management structure includes the monitoring of market-risk limits, consisting of a scheme of limits based on VaR, economic capital (based on VaR measurements) and VaR sub-limits, as well as stop-loss limits for each of the Group’s business units.

The model used estimates VaR in accordance with the "historical simulation" methodology, which involves estimating losses and gains that would have taken place in the current portfolio if the changes in market conditions that took place over a specific period of time in the past were repeated. Based on this information, it infers the maximum expected loss of the current portfolio within a given confidence level. This model has the advantage of reflecting precisely the historical distribution of the market variables and not assuming any specific distribution of probability. The historical period used in this model is two years. The historical simulation method is used in BBVA S.A., BBVA Bancomer, BBVA Colombia, Compass Bank and Garanti.

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VaR figures are estimated following two methodologies:

· VaR without smoothing, which awards equal weight to the daily information for the previous two years. This is currently the official methodology for measuring market risks for the purpose of monitoring compliance with risk limits.

· VaR with smoothing, which gives a greater weight to more recent market information. This metric supplements the previous one.

In the case of Global Markets Argentina and Global Markets Peru a parametric methodology is used to measure risk in terms of VaR.

At the same time, and following the guidelines established by the Spanish and European authorities, BBVA incorporates metrics in addition to VaR with the aim of meeting the Bank of Spain's regulatory requirements with respect to the calculation of bank capital for the trading book. Specifically, the new measures incorporated in the Group since December 2011 (stipulated by Basel 2.5) are:

· VaR: In regulatory terms, the VaR charge incorporates the stressed VaR charge, and the sum of the two (VaR and stressed VaR) is calculated. This quantifies the losses associated with the movements of the two risk factors inherent to market operations (interest rates, FX, RV, credit, etc.). Both VaR and stressed VaR are rescaled by a regulatory multiplier set at three and by the square root of ten to calculate the capital charge.

· Specific Risk: Incremental Risk Capital (“IRC”) Quantification of the risks of default and downgrading of the credit ratings of the bond and credit derivative positions in the portfolio. The specific capital risk by IRC is a charge exclusively used in the geographical areas with the internal model approved (BBVA S.A. and Bancomer). The capital charge is determined according to the associated losses (at 99.9% in a 1-year horizon under the hypothesis of constant risk) due to the rating migration and/or default state the issuer of an asset. In addition, the price risk is included in sovereign positions for the items specified.

· Specific Risk: Securitization and correlation portfolios. Capital charge for securitizations and the correlation portfolio to include the potential losses associated at the level of rating a specific credit structure (rating). Both are calculated by the standard method. The scope of the correlation portfolios refers to the FTD-type market operation and/or tranches of market CDOs and only for positions with an active market and hedging capacity.

Validity tests are performed regularly on the risk measurement models used by the Group. They estimate the maximum loss that could have been incurred in the positions 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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Market risk in 2018

The Group’s market risk remains at low levels compared to other risks managed by BBVA, particularly in terms of credit risk. This is due to the nature of the business. During the financial year 2018 the average VaR was €21 million, below the figure of 2017, with a high on March 16, 2018 of €26 million. The evolution in the BBVA Group’s market risk during 2018, measured as VaR without smoothing (see Glossary) with a 99% confidence level and a 1-day horizon (shown in millions of Euros) is as follows:

By type of market risk assumed by the Group's trading portfolio, the main risk factor for the Group continues to be that linked to interest rates, with a weight of 55% of the total at the end of year ended December 31, 2018 (this figure includes the spread risk). The relative weight has increased compared with the close of 2017 (48%). Exchange-rate risk maintains its proportion with respect to 2017 (14%), while equity, volatility and correlation risk have decreased, with a weight of 31% at the close of 2018 (vs. 38% at the close of 2017).

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As of December 31, 2018, 2017 and 2016 the balance of VaR was €17 million, €22 million and €26 million, respectively. These figures can be broken down as follows:

VaR by Risk Factor (Millions of euros)
| Interest/Spread Risk | Currency Risk | Stock-market Risk | Vega/Correlation Risk | Diversification Effect(*) | Total
December 2018 |  |  |  |  |  |
VaR average in the year | 20 | 6 | 4 | 9 | (20) | 21
VaR max in the year | 23 | 7 | 6 | 11 | (21) | 26
VaR min in the year | 17 | 6 | 4 | 7 | (18) | 16
End of period VaR | 19 | 5 | 3 | 7 | (17) | 17
December 2017 |  |  |  |  |  |
VaR average in the year | 25 | 10 | 3 | 13 | (23) | 27
VaR max in the year | 27 | 11 | 2 | 12 | (19) | 34
VaR min in the year | 23 | 7 | 4 | 14 | (26) | 22
End of period VaR | 23 | 7 | 4 | 14 | (26) | 22
December 2016 |  |  |  |  |  |
VaR average in the year | 28 | 10 | 4 | 11 | (23) | 29
VaR max in the year | 30 | 16 | 4 | 11 | (23) | 38
VaR min in the year | 21 | 10 | 1 | 11 | (20) | 23
End of period VaR | 29 | 7 | 2 | 12 | (24) | 26

(*) The diversification effect is the difference between the sum of the average individual risk factors and the total VaR figure that includes the implied correlation between all the variables and scenarios used in the measurement.

Validation of the model

The internal market risk model is validated on a regular basis by backtesting in both BBVA S.A. and Bancomer. The aim of backtesting is to validate the quality and precision of the internal market risk model used by 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 risk measurements generated by the internal market risk model. These tests showed that the internal market risk model of both BBVA, S.A. and Bancomer is adequate and precise.

Two types of backtesting have been carried out during 2018, 2017 and 2016:

· "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 position.

· "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 at the level of risk factor or business type, thus making a deeper comparison of the results with respect to risk measurements.

For the period between the year ended December 31, 2017 and the year ended December 31, 2018, the backtesting of the internal VaR calculation model was carried out, comparing the daily results obtained to the estimated risk level by the internal VaR calculation model. At the end of the year the comparison showed the internal VaR calculation model was working correctly, within the "green" zone (0-4 exceptions), thus validating the internal VaR calculation model, as has occurred each year since the internal market risk model was approved for the Group.

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Stress test analysis

A number of stress tests are carried out on 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 "Tequilazo" 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.

Simulated scenarios

Unlike the historical scenarios, which are fixed and therefore not suited to the composition of the risk portfolio at all times, the scenario used for the exercises of economic stress is based on Resampling methodology. This methodology is based on the use of dynamic scenarios are recalculated periodically depending on the main risks held in the trading portfolios. On a data window wide enough to collect different periods of stress (data are taken from 1-1-2008 until today), a simulation is performed by resampling of historic observations, generating a loss distribution and profits to analyze most extreme of births in the selected historical window. The advantage of this resampling methodology is that the period of stress is not predetermined, but depends on the portfolio maintained at each time, and making a large number of simulations (10,000 simulations) allows a richer information for the analysis of expected shortfall than what is available in the scenarios included in the calculation of VaR.

The main features of this approach are: a) the generated simulations respect the correlation structure of the data, b) flexibility in the inclusion of new risk factors and c) to allow the introduction of a lot of variability in the simulations (desirable to consider extreme events).

The impact of the stress test under multivariable simulation of the risk factors of the portfolio (Expected shortfall 95% to 20 days) as of December 31, 2018 is as follows:

Millions of Euros
| Europe | Mexico | Peru | Venezuela | Argentina | Colombia | Turkey | Compass
Expected Shortfall | (99) | (33) | (11) | - | (5) | (6) | (6) | (1)

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### 7.4.2 Structural risk

The Assets and Liabilities Committee (ALCO) is the main responsible body for the management of structural risks relating to liquidity/funding, interest rates, currency rates, equity and solvency. Every month, with the assistance of the CEO and representatives from the areas of Finance, Risks and Business Areas, this committee monitors the above risks and is presented with proposals for managing them for its approval. These management proposals are made proactively by the Finance area, taking into account the risk appetite framework and with the aim of guaranteeing recurrent earnings and financial stability and preserving the entity's solvency. All the balance-sheet management units have a local ALCO, assisted constantly by the members of the Corporate Center. There is also a corporate ALCO where the management strategies in the Group's subsidiaries are monitored and presented.

Structural interest-rate risk

The structural interest-rate risk (“IRRBB”) is related to the potential impact that variations in market interest rates have on an entity's net interest income and equity. In order to properly measure IRRBB, BBVA takes into account the main sources that generate this risk: repricing risk, yield curve risk, option risk and basis risk, which are analyzed from two complementary points of view: net interest income (short term) and economic value (long term).

ALCO monitors the interest-rate risk metrics and the Assets and Liabilities Management unit carries out the management proposals for the structural balance sheet. The management objective is to ensure the stability of net interest income and book value in the face of changes in market interest rates, while respecting the internal solvency and limits in the different balance-sheets and for BBVA Group as a whole; and complying with current and future regulatory requirements.

BBVA's structural interest-rate risk management control and monitoring is based on a set of metrics and tools that enable the entity's risk profile to be monitored correctly. A wide range of scenarios are measured on a regular basis, including sensitivities to parallel movements in the event of different shocks, changes in slope and curve, as well as delayed movements. Other probabilistic metrics based on statistical scenario-simulating methods are also assessed, such as earnings at risk (“EaR”) and economic capital (“EC”), which are defined as the maximum adverse deviations in net interest income and economic value, respectively, for a given confidence level and time horizon. Impact thresholds are established on these management metrics both in terms of deviations in net interest income and in terms of the impact on economic value. The process is carried out separately for each currency to which the Group is exposed, and the diversification effect between currencies and business units is considered after this.

In order to evaluate its effectiveness, the model is subjected to regular internal validation. In addition, the banking book’s interest-rate risk exposures are subjected to different stress tests in order to reveal balance sheet vulnerabilities under extreme scenarios. This testing includes an analysis of adverse macroeconomic scenarios designed specifically by BBVA Research, together with a wide range of potential scenarios that aim to identify interest-rate environments that are particularly damaging for the entity. This is done by generating extreme scenarios of a breakthrough in interest rate levels and historical correlations, giving rise to sudden changes in the slopes and even to inverted curves.

The model is necessarily underpinned by an elaborate set of hypotheses that aim to reproduce the behavior of the balance sheet as closely as possible to reality. Especially relevant among these assumptions are those related to the behavior of Non Maturity Deposits, for which stability and remuneration assumptions are established, consistent with an adequate segmentation by type of product and customer, and prepayment estimates (implicit optionality). The assumptions are reviewed and adapted, at least on an annual basis, to signs of changes in behavior, kept properly documented and reviewed on a regular basis in the internal validation processes.

The impacts on the metrics are assessed both from a point of view of economic value with a static model (gone concern) and from the perspective of net interest income, for which a dynamic model (going concern) consistent with the corporate assumptions of earnings forecasts is used.

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The table below shows the profile of average sensitivities to net interest income and value of the main banks in BBVA Group in 2018:

Sensitivity to Interest-Rate Analysis - December 2018
| 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 (***) | + (5% - 10%) | - (5% - 10%) | + (0% - 5%) | - (0% - 5%)
Mexico | + (0% - 5%) | - (0% - 5%) | + (0% - 5%) | - (0% - 5%)
USA | + (5% - 10%) | - (5% - 10%) | - (5% - 10%) | + (0% - 5%)
Turkey | + (0% - 5%) | - (0% - 5%) | - (0% - 5%) | + (0% - 5%)
South America | + (0% - 5%) | - (0% - 5%) | - (0% - 5%) | + (0% - 5%)
BBVA Group | + (0% - 5%) | - (0% - 5%) | - (0% - 5%) | - (0% - 5%)

(*) Percentage of "1 year" net interest income forecast for each unit.

(**) Percentage of Core Capital for each unit.

(***) In Europe downward movement including rates below the current ones.

In 2018 in Europe monetary policy has remained expansionary, maintaining rates at 0% and the deposit rate at -0.4%. In USA the rising rate cycle initiated by the Federal Reserve in 2015 has continued. In Mexico and Turkey, the upward cycle has continued because of volatility of their currencies and inflation prospects. In South America, monetary policy has continued to be expansive in most of the economies where the Group operates, with the exception of Argentina, where rates increased and actions were taken not to increase the monetary basis and slow the inflation.

The BBVA Group maintains, overall a positive and moderate sensitivity in its net interest income to an increase in interest rates. The higher relative net interest income sensitivities are observed in, particularly Euro and USD. In Europe however, the decrease in interest rates is limited by the downward path scope in interest rates. The Group maintains a moderate risk profile, according to its target risk, through effective management of its balance sheet structural risk.

Structural exchange-rate risk

In BBVA Group, structural exchange-rate risk arises from the consolidation of holdings in subsidiaries with functional currencies other than the euro. Its management is centralized in order to optimize the joint handling of permanent foreign currency exposures, taking into account the diversification.

The corporate Global ALM unit, through ALCO, designs and executes hedging strategies with the main purpose of controlling the potential negative effect of exchange-rate fluctuations on capital ratios and on the equivalent value in euros of the foreign-currency earnings of the Group's subsidiaries, considering transactions according to market expectations and their cost.

The risk monitoring metrics included in the framework of limits are integrated into management and supplemented with additional assessment indicators. At corporate level they are based on probabilistic metrics that measure the maximum deviation in the Group’s Capital, CET1 (“Common Equity Tier 1”) ratio, and net attributable profit. The probabilistic metrics make it possible to estimate the joint impact of exposure to different currencies taking into account the different variability in exchange rates and their correlations.

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The suitability of these risk assessment metrics is reviewed on a regular basis through backtesting exercises. The final element of structural exchange-rate risk control is the analysis of scenarios and stress with the aim of identifying in advance possible threats to future compliance with the risk appetite levels set, so that any necessary preventive management actions can be taken. The scenarios are based both on historical situations simulated by the risk model and on the risk scenarios provided by BBVA Research.

2018 has been characterized by higher volatility levels of FX rates in emerging markets. As for the main currencies of the geographies where the Group operates, it is worth mentioning the appreciation of Mexican peso and US Dollar against the euro (around 5% in both cases), while Turkish lira and Argentinian peso have strongly depreciated (25% and 48%, respectively) affected by idiosyncratic factors.

The Group's structural exchange-rate risk exposure level has remained fairly stable since the end of 2017. The hedging policy intends to keep low levels of sensitivity to movements in the exchange rates of emerging currencies against the euro and focuses on Mexican peso and Turkish lira. The risk mitigation level in capital ratio due to the book value of BBVA Group's holdings in foreign emerging currencies stood at around 70% and, as of the end of 2018, CET1 ratio sensitivity to the appreciation of 1% in the euro exchange rate for each currency is: US Dollar +1.1 bps; Mexican peso -0.2 bps; Turkish Lira -0.2 bps; other currencies -0.2 bps. On the other hand, hedging of emerging-currency denominated earnings of 2018 has reached an 82%, concentrated in Mexican peso, Turkish lira and the main Latin American currencies.

Structural equity risk

BBVA Group's exposure to structural equity risk stems basically from minority shareholdings in industrial and financial companies held with long or medium-term investment horizons. This exposure is modulated in some portfolios with positions held in derivative instruments on the same underlying assets, in order to adjust the portfolio sensitivity to potential changes in equity prices.

The management of structural equity portfolios is a responsibility of the Group's units specialized in this area. Their activity is subject to the risk management corporate policy on structural equity risk management, complying with the defined management principles and Risk Appetite Framework.

The Group's risk management systems also make it possible to anticipate potential negative impacts and take appropriate measures to prevent damage being caused to the entity. The risk control and limitation mechanisms are focused on the exposure, annual performance and economic capital estimated for each portfolio. Economic capital is estimated in accordance with a corporate model based on Monte Carlo simulations, taking into account the statistical performance of asset prices and the diversification existing among the different exposures.

Stress tests and analyses of sensitivity to different simulated scenarios are carried out periodically to analyze the risk profile in more depth. They are based on both past crisis situations and forecasts made by BBVA Research. This checks that the risks are limited and that the tolerance levels set by the Group are not at risk.

Backtesting is carried out on a regular basis on the risk measurement model used.

With regard to the equity markets, the world indexes have closed the year 2018 with generalized falls and volatility surges in a macro environment of global growth slowdown, increase of the political uncertainty and normalization of the monetary policies.

Structural equity risk, measured in terms of economic capital, has decreased in the period mainly due to lower exposure. 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 remained at around €-28 million as of December 31, 2018 and €-32 million as of December 31, 2017. This estimation takes into account the exposure in shares valued at market prices, or if not applicable, at fair value (excluding the positions in the Treasury Area and the net delta-equivalent positions in derivatives on the same underlyings.

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### 7.4.3 Financial Instruments offset

Financial assets and liabilities may be netted, i.e. they are presented for a net amount on the consolidated balance sheet only when the Group's entities satisfy with the provisions of IAS 32-Paragraph 42, so they have both the legal right to net recognized amounts, and the intention of settling the net amount or of realizing the asset and simultaneously paying the liability.

In addition, the Group has presented as gross amounts assets and liabilities on the consolidated balance sheet for which there are master netting arrangements in place, but for which there is no intention of settling net. The most common types of events that trigger the netting of reciprocal obligations are bankruptcy of the entity, surpassing certain level of indebtedness threshold, failure to pay, restructuring and dissolution of the entity.

In the current market context, derivatives are contracted under different framework contracts being the most widespread developed by the International Swaps and Derivatives Association (“ISDA”) and, for the Spanish market, the Framework Agreement on Financial Transactions (“CMOF”). Almost all portfolio derivative transactions have been concluded under these framework contracts, including in them the netting clauses mentioned in the preceding paragraph as "Master Netting Agreement", greatly reducing the credit exposure on these instruments. Additionally, in contracts signed with professional counterparties, the collateral agreement annexes called Credit Support Annex (“CSA”) are included, thereby minimizing exposure to a potential default of the counterparty.

Moreover, in transactions involving assets purchased or sold under a repurchase agreement there is a high volume transacted through clearing houses that articulate mechanisms to reduce counterparty risk, as well as through the signature of various master agreements for bilateral transactions, the most widely used being the Global Master Repurchase Agreement (GMRA), published by International Capital Market Association (“ICMA”), to which the clauses related to the collateral exchange are usually added within the text of the master agreement itself.

A summary of the effect of the compensation (via netting and collateral) for derivatives and securities operations is presented below as of December 31, 2018, 2017 and 2016:

December 2018 (Millions of euros)
|  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets (D) |
| Notes | Gross Amounts Recognized (A) | Gross Amounts Offset in the Consolidated Balance Sheets (B) | Net Amount Presented in the Consolidated Balance Sheets (C=A-B) | Financial Instruments | Cash Collateral Received/ Pledged | Net Amount (E=C-D)
Trading and hedging derivatives | 10, 15 | 49,908 | 16,480 | 33,428 | 25,024 | 7,790 | 613
Reverse repurchase, securities borrowing and similar agreements |  | 28,074 | 42 | 28,032 | 28,022 | 169 | (159)
Total Assets |  | 77,982 | 16,522 | 61,460 | 53,046 | 7,959 | 454
Trading and hedging derivatives | 10, 15 | 51,596 | 17,101 | 34,494 | 25,024 | 6,788 | 2,682
Repurchase, securities lending and similar agreements |  | 43,035 | 42 | 42,993 | 42,877 | 34 | 82
Total liabilities |  | 94,631 | 17,143 | 77,487 | 67,901 | 6,822 | 2,765

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December 2017 (Millions of euros)
|  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets (D) |
| Notes | Gross Amounts Recognized (A) | Gross Amounts Offset in the Consolidated Balance Sheets (B) | Net Amount Presented in the Consolidated Balance Sheets (C=A-B) | Financial Instruments | Cash Collateral Received/ Pledged | Net Amount (E=C-D)
Trading and hedging derivatives | 10, 15 | 49,333 | 11,584 | 37,749 | 27,106 | 7,442 | 3,202
Reverse repurchase, securities borrowing and similar agreements |  | 26,426 | 56 | 26,369 | 26,612 | 141 | (384)
Total Assets |  | 75,759 | 11,641 | 64,118 | 53,717 | 7,583 | 2,818
Trading and hedging derivatives | 10, 15 | 50,693 | 11,644 | 39,049 | 27,106 | 8,328 | 3,615
Repurchase, securities lending and similar agreements |  | 40,134 | 56 | 40,078 | 40,158 | 21 | (101)
Total liabilities |  | 90,827 | 11,701 | 79,126 | 67,264 | 8,349 | 3,514

December 2016 (Millions of euros)
|  |  |  |  | Gross Amounts Not Offset in the Consolidated Balance Sheets (D) |
| Notes | Gross Amounts Recognized (A) | Gross Amounts Offset in the Consolidated Balance Sheets (B) | Net Amount Presented in the Consolidated Balance Sheets (C=A-B) | Financial Instruments | Cash Collateral Received/ Pledged | Net Amount (E=C-D)
Trading and hedging derivatives | 10, 15 | 59,374 | 13,587 | 45,788 | 32,146 | 6,571 | 7,070
Reverse repurchase, securities borrowing and similar agreements |  | 25,833 | 2,912 | 22,921 | 23,080 | 174 | (333)
Total Assets |  | 85,208 | 16,499 | 68,709 | 55,226 | 6,745 | 6,738
Trading and hedging derivatives | 10, 15 | 59,545 | 14,080 | 45,465 | 32,146 | 7,272 | 6,047
Repurchase, securities lending and similar agreements |  | 49,474 | 2,912 | 46,562 | 47,915 | 176 | (1,529)
Total liabilities |  | 109,019 | 16,991 | 92,027 | 80,061 | 7,448 | 4,518

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7.5 Liquidity risk

7.5.1 Liquidity risk management

Management of liquidity and structural finance within the BBVA Group is based on the principle of the financial autonomy of the entities that make it up. This approach helps prevent and limit liquidity risk by reducing the Group’s vulnerability in periods of high risk. This decentralized management avoids possible contagion due to a crisis that could affect only one or several BBVA Group entities, which must cover their liquidity needs independently in the markets where they operate. Liquidity Management Units (LMUs) have been set up for this reason in the geographical areas where the main foreign subsidiaries operate, and also for the parent BBVA S.A.

Assets and Liabilities Management unit manages BBVA Group's liquidity and funding. It plans and executes the funding of the long-term structural gap of each LMUs and proposes to ALCO the actions to adopt in this regard in accordance with the policies and limits established by the Standing Committee.

As first core element, the Bank's target in terms of liquidity and funding risk is characterized through the Liquidity Coverage Ratio (LCR) and the Loan-to-Stable-Customer-Deposits (LtSCD) ratio. LCR is a regulatory measurement aimed at ensuring entities’ resistance in a scenario of liquidity stress within a time horizon of 30 days. BBVA, within its risk appetite framework and its limits and alerts schemes, has established a level of requirement for compliance with the LCR ratio both for the Group as a whole and for each of the Liquidity Management Units (LMUs) individually. The internal levels required are geared to comply sufficiently and efficiently in advance with the implementation of the regulatory requirement of 2018, at a level above 100%.

LCR ratio in Europe was applicable as from October 1, 2015. With an initial 60% minimum requirement, progressively increased (phased-in) up to 100% in 2018. Throughout the year 2018, LCR level at BBVA Group has been above 100%. As of December 31, 2018, the LCR ratio at Group level is 127%.

Although this regulatory requirement is mandatory at a Group level and Eurozone banks, all subsidiaries are above this minimum. In any case, it should be noted that liquidity excesses in subsidiaries are not deemed transferable when calculating the consolidated ratio. Taking into account the impact of these High Quality Liquid Assets excluded, LCR ratio would be 154%, which is +27% above the Group’s LCR.

LCR main LMU
| December 2018 | December 2017
Group | 127% | 128%
Eurozone | 145% | 151%
Bancomer | 154% | 148%
Compass(*) | 143% | 144%
Garanti | 209% | 134%

(*) Compass LCR calculated according to local regulation (Fed Modified LCR).

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The LtSCD measures the relation between the net loans credit investment and stable customer deposits. The aim is to preserve a stable funding structure in the medium term for each of the LMUs making up BBVA Group, taking into account that maintaining an adequate volume of stable customer funds is key to achieving a sound liquidity profile.

Stable customer deposits are defined as the customer funds captured and managed by business units among their target customers. These funds usually show little sensitivity to market changes and are largely non-volatile in terms of aggregate amounts per transaction, thanks to customer linkage to the unit. Stable funds in each LMU are calculated by analyzing the behavior of the balance sheets of the different customer segments identified as likely to provide stability to the funding structure, and by prioritizing an established relationship and applying bigger haircuts to the funding lines of less stable customers. The main base of stable funds is composed of deposits by retail individual customers and small businesses.

For the purpose of establishing the (maximum) target levels for LtSCD in each LMU and providing an optimal funding structure reference in terms of risk appetite, GRM-Structural Risks identifies and assesses the economic and financial variables that condition the funding structures in the various geographical areas.

The behavior of the indicators reflects that the funding structure remained robust in 2018, 2017 and 2016, in the sense that all the LMUs maintain levels of self-funding with stable customer funds higher than the required levels.

LtSCD by LMU
| December 2018 | December 2017 | December 2016
Group (average) | 106% | 110% | 113%
Eurozone | 101% | 108% | 113%
Bancomer | 114% | 109% | 113%
Compass | 119% | 109% | 108%
Garanti | 110% | 122% | 124%
Other LMUs | 99% | 108% | 107%

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The second core element in liquidity and funding risk management is to achieve proper diversification of the funding structure, avoiding excessive reliance on short-term funding and establishing a maximum level of short-term funding comprising both wholesale funding as well as funds from less stable non-retail customers. Regarding long-term funding, the maturity profile does not show significant concentrations, which enables adaptation of the anticipated issuance schedule to the best financial conditions of the markets. Finally, concentration risk is monitored at the LMU level, with a view to ensuring the right diversification both per counterparty and per instrument type.

The third element promotes the short-term resilience of the liquidity risk profile, making sure that each LMU has sufficient collateral to address the risk of wholesale markets closing. Basic Capacity is the short-term liquidity risk management and control metric that is defined as the relationship between the available explicit assets and the maturities of wholesale liabilities and volatile funds, at different terms to one year, with special relevance being given to 30 and 90-day maturities.

Each entity maintains an individual liquidity buffer, both Banco Bilbao Vizcaya Argentaria, S.A. and its subsidiaries, including BBVA Compass, BBVA Bancomer, Garanti Bank and the Latin American subsidiaries. The table below shows the liquidity available by instrument as of December 31, 2018 and 2017 for the most significant entities based on prudential supervisor’s information (Commission Implementing Regulations (EU) 2017/2114 of November 9, 2017):

December 2018 (Millions of euros)
| BBVA Eurozone | BBVA Bancomer | BBVA Compass | Garanti Bank | Other
Cash and withdrawable central bank reserves | 26,506 | 7,666 | 1,667 | 7,633 | 6,677
Level 1 tradable assets | 29,938 | 4,995 | 10,490 | 6,502 | 3,652
Level 2A tradable assets | 449 | 409 | 510 | - | -
Level 2B tradable assets | 4,040 | 33 | - | - | -
Other tradable assets | 5,661 | 1,372 | 1,043 | 499 | 617
Non tradable assets eligible for central banks | - | - | 2,314 | - | -
Cumulated Counterbalancing Capacity | 66,594 | 14,475 | 16,024 | 14,634 | 10,946

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December 2017 (Millions of euros)
| BBVA Eurozone (1) | BBVA Bancomer | BBVA Compass | Garanti Bank | Other
Cash and withdrawable central bank reserves | 15,634 | 8,649 | 2,150 | 6,692 | 6,083
Level 1 tradable assets | 38,954 | 3,805 | 9,028 | 5,705 | 6,141
Level 2A tradable assets | 386 | 418 | 753 | - | 10
Level 2B tradable assets | 4,995 | 69 | - | - | 21
Other tradable assets | 6,734 | 1,703 | 1,252 | 962 | 1,573
Non tradable assets eligible for central banks | - | - | 2,800 | - | -
Cumulated Counterbalancing Capacity | 66,703 | 14,644 | 15,983 | 13,359 | 13,828

(1) Includes Spain, Portugal and Rest of Eurasia.

Stress analyses are also a basic element of the liquidity and funding risk monitoring system, as they help anticipate deviations from the liquidity targets and limits set out in the risk appetite as well as establish tolerance ranges at different management levels. They also play a key role in the design of the Liquidity Contingency Plan and in defining the specific measures for action for realigning the risk profile.

For each of the scenarios, a check is carried out whether BBVA has sufficient liquid assets to meet the liquidity commitments/outflows in the various periods analyzed. The analysis considers four scenarios, one core and three crisis-related: systemic crisis; unexpected internal crisis with a considerable rating downgrade and/or affecting the ability to issue in wholesale markets and the perception of business risk by the banking intermediaries and the BBVA's customers; and a mixed scenario, as a combination of the two aforementioned scenarios. Each scenario considers the following factors: liquidity existing on the market, customer behavior and sources of funding, impact of rating downgrades, market values of liquid assets and collateral, and the interaction between liquidity requirements and the performance of the BBVA's asset quality.

The results of these stress analyses carried out regularly reveal that BBVA has a sufficient buffer of liquid assets to deal with the estimated liquidity outflows in a scenario such as a combination of a systemic crisis and an unexpected internal crisis, during a period in general longer than 3 months for LMUs, including a major downgrade in the BBVA's rating (by up to three notches).

Beside the results of stress exercises and risk metrics, Early Warning Indicators play an important role in the corporate model and also in the Liquidity Contingency Plan. These are mainly financing structure indicators, related to asset encumbrance, counterparty concentration, outflows of customer deposits, unexpected use of credit lines, and market indicators, which help to anticipate potential risks and capture market expectations.

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Below is a matrix of residual maturities by contractual periods based on supervisory prudential reporting as of December 31, 2018, 2017 and 2016:

December 2018. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
ASSETS |  |  |  |  |  |  |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 9,550 | 40,599 | - | - | - | - | - | - | - | - | 50,149
Deposits in credit entities | 801 | 3,211 | 216 | 141 | 83 | 152 | 133 | 178 | 27 | 1,269 | 6,211
Deposits in other financial institutions | 1 | 1,408 | 750 | 664 | 647 | 375 | 1,724 | 896 | 1,286 | 2,764 | 10,515
Reverse repo, securities borrowing and margin lending | - | 21,266 | 1,655 | 1,158 | 805 | 498 | 205 | 1,352 | 390 | 210 | 27,539
Loans and Advances | 132 | 19,825 | 25,939 | 23,265 | 15,347 | 16,433 | 42,100 | 32,336 | 53,386 | 120,571 | 349,334
Securities' portfolio settlement | - | 1,875 | 4,379 | 5,990 | 2,148 | 6,823 | 8,592 | 12,423 | 11,533 | 42,738 | 96,501

December 2018. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Wholesale funding | 1 | 2,678 | 1,652 | 2,160 | 2,425 | 2,736 | 7,225 | 8,578 | 16,040 | 26,363 | 69,858
Deposits in financial institutions | 7,107 | 5,599 | 751 | 1,992 | 377 | 1,240 | 1,149 | 229 | 196 | 904 | 19,544
Deposits in other financial institutions and international agencies | 10,680 | 4,327 | 1,580 | 458 | 302 | 309 | 781 | 304 | 825 | 1,692 | 21,258
Customer deposits | 252,630 | 44,866 | 18,514 | 10,625 | 6,217 | 7,345 | 5,667 | 2,137 | 1,207 | 1,310 | 350,518
Security pledge funding | 40 | 46,489 | 2,219 | 2,274 | 114 | 97 | 22,911 | 526 | 218 | 1,627 | 76,515
Derivatives, net | - | (75) | (523) | (68) | (5) | (117) | 498 | (91) | (67) | (392) | (840)

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December 2017. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
ASSETS |  |  |  |  |  |  |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 8,179 | 31,029 | - | - | - | - | - | - | - | - | 39,208
Deposits in credit entities | 252 | 4,391 | 181 | 169 | 120 | 122 | 116 | 112 | 157 | 1,868 | 7,488
Deposits in other financial institutions | 1 | 939 | 758 | 796 | 628 | 447 | 1,029 | 681 | 806 | 1,975 | 8,060
Reverse repo, securities borrowing and margin lending | 18,979 | 2,689 | 1,921 | 541 | 426 | 815 | 30 | 727 | 226 | - | 26,354
Loans and Advances | 267 | 21,203 | 26,323 | 23,606 | 15,380 | 17,516 | 43,973 | 35,383 | 50,809 | 123,568 | 358,028
Securities' portfolio settlement | 1 | 1,579 | 4,159 | 4,423 | 2,380 | 13,391 | 5,789 | 11,289 | 12,070 | 44,666 | 99,747

December 2017. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Wholesale funding | - | 3,648 | 4,209 | 4,238 | 1,227 | 2,456 | 5,772 | 6,432 | 18,391 | 30,162 | 76,535
Deposits in financial institutions | 6,831 | 5,863 | 1,082 | 2,335 | 392 | 1,714 | 930 | 765 | 171 | 1,429 | 21,512
Deposits in other financial institutions and international agencies | 10,700 | 4,827 | 3,290 | 1,959 | 554 | 1,328 | 963 | 286 | 355 | 1,045 | 25,307
Customer deposits | 233,068 | 45,171 | 18,616 | 11,428 | 8,711 | 10,368 | 7,607 | 2,612 | 1,833 | 2,034 | 341,448
Security pledge funding | - | 35,502 | 2,284 | 1,405 | 396 | 973 | 64 | 23,009 | 338 | 1,697 | 65,668
Derivatives, net | - | (18) | (110) | (116) | (135) | (117) | (336) | (91) | (106) | (419) | (1,448)

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December 2016. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
ASSETS |  |  |  |  |  |  |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 23,191 | 13,825 | - | - | - | - | - | - | - | - | 37,016
Deposits in credit entities | 991 | 4,068 | 254 | 155 | 48 | 72 | 117 | 87 | 122 | 4,087 | 10,002
Deposits in other financial institutions | 1 | 1,192 | 967 | 675 | 714 | 532 | 1,330 | 918 | 942 | 336 | 7,608
Reverse repo, securities borrowing and margin lending | - | 20,232 | 544 | 523 | - | 428 | 500 | 286 | 124 | 189 | 22,826
Loans and Advances | 591 | 20,272 | 25,990 | 22,318 | 16,212 | 15,613 | 44,956 | 35,093 | 55,561 | 133,589 | 370,195
Securities' portfolio settlement | - | 708 | 3,566 | 3,688 | 2,301 | 4,312 | 19,320 | 10,010 | 16,662 | 51,472 | 112,039

December 2016. Contractual Maturities (Millions of euros)
| Demand | Up to 1 Month | 1 to 3 Months | 3 to 6 Months | 6 to 9 Months | 9 to 12 Months | 1 to 2 Years | 2 to 3 Years | 3 to 5 Years | Over 5 Years | Total
LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Wholesale funding | 419 | 7,380 | 2,943 | 5,547 | 3,463 | 5,967 | 7,825 | 5,963 | 14,016 | 31,875 | 85,397
Deposits in financial institutions | 6,762 | 5,365 | 1,181 | 2,104 | 800 | 2,176 | 746 | 1,156 | 859 | 3,714 | 24,862
Deposits in other financial institutions and international agencies | 15,375 | 6,542 | 8,624 | 3,382 | 2,566 | 1,897 | 1,340 | 686 | 875 | 2,825 | 44,114
Customer deposits | 206,140 | 49,053 | 25,522 | 15,736 | 11,863 | 11,343 | 8,619 | 5,060 | 781 | 936 | 335,052
Security pledge funding | - | 38,153 | 3,561 | 1,403 | 1,004 | 912 | 1,281 | 640 | 23,959 | 1,712 | 72,626
Derivatives, net | - | (2,123) | (95) | (190) | (111) | (326) | (132) | (82) | (105) | (47) | (3,210)

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The matrix shows the retail nature of the funding structure, with a loan portfolio being mostly funded by customer deposits (66%). On the outflows side of the matrix, the “demand” maturity bucket mainly contains the retail customer sight accounts whose behavior historically showed a high level of stability and little concentration. According to a behavior analysis which is done every year in every entity, this type of account is considered to be stable and for liquidity risk purposes, it is estimated that 78% have a maturity of more than 5 years.

In the Euro Liquidity Management Unit (LMU), solid liquidity and funding situation, where activity has continued to generate liquidity through the decrease of Credit Gap. In addition, during 2018 the Euro LMU made 3 issues in the public market for €3,500 million; Senior Non Preferred (“SNP”) at 5 years for €1,500 million, Green bond SNP at 7 years for €1,000 million and AT1 for €1,000 million, which have allowed it to obtain long-term funding at favorable price conditions. These public operations have been complemented by a private issue T2 for USD 300 million.

In Mexico, sound liquidity position despite the market volatility, the Credit Gap has increased in 2018 due to a minor increase in deposits mainly because of the outflows of non-profitable USD deposits. During the financial year 2018, BBVA Bancomer made a local Tier II issuance on international markets for USD 1,000 million as well as an issuance on the local market for 7,000 million of Mexican pesos in 2 tranches: at 3 and 5 years, being the 3 years tranche the first Green Bond issued by a private bank.

In the United States, the containment of the cost of liabilities has led to a slightly increase in the credit gap. During the financial year 2018, BBVA Compass successfully issued 3 year senior debt for USD 1,150 million.

In Turkey an adequate liquidity situation is maintained, after having been affected by the currency volatility at the beginning of the second semester. Despite this, Garanti showed a good performance with the roll-over of the 2018 maturities of corporate funding. The main operations during the year were two syndicated loans for USD 2,300 million, the first Green Bond at 6 years for USD 75 million and future flows securitization (Diversified Payment Rights) for USD 375 million at 7 years.

Argentina was affected by the market volatility but no relevant impact on the liquidity situation of the entity has been noted. BBVA Francés maintains a solid liquidity situation distinguished by a major volume of cash reserves.

The liquidity position of the rest of subsidiaries has continued to be sound, maintaining a solid liquidity position in all the jurisdictions in which the Group operates. Access to capital markets of these subsidiaries has also been maintained with recurring issuances in the local market.

In this context, BBVA has maintained its objective of strengthening the funding structure of the different Group entities based on growing their self-funding from stable customer funds, while guaranteeing a sufficient buffer of fully available liquid assets, diversifying the various sources of funding available, and optimizing the generation of collateral available for dealing with stress situations in the markets.

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7.5.2 Asset encumbrance

As of December 31, 2018, 2017 and 2016, the encumbered (those provided as collateral for certain liabilities) and unencumbered assets are broken down as follows:

December 2018 (Millions of euros)
| Encumbered assets | Non-Encumbered assets
| Book value of Encumbered assets | Market value of Encumbered assets | Book value of non-encumbered assets | Market value of non-encumbered assets
Assets |  |  |  |
Equity instruments | 1,864 | 1,864 | 6,485 | 6,485
Debt Securities | 31,157 | 32,216 | 82,209 | 82,209
Loans and Advances and other assets | 74,928 |  | 478,880 |

December 2017 (Millions of euros)
| Encumbered assets | Non-Encumbered assets
| Book value of Encumbered assets | Market value of Encumbered assets | Book value of non-encumbered assets | Market value of non-encumbered assets
Assets |  |  |  |
Equity instruments | 2,297 | 2,297 | 9,616 | 9,616
Debt Securities | 28,700 | 29,798 | 84,391 | 84,391
Loans and Advances and other assets | 79,604 |  | 485,451 |

December 2016 (Millions of euros)
| Encumbered assets | Non-Encumbered assets
| Book value of Encumbered assets | Market value of Encumbered assets | Book value of non-encumbered assets | Market value of non-encumbered assets
Assets |  |  |  |
Equity instruments | 2,214 | 2,214 | 9,022 | 9,022
Debt Securities | 40,114 | 39,972 | 90,679 | 90,679
Loans and Advances and other assets | 94,718 |  | 495,109 |

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The committed value of "Loans and Advances and other assets" corresponds mainly to loans linked to the issue of covered bonds, territorial bonds or long-term securitized bonds (see Note 22.3) as well as those used as a guarantee to access certain funding transactions with central banks. Debt securities and equity instruments correspond to underlying that are delivered in repos with different types of counterparties, mainly clearing houses or credit institutions, and to a lesser extent central banks. Collateral provided to guarantee derivative transactions is also included as committed assets.

As of December 31, 2018, 2017 and 2016, collateral pledge mainly due to repurchase agreements and securities lending, and those which could be committed in order to obtain funding are provided below:

December 2018. Collateral received (Millions of euros)
| Fair value of encumbered collateral received or own debt securities issued | Fair value of collateral received or own debt securities issued available for encumbrance | Nominal amount of collateral received or own debt securities issued not available for encumbrance
Collateral received | 27,474 | 5,633 | 319
Equity instruments | 89 | 82 | -
Debt securities | 27,385 | 5,542 | 300
Loans and Advances and other assets | - | 8 | 19
Own debt securities issued other than own covered bonds or ABSs | 78 | 87 | -

December 2017. Collateral received (Millions of euros)
| Fair value of encumbered collateral received or own debt securities issued | Fair value of collateral received or own debt securities issued available for encumbrance | Nominal amount of collateral received or own debt securities issued not available for encumbrance
Collateral received | 23,881 | 9,630 | 201
Equity instruments | 103 | 5 | -
Debt securities | 23,715 | 9,619 | 121
Loans and Advances and other assets | 63 | 6 | 80
Own debt securities issued other than own covered bonds or ABSs | 3 | 161 | -

December 2016. Collateral received (Millions of euros)
| Fair value of encumbered collateral received or own debt securities issued | Fair value of collateral received or own debt securities issued available for encumbrance | Nominal amount of collateral received or own debt securities issued not available for encumbrance
Collateral received | 19,921 | 10,039 | 173
Equity instruments | 58 | 59 | -
Debt securities | 19,863 | 8,230 | 28
Loans and Advances and other assets | - | 1,750 | 144
Own debt securities issued other than own covered bonds or ABSs | 5 | - | -

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The guarantees received in the form of reverse repurchase agreements or security lending transactions are committed by their use in repurchase agreements, as is the case with debt securities.

As of December 31, 2018, 2017 and 2016, financial liabilities issued related to encumbered assets in financial transactions as well as their book value were as follows:

December 2018. Sources of encumbrance (Millions of euros)
| Matching liabilities, contingent liabilities or securities lent | Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered
Book value of financial liabilities | 113,498 | 131,172
Derivatives | 8,972 | 11,036
Loans and Advances | 85,989 | 97,361
Outstanding subordinated debt | 18,538 | 22,775
Other sources | 3,972 | 4,330

December 2017. Sources of encumbrance (Millions of euros)
| Matching liabilities, contingent liabilities or securities lent | Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered
Book value of financial liabilities | 118,704 | 133,312
Derivatives | 11,843 | 11,103
Loans and Advances | 87,484 | 98,478
Outstanding subordinated debt | 19,377 | 23,732
Other sources | 305 | 1,028

December 2016. Sources of encumbrance (Millions of euros)
| Matching liabilities, contingent liabilities or securities lent | Assets, collateral received and own debt securities issued other than covered bonds and ABSs encumbered
Book value of financial liabilities | 134,387 | 153,632
Derivatives | 9,304 | 9,794
Loans and Advances | 96,137 | 108,268
Outstanding subordinated debt | 28,946 | 35,569
Other sources | - | 2,594

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7.6 Operational Risk

BBVA defines operational risk (“OR”) as any risk that could result in losses caused by human errors, inadequate or faulty internal processes, misconduct with clients or in the markets, failures, disruptions or deficiencies of systems or communications, inadequate data management, legal risks and, lastly, from external events, including cyberattacks, frauds committed by third parties, disasters and an unsatisfactory service provided by suppliers.

Operational risk management is oriented towards the identification of the root causes to avoid their occurrence and mitigate possible consequences. This is carried out through the establishment of mitigation plans and control frameworks aimed at minimizing resulting losses and their impact on the recurrent generation of income and the profit of the Group. Operational risk management is integrated into the global risk management structure of the BBVA Group.

This section addresses general aspects of operational risk management as the main component of non-financial risks. However, sections devoted to conduct and compliance risk and to cybersecurity risk management are also included in this report.

Operational Risk Management Principles

The BBVA Group is committed to preferably applying advanced operational risk management models, regardless of the capital calculation regulatory model applicable at the time. Operational risk management at the BBVA Group shall:

· Be in line with the Risk Appetite Framework approved by BBVA's Board of Directors.

· Meet BBVA’s management needs arising from compliance with rules, regulation, industry standards and from decisions or positions taken by the governing bodies of the Group.

· Predict potential operational risks to which the Group shall be exposed as a result of the emergence or changes on new products, activities, processes or systems and services procurement or outsourcing decisions; and establish mechanisms to achieve a reasonable assessment and mitigation before implementation, in addition to a regular review on all existing processes.

· Establish methodologies, procedures and indicators to regularly reassess the relevant operational risks to which the Group is exposed to implement the most appropriate mitigation measures in each case, once the identified risk and the mitigation cost have been considered (cost-benefit analysis) and preserving the solvency of the Group at all times.

· Seek the causes behind the operational events suffered by the Group and establish the appropriate redressing measures (always considering the cost-benefit analysis). To that end, procedures for analyzing operational events must be in place, in addition to mechanisms to capture the potential operational losses resulting from those events.

· Analyze the public events with significant operational risk in other entities and to promote, if applicable, the implementation of the appropriate measures to avoid its occurrence in the Group.

· Identify, analyze and try to quantify events with a low probability of occurrence and a high impact that, due to their exceptional nature, may not be included in the loss database or, if included, with not highly representative impacts, in order to assess possible mitigation measures.

· Have an effective governance on which the functions and responsibilities of the Areas and Bodies intervening in OR management are clearly defined.

Irrespective of the implementation of all the possible measures and controls designed to avoid or mitigate the frequency and severity of OR events, BBVA ensures at all times the capital required to face potential expected or unexpected losses.

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Operational risk control and management model

The operational risk management cycle at BBVA is similar to the one implemented for the rest of risks. Its elements are:

Planning

Operational risk forms part of the risk appetite framework of the Group and includes three types of metrics:

· Economic capital calculated with the operational losses database of the Group and the industry, considering the corresponding diversification effects and the additional estimation of potential and emerging risks through stress scenarios designed for the main types of risks. The economic capital is regularly calculated for the main banks of the group and simulation capabilities are available to anticipate the impact of changes on the risk profile or new potential events.

· IRO metrics (operational risk losses vs. gross income) broken down by geography, business area and type of risk.

· In addition, work is in progress on the implementation in the entire group of a common and more granular scheme of metrics that covers the main types of operational risks.

Operational risk admission

The main purposes of the operational risk admission phase are the following:

· Anticipate potential operational risks to which the Group would be exposed with the emergence of new initiatives (new business, product, outsourcing, process transformation, new systems, etc.) or changes in those initiatives in place.

· Ensure that the implementation is carried out once the appropriate mitigation measures have been adopted, among others risk insurance, where appropriate.

The Corporate Policy on Operational Risk Management and Control sets out the specific operational risk admission framework through different committees, at a corporate and Business Area level, that follow a delegation structure based on the risk level of proposed initiatives.

Operational risk monitoring

The purpose of this phase is to check that the target operational risk profile of the group is within the authorized limits. Operational risk monitoring considers 2 scopes:

· Monitoring the operational risk admission process, oriented towards checking that accepted risks levels are within the limits and that defined controls are effective.

· Monitoring the operational risk “stock” linked to the processes, in order to carry out a regular reassessment to confirm that residual risks and target risk are reasonably aligned and, if not, to implement action plans to redress gaps to the desired level.

This process is supported by a corporate Governance, Risk & Compliance tool that monitors OR at a local level and its aggregation at a corporate level.

In addition, and in line with the best practices and recommendations provided by the BIS, BBVA has procedures to collect the operational losses occurred in the different entities of the Group and in other financial groups, with the appropriate level of detail to carry out an effective analysis that provides useful information for management purposes. To that end, a corporate tool implemented in all the countries of the Group is used.

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Operational risk mitigation

Several cross-sectional operational risk plans have been promoted over the last two years for the entire BBVA Group to encourage a forward-looking management of these risks. To that end, focuses have been identified from events, self-assessments and recommendations from auditors and supervisors in different geographies, both in the Group and the industry, thereby analyzing the best practices and fostering comprehensive action plans to strengthen and standardize the control environment.

One of the core plans is outsourcing management, which is an increasingly important subject in the Group, the industry and the regulatory environment. Some of the different initiatives launched under this scheme are summarized below:

· Strengthening the admission process of these initiatives and their control and monitoring frameworks.

· New internal regulation comprising the best practices of the industry.

· Integration in the 3 lines of defense control model: roles and responsibilities in each phase of its life cycle.

· Risk management of the service and the supplier.

· Review of its governance process, which is included in operational risk governance, and escalation criteria.

· Adaptation of the management tool to the new requirements.

· Internal communication process and training between outsourcing units and senior management, including these issues on the agenda of the main control committees of the Group.

This plan will still be promoted in the year 2019 with a focus on a review of the most significant outsourcing stock.

Governance of Non-financial risks

The non-financial risks governance model at the BBVA Group is based on two components:

· The three lines of defense control model, in accordance with the best practices of the industry and through which compliance with the most advanced standards in terms of operational risk internal control is ensured.

· Scheme of Corporate Assurance Committees and Operational Risk and Internal Control Committees at the level of the different business areas.

Corporate Assurance establishes a structure of corporate and local committees that provides Senior Management with a comprehensive and consistent view of the most relevant non-financial risks. The purpose is to ensure a forward-looking and prompt decision-making process for the mitigation or taking of the major risks both at a local level and at the level of the consolidated Group.

In addition, the Non-Financial Risks unit periodically reports the Risk Committee of the Board on the situation of non-financial risks management in the Group.

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7.7 Risk concentration

Policies for preventing excessive risk concentration

In order to prevent the build-up of excessive risk concentrations at the individual, sector and portfolio levels, BBVA Group maintains updated maximum permitted risk concentration indices which are tied to the various observable variables related to concentration risk.

Together with the limits for individual concentration, the Group uses the Herfindahl index to measure the concentration of the Group's portfolio and the banking group's subsidiaries. At the BBVA Group level, the index reached implies a "very low" degree of concentration.

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 much as possible, to reconcile 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 shareholder´s entity that assumes them), the markets, the macroeconomic situation, etc.

Risk concentrations by geography

The breakdown of the main figures in the most significant foreign currencies in the accompanying consolidated balance sheets is set forth in Appendix IX.

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 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, rating agencies and export credit organizations.

For additional information on sovereign risk in Europe see Appendix IX.

Valuation and impairment methods

The valuation methods used to assess the instruments that are subject to sovereign risks are the same ones used for other instruments included in the relevant portfolios and are detailed in Note 8.

Specifically, the fair value of sovereign debt securities of European countries has been considered equivalent to their listed price in active markets (Level 1 as defined in Note 8).

Risk related to the developer and Real-Estate sector in Spain

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The relative weight of the investment in Real Estate developments has dramatically decreased during the last years, especially since 2014. A corporate sales policy has been rolled out to eliminate those real estate assets from the balance sheet which have been most difficult to be commercialized. The sales of 80% of the Group’s share in Divarian and of other performing and NPL wholesale portfolios to Funds and specialized investors have been some of the most relevant transactions (see Note 3).

Policies and strategies established by the Group to deal with risks related to the developer and real-estate sector

BBVA has teams specializing in the management of the Real-Estate Sector risk, given its economic importance and specific technical component. This specialization is not only in the Risk-Acceptance teams, but throughout the handling, commercial, problem risks and legal, etc. It also includes the research department of the BBVA Group (BBVA Research), which helps determine the medium/long-term vision needed to manage this portfolio.

The policies established to address the risks related to the developer and real-estate sector, aim to accomplish, among others, the following objectives: to avoid concentration in terms of customers, products and regions; to estimate the risk profile for the portfolio; and to anticipate possible worsening of the portfolio within a sector is highly cyclic.

Specific policies for analysis and admission of new developer risk transactions

In the analysis of new operations, the assessment of the commercial operation in terms of the economic and financial viability of the project has been one of the constant.

The monitoring of the work, the sales and the legal situation of the project are essential aspects for the admission and follow-up of new real estate operations. With regard the participation of the Risk Acceptance teams, they have a direct link and participate in the committees of areas such as Valuation, Legal, Research and Recoveries. This guarantees coordination and exchange of information in all the processes.

The following strategies have been implemented with customers in the developer sector: avoidance of large corporate transactions, which had already reduced their share in the years of greatest market growth. Additionally, very restrictive limits have been established for the second-home market and for the of land operations. Feasibility studies, at project level, are performed by doing a contrast analysis in the pre-commercialization phase, with an appropriate funding cycle and in locations with low commercialization risk.

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Risk monitoring policies

The base information for analyzing the real estate portfolios is updated monthly. The tools used include the so-called “watch-list”, which is updated monthly with the progress of each client under watch, and the different strategic plans for management of special groups. There are plans that involve an intensification of the review of the portfolio for financing land, while, in the case of ongoing promotions, they are classified based on the rate of progress of the projects. This implies a comparison of the progress of the work and the sales, including a scoreboard which enables the persons in charge to detect timely any deviation from the project’s initial plan.

These actions have enabled BBVA to identify possible impairment situations, by always keeping an eye on BBVA’s position with each customer (whether or not as first creditor). In this regard, key aspects include management of the risk policy to be followed with each customer, contract review, improved collateral and rate review (repricing. Since 2013, there are no threats of new defaults in the portfolio

Proper management of the relationship with each customer requires knowledge of various aspects such as an analysis of the company’s future viability, the updating of the information on the debtor and the guarantors (their current situation and business course, economic-financial information, debt analysis and generation of funds), and the updating of the appraisal of the assets offered as collateral.

The volume of restructurings during the last period has been very low, being close to 0.

Policies applied in the management of real estate assets in Spain

Regarding the financing of real estate, a new regulation has been updated in 2018 in which recommendations for the promotion of residential real estate are established.

The recommendations represent guidelines about how to manage the credit admission activity of BBVA Group entities based on best practices of markets in which this activity is performed. It is expected that a high percentage of the current transactions will be in compliance with the latter.

The guidelines apply to new transactions with clients which are not classified as impaired or Watchlist (WL1 or WL2).

The policies deriving from the guidelines foresee a prudential intervention in a market which has changed its cycle in almost all of the geographies and which is showing a more sustainable behavior in terms of demography, employment and economic and investment capacities.

For quantitative information about the risk related to the developer and Real-Estate sector in Spain see Appendix IX.

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8. Fair Value of financial instruments

Framework and processes control

As part of the process established in the Group for determining the fair value in order to ensure that financial assets and liabilities are properly valued, BBVA has established, at a geographic level, a structure of Risk Operational Admission and Product Governance Committees responsible for validating and approving new products or types of financial assets and liabilities before being contracted. Local management responsible for valuation, which are independent from the business (see Note 7) are members of these committees.

These areas are required to ensure, prior to the approval stage, the existence of not only technical and human resources, but also adequate informational sources to measure the fair value of these financial assets and liabilities, in accordance with the rules established by the Group and using models that have been validated and approved by the responsible areas.

Fair value hierarchy

The fair value of financial instrument is defined as 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. It is therefore a market-based measurement and not specific to each entity.

All financial instruments, both assets and liabilities are initially recognized at fair value, which at that point is equivalent to the transaction price, unless there is evidence to the contrary in the market. Subsequently, depending on the type of financial instrument, it may continue to be recognized at amortized cost or fair value through adjustments in the consolidated income statement or equity.

When possible, the fair value is determined as the market price of a financial instrument. However, for many of the financial assets and liabilities of the Group, especially in the case of derivatives, there is no market price available, so its fair value is estimated on the basis of the price established in recent transactions involving similar instruments or, in the absence thereof, by using mathematical measurement models that are sufficiently tried and trusted by the international financial community. The estimates of the fair value derived from the use of such models 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 in the measurement models and possible inaccuracies in the assumptions and parameters required by these models may mean that the estimated fair value of an asset or liability does not exactly match the price for which the asset or liability could be exchanged or settled on the date of its measurement.

Additionally, for financial assets and liabilities that show significant uncertainty in inputs or model parameters used for valuation, criteria is established to measure said uncertainty and activity limits are set based on these. Finally, these measurements are compared, as much as possible, against other sources such as the measurements obtained by the business teams or those obtained by other market participants.

The process for determining the fair value requires the classification of the financial assets and liabilities according to the measurement processes used as set forth below:

· Level 1: Valuation using directly the quotation of the instrument, observable and readily and regularly available from independent price sources and referenced to active markets that the entity can access at the measurement date. The instruments classified within this level are fixed-income securities, equity instruments and certain derivatives.

· Level 2: Valuation of financial instruments with commonly accepted techniques that use inputs obtained from observable data in markets.

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· Level 3: Valuation of financial instruments with valuation techniques that use significant unobservable inputs in the market. As of December 31, 2018, the affected instruments at fair value accounted for approximately 0.56% of financial assets and 0.46% of the Group’s financial liabilities recorded at fair value. Model selection and validation is undertaken by control areas outside the business areas.

8.1 Fair value of financial instrument

Below is a comparison of the carrying amount of the Group’s financial instruments in the accompanying consolidated balance sheets and their respective fair values.

Fair Value and Carrying Amount (Millions of euros)
|  | 2018
| Notes | Carrying Amount | Fair Value
ASSETS |  |  |
Cash, cash balances at central banks and other demand deposits | 9 | 58,196 | 58,196
Financial assets held for trading | 10 | 90,117 | 90,117
Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 5,135 | 5,135
Financial assets designated at fair value through profit or loss | 12 | 1,313 | 1,313
Financial assets at fair value through other comprehensive income | 13 | 56,337 | 56,337
Financial assets at amortized cost | 14 | 419,660 | 419,857
Hedging derivatives | 15 | 2,892 | 2,892
LIABILITIES |  |  |
Financial liabilities held for trading | 10 | 80,774 | 80,774
Financial liabilities designated at fair value through profit or loss | 12 | 6,993 | 6,993
Financial liabilities at amortized cost | 22 | 509,185 | 510,300
Hedging derivatives | 15 | 2,680 | 2,680

Fair Value and Carrying Amount (Millions of euros)
|  | 2017 | 2016
| Notes | Carrying Amount | Fair Value | Carrying Amount | Fair Value
ASSETS |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 9 | 42,680 | 42,680 | 40,039 | 40,039
Financial assets held for trading | 10 | 64,695 | 64,695 | 74,950 | 74,950
Financial assets designated at fair value through profit or loss | 12 | 2,709 | 2,709 | 2,062 | 2,062
Available-for-sale financial assets |  | 69,476 | 69,476 | 79,221 | 79,221
Loans and receivables |  | 431,521 | 438,991 | 465,977 | 468,844
Held-to-maturity investments |  | 13,754 | 13,865 | 17,696 | 17,619
Derivatives – Hedge accounting | 15 | 2,485 | 2,485 | 2,833 | 2,833
LIABILITIES |  |  |  |  |
Financial liabilities held for trading | 10 | 46,182 | 46,182 | 54,675 | 54,675
Financial liabilities designated at fair value through profit or loss | 12 | 2,222 | 2,222 | 2,338 | 2,338
Financial liabilities at amortized cost | 22 | 543,713 | 544,604 | 589,210 | 594,190
Derivatives – Hedge accounting | 15 | 2,880 | 2,880 | 2,347 | 2,347

2017 and 2016 are presented separately due to the implementation of IFRS 9.

Not all financial assets and liabilities are recorded at fair value, so below we provide the information on financial instruments recorded at fair value and subsequently the information of those recorded at amortized cost (including their fair value), although this value is not used when accounting for these instruments.

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8.1.1 Fair value of financial instrument recognized at fair value, according to valuation criteria

Below are the different elements used in the valuation technique of financial instruments.

Active Market

BBVA considers active market as “a market that allows the observation of bid and offer prices representative of the levels to which the market participants are willing to negotiate an asset, with sufficient frequency and volume”.

By default, BBVA would consider all internally approved “Organized Markets” as active markets, without considering this an unchangeable list.

Furthermore, BBVA would consider as traded in an “Organized Market” quotations for assets or liabilities from OTC markets when they are obtained from independent sources, observable on a daily basis and fulfil certain conditions.

The following table shows the financial instruments carried at fair value in the accompanying consolidated balance sheets, broken down by the measurement technique used to determine their fair value:

Fair Value of financial Instruments by Levels (Millions of euros)
|  | 2018
| Notes | Level 1 | Level 2 | Level 3
ASSETS- |  |  |  |
Financial assets held for trading | 10 | 26,730 | 62,983 | 404
Loans and advances to customers |  | 47 | 28,642 | 60
Debt securities |  | 17,884 | 7,494 | 199
Equity instruments |  | 5,194 | - | 60
Derivatives |  | 3,605 | 26,846 | 85
Non-trading financial assets mandatorily at fair value through profit or loss | 11 | 3,127 | 78 | 1,929
Loans and advances |  | 25 | - | 1,778
Debt securities |  | 90 | 71 | 76
Equity instruments |  | 3,012 | 8 | 75
Financial assets designated at fair value through profit or loss | 12 | 1,313 | - | -
Loans and advances |  | - | - | -
Debt securities |  | 1,313 | - | -
Equity instruments |  | - | - | -
Financial assets at fair value through other comprehensive income | 13 | 45,824 | 9,323 | 1,190
Loans and advances |  | 33 | - | -
Debt securities |  | 43,788 | 9,211 | 711
Equity instruments |  | 2,003 | 113 | 479
Hedging derivatives | 15 | 7 | 2,882 | 3
LIABILITIES- |  |  |  |
Financial liabilities held for trading | 10 | 22,932 | 57,573 | 269
Deposits |  | 7,989 | 29,945 | -
Trading derivatives |  | 3,919 | 27,628 | 267
Other financial liabilities |  | 11,024 | - | 1
Financial liabilities designated at fair value through profit or loss | 12 | - | 4,478 | 2,515
Customer deposits |  | - | 976 | -
Debt certificates |  | - | 2,858 | -
Other financial liabilities |  | - | 643 | 2,515
Derivatives – Hedge accounting | 15 | 223 | 2,454 | 3

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Fair Value of financial Instruments by Levels (Millions of euros)
|  | 2017 | 2016
| Notes | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3
ASSETS- |  |  |  |  |  |  |
Financial assets held for trading | 10 | 29,057 | 35,349 | 289 | 32,544 | 42,221 | 184
Loans and advances to customers |  | - | 56 | - | - | 154 | -
Debt securities |  | 21,107 | 1,444 | 22 | 26,720 | 418 | 28
Equity instruments |  | 6,688 | 33 | 80 | 4,570 | 9 | 96
Derivatives |  | 1,262 | 33,815 | 187 | 1,254 | 41,640 | 60
Financial assets designated at fair value through profit or loss | 11 | 2,061 | 648 | - | 2,062 | - | -
Loans and advances to customers |  | - | 648 | - | - | - | -
Loans and advances to credit institutions |  | - | - | - | - | - | -
Debt securities |  | 174 | - | - | 142 | - | -
Equity instruments |  | 1,888 | - | - | 1,920 | - | -
Available-for-sale financial assets |  | 57,381 | 11,082 | 544 | 62,125 | 15,894 | 637
Debt securities |  | 54,850 | 10,948 | 454 | 58,372 | 15,779 | 429
Equity instruments |  | 2,531 | 134 | 90 | 3,753 | 115 | 208
Hedging derivatives | 15 | - | 2,483 | 2 | 41 | 2,792 | -
LIABILITIES- |  |  |  |  |  |  |
Financial liabilities held for trading | 10 | 11,191 | 34,866 | 125 | 12,502 | 42,120 | 53
Derivatives |  | 1,183 | 34,866 | 119 | 952 | 42,120 | 47
Short positions |  | 10,008 | - | 6 | 11,550 | - | 6
Financial liabilities designated at fair value through profit or loss | 12 | - | 2,222 | - | - | 2,338 | -
Derivatives – Hedge accounting | 15 | 274 | 2,606 | - | 94 | 2,189 | 64

The years 2017 and 2016 are presented separately due to the implementation of IFRS 9.

Financial instruments carried at fair value corresponding to the companies that belong to Banco Provincial Group in Venezuela whose balance is denominated in “bolivares fuertes” are classified under Level 3 in the above tables (see Note 2.2.20).

The following table sets forth the main valuation techniques, hypothesis and inputs used in the estimation of fair value of the financial instruments classified under Levels 2 and 3, based on the type of financial asset and liability and the corresponding balances as of December 31, 2018:

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Fair Value of financial Instruments by Levels. December 2018 (Millions of euros)
| Level 2 | Level 3 | Valuation technique(s) | Observable inputs | Unobservable inputs
ASSETS |  |  |  |  |
Financial assets held for trading | 62,983 | 404 |  |  |
Loans and advances | 28,642 | 60 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Current market interest rates | - Prepayment rates - Issuer´s credit risk - Recovery rates
Debt securities | 7,494 | 199 | Present-value method (Discounted future cash flows) Observed prices in non active markets | - Issuer´s credit risk - Current market interest rates - Non active markets prices | - Prepayment rates - Issuer´s credit risk - Recovery rates
Equity instruments | - | 60 | Comparable pricing (Observable price in a similar market) Present-value method | - Brokers quotes - Market operations - NAVs published | - NAV provided by the administrator of the fund
Derivatives | 26,846 | 85 |  |  |
Interest rate |  |  | Interest rate products (Interest rate swaps, Call money Swaps y FRA): Discounted cash flows Caps/Floors: Black, Hull-White y SABR Bond options: Black Swaptions: Black, Hull-White y LGM Other Interest rate options: Black, Hull-White y LGM Constant Maturity Swaps: SABR | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Beta - Implicit correlations between tenors - interest rates volatility
Equity |  |  | Future and Equity Forward: Discounted future cash flows Equity Options: Local Volatility, Momentum adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Implicit assets correlations - Long term implicit correlations - Implicit dividends and long term repos
Foreign exchange and gold |  |  | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Local Volatility, moments adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Implicit assets correlations - Long term implicit correlations
Credit |  |  | Credit Derivatives: Default model and Gaussian copula | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility
Commodities |  |  | Commodities: Momentum adjustment and Discounted cash flows | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Non-trading financial assets mandatorily at fair value through profit or loss | 78 | 1,929 |  |  |
Loans and advances | - | 1,778 | Present-value method (Discounted future cash flows) Specific criteria for the liquidation of losses established by the EPA protocol |  | - Prepayment rates - Issuer credit risk - Recovery rates - PD and LGD
Debt securities | 71 | 76 | Present-value method (Discounted future cash flows) | - Issuer credit risk - Current market interest rates | - Prepayment rates - Issuer credit risk - Recovery rates
Equity instruments | 8 | 75 | Present-value method (Discounted future cash flows) | - Issuer credit risk - Current market interest rates | - Prepayment rates - Issuer credit risk - Recovery rates
Financial assets at fair value through other comprehensive income | 9,323 | 1,190 |  |  |
Debt securities | 9,211 | 711 | Present-value method (Discounted future cash flows) Observed prices in non active markets | - Issuer´s credit risk - Current market interest rates - Non active market prices | - Prepayment rates - Issuer credit risk - Recovery rates
Equity instruments | 113 | 479 | Comparable pricing (Observable price in a similar market) Present-value method | - Brokers quotes - Market operations - NAVs published | - NAV provided by the administrator of the fund
Hedging derivatives | 2,882 | 3 |  |  |
Interest rate |  |  | Interest rate products (Interest rate swaps, Call money Swaps y FRA): Discounted cash flows Caps/Floors: Black, Hull-White y SABR Bond options: Black Swaptions: Black, Hull-White y LGM Other Interest rate options: Black, Hull-White y LGM Constant Maturity Swaps: SABR | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Equity |  |  | Future and Equity Forward: Discounted future cash flows Equity Options: Local Volatility, Momentum adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Foreign exchange and gold |  |  | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Local Volatility, moments adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Credit |  |  | Credit Derivatives: Default model and Gaussian copula | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Commodities |  |  | Commodities: Momentum adjustment and Discounted cash flows | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |

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Fair Value of financial Instruments by Levels. December 2018 (Millions of euros)
|  |  | Valuation technique(s) | Observable inputs | Unobservable inputs
LIABILITIES |  |  |  |  |
Financial liabilities held for trading | 57,573 | 269 |  |  |
Deposits | 29,945 | - |  |  |
Derivatives | 27,628 | 267 |  |  |
Interest rate |  |  | Interest rate products (Interest rate swaps, Call money Swaps y FRA): Discounted cash flows Caps/Floors: Black, Hull-White y SABR Bond options: Black Swaptions: Black, Hull-White y LGM Other Interest rate options: Black, Hull-White y LGM Constant Maturity Swaps: SABR | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Beta - Correlation between tenors - interest rates volatility
Equity |  |  | Future and Equity Forward: Discounted future cash flows Equity Options: Local Volatility, Momentum adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Assets correlation
Foreign exchange and gold |  |  | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Local Volatility, moments adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Assets correlation
Credit |  |  | Credit Derivatives: Default model and Gaussian copula | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility
Commodities |  |  | Commodities: Momentum adjustment and Discounted cash flows | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |
Short positions | - | 1 | Present-value method (Discounted future cash flows) |  | - Correlation default - Credit spread - Recovery rates - Interest rate yield
Financial liabilities designated at fair value through profit or loss | 4,478 | 2,515 | Present-value method (Discounted future cash flows) | - Prepayment rates - Issuer´s credit risk - Current market interest rates | - Prepayment rates - Issuer´s credit risk - Current market interest rates
Derivatives – Hedge accounting | 2,454 | 3 |  |  |
Interest rate |  |  | Interest rate products (Interest rate swaps, Call money Swaps y FRA): Discounted cash flows Caps/Floors: Black, Hull-White y SABR Bond options: Black Swaptions: Black, Hull-White y LGM Other Interest rate options: Black, Hull-White y LGM Constant Maturity Swaps: SABR | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Beta - Implicit correlations between tenors - interest rates volatility
Equity |  |  | Future and Equity Forward: Discounted future cash flows Equity Options: Local Volatility, Momentum adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Implicit assets correlations - Long term implicit correlations - Implicit dividends and long term repos
Foreign exchange and gold |  |  | Future and Equity Forward: Discounted future cash flows Foreign exchange Options: Local Volatility, moments adjustment | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Volatility of volatility - Implicit assets correlations - Long term implicit correlations
Credit |  |  | Credit Derivatives: Default model and Gaussian copula | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations | - Correlation default - Credit spread - Recovery rates - Interest rate yield - Default volatility
Commodities |  |  | Commodities: Momentum adjustment and Discounted cash flows | - Exchange rates - Market quoted future prices - Market interest rates - Underlying assets prices: shares, funds, commodities - Market observable volatilities - Issuer credit spread levels - Quoted dividends - Market listed correlations |

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Main valuation techniques

The main techniques used for the assessment of the majority of the financial instruments classified in Level 3, and its main unobservable inputs, are described below:

· The net present value (net present value method): This technique uses the future cash flows of each debt security, which are established in the different contracts, and discounted to their present value. This technique often includes many observable inputs, but may also include unobservable inputs, as described below:

- Credit Spread: This input represents the difference in yield of a debt security and the reference rate, reflecting the additional return that a market participant would require to take the credit risk of that debt security. Therefore, the credit spread of the debt security is part of the discount rate used to calculate the present value of the future cash flows.

- Recovery rate: This input represents the percentage of principal and interest recovered from a debt instrument that has defaulted.

· Comparable prices (similar asset prices): This input represents the prices of comparable financial instruments and benchmarks used to calculate a reference yield based on relative movements from the entry price or current market levels. Further adjustments to account for differences that may exist between financial instrument being valued and the comparable financial instrument may be added. It can also be assumed that the price of the financial instrument is equivalent to the comparable instrument.

· Net asset value: This input represents the total value of the financial assets and liabilities of a fund and is published by the fund manager thereof.

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· Gaussian copula: This model is used to integrate default probabilities of credit instruments referenced to more than one underlying CDS. The joint density function used to value the instrument is constructed by using a Gaussian copula that relates the marginal densities by a normal distribution, usually extracted from the correlation matrix of events approaching default by CDS issuers.

· Black 76: variant of Black Scholes model, whose main application is the valuation of bond options, cap floors and swaptions where the behavior of the Forward and not the Spot itself, is directly modeled.

· Black Scholes: The Black Scholes model postulates log-normal distribution for the prices of securities, so that the expected return under the risk neutral measure is the risk free interest rate. Under this assumption, the price of vanilla options can be obtained analytically, so that inverting the Black- Scholes formula, the implied volatility for process of the price can be calculated.

· Heston: This model, typically applied to equity OTC options, assumes stochastic behavior of volatility. According to which, the volatility follows a process that reverts to a long-term level and is correlated with the underlying equity instrument. As opposed to local volatility models, in which the volatility evolves deterministically, the Heston model is more flexible, allowing it to be similar to that observed in the short term today.

· Libor market model: This model assumes that the dynamics of the interest rate curve can be modeled based on the set of forward contracts that compose the underlying interest rate. The correlation matrix is parameterized on the assumption that the correlation between any two forward contracts decreases at a constant rate, beta, to the extent of the difference in their respective due dates. The input “Credit default volatility” is a volatility input of the credit factor dynamic. The multifactorial frame of this model makes it ideal for the valuation of instruments sensitive to the slope or curve, including interest rate option.

· Local Volatility: In the local volatility models of the volatility, instead of being static, evolves over time according to the level of moneyness of the underlying, capturing the existence of smiles. These models are appropriate for pricing path dependent options when use Monte Carlo simulation technique is used.

Adjustments to the valuation for risk of default

Under IFRS 13 the credit risk valuation adjustments must be considered in the classification of assets and liabilities within fair value hierarchy, because of the absence of observables data of probabilities of default used in the calculation.

The credit valuation adjustments (“CVA”) and debit valuation adjustments (“DVA”) are a part of derivative instrument valuations, both financial assets and liabilities, to reflect the impact in the fair value of the credit risk of the counterparty and BBVA, respectively.

These adjustments are calculated by estimating Exposure At Default, Probability of Default and Loss Given Default, for all derivative products on any instrument at the legal entity level (all counterparties under a same ISDA / CMOF) in which BBVA has exposure.

As a general rule, the calculation of CVA is done through simulations of market and credit variables to calculate the expected positive exposure, given the Exposure at Default and multiplying the result by the Loss Given Default of the counterparty. Consequently, the DVA is calculated as the result of the expected negative exposure given the Exposure at Default and multiplying the result by the Loss Given Default of the counterparty. Both calculations are performed throughout the entire period of potential exposure.

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The information needed to calculate the exposure at default and the loss given default come from the credit markets (Credit Default Swaps or iTraxx Indexes), where rating is available. For those cases where the rating is not available, BBVA implements a mapping process based on the sector, rating and geography to assign probabilities of both probability of default and loss given default, calibrated directly to market or with an adjustment market factor for the probability of default and the historical expected loss.

The amounts recognized in the consolidated balance sheet as of December 31, 2018 and 2017 related to the valuation adjustments to the credit assessment of the derivative asset as “Credit Valuation Adjustments” (“CVA”) was €-163 million and €-153 million respectively, and the valuation adjustments to the derivative liabilities as “Debit Valuation Adjustment” (DVA) was €214 million and €138 million respectively . The impact recorded under “Gains or (-) losses on financial assets and liabilities held for trading, net” in the consolidated income statement as for the years ended 2018 and 2017 corresponding to the mentioned adjustments was a net impact of €-24 million and €-23 million respectively. Additionally, as of December 31, 2018, €-12 million related to the “Funding Valuation Adjustments” (“FVA”) were recognized in the consolidated balance sheet.

Unobservable inputs

Quantitative information of unobservable inputs used to calculate Level 3 valuations is presented below as of December 31, 2018:

Financial instrument | Valuation technique(s) | Significant unobservable inputs | Min | Average | Max | Units
Debt Securities | Net Present Value | Credit Spread | 37 | 152.22 | 385.00 | b.p.
Recovery Rate | 0.00% | 32.06% | 40.00% | %
Comparable pricing |  | 1.00% | 88.00% | 275.00% | %
Equity instruments | Net Asset Value |  |
Comparable pricing |
Credit Option | Gaussian Copula | Correlation Default | 0.00% | 37.98% | 60.26% | %
Corporate Bond Option | Black 76 | Price Volatility | - | - | - | vegas
Equity OTC Option | Heston | Forward Volatility Skew | 47.05 | 47.05 | 47.05 | Vegas
Local Volatility | Dividends |
Volatility | 13.79 | 27.24 | 65.02 | vegas
FX OTC Options | Black Scholes/Local Vol | Volatility | 5.05 | 7.73 | 9.71 | vegas
Interest Rate Option | Libor Market Model | Beta | 0.25 | 9.00 | 18.00 | %
Correlation Rate/Credit | (100) | - | 100 | %
Credit Default Volatility | - | - | - | Vegas

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Financial assets and liabilities classified as Level 3

The changes in the balance of Level 3 financial assets and liabilities included in the accompanying consolidated balance sheets during 2018, 2017 and 2016, are as follows:

Financial Assets Level 3: Changes in the Period (Millions of euros)
| 2018 | 2017 | 2016
| Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Balance at the beginning | 835 | 125 | 822 | 116 | 463 | 182
Group incorporations | - | - | - | - | - | -
Changes in fair value recognized in profit and loss (*) | (167) | (95) | (24) | (21) | 33 | (86)
Changes in fair value not recognized in profit and loss | (4) | - | (45) | - | (81) | (3)
Acquisitions, disposals and liquidations (**) | 2,102 | 2,710 | 32 | 320 | 438 | (25)
Net transfers to Level 3 | 761 | 47 | 106 | (39) | 16 | -
Exchange differences and others | - | - | (55) | (250) | (47) | 49
Balance at the end | 3,527 | 2,787 | 835 | 125 | 822 | 116

(*) Profit or loss that is attributable to gains or losses relating to those financial assets and liabilities held as of December 31, 2018, 2017 and 2016. Valuation adjustments are recorded under the heading “Gains (losses) on financial assets and liabilities, net”.

(**) Of which, in 2018, the assets roll forward is comprised of €2,400 million of acquisitions, €254 millions of disposals and €44 millions of liquidations. The liabilities roll forward is comprised of €2,716 million of acquisitions and €5 millions of liquidations.

As of December 31, 2018, the profit/loss on sales of financial instruments classified as Level 3 recognized in the accompanying consolidated income statement was not material.

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Transfers between levels

The Global Valuation Area, in collaboration with BBVA Group, has established the rules for a proper financials instruments held for trading classification according to the fair value hierarchy defined by international accounting standards.

On a monthly basis, any new assets added to the portfolio are classified, according to this criterion, by the accounting subsidiary. Then, there is a quarterly review of the portfolio in order to analyze the need for a change in classification of any of these assets.

The financial instruments transferred between the different levels of measurement for the year ended December 31, 2018 are recorded at the following amounts in the accompanying consolidated balance sheets as of December 31, 2018:

Transfer Between Levels. December 2018 (Millions of euros)
| From: | Level 1 | Level 2 | Level 3
| To: | Level 2 | Level 3 | Level 1 | Level 3 | Level 1 | Level2
ASSETS |  |  |  |  |  |  |
Financial assets held for trading |  | 1,171 | 2 | 2 | 6 | - | 2
Non-trading financial assets mandatorily at fair value through profit or loss |  | - | - | 9 | 67 | - | 24
Financial assets at fair value through other comprehensive income |  | 134 | 72 | - | 515 | - | -
Derivatives |  | - | - | - | 52 | 118 | 49
Total |  | 1,305 | 74 | 11 | 641 | 118 | 75
LIABILITIES- |  |  |  |  |  |  |
Financial liabilities held for trading |  | - | - | - | 138 | - | 37
Total |  | - | - | - | 138 | - | 37

The amount of financial instruments that were transferred between levels of valuation for the year ended December 31, 2018 is not material relative to the total portfolios, and corresponds to the above changes in the classification between levels these financial instruments modified some of their features, specifically:

· Transfers between Levels 1 and 2 represent mainly debt and equity instruments, which are either no longer listed on an active market (transfer from Level 1 to 2) or have just started to be listed (transfer from Level 2 to 1).

· Transfers from Level 2 to Level 3 are mainly due to derivative transactions.

· Transfers from Level 3 to Level 2 generally affect derivative and debt instruments transactions, for which inputs observable in the market have been obtained.

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Sensitivity Analysis

Sensitivity analysis is performed on financial instruments with significant unobservable inputs (financial instruments included in level 3), in order to obtain a reasonable range of possible alternative valuations. This analysis is carried out on a monthly basis, based on the criteria defined by the Global Valuation Area taking into account the nature of the methods used for the assessment and the reliability and availability of inputs and proxies used. In order to establish, with a sufficient degree of certainty, the valuating risk that is incurred in such assets without applying diversification criteria between them.

As of December 31, 2018, the effect on profit for the period and total equity of changing the main unobservable inputs used for the measurement of Level 3 financial instruments for other reasonably possible unobservable inputs, taking the highest (most favorable input) or lowest (least favorable input) value of the range deemed probable, would be as follows:

Financial Assets Level 3: Sensitivity Analysis (Millions of euros)
| Potential Impact on Consolidated Income Statement | Potential Impact on Total Equity
| Most Favorable Hypothesis | Least Favorable Hypothesis | Most Favorable Hypothesis | Least Favorable Hypothesis
ASSETS |  |  |  |
Financial assets held for trading | 6 | (13) | - | -
Loans and Advances | - | - | - | -
Debt securities | 2 | (3) | - | -
Equity instruments | 3 | (9) | - | -
Derivatives | 1 | (1) | - | -
Non-trading financial assets mandatorily at fair value through profit or loss | 291 | (181) | - | -
Loans and Advances | 285 | (161) | - | -
Debt securities | 3 | (12) | - | -
Equity instruments | 3 | (8) | - | -
Financial assets designated at fair value through profit or loss | - | - | - | -
Financial assets at fair value through other comprehensive income | - | - | 1 | (1)
LIABILITIES |  |  |  |
Financial liabilities held for trading | 1 | (1) | 1 | (1)
Total | 297 | (194) | 1 | (1)

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8.2 Fair value of financial instruments carried at cost

The valuation technique used to calculate the fair value of financial assets and liabilities carried at cost as of December 31, 2018, are presented below:

Financial assets

6. Cash, balances at central banks and other demand deposits / loans to central banks / short-term loans to credit institutions / Repurchase agreements: in general, their fair value is assimilated to their book value, due to the nature of the counterparty and because they are mainly short-term balances in which the book value is the most reasonable estimation of the value of the asset.

7. Loans to credit institutions which are not short-term and loans to customers: In general, the fair value of these financial assets is determined by the discount of expected future cash flows, using market interest rates at the time of valuation adjusted by the credit spread and taking all kind of behavior hypothesis if it is considered to be relevant (prepayment fees, optionality, etc.).

8. Debt securities: Fair value estimated based on the available market price or by using internal valuation methodologies.

Financial liabilities

9. Deposits from central banks: for recurrent liquidity auctions and other monetary policy instruments of central banks, / short-term deposits from credit institutions / repurchase agreements / short-term customer deposits: their book value is considered to be the best estimation of their fair value.

10. Deposits of credit institutions which are not short-term and term customer deposits: these deposits will be valued by discounting future cash flows using the interest rate curve in effect at the time of the adjustment adjusted by the credit spread and incorporating any behavioral assumptions if this proves relevant (early repayments , optionalities, etc.).

11. Debt certificate (Issuances): The fair value estimation of these liabilities depend on the availability of market prices or by using the present value method: discount of future cash flows, using market interest rates at valuation time and taking into account the credit spread.

The following table presents the fair value of key financial instruments carried at amortized cost in the accompanying consolidated balance sheets as of December 31, 2018, 2017 and 2016, broken down according to the method of valuation used for the estimation:

Fair Value of financial Instruments at amortized cost by Levels (Millions of euros)
|  | 2018
| Notes | Level 1 | Level 2 | Level 3
ASSETS |  |  |  |
Cash, cash balances at central banks and other demand deposits | 9 | 58,024 | - | 172
Financial assets at amortized cost | 14 | 21,419 | 204,619 | 193,819
LIABILITIES |  |  |  |
Financial liabilities at amortized cost | 22 | 58,225 | 269,128 | 182,948

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The main valuation techniques and inputs used to estimate the fair value of financial instruments accounted for at cost and classified in levels 2 and 3 is shown below. These are broken down by type of financial instrument and the balances correspond to those as of December 31, 2018:

Fair Value of financial Instruments at amortized cost by valuation technique. December 2018 (Millions of euros)
| Level 2 | Level 3 | Valuation technique(s) | Main inputs used
ASSETS |  |  |  |
Financial assets at amortized cost | 204,619 | 193,819 |  |
Central Banks | - | 1 | Present-value method (Discounted future cash flows) | - Credit spread - Prepayment rates - Interest rate yield
Loans and advances to credit institutions | 4,934 | 4,291 | Present-value method (Discounted future cash flows) | - Credit spread - Prepayment rates - Interest rate yield
Loans and advances to customers | 190,666 | 183,645 | Present-value method (Discounted future cash flows) | - Credit spread - Prepayment rates - Interest rate yield
Debt securities | 9,019 | 5,881 | Present-value method (Discounted future cash flows) | - Credit spread - Interest rate yield
LIABILITIES |  |  |  |
Financial liabilities at amortized cost | 269,128 | 182,948 |  |
Central Banks | 196 | - | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield
Loans and advances to credit institutions | 22,281 | 9,852 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield
Loans and advances to customers | 240,547 | 135,270 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield
Debt securities | 6,104 | 25,096 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield
Other financial liabilities | - | 12,730 | Present-value method (Discounted future cash flows) | - Issuer´s credit risk - Prepayment rates - Interest rate yield

Equity instruments at cost

Until 2017, there were equity instruments and discretionary profit-sharing arrangements in some entities which were recognized at cost in the Group’s consolidated balance sheets because their fair value could not be estimated in a sufficiently reliable manner for the amount of €469 and €565 million, as of December 31, 2017 and 2016, respectively.

9. Cash, cash balances at central banks and other demands deposits

The breakdown of the balance under the heading “Cash, cash balances at central banks and other demands deposits” in the accompanying consolidated balance sheets is as follows:

Cash, cash balances at central banks and other demand deposits (Millions of euros)
|  | 2018 | 2017 | 2016
Cash on hand |  | 6,346 | 6,220 | 7,413
Cash balances at central banks |  | 43,880 | 31,718 | 28,671
Other demand deposits |  | 7,970 | 4,742 | 3,955
Total |  | 58,196 | 42,680 | 40,039

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10. Financial assets and liabilities held for trading

## 10.1 Breakdown of the balance

The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:

Financial Assets and Liabilities Held-for-Trading (Millions of euros)
| Notes | 2018 | 2017 | 2016
ASSETS |  |  |  |
Derivatives |  | 30,536 | 35,265 | 42,955
Debt securities | 7.3.2 | 25,577 | 22,573 | 27,166
Loans and advances | 7.3.2 | 28,750 | 56 | 154
Equity instruments | 7.3.2 | 5,254 | 6,801 | 4,675
Total Assets |  | 90,117 | 64,695 | 74,950
LIABILITIES |  |  |  |
Derivatives |  | 31,815 | 36,169 | 43,118
Short positions |  | 11,025 | 10,013 | 11,556
Deposits |  | 37,934 |  |
Total Liabilities |  | 80,774 | 46,182 | 54,675

As of December 31, 2018 “Short positions” include €10,255 million held with General governments.

## 10.2 Debt securities

The breakdown by type of issuer of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Financial Assets Held-for-Trading. Debt securities by issuer (Millions of euros)
| 2018 | 2017 | 2016
Issued by Central Banks | 1,001 | 1,371 | 544
Issued by public administrations | 22,950 | 19,344 | 23,621
Issued by financial institutions | 790 | 816 | 1,652
Other debt securities | 836 | 1,041 | 1,349
Total | 25,577 | 22,573 | 27,166

##

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## 10.3 Loans and advances

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Financial Assets Held-for-Trading. Loans and advances (Millions of euros)
| Notes | 2018 | 2017 | 2016
Loans and advances to central banks |  | 2,163 | - | -
Reverse repurchase agreements | 35 | 2,163 | - | -
Loans and advances to credit institutions |  | 14,566 | - | -
Reverse repurchase agreements | 35 | 13,305 | - | -
Loans and advances to customers |  | 12,021 | 56 | 154
Reverse repurchase agreements | 35 | 11,794 | - | -
Total |  | 28,750 | 56 | 154

## 10.4 Equity instruments

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Financial Assets Held-for-Trading. Equity instruments by Issuer (Millions of euros)
| 2018 | 2017 | 2016
Shares of Spanish companies |  |  |
Credit institutions | 576 | 617 | 781
Other sectors | 536 | 603 | 956
Subtotal | 1,112 | 1,220 | 1,737
Shares of foreign companies |  |  |
Credit institutions | 304 | 345 | 220
Other sectors | 3,838 | 5,236 | 2,718
Subtotal | 4,142 | 5,581 | 2,939
Total | 5,254 | 6,801 | 4,675

##

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## 10.5 Deposits

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Financial Liabilities Held-for-Trading. Deposits (Millions of euros)
| Notes | 2018 | 2017 | 2016
Deposits from central banks (*) |  | 10,511 |  |
Repurchase agreement | 35 | 10,511 |  |
Deposits from credit institutions (*) |  | 15,687 |  |
Repurchase agreement | 35 | 14,839 |  |
Deposits from customers (*) |  | 11,736 |  |
Repurchase agreement | 35 | 11,466 |  |
Total |  | 37,934 |  |

##

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## 10.6 Derivatives

The derivatives portfolio arises from the Group’s need to manage the risks it is exposed to in the normal course of business and also to market products amongst the Group’s customers. As of December 31, 2018, 2017 and 2016, trading derivatives were mainly contracted in over-the-counter (OTC) markets, with counterparties, consisting primarily of foreign credit institutions, and are related to foreign-exchange, interest-rate and equity risk.

Below is a breakdown of the net positions by transaction type of the fair value and notional amounts of derivatives recognized in the accompanying consolidated balance sheets, divided into organized and OTC markets:

Derivatives by type of risk / by product or by type of market - December 2018 (Millions of Euros)
| Assets | Liabilities | Notional amount - Total
Interest rate | 19,147 | 18,769 | 2,929,371
OTC options | 1,940 | 2,413 | 207,107
OTC other | 17,206 | 16,356 | 2,702,909
Organized market options | - | - | 6,092
Organized market other | - | - | 13,263
Equity | 2,799 | 2,956 | 114,184
OTC options | 400 | 341 | 32,906
OTC other | 230 | 123 | 6,693
Organized market options | 2,168 | 2,492 | 72,062
Organized market other | - | - | 2,524
Foreign exchange and gold | 8,355 | 9,693 | 432,283
OTC options | 226 | 309 | 21,293
OTC other | 8,118 | 9,329 | 405,659
Organized market options | - | 1 | 45
Organized market other | 11 | 54 | 5,286
Credit | 232 | 393 | 25,452
Credit default swap | 228 | 248 | 22,791
Credit spread option | 2 | - | 500
Total return swap | 2 | 145 | 2,161
Other | - | - | -
Commodities | 3 | 3 | 67
Other | - | - | -
DERIVATIVES | 30,536 | 31,815 | 3,501,358
of which: OTC - credit institutions | 16,979 | 18,729 | 897,384
of which: OTC - other financial corporations | 7,372 | 7,758 | 2,355,784
of which: OTC - other | 4,005 | 2,780 | 148,917

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Derivatives by type of risk / by product or by type of market - December 2017 (Millions of Euros)
| Assets | Liabilities | Notional amount - Total
Interest rate | 22,606 | 22,546 | 2,152,490
OTC options | 2,429 | 2,581 | 212,554
OTC other | 20,177 | 19,965 | 1,916,920
Organized market options | - | - | 600
Organized market other | - | - | 22,416
Equity | 1,778 | 2,336 | 95,573
OTC options | 495 | 1,118 | 34,140
OTC other | 83 | 90 | 8,158
Organized market options | 1,200 | 1,129 | 48,644
Organized market other | - | - | 4,631
Foreign exchange and gold | 10,371 | 10,729 | 380,404
OTC options | 245 | 258 | 24,447
OTC other | 10,092 | 10,430 | 348,857
Organized market options | - | 3 | 104
Organized market other | 34 | 37 | 6,997
Credit | 489 | 517 | 30,181
Credit default swap | 480 | 507 | 27,942
Credit spread option | - | - | 200
Total return swap | 9 | 9 | 2,039
Other | - | - | -
Commodities | 3 | 3 | 36
Other | 18 | 38 | 561
DERIVATIVES | 35,265 | 36,169 | 2,659,246
of which: OTC - credit institutions | 21,016 | 22,804 | 898,209
of which: OTC - other financial corporations | 8,695 | 9,207 | 1,548,919
of which: OTC - other | 4,316 | 2,986 | 128,722

F-158

Derivatives by type of risk / by product or by type of market - December 2016 (Millions of Euros)
| Assets | Liabilities | Notional amount - Total
Interest rate | 25,770 | 25,322 | 1,556,150
OTC options | 3,331 | 3,428 | 217,958
OTC other | 22,339 | 21,792 | 1,296,183
Organized market options | 1 | - | 1,311
Organized market other | 100 | 102 | 40,698
Equity | 2,032 | 2,252 | 90,655
OTC options | 718 | 1,224 | 44,837
OTC other | 109 | 91 | 5,312
Organized market options | 1,205 | 937 | 36,795
Organized market other | - | - | 3,712
Foreign exchange and gold | 14,872 | 15,179 | 425,506
OTC options | 417 | 539 | 27,583
OTC other | 14,436 | 14,624 | 392,240
Organized market options | 3 | - | 175
Organized market other | 16 | 16 | 5,508
Credit | 261 | 338 | 19,399
Credit default swap | 246 | 230 | 15,788
Credit spread option | - | - | 150
Total return swap | 2 | 108 | 1,895
Other | 14 | - | 1,565
Commodities | 6 | 6 | 169
Other | 13 | 22 | 1,065
DERIVATIVES | 42,955 | 43,118 | 2,092,945
of which: OTC - credit institutions | 26,438 | 28,005 | 806,096
of which: OTC - other financial corporations | 8,786 | 9,362 | 1,023,174
of which: OTC - other | 6,404 | 4,694 | 175,473

F-159

11. Non-trading financial assets mandatorily at fair value through profit or loss

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Non-trading financial assets mandatorily at fair value through profit or loss (Millions of Euros)
| Notes | 2018
Equity instruments | 7.3.2 | 3,095
Debt securities | 7.3.2 | 237
Loans and advances | 7.3.2 | 1,803
Total |  | 5,135

This heading is included with the implementation of IFRS 9 on January 1, 2018. Previously, this category did not exist in IAS 39 (see Note 2.2.1 and 2.3).

12. Financial assets and liabilities designated at fair value through profit or loss

The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:

Financial assets and liabilities designated at fair value through profit or loss (Millions of euros)
| Notes | 2018 | 2017 | 2016
ASSETS |  |  |  |
Equity instruments |  |  | 1,888 | 1,920
Unit-linked products |  |  | 1,621 | 1,749
Other securities |  |  | 266 | 171
Debt securities |  | 1,313 | 174 | 142
Loans and advances |  | - | 648 | -
Total Assets | 7.3.2 | 1,313 | 2,709 | 2,062
LIABILITIES |  |  |  |
Deposits |  | 976 | - | -
Debt certificates |  | 2,858 | - | -
Other financial liabilities |  | 3,159 | 2,222 | 2,338
Unit-linked products |  | 3,159 | 2,222 | 2,338
Total Liabilities |  | 6,993 | 2,222 | 2,338

With the implementation of IFRS 9 on January 1, 2018, equity instruments under this heading have been reclassified to the heading: “Non-trading financial assets mandatorily at fair value through profit or loss” (see Note 11).

As of December 31, 2018, 2017 and 2016, the most significant balances within financial liabilities designated at fair value through profit or loss related to assets and liabilities linked to insurance products where the policyholder bears the risk ("Unit-Link"). This type of product is sold only in Spain, through BBVA Seguros S.A., insurance and reinsurance and in Mexico through Seguros Bancomer S.A. de CV.

Since the liabilities linked to insurance products in which the policyholder assumes the risk are valued the same way as the assets associated to these insurance products, there is no credit risk component borne by the Group in relation to these liabilities.

F-160

13. Financial assets at fair value through other comprehensive income

13.1 Balance details

The breakdown of the balance by the main financial instruments in the accompanying consolidated balance sheets is as follows:

Financial assets designated at fair value through other comprehensive income (Millions of euros)
| Notes | 2018 | 2017 | 2016
Debt securities | 7.3.2 | 53,737 | 66,273 | 74,739
Impairment losses |  | (28) | (21) | (159)
Subtotal |  | 53,709 | 66,251 | 74,580
Equity instruments | 7.3.2 | 2,595 | 4,488 | 4,814
Impairment losses |  | - | (1,264) | (174)
Subtotal |  | 2,595 | 3,224 | 4,641
Loans and advances to credit entities |  | 33 | - | -
Total |  | 56,337 | 69,476 | 79,221

F-161

13.2 Debt securities

The breakdown of the balance under the heading “Debt securities” of the accompanying consolidated financial statements, broken down by the nature of the financial instruments, is as follows:

Financial assets designated at fair value through other comprehensive income: Debt Securities. December 2018 (Millions of euros)
| Amortized Cost (*) | Unrealized Gains | Unrealized Losses | Book Value
Domestic Debt Securities |  |  |  |
Spanish Government and other general governments agencies debt securities | 17,205 | 661 | (9) | 17,857
Other debt securities | 1,597 | 100 | (1) | 1,696
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 793 | 63 | - | 855
Issued by other issuers | 804 | 37 | (1) | 841
Subtotal | 18,802 | 761 | (10) | 19,553
Foreign Debt Securities |  |  |  |
Mexico | 6,299 | 6 | (142) | 6,163
Mexican Government and other general governments agencies debt securities | 5,286 | 4 | (121) | 5,169
Other debt securities | 1,013 | 2 | (21) | 994
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 35 | - | (1) | 34
Issued by other issuers | 978 | 2 | (20) | 961
The United States | 14,507 | 47 | (217) | 14,338
Government securities | 11,227 | 37 | (135) | 11,130
US Treasury and other US Government agencies | 7,285 | 29 | (56) | 7,258
States and political subdivisions | 3,942 | 8 | (79) | 3,872
Other debt securities | 3,280 | 10 | (82) | 3,208
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 49 | 1 | - | 50
Issued by other issuers | 3,231 | 9 | (82) | 3,158
Turkey | 4,164 | 20 | (269) | 3,916
Turkey Government and other general governments agencies debt securities | 4,007 | 20 | (256) | 3,771
Other debt securities | 157 | - | (13) | 145
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 157 | - | (13) | 145
Issued by other issuers | - | - | - | -
Other countries | 9,551 | 319 | (130) | 9,740
Other foreign governments and other general governments agencies debt securities | 4,510 | 173 | (82) | 4,601
Other debt securities | 5,041 | 146 | (48) | 5,139
Issued by Central Banks | 987 | 2 | (4) | 986
Issued by credit institutions | 1,856 | 111 | (20) | 1,947
Issued by other issuers | 2,197 | 33 | (25) | 2,206
Subtotal | 34,521 | 392 | (758) | 34,157
Total | 53,323 | 1,153 | (768) | 53,709

(*) The amortized cost includes portfolio gains/losses linked to insurance contracts in which the policyholder assumes the risk in case of redemption.

F-162

Available-for-sale financial assets: Debt Securities. December 2017 (Millions of euros)
| Amortized Cost (*) | Unrealized Gains | Unrealized Losses | Book Value
Domestic Debt Securities |  |  |  |
Spanish Government and other general governments agencies debt securities | 22,765 | 791 | (17) | 23,539
Other debt securities | 1,951 | 114 | - | 2,066
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 891 | 72 | - | 962
Issued by other issuers | 1,061 | 43 | - | 1,103
Subtotal | 24,716 | 906 | (17) | 25,605
Foreign Debt Securities |  |  |  |
Mexico | 9,755 | 45 | (142) | 9,658
Mexican Government and other general governments agencies debt securities | 8,101 | 34 | (120) | 8,015
Other debt securities | 1,654 | 11 | (22) | 1,643
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 212 | 1 | (3) | 209
Issued by other issuers | 1,442 | 10 | (19) | 1,434
The United States | 12,479 | 36 | (198) | 12,317
Government securities | 8,625 | 8 | (133) | 8,500
US Treasury and other US Government agencies | 3,052 | - | (34) | 3,018
States and political subdivisions | 5,573 | 8 | (99) | 5,482
Other debt securities | 3,854 | 28 | (65) | 3,817
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 56 | 1 | - | 57
Issued by other issuers | 3,798 | 26 | (65) | 3,759
Turkey | 5,052 | 48 | (115) | 4,985
Turkey Government and other general governments agencies debt securities | 5,033 | 48 | (114) | 4,967
Other debt securities | 19 | 1 | (1) | 19
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 19 | - | (1) | 19
Issued by other issuers | - | - | - | -
Other countries | 13,271 | 533 | (117) | 13,687
Other foreign governments and other general governments agencies debt securities | 6,774 | 325 | (77) | 7,022
Other debt securities | 6,497 | 208 | (40) | 6,664
Issued by Central Banks | 1,330 | 2 | (1) | 1,331
Issued by credit institutions | 2,535 | 139 | (19) | 2,654
Issued by other issuers | 2,632 | 66 | (19) | 2,679
Subtotal | 40,557 | 661 | (572) | 40,647
Total | 65,273 | 1,567 | (589) | 66,251

(*) The amortized cost includes portfolio gains/losses linked to insurance contracts in which the policyholder assumes the risk in case of redemption.

F-163

Available-for-sale financial assets: Debt Securities. December 2016 (Millions of euros)
| Amortized Cost (*) | Unrealized Gains | Unrealized Losses | Book Value
Domestic Debt Securities |  |  |  |
Spanish Government and other general governments agencies debt securities | 22,427 | 711 | (18) | 23,119
Other debt securities | 2,305 | 117 | (1) | 2,421
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 986 | 82 | - | 1,067
Issued by other issuers | 1,319 | 36 | (1) | 1,354
Subtotal | 24,731 | 828 | (19) | 25,540
Foreign Debt Securities |  |  |  |
Mexico | 11,525 | 19 | (343) | 11,200
Mexican Government and other general governments agencies debt securities | 9,728 | 11 | (301) | 9,438
Other debt securities | 1,797 | 8 | (42) | 1,763
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 86 | 2 | (1) | 87
Issued by other issuers | 1,710 | 6 | (41) | 1,675
The United States | 14,256 | 48 | (261) | 14,043
Government securities | 8,460 | 9 | (131) | 8,337
US Treasury and other US Government agencies | 1,702 | 1 | (19) | 1,683
States and political subdivisions | 6,758 | 8 | (112) | 6,654
Other debt securities | 5,797 | 39 | (130) | 5,706
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 95 | 2 | - | 97
Issued by other issuers | 5,702 | 37 | (130) | 5,609
Turkey | 5,550 | 73 | (180) | 5,443
Turkey Government and other general governments agencies debt securities | 5,055 | 70 | (164) | 4,961
Other debt securities | 495 | 2 | (16) | 482
Issued by Central Banks | - | - | - | -
Issued by credit institutions | 448 | 2 | (15) | 436
Issued by other issuers | 47 | - | (1) | 46
Other countries | 17,923 | 634 | (203) | 18,354
Other foreign governments and other general government agencies debt securities | 7,882 | 373 | (98) | 8,156
Other debt securities | 10,041 | 261 | (105) | 10,197
Issued by Central Banks | 1,657 | 4 | (2) | 1,659
Issued by credit institutions | 3,269 | 96 | (54) | 3,311
Issued by other issuers | 5,115 | 161 | (49) | 5,227
Subtotal | 49,253 | 773 | (987) | 49,040
Total | 73,985 | 1,601 | (1,006) | 74,580

(*) The amortized cost includes portfolio gains/losses linked to insurance contracts in which the policyholder assumes the risk in case of redemption.

The credit ratings of the issuers of debt securities as of December 31, 2018, 2017 and 2016, are as follows:

Debt Securities by Rating
| December 2018 | December 2017 | December 2016
| Fair Value (Millions of Euros) | % | Fair Value (Millions of Euros) | % | Fair Value (Millions of Euros) | %
AAA | 531 | 1.0% | 687 | 1.0% | 4,922 | 6.6%
AA+ | 13,100 | 24.4% | 10,738 | 16.2% | 11,172 | 15.0%
AA | 222 | 0.4% | 507 | 0.8% | 594 | 0.8%
AA- | 409 | 0.8% | 291 | 0.4% | 575 | 0.8%
A+ | 632 | 1.2% | 664 | 1.0% | 1,230 | 1.6%
A | 687 | 1.3% | 683 | 1.0% | 7,442 | 10.0%
A- | 18,426 | 34.3% | 1,330 | 2.0% | 1,719 | 2.3%
BBB+ | 9,195 | 17.1% | 35,175 | 53.1% | 29,569 | 39.6%
BBB | 4,607 | 8.6% | 7,958 | 12.0% | 3,233 | 4.3%
BBB- | 1,003 | 1.9% | 5,583 | 8.4% | 6,809 | 9.1%
BB+ or below | 4,453 | 8.3% | 1,564 | 2.4% | 2,055 | 2.8%
Without rating | 445 | 0.8% | 1,071 | 1.6% | 5,261 | 7.1%
Total | 53,709 | 100% | 66,251 | 100.0% | 74,580 | 100.0%

F-164

13.3 Equity instruments

The breakdown of the balance under the heading "Equity instruments" of the accompanying consolidated financial statements as of December 31, 2018, 2017 and 2016, are as follows:

Financial assets designated at fair value through other comprehensive income: Equity Instruments. December 2018 (Millions of euros)
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value
Equity instruments listed |  |  |  |
Listed Spanish company shares | 2,172 | - | (210) | 1,962
Credit institutions | - | - | - | -
Other entities | 2,172 | - | (210) | 1,962
Listed foreign company shares | 90 | 43 | (12) | 121
United States | 20 | 17 | - | 37
Mexico | 1 | 25 | - | 26
Turkey | 3 | - | (1) | 2
Other countries | 66 | 1 | (11) | 56
Subtotal | 2,262 | 43 | (222) | 2,083
Unlisted equity instruments | - | - | - | -
Unlisted Spanish company shares | 6 | 1 | - | 7
Credit institutions | - | - | - | -
Other entities | 6 | 1 | - | 7
Unlisted foreign companies shares | 453 | 54 | (1) | 506
United States | 388 | 23 | - | 411
Mexico | - | - | - | -
Turkey | 6 | 4 | - | 10
Other countries | 59 | 27 | (1) | 85
Subtotal | 459 | 55 | (1) | 513
Total | 2,721 | 98 | (223) | 2,595

Available-for-sale financial assets: Equity Securities. December 2017 (Millions of euros)
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value
Equity instruments listed |  |  |  |
Listed Spanish company shares | 2,189 | - | (1) | 2,188
Credit institutions | - | - | - | -
Other entities | 2,189 | - | (1) | 2,188
Listed foreign company shares | 215 | 33 | (7) | 241
United States | 11 | - | - | 11
Mexico | 8 | 25 | - | 33
Turkey | 4 | 1 | - | 5
Other countries | 192 | 7 | (7) | 192
Subtotal | 2,404 | 33 | (8) | 2,429
Unlisted equity instruments |  |  |  |
Unlisted Spanish company shares | 33 | 29 | - | 62
Credit institutions | 4 | - | - | 4
Other entities | 29 | 29 | - | 58
Unlisted foreign companies shares | 665 | 77 | (8) | 734
United States | 498 | 40 | (6) | 532
Mexico | 1 | - | - | 1
Turkey | 15 | 6 | (2) | 19
Other countries | 151 | 31 | - | 182
Subtotal | 698 | 106 | (8) | 796
Total | 3,102 | 139 | (16) | 3,224

F-165

Available-for-sale financial assets: Equity Securities. December 2016 (Millions of euros)
| Amortized Cost | Unrealized Gains | Unrealized Losses | Fair Value
Equity instruments listed |  |  |  |
Listed Spanish company shares | 3,690 | 17 | (944) | 2,763
Credit institutions | - | - | - | -
Other entities | 3,690 | 17 | (944) | 2,763
Listed foreign company shares | 793 | 289 | (15) | 1,066
United States | 16 | 22 | - | 38
Mexico | 8 | 33 | - | 41
Turkey | 5 | 1 | - | 6
Other countries | 763 | 234 | (15) | 981
Subtotal | 4,483 | 306 | (960) | 3,829
Unlisted equity instruments |  |  |  |
Unlisted Spanish company shares | 57 | 2 | (1) | 59
Credit institutions | 4 | - | - | 4
Other entities | 53 | 2 | (1) | 55
Unlisted foreign companies shares | 708 | 46 | (2) | 752
United States | 537 | 13 | - | 550
Mexico | 1 | - | - | 1
Turkey | 18 | 7 | (2) | 24
Other countries | 152 | 26 | - | 178
Subtotal | 766 | 48 | (3) | 811
Total | 5,248 | 355 | (962) | 4,641

13.4 Gains/losses

Debt securities

The changes in the gains/losses, net of taxes, recognized in 2018 under the equity heading “Accumulated other comprehensive income – Items that may be reclassified to profit or loss - Financial assets at fair value through other comprehensive income” in the accompanying consolidated balance sheets are as follows:

Accumulated other comprehensive income-Items that may be reclassified to profit or loss - Financial assets at fair value through other comprehensive income (Millions of euros)
| Notes | 2018
Balance at the beginning |  | 1,557
Effect of changes in accounting policies (IFRS 9) |  | (58)
Valuation gains and losses |  | (640)
Amounts transferred to income |  | (137)
Other reclassifications |  | -
Income tax |  | 221
Balance at the end | 30 | 943

F-166

In 2018, the debt securities impaired recognized in the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss - Financial assets at fair value through other comprehensive income” in the accompanying consolidated income statement amounted to €1 million. In 2017 the recovery recognized amounted €4 million; meanwhile, in 2016 the impairment recognized amounted €157 million (see Note 47).

Equity instruments

The changes in the gains/losses, net of taxes, recognized under the equity heading “Accumulated other comprehensive income – Items that will not be reclassified to profit or loss - Fair value changes of equity instruments measured at fair value through other comprehensive income” in the accompanying consolidated balance sheets are as follows:

Accumulated other comprehensive income-Items that may be reclassified to profit or loss - Financial assets at fair value through other comprehensive income (Millions of euros)
| Notes | 2018
Balance at the beginning |  | 84
Effect of changes in accounting policies (IFRS 9) |  | (40)
Valuation gains and losses |  | (174)
Amounts transferred to income |  | -
Other reclassifications |  | -
Income tax |  | (25)
Balance at the end | 30 | (155)

In 2018, there has been no impairment recognized under the heading “Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss - Financial assets at fair value through other comprehensive income” in the accompanying consolidated income statement. In 2017 and 2016 the impairment recognized were €1,131 and €46 million, respectively (see Note 47).

Years 2017 and 2016

2017 and 2016 are presented separately due to the implementation of IFRS 9:

Accumulated other comprehensive income-Items that may be reclassified to profit or loss - Available-for-Sale Financial Assets (Millions of euros)
| Notes | 2017 | 2016
Balance at the beginning |  | 947 | 1,674
Valuation gains and losses |  | 321 | 400
Amounts transferred to income |  | 356 | (1,181)
Other reclassifications |  | (10) | 116
Income tax |  | 27 | (62)
Balance at the end | 30 | 1,641 | 947
Of which: |  | - | -
Debt securities |  | 1,557 | 1,629
Equity instruments |  | 84 | (682)

F-167

14. Financial assets at amortized cost

14.1 Balance details

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the nature of the financial instrument, is as follows:

Financial assets at amortized cost (Millions of Euros)
| December 2018 | December 2017 | December 2016
Debt securities | 32,530 | 24,093 | 28,905
Loans and advances to central banks | 3,941 | 7,300 | 8,894
Loans and advances to credit institutions | 9,163 | 26,261 | 31,373
Loans and advances to customers | 374,027 | 387,621 | 414,500
Government | 28,114 | 31,645 |
Other financial corporations | 9,468 | 18,173 |
Non-financial corporations | 163,922 | 164,510 |
Other | 172,522 | 173,293 |
Total | 419,660 | 445,275 | 483,672

During financial year 2018, there have been no significant reclassifications neither from “Financial assets at amortized cost” to other headings or from other headings to “Financial assets at amortized cost”.

14.2 Loans and advances to central banks and credit institutions

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to their nature, is as follows:

Loans and Advances to Central Banks and Credit Institutions (Millions of euros)
| Notes | 2018 | 2017 | 2016
Loans and advances to central banks | 7.3.2 | 3,941 | 7,300 | 8,894
Loans and advances to credit institutions | 7.3.2 | 9,163 | 26,261 | 31,373
Reverse repurchase agreements | 35 | 478 | 13,861 | 15,561
Other loans |  | 8,685 | 12,400 | 15,812
Total |  | 13,104 | 33,561 | 40,267
Of which: |  | - | - | -
Impairment losses | 7.3.5 / 7.3.2 | (18) | (36) | (43)

14.3 Loans and advances to customers

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to their nature, is as follows:

Loans and Advances to Customers (Millions of euros)
| Notes | 2018 | 2017 | 2016
On demand and short notice |  | 3,641 | 10,560 | 11,251
Credit card debt |  | 15,445 | 15,835 | 16,596
Trade receivables |  | 17,436 | 22,705 | 23,753
Finance leases |  | 8,650 | 8,642 | 9,442
Reverse repurchase loans | 35 | 294 | 11,554 | 7,291
Other term loans |  | 324,767 | 313,336 | 339,862
Advances that are not loans |  | 3,794 | 4,989 | 6,306
Total | 7.3.2 | 374,027 | 387,621 | 414,500
Of which: |  | - | - | -
Impaired assets | 7.3.5 | 16,349 | 19,390 | 22,915
Impairment losses | 7.3.5 / 7.3.2 | (12,199) | (12,748) | (15,974)

F-168

As of December 31, 2018, 2017 and 2016, 38%, 38% and 34%, respectively, of "Loans and advances to customers" with maturity greater than one year have fixed-interest rates and 62%, 62% and 66%, respectively, have variable interest rates.

The heading “Financial assets at amortized cost – Loans and advances to customers” in the accompanying consolidated balance sheets also includes certain secured loans that, as pursuant to the Mortgage Market Act, are linked to long-term mortgage-covered bonds.

This heading also includes some loans that have been securitized. The balances recognized in the accompanying consolidated balance sheets corresponding to these securitized loans are as follows:

Securitized Loans (Millions of euros)
| 2018 | 2017 | 2016
Securitized mortgage assets | 26,556 | 28,950 | 29,512
Other securitized assets | 3,221 | 4,143 | 3,731
Total | 29,777 | 33,093 | 33,243

14.4 Debt securities

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the issuer of the debt securities, is as follows:

Debt securities (Millions of euros)
| Notes | 2018 | 2017 | 2016
Government |  | 25,014 | 17,030 | 20,736
Credit institutions |  | 644 | 1,152 | 1,688
Other sectors |  | 6,872 | 5,911 | 6,481
Total gross | 7.3.2 | 32,530 | 24,093 | 28,905
Of which: |  | - | - | -
Impairment losses |  | (51) | (15) | (17)

As of December 31, 2018, 2017 and 2016, the credit ratings of the issuers of debt securities classified as follows:

Financial assets at amortized cost. Debt Securities by Rating
| December 2018 |  | December 2017 |  | December 2016 |
| Carrying amount (Millions of Euros) | % | Carrying amount (Millions of Euros) | % | Carrying amount (Millions of Euros) | %
AAA | 49 | 0.2% | - | - | - | -
AA+ | 1,969 | 6.1% | - | - | - | -
AA | 62 | 0.2% | 41 | 0.3% | 43 | 0.2%
AA- | - | 0.0% | - | - | 134 | 0.8%
A+ | 607 | 1.9% | 55 | 0.4% | - | -
A | 21 | 0.1% | - | - | - | -
A- | 6,117 | 18.8% | - | - | - | -
BBB+ | 13,894 | 42.7% | 5,667 | 41.2% | 10,472 | 59.2%
BBB | 1,623 | 5.0% | 2,412 | 17.5% | 591 | 3.3%
BBB- | 2,694 | 8.3% | 2,818 | 20.5% | 5,187 | 29.3%
BB+ or below | 4,371 | 13.4% | 1,696 | 12.3% | - | -
Without rating | 1,123 | 3.5% | 1,064 | 7.7% | 1,270 | 7.2%
Total | 32,530 | 100.0% | 13,754 | 100.0% | 17,696 | 100.0%

F-169

In 2016, according to the applicable accounting policy, some debt securities were reclassified between existing accounts from such policy (from “Available for sale financial assets” to “Loans and receivables” and “Held-to-maturity investments” of the consolidated balance sheet. As mentioned in Note 1.3, on January 1, 2018, IFRS 9 became effective, therefore, the debt securities previously reclassified are recorded under “Financial assets at amortized cost” in the consolidated balance sheet as of December 31, 2018. The following table shows the fair value and carrying amounts of these reclassified financial assets:

Debt Securities reclassified (Millions of euros)
| As of Reclassification date | As of December 31, 2018 | As of December 31, 2017 | As of December 31, 2016
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Carrying Amount | Fair Value
BBVA, S.A. | 12,024 | 12,024 | 1,467 | 1,486 | 7,236 | 7,286 | 10,433 | 10,498
TURKIYE GARANTI BANKASI, A.S | 6,488 | 6,488 | 2,859 | 2,668 | 5,381 | 5,392 | 6,230 | 6,083
Total | 18,512 | 18,512 | 4,326 | 4,154 | 12,617 | 12,678 | 16,663 | 16,581

As of December 31, 2018, 2017 and 2016, the amount recognized in the income statement from the valuation at amortized cost of the reclassified financial assets, as well as the impact recognized on the income statement and under the heading “Total Equity - Accumulated other comprehensive income”, if the reclassification was not performed is included in the following table.

Effect on Income Statement and Other Comprehensive Income (Millions of euros)
| 2018 | 2017 | 2016
| Recognized in | Effect of not Reclassifying in | Recognized in | Effect of not Reclassifying in | Recognized in | Effect of not Reclassifying in
| Income Statement | Income Statement | Equity "Accumulated other comprehensive income" | Income Statement | Income Statement | Equity "Accumulated other comprehensive income" | Income Statement | Income Statement | Equity "Accumulated other comprehensive income"
BBVA, S.A. | 41 | 41 | (2) | 198 | 198 | (14) | 252 | 252 | (91)
TURKIYE GARANTI BANKASI, A.S | 414 | 414 | (172) | 545 | 545 | (16) | 326 | 326 | (225)
Total | 456 | 456 | (173) | 743 | 743 | (30) | 578 | 578 | (316)

15. Hedging derivatives and fair value changes of the hedged items in portfolio hedges of interest rate risk

The balance of these headings in the accompanying consolidated balance sheets is as follows:

Derivatives – Hedge accounting and fair value changes of the hedged items in portfolio hedge of interest rate risk (Millions of euros)
| 2018 | 2017 | 2016
ASSETS |  |  |
Hedging Derivatives | 2,892 | 2,485 | 2,833
Fair value changes of the hedged items in portfolio hedges of interest rate risk | (21) | (25) | 17
LIABILITIES |  |  |
Hedging Derivatives | 2,680 | 2,880 | 2,347
Fair value changes of the hedged items in portfolio hedges of interest rate risk | - | (7) | -

F-170

As of December 31, 2018, 2017 and 2016, the main positions hedged by the Group and the derivatives designated to hedge those positions were:

· Fair value hedging:

- Fixed-interest debt securities at fair value through other comprehensive income and at amortized cost: The interest rate risk of these securities is hedged using interest rate derivatives (fixed-variable swaps) and forward sales.

- Long-term fixed-interest debt securities issued by the Bank: the interest rate risk of these securities is hedged using interest rate derivatives (fixed-variable swaps).

- Fixed-interest loans: The equity price risk of these instruments is hedged using interest rate derivatives (fixed-variable swaps).

- Fixed-interest and/or embedded derivative deposit portfolio hedges: it covers the interest rate risk through fixed-variable swaps. The valuation of the borrowed deposits corresponding to the interest rate risk is in the heading "Fair value changes of the hedged items in portfolio hedges of interest rate risk”.

· Cash-flow hedges: Most of the hedged items are floating interest-rate loans and asset hedges linked to the inflation of the financial assets at fair value through other comprehensive income portfolio. This risk is hedged using foreign-exchange, interest-rate swaps, inflation and FRA’s (“Forward Rate Agreement”).

· Net foreign-currency investment hedges: These hedged risks are foreign-currency investments in the Group’s foreign subsidiaries. This risk is hedged mainly with foreign-exchange options and forward currency sales and purchases.

Note 7 analyzes the Group’s main risks that are hedged using these derivatives.

The details of the net positions by hedged risk of the fair value of the hedging derivatives recognized in the accompanying consolidated balance sheets are as follows:

Hedging Derivatives Breakdown by type of risk and type of hedge (Millions of euros)
|  | 2018 | 2017 | 2016
|  | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities
Interest rate |  | 982 | 513 | 1,141 | 850 | 1,154 | 974
OTC options |  | 5 | 158 | 100 | 111 | 125 | 118
OTC other |  | 978 | 355 | 1,041 | 739 | 1,029 | 856
Organized market options |  | - | - | - | - | - | -
Organized market other |  | - | - | - | - | - | -
Equity |  | 6 | - | - | - | - | 50
OTC options |  | 6 | - | - | - | - | 50
OTC other |  | - | - | - | - | - | -
Organized market options |  | - | - | - | - | - | -
Organized market other |  | - | - | - | - | - | -
Foreign exchange and gold |  | 587 | 398 | 625 | 511 | 817 | 553
OTC options |  | - | - | - | - | - | -
OTC other |  | 587 | 398 | 625 | 511 | 817 | 553
Organized market options |  | - | - | - | - | - | -
Organized market other |  | - | - | - | - | - | -
Credit |  | - | - | - | - | - | -
Commodities |  | - | - | - | - | - | -
Other |  | - | - | - | - | - | -
FAIR VALUE HEDGES |  | 1,575 | 912 | 1,766 | 1,362 | 1,970 | 1,577
Interest rate |  | 221 | 562 | 244 | 533 | 194 | 358
OTC options |  | - | - | - | - | - | -
OTC other |  | 219 | 562 | 242 | 533 | 186 | 358
Organized market options |  | - | - | - | - | - | -
Organized market other |  | 2 | - | 2 | - | 8 | -
Equity |  | - | - | - | - | - | -
Foreign exchange and gold |  | 955 | 873 | 119 | 714 | 248 | 118
OTC options |  | - | - | - | - | 89 | 70
OTC other |  | 955 | 873 | 119 | 714 | 160 | 48
Organized market options |  | - | - | - | - | - | -
Organized market other |  | - | - | - | - | - | -
Credit |  | - | - | - | - | - | -
Commodities |  | - | - | - | - | - | -
Other |  | - | - | - | - | - | -
CASH FLOW HEDGES |  | 1,176 | 1,435 | 363 | 1,247 | 442 | 476
HEDGE OF NET INVESTMENTS IN A FOREIGN OPERATION |  | 92 | 231 | 301 | 15 | 362 | 79
PORTFOLIO FAIR VALUE HEDGES OF INTEREST RATE RISK |  | 33 | 90 | 46 | 256 | 55 | 214
PORTFOLIO CASH FLOW HEDGES OF INTEREST RATE RISK |  | 15 | 12 | 9 | - | 4 | -
DERIVATIVES-HEDGE ACCOUNTING |  | 2,892 | 2,680 | 2,485 | 2,880 | 2,833 | 2,347
of which: OTC - credit institutions |  | 2,534 | 2,462 | 1,829 | 2,527 | 2,381 | 2,103
of which: OTC - other financial corporations |  | 355 | 216 | 651 | 234 | 435 | 165
of which: OTC - other |  | 2 | 2 | 2 | 120 | 9 | 79

F-171

The cash flows forecasts for the coming years for cash flow hedging recognized on the accompanying consolidated balance sheet as of December 31, 2018 are:

Cash Flows of Hedging Instruments (Millions of euros)
| 3 Months or Less | From 3 Months to 1 Year | From 1 to 5 Years | More than 5 Years | Total
Receivable cash inflows | 116 | 277 | 1,828 | 2,181 | 4,401
Payable cash outflows | 139 | 517 | 2,215 | 2,221 | 5,092

The above cash flows will have an impact on the Group’s consolidated income statements until 2058.

In 2018, 2017 and 2016, there was no reclassification in the accompanying consolidated income statements of any amount corresponding to cash flow hedges that was previously recognized in equity (see Note 41).

The amount for derivatives designated as accounting hedges that did not pass the effectiveness test in December 31, 2018, 2017 and 2016 were not material.

16. Investments in joint ventures, associates

16.1 Joint venture s and associates

The breakdown of the balance of “Investments in joint ventures and associates” (see Note 2.1) in the accompanying consolidated balance sheets is as follows:

Joint Ventures and Associates Entities. Breakdown by entities (Millions of euros)
| 2018 | 2017 | 2016
Joint ventures |  |  |
Fideic F 403853 5 BBVA Bancom Ser.Zibata | - | 27 | 33
Fideicomiso 1729 Invex Enajenacion de Cartera | 55 | 53 | 57
PSA Finance Argentina Compañia Financier | 10 | 14 | 21
Altura Markets, S.V., S.A. | 69 | 64 | 19
RCI Colombia | 32 | 19 | 17
Other joint ventures | 7 | 79 | 82
Subtotal | 173 | 256 | 229
Associates Entities |  |  |
Metrovacesa Suelo y Promoción, S.A. | 508 | 697 | 208
Testa Residencial SOCIMI, S.A.U. | - | 444 | 91
Metrovacesa Promoción y Arrendamientos, S.A. | - | - | 67
Atom Bank, PLC | 138 | 66 | 43
Divarian Propiedad S.A.U. | 591 | - | -
Servired | 9 | 9 | 11
Other associates | 159 | 116 | 116
Subtotal | 1,405 | 1,332 | 536
Total | 1,578 | 1,588 | 765

F-172

Details of the joint ventures and associates as of December 31, 2018 are shown in Appendix II.

The following is a summary of the changes in the in December 31, 2018, 2017 and 2016 under this heading in the accompanying consolidated balance sheets:

Joint Ventures and Associates Entities. Changes in the Year (Millions of euros)
| Notes | 2018 | 2017 | 2016
Balance at the beginning |  | 1,588 | 765 | 879
Acquisitions and capital increases |  | 309 | 868 | 456
Disposals and capital reductions |  | (516) | (8) | (91)
Transfers and changes of consolidation method |  | 211 | - | (351)
Share of profit and loss | 39 | (7) | 3 | 25
Exchange differences |  | 2 | (29) | (34)
Dividends, valuation adjustments and others |  | (8) | (12) | (118)
Balance at the end |  | 1,578 | 1,588 | 765

The variation during the year 2018 is mainly explained by the decrease of BBVA Group stakes in Testa Residencial, S.A., Metrovacesa Suelo y Promoción, S.A. and Divarian Propiedad, S.A.U. (see Note 3 and Appendix III).

The variation during the year 2017 is mainly explained by the increase of BBVA Group stakes in Testa Residencial, S.A. and Metrovacesa Suelo y Promoción, S.A. through its contribution to the capital increases carried out by both entities by contributing assets from the Bank’s real estate assets (see Note 21).

During the year 2016, two capital increases in Metrovacesa, S.A. were made through a debt swap and a contribution of real estate assets, which provided the Group 357 million euros, after this there was a partial Split of Metrovacesa, S.A. in favor of a beneficiary company from a new constitution denominated Metrovacesa Suelo y Promocion, S.A. In the fourth quarter of the year 2016, there was a total split of Metrovacesa, S.A. through its extinction and division of its patrimony in three parts, two of which merged with Merlin Properties, SOCIMI, S.A. and Testa Residencial, SOCIMI, S.A. As result of the previous mentioned splits, the Group received equity interests in the corresponding beneficiary companies, 6.41% of its capital was received, having been transferred to the heading "Available-for-sale” of the consolidated financial assets as of December 31, 2016.

Appendix III provides notifications on acquisitions and disposals of holdings in subsidiaries, joint ventures and associates, in compliance with Article 155 of the Corporations Act and Article 53 of the Securities Market Act 24/1988.

F-173

16.2 Other information about associates and joint ventures

If these entities had been consolidated rather than accounted for using the equity method, the change in each of the lines of balance sheet and the consolidated income statement would not be significant.

As of December 31, 2018, 2017 and 2016 there was no financial support agreement or other contractual commitment to associates and joint ventures entities from the holding or the subsidiaries that are not recognized in the financial statements (see Note 53.2).

As of December 31, 2018, 2017 and 2016 there was no contingent liability in connection with the investments in joint ventures and associates (see Note 53.2).

16.3 Impairment

As described in IAS 36, when there is indicator of impairment, the book value of the associates and joint venture entities should be compared with their recoverable amount, being the latter calculated as the higher between the value in use and the fair value minus the cost of sale. As of December 31, 2018, 2017 and 2016, there were no significant impairments recognized.

17. Tangible assets

The breakdown and movement of the balance and changes of this heading in the accompanying consolidated balance sheets, according to the nature of the related items, is as follows:

Tangible Assets: Breakdown by Type of Assets and Changes in the year 2018. (Millions of euros) |
|  | For Own Use | Total tangible asset of Own Use | Investment Properties | Assets Leased out under an Operating Lease | Total |
| Notes | Land and Buildings | Work in Progress | Furniture, Fixtures and Vehicles |
Cost |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 5,490 | 234 | 6,628 | 12,352 | 228 | 492 | 13,072 |
Additions |  | 445 | 78 | 404 | 927 | 11 | - | 938 |
Retirements |  | (98) | (17) | (492) | (607) | (149) | (1) | (757) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | - | - |
Transfers |  | 64 | (177) | (12) | (125) | (5) | - | (130) |
Exchange difference and other |  | 38 | (48) | (214) | (224) | 116 | (105) | (213) |
Balance at the end |  | 5,939 | 70 | 6,314 | 12,323 | 201 | 386 | 12,910 |
Accrued depreciation |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 1,076 | - | 4,380 | 5,456 | 13 | 77 | 5,546 |
Additions | 45 | 120 | - | 469 | 589 | 5 | - | 594 |
Retirements |  | (36) | - | (403) | (439) | (8) | - | (447) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | (3) | - | - | (3) | - | - | (3) |
Transfers |  | (31) | - | (22) | (53) | (2) | - | (55) |
Exchange difference and other |  | 12 | - | (212) | (200) | 3 | (1) | (198) |
Balance at the end |  | 1,138 | - | 4,212 | 5,350 | 11 | 76 | 5,437 |
Impairment |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 315 | - | - | 315 | 20 | - | 335 |
Additions | 48 | 30 | - | - | 30 | (25) | - | 5 |
Retirements |  | - | - | - | - | (27) | - | (27) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | - | - |
Transfers |  | (77) | - | - | (77) | (3) | - | (80) |
Exchange difference and other |  | (51) | - | - | (51) | 62 | - | 11 |
Balance at the end |  | 217 | - | - | 217 | 27 | - | 244 |
Net tangible assets |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 4,099 | 234 | 2,248 | 6,581 | 195 | 415 | 7,191 |
Balance at the end |  | 4,584 | 70 | 2,102 | 6,756 | 163 | 310 | 7,229 |

F-174

Tangible Assets. Breakdown by Type of Assets and Changes in the year 2017 (Millions of euros) |
|  | For Own Use | Total tangible asset of Own Use | Investment Properties | Assets Leased out under an Operating Lease | Total |
| Notes | Land and Buildings | Work in Progress | Furniture, Fixtures and Vehicles |
Cost |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 6,176 | 240 | 7,059 | 13,473 | 1,163 | 958 | 15,594 |
Additions |  | 49 | 128 | 397 | 574 | 1 | 201 | 776 |
Retirements |  | (42) | (29) | (264) | (335) | (90) | (93) | (518) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | (552) | (552) |
Transfers |  | (273) | (57) | (186) | (516) | (698) | - | (1,214) |
Exchange difference and other |  | (420) | (48) | (378) | (844) | (148) | (22) | (1,014) |
Balance at the end |  | 5,490 | 234 | 6,628 | 12,352 | 228 | 492 | 13,072 |
Accrued depreciation |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 1,116 | - | 4,461 | 5,577 | 63 | 216 | 5,856 |
Additions | 45 | 127 | - | 553 | 680 | 13 | - | 693 |
Retirements |  | (26) | - | (235) | (261) | (7) | (21) | (289) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | (134) | (134) |
Transfers |  | (53) | - | (146) | (199) | (31) | - | (230) |
Exchange difference and other |  | (88) | - | (253) | (341) | (25) | 16 | (350) |
Balance at the end |  | 1,076 | - | 4,380 | 5,456 | 13 | 77 | 5,546 |
Impairment |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 379 | - | - | 379 | 409 | 10 | 798 |
Additions | 48 | 5 | - | - | 5 | 37 | - | 42 |
Retirements |  | (2) | - | - | (2) | (10) | - | (12) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | (10) | (10) |
Transfers |  | (58) | - | - | (58) | (276) | - | (334) |
Exchange difference and other |  | (9) | - | - | (9) | (140) | - | (149) |
Balance at the end |  | 315 | - | - | 315 | 20 | - | 335 |
Net tangible assets |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 4,681 | 240 | 2,598 | 7,519 | 691 | 732 | 8,941 |
Balance at the end |  | 4,099 | 234 | 2,248 | 6,581 | 195 | 415 | 7,191 |

F-175

Tangible Assets. Breakdown by Type of Assets and Changes in the year 2016 (Millions of euros) |
|  | For Own Use | Total tangible asset of Own Use | Investment Properties | Assets Leased out under an Operating Lease | Total |
| Notes | Land and Buildings | Work in Progress | Furniture, Fixtures and Vehicles |
Cost |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 5,858 | 545 | 7,628 | 14,029 | 2,391 | 668 | 17,088 |
Additions |  | 30 | 320 | 563 | 913 | 62 | 337 | 1,312 |
Retirements |  | (85) | (29) | (468) | (582) | (117) | (97) | (796) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | (7) | - | (1) | (8) | (3) | - | (11) |
Transfers |  | 676 | (544) | (386) | (254) | (986) | 84 | (1,156) |
Exchange difference and other |  | (296) | (52) | (277) | (625) | (184) | (34) | (843) |
Balance at the end |  | 6,176 | 240 | 7,059 | 13,473 | 1,163 | 958 | 15,594 |
Accrued depreciation |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 1,103 | - | 4,551 | 5,654 | 116 | 202 | 5,972 |
Additions | 45 | 106 | - | 561 | 667 | 23 | - | 690 |
Retirements |  | (72) | - | (461) | (533) | (10) | (17) | (560) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | - | - |
Transfers |  | (1) | - | (37) | (38) | (55) | 55 | (38) |
Exchange difference and other |  | (20) | - | (153) | (173) | (11) | (24) | (208) |
Balance at the end |  | 1,116 | - | 4,461 | 5,577 | 63 | 216 | 5,856 |
Impairment |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 354 | - | - | 354 | 808 | 10 | 1,172 |
Additions | 48 | 48 | - | 5 | 53 | 90 | - | 143 |
Retirements |  | (2) | - | - | (2) | (9) | - | (11) |
Acquisition of subsidiaries in the year |  | - | - | - | - | - | - | - |
Disposal of entities in the year |  | - | - | - | - | - | - | - |
Transfers |  | (1) | - | - | (1) | (380) | - | (381) |
Exchange difference and other |  | (20) | - | (5) | (25) | (100) | - | (125) |
Balance at the end |  | 379 | - | - | 379 | 409 | 10 | 798 |
Net tangible assets |  |  |  |  |  |  |  |  |
Balance at the beginning |  | 4,401 | 545 | 3,077 | 8,021 | 1,467 | 456 | 9,944 |
Balance at the end |  | 4,681 | 240 | 2,598 | 7,519 | 691 | 732 | 8,941 |

As of December 31, 2018, 2017 and 2016, the cost of fully amortized tangible assets that remained in use were €2,624, €2,660 and €2,313 million respectively while its recoverable residual value was not significant.

As of December 31, 2018, 2017 and 2016 the amount of tangible assets under financial lease schemes on which the purchase option is expected to be exercised was not material. The main activity of the Group is carried out through a network of bank branches located geographically as shown in the following table:

Branches by Geographical Location (Number of branches)
| 2018 | 2017 | 2016
Spain | 2,840 | 3,019 | 3,303
Mexico | 1,836 | 1,840 | 1,836
South America | 1,543 | 1,631 | 1,667
The United States | 646 | 651 | 676
Turkey | 1,066 | 1,095 | 1,131
Rest of Eurasia | 32 | 35 | 47
Total | 7,963 | 8,271 | 8,660

F-176

The following table shows the detail of the net carrying amount of the tangible assets corresponding to Spanish and foreign subsidiaries as of December 31, 2018, 2017 and 2016:

Tangible Assets by Spanish and Foreign Subsidiaries. Net Assets Values (Millions of euros)
|  | 2018 | 2017 | 2016
BBVA and Spanish subsidiaries |  | 2,705 | 2,574 | 3,692
Foreign subsidiaries |  | 4,524 | 4,617 | 5,249
Total |  | 7,229 | 7,191 | 8,941

18. Intangible assets

18.1 Goodwill

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, according to the cash-generating units (CGUs), is as follows:

Goodwill. Breakdown by CGU and Changes of the year (Millions of euros)
| The United States | Turkey | Mexico | Colombia | Chile | Other | Total
Balance as of December 31, 2015 | 5,328 | 727 | 602 | 176 | 62 | 20 | 6,915
Additions | - | - | - | - | - | 8 | 8
Exchange difference | 175 | (101) | (79) | 14 | 6 | - | 15
Impairment | - | - | - | - | - | - | -
Other | - | (1) | - | - | - | - | (1)
Balance as of December 31, 2016 | 5,503 | 624 | 523 | 191 | 68 | 28 | 6,937
Additions | - | - | 24 | - | - | - | 24
Exchange difference | (666) | (115) | (44) | (22) | (3) | (1) | (851)
Impairment | - | - | - | - | - | (4) | (4)
Other | - | - | (10) | - | (33) | - | (43)
Balance as of December 31, 2017 | 4,837 | 509 | 493 | 168 | 32 | 23 | 6,062
Additions | - | - | - | - | - | - | -
Exchange difference | 229 | (127) | 26 | (7) | (3) | - | 118
Impairment | - | - | - | - | - | - | -
Other | - | - | - | - | - | - | -
Balance as of December 31, 2018 | 5,066 | 382 | 519 | 161 | 29 | 23 | 6,180

In 2018, 2017 and 2016, there were no significant business combinations.

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Impairment Test

As mentioned in Note 2.2.8 of the consolidated financial statements for the year 2018, the cash-generating units (CGUs) to which goodwill has been allocated are periodically tested for impairment by including the allocated goodwill in their carrying amount. This analysis is performed at least annually and whenever there is any indication of impairment.

Both the CGU’s fair values and the fair values assigned to its assets and liabilities had been based on the estimates and assumptions that the Group’s Management has deemed most likely given the circumstances. However, some changes to the valuation assumptions used could result in differences in the impairment test result.

Three key assumptions are used when calculating the impairment test. These hypothesis are the ones to which the amount of the recoverable value is most sensitive:

· The forecast cash flows estimated by the Group's management, and based on the latest available budgets for the next 5 years.

· The constant sustainable growth rate for extrapolating cash flows, starting in the fifth year (2023), beyond the period covered by the budgets or forecasts.

· The discount rate on future cash flows, which coincides with the cost of capital assigned to each CGU, and which consists of a risk-free rate plus a premium that reflects the inherent risk of each of the businesses evaluated.

The focus used by the Group's management to determine the values of the hypotheses is based both on its projections and past experience. These values are uniform and use external sources of information. At the same time, the valuations of the most significant goodwill have in general been reviewed by independent experts (not the Group's external auditors) who apply different valuation methods according to each type of asset and liability. The valuation methods used are: The method for calculating the discounted value of future cash flows, the market transaction method and the cost method.

As of December 31, 2018, 2017 and 2016, no indicators of impairment have been identified in any of the main CGUs.

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Goodwill - United States CGU

The Group’s most significant goodwill corresponds to the CGU in the United States, the main significant hypotheses used in the impairment test of this mentioned CGU are:

Impairment test hypotheses CGU Goodwill in the United States
| 2018 | 2017 | 2016
Discount rate | 10.5% | 10.0% | 10.0%
Sustainable growth rate | 4.0% | 4.0% | 4.0%

Given the potential growth of the sector, in accordance with paragraph 33 of IAS 36, as of December 31, 2018, 2017 and 2016 the Group used a steady growth rate of 4.0% based on the real GDP growth rate of the United States and expected inflation. This 4.0% rate is less than the historical average of the past 30 years of the nominal GDP rate of the United States and lower than the real GDP growth forecasted by the IMF.

The assumptions with a greater relative weight and whose volatility could affect more in determining the present value of the cash flows starting on the fifth year are the discount rate and the sustainable growth rate. Below is shown the increased (or decreased) amount of the recoverable amount as a result of a reasonable variation (in basis points) of each of the key assumptions:

Sensitivity analysis for main hypotheses - USA (Millions of euros)
| Impact of an increase of 50 basis points (*) | Impact of a decrease of 50 basis points (*)
Discount rate | (1,009) | 1,176
Sustainable growth rate | 526 | (451)

(*) Based on historical changes, the use of 50 basis points to calculate the sensitivity analysis would be a reasonable variation with respect to the observed variations over the last five years.

Another assumption used, and with a high impact on the impairment test, is the budgets of the CGU and specifically the effect that changes in interest rates have on cash flows.

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Goodwill - Turkey CGU

The Group’s most significant goodwill corresponds to the CGU in the Turkey, the main significant hypotheses used in the impairment test of this mentioned CGU are:

Impairment test assumptions CGU Goodwill in Turkey
| 2018 | 2017 | 2016
Discount rate | 24.3% | 18.0% | 17.7%
Sustainable growth rate | 7.0% | 7.0% | 7.0%

Given the potential growth of the sector, in accordance with paragraph 33 of IAS 36, as of December 31, 2018, 2017 and 2016 the Group used a steady growth rate of 7.0% based on the real GDP growth rate of Turkey and expected inflation.

The assumptions with a greater relative weight and whose volatility could affect more in determining the present value of the cash flows starting on the fifth year are the discount rate and the sustainable growth rate. Below is shown the increased (or decreased) amount of the recoverable amount as a result of a reasonable variation (in basis points) of each of the key assumptions:

Sensitivity analysis for main assumptions - Turkey (Millions of euros)
| Impact of an increase of 50 basis points (*) | Impact of a decrease of 50 basis points (*)
Discount rate | (149) | 158
Sustainable growth rate | 40 | (37)

(*) Based on historical changes, the use of 50 basis points to calculate the sensitivity analysis would be a reasonable variation with respect to the observed variations over the last five years.

Goodwill in business combinations

There were no significant business combinations during 2018, 2017 and 2016.

18.2 Other intangible assets

The breakdown of the balance and changes of this heading in the accompanying consolidated balance sheets, according to the nature of the related items, is as follows:

Other intangible assets (Millions of euros)
|  | 2018 | 2017 | 2016
Computer software acquisition expenses |  | 1,605 | 1,682 | 1,877
Other intangible assets with an infinite useful life |  | 11 | 12 | 12
Other intangible assets with a definite useful life |  | 518 | 708 | 960
Total |  | 2,134 | 2,402 | 2,849

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The changes of this heading in December 31, 2018, 2017 and 2016, are as follows:

Other Intangible Assets (Millions of euros)
| Notes | 2018 | 2017 | 2016
Balance at the beginning |  | 2,402 | 2,849 | 3,137
Acquisition of subsidiaries in the year |  | - | - | -
Additions |  | 552 | 564 | 645
Amortization in the year | 45 | (614) | (694) | (735)
Exchange differences and other |  | (123) | (305) | (196)
Impairment |  | (83) | (12) | (3)
Balance at the end |  | 2,134 | 2,402 | 2,849

As of December 31, 2018, 2017and 2016, the cost of fully amortized intangible assets that remained in use were €1,604 million, €1,380 million and €1,501 million respectively, while their recoverable value was not significant.

19. Tax assets and liabilities

19.1 Consolidated tax group

Pursuant to current legislation, the BBVA Consolidated Tax Group includes the Bank (as the parent company) and its Spanish subsidiaries that meet the requirements provided for under Spanish legislation regulating the taxation regime for the consolidated profit of corporate groups.

The Group’s non-Spanish other banks and subsidiaries file tax returns in accordance with the tax legislation in force in each country.

19.2 Years open for review by the tax authorities

The years open to review in the BBVA Consolidated Tax Group as of December 31, 2018 are 2014 and subsequent years for the main taxes applicable.

The remainder of the Spanish consolidated entities in general have the last four years open for inspection by the tax authorities for the main taxes applicable, except for those in which there has been an interruption of the limitation period due to the start of an inspection.

In the year 2017 as a consequence of the tax authorities examination reviews, inspections were initiated through the year 2013 inclusive, and all such years closed with acceptance during the year 2017. Therefore, these inspections did not constitute any material amount to record in the Consolidated Annual accounts as their impact was provisioned.

In view of the varying interpretations that can be made of some applicable tax legislation, the outcome of the tax inspections of the open years that may be conducted by the tax authorities in the future may give rise to contingent tax liabilities which cannot be reasonably estimated at the present time. However, the Group considers that the possibility of these contingent liabilities becoming actual liabilities is remote and, in any case, the tax charge which might arise therefore would not materially affect the Group’s accompanying consolidated financial statements.

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19.3 Reconciliation

The reconciliation of the Group’s corporate income tax expense resulting from the application of the Spanish corporation income tax rate and the income tax expense recognized in the accompanying consolidated income statements is as follows:

Reconciliation of Taxation at the Spanish Corporation Tax Rate to the Tax Expense Recorded for the Period (Millions of euros)
| 2018 | 2017 | 2016
| Amount | Effective Tax % | Amount | Effective Tax % | Amount | Effective Tax %
Profit or (-) loss before tax | 8,446 |  | 6,931 |  | 6,392 |
From continuing operations | 8,446 |  | 6,931 |  | 6,392 |
From discontinued operations | - |  | - |  | - |
Taxation at Spanish corporation tax rate 30% | 2,534 |  | 2,079 |  | 1,918 |
Lower effective tax rate from foreign entities (*) | (234) |  | (307) |  | (298) |
Mexico | (78) | 28% | (100) | 27% | (105) | 26%
Chile | (18) | 21% | (29) | 21% | (27) | 17%
Colombia | 10 | 33% | (3) | 29% | 22 | 36%
Peru | (12) | 28% | (16) | 27% | (18) | 26%
Turkey | (132) | 20% | (182) | 21% | (176) | 21%
Others | (4) |  | 23 |  | 6 |
Revenues with lower tax rate (dividends/capital gains) | (57) |  | (53) |  | (69) |
Equity accounted earnings | 3 |  | (2) |  | (11) |
Other effects | 49 |  | 452 |  | 159 |
Current income tax | 2,295 |  | 2,169 |  | 1,699 |
Of which: |  |  |  |  |  |
Continuing operations | 2,295 |  | 2,169 |  | 1,699 |
Discontinued operations | - |  | - |  | - |

(*) Calculated by applying the difference between the tax rate in force in Spain and the one applied to the Group’s earnings in each jurisdiction.

The effective income tax rate for the Group in the years ended December 31, 2018, 2017 and 2016 is as follows:

Effective Tax Rate (Millions of euros)
|  | 2018 | 2017 | 2016
Income from: |  |  |  |
Consolidated Tax Group |  | 1,482 | (678) | (483)
Other Spanish Entities |  | 33 | 29 | 52
Foreign Entities |  | 6,931 | 7,580 | 6,823
Total |  | 8,446 | 6,931 | 6,392
Income tax and other taxes |  | 2,295 | 2,169 | 1,699
Effective Tax Rate |  | 27.17% | 31.3% | 26.6%

In the year 2018, the changes in the nominal tax rate on corporate income tax, in comparison with those existing in the previous year, in the main countries in which the Group has a presence, have been in United States (federal tax from 35% to 21%), Turkey (from 20% to 22%), Argentina (from 35% to 30%), Chile (from 25.5% to 27%) and Colombia (from 40% to 37%). In the year 2017, the changes in the nominal tax rate on corporate income tax, in comparison with those existing in the previous period, in the main countries in which the Group has a presence, have been in Chile (from 24.0% to 25.5%) and Peru (from 28.0% to 29.5%).

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19.4 Income tax recognized in equity

In addition to the income tax expense recognized in the accompanying consolidated income statements, the Group has recognized the following income tax charges for these items in the consolidated total equity:

Tax recognized in total equity (Millions of euros)
|  | 2018 | 2017 | 2016
Charges to total equity |  |  |  |
Debt securities and others |  | (87) | (355) | (533)
Equity instruments |  | (56) | (74) | (2)
Subtotal |  | (143) | (429) | (535)
Total |  | (143) | (429) | (535)

19.5 Current and deferred taxes

The balance under the heading "Tax assets" in the accompanying consolidated balance sheets includes current and deferred tax assets. The balance under the “Tax liabilities” heading includes the Group’s various current and deferred tax liabilities. The details of the mentioned tax assets and liabilities are as follows:

Tax assets and liabilities (Millions of euros)
|  | 2018 | 2017 | 2016
Tax assets |  |  |  |
Current tax assets |  | 2,784 | 2,163 | 1,853
Deferred tax assets |  | 15,316 | 14,725 | 16,391
Pensions |  | 405 | 395 | 1,190
Financial Instruments |  | 1,401 | 1,453 | 1,371
Other assets (investments in subsidiaries) |  | 302 | 357 | 662
Impairment losses |  | 1,375 | 1,005 | 1,390
Other |  | 990 | 870 | 1,236
Secured tax assets (*) |  | 9,363 | 9,433 | 9,431
Tax losses |  | 1,480 | 1,212 | 1,111
Total |  | 18,100 | 16,888 | 18,245
Tax Liabilities |  |  |  |
Current tax liabilities |  | 1,230 | 1,114 | 1,276
Deferred tax liabilities |  | 2,046 | 2,184 | 3,392
Financial Instruments |  | 1,136 | 1,427 | 1,794
Charge for income tax and other taxes |  | 910 | 757 | 1,598
Total |  | 3,276 | 3,298 | 4,668

(*) Law guaranteeing the deferred tax assets has been approved in Spain in 2013. In years 2016 and 2017 guaranteed deferred tax assets also existed in Portugal but in year 2018 they lost the guarantee due to the merge between BBVA Portugal S.A. and BBVA, S.A.

At the end of year 2018, a tax reform has taken place in Colombia, which is expected to hold a 37% tax rate for financial institutions in 2019 (prior to the reform, a 33% tax rate was planned).

The most significant variations of the deferred assets and liabilities in the years 2018, 2017 and 2016 derived from the followings causes:

Deferred tax assets and liabilities (Millions of euros)
|  | 2018 | 2017 | 2016
|  | Deferred Assets | Deferred Liabilities | Deferred Assets | Deferred Liabilities | Deferred Assets | Deferred Liabilities
Balance at the beginning |  | 14,725 | 2,184 | 16,391 | 3,392 | 15,878 | 3,418
Pensions |  | 10 | - | (795) | - | 168 | -
Financials Instruments |  | (52) | (291) | 82 | (367) | (103) | (113)
Other assets |  | (55) | - | (305) | - | 108 | -
Impairment losses |  | 370 | - | (385) | - | 44 | -
Others |  | 120 | 153 | (366) | (841) | 255 | -
Guaranteed Tax assets |  | (70) | - | 2 | - | (105) | -
Tax Losses |  | 268 | - | 101 | - | 146 | -
Charge for income tax and other taxes |  | - | - | - | - | - | 87
Balance at the end |  | 15,316 | 2,046 | 14,725 | 2,184 | 16,391 | 3,392

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With respect to the changes in assets and liabilities due to deferred tax contained in the above table, the following should be pointed out:

· The decrease in guaranteed tax assets is motivated because those corresponding to Portugal are no longer considered as guaranteed.

· The increase in tax losses is mainly due to the Corporate Income Tax (CIT) return 2017 that has generated differences with respect to the estimate of Corporate Tax reflected in the financial statements, on the other hand, the increase in tax losses is also due to the generation of negative tax bases and deductions during year 2018.

· The evolution of the deferred tax assets and liabilities (without taking into consideration the guaranteed deferred tax asset and the tax losses) in net terms is a decrease of €531 million mainly due to the first implementation of IFRS9, the variations in the valuation of portfolio securities and to the operation of the corporate income tax in which differences between accounting and taxation produce movements in the deferred taxes.

On the deferred tax assets and liabilities contained in the table above, those included in section 19.4 above have been recognized against the entity's equity, and the rest against earnings for the year or reserves.

As of December 31, 2018, 2017 and 2016, the estimated amount of temporary differences associated with investments in subsidiaries, joint ventures and associates, which were not recognized deferred tax liabilities in the accompanying consolidated balance sheets, amounted to 443 million euros, 376 million euros and 874 million euros, respectively.

Of the deferred tax assets contained in the above table, the detail of the items and amounts guaranteed by the Spanish government, broken down by the items that originated those assets is as follows:

Secured tax assets (Millions of euros)
|  | 2018 | 2017 (*) | 2016 (*)
Pensions |  | 1,874 | 1,897 | 1,901
Impairment losses |  | 7,489 | 7,536 | 7,530
Total |  | 9,363 | 9,433 | 9,431

(*) In 2017 and 2016 guaranteed deferred tax assets also existed in Portugal but in 2018 they lost the guarantee.

As of December 31, 2018, non-guaranteed net deferred tax assets of the above table amounted to €3,907 million (€3,108 and €3,568 million as of December 31, 2017 and 2016 respectively), which broken down by major geographies is as follows:

· Spain: Net deferred tax assets recognized in Spain totaled €2,653 million as of December 31, 2018 (€2,052 and €2,007 million as of December 31, 2017 and 2016, respectively). €1,462 million of the figure recorded in the year ended December 31, 2018 for net deferred tax assets related to tax credits and tax loss carry forwards and €1,191 million relate to temporary differences.

· Mexico: Net deferred tax assets recognized in Mexico amounted to €826 million as of December 31, 2018 (€615 and €698 million as of December 31, 2017 and 2016, respectively). 99.97% of deferred tax assets as of December 31, 2018 relate to temporary differences. The remainders are tax credits carry forwards.

· South America: Net deferred tax assets recognized in South America amounted to €383 thousand as of December 31, 2018 (€26 and €362 million as of December 31, 2017 and 2016, respectively). Practically all the deferred tax assets are related to temporary differences, only 1.03% are related to tax credits.

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· The United States: Net deferred tax assets recognized in The United States amounted to €164 million as of December 31, 2018 (€180 and €345 million as of December 31, 2017 and 2016, respectively). All the deferred tax assets relate to temporary differences.

· Turkey: Net deferred tax assets recognized in Turkey amounted to €250 million as of December 31, 2018 (€224 and €135 million as of December 31, 2017 and 2016 respectively). As of December 31, 2018, all the deferred tax assets correspond to €15 million of tax credits related to tax losses carry forwards and deductions and €235 million relate to temporary differences.

Based on the information available as of December 31, 2018, including historical levels of benefits and projected results available to the Group for the coming years, it is considered that sufficient taxable income will be generated for the recovery of above mentioned unsecured deferred tax assets when they become deductible according to the tax laws.

On the other hand, the Group has not recognized certain deductible temporary differences, negative tax bases and deductions for which, in general, there is no legal period for offsetting, amounting to approximately € 2,236 million, which are mainly originated by Catalunya Banc.

20. Other assets and liabilities

The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:

Other assets and liabilities: (Millions of euros)
|  | 2018 | 2017 | 2016
ASSETS |  |  |  |
Inventories |  | 635 | 229 | 3,298
Real estate |  | 633 | 226 | 3,268
Others |  | 2 | 3 | 29
Transactions in progress |  | 249 | 156 | 241
Accruals |  | 702 | 768 | 723
Prepaid expenses |  | 465 | 509 | 518
Other prepayments and accrued income |  | 237 | 259 | 204
Other items |  | 3,886 | 3,207 | 3,012
Total Other Assets |  | 5,472 | 4,359 | 7,274
LIABILITIES |  |  |  |
Transactions in progress |  | 39 | 165 | 127
Accruals |  | 2,558 | 2,490 | 2,721
Accrued expenses |  | 2,119 | 1,997 | 2,125
Other accrued expenses and deferred income |  | 439 | 493 | 596
Other items |  | 1,704 | 1,894 | 2,131
Total Other Liabilities |  | 4,301 | 4,550 | 4,979

"Inventories" includes the net book value of land and building purchases that the Group’s Real estate entities have available for sale or as part of their business. Balances under this heading include mainly real estate assets acquired by these entities from distressed customers (mostly in Spain), net of their corresponding losses. The roll-forward of our inventories from distressed customers is provided below:

Inventories from Distressed Customers (Millions of euros)
| 2018 | 2017 | 2016
Gross value |  |  |
Balance at the beginning | 91 | 8,499 | 9,318
Business combinations and disposals | - | - | -
Acquisitions | - | 533 | 336
Disposals | (20) | (2,288) | (1,214)
Others | - | (6,653) | 59
Balance at the end | 71 | 91 | 8,499
Accumulated impairment losses | (21) | (26) | (5,385)
Carrying amount | 49 | 65 | 3,114

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As of December 31, 2017, the majority of the balance of real estate assets acquired from distressed customers was reclassified to the heading "Non-current assets and disposable groups of items that have been classified as held for sale" (see Note 21) due to the agreement with Cerberus to transfer the Real Estate business in Spain (see Note 3).

The impairment included under the heading “Impairment or reversal of impairment of non- financial assets” of the accompanying consolidated financial statements were €51, €306 and €375 million in 2018, 2017 and 2016, respectively (see Note 48).

As indicated in Note 2.2.6, “Inventories” are valued at the lower amount between its fair value less costs to sell and its book value. As of December 31, 2018, practically all of the carrying amount of the assets recorded at fair value on a non-recurring basis coincides with their fair value.

21. Non-current assets and disposal groups held for sale

The composition of the balance under the heading “Non-current assets and disposal groups classified as held for sale” in the accompanying consolidated balance sheets, broken down by the origin of the assets, is as follows:

Non-current assets and disposal groups classified as held for sale Breakdown by items (Millions of euros)
|  | 2018 | 2017 | 2016
Foreclosures and recoveries |  | 2,211 | 6,207 | 4,225
Foreclosures (*) |  | 2,135 | 6,047 | 4,057
Recoveries from financial leases |  | 76 | 160 | 168
Other assets from tangible assets |  | 433 | 447 | 1,181
Property, plant and equipment |  | 276 | 447 | 378
Operating leases |  | - | - | 803
Investment properties (*) |  | 158 | - | -
Business sale - Assets (**) |  | 29 | 18,623 | 40
Accrued amortization (***) |  | (44) | (77) | (116)
Impairment losses |  | (628) | (1,348) | (1,727)
Total Non-current assets and disposal groups classified as held for sale |  | 2,001 | 23,853 | 3,603

(*) Corresponds mainly to the agreement with Cerberus to transfer the "Real Estate" business in Spain (see Note 3).

(**) Corresponds mainly to the BBVA´s stake in BBVA Chile (see Note 3).

(***) Amortization accumulated until related asset reclassified as “non-current assets and disposal groups held for sale”.

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The changes in the balances of “Non-current assets and disposal groups classified as held for sale” in 2018, 2017 and 2016 are as follows:

Non-current assets and disposal groups classified as held for sale Changes in the year 2018 (Millions of euros)
|  | Foreclosed Assets | From Own Use Assets (*) | Other assets (**) | Total
| Notes | Foreclosed Assets through Auction Proceeding | Recovered Assets from Finance Leases
Cost (1) |  |  |  |  |  |
Balance at the beginning |  | 6,047 | 160 | 371 | 18,623 | 25,201
Additions |  | 637 | 55 | 4 | - | 696
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (4,354) | (135) | (227) | (18,594) | (23,310)
Transfers, other movements and exchange differences |  | (195) | (4) | 241 | - | 42
Balance at the end |  | 2,135 | 76 | 389 | 29 | 2,629
Impairment (2) |  |  |  |  |  |
Balance at the beginning |  | 1,102 | 52 | 194 | - | 1,348
Additions | 50 | 195 | 11 | 2 | - | 208
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (793) | (37) | (101) | - | (931)
Other movements and exchange differences |  | (22) | (4) | 29 | - | 3
Balance at the end |  | 482 | 22 | 124 | - | 628
Balance at the end of Net carrying value (1)-(2) |  | 1,653 | 54 | 265 | 29 | 2,001

(*) Net of amortization accumulated until assets were reclassified as non-current assets held for sale.

(**) The variation corresponds mainly to the BBVA’s stake in BBVA Chile and the agreement with Cerberus to transfer the "Real Estate" business in Spain (see Note 3).

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Non-current assets and disposal groups classified as held for sale Changes in the year 2017 (Millions of euros)
|  | Foreclosed Assets | From Own Use Assets (*) | Other assets | Total
| Notes | Foreclosed Assets through Auction Proceeding | Recovered Assets from Finance Leases
Cost (1) |  |  |  |  |  |
Balance at the beginning |  | 4,057 | 168 | 1,065 | 40 | 5,330
Additions |  | 791 | 45 | 1 | - | 837
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (1,037) | (49) | (131) | - | (1,217)
Transfers, other movements and exchange differences |  | 2,236 | (4) | (564) | 18,583 | 20,251
Balance at the end |  | 6,047 | 160 | 371 | 18,623 | 25,201
Impairment (2) |  |  |  |  |  |
Balance at the beginning |  | 1,237 | 47 | 443 | - | 1,727
Additions | 50 | 143 | 14 | 1 | - | 158
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (272) | (7) | (42) | - | (321)
Other movements and exchange differences |  | (6) | (2) | (208) | - | (216)
Balance at the end |  | 1,102 | 52 | 194 | - | 1,348
Balance at the end of Net carrying value (1)-(2) |  | 4,945 | 108 | 177 | 18,623 | 23,853

(*) Net of amortization accumulated until assets were reclassified as non-current assets held for sale.

(**) The variation corresponds mainly to the BBVA’s stake in BBVA Chile and the agreement with Cerberus to transfer the "Real Estate" business in Spain (see Note 3).

Non-current assets and disposal groups classified as held for sale Changes in the year 2016 (Millions of euros)
|  | Foreclosed Assets | From Own Use Assets (*) | Other assets (**) | Total
| Notes | Foreclosed Assets through Auction Proceeding | Recovered Assets from Finance Leases
Cost (1) |  |  |  |  |  |
Balance at the beginning |  | 3,775 | 216 | 626 | 37 | 4,654
Additions |  | 582 | 57 | 23 | - | 662
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (779) | (77) | (170) | 3 | (1,023)
Transfers, other movements and exchange differences |  | 480 | (28) | 586 | - | 1,037
Balance at the end |  | 4,057 | 168 | 1,065 | 40 | 5,330
Impairment (2) |  |  |  |  |  |
Balance at the beginning |  | 994 | 52 | 240 | - | 1,285
Additions | 50 | 129 | 3 | 5 | - | 136
Contributions from merger transactions |  | - | - | - | - | -
Retirements (sales and other decreases) |  | (153) | (6) | (33) | - | (192)
Other movements and exchange differences |  | 268 | (2) | 232 | - | 499
Balance at the end |  | 1,237 | 47 | 443 | - | 1,727
Balance at the end of Net carrying value (1)-(2) |  | 2,820 | 121 | 621 | 40 | 3,603

(*) Net of amortization accumulated until assets were reclassified as non-current assets held for sale.

As indicated in Note 2.2.4, “Non-current assets and disposal groups held for sale” and “liabilities included in disposal groups classified as held for sale” are valued at the lower amount between its fair value less costs to sell and its book value. As of December 31, 2018, practically all of the carrying amount of the assets recorded at fair value on a non-recurring basis coincides with their fair value.

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Assets from foreclosures or recoveries

As of December 31, 2018, 2017 and 2016, assets from foreclosures and recoveries, net of impairment losses, by nature of the asset, amounted to €1,072, €1,924 and €2,326 million in assets for residential use; €182, €491 and €574 million in assets for tertiary use (industrial, commercial or office) and €19, €29 and €41 million in assets for agricultural use, respectively.

In December 31, 2018, 2017 and 2016, the average sale time of assets from foreclosures or recoveries was between 2 and 3 years.

During the years 2018, 2017 and 2016, some of the sale transactions for these assets were financed by Group companies. The amount of loans to buyers of these assets in those years amounted to €82, €207 and €219 million, respectively; with an average financing of 50% of the sales price.

As of December 31, 2018, 2017 and 2016, the amount of the profits arising from the sale of Group companies financed assets - and therefore not recognized in the consolidated income statement - amounted to €1 in each financial year.

22. Financial liabilities at amortized cost

22.1 Breakdown of the balance

The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:

Financial liabilities measured at amortized cost (Millions of euros)
| 2018 | 2017 | 2016
Deposits | 435,229 | 467,949 | 499,706
Deposits from Central Banks (*) | 27,281 | 37,054 | 34,740
Deposits from Credit Institutions | 31,978 | 54,516 | 63,501
Customer deposits | 375,970 | 376,379 | 401,465
Debt certificates | 61,112 | 63,915 | 76,375
Other financial liabilities | 12,844 | 11,850 | 13,129
Total | 509,185 | 543,713 | 589,210

(*) As of December 31, 2018, balance relating to repurchase agreements in Central Banks is €375 million (see Note 35).

22.2 Deposits from credit institutions

The breakdown of the balance under this heading in the consolidated balance sheets, according to the nature of the financial instruments, is as follows:

Deposits from credit institutions (Millions of euros)
| Notes | 2018 | 2017 | 2016
Term deposits |  | 19,015 | 25,941 | 30,429
Demand deposits |  | 8,370 | 3,731 | 4,651
Repurchase agreements | 35 | 4,593 | 24,843 | 28,420
Total |  | 31,978 | 54,516 | 63,501

The breakdown by geographical area and the nature of the related instruments of this heading in the accompanying consolidated balance sheets is as follows:

Deposits from Credit Institutions. December 2018 (Millions of euros)
| Demand Deposits & Reciprocal Accounts | Term Deposits | Repurchase Agreements | Total
Spain | 1,981 | 2,527 | 55 | 4,563
The United States | 1,701 | 2,677 | - | 4,379
Mexico | 280 | 286 | - | 566
Turkey | 651 | 669 | 4 | 1,323
South America | 442 | 1,892 | - | 2,335
Rest of Europe | 3,108 | 6,903 | 4,534 | 14,545
Rest of the world | 207 | 4,061 | - | 4,268
Total | 8,370 | 19,015 | 4,593 | 31,978

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Deposits from Credit Institutions. December 2017 (Millions of euros)
| Demand Deposits & Reciprocal Accounts | Term Deposits | Repurchase Agreements | Total
Spain | 762 | 3,879 | 878 | 5,518
The United States | 1,563 | 2,398 | - | 3,961
Mexico | 282 | 330 | 1,817 | 2,429
Turkey | 73 | 836 | 44 | 953
South America | 448 | 2,538 | 13 | 2,999
Rest of Europe | 526 | 12,592 | 21,732 | 34,849
Rest of the world | 77 | 3,369 | 360 | 3,806
Total | 3,731 | 25,941 | 24,843 | 54,516

Deposits from Credit Institutions. December 2016 (Millions of euros)
| Demand Deposits & Reciprocal Accounts | Term Deposits | Repurchase Agreements | Total
Spain | 956 | 4,995 | 817 | 6,768
The United States | 1,812 | 3,225 | 3 | 5,040
Mexico | 306 | 426 | 2,931 | 3,663
Turkey | 317 | 1,140 | 5 | 1,463
South America | 275 | 3,294 | 465 | 4,035
Rest of Europe | 896 | 13,751 | 23,691 | 38,338
Rest of the world | 88 | 3,597 | 509 | 4,194
Total | 4,651 | 30,429 | 28,420 | 63,501

22.3 Customer deposits

The breakdown of this heading in the accompanying consolidated balance sheets, by type of financial instrument, is as follows:

Customer deposits (Millions of euros)
|  | 2018 | 2017 | 2016
General Governments |  | 26,459 | 23,210 | 21,396
Current accounts |  | 238,907 | 223,497 | 212,604
Time deposits |  | 105,257 | 116,538 | 153,388
Repurchase agreements |  | 1,207 | 9,076 | 13,514
Subordinated deposits |  | 220 | 194 | 233
Other accounts |  | 3,920 | 3,864 | 330
Total |  | 375,970 | 376,379 | 401,465
Of which: |  |  |  |
In Euros |  | 184,934 | 184,150 | 189,438
In foreign currency |  | 191,036 | 192,229 | 212,027

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The breakdown by geographical area of this heading in the accompanying consolidated balance sheets, by type of instrument is as follows:

Customer Deposits. December 2018 (Millions of euros)
| Demand Deposits | Term Deposits | Repurchase Agreements | Total
Spain | 138,236 | 28,165 | 3 | 166,403
The United States | 41,222 | 21,317 | - | 62,539
Mexico | 38,383 | 11,837 | 770 | 50,991
Turkey | 10,856 | 22,564 | 7 | 33,427
South America | 23,811 | 14,159 | - | 37,970
Rest of Europe | 7,233 | 14,415 | 429 | 22,077
Rest of the world | 831 | 1,731 | - | 2,563
Total | 260,573 | 114,188 | 1,209 | 375,970

Customer Deposits. December 2017 (Millions of euros)
| Demand Deposits | Term Deposits | Repurchase Agreements | Total
Spain | 123,382 | 39,513 | 2,664 | 165,559
The United States | 36,728 | 21,436 | - | 58,164
Mexico | 36,492 | 11,622 | 4,272 | 52,387
Turkey | 12,427 | 24,237 | 152 | 36,815
South America | 23,710 | 15,053 | 2 | 38,764
Rest of Europe | 6,816 | 13,372 | 1,989 | 22,177
Rest of the world | 1,028 | 1,484 | - | 2,511
Total | 240,583 | 126,716 | 9,079 | 376,379

Customer Deposits. December 2016 (Millions of euros)
| Demand Deposits | Term Deposits | Repurchase Agreements | Total
Spain | 102,730 | 56,391 | 1,901 | 161,022
The United States | 26,997 | 23,023 | 263 | 50,282
Mexico | 36,468 | 10,647 | 7,002 | 54,117
Turkey | 47,340 | 14,971 | - | 62,311
South America | 9,862 | 28,328 | 21 | 38,211
Rest of Europe | 6,959 | 19,683 | 4,306 | 30,949
Rest of the world | 1,190 | 3,382 | - | 4,572
Total | 231,547 | 156,425 | 13,493 | 401,465

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22.4 Debt certificates

The breakdown of the balance under this heading, by currency, is as follows:

Debt certificates (Millions of euros)
| 2018 | 2017 | 2016
In Euros | 37,436 | 38,735 | 45,619
Promissory bills and notes | 267 | 1,309 | 875
Non-convertible bonds and debentures | 9,638 | 9,418 | 8,766
Covered bonds (*) | 15,809 | 16,425 | 24,845
Hybrid financial instruments | 814 | 807 | 468
Securitization bonds | 1,630 | 2,295 | 3,693
Wholesale funding | 142 | - | -
Subordinated liabilities | 9,136 | 8,481 | 6,972
Convertible | 5,490 | 4,500 | 4,070
Convertible perpetual securities | 5,490 | 4,500 | 4,070
Convertible subordinated debt | - | - | -
Non-convertible | 3,647 | 3,981 | 2,902
Preferred Stock | 107 | 107 | 359
Other subordinated liabilities | 3,540 | 3,875 | 2,543
In Foreign Currencies | 23,676 | 25,180 | 30,759
Promissory bills and notes | 3,237 | 3,157 | 382
Non-convertible bonds and debentures | 9,335 | 11,109 | 15,134
Covered bonds (*) | 569 | 650 | 149
Hybrid financial instruments | 1,455 | 1,809 | 2,059
Securitization bonds | 38 | 47 | 3,019
Wholesale funding | 544 | - | -
Subordinated liabilities | 8,499 | 8,407 | 10,016
Convertible | 873 | 2,085 | 1,548
Convertible perpetual securities | 873 | 2,085 | 1,548
Convertible subordinated debt | - | - | -
Non-convertible | 7,626 | 6,323 | 8,467
Preferred Stock | 74 | 55 | 620
Other subordinated liabilities | 7,552 | 6,268 | 7,846
Total | 61,112 | 63,915 | 76,375

(*) Including mortgage-covered bonds (see Appendix III).

As of December 31, 2018, 67% of “Debt certificates” have fixed-interest rates and 33% have variable interest rates.

Most of the foreign currency issues are denominated in U.S. dollars.

22.4.1 Subordinated liabilities

The issuances of BBVA International Preferred, S.A.U., BBVA Global Finance, Ltd., Caixa Terrassa Societat de Participacions Preferents, S.A.U. and CaixaSabadell Preferents, S.A.U., are jointly, severally and irrevocably guaranteed by the Bank. The balance variances are mainly due to the following transactions:

Convertible perpetual liabilities

On September 24, 2018, BBVA carried out the seventh issuance of perpetual contingent convertible securities (additional tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of €1,000 million. This issuance is listed in the AIAF Fixed Income Securities Market and in any case the issuance shall be offered or sold to any retail clients. The issuance qualifies as additional tier 1 capital of the Bank and the Group in accordance with Regulation EU 575/2013.

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The additional five issuances of perpetual contingent convertible securities (additional tier 1 instruments) with exclusion of pre-emptive subscription rights of shareholders were carried out in February 2014 and February 2015 for an amount of €1.5 billion each one; in April 2016 for an amount of €1 billion; in May 2017 for an amount of €500 million and in November 2017 for an amount of USD1 billion. These issuances were targeted only at qualified investors and foreign private banking clients not being offered to, and not being subscribed for, in Spain or by Spanish residents. The first issuance is listed in the Singapore Exchange Securities Trading Limited and the other issuances are listed in the Global Exchange Market of the Irish Stock Exchange. Furthermore, these issuances qualify as additional tier 1 capital of the Bank and the Group in accordance with Regulation UE 575/2013.

These perpetual securities will be converted into newly issued ordinary shares of BBVA if the CET 1 ratio of the Bank or the Group is less than 5.125%, in accordance with their respective terms and conditions.

These issues may be fully redeemed at BBVA´s option only in the cases contemplated in their respective terms and conditions, and in any case, in accordance with the provisions of the applicable legislation.

In particular, on May 9, 2018, the Bank early redeemed the issuance of preferred securities contingently convertible (additional tier 1 instrument) carried out by the Bank on May 9, 2013, for an amount of USD1.5 billion on the First Reset Date of the issuance and once the prior consent from the Regulator was obtained.

Additionally, on January 15, 2019, the Bank has notified its irrevocable decision to early redeem next February 19, 2019 the issuance of preferred securities contingently convertible (additional tier 1 instrument), carried out by the Bank on February 19, 2014, for a total amount of €1,5 billion and once the prior consent from the Regulator has been obtained.

Preferred securities

The breakdown by issuer of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Preferred Securities by Issuer (Millions of euros)
| 2018 | 2017 | 2016
BBVA International Preferred, S.A.U. (1) | 35 | 36 | 855
Unnim Group (2) | 98 | 98 | 100
Compass Group | 19 | 19 | 22
BBVA Colombia, S.A. | 19 | 1 | 1
Others | 9 | 9 | 1
Total | 181 | 163 | 979

(1) Listed on the London and New York stock exchanges.

(2) Unnim Group: Issuances prior to the acquisition by BBVA.

These issues were fully subscribed at the moment of the issue by qualified/institutional investors outside the Group and are redeemable at the issuer company’s option after five years from the issue date, depending on the terms of each issue and with prior consent from the Bank of Spain.

Redemption of preferred securities

On March 20, 2017 BBVA International Preferred, S.A.U. carried out the early redemption in full of its Series B preferred securities for an outstanding amount of €164,350,000.

Likewise, on March 22, 2017 BBVA International Preferred, S.A.U. carried out the early redemption in full of its Series A preferred securities for an outstanding amount of €85,550,000.

Finally, on April 18, 2017 BBVA International Preferred, S.A.U. carried out the early redemption in full of its Series C preferred securities for an outstanding amount of USD 600,000,000.

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22.5 Other financial liabilities

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Other financial liabilities (Millions of euros)
| Notes | 2018 | 2017 | 2016
Creditors for other financial liabilities |  | 2,891 | 2,835 | 3,465
Collection accounts |  | 4,305 | 3,452 | 2,768
Creditors for other payables |  | 5,648 | 5,563 | 6,370
Dividend payable but pending payment | 4 | - | - | 525
Total |  | 12,844 | 11,850 | 13,129

23. Assets and liabilities under insurance and reinsurance contracts

The Group has insurance subsidiaries mainly in Spain and Latin America (mostly in Mexico). The main product offered by the insurance subsidiaries is life insurance to cover the risk of death (risk insurance) and life-savings insurance. Within life and accident insurance, a distinction is made between freely sold products and those offered to customers who have taken mortgage or consumer loans, which cover the principal of those loans in the event of the customer’s death.

There are two types of savings products: individual insurance, which seeks to provide the customer with savings for retirement or other events, and group insurance, which is taken out by employers to cover their commitments to their employees.

The insurance business is affected by different risks, including those that are related to the BBVA Group such as credit risk, market risk, liquidity risk and operational risk and the methodology for risk measurement applied in the insurance activity is similar (see Note 7), although it has a differentiated management due to the particular characteristics of the insurance business, such as the coverage of contracted obligations and the long term of the commitments. Additionally, the insurance business generates certain specific risks, of a probabilistic nature:

· Technical risk: arises from deviations in the estimation of the casualty rate of insurances, either in terms of numbers, the amount of such claims and the timing of its occurrence.

· Biometric risk: depending on the deviations in the expected mortality behavior or the survival of the insured persons.

The insurance industry is highly regulated in each country. In this regard, it should be noted that the insurance industry is undergoing a gradual regulatory transformation through new risk-based capital regulations, which have already been published in several countries.

The most significant provisions recognized by consolidated insurance subsidiaries with respect to insurance policies issued by them are under the heading “Liabilities under insurance and reinsurance contracts” in the accompanying consolidated balance sheets.

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The breakdown of the balance under this heading is as follows:

Technical Reserves by type of insurance product (Millions of euros)
| 2018 | 2017 | 2016
Mathematical reserves | 8,504 | 7,961 | 7,813
Individual life insurance (1) | 6,201 | 5,359 | 4,791
Savings | 5,180 | 4,391 | 3,943
Risk | 1,021 | 967 | 848
Others | - | 1 | -
Group insurance (2) | 2,303 | 2,601 | 3,022
Savings | 2,210 | 2,455 | 2,801
Risk | 93 | 147 | 221
Others | - | - | -
Provision for unpaid claims reported | 662 | 631 | 691
Provisions for unexpired risks and other provisions | 668 | 631 | 635
Total | 9,834 | 9,223 | 9,139

(1) Provides coverage in the event of death or disability.

(2) The insurance policies purchased by employers (other than BBVA Group) on behalf of its employees.

The cash flows of those Liabilities under insurance and reinsurance contracts are shown below:

Maturity (Millions of euros) Liabilities under Insurance and Reinsurance Contracts
| Up to 1 Year | 1 to 3 Years | 3 to 5 Years | Over 5 Years | Total
2018 | 1,686 | 1,041 | 1,822 | 5,285 | 9,834
2017 | 1,560 | 1,119 | 1,502 | 5,042 | 9,223
2016 | 1,705 | 1,214 | 1,482 | 4,738 | 9,139

The modeling methods and techniques used to calculate the mathematical reserves for the insurance products are actuarial and financial methods and modeling techniques approved by the respective country’s insurance regulator or supervisor. The most important insurance entities are located in Spain and Mexico (which together account for approximately 85% of the insurance revenues), where the modeling methods and techniques are reviewed by the insurance regulator in Spain (General Directorate of Insurance) and Mexico (National Insurance and Bonding Commission), respectively. The modeling methods and techniques used to calculate the mathematical reserves for the insurance products are compliant with IFRS and primarily involve the valuation of the estimated future cash flows, discounted at the technical interest rate for each policy. To ensure this technical interest rate, asset-liability management is carried out, acquiring a portfolio of securities that generate the cash flows needed to cover the payment commitments assumed with the customers.

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The table below shows the key assumptions as of December 31, 2018, used in the calculation of the mathematical reserves for insurance products in Spain and Mexico, respectively:

Mathematical Reserves
| Mortality table | Average technical interest type
| Spain | Mexico | Spain | Mexico
Individual life insurance (1) | GRMF 80-2 GKM 80 / GKMF 95 PERMF 2000 PASEM | Tables of the Comisión Nacional de Seguros y Fianzas 2000-individual | 0.26%-3.27% | 2.50%
Group insurance(2) | PERMF 2000 | Tables of the Comisión Nacional de Seguros y Fianzas 2000-grupo | Depending on the related portfolio | 5.50%

(1) Provides coverage in the case of one or more of the following events: death and disability.

(2) Insurance policies purchased by companies (other than Group BBVA entities) on behalf of their employees.

The heading “Assets under reinsurance and insurance contracts” in the accompanying consolidated balance sheets includes the amounts that the consolidated insurance 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 subsidiaries. As of December 31, 2018, 2017 and 2016, the balance under this heading amounted to €366 million, €421 million and €447 million, respectively.

24. Provisions

The breakdown of the balance under this heading in the accompanying consolidated balance sheets, based on type of provisions, is as follows:

Provisions. Breakdown by concepts (Millions of euros)
| Notes | 2018 | 2017 | 2016
Provisions for pensions and similar obligations | 25 | 4,787 | 5,407 | 6,025
Other long term employee benefits | 25 | 62 | 67 | 69
Provisions for taxes and other legal contingencies |  | 686 | 756 | 418
Provisions for contingent risks and commitments |  | 636 | 578 | 950
Other provisions |  | 601 | 669 | 1,609
Total |  | 6,772 | 7,477 | 9,071

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The change in provisions for pensions and similar obligations for the years ended December 31, 2018, 2017 and 2016 is as follows:

Provisions for pensions and similar obligations. Changes Over the Year (Millions of euros)
| Notes | 2018 | 2017 | 2016
Balance at the beginning |  | 5,407 | 6,025 | 6,299
Add |  |  |  |
Charges to income for the year |  | 126 | 391 | 402
Interest expenses and similar charges |  | 78 | 71 | 96
Personnel expenses | 44.1 | 58 | 62 | 67
Provision expenses |  | (10) | 258 | 239
Charges to equity (1) | 25 | 41 | 140 | 339
Transfers and other changes |  | 95 | (264) | 66
Less |  |  |  |
Benefit payments | 25 | (779) | (861) | (926)
Employer contributions | 25 | (103) | (25) | (154)
Balance at the end |  | 4,787 | 5,407 | 6,025

(1) Correspond to actuarial losses (gains) arising from certain defined-benefit post-employment pension commitments and other similar benefits recognized in “Equity” (see Note 2.2.12).

Provisions for Taxes, Legal Contingents and Other Provisions. Changes Over the Year (Millions of euros)
| 2018 | 2017 | 2016
Balance at beginning | 1,425 | 2,028 | 1,771
Additions | 455 | 868 | 1,109
Acquisition of subsidiaries | - | - | -
Unused amounts reversed during the period | (184) | (164) | (311)
Amount used and other variations | (410) | (1,306) | (540)
Balance at the end | 1,286 | 1,425 | 2,028

Ongoing legal proceedings and litigation

The financial sector faces an environment of increasing regulatory and litigious pressure. In this environment, the different Group’s entities are often parties to individual or collective legal proceedings arising from the ordinary activity of their businesses. In accordance with the procedural status of these proceedings and according to the criteria of the attorneys who manage them, BBVA considers that none of them is material, individually or in aggregate, and that no significant impact will derive from them neither in the results of operations nor on liquidity, nor in the financial position at a consolidated level of the Group, as at the level of the individual Bank. The Group Management considers that the provisions made in connection with these legal proceedings are adequate.

As mentioned in Note 7.2 Risk factors, the Group is subject or may be subject in the future to a series of legal and regulatory investigations, procedures and actions which, in case of a negative result, could have an adverse impact on the Group.

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25. Post-employment and other employee benefit commitments

As stated in Note 2.2.12, the Group has assumed commitments with employees including short-term employee benefits (see Note 44.1), defined contribution and defined benefit plans (see Glossary), healthcare and other long-term employee benefits.

The Group sponsors defined-contribution plans for the majority of its active employees with the plans in Spain and Mexico being the most significant. Most defined benefit plans are closed to new employees with liabilities relating largely to retired employees, the most significant being those in Spain, Mexico, the United States and Turkey. In Mexico, the Group provides medical benefits to a closed group of employees and their family members, both active service and in retirees.

The breakdown of the balance sheet net defined benefit liability as of December 31, 2018, 2017 and 2016 is provided below:

Net Defined Benefit Liability (asset) on the Consolidated Balance Sheet (Millions of euros)
| 2018 | 2017 | 2016
Pension commitments | 4,678 | 4,969 | 5,277
Early retirement commitments | 1,793 | 2,210 | 2,559
Medical benefits commitments | 1,114 | 1,204 | 1,015
Other long term employee benefits | 62 | 67 | 69
Total commitments | 7,647 | 8,451 | 8,920
Pension plan assets | 1,694 | 1,892 | 1,909
Medical benefit plan assets | 1,146 | 1,114 | 1,113
Total plan assets (1) | 2,840 | 3,006 | 3,022
Total net liability / asset | 4,807 | 5,445 | 5,898
Of which: |  |  |
Net asset on the consolidated balance sheet (2) | (41) | (27) | (194)
Net liability on the consolidated balance sheet for provisions for pensions and similar obligations (3) | 4,787 | 5,407 | 6,025
Net liability on the consolidated balance sheet for other long term employee benefits (4) | 62 | 67 | 69

(1) In Turkey, the foundation responsible for managing the benefit commitments holds an additional asset of 181€ million which, in accordance with IFRS regarding the asset ceiling, has not been recognized in the Consolidated Financial Statements, because although it could be used to reduce future pension contributions it could not be immediately refunded to the employer.

(2) Recorded under the heading “Other Assets - Other” of the consolidated balance sheet (see Note 20).

(3) Recorded under the heading “Provisions - Provisions for pensions and similar obligations” of the consolidated balance sheet (see Note 24).

(4) Recorded under the heading “Provisions – Other long-term employee benefits” of the consolidated balance sheet.

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The amounts relating to benefit commitments charged to consolidated income statement for the years 2018, 2017 and 2016 are as follows:

Consolidated Income Statement Impact (Millions of euros)
| Notes | 2018 | 2017 | 2016
Interest and similar expenses |  | 78 | 71 | 96
Interest expense |  | 295 | 294 | 303
Interest income |  | (217) | (223) | (207)
Personnel expenses |  | 147 | 149 | 154
Defined contribution plan expense | 44.1 | 89 | 87 | 87
Defined benefit plan expense | 44.1 | 58 | 62 | 67
Provisions (net) | 46 | 125 | 343 | 332
Early retirement expense |  | 141 | 227 | 236
Past service cost expense |  | (33) | 3 | (2)
Remeasurements (*) |  | (10) | 31 | 3
Other provision expenses |  | 28 | 82 | 95
Total impact on Consolidated Income Statement: Debit (Credit) |  | 350 | 563 | 582

(*) Actuarial losses (gains) on remeasurement of the net defined benefit liability relating to early retirements in Spain and other long-term employee benefits that are charged to the income statements (see Note 2.2.12).

The amounts relating to post-employment benefits charged to the consolidated balance sheet correspond to the actuarial gains (losses) on remeasurement of the net defined benefit liability relating to pension and medical commitments before income taxes. As of December 31, 2018, 2017 and 2016 are as follows:

Equity Impact (Millions of euros)
|  | 2018 | 2017 | 2016
Defined benefit plans |  | 81 | (40) | 237
Post-employment medical benefits |  | (47) | 179 | 119
Total impact on equity: Debit (Credit) |  | 34 | 140 | 356

##

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## 25.1 Defined benefit plans

Defined benefit commitments relate mainly to employees who have already retired or taken early retirement, certain closed groups of active employees still accruing defined benefit pensions, and in-service death and disability benefits provided to most active employees. For the latter, the Group pays the required premiums to fully insure the related liability. The change in these pension commitments during the years ended December 31, 2018, 2017 and 2016 is presented below:

Defined Benefits (Millions of euros)
|  | 2018 |  |  | 2017 |  |  | 2016 |
| Defined Benefit Obligation | Plan Assets | Net Liability (asset) | Defined Benefit Obligation | Plan Assets | Net Liability (asset) | Defined Benefit Obligation | Plan Assets | Net Liability (asset)
Balance at the beginning | 8,384 | 3,006 | 5,378 | 8,851 | 3,022 | 5,829 | 9,184 | 3,124 | 6,060
Current service cost | 61 | - | 61 | 64 | - | 64 | 67 | - | 67
Interest income or expense | 292 | 217 | 76 | 290 | 223 | 68 | 299 | 207 | 92
Contributions by plan participants | 4 | 3 | 1 | 4 | 4 | - | 5 | 5 | -
Employer contributions | - | 103 | (103) | - | 25 | (25) | - | 154 | (154)
Past service costs (1) | 109 | - | 109 | 231 | - | 231 | 235 | - | 235
Remeasurements: | (263) | (286) | 21 | 331 | 161 | 171 | 354 | (5) | 359
Return on plan assets (2) | - | (286) | 286 | - | 161 | (161) | - | (20) | 20
From changes in demographic assumptions | 14 | - | 14 | 100 | - | 100 | 107 | - | 107
From changes in financial assumptions | (274) | - | (274) | 220 | - | 220 | 106 | - | 106
Other actuarial gain and losses | (3) | - | (5) | 12 | - | 12 | 141 | 15 | 125
Benefit payments | (979) | (200) | (779) | (1,029) | (169) | (861) | (1,052) | (169) | (883)
Settlement payments | - | - | - | - | - | - | (43) | - | (43)
Business combinations and disposals | - | - | - | - | - | - | - | - | -
Effect on changes in foreign exchange rates | (31) | (9) | (22) | (278) | (258) | (19) | (282) | (293) | 11
Conversions to defined contributions | - | - | - | (82) | - | (82) | - | - | -
Other effects | 10 | 6 | 4 | (1) | (1) | - | 84 | - | 84
Balance at the end | 7,585 | 2,840 | 4,745 | 8,384 | 3,006 | 5,378 | 8,851 | 3,022 | 5,829
Of which |  |  |  |  |  |  |  |  |
Spain | 4,807 | 260 | 4,547 | 5,442 | 320 | 5,122 | 6,157 | 358 | 5,799
Mexico | 1,615 | 1,587 | 28 | 1,661 | 1,602 | 60 | 1,456 | 1,627 | (171)
The United States | 326 | 287 | 39 | 360 | 309 | 51 | 385 | 339 | 46
Turkey | 422 | 339 | 83 | 520 | 424 | 96 | 447 | 348 | 99

(1) Including gains and losses arising from settlements.

(2) Excluding interest, which is recorded under "Interest income or expense".

The balance under the heading “Provisions - Pensions and other post-employment defined benefit obligations” of the accompanying consolidated balance sheet as of December 31, 2018 includes €332 million relating to post-employment benefit commitments to former members of the Board of Directors and the Bank’s Management (see Note 54).

The most significant commitments are those in Spain and Mexico and, to a lesser extent, in the United States and Turkey. The remaining commitments are located mostly in Portugal and South America. Unless otherwise required by local regulation, all defined benefit plans have been closed to new entrants, who instead are able to participate in the Group´s defined contribution plans.

Both the costs and the present value of the commitments are determined by independent qualified actuaries using the “projected unit credit” method.

In order to guarantee the good governance of these plans, the Group has established specific benefits committees. These benefit committees include members from the different areas of the business to ensure that all decisions are made taking into consideration all of the associated impacts.

The following table sets out the key actuarial assumptions used in the valuation of these commitments as of December 31, 2018, 2017 and 2016:

Actuarial Assumptions (Millions of euros)
|  | 2018 |  |  |  | 2017 |  |  |  | 2016 |  |
| Spain | Mexico | USA | Turkey | Spain | Mexico | USA | Turkey | Spain | Mexico | USA | Turkey
Discount rate | 1.28% | 10.45% | 4.23% | 16.30% | 1.24% | 9.48% | 3.57% | 11.60% | 1.50% | 9.95% | 4.04% | 11.50%
Rate of salary increase | - | 4.75% | - | 14.00% | - | 4.75% | - | 9.90% | 1.50% | 4.75% | 3.00% | 9.30%
Rate of pension increase | - | 2.51% | - | 12.50% | - | 2.13% | - | 8.40% | - | 2.13% | - | 7.80%
Medical cost trend rate | - | 7.00% | - | 16.70% | - | 7.00% | - | 12.60% | - | 6.75% | - | 10.92%
Mortality tables | PERM/F 2000P | EMSSA09 | RP 2014 | CSO2001 | PERM/F 2000P | EMSSA09 | RP 2014 | CSO2001 | PERM/F 2000P | EMSSA97 (adjustment EMSSA09) | RP 2014 | CSO2001

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In Spain, the discount rate shown as of December, 31, 2018, corresponds to the weighted average rate, the actual discount rates used are 0.50% and 1.75% depending on the type of commitment.

Discount rates used to value future benefit cash flows have been determined by reference to high quality corporate bonds (Note 2.2.12) denominated in Euro in the case of Spain, Mexican peso for Mexico and USD for the United States, and government bonds denominated in new Turkish Lira for Turkey.

The expected return on plan assets has been set in line with the adopted discount rate.

Assumed retirement ages have been set by reference to the earliest age at which employees are entitled to retire, the contractually agreed age in the case of early retirements in Spain or by using retirement rates.

Changes in the main actuarial assumptions may affect the valuation of the commitments. The table below shows the sensitivity of the benefit obligations to changes in the key assumptions:

Sensitivity Analysis (Millions of euros)
| Basis points change | 2018 | 2017
| Increase | Decrease | Increase | Decrease
Discount rate | 50 | (298) | 332 | (352) | 386
Rate of salary increase | 50 | 3 | (3) | 5 | (5)
Rate of pension increase | 50 | 19 | (18) | 23 | (22)
Medical cost trend rate | 100 | 229 | (181) | 290 | (225)
Change in obligation from each additional year of longevity | - | 108 | - | 155 | -

The sensitivities provided above have been determined at the date of these consolidated financial statements, and reflect solely the impact of changing one individual assumption at a time, keeping the rest of the assumptions unchanged, thereby excluding the effects which may result from combined assumption changes.

In addition to the commitments to employees shown above, the Group has other less material long-term employee benefits. These include long-service awards, which consist of either an established monetary award or some vacation days granted to certain groups of employees when they complete a given number of years of service. As of December 31, 2018, 2017 and 2016, the actuarial liabilities for the outstanding awards amounted to €62 million, €67 million, and €69 million, respectively. These commitments are recorded under the heading "Provisions - Other long-term employee benefits" of the accompanying consolidated balance sheet (see Note 24).

As described above, the Group maintains both pension and medical post-employment benefit commitments with their employees.

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25.1.1 Post-employment commitments and similar obligations

These commitments relate mostly to pensions in payment, and which have been determined based on salary and years of service. For most plans, pension payments are due on retirement, death and long term disability.

In addition, during the year 2018, Group entities in Spain offered certain employees the option to take retirement or early retirement (that is, earlier than the age stipulated in the collective labor agreement in force). This offer was accepted by 489 employees (731 and 613 employees during years 2017 and 2016, respectively). These commitments include the compensation and indemnities due as well as the contributions payable to external pension funds during the early retirement period. As of December 31, 2018, 2017 and 2016, the value of these commitments amounted to €1,793 million, €2,210 million and €2,559 million, respectively. The change in the benefit plan obligations and plan assets as of December 31, 2018 was as follows:

Post-employment commitments 2018 (Millions of euros)
| Defined Benefit Obligation
| Spain | Mexico | USA | Turkey | Rest of the world
Balance at the beginning | 5,442 | 470 | 360 | 520 | 387
Current service cost | 4 | 5 | - | 21 | 4
Interest income or expense | 64 | 44 | 13 | 47 | 9
Contributions by plan participants | - | - | - | 3 | 1
Employer contributions | - | - | - | - | -
Past service costs (1) | 148 | (1) | - | 2 | 2
Remeasurements: | (32) | 18 | (28) | (18) | 3
Return on plan assets (2) | - | - | - | - | -
From changes in demographic assumptions | - | - | (1) | - | 15
From changes in financial assumptions | - | (9) | (28) | (45) | (12)
Other actuarial gain and losses | (32) | 27 | 1 | 29 | -
Benefit payments | (824) | (48) | (35) | (21) | (18)
Settlement payments | - | - | - | - | -
Business combinations and disposals | - | - | - | - | -
Effect on changes in foreign exchange rates | - | 25 | 17 | (134) | (2)
Conversions to defined contributions | - | - | - | - | -
Other effects | 5 | (2) | (1) | - | 17
Balance at the end | 4,807 | 512 | 326 | 422 | 402
Of which: |  |  |  |  |
Vested benefit obligation relating to current employees | 111 |  |  |  |
Vested benefit obligation relating to retired employees | 4,696 |  |  |  |

Post-employment commitments 2018 (Millions of euros)
| Plan Assets
| Spain | Mexico | USA | Turkey | Rest of the world
Balance at the beginning | 320 | 488 | 309 | 424 | 351
Current service cost | - | - | - | - | -
Interest income or expense | 5 | 46 | 11 | 39 | 7
Contributions by plan participants | - | - | - | 3 | 1
Employer contributions | - | - | 2 | 13 | 18
Past service costs (1) | - | - | - | - | -
Remeasurements: | (4) | (70) | (17) | (21) | (11)
Return on plan assets (2) | (4) | (70) | (17) | (21) | (11)
From changes in demographic assumptions | - | - | - | - | -
From changes in financial assumptions | - | - | - | - | -
Other actuarial gain and losses | - | - | - | - | -
Benefit payments | (61) | (47) | (33) | (10) | (15)
Settlement payments | - | - | - | - | -
Business combinations and disposals | - | - | - | - | -
Effect on changes in foreign exchange rates | - | 26 | 15 | (108) | (1)
Conversions to defined contributions | - | - | - | - | -
Other effects | - | (1) | - | - | 17
Balance at the end | 260 | 441 | 287 | 339 | 366

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Post-employment commitments 2018 (Millions of euros)
| Net Liability (Asset)
| Spain | Mexico | USA | Turkey | Rest of the world
Balance at the beginning | 5,122 | (18) | 51 | 96 | 36
Current service cost | 4 | 5 | - | 21 | 4
Interest income or expense | 59 | (2) | 2 | 8 | 2
Contributions by plan participants | - | - | - | - | 1
Employer contributions | - | - | (2) | (13) | (18)
Past service costs (1) | 148 | (1) | - | 2 | 2
Remeasurements: | (28) | 88 | (11) | 3 | 14
Return on plan assets (2) | 4 | 70 | 17 | 21 | 11
From changes in demographic assumptions | - | - | (1) | - | 15
From changes in financial assumptions | - | (9) | (28) | (45) | (12)
Other actuarial gain and losses | (32) | 27 | 1 | 29 | -
Benefit payments | (763) | - | (2) | (11) | (3)
Settlement payments | - | - | - | - | -
Business combinations and disposals | - | - | - | - | -
Effect on changes in foreign exchange rates | - | (1) | 2 | (26) | (1)
Conversions to defined contributions | - | - | - | - | -
Other effects | 5 | - | (1) | - | -
Balance at the end | 4,547 | 71 | 39 | 83 | 35

(1) Including gains and losses arising from settlements.

(2) Excluding interest, which is recorded under "Interest income or expense".

The change in net liabilities (assets) during the years ended 2017 and 2016 was as follows:

Post-employment commitments (Millions of euros)
| 2017: Net liability (asset) | 2016: Net liability (asset)
| Spain | Mexico | USA | Turkey | Rest of the world | Spain | Mexico | USA | Turkey | Rest of the world
Balance at the beginning | 5,799 | (59) | 46 | 99 | 43 | 6,109 | (79) | 35 | 97 | 24
Current service cost | 4 | 5 | 3 | 21 | 5 | 10 | 6 | 4 | 22 | 5
Interest income or expense | 73 | (6) | 1 | 9 | 2 | 98 | (7) | 1 | 8 | 2
Contributions by plan participants | - | - | - | - | - | - | - | - | - | -
Employer contributions | - | (1) | - | (16) | (8) | - | (14) | (1) | (17) | (9)
Past service costs (1) | 235 | 1 | - | 4 | 3 | 240 | 1 | - | 4 | (4)
Remeasurements: | (67) | 38 | 9 | 12 | (1) | 188 | 23 | 10 | 8 | 11
Return on plan assets (2) | (21) | (10) | (11) | (101) | 2 | (35) | 23 | 3 | (23) | (8)
From changes in demographic assumptions | - | 22 | (2) | - | (3) | - | 2 | (5) | - | (1)
From changes in financial assumptions | (33) | 18 | 22 | 81 | 4 | 192 | (22) | 13 | (23) | 37
Other actuarial gain and losses | (13) | 7 | - | 32 | (4) | 31 | 19 | (1) | 54 | (17)
Benefit payments | (842) | (1) | (2) | (11) | (3) | (867) | - | (3) | (9) | (2)
Settlement payments | - | - | - | - | - | (43) | - | - | - | -
Business combinations and disposals | - | - | - | - | - | - | - | - | - | -
Effect on changes in foreign exchange rates | - | 5 | (5) | (21) | (5) | - | 10 | 2 | (15) | (4)
Conversions to defined contributions | (82) | - | - | - | - | - | - | - | - | -
Other effects | 2 | - | (1) | - | (1) | 63 | - | (3) | - | 20
Balance at the end | 5,122 | (18) | 51 | 96 | 36 | 5,799 | (59) | 46 | 99 | 42

(1) Includes gains and losses from settlements.

(2) Excludes interest which is reflected in the line item “Interest income and expenses”.

In Spain, local regulation requires that pension and death benefit commitments must be funded, either through a qualified pension plan or an insurance contract.

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In the Spanish entities these commitments are covered by insurance contracts which meet the requirements of the accounting standard regarding the non-recoverability of contributions. However, a significant number of the insurance contracts are with BBVA Seguros, S.A. – a consolidated subsidiary and related party – and consequently these policies cannot be considered plan assets under IAS 19. For this reason, the liabilities insured under these policies are fully recognized under the heading "Provisions – Pensions and other postemployment defined benefit obligations" of the accompanying consolidated balance sheet (see Note 24), while the related assets held by the insurance company are included within the Group´s consolidated assets (recorded according to the classification of the corresponding financial instruments). As of December 31, 2018 the value of these separate assets was €2,543 million, representing direct rights of the insured employees held in the consolidated balance sheet, hence these benefits are effectively fully funded.

On the other hand, some pension commitments have been funded through insurance contracts with insurance companies not related to the Group, and can therefore be considered qualifying insurance policies and plan assets under IAS 19. In this case the accompanying consolidated balance sheet reflects the value of the obligations net of the fair value of the qualifying insurance policies. As of December 31, 2018, 2017 and 2016, the fair value of the aforementioned insurance policies (€260, €320 million and €358 million, respectively) exactly match the value of the corresponding obligations and therefore no amount for this item has been recorded in the accompanying consolidated balance sheet.

Pensions benefits are paid by the insurance companies with whom BBVA has insurance contracts and to whom all insurance premiums have been paid. The premiums are determined by the insurance companies using “cash flow matching” techniques to ensure that benefits can be met when due, guaranteeing both the actuarial and interest rate risk.

In Mexico, there is a defined benefit plan for employees hired prior to 2001. Other employees participate in a defined contribution plan. External funds/trusts have been constituted locally to meet benefit payments as required by local regulation.

In the United States there are mainly two defined benefit plans, both closed to new employees, who instead are able to join a defined contribution plan. External funds/trusts have been constituted locally to fund the plans, as required by local regulation.

In 2008, the Turkish government passed a law to unify the different existing pension systems under a single umbrella Social Security system. Such system provides for the transfer of the various previously established funds.

The financial sector is in this stage at present, maintaining these pension commitments managed by external pension funds (foundations) established for that purpose.

The Foundation that maintains the assets and liabilities relating to employees of Garanti in Turkey, as per the local regulatory requirements, has recorded an obligation amounting to €241 million as of December 31, 2018 pending future transfer to the Social Security system.

Furthermore, Garanti has set up a defined benefit pension plan for employees, additional to the social security benefits, reflected in the consolidated balance sheet.

Until the year 2016, the Bank also had commitments to pay indemnities to certain employees and members of the Group’s Senior Management in the event that they cease to hold their positions for reasons other than their own will, retirement, disability or serious dereliction of duties. The amount will be calculated according to the salary and professional conditions of each employee, taking into consideration fixed elements of the remuneration and the length of office at the Bank. Under no circumstances indemnities will be paid in cases of disciplinary dismissal for misconduct upon decision of the employer on grounds of the employee's serious dereliction of duties.

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25.1.2 Medical benefit commitments

The change in defined benefit obligations and plan assets during the years 2018, 2017 and 2016 was as follows:

Medical Benefits Commitments
| 2018 | 2017 | 2016
| Defined Benefit Obligation | Plan assets | Net liability (asset) | Defined Benefit Obligation | Plan assets | Net liability (asset) | Defined Benefit Obligation | Plan assets | Net liability (asset)
Balance at the beginning | 1,204 | 1,114 | 91 | 1,015 | 1,113 | (98) | 1,022 | 1,149 | (127)
Current service cost | 27 | - | 27 | 26 | - | 26 | 24 | - | 24
Interest income or expense | 116 | 109 | 8 | 101 | 112 | (11) | 86 | 97 | (11)
Contributions by plan participants | - | - | - | - | - | - | - | - | -
Employer contributions | - | 71 | (71) | - | - | - | - | 114 | (114)
Past service costs (1) | (42) | - | (42) | (11) | - | (11) | (5) | - | (5)
Remeasurements: | (210) | (164) | (47) | 200 | 21 | 179 | 59 | (60) | 119
Return on plan assets (2) | - | (164) | 164 | - | 21 | (21) | - | (60) | 60
From changes in demographic assumptions | - | - | - | 83 | - | 83 | 110 | - | 110
From changes in financial assumptions | (182) | - | (182) | 128 | - | 128 | (91) | - | (91)
Other actuarial gain and losses | (28) | - | (28) | (10) | - | (10) | 39 | - | 39
Benefit payments | (34) | (33) | (1) | (35) | (33) | (2) | (33) | (30) | (2)
Settlement payments | - | - | - | - | - | - | - | - | -
Business combinations and disposals | - | - | - | - | - | - | - | - | -
Effect on changes in foreign exchange rates | 62 | 59 | 3 | (92) | (100) | 8 | (138) | (156) | 18
Other effects | (9) | (9) | - | - | - | - | - | - | -
Balance at the end | 1,114 | 1,146 | (32) | 1,204 | 1,114 | 91 | 1,015 | 1,113 | (98)

(1) Including gains and losses arising from settlements.

(2) Excluding interest, which is recorded under "Interest income or expense".

In Mexico, there is a medical benefit plan for employees hired prior to 2007. New employees from 2007 are covered by a medical insurance policy. An external trust has been constituted locally to fund the plan, in accordance with local legislation and Group policy.

In Turkey, employees are currently provided with medical benefits through a foundation in collaboration with the Social Security system, although local legislation prescribes the future unification of this and similar systems into the general Social Security system itself.

The valuation of these benefits and their accounting treatment follow the same methodology as that employed in the valuation of pension commitments.

25.1.3 Estimated benefit payments

As of December 31, 2018, the estimated benefit payments over the next ten years for all the entities in Spain, Mexico, The United States and Turkey are as follows:

Estimated Benefit Payments (Millions of euros)
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024-2028
Commitments in Spain | 684 | 611 | 518 | 419 | 333 | 965
Commitments in Mexico | 91 | 92 | 99 | 106 | 112 | 680
Commitments in United States | 16 | 17 | 17 | 18 | 19 | 103
Commitments in Turkey | 24 | 14 | 18 | 20 | 25 | 231
Total | 815 | 734 | 652 | 563 | 489 | 1,979

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25.1.4 Plan assets

The majority of the Group´s defined benefit plans are funded by plan assets held in external funds/trusts legally separate from the Group sponsoring entity. However, in accordance with local regulation, some commitments are not externally funded and covered through internally held provisions, principally those relating to early retirements in Spain.

Plan assets are those assets which will be used to directly settle the assumed commitments and which meet the following conditions: they are not part of the Group sponsoring entities assets, they are available only to pay post-employment benefits and they cannot be returned to the Group sponsoring entity.

To manage the assets associated with defined benefit plans, BBVA Group has established investment policies designed according to criteria of prudence and minimizing the financial risks associated with plan assets.

The investment policy consists of investing in a low risk and diversified portfolio of assets with maturities consistent with the term of the benefit obligation and which, together with contributions made to the plan, will be sufficient to meet benefit payments when due, thus mitigating the plans‘ risks.

In those countries where plan assets are held in pension funds or trusts, the investment policy is developed consistently with local regulation. When selecting specific assets, current market conditions, the risk profile of the assets and their future market outlook are all taken into consideration. In all the cases, the selection of assets takes into consideration the term of the benefit obligations as well as short-term liquidity requirements.

The risks associated with these commitments are those which give rise to a deficit in the plan assets. A deficit could arise from factors such as a fall in the market value of plan assets, an increase in long-term interest rates leading to a decrease in the fair value of fixed income securities, or a deterioration of the economy resulting in more write-downs and credit rating downgrades.

The table below shows the allocation of plan assets of the main companies of the BBVA Group as of December 31, 2018:

Plan Assets Breakdown (Millions of euros)
| 2018
Cash or cash equivalents | 26
Debt securities (Government bonds) | 2,080
Property | -
Mutual funds | 2
Insurance contracts | 132
Other investments | -
Total | 2,241
Of which: |
Bank account in BBVA | 3
Debt securities issued by BBVA | -
Property occupied by BBVA | -

In addition to the above there are plan assets relating to the previously mentioned insurance contracts in Spain and the foundation in Turkey.

The following table provides details of investments in listed securities (Level 1) as of December 31, 2018:

Investments in listed markets
| 2018
Cash or cash equivalents | 26
Debt securities (Government bonds) | 2,080
Mutual funds | 2
Total | 2,109
Of which: |
Bank account in BBVA | 3
Debt securities issued by BBVA | -
Property occupied by BBVA | -

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The remainders of the assets are mainly invested in Level 2 assets in in accordance with the classification established under IFRS 13 (mainly insurance contracts). As of December 31, 2018, almost all of the assets related to employee’s commitments corresponded to fixed income securities.

## 25.2 Defined contribution plans

Certain Group entities sponsor defined contribution plans. Some of these plans allow employees to make contributions which are then matched by the employer.

Contributions are recognized as and when they are accrued, with a charge to the consolidated income statement in the corresponding year. No liability is therefore recognized in the accompanying consolidated balance sheet (see Note 44.1).

26. Common stock

As of December 31, 2018 BBVA’s common stock amounted to €3,267,264,424.20 divided into 6,667,886,580 fully subscribed and paid-up registered shares, all of the same class and series, at €0.49 par value each, represented through book-entries. All of the Bank shares carry the same voting and dividend rights, and no single stockholder enjoys special voting rights. Each and every share is part of the Bank’s common stock.

The Bank’s shares are traded on the stock markets of Madrid, Barcelona, Bilbao and Valencia through the Sistema de Interconexión Bursátil Español (Mercado Continuo), as well as on the London and Mexico stock markets. BBVA American Depositary Shares (ADSs) traded on the New York Stock Exchange.

Additionally, as of December 31, 2018, the shares of BBVA Banco Continental, S.A.; Banco Provincial, S.A.; BBVA Colombia, S.A.; BBVA Banco Francés, S.A. and Turkiye Garanti Bankasi A.S., were listed on their respective local stock markets. BBVA Banco Francés, S.A. was also quoted in the Latin American market (Latibex) of the Madrid Stock Exchange and the New York Stock Exchange.

As of December 31, 2018, State Street Bank and Trust Co., Chase Nominees Ltd and The Bank of New York Mellon SA NV in their capacity as international custodian/depositary banks, held 10.69%, 6.33%, and 2.31% of BBVA common stock, respectively. Of said positions held by the custodian banks, BBVA is not aware of any individual shareholders with direct or indirect holdings greater than or equal to 3% of BBVA common stock outstanding.

On February 4, 2019, Blackrock, Inc. reported to the SEC that, as of December 31, 2018, it beneficially owned 6.6% of BBVA’s common stock.

BBVA is not aware of any direct or indirect interests through which control of the Bank may be exercised. BBVA has not received any information on stockholder agreements including the regulation of the exercise of voting rights at its annual general meetings or restricting or placing conditions on the free transferability of BBVA shares. No agreement is known that could give rise to changes in the control of the Bank.

The changes in the heading “Paid up Capital” of the accompanying consolidated balance sheets are due to

the following common stock increases:

Capital Increase
| Number of Shares | Common Stock (Millions of Euros)
As of December 31, 2015 | 6,366,680,118 | 3,120
Dividend option - April 2016 | 113,677,807 | 56
Dividend option - October 2016 | 86,257,317 | 42
As of December 31, 2016 | 6,566,615,242 | 3,218
Dividend option . April 2017 | 101,271,338 | 50
As of December 31, 2017 | 6,667,886,580 | 3,267
As of December 31, 2018 | 6,667,886,580 | 3,267

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“Dividend Option” Program in 2017:

The AGM of BBVA held on March 17, 2017 adopted, under agenda item three, a capital increase to be charged to voluntary reserves to implement the shareholder remuneration system called the “Dividend Option” this year in similar conditions to those agreed in 2014, 2015 and 2016, conferring on the Board of Directors, in accordance with article 297.1.a) of the Spanish Companies Act, the authority to set the date on which the capital increase should be carried out, within one year of the date of approval of the AGM resolution.

By virtue of such resolution, the Board of Directors of BBVA resolved, on March 29, 2017, to execute the capital increase to be charged to voluntary reserves, in accordance with the terms and conditions approved by the AGM mentioned above. As a result, BBVA’s share capital was increased by an amount of 49,622,955.62 euros through the issuance of 101,271,338 newly-issued BBVA ordinary shares at 0.49 euros par value each (see Note 4).

“Dividend Option” Program in 2016:

The AGM held on March 11, 2016, under agenda item three, adopted four capital increase resolutions to be charged to voluntary reserves to once again implement the shareholder remuneration program called the “Dividend Option” (see Note 4), conferring on the Board of Directors, in accordance with article 297.1 a) of the Spanish Companies Act, the authority to set the date on which said capital increases should be carried out, within one year of the date of approval of the AGM resolution, including the power not to implement any of the resolutions, when deemed advisable.

On March 31, 2016, the Board of Directors of BBVA approved the execution of the first of the capital increases charged to voluntary reserves, in accordance with the terms and conditions agreed by the aforementioned AGM. As a result of this increase, the Bank’s capital increased by €55,702,125.43 through the issuance of 113,677,807 ordinary shares at €0.49 par values each.

On September 28, 2016, BBVA’s Board of Directors approved the execution of the second of the capital increases charged to voluntary reserves in accordance with the terms and conditions agreed by the aforementioned AGM. As a result of this increase, the Bank’s capital increased by €42,266,085.33 through the issuance of 86,257,317 ordinary shares at €0.49 par value each.

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Convertible and/or exchangeable securities:

The AGM held on March 17, 2017, resolved, under agenda item five, to confer authority to the Board of Directors to issue securities convertible into newly issued BBVA shares, on one or several occasions, within the maximum term of five years to be counted from the approval date of the authorization, up to a maximum overall amount of €8 billion or its equivalent in any other currency. Likewise, the AGM resolved to confer to the Board of Directors the authority to totally or partially exclude shareholders’ pre-emptive subscription rights within the framework of a specific issue of convertible securities, although this power was limited to ensure the nominal amount of the capital increases resolved or effectively carried out to cover the conversion of mandatory convertible issuances of this authority (without prejudice to anti-dilution adjustments), with exclusion of pre-emptive subscription rights and of those likewise resolved or carried out with exclusion of pre-emptive subscription rights in use of the authority to increase the share capital conferred by the AGM held on March 17, 2017, under agenda item four, do not exceed the maximum nominal amount, overall, of 20% of the share capital of BBVA at the time of the authorization, this limit not being applicable to contingent convertible issues.

In use of the authority mentioned above, BBVA carried out, on May 24, 2017 the fifth issuance of perpetual contingent convertible securities (additional tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of €500 million. This issuance is listed in the Global Exchange Market of the Irish Stock Exchange and was targeted only at qualified investors, not being offered to, and not being subscribed for, in Spain or by Spanish residents. The issuance qualifies as additional tier 1 capital of the Bank and the Group in accordance with Regulation EU 575/2013 (see Note 22.4).

Likewise, in use of such authority, BBVA carried out, on November 14, 2017 the sixth issuance of perpetual contingent convertible securities (additional tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders, for a total nominal amount of $1,000 million. This issuance is listed in the Global Exchange Market of the Irish Stock Exchange and was targeted only at qualified investors, not being offered to, and not being subscribed for, in Spain or by Spanish residents. The qualification of this issuance as additional tier 1 capital has been requested (see Note 22.4).

In past years, BBVA has carried out, in use of the authority to issue convertible securities conferred by the AGM held on March 16, 2012 (in effect until March 16, 2017), four additional issuances of perpetual contingent convertible securities (additional tier 1 instrument), with exclusion of pre-emptive subscription rights of shareholders (in April 2013 for an amount of $1.5 billion, in February 2014 and February 2015 for an amount of €1.5 billion each one, and in April 2016 for an amount of €1 billion). These issuances were targeted only at qualified investors and foreign private banking clients not being offered to, and not being subscribed for, in Spain or by Spanish residents. The first two issuances are listed in the Singapore Exchange Securities Trading Limited and the last two issuances are listed in the Global Exchange Market of the Irish Stock Exchange. Furthermore, these four issuances qualify as additional tier 1 capital of the Bank and the Group in accordance with Regulation UE 575/2013 (see Note 22.4).

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Convertible and/or exchangeable securities:

BBVA’s AGM held on March 17, 2017 resolved, under agenda item four, to confer authority on the Board of Directors to increase Bank’s share capital, on one or several occasions, subject to provisions in the law and in the Company Bylaws that may be applicable at any time, within the legal term of five years of the approval date of the authorization, up to the maximum amount corresponding to 50% of Bank’s share capital at the time on which the resolution was adopted, likewise conferring authority to the Board of Directors to totally or partially exclude shareholders’ pre-emptive subscription rights over any specific issue that may be made under such authority; although the power to exclude pre-emptive subscription rights was limited, such that the nominal amount of the capital increases resolved or effectively carried out with the exclusion of pre-emptive subscription rights in use of the referred authority and those that may be resolved or carried out to cover the conversion of mandatory convertible issues that may equally be made with the exclusion of pre-emptive subscription rights in use of the authority to issue convertible securities conferred by the AGM held on March 17, 2017, under agenda item five (without prejudice to the anti-dilution adjustments) shall not exceed the nominal maximum overall amount of 20% of the share capital of BBVA at the time of the authorization.

As of the date of this document, the Bank’s Board of Directors has not exercised the authority conferred by the AGM.

27. Share premium

As of December 31, 2018, 2017 and 2016, the balance under this heading in the accompanying consolidated balance sheets was €23,992 million.

The amended Spanish Corporation Act expressly permits the use of the share premium balance to increase capital and establishes no specific restrictions as to its use (see Note 26).

28. Retained earnings, revaluation reserves and other reserves

The breakdown of the balance under this heading in the accompanying consolidated balance sheet is as follows:

Retained earnings, revaluation reserves and other reserves. Breakdown by concepts (Millions of euros)
| 2018 | 2017 | 2016
Legal reserve | 653 | 644 | 624
Restricted reserve | 133 | 159 | 201
Reserves for regularizations and balance revaluations | 3 | 12 | 20
Voluntary reserves | 8,010 | 8,643 | 8,521
Total reserves holding company | 8,799 | 9,458 | 9,366
Consolidation reserves attributed to the Bank and dependent consolidated companies. | 14,164 | 14,132 | 12,439
Total | 22,963 | 23,590 | 21,805

The impact of the first application of IFRS 9 and the change in accounting policies due to hyperinflation is recorded in the heading "Consolidation reserves attributed to the Bank and dependent consolidated companies" of the previous table (see Notes 1.3, 2.4 and 2.2.20).

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28.1 Legal reserve

Under the amended Corporations Act, 10% of any profit made each year must be transferred to the legal reserve. The transfer must be made until the legal reserve reaches 20% of the common stock.

The legal reserve can be used to increase the common stock provided that the remaining reserve balance does not fall below 10% of the increased capital. While it does not exceed 20% of the common stock, it can only be allocated to offset losses exclusively in the case that there are not sufficient reserves available.

28.2 Restricted reserves

As of December 31, 2018, 2017 and 2016, the Bank’s restricted reserves are as follows:

Restricted Reserves (Millions of euros)
| 2018 | 2017 | 2016
Restricted reserve for retired capital | 88 | 88 | 88
Restricted reserve for Parent Company shares and loans for those shares | 44 | 69 | 111
Restricted reserve for redenomination of capital in euros | 2 | 2 | 2
Total | 133 | 159 | 201

The restricted reserve for retired capital resulted from the reduction of the nominal par value of the BBVA shares made in April 2000.

The second heading corresponds to restricted reserves related to the amount of shares issued by the Bank in its possession at each date, as well as the amount of customer loans outstanding at those dates that were granted for the purchase of, or are secured by, the Parent Company shares.

Finally, pursuant to Law 46/1998 on the Introduction of the Euro, a restricted reserve is recognized as a result of the rounding effect of the redenomination of the Parent Company common stock in euros.

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28.3 Retained earnings, revaluation reserves and other reserves by entity

The breakdown, by company or corporate group, under the headings “Retained earnings, revaluation reserves and other reserves” in the accompanying consolidated balance sheets is as follows:

Retained earnings, Revaluation reserves and Other reserves (Millions of euros)
| 2018 | 2017 | 2016
Retained earnings and Revaluation reserves |  |  |
Holding Company | 14,643 | 15,625 | 14,101
BBVA Bancomer Group | 10,014 | 9,442 | 9,108
BBVA Seguros, S.A. | (127) | (215) | (62)
Corporacion General Financiera, S.A. | 1,084 | 1,202 | 1,187
BBVA Banco Provincial Group | (124) | (113) | (92)
BBVA Chile Group | 552 | 951 | 1,264
BBVA Paraguay | 119 | 108 | 98
Compañía de Cartera e Inversiones, S.A. | 108 | (20) | (27)
Anida Grupo Inmobiliario, S.L. | 363 | 515 | 528
BBVA Suiza, S.A. | (53) | (57) | (1)
BBVA Continental Group | 756 | 681 | 611
BBVA Luxinvest, S.A. | (48) | 25 | 16
BBVA Colombia Group | 998 | 926 | 803
BBVA Banco Francés Group | 103 | 999 | 827
Banco Industrial De Bilbao, S.A. | - | 25 | 61
Uno-E Bank, S.A | - | - | -
Gran Jorge Juan, S.A. | (33) | (47) | (30)
BBVA Portugal Group | (66) | (436) | (477)
Participaciones Arenal, S.L. | (4) | (183) | (180)
BBVA Propiedad S.A. | - | (503) | (431)
Anida Operaciones Singulares, S.L. | (5,317) | (4,881) | (4,127)
Grupo BBVA USA Bancshares | (586) | (794) | (1,053)
Garanti Turkiye Bankasi Group | 1,415 | 751 | 127
Unnim Real Estate | (587) | (576) | (477)
Bilbao Vizcaya Holding, S.A. | 49 | 145 | 139
Pecri Inversión S.L. | (74) | (73) | (75)
Other | (164) | 127 | 25
Subtotal | 23,021 | 23,624 | 21,864
Other reserves or accumulated losses of investments in joint ventures and associates | - | - | -
Metrovacesa, S.A. | - | - | -
Metrovacesa Suelo, S.A. | (61) | (53) | (52)
Other | 2 | 18 | (7)
Subtotal | (59) | (35) | (59)
Total | 22,963 | 23,590 | 21,805

For the purpose of allocating the reserves and accumulated losses to the consolidated entities and to the parent company, the transfers of reserves arising from the dividends paid and transactions between these entities are taken into account in the period in which they took place.

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29. Treasury shares

In the years ended December 31, 2018, 2017 and 2016 the Group entities performed the following transactions with shares issued by the Bank:

Treasury Shares (Millions of euros)
| 2018 | 2017 | 2016
| Number of Shares | Millions of Euros | Number of Shares | Millions of Euros | Number of Shares | Millions of Euros
Balance at beginning | 13,339,582 | 96 | 7,230,787 | 48 | 38,917,665 | 309
+ Purchases | 279,903,844 | 1,683 | 238,065,297 | 1,674 | 379,850,939 | 2,004
- Sales and other changes | (245,985,735) | (1,505) | (231,956,502) | (1,622) | (411,537,817) | (2,263)
+/- Derivatives on BBVA shares | - | - | - | (4) | - | (1)
+/- Other changes | - | 23 | - | - | - | -
Balance at the end | 47,257,691 | 296 | 13,339,582 | 96 | 7,230,787 | 48
Of which: | - | - | - | - | - | -
Held by BBVA, S.A. | - | - | - | - | 2,789,894 | 22
Held by Corporación General Financiera, S.A. | 47,257,691 | 296 | 13,339,582 | 96 | 4,440,893 | 26
Held by other subsidiaries | - | - | - | - | - | -
Average purchase price in Euros | 6.11 | - | 7.03 | - | 5.27 | -
Average selling price in Euros | 6.25 | - | 6.99 | - | 5.50 | -
Net gain or losses on transactions (Shareholders' funds-Reserves) |  | (24) |  | 1 |  | (30)

The percentages of treasury shares held by the Group in the years ended December 31, 2018, 2017 and 2016 are as follows:

Treasury Stock
| 2018 | 2017 | 2016
| Min | Max | Closing | Min | Max | Closing | Min | Max | Closing
% treasury stock | 0.200% | 0.850% | 0.709% | 0.004% | 0.278% | 0.200% | 0.081% | 0.756% | 0.110%

The number of BBVA shares accepted by the Group in pledge of loans as of December 31, 2018, 2017 and 2016 is as follows:

Shares of BBVA Accepted in Pledge
| 2018 | 2017 | 2016
Number of shares in pledge | 61,632,832 | 64,633,003 | 90,731,198
Nominal value | 0.49 | 0.49 | 0.49
% of share capital | 0.92% | 0.97% | 1.38%

The number of BBVA shares owned by third parties but under management of a company within the Group as of December 31, 2018, 2017 and 2016 is as follows:

Shares of BBVA Owned by Third Parties but Managed by the Group
| 2018 | 2017 | 2016
Number of shares owned by third parties | 25,306,229 | 34,597,310 | 85,766,602
Nominal value | 0.49 | 0.49 | 0.49
% of share capital | 0.38% | 0.52% | 1.31%

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30. Accumulated other comprehensive income (loss)

The breakdown of the balance under this heading in the accompanying consolidated balance sheets is as follows:

Accumulated other comprehensive income (Millions of euros)
| Notes | 2018 | 2017(*) | 2016(*)
Items that will not be reclassified to profit or loss |  | (1,284) | (1,183) | (1,095)
Actuarial gains or losses on defined benefit pension plans |  | (1,245) | (1,183) | (1,095)
Non-current assets and disposal groups classified as held for sale |  | - | - | -
Share of other recognized income and expense of investments in subsidiaries, joint ventures and associates |  | - | - | -
Fair value changes of equity instruments measured at fair value through other comprehensive income | 13.4 | (155) |  |
Hedge ineffectiveness of fair value hedges for equity instruments measured at fair value through other comprehensive income |  | - |  |
Fair value changes of equity instruments measured at fair value through other comprehensive income (hedged item) |  | - |  |
Fair value changes of equity instruments measured at fair value through other comprehensive income (hedging instrument) |  | - |  |
Fair value changes of financial liabilities at fair value through profit or loss attributable to changes in their credit risk |  | 116 |  |
Items that may be reclassified to profit or loss |  | (5,932) | (5,755) | (2,527)
Hedge of net investments in foreign operations (effective portion) |  | (218) | 1 | (118)
Foreign currency translation |  | (6,643) | (7,297) | (3,349)
Hedging derivatives. Cash flow hedges (effective portion) |  | (6) | (34) | 16
Financial assets available for sale | 13.4 |  | 1,641 | 947
Fair value changes of debt instruments measured at fair value through other comprehensive income | 13.4 | 943 |  |
Hedging instruments (non-designated items) |  | - | - | -
Non-current assets and disposal groups classified as held for sale |  | 1 | (26) | -
Share of other recognized income and expense of investments in subsidiaries, joint ventures and associates |  | (9) | (40) | (31)
Total |  | (7,215) | (6,939) | (3,622)

(*) See Note 1.3.

The balances recognized under these headings are presented net of tax.

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31. Minority interest

The breakdown by groups of consolidated entities of the balance under the heading “Minority interests (non-controlling interest)” of total equity in the accompanying consolidated balance sheets is as follows:

Non-Controlling Interests (Millions of euros)
| 2018 | 2017 | 2016
BBVA Colombia Group | 67 | 65 | 67
BBVA Chile Group (*) | - | 399 | 377
BBVA Banco Continental Group | 1,167 | 1,059 | 1,059
BBVA Banco Provincial Group | 67 | 78 | 97
BBVA Banco Francés Group | 352 | 420 | 243
Garanti Group | 4,058 | 4,903 | 6,157
Other entities | 53 | 55 | 64
Total | 5,764 | 6,979 | 8,064

(*) See Note 3.

These amounts are broken down by groups of consolidated entities under the heading “Attributable to minority interests (non-controlling interest)” in the accompanying consolidated income statements:

Profit attributable to Non-Controlling Interests (Millions of euros)
| 2018 | 2017 | 2016
BBVA Colombia Group | 9 | 7 | 9
BBVA Chile Group (*) | 26 | 51 | 40
BBVA Banco Continental Group | 227 | 208 | 193
BBVA Banco Provincial Group | (5) | (2) | (2)
BBVA Banco Francés Group | (18) | 93 | 55
Garanti Group | 585 | 883 | 917
Other entities | 4 | 4 | 8
Total | 827 | 1,244 | 1,218

(*) See Note 3.

Dividends distributed to non-controlling interest of the Group during the year 2018 are: Garanti Group €233 million, BBVA Banco Continental Group €108 million, BBVA Chile Group €14 million, BBVA Banco Francés Group €13 million and other Spanish entities accounted for €10 million.

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32. Capital base and capital management

32.1 Capital base

As of December 31, 2018, 2017 and 2016, equity is calculated in accordance to the applicable regulation of each period on minimum capital base requirements for Spanish credit institutions –both as individual entities and as consolidated group– and how to calculate them, as well as the various internal capital adequacy assessment processes they should have in place and the information they should disclose to the market.

The minimum capital base requirements established by the current regulation are calculated according to the Group’s exposure to credit and dilution risk, counterparty and liquidity risk relating to the trading portfolio, exchange-rate risk and operational risk. In addition, the Group must fulfill the risk concentration limits established in said regulation and the internal corporate governance obligations.

At the date of preparation of these consolidated financial statements, BBVA has not received an official communication of the ECB about the results of the SREP process which had been carried out during the financial year 2018 and which will include requirements regarding the capital ratio (both at individual and consolidated level) applicable to BBVA and its Group as from the date indicated in that communication. As soon as this communication will be available, BBVA will disclose it to the markets by means of public relevant events.

Taking into account fully application of capital buffers since January 1, 2019 and considering last capital requirement communicated from ECB, BBVA has to maintain since January 1, 2019 i) a CET1 ratio of 9.26% at consolidated level and ii) a total capital ratio of 12.76% at consolidated level. This total consolidated capital ratio includes i) the minimum common equity tier 1 capital (CET1) requirement under Pillar 1 (4.5%); ii) the additional tier 1 capital (AT1) requirement under Pillar 1 (1.5%); iii) the tier 2 capital requirement under Pillar 1 (2%); iv) the CET1 capital requirement under Pillar 2 (1.5%); v) the capital conservation buffer (2.5% of CET1); vi) the Other Systemic Important Institution buffer (OSII) (0.75% of CET1); and vii) the countercyclical capital buffer (0.01% of CET1).

The Group’s bank capital in accordance with the aforementioned applicable regulation, considering entities scope required by the above regulation, as of December 31, 2018, 2017 and 2016 is shown below:

Eligible capital resources (Millions of euros)
| Notes | December 2018 (*) | December 2017 | December 2016
Capital | 26 | 3,267 | 3,267 | 3,218
Share premium | 27 | 23,992 | 23,992 | 23,992
Retained earnings, revaluation reserves and other reserves | 28 | 22,963 | 23,590 | 21,805
Other equity instruments, net | 28 | 50 | 54 | 54
Treasury shares | 29 | (296) | (96) | (48)
Attributable to the parent company | 6 | 5,324 | 3,519 | 3,475
Attributable dividend | 4 | (975) | (1,043) | (1,510)
Total equity |  | 54,325 | 53,283 | 50,985
Accumulated other comprehensive income | 30 | (7,215) | (6,939) | (3,622)
Non-controlling interest | 31 | 5,764 | 6,979 | 8,064
Shareholders' equity |  | 52,874 | 53,323 | 55,428
Intangible assets |  | (8,199) | (6,627) | (5,675)
Fin. treasury shares |  | (27) | (48) | (82)
Indirect treasury shares |  | (108) | (134) | (51)
Deductions |  | (8,334) | (6,809) | (5,808)
Temporary CET 1 adjustments |  | - | (273) | (129)
Capital gains from the Available-for-sale debt instruments portfolio |  | - | (256) | (402)
Capital gains from the Available-for-sale equity portfolio |  | - | (17) | 273
Differences from solvency and accounting level |  | (176) | (189) | (120)
Equity not eligible at solvency level |  | (176) | (462) | (249)
Other adjustments and deductions |  | (4,053) | 3,711 | (2,001)
Common Equity Tier 1 (CET 1) |  | 40,311 | 42,341 | 47,370
Additional Tier 1 before Regulatory Adjustments |  | 5,634 | 6,296 | 6,114
Total Regulatory Adjustments of Additional Tier 1 |  | - | (1,657) | (3,401)
Tier 1 |  | 45,945 | 46,980 | 50,083
Tier 2 |  | 8,754 | 8,798 | 8,810
Total Minimum equity required |  | 41,607 | 40,370 | 37,923

(*) Provisional data.

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Capital Base
| 2018 (*) | 2017 | 2016
Tier 1 (millions of euros) (a) | 45,945 | 46,980 | 50,083
Exposure (millions of euros) (b) | 705,406 | 700,443 | 747,216
Leverage ratio (a)/(b) (percentage) | 6.51% | 6.71% | 6.70%

(*) Provisional data.

As of December 31, 2018 Common Equity Tier 1 (CET1) phased-in ratio stood at 11.6% (in terms of fully loaded, CET1 stood at 11.3%). Excluding the effect of the phased-in calendar in minority interest and deductions that goes from 80% in 2017 to 100% in 2018, and including the positive impact of the sale of the stake in BBVA Chile (+50 bps), the CETI phased-in ratio has increased by +48 bps. This increase is mainly explained by the generation of profit, net of dividend payments and remunerations of AT1 instruments and dividends received by the Bank, and the stability in the level of risk weighted assets (RWA).

This CET1 phased-in ratio includes the impact of the initial implementation of IFRS9. In this context, the European Commission and Parliament have established temporary arrangements that are voluntary for the institutions, adapting the impact of IFRS9 on capital ratios. BBVA has informed the supervisory board its adherence to these arrangements.

In addition, transfer of the real estate business of BBVA in Spain to Cerberus has no material impact on the ratios (see Note 3).

TIER1 phased-in ratio stood at 13.2% as of December 31, 2018. During the year the Group has computed two new issuances of contingent convertible bonds (CoCos) as TIER1 instruments for US$1,000 million and €1,000 million, respectively. In addition, the Group has no longer includes a US$1,500 million issuance which was early redeemed in May 2018 and announced in January 2019 its intention to exercise the early redemption of an issuance of €1,500 million. The net effect on TIER1 phased-in ratio was -15 bps.

Regarding TIER2 ratio, in the third quarter the Group has received authorization from the supervisor to include a subordinated issuance of US$300 million and no longer includes BBVA Chile subordinated instruments. As result of the above mentioned effects, the total capital phased-in ratio stood at 15.7%.

In addition, the Group has continued its program to meet the MREL requirements by carrying two public senior non-preferred instruments by a total amount of €2.5 billion. In terms of MREL (which stands for Minimum Requirement for own funds and Eligible Liabilities), BBVA has to reach, by January 1, 2020, an amount of own funds and eligible liabilities equal to 15.08% of the total liabilities and own funds of its resolution group (BBVA, S.A. and its subsidiaries from the same European resolution group) as of December 31, 2016. This MREL requirement would be equal to 28.04% in terms of risk-weighted assets of the resolution group as of December 31, 2016. The Group believes that it is currently in line with this requirement.

Risk-weighted assets (RWA) have decreased during the year, largely due to the sale of BBVA Chile and the depreciation of currencies against euro. The Group has performed three securitizations during the year: a traditional one in June of an automobile loan portfolio of consumer finance amounting to €800 million, and two synthetic ones in March and December, on which the European Investment Fund (EIF, a subsidiary of the European Investment Bank) provided a financial guarantee. These three securitizations have produced a positive impact on capital of €971 million via RWA release. Additionally, during the first half of the year, BBVA has received an authorization from the ECB to update the calculation of RWA on structural FX risk under the standard model.

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A reconciliation of the consolidated accounting and regulatory perimeters as of December 31st 2018 is presented below (provisional data):

Public balance sheet headings (Millions of euros)
| Public balance sheet | Insurance companies and real estate companies (1) | Jointly-controlled entities and other adjustments (2) | Regulatory balance sheet
Cash, cash balances at central banks and other demand deposits | 58,196 | (3) | 103 | 58,296
Financial assets held for trading | 90,117 | 1,277 | - | 91,394
Non- trading financial assets mandatorily at fair value through profit or loss | 5,135 | (2,768) | - | 2,367
Financial assets designated at fair value through profit or loss | 1,313 | (1,313) | - | -
Financial assets designated at fair value through other comprehensive income | 56,337 | (14,318) | - | 42,019
Financial assets at amortized cost | 419,660 | (6,279) | 593 | 413,974
Hedging derivatives | 2,892 | (87) | - | 2,805
Fair value changes of the hedged items in portfolio hedges of interest rate risk | (21) | - | - | (21)
Investments in entities accounted for using the equity method | 1,578 | 2,587 | (80) | 4,085
Non- current assets and disposal groups held for sale | 2,001 | (2) | 2 | 2,001
Other | 39,481 | 715 | 3 | 40,199
Total assets | 676,689 | (20,191) | 621 | 657,119

(1) Correspond to balances of entities fully consolidated in the public balance sheet but consolidated by the equity method in the regulatory balance sheet.

(2) Correspond to intragroup adjustments and other consolidation adjustments.

32.2 Capital management

Capital management in the BBVA Group has a twofold aim:

· Maintain a level of capitalization according to the business objectives in all countries in which it operates and, simultaneously,

· Maximize the return on shareholders’ funds through the efficient allocation of capital to the different units, a good management of the balance sheet and appropriate use of the various instruments forming the basis of the Group’s equity: shares, preferred securities and subordinate debt.

This capital management is carried out determining the capital base and the solvency ratios established by the prudential and minimum capital requirements also have to be met for the entities subject to prudential supervision in each country.

The current regulation allows each entity to apply its own internal ratings-based (IRB) approach to risk assessment and capital management, subject to Bank of Spain approval. The BBVA Group carries out an integrated management of these risks in accordance with its internal policies and its internal capital estimation model has received the Bank of Spain’s approval for certain portfolios (see Note 7).

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33. Commitments and guarantees given

The breakdown of the balance under these headings in the accompanying consolidated balance sheets is as follows:

Loan commitments, financial guarantees and other commitments (Millions of euros)
| Notes | 2018 | 2017 | 2016
Loan commitments given | 7.3.2 | 118,959 | 94,268 | 107,254
of which: defaulted |  | 247 | 537 | 411
Central banks |  | - | 1 | 1
General governments |  | 2,318 | 2,198 | 4,354
Credit institutions |  | 9,635 | 946 | 1,209
Other financial corporations |  | 5,664 | 3,795 | 4,155
Non-financial corporations |  | 58,405 | 58,133 | 71,710
Households |  | 42,936 | 29,195 | 25,824
Financial guarantees given (*) | 7.3.2 | 16,454 | 16,545 | 18,267
of which: defaulted |  | 332 | 278 | 278
Central banks |  | 2 | - | -
General governments |  | 159 | 248 | 103
Credit institutions |  | 1,274 | 1,158 | 1,553
Other financial corporations |  | 730 | 3,105 | 722
Non-financial corporations |  | 13,970 | 11,518 | 15,354
Households |  | 319 | 516 | 534
Other commitments and guarantees given | 7.3.2 | 35,098 | 45,738 | 42,592
of which: defaulted |  | 408 | 461 | 402
Central banks |  | 1 | 7 | 12
General governments |  | 248 | 227 | 372
Credit institutions |  | 5,875 | 15,330 | 9,880
Other financial corporations |  | 2,990 | 3,820 | 4,892
Non-financial corporations |  | 25,723 | 25,992 | 27,297
Households |  | 261 | 362 | 138
Total Loan commitments and financial guarantees |  | 170,511 | 156,551 | 168,113

(*) Non performing financial guarantees given amounted to €740, €739 and €680 million, respectively, as of December 31, 2018, December 31, 2017, and December 31, 2016, respectively.

As of December 31, 2018, the provisions for loan commitments given, financial guarantees given and other commitments and guarantees given, recorded in the consolidated balance sheet amounted €338 million, €252 million and €45 million, respectively.

Since a significant portion of the amounts above will expire without any payment being made by the consolidated entities, the aggregate balance of these commitments cannot be considered the actual future requirement for financing or liquidity to be provided by the BBVA Group to third parties.

In the years 2018, 2017 and 2016, no issuance of debt securities carried out by associates of the BBVA Group, joint venture entities or non-Group entities have been guaranteed.

34. Other contingent assets and liabilities

As of December 31, 2018, 2017 and 2016 there were no material contingent assets or liabilities other than those disclosed in the accompanying notes to the consolidated financial statements.

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35. Purchase and sale commitments and future payment obligations

The breakdown of purchase and sale commitments of the BBVA Group as of December 31, 2018, 2017 and 2016 is as follows:

Purchase and Sale Commitments (Millions of euros)
| Notes | 2018 | 2017 | 2016
Financial instruments sold with repurchase commitments |  | 42,993 | 40,077 | 46,562
Financial liabilities held for trading | 10 | 36,815 | - | -
Central Banks |  | 10,511 | - | -
Credit Institutions |  | 14,839 | - | -
General governments |  | 11,466 | - | -
Financial liabilities at amortized cost | 22 | 6,178 | 40,077 | 46,562
Central Banks |  | 375 | 6,155 | 4,649
Credit Institutions |  | 4,593 | 24,843 | 28,421
Customer deposits |  | 1,209 | 9,079 | 13,491
Financial instruments purchased with resale commitments |  | 28,034 | 26,368 | 22,921
Financial assets held for trading | 10 | 27,262 | - | -
Central Banks |  | 2,163 | - | -
Credit Institutions |  | 13,305 | - | -
General governments |  | 11,794 | - | -
Financial assets at amortized cost | 14 | 772 | 26,368 | 22,921
Central Banks |  | - | 305 | 81
Credit Institutions |  | 478 | 13,861 | 15,561
General governments |  | 294 | 12,202 | 7,279

A breakdown of the maturity of other payment obligations, not included in previous notes, due after December 31, 2018 is provided below:

Maturity of Future Payment Obligations (Millions of euros)
| Up to 1 Year | 1 to 3 Years | 3 to 5 Years | Over 5 Years | Total
Finance leases | - | - | - | - | -
Operating leases | 251 | 253 | 554 | 1,879 | 2,937
Purchase commitments | 28 | - | - | - | 28
Technology and systems projects | 7 | - | - | - | 7
Other projects | 20 | - | - | - | 20
Total | 279 | 253 | 554 | 1,879 | 2,965

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36. Transactions on behalf of third parties

As of December 31, 2018, 2017 and 2016 the details of the most transactions on behalf of third parties are as follows:

Transactions on Behalf of Third Parties (Millions of euros)
| 2018 | 2017 | 2016
Financial instruments entrusted to BBVA by third parties | 628,417 | 624,822 | 637,761
Conditional bills and other securities received for collection | 13,484 | 14,775 | 16,054
Securities lending | 4,866 | 5,485 | 3,968
Total | 646,768 | 645,081 | 657,783

As of December 31, 2018, 2017 and 2016 the customer funds managed by the BBVA Group are as follows:

Customer Funds by Type (Millions of euros)
| 2018 | 2017 | 2016
Asset management by type of customer (*): |  |  |
Collective investment | 61,393 | 60,939 | 55,037
Pension funds | 33,807 | 33,985 | 33,418
Customer portfolios managed | 29,953 | 36,901 | 40,805
Of which: |  |  |
Portfolios managed on a discretionary basis | 23,657 | 19,628 | 18,165
Other resources | 2,949 | 3,081 | 2,831
Customer resources distributed but not managed by type of product: |  |  |
Collective investment | 3,468 | 3,407 | 3,695
Insurance products | 32 | 35 | 39
Other | - | - | -
Total | 131,603 | 138,347 | 135,824

(*) Excludes balances from securitization funds.

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37. Net interest income

37.1 Interest income and other income

The breakdown of the interest income and other income recognized in the accompanying consolidated income statement is as follows:

Interest income and other income. Breakdown by Origin (Millions of euros)
| Notes | 2018 | 2017 | 2016
Central Banks |  | 482 | 406 | 229
Loans and advances to credit institutions |  | 458 | 410 | 217
Loans and advances to customers |  | 22,831 | 22,699 | 21,608
Debt securities |  | 4,395 | 3,809 | 4,128
Held for trading |  | 1,552 | 1,263 | 1,014
Other portfolios |  | 2,843 | 2,546 | 3,114
Adjustments of income as a result of hedging transactions |  | (201) | 427 | (385)
Cash flow hedges (effective portion) |  | (3) | 15 | 12
Fair value hedges |  | (198) | 412 | (397)
Insurance activity |  | 1,142 | 1,058 | 1,219
Other income |  | 722 | 487 | 692
Total | 55.2 | 29,831 | 29,296 | 27,708
Of which: |  |  |  |
Financial assets at fair value through other comprehensive income |  | 2,306 | 1,962 | -
Financial assets at amortized cost |  | 24,668 | 23,803 | 24,578
Other |  | 2,856 | 3,531 | 3,130

The amounts recognized in consolidated equity in connection with hedging derivatives and the amounts derecognized from consolidated equity and taken to the consolidated income statement during the years are given in the accompanying “Consolidated statements of recognized income and expenses”.

37.2 Interest expense

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Interest Expenses. Breakdown by Origin (Millions of euros)
| 2018 | 2017 | 2016
Central banks | 80 | 123 | 192
Deposits from credit institutions | 2,023 | 1,880 | 1,367
Customers deposits | 6,523 | 5,814 | 5,766
Debt certificates | 1,936 | 1,930 | 2,323
Adjustments of expenses as a result of hedging transactions | (323) | 665 | (574)
Cash flow hedges (effective portion) | 46 | 38 | 42
Fair value hedges | (368) | 627 | (616)
Cost attributable to pension funds | 119 | 125 | 96
Insurance activity | 607 | 682 | 846
Other expenses | 1,274 | 316 | 634
Total | 12,239 | 11,537 | 10,648

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37.3 Average return on investments and average borrowing cost

The detail of the average return on investments in the years ended December 31, 2018, 2017 and 2016 is as follows:

Assets (Millions of euros)
|  | 2018 |  |  | 2017 |  |  | 2016 |
| Average Balances | Interest income | Average Interest Rates (%) | Average Balances | Interest income | Average Interest Rates (%) | Average Balances | Interest income | Average Interest Rates (%)
Cash and balances with central banks and other demand deposits | 42,730 | 135 | 0.32 | 33,917 | 83 | 0.25 | 26,209 | 10 | 0.04
Securities portfolio and derivatives | 179,672 | 5,707 | 3.18 | 177,164 | 4,724 | 2.67 | 202,388 | 5,072 | 2.51
Loans and advances to central banks | 5,518 | 258 | 4.67 | 10,945 | 258 | 2.36 | 15,326 | 229 | 1.50
Loans and advances to credit institutions | 25,634 | 657 | 2.56 | 26,420 | 485 | 1.83 | 28,078 | 218 | 0.78
Loans and advances to customers | 378,996 | 22,804 | 6.02 | 407,153 | 23,261 | 5.71 | 410,895 | 21,853 | 5.32
Euros | 181,668 | 3,381 | 1.86 | 196,893 | 3,449 | 1.75 | 201,967 | 3,750 | 1.86
Foreign currency | 197,328 | 19,423 | 9.84 | 210,261 | 19,812 | 9.42 | 208,928 | 18,104 | 8.67
Other assets | 46,343 | 270 | 0.58 | 48,872 | 485 | 0.99 | 52,748 | 325 | 0.62
Total | 678,893 | 29,831 | 4.39 | 704,471 | 29,296 | 4.16 | 735,645 | 27,708 | 3.77

The average borrowing cost in the years ended December 31, 2018, 2017 and 2016 is as follows:

Liabilities (Millions of euros)
|  | 2018 |  |  | 2017 |  |  | 2016 |
| Average Balances | Interest expenses | Average Interest Rates (%) | Average Balances | Interest expenses | Average Interest Rates (%) | Average Balances | Interest expenses | Average Interest Rates (%)
Deposits from central banks and credit institutions | 65,044 | 2,192 | 3.37 | 90,619 | 2,212 | 2.44 | 101,975 | 1,866 | 1.83
Customer deposits | 370,078 | 6,559 | 1.77 | 392,057 | 7,007 | 1.79 | 398,851 | 5,944 | 1.49
Euros | 178,370 | 337 | 0.19 | 186,261 | 461 | 0.25 | 195,310 | 766 | 0.39
Foreign currency | 191,709 | 6,222 | 3.25 | 205,796 | 6,546 | 3.18 | 203,541 | 5,178 | 2.54
Debt certificates | 75,927 | 1,753 | 2.31 | 84,221 | 1,631 | 1.94 | 89,876 | 1,738 | 1.93
Other liabilities | 115,638 | 1,735 | 1.50 | 82,699 | 687 | 0.83 | 89,328 | 1,101 | 1.23
Equity | 52,206 | - | - | 54,874 | - | - | 55,616 | - | -
Total | 678,893 | 12,239 | 1.80 | 704,471 | 11,537 | 1.64 | 735,645 | 10,648 | 1.45

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The change in the balance under the headings “Interest income and other income” and “Interest expense” in the accompanying consolidated income statements is the result of exchange rate effect, changing prices (price effect) and changing volume of activity (volume effect), as can be seen below:

Interest Income and Expenses : Change in the Balance (Millions of euros)
| 2018 / 2017 | 2017 / 2016
| Volume Effect (1) | Price Effect (2) | Total Effect | Volume Effect (1) | Price Effect (2) | Total Effect
Cash and balances with central banks and other demand deposits | 22 | 30 | 51 | 3 | 71 | 74
Securities portfolio and derivatives | 67 | 916 | 983 | (632) | 285 | (347)
Loans and advances to Central Banks | (128) | 128 | - | (66) | 94 | 29
Loans and advances to credit institutions | (14) | 187 | 172 | (13) | 279 | 266
Loans and advances to customers | (1,609) | 1,152 | (456) | (199) | 1,606 | 1,408
Euros | (267) | 199 | (68) | (94) | (206) | (301)
Foreign currencies | (1,219) | 830 | (389) | 115 | 1,593 | 1,708
Other assets | (25) | (190) | (215) | (24) | 184 | 160
Interest income | - | - | 535 | - | - | 1,588
Deposits from central banks and credit institutions | (624) | 604 | (20) | (208) | 554 | 346
Customer deposits | (393) | (55) | (448) | (101) | 1,164 | 1,063
Euros | (20) | (104) | (124) | (35) | (269) | (305)
Foreign currencies | (448) | 124 | (324) | 57 | 1,311 | 1,368
Debt securities issued | (161) | 282 | 122 | (109) | 3 | (106)
Other liabilities | 274 | 774 | 1,048 | (82) | (332) | (414)
Interest expenses | - | - | 702 | - | - | 889
Net Interest Income | - | - | (167) | - | - | 699

(1) The volume effect is calculated as the result of the interest rate of the initial period multiplied by the difference between the average balances of both periods.

(2) The price effect is calculated as the result of the average balance of the last period multiplied by the difference between the interest rates of both periods.

38. Dividend income

The balances for this heading in the accompanying consolidated income statements correspond to dividends on shares and equity instruments other than those from shares in entities accounted for using the equity method (see Note 39), as can be seen in the breakdown below:

Dividend Income (Millions of euros)
| 2018 | 2017 | 2016
Dividends from: |  |  |
Financial assets held for trading and financial assets at fair value through profit or loss | 19 | 145 | 161
Financial assets at fair value through other comprehensive income | 138 | 188 | 307
Total | 157 | 334 | 467

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

Net income from “Investments in Entities Accounted for Using the Equity Method” resulted in a negative impact of €7 million as of December 31, 2018, compared with the positive impact of €4 and €25 million recorded as of December 31, 2017 and 2016, respectively.

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40. Fee and commission income and expense

The breakdown of the balance under these heading in the accompanying consolidated income statements is as follows:

Fee and Commission Income (Millions of euros)
| 2018 | 2017 | 2016
Bills receivables | 39 | 46 | 52
Demand accounts | 451 | 507 | 469
Credit and debit cards | 2,900 | 2,834 | 2,679
Checks | 194 | 212 | 207
Transfers and other payment orders | 605 | 601 | 578
Insurance product commissions | 171 | 192 | 178
Commitment fees | 223 | 231 | 237
Contingent risks | 390 | 396 | 406
Asset Management | 1,023 | 923 | 839
Securities fees | 325 | 385 | 335
Custody securities | 122 | 122 | 122
Other fees and commissions | 689 | 700 | 701
Total | 7,132 | 7,150 | 6,804

The breakdown of fee and commission expense under these heading in the accompanying consolidated income statements is as follows:

Fee and Commission Expense (Millions of euros)
| 2018 | 2017 | 2016
Credit and debit cards | 1,502 | 1,458 | 1,334
Transfers and other payment orders | 96 | 102 | 102
Commissions for selling insurance | 48 | 60 | 63
Other fees and commissions | 607 | 610 | 587
Total | 2,253 | 2,229 | 2,086

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41. Gains (losses) on financial assets and liabilities, net and Exchange differences

The breakdown of the balance under this heading, by source of the related items, in the accompanying consolidated income statement is as follows:

Gains (losses) on financial assets and liabilities and exchange differences: Breakdown by Heading of the Consolidated Income Statements (Millions of euros)
| 2018 | 2017 | 2016
Gains or losses on derecognition of financial assets and liabilities not measured at fair value through profit or loss, net | 216 | 985 | 1,375
Financial assets at amortized cost | 51 | 133 | 95
Other financial assets and liabilities | 164 | 852 | 1,281
Gains or losses on financial assets and liabilities held for trading, net | 707 | 218 | 248
Reclassification of financial assets from fair value through other comprehensive income | - |  |
Reclassification of financial assets from amortized cost | - |  |
Other gains or (-) losses | 707 |  |
Gains (losses) on non-trading financial assets mandatorily at fair value through profit or loss, net | 96 |  |
Reclassification of financial assets from fair value through other comprehensive income | - |  |
Reclassification of financial assets from amortized cost | - |  |
Other gains or (-) losses | 96 |  |
Gains or losses on financial assets and liabilities designated at fair value through profit or loss, net | 143 | (56) | 114
Gains or losses from hedge accounting, net | 72 | (209) | (76)
Subtotal Gains or (losses) on financial assets and liabilities | 1,234 | 938 | 1,661
Exchange Differences | (9) | 1,030 | 472
Total | 1,223 | 1,968 | 2,133

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The breakdown of the balance (excluding exchange rate differences) under this heading in the accompanying income statements by the nature of financial instruments is as follows:

Gains (losses) on financial assets and liabilities: Breakdown by nature of the Financial Instrument (Millions of euros)
| 2018 | 2017 | 2016
Debt instruments | 354 | 545 | 906
Equity instruments | (253) | 845 | 459
Loans and advances to customers | (172) | 97 | 65
Trading derivatives and hedge accounting | 927 | (470) | 109
Customer deposits | 240 | (96) | 87
Other | 137 | 18 | 35
Total | 1,233 | 938 | 1,661

The breakdown of the balance of the impact of the derivatives (trading and hedging) under this heading in the accompanying consolidated income statements is as follows:

Derivatives - Hedge accounting (Millions of euros)
| 2018 | 2017 | 2016
Derivatives |  |  |
Interest rate agreements | 90 | 165 | 431
Securities agreements | 294 | (139) | 86
Commodity agreements | (2) | 99 | (29)
Credit derivative agreements | (109) | (564) | (118)
Foreign-exchange agreements | 606 | 315 | 186
Other agreements | (24) | (137) | (371)
Subtotal | 856 | (261) | 185
Hedging Derivatives Ineffectiveness |  |  |
Fair value hedges | 87 | (177) | (76)
Hedging derivative | (150) | (236) | (330)
Hedged item | 237 | 59 | 254
Cash flow hedges | (15) | (32) | -
Subtotal | 72 | (209) | (76)
Total | 927 | (470) | 109

In addition, in the years ended December 31, 2018, 2017 and 2016, under the heading “Gains or losses on financial assets and liabilities held for trading, net” of the consolidated income statement, net amounts of negative €113 million, positive €235 million and positive €151 million, respectively, were recognized for transactions with foreign exchange trading derivatives.

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42. Other operating income and expense

The breakdown of the balance under the heading “Other operating income” in the accompanying consolidated income statements is as follows:

Other operating income (Millions of euros)
| 2018 | 2017 | 2016
Gains from sales of non-financial services | 458 | 1,109 | 882
Of which: Real estate | 283 | 884 | 588
Other | 491 | 330 | 390
Of which: net profit from building leases | 21 | 61 | 76
Total | 949 | 1,439 | 1,272

The breakdown of the balance under the heading “Other operating expense” in the accompanying consolidated income statements is as follows:

Other operating expense (Millions of euros)
| 2018 | 2017 | 2016
Change in inventories | 292 | 886 | 617
Of Which: Real estate | 248 | 816 | 511
Other | 1,808 | 1,337 | 1,511
Total | 2,101 | 2,223 | 2,128

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43. Income and expense from insurance and reinsurance contracts

The detail of the headings “Income and expense from insurance and reinsurance contracts” in the accompanying consolidated income statements is as follows:

Other operating income and expense on insurance and reinsurance contracts (Millions of euros)
| 2018 | 2017 | 2016
Income on insurance and reinsurance contracts | 2,949 | 3,342 | 3,652
Expenses on insurance and reinsurance contracts | (1,894) | (2,272) | (2,545)
Total | 1,055 | 1,069 | 1,107

The table below shows the contribution of each insurance product to the Group´s income for the years ended December 31, 2018, 2017 and 2016:

Income by type of insurance product (Millions of euros)
| 2018 | 2017 | 2016
Life insurance | 682 | 604 | 634
Individual | 486 | 346 | 268
Savings | 56 | 38 | 30
Risk | 430 | 308 | 238
Group insurance | 196 | 258 | 366
Savings | 39 | (4) | 8
Risk | 157 | 263 | 357
Non-Life insurance | 373 | 464 | 474
Home insurance | 110 | 118 | 131
Other non-life insurance products | 263 | 346 | 342
Total | 1,055 | 1,069 | 1,107

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44. Administration costs

44.1 Personnel expenses

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Personnel Expenses (Millions of euros)
| Notes | 2018 | 2017 | 2016
Wages and salaries |  | 4,786 | 5,163 | 5,267
Social security costs |  | 722 | 761 | 784
Defined contribution plan expense | 25 | 89 | 87 | 87
Defined benefit plan expense | 25 | 58 | 62 | 67
Other personnel expenses |  | 465 | 497 | 516
Total |  | 6,120 | 6,571 | 6,722

The breakdown of the average number of employees in the BBVA Group in the year ended December 31, 2018, 2017 and 2016 by professional categories and geographical areas is as follows:

Average Number of Employees
| 2018 | 2017 | 2016
Spanish banks |  |  |
Management Team | 1,047 | 1,026 | 1,044
Other line personnel | 21,840 | 22,180 | 23,211
Clerical staff | 2,818 | 3,060 | 3,730
Branches abroad | 589 | 603 | 718
Subtotal | 26,294 | 26,869 | 28,703
Companies abroad |  |  |
Mexico | 31,655 | 30,664 | 30,378
United States | 9,786 | 9,532 | 9,710
Turkey | 22,322 | 23,154 | 23,900
Venezuela | 3,631 | 4,379 | 5,097
Argentina | 6,074 | 6,173 | 6,041
Colombia | 5,185 | 5,374 | 5,714
Peru | 5,879 | 5,571 | 5,455
Other | 3,767 | 5,501 | 5,037
Subtotal | 88,299 | 90,348 | 91,332
Pension fund managers | 395 | 362 | 335
Other non-banking companies | 14,349 | 14,925 | 16,307
Total | 129,336 | 132,504 | 136,677
Of which: |  |  |
Men | 59,547 | 60,730 | 62,738
Women | 69,790 | 71,774 | 73,939
Of which: |  |  |
BBVA, S.A. | 26,294 | 26,869 | 25,979

The breakdown of the number of employees in the BBVA Group as of December 31, 2018, 2017 and 2016 by category and gender is as follows:

Number of Employees at the period end. Professional Category and Gender
| 2018 | 2017 | 2016
| Male | Female | Male | Female | Male | Female
Management Team | 1,197 | 339 | 1,244 | 342 | 1,331 | 350
Other line personnel | 37,461 | 38,918 | 38,670 | 39,191 | 38,514 | 39,213
Clerical staff | 19,315 | 28,397 | 20,639 | 31,770 | 22,066 | 33,318
Total | 57,973 | 67,654 | 60,553 | 71,303 | 61,911 | 72,881

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### 44.1.1 Share-based employee remuneration

The amounts recognized under the heading “Administration costs - Personnel expenses - Other personnel expenses” in the consolidated income statements for the year ended December 31, 2018, 2017 and 2016, corresponding to the remuneration plans based on equity instruments in each year, amounted to €29 million, €38 million and €57 million, respectively. These amounts have been recognized with a corresponding entry under the heading “Shareholders’ funds - Other equity instruments” in the accompanying consolidated balance sheets, net of tax effect.

The characteristics of the Group's remuneration plans based on equity instruments are described below.

System of Variable Remuneration in Shares

In BBVA, the annual variable remuneration applying generally to all employees consists of one incentive, to be paid in cash, awarded once a year and linked to the achievement of predetermined objectives and to a sound risk management (hereinafter, the “Annual Variable Remuneration”).

According to the remuneration policy for BBVA Group, in force since 2017, the specific settlement and payment system for the Annual Variable Remuneration applicable to those employees and senior managers whose professional activities have a significant impact on the Group’s risk profile including the executive directors and members of BBVA Senior Management (hereinafter, the "Identified Staff"), which includes, among others, the payment in shares of part of their Annual Variable Remuneration.

This remuneration policy was approved, with respect to BBVA directors, by the Board of Directors held on February 9, 2017, and by the Annual General Shareholders’ Meeting held on March 17, 2017.

This remuneration policy includes a specific settlement and payment system of the Annual Variable Remuneration applicable to the Identified Staff, including directors and senior management, under the following rules, among others:

· A significant percentage of variable remuneration – 60% in the case of executive directors, Senior Management and those Identified Staff members with particularly high variable remuneration, and 40% for the rest of the Identified Staff– shall be deferred over a five-year period, in the case of executive directors and Senior Management, and over a three-year period, for the remaining Identified Staff.

· 50% of the variable remuneration of each year (including both upfront and deferred portions), shall be established in BBVA shares, albeit a larger proportion (60%) in shares shall be deferred in the case of executive directors and Senior Management.

· The variable remuneration will be subject to ex ante adjustments, so that it will not be accrued, or will be accrued in a reduced amount, should a certain level of profit or capital ratio not be obtained. Likewise, the Annual Variable Remuneration will be reduced upon performance assessment in the event of negative evolution of the Bank’s results or other parameters such as the level of achievement of budgeted targets.

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· The deferred component of the variable remuneration (in shares and in cash) may be reduced in its entirety, yet not increased, based on the result of multi-year performance indicators aligned with the Bank’s fundamental risk management and control metrics, related to the solvency, capital, liquidity, funding or profitability, or to the share performance and recurring results of the Group.

· During the entire deferral period (5 or 3 years, as applicable) and retention period, variable remuneration shall be subject to malus and clawback arrangements, both linked to a downturn in financial performance of the Bank, specific unit or area, or individual, under certain circumstances.

· All shares shall be withheld for a period of one year after delivery, except for those shares required to honor the payment of taxes.

· No personal hedging strategies or insurance may be used in connection with remuneration and responsibility that may undermine the effects of alignment with sound risk management.

· The deferred amounts in cash subject to multi-year performance indicators that are finally paid shall be subject to updating, in the terms determined by the Bank’s Board of Directors, upon proposal of the Remunerations Committee, whereas deferred amounts in shares shall not be updated.

· Finally, the variable component of the remuneration of the Identified Staff members shall be limited to a maximum amount of 100% of the fixed component of total remuneration, unless the General Meeting resolves to increase this percentage up to 200%.

In this regard, the General Meeting held on March 16, 2018 resolved to increase the maximum level of variable remuneration to 200% of the fixed component for a number of the Identified Staff, in the terms indicated in the Report of Recommendations issued for this purpose by the Board of Directors dated February 12, 2018.

In accordance with the new remuneration policy applicable to the Identified Staff, malus and clawback arrangements will be applicable to the Annual Variable Remuneration awarded as of the year 2016, inclusive, for each member of the Identified Staff.

According to the settlement and payment scheme indicated, during 2018, members of the Identified Staff received a total amount of 3,932,268 shares corresponding to the initial payment corresponding to 2017 Annual Variable Remuneration to be delivered in shares.

Additionally, the remuneration policy prevailing until 2014 provided for a specific settlement and payment scheme for the variable remuneration of the Identified Staff that established a three-year deferral period for the Annual Variable Remuneration, being the deferred amount paid in thirds over this period in equal parts, in cash and in BBVA shares.

According to this prior scheme, during 2018, the members of the Identified Staff received the shares corresponding to the deferred parts of the Annual Variable Remuneration from previous years, and their corresponding adjustments in cash, delivery of which corresponded in 2018, were delivered to the beneficiary members of the Identified Staff, resulting in a total amount of 941,366 shares corresponding to the last deferred third of the 2014 Annual Variable Remuneration and €903,711 as adjustments for updates of the shares granted.

The information on the delivery of shares to executive Directors and senior management corresponding to the deferred parts of the Annual Variable Remuneration from previous years and their corresponding adjustments in cash, are detailed in Note 54.

Additionally, in line with specific regulation applicable in Portugal and Brazil, BBVA identifies those employees that, according to local regulators, should be subject to a specific settlement and payment scheme of the Annual Variable Remuneration.

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According to this regulation, during 2018 a number of 39,555 shares corresponding to the initial payment of 2017 Annual Variable Remuneration were delivered to these beneficiaries.

Additionally, during 2018 the shares corresponding to the deferred parts of the Annual Variable Remuneration and their corresponding adjustments in cash, were delivered to these beneficiaries, giving rise in 2018, of a total of 12,120 shares corresponding to the first deferred third of the 2016 Annual Variable Remuneration, and €2,679 as adjustments for updates of the shares granted; a total of 10,485 shares corresponding to the second third of the 2015 Annual Variable Remuneration, and €6,186 as adjustments for updates of the shares granted; and a total of 7,158 shares corresponding to the final third of the 2014 Annual Variable Remuneration, and €6,872 as adjustments for updates of the shares granted.

44.2 Other administrative expenses

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Other Administrative Expenses (Millions of euros)
| 2018 | 2017 | 2016
Technology and systems | 1,133 | 692 | 673
Communications | 235 | 269 | 294
Advertising | 336 | 352 | 398
Property, fixtures and materials | 982 | 1,033 | 1,080
Of which: Rent expenses (*) | 552 | 581 | 616
Taxes other than income tax | 417 | 456 | 433
Other expenses | 1,271 | 1,738 | 1,766
Total | 4,374 | 4,541 | 4,644

(*) The consolidated companies do not expect to terminate the lease contracts early.

45. Depreciation and Amortization

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Depreciation and amortization (Millions of euros)
| Notes | 2018 | 2017 | 2016
Tangible assets | 17 | 594 | 694 | 690
For own use |  | 589 | 680 | 667
Investment properties |  | 5 | 13 | 23
Assets leased out under operating lease |  | - | - | -
Other Intangible assets |  | 613 | 694 | 735
Total |  | 1,208 | 1,387 | 1,426

46. Provisions or (reversal) of provisions

In the years ended December 31, 2018, 2017 and 2016 the net provisions recognized in this income statement line item were as follows:

Provisions or (reversal) of provisions (Millions of euros)
| Notes | 2018 | 2017 | 2016
Pensions and other post employment defined benefit obligations | 25 | 125 | 343 | 332
Commitments and guarantees given |  | (48) | (313) | 56
Pending legal issues and tax litigation |  | 133 | 318 | 76
Other Provisions |  | 163 | 397 | 722
Total |  | 373 | 745 | 1,186

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47. Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss

The breakdown of Impairment or reversal of impairment on financial assets not measured at fair value through profit or loss by the nature of those assets in the accompanying consolidated income statements is as follows:

Impairment or (reversal) of impairment on financial assets not measured at fair value through profit or loss (Millions of euros)
| Notes | 2018 | 2017 | 2016
Financial assets at fair value through other comprehensive income | 13.4 | 1 | 1,127 | 202
Debt securities |  | 1 | (4) | 157
Equity instruments |  | - | 1,131 | 46
Financial assets at amortized cost |  | 3,980 | 3,677 | 3,597
Of which: Recovery of written-off assets | 7.3.5 | 589 | 558 | 541
Held to maturity investments |  |  | (1) | 1
Total |  | 3,981 | 4,803 | 3,801

48. Impairment or (reversal) of impairment on non-financial assets

The impairment losses on non-financial assets broken down by the nature of those assets in the accompanying consolidated income statements are as follows:

Impairment or (reversal) of impairment on non-financial assets (Millions of euros)
| Notes | 2018 | 2017 | 2016
Tangible assets | 17 | 5 | 42 | 143
Intangible assets | 18.2 | 83 | 16 | 3
Others | 20 | 51 | 306 | 375
Total |  | 138 | 363 | 521

49. Gains (losses) on derecognition of non - financial assets and subsidiaries, net

The breakdown of the balance under this heading in the accompanying consolidated income statements is as follows:

Gains (losses) on derecognition of non-financial assets and subsidiaries, net (Millions of euros)
| 2018 | 2017 | 2016
Gains |  |  |
Disposal of investments in non-consolidated subsidiaries | 55 | 38 | 111
Disposal of tangible assets and other | 81 | 69 | 64
Losses: |  |  |
Disposal of investments in non-consolidated subsidiaries | (13) | (27) | (58)
Disposal of tangible assets and other | (45) | (33) | (47)
Total | 78 | 47 | 70

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50. Profit (loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations

The main items included in the balance under this heading in the accompanying consolidated income statements are as follows:

Profit (loss) from non-current assets and disposal groups classified as held for sale not qualifying as discontinued operations (Millions of euros)
| Notes | 2018 | 2017 | 2016
Gains on sale of real estate |  | 129 | 102 | 66
Impairment of non-current assets held for sale | 21 | (208) | (158) | (136)
Gains on sale of investments classified as non-current assets held for sale (*) |  | 894 | 82 | 39
Gains on sale of equity instruments classified as non-current assets held for sale |  | - | - | -
Total |  | 815 | 26 | (31)

(*) The change is mainly as a result of the sale of the BBVA stake in BBVA Chile (see Note 3).

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51. Consolidated statements of cash flows

In the consolidated statements of cash flows, the balance of “Cash equivalent in central banks” includes short-term deposits at central banks under the heading "Financial assets at amortized cost" in the accompanying consolidated balance sheets and does not include demand deposits with credit institutions recorded in the heading "Cash, balances in cash at Central Bank and other demand deposits".

Cash flows from operating activities increased in the year ended December 31, 2018 by €6,609 million (compared with a decrease of €4,568 million in December 31, 2017), mainly due to the change in “Financial assets held for trading”.

Cash flows from investing activities increased in the year ended December 31, 2018 by €4,614 million (compared with an increase of €3,462 million in December 31, 2017), mainly due to the change in “Joint Ventures and Associates”.

Cash flows from financing activities decreased in the year ended December 31, 2018 by €4,994 million (compared with an increase of €1,015 million in December 31, 2017), mainly due to the change in “Subordinated Liabilities”.

The variation between 2018 and 2017 of the financial liabilities from financing activities is the following:

Liabilities from financing activities (Millions of Euros)
| December 31, 2017 | Cash flows | Non-cash changes | December 31, 2018
| Acquisition | Disposal | Foreign exchange movement | Fair value changes
Debt certificates | 50,635 | (1,621) | - | (1,900) | (779) | - | 46,335
Subordinated debt certificates | 17,443 | 857 | - | (694) | 29 | - | 17,635
Short-term debt | 10,013 | 931 | - | - | 81 | - | 11,025
Other financial liabilities | 8,891 | 1,574 | - | (643) | (1,328) | - | 8,495
Total | 86,982 | 1,741 | - | (3,237) | (1,997) | - | 83,490
Liabilities from financing activities (Millions of Euros)
| December 31, 2016 | Cash flows | Non-cash changes | December 31, 2017
| Acquisition | Disposal | Foreign exchange movement | Fair value changes
Debt certificates | 59,388 | (5,958) | - | - | (2,796) | - | 50,635
Subordinated debt certificates | 16,987 | 1,679 | - | - | (1,223) | - | 17,443
Short-term debt | 11,556 | (1,319) | - | - | (224) | - | 10,013
Other financial liabilities | 10,179 | (378) | - | - | (910) | - | 8,891
Total | 98,111 | (5,976) | - | - | (5,153) | - | 86,982

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52. Accountant fees and services

The details of the fees for the services contracted by entities of the BBVA Group for the years ended December 31, 2018 and 2017 with their respective auditors and other audit entities are as follows:

Fees for Audits Conducted and Other Related Services (Millions of euros) (**)
| 2018 | 2017
Audits of the companies audited by firms belonging to the KPMG worldwide organization and other reports related with the audit (*) | 26.1 | 27.2
Other reports required pursuant to applicable legislation and tax regulations issued by the national supervisory bodies of the countries in which the Group operates, reviewed by firms belonging to the KPMG worldwide organization | 1.5 | 1.9
Fees for audits conducted by other firms | 0.1 | 0.1

(*) Including fees pertaining to annual legal audits (€22.4 and 22.6 million as of December 31, 2018 and December 31, 2017, respectively).

(**) Regardless of the billed period.

In the year ended December 31, 2018, other entities in the BBVA Group contracted other services (other than audits) as follows:

Other Services rendered (Millions of euros)
| 2018 | 2017
Firms belonging to the KPMG worldwide organization | 0.3 | 0.5

This total of contracted services includes the detail of the services provided by KPMG Auditores, S.L. to BBVA, S.A. or its controlled companies at the date of preparation of these consolidated financial statements as follows:

Fees for Audits Conducted (*) (Millions of euros)
| 2018 | 2017
Legal audit of BBVA,S.A. or its companies under control | 6.7 | 6.8
Other audit services of BBVA, S.A. or its companies under control | 5.9 | 5.0
Limited Review of BBVA, S.A. or its companies under control | 1.1 | 0.9
Reports related to issuances | 0.3 | 0.4
Assurance jobs and other required by the regulator | 0.9 | 0.6
Other | - | -

(*) Services provided by KPMG Auditores, S.L. to companies located in Spain, to the branch of BBVA in New York and to the branch of BBVA in London.

The services provided by the auditors meet the independence requirements of the external auditor established under Audit of Accounts Law (Law 22/2015) and under the Sarbanes-Oxley Act of 2002 adopted by the Securities and Exchange Commission (SEC).

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53. Related-party transactions

As financial institutions, BBVA and other entities in the Group engage in transactions with related parties in the normal course of their business. All of these transactions are not material and are carried out under normal market conditions. As of December 31, 2018, 2017 and 2016, the following are the transactions with related parties:

## 53.1 Transactions with significant shareholders

As of December 31, 2018, 2017 and 2016, there were no shareholders considered significant (see Note 26).

## 53.2 Transactions with BBVA Group entities

The balances of the main aggregates in the accompanying consolidated balance sheets arising from the transactions carried out by the BBVA Group with associates and joint venture entities accounted for using the equity method are as follows:

Balances arising from transactions with Entities of the Group (Millions of euros)
| 2018 | 2017 | 2016
Assets: |  |  |
Loans and advances to credit institutions | 132 | 91 | 69
Loans and advances to customers | 1,866 | 510 | 442
Liabilities: |  |  |
Deposits from credit institutions | 2 | 5 | 1
Customer deposits | 521 | 428 | 533
Debt certificates | - | - | -
Memorandum accounts: | - |  |
Financial guarantees given | 78 | 78 | 42
Contingent commitments | 1,358 | 114 | 121
Other | 152 | 1,175 | 1,466

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The balances of the main aggregates in the accompanying consolidated income statements resulting from transactions with associates and joint venture entities that are accounted for under the equity method are as follows:

Balances of Income Statement arising from transactions with Entities of the Group (Millions of euros)
| 2018 | 2017 | 2016
Income statement: |  |  |
Financial incomes | 55 | 26 | 26
Financial costs | 2 | 1 | 1
Fee and Commission Income | 5 | 5 | 5
Fee and Commission Expenses | 48 | 49 | 58

There were no other material effects in the consolidated financial statements arising from dealings with these entities, other than the effects from using the equity method (see Note 2.1) and from the insurance policies to cover pension or similar (see Note 25) commitments and the futures transactions arranged by BBVA Group with these entities, associates and joint ventures.

In addition, as part of its normal activity, the BBVA Group has entered into agreements and commitments of various types with shareholders of subsidiaries and associates, which have no material effects on the accompanying consolidated financial statements.

## 53.3 Transactions with members of the Board of Directors and Senior Management

The information on the remuneration of the members of the BBVA Board of Directors and Senior Management is included in Note 54.

As of December 31, 2018, the amount availed against the loans granted by the Group’s entities to the members of the Board of Directors amounted to €611 thousand. As of December 31, 2017 and 2016, there were no loans granted by the Group’s entities to the members of the Board of Directors. The amount availed against the loans granted by the Group’s entities to the members of Senior Management on those same dates (excluding the executive directors) amounted to €3,783, €4,049 and €5,573 thousand, respectively.

As of December 31, 2018, 2017 and 2016, there were no loans granted to parties related to the members of the Board of Directors. As of December 31, 2018, 2017 and 2016 the amount availed against the loans granted to parties related to members of the Senior Management amounted to €69, €85 and €98 thousand, respectively.

As of December 31, 2018, 2017 and 2016 no guarantees had been granted to any member of the Board of Directors.

As of December 31, 2018, 2017 and 2016, the amount availed against guarantees arranged with members of the Senior Management amounted to €38, €28 and €28 thousand, respectively.

As of December 31, 2018, no commercial loans and guarantees has been granted to parties related to the members of the Bank’s Board of Directors and the Senior Management. As of December 31, 2017 and 2016 the amount availed against commercial loans and guarantees arranged with parties related to the members of the Bank’s Board of Directors and the Senior Management totaled €8 thousand.

##

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## 53.4 Transactions with other related parties

As of December 31, 2018, 2017 and 2016, the Group did not conduct any transactions with other related parties that are not in the ordinary course of its business, which were not carried out at arm's-length market conditions and of marginal relevance; whose information is not necessary to give a true picture of the BBVA Group’s consolidated net equity, net earnings and financial situation.

54. Remuneration and other benefits to the Board of Directors and to the members of the Bank’s Senior Management

Remuneration received by non-executive directors during the 2018 financial year

The remunerations paid to non-executive members of the Board of Directors during the 2018 financial year are indicated below, individually and itemized:

Remuneration for non-executive directors (thousands of euro)
| Board of Directors | Executive Committee | Audit and Compliance Committee | Risk Committee | Remunerations Committee | Appointments Committee | Technology and Cybersecurity Committee | Total
Tomás Alfaro Drake | 129 | - | 18 | - | 43 | 25 | 43 | 258
José Miguel Andrés Torrecillas | 129 | - | 179 | 107 | - | 71 | - | 485
Jaime Félix Caruana Lacorte (1) | 75 | 83 | - | 53 | - | - | 25 | 237
Belén Garijo López | 129 | - | 71 | - | 107 | 20 | - | 328
Sunir Kumar Kapoor | 129 | - | - | - | - | - | 43 | 172
Carlos Loring Martínez de Irujo | 129 | 167 | - | 107 | 43 | - | - | 445
Lourdes Máiz Carro | 129 | - | 71 | - | 43 | 41 | - | 284
José Maldonado Ramos | 129 | 167 | - | 53 | - | 41 | - | 390
Ana Peralta Moreno (1) | 86 | - | 36 | - | 21 | - | - | 143
Juan Pi Llorens | 129 | - | 71 | 214 | - | - | 43 | 457
Susana Rodríguez Vidarte | 129 | 167 | - | 107 | - | 41 | - | 443
Jan Verplancke (1) | 107 | - | - | - | - | - | 25 | 132
Total (2) | 1,427 | 584 | 446 | 642 | 257 | 239 | 179 | 3,773

(1) Directors appointed by the General Meeting held on 16 March 2018. This includes the remunerations paid for membership of the various Board Committees throughout the 2018 financial year. The composition of these Committees was modified on 27 June 2018. Remunerations paid in accordance with the date of acceptance of said appointment.

(2) In addition, José Antonio Fernández Rivero, who stepped down as director on 16 March 2018, received a total of €95 thousand in 2018, for his membership of the Board and of a number of Board Committees.

Also, during the 2018 financial year, €107 thousand has been paid out in casualty and healthcare insurance premiums for non-executive members of the Board of Directors.

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Remuneration received by executive directors during the 2018 financial year

Over the course of financial year 2018, the executive directors have received the amount of the Annual Fixed Remuneration corresponding to said financial year, established in the Remuneration Policy for BBVA Directors applicable in 2018, which was approved by the General Meeting held on 17 March 2017.

In addition, the executive directors have received the Annual Variable Remuneration for 2017 financial year, which, in accordance with the settlement and payment system set out in said Policy, was due to be paid to them during the first quarter of financial year 2018.

In application of this settlement and payment system:

· 40% of the 2017 Annual Variable Remuneration corresponding to executive directors has been paid, having the conditions been met, in the first quarter of financial year 2018 (hereinafter, the "Upfront Portion"), in equal parts in cash and in shares.

· The remaining 60% of the Annual Variable Remuneration, both in cash and in shares, has been deferred in its entirety for a period of five years, and its accrual and payment will be subject to compliance with a series of multi-year indicators (hereinafter, the "Deferred Portion"). The application of these indicators, calculated over the first three years of deferral, may lead to a reduction of the Deferred Portion, even in its entirety, but in no event may be increased. Provided that the relevant conditions have been met, the resulting amount will then be paid (40% in cash and 60% in shares), according to the following schedule: 60% in 2021, 20% in 2022 and the remaining 20% in 2023.

· All the shares delivered to the executive directors as Annual Variable Remuneration, both of the Upfront Portion and the Deferred Portion will be withheld for a period of one year after their delivery; this will not apply to those shares transferred to honor the payment of taxes arising therefrom.

· The Deferred Portion of the Annual Variable Remuneration in cash will be subject to updating under the terms established by the Board of Directors.

· Executive directors may not use personal hedging strategies or insurance in connection with the remuneration and responsibility that may undermine the effects of alignment with prudent risk management.

· The variable component of the remuneration for executive directors corresponding financial year 2017 is limited to a maximum amount of 200% of the fixed component of the total remuneration, as agreed by the General Meeting.

· Over the entire deferral and withholding period, the entire Annual Variable Remuneration for the executive directors will be subject to reduction and recovery ("malus" and "clawback") arrangements.

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Additionally, upon receipt of the shares, executive directors will not be allowed to transfer a number of shares equivalent to twice their Annual Fixed Remuneration (AFR) for at least three years after their delivery.

Similarly, in application of the settlement and payment system of the annual variable remuneration for 2014 financial year, in accordance with the remuneration policy applicable at that time, the executive directors have received in 2018 the last third of the deferred annual variable remuneration for 2014 financial year, delivery of which corresponded in 2018, thus concluding payment of the deferred variable remuneration for 2014.

In accordance with the above, the remunerations paid to executive directors during financial year 2018 are indicated below, individually and itemized:

Annual Fixed Remuneration (thousands of euro), received in 2018
Carlos Torres Vila | 1,965
José Manuel González-Páramo Martínez-Murillo | 834
Total | 2,799

Variable remuneration for financial year 2017, received in 2018
| In cash (1) (thousands of euro) | In shares (1)
Carlos Torres Vila | 562 | 77,493
José Manuel González-Páramo Martínez-Murillo | 87 | 12,029
Total | 649 | 89,522

(1) Remunerations corresponding to the Upfront Portion (40%) of the Annual Variable Remuneration for financial year 2017, 50% in cash and 50% in shares.

Deferred variable remuneration for financial year 2014, received in 2018
| In cash (1) (thousands of euro) | In shares (1)
Carlos Torres Vila | 105 | 11,766
José Manuel González-Páramo Martínez-Murillo | 33 | 3,678
Total | 137 | 15,444

(1) Remunerations corresponding to the last third of the deferred annual variable remuneration for financial year 2014, 50% in cash and 50% in shares, along with its update in cash.

In addition, the executive directors received remuneration in kind throughout financial year 2018, including insurance premiums and others, amounting to a total of €236 thousand, of which €154 thousand correspond to Carlos Torres Vila and €82 thousand to José Manuel González-Páramo Martínez-Murillo.

Former Group Executive Chairman, Francisco González Rodríguez, who stepped down from this position with effect on 21 December 2018, received, during 2018, €2,475 thousand as Annual Fixed Remuneration; €660 thousand and 90,933 BBVA shares corresponding to 40% of the Annual Variable Remuneration for financial year 2017; and €332 thousand and 37,390 BBVA shares as settlement of the last third of the deferred variable remuneration for financial year 2014, payment of which corresponded in first quarter of financial year 2018, including the corresponding update; as well as €20 thousand as remuneration in kind.

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On the other hand, it is indicated that in 2018, CEO Onur Genç—who was appointed by resolution of BBVA's Board of Directors on 20 December 2018— has not received any remuneration for said role in 2018, having received fixed and variable remuneration in accordance with his previous position as Chairman and CEO of BBVA Compass, this remuneration being subject to the settlement and payment system applicable to said position. Thus, over the course of the financial year 2018, he has received €2,240(*) thousand as Annual Fixed Remuneration; €191(*) thousand and 26,531 BBVA ADSs corresponding to 40% of the Annual Variable Remuneration for financial year 2017; and €376 thousand as remuneration in kind, which includes benefits for his expatriate status in the United States.

(*) Amounts paid in US Dollars. Euro details are for information purposes.

· Annual Variable Remuneration for executive directors for financial year 2018

Following year-end 2018, the Annual Variable Remuneration for executive directors corresponding to said period has been determined, applying the conditions established at the beginning of the year, as established in the Remuneration Policy for BBVA Directors approved by the General Meeting on 17 March 2017 with the following settlement and payment system:

· The Upfront Portion (40%) of the Annual Variable Remuneration of the executive directors for 2018 will be paid, if conditions are met, in equal parts in cash and shares, during the first quarter of 2019, which amounts to €479 thousand and 100,436 BBVA shares in the case of Carlos Torres Vila; and €79 thousand and 16,641 BBVA shares in the case of José Manuel González-Páramo Martínez-Murillo.

· The Deferred Portion (60%) remaining will be deferred for a five-year period, subject to compliance with the multi-year performance indicators determined by the Board of Directors at the start of financial year 2018, calculated over the first three-year deferral period. Provided that the conditions are met, the resulting amount will vest (40% in cash and 60% in shares), under the following schedule: 60% after the third year of deferral, 20% after the fourth year of deferral and the remaining 20% after the fifth year of deferral. All the above is subject to the settlement and payment system conditions set out in the Remuneration Policy for BBVA Directors, which includes malus and clawback arrangements and retention periods for shares.

As regards former Group Executive Chairman, Francisco González Rodríguez, his Annual Variable Remuneration for 2018 has been determined. This Annual Variable Remuneration for 2018 will be received, provided that conditions are met, in accordance with the same settlement and payment system applicable to executive directors which includes deferral rules, malus and clawback arrangements and retention periods for shares. Thus, the Upfront Portion (40%) has been determined in: €528 thousand and 110,814 BBVA shares. Accrual and payment of the Deferred Portion (remaining 60%), 40% in cash and 60% in shares, will be subject to compliance with multi-year performance indicators approved by the Board of Directors. All the above is subject to the conditions of the settlement and payment system established in the Remuneration Policy for BBVA Directors, which includes malus and clawback arrangements and withholding periods for shares.

As regards CEO Onur Genç and as aforementioned, his Annual Variable Remuneration for financial year 2018 is linked to his previous position as Chairman and CEO of BBVA Compass and has been determined in accordance with the settlement and payment system applicable for such position. Thus, providing that applicable conditions are met, 40% of Annual Variable Remuneration for 2018 will be paid in the first quarter of 2019, amounting to a total of €196 thousand(*) and 41,267 BBVA shares. Accrual and payment of the remaining 60% of the Annual Variable Remuneration for financial year 2018, 50% in cash and 50% in shares, will be deferred for a three-year period and will be subject to compliance with multi-year performance indicators set by the Board of Directors for the whole Identified Staff at the beginning of 2018 and measured over the course of the three-year period.

(*) Euro details are for information purposes. Year-end 2018 exchange rate applied: EUR/USD 1,145001.

At the time of drafting of these consolidated Annual Accounts none of these remunerations have been paid.

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The amounts corresponding to deferred shares is detailed in the section "Remuneration based on Capital/Equity Instruments" and the cash part in "Other Liabilities/Other Accruals" in the consolidated balance sheet at 31 December 2018.

· Deferred Annual Variable Remuneration of executive directors for financial year 2015

Following year-end 2018, the deferred Annual Variable Remuneration of executive directors for financial year 2015 has been determined, with delivery, if conditions are met, corresponding during the first quarter of financial year 2019, subject to the conditions established for this purpose in the Remuneration Policy for BBVA Directors approved by the General Meeting on 13 March 2015.

Thus, based on the result of each of the multi-year performance indicators set by the Board in 2015 to calculate the deferred portion of this remuneration, and in application of the corresponding scales of achievement and their corresponding targets and weightings, likewise approved by the Board, the deferred portion of the Annual Variable Remuneration for financial year 2015 has been adjusted downwards as a consequence of result of the TSR indicator, which scale has determined a 10% reduction in the deferred amount associated to this indicator. The final amount of the deferred portion of the Annual Variable Remuneration for financial year 2015, after the corresponding adjustment in light of the result of the TSR indicator, has been determined in an amount of €612 thousand and 79,157 BBVA shares, in the case of Carlos Torres Vila, and €113 thousand and 14,667 BBVA shares in the case of José Manuel González-Páramo Martínez-Murillo, which includes the corresponding updating.

As regards the former Group Executive Chairman, Francisco González Rodríguez, his deferred Annual Variable Remuneration for financial year 2015 has been determined, to be received, providing that conditions are met, in accordance with the same settlement and payment system applicable to executive directors, amounting to a total of €1,035 thousand and 133,947 BBVA shares, which includes the corresponding updating.

At the time of drafting of these consolidated Annual Accounts none of these remunerations have been paid.

Lastly, as at year-end 2018 and in accordance with the conditions established in the remuneration policies applicable in the corresponding years, 50% and 60% of the annual variable remuneration of the executive directors corresponding to 2016 and 2017 financial years, respectively, has been deferred, to be received in future years, if applicable conditions are met, in accordance with the terms established in the remuneration policy applicable for each of such financial years.

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Remuneration received by the members of Senior Management in the 2018 financial year

The members of Senior Management, excluding executive directors, who held that position as at 20 December 2018(*) (15 members) have, over the course of the 2018 financial year, received the amount of the fixed remuneration corresponding to that financial year and the Annual Variable Remuneration for the 2017 financial year, which, in accordance with the settlement and payment system set out in the remuneration policy applicable to Senior Management in this financial year, was due to be paid to them during the first quarter of 2018.

In application of this settlement and payment system:

· 40% of the Annual Variable Remuneration due to members of the Senior Management for the 2017 financial year, 40% has been paid, as the conditions have been met, in the first quarter of the 2018 financial year (the "Upfront Portion"), in equal parts in cash and in shares.

· The remaining 60% of the Annual Variable Remuneration, in both cash and shares, has been deferred in its entirety for a period of five years, and its accrual and payment will be subject to compliance with a series of multi-year indicators (the "Deferred Portion"). The application of these indicators, calculated over the first three years of deferral, may lead to a reduction of the Deferred Portion, even in its entirety, but in no event may be increased. Provided that the relevant conditions have been met, the resulting amount will then be paid (40% in cash and 60% in shares), according to the following payment schedule: 60% in 2021, 20% in 2022 and the remaining 20% in 2023.

· The shares received as Annual Variable Remuneration will be withheld for a period of one year after their delivery, with the exception of those transferred to honor the payment of taxes arising from their delivery.

· The deferred portion of the Annual Variable Remuneration in cash will be subject to updating under the terms established by the Board of Directors.

· No personal hedging strategies or insurance may be used in connection with the remuneration and the responsibility that may undermine the effects of alignment with prudent risk management.

· The variable component of the remuneration corresponding to the financial year 2017 will be limited to a maximum amount of 200% of the fixed component of the total remuneration, as agreed by the General Meeting.

· Over the entire deferral and withholding period, the total Annual Variable Remuneration will be subject to variable "malus" and "clawback" arrangements.

Similarly, in application of the settlement and payment system of the annual variable remuneration for 2014 financial year, in accordance with the remuneration policy applicable at that time, the Senior Management who were beneficiaries of such remuneration, have received the deferred last third of the annual variable remuneration for that financial year, which delivery corresponded to the first quarter of 2018, thus concluding payment of the deferred variable remuneration for the 2014 financial year.

(*) Date of the Board of Directors’ resolution by which organizational changes were approved in the Group.

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In accordance with the above, the remuneration paid to members of the Senior Management as a whole, who held that position as at 20 December 2018, excluding executive directors, during the 2018 financial year is indicated below (itemized):

Annual Fixed Remuneration (thousands of euro) received in 2018
Senior Management total | 16,129

Annual Variable Remuneration for the 2017 financial year, received in 2018
| In cash (thousands of euro) | In shares
Senior Management total | 1,489 | 205,104

Deferred variable remuneration for the 2014 financial year, received in 2018
| In cash (thousands of euro) | In shares
Senior Management total | 573 | 64,853

In addition, all members of Senior Management who held that position as at 20 December 2018, excluding executive directors, received remuneration in kind throughout the 2018 financial year, including insurance premiums and others, amounting to a total of €875 thousand.

At the year-end 2018 and subject to the conditions established in the remuneration policies applicable to the corresponding year for, components of the annual variable remuneration of members of the Senior Management who were beneficiaries of remunerations for the 2016 and 2017 financial years, are deferred to be received in future years, if conditions are met, in accordance with the policy applicable for each of such financial years.

As regards of those members of the Senior Management who were appointed by resolution of BBVA's Board of Directors on 20 December 2018 (5 members) have not received any remuneration for such condition, having received fixed and variable remuneration in line with their former positions and functions amounting in aggregate €1,757 thousand as Annual Fixed Remuneration; €337 thousand and 24,293 BBVA shares for Upfront Portion of the Annual Variable Remuneration for the 2017 financial year; and €33 thousand and 3,684 BBVA shares as settlement of the deferred last third of the Annual Variable Remuneration for the 2014 financial year to the Senior Management who were beneficiaries of such remuneration, including the corresponding update, as well as remuneration in kind and others for an amount of €158 thousand, all in application of the remuneration policy to which they were entitled in their condition as risk taker.

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· Annual Variable Remuneration for Senior Management for financial year 2018

Following year-end 2018, the Annual Variable Remuneration of Senior Management corresponding to said period has been determined, excluding executive directors, who held that position as at 20 December 2018 (15 members).

Therefore, the 2018 Annual Variable Remuneration to all of the Senior Management, excluding executive directors, has been determined in a total amount of €7,074 thousand, in application of the settlement and payment system for this group. T he 40% of the Annual Variable Remuneration corresponding to each of will be paid, providing the conditions are met, in equal parts in cash and in shares, during the first quarter of 2019. The remaining 60% of the Annual Variable Remuneration (40% in cash and 60% in shares) will be subject to compliance with a series of multi-year indicators and to the rest of the settlement and payment system conditions set out in the remuneration policy applicable to Senior Management, which includes malus and clawback arrangements and retention periods for shares.

As regards those members of the Senior Management who were appointed by resolution of BBVA's Board of Directors on 20 December 2018 (5 members), their Annual Variable Remuneration for the 2018 year-end has been calculated in line with their former positions and functions, amounting in aggregate €633 thousand, being subject to the conditions set out in the remuneration policy to which they were entitled in their condition as risk taker.

At the time of drafting of these consolidated Annual Accounts none of these remunerations have been paid.

· Deferred Annual Variable Remuneration of Senior Management for financial year 2015

Following year-end 2018, the deferred Annual Variable Remuneration of Senior Management for financial year 2015 has been determined, excluding executive directors, who held that position as at 20 December 2018 (15 members).

Thus, based on the result of each of the multi-year performance indicators set by the Board in 2015 to calculate the deferred portion of this remuneration, and in application of the corresponding scales of achievement and their corresponding targets and weightings, likewise approved by the Board, the deferred portion of the Annual Variable Remuneration for financial year 2015 has been adjusted downwards as a consequence of result of the TSR indicator, which scale has determined a 10% reduction in the deferred amount associated to this indicator. The final amount of the deferred portion of the Annual Variable Remuneration for financial year 2015 to be paid to Senior Management beneficiaries of such remuneration, if applicable conditions are met, after the corresponding adjustment in light of the result of the TSR indicator, has been determined in an amount of €2,936 thousand and 382,407 BBVA shares, which includes the corresponding updating.

As regards those members of the Senior Management who were appointed by resolution of BBVA's Board of Directors on 20 December 2018 (5 members) that were entitled to such deferred remuneration, their Annual Variable Remuneration for financial year 2015 has been calculated in line with their former positions and functions, amounting in aggregate €110 thousand and 14,203 BBVA shares, which includes the corresponding updating and being subject to the conditions set out in the remuneration policy to which they were entitled in their condition as a Group's risk takers.

At the time of drafting of these consolidated Annual Accounts none of these remunerations have been paid.

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· Remuneration system with deferred delivery of shares for non-executive directors

BBVA has a remuneration system in shares with deferred delivery for its non-executive directors, which was approved by the General Shareholders' Meeting held on 18 March 2006 and extended by resolutions of the General Shareholders' Meetings held on 11 March 2011 and 11 March 2016 for an additional period of five years in each case.

This system involves the annual allocation to non-executive directors of a number of "theoretical shares" of BBVA equivalent to 20% of the total remuneration received in cash received by each director in the previous financial year. This is calculated according to the average closing prices of BBVA shares during the 60 trading sessions prior to the dates of the Annual General Shareholders' Meetings that approve the corresponding financial statements for each financial year.

These shares will be delivered to each beneficiary, where applicable, after they leave their positions as directors for reasons other than serious breach of their duties.

The "theoretical shares" allocated in 2018 to each non-executive director beneficiaries of the remuneration system in shares with deferred delivery, corresponding to 20% of the total remuneration in cash received by each of them in 2017, are as follows:

| Theoretical shares allocated in 2018 | Theoretical shares accumulated as at 31 December 2018
Tomás Alfaro Drake | 10,367 | 83,449
José Miguel Andrés Torrecillas | 12,755 | 36,565
Belén Garijo López | 7,865 | 34,641
Sunir Kumar Kapoor | 4,811 | 8,976
Carlos Loring Martínez de Irujo | 11,985 | 98,876
Lourdes Máiz Carro | 7,454 | 23,160
José Maldonado Ramos | 11,176 | 78,995
Juan Pi Llorens | 11,562 | 54,171
Susana Rodríguez Vidarte | 12,425 | 104,983
Total (1) | 90,400 | 523,816

(1) In addition, in 2018, 10,188 "theoretical shares" were allocated to José Antonio Fernández Rivero, who stepped down as a director on 16 March 2018.

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· Pension commitments

At the end of the 2018 financial year, the Bank has pension commitments in favor of the executive directors Carlos Torres Vila and José Manuel González-Páramo Martínez-Murillo to cover contingencies for retirement, disability and death, in accordance with the Bylaws, the Remuneration Policy for BBVA Directors and their respective contracts entered into with the Bank.

With regard to Carlos Torres Vila, the Remuneration Policy for BBVA Directors provides for a benefits framework according to which he is entitled, provided that he does not leave his position as Chief Executive Officer due to serious breach of duties, to receive a retirement pension when he reaches the legally established retirement age, in the form of capital or income. The amount of this pension shall result from the funds accumulated by the Bank up to December 2016 to cover the commitments under his previous benefits scheme, plus the sum of the annual contributions made by the Bank from 1 January 2017 to cover said pension, as well as the corresponding accumulated yields.

The amount set out in the Remuneration Policy for BBVA Directors as annual contribution to cover retirement benefit under the defined-contribution scheme for Carlos Torres Vila is €1,642 thousand.

15% of the aforementioned agreed annual contribution will be based on variable components and considered "discretionary pension benefits", therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with this Policy.

Should the contractual relationship be terminated before he reaches the retirement age for reasons other than serious breach of duties, the retirement pension due to Carlos Torres Vila upon reaching the legally established retirement age will be calculated based on the total contributions made by the Bank under the terms set out, up to that date, plus the corresponding accumulated yield, with no additional contributions to be made by the Bank from the time of termination.

With respect to the commitments to cover the contingencies for death and disability benefits for Carlos Torres Vila, the Bank will undertake the payment of the corresponding annual insurance premiums in order to top up the coverage the death and disability contingencies of his benefits system.

In line with the above, during the 2018 financial year, €1,896 thousand has been recorded to meet the benefits commitments for Carlos Torres Vila, amount which includes the contribution to the retirement contingency (€1,642 thousand) and to death and disability (€212 thousand), as well as €42 thousand corresponding to the adjustments made to the amount of "discretionary pension benefits" from 2017, as declared at 2017 year-end and which had to be recorded in the accumulated fund in 2018. As a result, the total accumulated amount of the fund to meet retirement commitments with Carlos Torres Vila amounts to €18,581 thousand as at 31 December 2018.

15% of the agreed annual contribution to retirement (€246 thousand) has been recognized in 2018 as "discretionary pension benefits". Following year-end 2018, this amount has been adjusted according to the criteria established to determine Carlos Torres Vila's Annual Variable Remuneration for 2018. Accordingly, the "discretionary pension benefits" for the financial year have been determined in an amount of €245 thousand, which will be included in the accumulated fund for 2019, subject to the same conditions as the Deferred Component of Annual Variable Remuneration for 2018, as well as the remaining conditions established for these benefits in the Remuneration Policy for BBVA Directors.

In the case of José Manuel González-Páramo Martínez-Murillo, the pension system provided for in the Remuneration Policy for BBVA Directors establishes an annual contribution of 30% of his Annual Fixed Remuneration, to cover the contingency of his retirement, as well as the payment of the corresponding insurance premiums in order to top up the coverage of death and disability.

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15% of the aforementioned agreed annual contribution will be based on variable components and considered "discretionary pension benefits", therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with this Policy.

José Manuel González-Páramo Martínez-Murillo, upon reaching retirement age, will be entitled to receive, in the form of capital or income, the benefits arising from contributions made by the Bank to cover pension commitments, plus the corresponding yield accumulated up to that date, provided he does not leave his position due to serious breach of duties. In the event of voluntary termination of contractual relationship by the director before retirement, the benefits will be limited to 50% of the contributions made by the Bank up to that date, as well as the corresponding accumulated yield, with no additional contributions to be made by the Bank upon termination.

With respect to the commitments to cover the contingencies for death and disability benefits for José Manuel González-Páramo Martínez-Murillo, the Bank will undertake the payment of the corresponding annual insurance premiums in order to top up the coverage the death and disability contingencies of his benefits system.

In line with the above, during the 2018 financial year, €405 thousand has been recorded to meet the benefits commitments for José Manuel González-Páramo Martínez-Murillo, amount which includes the contribution to the retirement contingency (€250 thousand) and to death and disability (€147 thousand), as well as €8 thousand corresponding to the adjustments made to the amount of "discretionary pension benefits" from 2017, as declared at 2017 year-end and which had to be recorded in the accumulated fund in 2018. As a result, the total accumulated amount of the fund to meet retirement commitments with José Manuel González-Páramo amounts to €1,067 thousand as at 31 December 2018.

15% of the agreed annual contribution to retirement (€38 thousand) has been recognized in 2018 as "discretionary pension benefits". Following year-end 2018, this amount has been adjusted according to the criteria established to determine José Manuel González-Páramo Martínez-Murillo’s Annual Variable Remuneration for 2018. Accordingly, the "discretionary pension benefits" for the financial year have been determined in an amount of €42 thousand, which will be included in the accumulated fund for 2019, subject to the same conditions as the Deferred Component of Annual Variable Remuneration for 2018, as well as the remaining conditions established for these benefits in the Remuneration Policy for BBVA Directors.

As of 31 December 2018 there are no other pension commitments undertaken in favor of other executive directors.

Likewise, during the 2018 financial year, €4,754 thousand has been recorded to meet the benefits commitments undertaken with members of the Senior Management, excluding executive directors, who held said position as at 20 December 2018 (15 members), amount which includes the contribution to the retirement contingency (€3,883 thousand) and to death and disability (€831 thousand), as well as €40 thousand corresponding to the adjustments made to the amount of "discretionary pension benefits" from 2017, as declared at 2017 year-end and which had to be recorded in the accumulated fund in 2018. As a result, the total accumulated amount of the fund to meet retirement commitments with Senior Management amounts to €57,429 thousand as at 31 December 2018.

15% of the agreed annual contributions for members of Senior Management who held that position as at 20 December 2018 will be based on variable components and considered "discretionary pension benefits", therefore subject to the conditions regarding delivery in shares, retention and clawback established in the applicable regulations, as well as any other conditions concerning variable remuneration that may be applicable in accordance with the remuneration policy applicable to members of Senior Management.

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To this end, of the agreed annual contribution to retirement, an amount of €571 thousand has been recognized in 2018 as "discretionary pension benefits". Following year-end 2018, this amount has been adjusted according to the criteria established to determine the Annual Variable Remuneration of the Senior Management for 2018. Accordingly, the "discretionary pension benefits" for the financial year, corresponding to members of the Senior Management who held that position as at 20 December 2018, have been determined in an amount of €555 thousand, which will be included in the accumulated fund for 2019, subject to the same conditions as the Deferred Component of Annual Variable Remuneration for 2018, as well as the remaining conditions established for these benefits in the remuneration policy applicable to members of the Senior Management.

During the 2018 financial year, €146 thousand has been recorded to meet the benefits commitments undertaken with the members of the Senior Management, excluding executive directors, who were appointed by BBVA's Board of Directors on 20 December 2018 (five members), pursuant to the commitments made by the Bank with each of them in relation to their previous positions and functions, with such amount including both the contribution to retirement contingency(€97 thousand) as well as to death and disability (€49 thousand), with the fund accumulated to meet retirement commitments for this group amounting to a total of €1,713 thousand.

Termination of the contractual relationship

In accordance with the Remuneration Policy for BBVA Directors, the Bank has no commitments to pay severance payments to executive directors.

The contractual framework defined in the aforementioned Policy for Carlos Torres Vila and for the executive director José Manuel González-Páramo Martínez-Murillo, includes a post-contractual non-compete agreement for a period of two years after they cease as BBVA executive directors, in accordance to which they will receive remuneration from the Bank for an amount equivalent to one Annual Fixed Remuneration for each year of duration of the non-compete arrangement , which shall be paid periodically over the course of the two years, provided that they leave their positions as executive directors for reasons other than retirement, disability or serious breach of duties.

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55. Other information

55.1 Environmental impact

Given the activities BBVA Group entities engage in, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that could have a significant effect on its consolidated equity, financial situation and profits. Consequently, as of December 31, 2018, there is no item in the Group’s accompanying consolidated financial statements that requires disclosure in an environmental information report pursuant to Ministry of Justice Order JUS/471/2017, of May 19, and consequently no specific disclosure of information on environmental matters is included in these financial statements.

55.2 Reporting requirements of the Spanish National Securities Market Commission (CNMV)

Dividends paid in the year

The table below presents the dividends per share paid in cash during 2018, 2017 and 2016 (cash basis dividend, regardless of the year in which they were accrued), but without including other shareholder remuneration, such as the “Dividend Option”. See Notes 4 and 26 for a complete analysis of all remuneration awarded to the shareholders.

Dividends Paid ("Dividend Option" not included)
|  | 2018 |  |  | 2017 |  |  | 2016 |
| % Over Nominal | Euros per Share | Amount (Millions of Euros) | % Over Nominal | Euros per Share | Amount (Millions of Euros) | % Over Nominal | Euros per Share | Amount (Millions of Euros)
Ordinary shares | 51.02% | 0.25 | 1,667 | 34.69% | 0.17 | 1,125 | 32.65% | 0.16 | 1,028
Rest of shares | - | - | - | - | - | - | - | - | -
Total dividends paid in cash | 51.02% | 0.25 | 1,667 | 34.69% | 0.17 | 1,125 | 32.65% | 0.16 | 1,028
Dividends with charge to income | 51.02% | 0.25 | 1,667 | 34.69% | 0.17 | 1,125 | 32.65% | 0.16 | 1,028
Dividends with charge to reserve or share premium | - | - | - | - | - | - | - | - | -
Dividends in kind | - | - | - | - | - | - | - | - | -

F-252

Ordinary earnings and ordinary income by operating segment

The detail of the consolidated profit for each operating segment is as follows as of December 31 2018, 2017 and 2016:

Profit Attributable by Operating Segments
| Notes | 2018 | 2017 | 2016
Spain |  | 1,400 | 877 | 305
United States |  | 736 | 486 | 442
Mexico |  | 2,367 | 2,170 | 1,980
Turkey |  | 567 | 823 | 596
South America |  | 578 | 847 | 757
Rest of Eurasia |  | 96 | 128 | 154
Subtotal operating segments |  | 5,743 | 5,331 | 4,235
Corporate Center |  | (419) | (1,812) | (760)
Profit attributable to parent company | 6 | 5,324 | 3,519 | 3,475
Non-assigned income |  | - | - | -
Elimination of interim income (between segments) |  | - | - | -
Other gains (losses) (*) |  | 827 | 1,243 | 1,218
Income tax and/or profit from discontinued operations |  | 2,295 | 2,169 | 1,699
Operating profit before tax | 6 | 8,446 | 6,931 | 6,392

(*) Profit attributable to non-controlling interests.

Interest income by geographical area

The breakdown of the balance of “Interest income and other income” in the accompanying consolidated income statements by geographical area is as follows:

Interest Income. Breakdown by geographical area (Millions of euros)
| Notes | 2018 | 2017 | 2016
Domestic |  | 4,952 | 5,093 | 5,962
Foreign |  | 24,879 | 24,203 | 21,745
European Union |  | 509 | 422 | 291
Eurozone |  | 391 | 239 | 291
No eurozone |  | 117 | 183 | -
Other countries |  | 24,370 | 23,781 | 21,455
Total | 37.1 | 29,831 | 29,296 | 27,708

F-253

56. Subsequent events

On January 15, 2019, BBVA announced its irrevocable decision to early redeem, on February 19, 2019, the issuance of preferred securities contingently convertible (additional tier 1 instrument) carried out by the Bank on February 19, 2014, for an amount of €1.5 billion on the First Reset Date of the issuance and once the prior consent from the Regulator was obtained (see Note 22.4).

The Board of Directors, in their meeting on January 31, 2019, agreed on carrying out an issuance of bonds convertible into ordinary shares of BBVA with exclusion of pre-emptive subscription rights, under the power delegated by the General Shareholders' Meeting of the Company held on March 17, 2017 under the fifth item on the agenda which is pending to be executed.

On February 1, 2019 it was announced that it was foreseen to submit to the consideration of the corresponding government bodies the proposal of cash payment in a gross amount of euro 0.16 per share to be paid in April as final dividend for 2018 (see Note 4).

On February 14, 2019, the results of the supervisory review and evaluation process (SREP) were announced.

On 19 February, BBVA announced the irrevocable decision to early redeem, on April 11, the issuance of subordinated bonds (Subordinated Notes) that has been computed as Tier 2 capital for an amount of €1.5 billion, coinciding with the Optional Amortization date of said issue, and once the prior consent from the Regulator has been obtained.

From January 1, 2019 to the date of preparation of these Consolidated Financial Statements, no other subsequent events not mentioned above in these financial statements have taken place that could significantly affect the Group’s earnings or its equity position.

F-254

Appendices

F-255

APPENDIX I Additional information on consolidated subsidiaries and consolidated structured entities composing the BBVA Group

Additional Information on Consolidated Subsidiaries and consolidated structured entities composing the BBVA Group

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
ACTIVOS MACORP SL | SPAIN | REAL ESTATE | 50.63 | 49.37 | 100.00 | 21 | 24 | 3 | 20 | 1
ALCALA 120 PROMOC. Y GEST.IMMOB. S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 17 | 26 | 8 | 16 | 2
ANIDA GERMANIA IMMOBILIEN ONE, GMBH | GERMANY | IN LIQUIDATION | - | 100.00 | 100.00 | - | - | - | - | -
ANIDA GRUPO INMOBILIARIO SL | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 1,569 | 1,642 | 38 | 1,863 | (259)
ANIDA INMOBILIARIA, S.A. DE C.V. | MEXICO | INVESTMENT COMPANY | - | 100.00 | 100.00 | 113 | 80 | - | 59 | 21
ANIDA OPERACIONES SINGULARES, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1,485 | 2,381 | 893 | 1,678 | (190)
ANIDA PROYECTOS INMOBILIARIOS, S.A. DE C.V. | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 53 | 57 | 4 | 32 | 21
ANIDAPORT INVESTIMENTOS IMOBILIARIOS, UNIPESSOAL, LTDA | PORTUGAL | REAL ESTATE | - | 100.00 | 100.00 | 23 | 62 | 53 | 6 | 2
APLICA NEXTGEN OPERADORA S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 1 | 10 | 9 | 1 | -
APLICA NEXTGEN SERVICIOS S.A. DE C.V | MEXICO | SERVICES | - | 100.00 | 100.00 | - | 3 | 3 | - | -
APLICA TECNOLOGIA AVANZADA SA DE CV | MEXICO | SERVICES | 100.00 | - | 100.00 | 203 | 232 | 21 | 214 | (3)
ARIZONA FINANCIAL PRODUCTS, INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 855 | 855 | - | 855 | 1
ARRAHONA AMBIT, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 12 | 34 | 10 | 14 | 9
ARRAHONA IMMO, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 53 | 118 | 4 | 105 | 9
ARRAHONA NEXUS, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 58 | 131 | 67 | 58 | 6
ARRAHONA RENT, S.L.U. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 9 | 12 | 1 | 10 | -
ARRELS CT FINSOL, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 64 | 114 | 35 | 64 | 15
ARRELS CT LLOGUER, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 5 | 27 | 21 | 5 | 1
ARRELS CT PATRIMONI I PROJECTES, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 22 | 52 | 28 | 22 | 2
ARRELS CT PROMOU SA | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 28 | 60 | 23 | 28 | 9
AZLO BUSINESS, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 11 | 12 | 1 | 18 | (8)
BAHIA SUR RESORT S.C. | SPAIN | INACTIVE | 99.95 | - | 99.95 | 1 | 1 | - | 1 | -
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY SA | URUGUAY | BANKING | 100.00 | - | 100.00 | 110 | 2,850 | 2,652 | 168 | 30
BANCO INDUSTRIAL DE BILBAO SA | SPAIN | BANKING | - | 99.93 | 99.93 | 46 | 45 | - | 60 | (15)
BANCO OCCIDENTAL SA | SPAIN | BANKING | 49.43 | 50.57 | 100.00 | 17 | 18 | - | 18 | -
BANCO PROVINCIAL OVERSEAS NV | CURAÇAO | BANKING | - | 100.00 | 100.00 | 48 | 403 | 355 | 44 | 5
BANCO PROVINCIAL SA - BANCO UNIVERSAL | VENEZUELA | BANKING | 1.46 | 53.75 | 55.21 | 52 | 296 | 174 | 140 | (18)
BANCOMER FOREIGN EXCHANGE INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 21 | 21 | - | 16 | 5
BANCOMER PAYMENT SERVICES INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1 | 2 | 1 | 1 | -
BBV AMERICA SL | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 79 | 614 | - | 604 | 10
BBVA AGENCIA DE SEGUROS COLOMBIA LTDA | COLOMBIA | INSURANCES SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
BBVA ASSET MANAGEMENT CONTINENTAL SA SAF | PERU | FINANCIAL SERVICES | - | 100.00 | 100.00 | 15 | 18 | 3 | 11 | 4
BBVA ASSET MANAGEMENT SA SGIIC | SPAIN | OTHER INVESTMENT COMPANIES | 17.00 | 83.00 | 100.00 | 38 | 111 | 55 | (41) | 98
BBVA ASSET MANAGEMENT SA SOCIEDAD FIDUCIARIA (BBVA FIDUCIARIA) | COLOMBIA | FINANCIAL SERVICES | - | 100.00 | 100.00 | 29 | 32 | 4 | 19 | 10
BBVA AUTOMERCANTIL COMERCIO E ALUGER DE VEICULOS AUTOMOVEIS LDA. | PORTUGAL | FINANCIAL SERVICES | 100.00 | - | 100.00 | 4 | 26 | 21 | 4 | -
BBVA BANCO CONTINENTAL SA | PERU | BANKING | - | 46.12 | 46.12 | 998 | 19,382 | 17,212 | 1,747 | 423
BBVA BANCO FRANCES SA | ARGENTINA | BANKING | 39.97 | 26.58 | 66.55 | 157 | 8,189 | 7,166 | 1,047 | (23)
BBVA BANCOMER GESTION, S.A. DE C.V. | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 14 | 31 | 17 | 9 | 5
BBVA BANCOMER OPERADORA, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 69 | 269 | 199 | 60 | 9
BBVA BANCOMER SA INSTITUCION DE BANCA MULTIPLE GRUPO FINANCIERO BBVA BANCOMER | MEXICO | BANKING | - | 100.00 | 100.00 | 8,633 | 87,919 | 79,560 | 6,374 | 1,985
(*) Information on foreign companies at exchange rate on December 31, 2018

F-256

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
BBVA BANCOMER SEGUROS SALUD SA DE CV | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | 13 | 23 | 10 | 12 | 2
BBVA BANCOMER SERVICIOS ADMINISTRATIVOS, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 38 | 197 | 159 | 27 | 11
BBVA BRASIL BANCO DE INVESTIMENTO SA | BRASIL | BANKING | 100.00 | - | 100.00 | 16 | 28 | 3 | 25 | -
BBVA BROKER CORREDURIA DE SEGUROS Y REASEGUROS SA | SPAIN | INSURANCES SERVICES | 99.94 | 0.06 | 100.00 | - | 15 | 3 | 8 | 4
BBVA BROKER SA | ARGENTINA | INSURANCES SERVICES | - | 99.99 | 99.99 | - | 9 | 2 | 2 | 5
BBVA COLOMBIA SA | COLOMBIA | BANKING | 77.41 | 18.06 | 95.47 | 355 | 16,793 | 15,572 | 1,035 | 186
BBVA COMPASS BANCSHARES INC | UNITED STATES | INVESTMENT COMPANY | 100.00 | - | 100.00 | 11,703 | 11,817 | 41 | 11,131 | 645
BBVA COMPASS FINANCIAL CORPORATION | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 230 | 432 | 210 | 217 | 5
BBVA COMPASS INSURANCE AGENCY, INC | UNITED STATES | INSURANCES SERVICES | - | 100.00 | 100.00 | 38 | 40 | 2 | 29 | 9
BBVA COMPASS PAYMENTS INC | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | 88 | 88 | - | 73 | 15
BBVA CONSOLIDAR SEGUROS SA | ARGENTINA | INSURANCES SERVICES | 87.78 | 12.22 | 100.00 | 8 | 82 | 55 | 22 | 4
BBVA CONSULTING ( BEIJING) LIMITED | CHINA | FINANCIAL SERVICES | - | 100.00 | 100.00 | 2 | 2 | - | 2 | -
BBVA CONSULTORIA, S.A. | SPAIN | SERVICES | - | 100.00 | 100.00 | 2 | 5 | 3 | 2 | -
BBVA CONSUMER FINANCE ENTIDAD DE DESARROLLO A LA PEQUEÑA Y MICRO EMPRESA EDPYME SA (BBVA CONSUMER FINANCE - EDPYME) | PERU | FINANCIAL SERVICES | - | 100.00 | 100.00 | 21 | 135 | 115 | 17 | 3
BBVA DATA & ANALYTICS SL | SPAIN | SERVICES | - | 100.00 | 100.00 | 6 | 5 | 2 | 3 | 1
BBVA DISTRIBUIDORA DE SEGUROS S.R.L. | URUGUAY | INSURANCES SERVICES | - | 100.00 | 100.00 | 5 | 5 | - | 3 | 2
BBVA FINANZIA SPA | ITALY | IN LIQUIDATION | 100.00 | - | 100.00 | 4 | 13 | 10 | 4 | -
BBVA FRANCES ASSET MANAGMENT S.A. SOCIEDAD GERENTE DE FONDOS COMUNES DE INVERSIÓN. | ARGENTINA | FINANCIAL SERVICES | - | 100.00 | 100.00 | 11 | 15 | 5 | 11 | -
BBVA FRANCES VALORES, S.A. | ARGENTINA | SECURITIES DEALER | - | 100.00 | 100.00 | 4 | 5 | 1 | 5 | (1)
BBVA FUNDOS S.GESTORA FUNDOS PENSOES SA | PORTUGAL | PENSION FUNDS MANAGEMENT | 100.00 | - | 100.00 | 10 | 10 | - | 8 | 2
BBVA GLOBAL FINANCE LTD | CAYMAN ISLANDS | FINANCIAL SERVICES | 100.00 | - | 100.00 | - | 179 | 175 | 4 | -
BBVA GLOBAL MARKETS BV | NETHERLANDS | FINANCIAL SERVICES | 100.00 | - | 100.00 | - | 2,562 | 2,561 | - | -
BBVA HOLDING CHILE SA | CHILE | INVESTMENT COMPANY | 61.22 | 38.78 | 100.00 | 139 | 348 | - | 273 | 75
BBVA INFORMATION TECHNOLOGY ESPAÑA SL | SPAIN | SERVICES | 76.00 | - | 76.00 | 1 | 6 | 5 | 1 | -
BBVA INSTITUIÇAO FINANCEIRA DE CREDITO SA | PORTUGAL | FINANCIAL SERVICES | 49.90 | 50.10 | 100.00 | 39 | 422 | 369 | 50 | 3
BBVA INTERNATIONAL PREFERRED SOCIEDAD ANONIMA | SPAIN | FINANCIAL SERVICES | 100.00 | - | 100.00 | - | 36 | 35 | - | -
BBVA IRELAND PLC | IRELAND | FINANCIAL SERVICES | 100.00 | - | 100.00 | 2 | 52 | 48 | 2 | 1
BBVA LEASING MEXICO SA DE CV | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 51 | 888 | 751 | 127 | 10
BBVA LUXINVEST SA | LUXEMBOURG | PENSION FUNDS MANAGEMENT | 36.00 | 64.00 | 100.00 | - | 2 | 1 | (1) | 1
BBVA MEDIACION OPERADOR DE BANCA-SEGUROS VINCULADO, S.A. | SPAIN | INSURANCES SERVICES | - | 100.00 | 100.00 | 10 | 96 | 69 | 10 | 17
BBVA NEXT TECHNOLOGIES SLU | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 19 | 41 | 18 | 20 | 3
BBVA NOMINEES LIMITED | UNITED KINGDOM | IN LIQUIDATION | 100.00 | - | 100.00 | - | - | - | - | -
BBVA OP3N S.L. | SPAIN | SERVICES | - | 100.00 | 100.00 | - | 3 | 4 | (1) | (1)
BBVA OPEN PLATFORM INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 1 | 2 | 1 | 8 | (7)
BBVA PARAGUAY SA | PARAGUAY | BANKING | 100.00 | - | 100.00 | 23 | 1,923 | 1,741 | 150 | 32
BBVA PENSIONES SA ENTIDAD GESTORA DE FONDOS DE PENSIONES | SPAIN | PENSION FUNDS MANAGEMENT | 100.00 | - | 100.00 | 13 | 40 | 13 | 16 | 11
BBVA PLANIFICACION PATRIMONIAL SL | SPAIN | FINANCIAL SERVICES | 80.00 | 20.00 | 100.00 | - | 1 | - | 1 | -
BBVA PREVISION AFP SA ADM.DE FONDOS DE PENSIONES | BOLIVIA | PENSION FUNDS MANAGEMENT | 75.00 | 5.00 | 80.00 | 1 | 26 | 15 | 5 | 7
BBVA PROCUREMENT SERVICES AMERICA DEL SUR SpA | CHILE | SERVICES | - | 100.00 | 100.00 | 6 | 8 | 1 | 6 | 1
BBVA RE DAC | IRELAND | INSURANCES SERVICES | - | 100.00 | 100.00 | 39 | 68 | 25 | 48 | (6)
(*) Information on foreign companies at exchange rate on December 31, 2018

F-257

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
BBVA REAL ESTATE MEXICO, S.A. DE C.V. | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
BBVA SECURITIES INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 192 | 398 | 205 | 187 | 6
BBVA SEGUROS COLOMBIA SA | COLOMBIA | INSURANCES SERVICES | 94.00 | 6.00 | 100.00 | 10 | 90 | 68 | 13 | 9
BBVA SEGUROS DE VIDA COLOMBIA SA | COLOMBIA | INSURANCES SERVICES | 94.00 | 6.00 | 100.00 | 14 | 402 | 282 | 86 | 33
BBVA SEGUROS SA DE SEGUROS Y REASEGUROS | SPAIN | INSURANCES SERVICES | 99.96 | - | 99.96 | 713 | 17,303 | 16,509 | 484 | 309
BBVA SERVICIOS, S.A. | SPAIN | COMMERCIAL | - | 100.00 | 100.00 | - | 8 | - | 7 | -
BBVA SUIZA SA (BBVA SWITZERLAND) | SWITZERLAND | BANKING | 100.00 | - | 100.00 | 98 | 832 | 719 | 108 | 4
BBVA TRADE, S.A. (**) | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 4 | 42 | 37 | 5 | -
BBVA TRANSFER SERVICES INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 66 | 118 | 51 | 57 | 9
BBVA VALORES COLOMBIA SA COMISIONISTA DE BOLSA | COLOMBIA | SECURITIES DEALER | - | 100.00 | 100.00 | 5 | 6 | 1 | 4 | 1
BBVA WEALTH SOLUTIONS, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 8 | 8 | - | 6 | 2
BEEVA TEC OPERADORA, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | - | 2 | 2 | - | -
BEEVA TEC SA DE CV | MEXICO | SERVICES | - | 100.00 | 100.00 | 1 | 6 | 3 | 2 | 1
BILBAO VIZCAYA HOLDING SA | SPAIN | INVESTMENT COMPANY | 89.00 | 11.00 | 100.00 | 51 | 234 | 141 | 90 | 3
CAIXA MANRESA IMMOBILIARIA ON CASA SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 2 | 2 | - | 2 | -
CAIXA MANRESA IMMOBILIARIA SOCIAL SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 4 | 3 | - | 3 | -
CAIXA TERRASSA SOCIETAT DE PARTICIPACIONS PREFERENTS SAU | SPAIN | FINANCIAL SERVICES | 100.00 | - | 100.00 | 1 | 76 | 74 | 2 | -
CAIXASABADELL PREFERENTS SA | SPAIN | FINANCIAL SERVICES | 100.00 | - | 100.00 | - | 91 | 90 | 1 | -
CARTERA E INVERSIONES SA CIA DE | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 92 | 224 | 120 | (83) | 186
CASA DE BOLSA BBVA BANCOMER SA DE CV | MEXICO | SECURITIES DEALER | - | 100.00 | 100.00 | 48 | 57 | 8 | 21 | 27
CATALONIA GEBIRA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | - | 1 | 1 | - | -
CATALONIA PROMODIS 4, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1 | 4 | 2 | 2 | -
CATALUNYACAIXA CAPITAL SA | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 79 | 88 | 7 | 76 | 5
CATALUNYACAIXA IMMOBILIARIA SA | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 328 | 324 | 8 | 303 | 14
CATALUNYACAIXA SERVEIS SA | SPAIN | SERVICES | 100.00 | - | 100.00 | 2 | 8 | 6 | 3 | -
CDD GESTIONI S.R.L. | ITALY | REAL ESTATE | 100.00 | - | 100.00 | 5 | 12 | 2 | 6 | 4
CETACTIUS SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 1 | 1 | - | 1 | -
CIDESSA DOS, S.L. | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 15 | 15 | 1 | 15 | -
CIDESSA UNO SL | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 5 | 283 | 251 | (50) | 83
CIERVANA SL | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 53 | 60 | 6 | 54 | -
CLUB GOLF HACIENDA EL ALAMO, S.L. | SPAIN | IN LIQUIDATION | - | 97.87 | 97.87 | 1 | 2 | 1 | - | 1
COMERCIALIZADORA CORPORATIVA SAC | PERU | FINANCIAL SERVICES | - | 50.00 | 50.00 | - | 1 | 1 | - | -
COMERCIALIZADORA DE SERVICIOS FINANCIEROS, S.A. | COLOMBIA | SERVICES | - | 100.00 | 100.00 | 4 | 9 | 5 | 3 | 1
COMPAÑIA CHILENA DE INVERSIONES SL | SPAIN | INVESTMENT COMPANY | 99.97 | 0.03 | 100.00 | 221 | 719 | 280 | (59) | 498
COMPASS BANK | UNITED STATES | BANKING | - | 100.00 | 100.00 | 10,950 | 84,383 | 73,398 | 10,267 | 718
COMPASS CAPITAL MARKETS, INC. | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | 7,203 | 7,203 | - | 7,116 | 88
COMPASS GP, INC. | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | 43 | 54 | 10 | 43 | -
COMPASS INSURANCE TRUST | UNITED STATES | INSURANCES SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
COMPASS LIMITED PARTNER, INC. | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | 6,305 | 6,305 | - | 6,218 | 87
COMPASS LOAN HOLDINGS TRS, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 72 | 72 | - | 71 | 1
(*) Information on foreign companies at exchange rate on December 31, 2018
(**) This company has an equity loan from CARTERA E INVERSIONES S.A., CIA DE.

F-258

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
COMPASS MORTGAGE CORPORATION | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 2,857 | 2,950 | 98 | 2,783 | 69
COMPASS MORTGAGE FINANCING, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
COMPASS SOUTHWEST, LP | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 5,213 | 5,229 | 5 | 5,151 | 73
COMPASS TEXAS MORTGAGE FINANCING, INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
CONSOLIDAR A.F.J.P SA | ARGENTINA | IN LIQUIDATION | 46.00 | 53.89 | 100.00 | 1 | 2 | 1 | 2 | -
CONTENTS AREA, S.L. | SPAIN | SERVICES | - | 100.00 | 100.00 | 6 | 8 | 1 | 6 | 1
CONTINENTAL BOLSA SDAD. AGENTE DE BOLSA SA | PERU | SECURITIES DEALER | - | 100.00 | 100.00 | 6 | 103 | 98 | 4 | 2
CONTINENTAL DPR FINANCE COMPANY | CAYMAN ISLANDS | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 52 | 52 | - | -
CONTINENTAL SOCIEDAD TITULIZADORA SA | PERU | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1 | 1 | - | 1 | -
CONTRATACION DE PERSONAL, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 6 | 11 | 5 | 5 | 1
COPROMED SA DE CV | MEXICO | SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
CORPORACION GENERAL FINANCIERA SA | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 510 | 1,577 | - | 1,642 | (65)
COVAULT, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 1 | 1 | 1 | 2 | (2)
DALLAS CREATION CENTER, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 4 | 8 | 4 | - | 3
DATA ARCHITECTURE AND TECHNOLOGY S.L. | SPAIN | SERVICES | - | 51.00 | 51.00 | - | 4 | 1 | 2 | -
DENIZEN FINANCIAL, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | - | - | 1 | 3 | (3)
DENIZEN GLOBAL FINANCIAL SAU | SPAIN | PAYMENT ENTITIE | 100.00 | - | 100.00 | 2 | 4 | 1 | 4 | (1)
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1859 | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
DEUTSCHE BANK MEXICO SA FIDEICOMISO F/1860 | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
DISTRITO CASTELLANA NORTE, S.A. | SPAIN | REAL ESTATE | - | 75.54 | 75.54 | 98 | 147 | 20 | 133 | (5)
ECASA, S.A. | CHILE | FINANCIAL SERVICES | - | 100.00 | 100.00 | 25 | 30 | 4 | 14 | 11
EL ENCINAR METROPOLITANO, S.A. | SPAIN | REAL ESTATE | - | 99.05 | 99.05 | 6 | 6 | - | 6 | -
EL MILANILLO, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 7 | 13 | 6 | 9 | (3)
EMPRENDIMIENTOS DE VALOR S.A. | URUGUAY | FINANCIAL SERVICES | - | 100.00 | 100.00 | 3 | 6 | 3 | 3 | -
ENTIDAD DE PROMOCION DE NEGOCIOS SA | SPAIN | HOLDING | - | 99.88 | 99.88 | 15 | 17 | - | 17 | -
ENTRE2 SERVICIOS FINANCIEROS E.F.C SA | SPAIN | FINANCIAL SERVICES | 100.00 | - | 100.00 | 9 | 9 | - | 9 | -
ESPAIS SABADELL PROMOCIONS INMOBILIARIES, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 6 | 8 | - | 8 | -
EUROPEA DE TITULIZACION SA SGFT . | SPAIN | FINANCIAL SERVICES | 88.24 | - | 88.24 | 2 | 34 | 2 | 28 | 4
EXPANSION INTERCOMARCAL SL | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 16 | 17 | - | 16 | -
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION | MEXICO | REAL ESTATE | - | 42.40 | 42.40 | - | 1 | - | 1 | -
F/253863 EL DESEO RESIDENCIAL | MEXICO | REAL ESTATE | - | 65.00 | 65.00 | - | 1 | - | 1 | -
F/403035-9 BBVA HORIZONTES RESIDENCIAL | MEXICO | REAL ESTATE | - | 65.00 | 65.00 | - | - | - | - | -
FIDEICOMISO 28991-8 TRADING EN LOS MCADOS FINANCIEROS | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 2 | 2 | - | 2 | -
FIDEICOMISO F/29764-8 SOCIO LIQUIDADOR DE OPERACIONES FINANCIERAS DERIVADAS | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 46 | 46 | - | 41 | 6
FIDEICOMISO F/403112-6 DE ADMINISTRACION DOS LAGOS | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | - | - | - | - | -
FIDEICOMISO HARES BBVA BANCOMER F/ 47997-2 | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 4 | 8 | 5 | 4 | -
FIDEICOMISO LOTE 6.1 ZARAGOZA | COLOMBIA | REAL ESTATE | - | 59.99 | 59.99 | - | 2 | - | 2 | -
FIDEICOMISO N.989 EN THE BANK OF NEW YORK MELLON SA INSTITUCION DE BANCA MULTIPLE FIDUCIARIO (FIDEIC.00989 6 EMISION) | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 79 | 79 | (3) | 3
(*) Information on foreign companies at exchange rate on December 31, 2018

F-259

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
FIDEICOMISO Nº 711 EN BANCO INVEX SA INSTITUCION DE BANCA MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 1ª EMISION) | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 13 | 14 | (1) | -
FIDEICOMISO Nº 752 EN BANCO INVEX SA INSTITUCION DE BANCA MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 2ª EMISION) | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 7 | 7 | - | -
FIDEICOMISO Nº 847 EN BANCO INVEX SA INSTITUCION DE BANCA MULTIPLE INVEX GRUPO FINANCIERO FIDUCIARIO (FIDEIC. INVEX 4ª EMISION) | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 39 | 38 | - | 1
FIDEICOMISO SCOTIABANK INVERLAT S A F100322908 | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 7 | 13 | 6 | 6 | 1
FINANCEIRA DO COMERCIO EXTERIOR SAR. | PORTUGAL | INACTIVE | 100.00 | - | 100.00 | - | - | - | - | -
FINANCIERA AYUDAMOS S.A. DE C.V., SOFOMER | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 11 | 12 | 1 | 16 | (6)
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. | SPAIN | IN LIQUIDATION | - | 60.00 | 60.00 | - | - | - | - | -
FORUM COMERCIALIZADORA DEL PERU SA | PERU | SERVICES | - | 100.00 | 100.00 | 2 | 1 | - | 1 | -
FORUM DISTRIBUIDORA DEL PERU SA | PERU | FINANCIAL SERVICES | - | 100.00 | 100.00 | 5 | 46 | 41 | 5 | -
FORUM DISTRIBUIDORA, S.A. | CHILE | FINANCIAL SERVICES | - | 100.00 | 100.00 | 39 | 373 | 336 | 32 | 5
FORUM SERVICIOS FINANCIEROS, S.A. | CHILE | FINANCIAL SERVICES | - | 100.00 | 100.00 | 244 | 3,014 | 2,785 | 161 | 68
FUTURO FAMILIAR, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 1 | 4 | 3 | 1 | -
G NETHERLANDS BV | NETHERLANDS | INVESTMENT COMPANY | - | 100.00 | 100.00 | 340 | 348 | 50 | 299 | (1)
GARANTI BANK SA | ROMANIA | BANKING | - | 100.00 | 100.00 | 269 | 2,216 | 1,930 | 258 | 28
GARANTI BILISIM TEKNOLOJISI VE TIC TAS | TURKEY | SERVICES | - | 100.00 | 100.00 | 13 | 17 | 4 | 12 | 2
GARANTI DIVERSIFIED PAYMENT RIGHTS FINANCE COMPANY | CAYMAN ISLANDS | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 3,316 | 3,321 | (3) | (3)
GARANTI EMEKLILIK VE HAYAT AS | TURKEY | INSURANCES SERVICES | - | 84.91 | 84.91 | 126 | 266 | 120 | 67 | 79
GARANTI FACTORING HIZMETLERI AS | TURKEY | FINANCIAL SERVICES | - | 81.84 | 81.84 | 19 | 399 | 376 | 29 | (6)
GARANTI FILO SIGORTA ARACILIK HIZMETLERI A.S. | TURKEY | INSURANCES SERVICES | - | 100.00 | 100.00 | - | 1 | - | - | -
GARANTI FILO YONETIM HIZMETLERI A.S. | TURKEY | OTHER HOLDING | - | 100.00 | 100.00 | 2 | 302 | 301 | - | 1
GARANTI FINANSAL KIRALAMA AS | TURKEY | FINANCIAL SERVICES | - | 100.00 | 100.00 | 149 | 995 | 846 | 133 | 16
GARANTI HIZMET YONETIMI AS | TURKEY | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 1 | - | 1 | -
GARANTI HOLDING BV | NETHERLANDS | INVESTMENT COMPANY | - | 100.00 | 100.00 | 228 | 340 | - | 340 | -
GARANTI KONUT FINANSMANI DANISMANLIK HIZMETLERI AS (GARANTI MORTGAGE) | TURKEY | SERVICES | - | 100.00 | 100.00 | - | 1 | - | - | -
GARANTI KULTUR AS | TURKEY | SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
GARANTI ODEME SISTEMLERI AS (GOSAS) | TURKEY | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 6 | 3 | 3 | 1
GARANTI PORTFOY YONETIMI AS | TURKEY | FINANCIAL SERVICES | - | 100.00 | 100.00 | 16 | 19 | 2 | 11 | 5
GARANTI YATIRIM MENKUL KIYMETLER AS | TURKEY | FINANCIAL SERVICES | - | 100.00 | 100.00 | 29 | 56 | 27 | 19 | 11
GARANTI YATIRIM ORTAKLIGI AS | TURKEY | INVESTMENT COMPANY | - | 3.61 | 95.49 | - | 6 | - | 6 | -
GARANTIBANK INTERNATIONAL NV | NETHERLANDS | BANKING | - | 100.00 | 100.00 | 578 | 4,278 | 3,703 | 560 | 14
GARRAF MEDITERRANIA, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 2 | 2 | 1 | 2 | -
GESCAT GESTIO DE SOL SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 8 | 20 | 8 | 14 | (2)
GESCAT LLEVANT, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 3 | 5 | 2 | 2 | 1
GESCAT LLOGUERS SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 3 | 4 | - | 3 | -
GESCAT POLSKA SP ZOO | POLAND | REAL ESTATE | 100.00 | - | 100.00 | 10 | 10 | - | 9 | 1
GESCAT SINEVA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 6 | 6 | - | 6 | -
GESCAT VIVENDES EN COMERCIALITZACIO SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 93 | 107 | 14 | 98 | (6)
GESTION DE PREVISION Y PENSIONES SA | SPAIN | PENSION FUNDS MANAGEMENT | 60.00 | - | 60.00 | 9 | 28 | 1 | 21 | 6
GESTION Y ADMINISTRACION DE RECIBOS, S.A. - GARSA | SPAIN | SERVICES | - | 100.00 | 100.00 | 1 | 2 | - | 2 | -
GRAN JORGE JUAN SA | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 409 | 966 | 558 | 395 | 14
(*) Information on foreign companies at exchange rate on December 31, 2018

F-260

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
GRUPO FINANCIERO BBVA BANCOMER SA DE CV | MEXICO | FINANCIAL SERVICES | 99.98 | - | 99.98 | 6,678 | 9,642 | - | 7,323 | 2,318
GUARANTY BUSINESS CREDIT CORPORATION | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 32 | 32 | - | 32 | -
GUARANTY PLUS HOLDING COMPANY | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | - | - | - | - | -
HABITATGES FINVER, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1 | 2 | - | 1 | -
HABITATGES JUVIPRO, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1 | 1 | - | 1 | -
HOLAMUNO AGENTE DE SEGUROS VINCULADO, S.L.U.(**) | SPAIN | INSURANCES SERVICES | - | 100.00 | 100.00 | - | 2 | 4 | (1) | (2)
HOLVI DEUTSCHLAND SERVICE GMBH | GERMANY | SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
HOLVI PAYMENT SERVICE OY | FINLAND | FINANCIAL SERVICES | - | 100.00 | 100.00 | 32 | 5 | 2 | 12 | (9)
HUMAN RESOURCES PROVIDER, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 404 | 404 | - | 398 | 6
HUMAN RESOURCES SUPPORT, INC | UNITED STATES | SERVICES | - | 100.00 | 100.00 | 399 | 399 | - | 393 | 6
INMESP DESARROLLADORA, S.A. DE C.V. | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 26 | 34 | 9 | 25 | -
INMUEBLES Y RECUPERACIONES CONTINENTAL SA | PERU | REAL ESTATE | - | 100.00 | 100.00 | 40 | 41 | 1 | 39 | 1
INPAU, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 25 | 25 | - | 25 | -
INVERAHORRO SL | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 101 | 103 | - | 105 | (3)
INVERPRO DESENVOLUPAMENT, S.L. | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 4 | 10 | 2 | 4 | 3
INVERSIONES ALDAMA, C.A. | VENEZUELA | IN LIQUIDATION | - | 100.00 | 100.00 | - | - | - | - | -
INVERSIONES BANPRO INTERNATIONAL INC NV | CURAÇAO | INVESTMENT COMPANY | 48.00 | - | 48.01 | 16 | 52 | 2 | 45 | 5
INVERSIONES BAPROBA CA | VENEZUELA | FINANCIAL SERVICES | 100 | - | 100.00 | 1 | 1 | - | - | 1
INVERSIONES DE INNOVACION EN SERVICIOS FINANCIEROS, S.L. | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 40 | 41 | 1 | 40 | -
INVERSIONES P.H.R.4, C.A. | VENEZUELA | INACTIVE | - | 60.46 | 60.46 | - | - | - | - | -
IRIDION SOLUCIONS IMMOBILIARIES SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 2 | 3 | 1 | 2 | -
JALE PROCAM, S.L. | SPAIN | IN LIQUIDATION | - | 50.00 | 50.00 | - | 3 | 56 | (49) | (4)
L'EIX IMMOBLES, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 2 | 9 | 7 | 2 | -
LIQUIDITY ADVISORS LP | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1,116 | 1,124 | 2 | 1,108 | 14
MADIVA SOLUCIONES, S.L. | SPAIN | SERVICES | - | 100.00 | 100.00 | 9 | 3 | 1 | 2 | 1
MICRO SPINAL LLC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
MISAPRE, S.A. DE C.V. | MEXICO | FINANCIAL SERVICES | - | 100.00 | 100.00 | 2 | 2 | - | 2 | -
MOMENTUM SOCIAL INVESTMENT HOLDING, S.L. | SPAIN | INVESTMENT COMPANY | - | 100.00 | 100.00 | 7 | 7 | - | 7 | -
MOTORACTIVE IFN SA | ROMANIA | FINANCIAL SERVICES | - | 100.00 | 100.00 | 37 | 185 | 158 | 23 | 3
MOTORACTIVE MULTISERVICES SRL | ROMANIA | SERVICES | - | 100.00 | 100.00 | - | 16 | 14 | 1 | 1
MULTIASISTENCIA OPERADORA S.A. DE C.V. | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | - | 1 | 1 | - | -
MULTIASISTENCIA SERVICIOS S.A. DE C.V. | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | - | 1 | - | - | -
MULTIASISTENCIA, S.A. DE C.V. | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | 22 | 35 | 13 | 15 | 6
NEWCO PERU SAC | PERU | INVESTMENT COMPANY | 100.00 | - | 100.00 | 124 | 1,005 | - | 829 | 176
NOIDIRI SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | - | - | - | - | -
NOVA TERRASSA 3, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 6 | 6 | - | 6 | -
OPCION VOLCAN, S.A. | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 19 | 23 | 4 | 20 | -
OPENPAY S.A.P.I DE C.V. | MEXICO | PAYMENT ENTITIES | - | 100.00 | 100.00 | 15 | 2 | 1 | 1 | -
OPENPAY SERVICIOS S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
OPERADORA DOS LAGOS S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 1 | 2 | 1 | 1 | -
(*) Information on foreign companies at exchange rate on December 31, 2018
(**) These companies have an equity loan from BILBAO VIZCAYA HOLDING, S.A.

F-261

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
OPPLUS OPERACIONES Y SERVICIOS SA | SPAIN | SERVICES | 100.00 | - | 100.00 | 1 | 41 | 11 | 24 | 6
OPPLUS SAC | PERU | IN LIQUIDATION | - | 100.00 | 100.00 | 1 | 1 | - | 1 | -
P.I. HOLDINGS NO. 3, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1 | 1 | - | 1 | -
PARCSUD PLANNER, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1 | 4 | 2 | 1 | -
PECRI INVERSION SA | SPAIN | OTHER INVESTMENT COMPANIES | 100.00 | - | 100.00 | 163 | 164 | - | 148 | 15
PENSIONES BBVA BANCOMER, S.A. DE C.V., GRUPO FINANCIERO BBVA BANCOMER | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | 185 | 4,629 | 4,449 | 140 | 41
PERSONAL DATA BANK SLU | SPAIN | SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
PHOENIX LOAN HOLDINGS, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 339 | 361 | 20 | 336 | 5
PI HOLDINGS NO. 1, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 83 | 83 | - | 83 | -
PORTICO PROCAM, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 26 | 26 | - | 25 | -
PROMOCIONES Y CONSTRUCCIONES CERBAT, S.L.U. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 8 | 8 | - | 8 | -
PROMOTORA DEL VALLES, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 39 | 101 | 65 | 49 | (13)
PROMOU CT 3AG DELTA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 1 | 10 | 9 | 1 | -
PROMOU CT EIX MACIA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 4 | 5 | - | 5 | -
PROMOU CT GEBIRA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 2 | 8 | 6 | 1 | 1
PROMOU CT OPENSEGRE, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 5 | 29 | 22 | 6 | 1
PROMOU CT VALLES, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 2 | 8 | 6 | 2 | -
PROMOU GLOBAL, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 18 | 45 | 28 | 7 | 11
PRONORTE UNO PROCAM, S.A. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | - | 5 | 4 | - | -
PROPEL VENTURE PARTNERS GLOBAL, S.L | SPAIN | FINANCIAL SERVICES | - | 99.50 | 99.50 | 31 | 64 | 20 | 33 | 10
PROPEL VENTURE PARTNERS US FUND I, L.P. | UNITED STATES | VENTURE CAPITAL | - | 100.00 | 100.00 | 71 | 71 | - | 70 | -
PRO-SALUD, C.A. | VENEZUELA | INACTIVE | - | 58.86 | 58.86 | - | - | - | - | -
PROVINCIAL DE VALORES CASA DE BOLSA CA | VENEZUELA | SECURITIES DEALER | - | 90.00 | 90.00 | 1 | 2 | 1 | - | 1
PROVINCIAL SDAD.ADMIN.DE ENTIDADES DE INV.COLECTIVA CA | VENEZUELA | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
PROV-INFI-ARRAHONA, S.L. | SPAIN | REAL ESTATE | - | 100.00 | 100.00 | 6 | 9 | 3 | 4 | 2
PROVIVIENDA ENTIDAD RECAUDADORA Y ADMIN.DE APORTES, S.A. | BOLIVIA | PENSION FUNDS MANAGEMENT | - | 100.00 | 100.00 | 2 | 8 | 7 | 2 | -
PUERTO CIUDAD LAS PALMAS, S.A. (**) | SPAIN | REAL ESTATE | - | 96.64 | 96.64 | - | 21 | 45 | (18) | (6)
QIPRO SOLUCIONES S.L. | SPAIN | SERVICES | - | 100.00 | 100.00 | 5 | 15 | 3 | 10 | 2
RALFI IFN SA | ROMANIA | FINANCIAL SERVICES | - | 100.00 | 100.00 | 39 | 126 | 109 | 15 | 2
RENTRUCKS ALQUILER Y SERVICIOS DE TRANSPORTE SA | SPAIN | INACTIVE | 100.00 | - | 100.00 | 1 | 1 | - | 2 | (1)
RESIDENCIAL CUMBRES DE SANTA FE, S.A. DE C.V. | MEXICO | REAL ESTATE | - | 100.00 | 100.00 | 3 | 3 | - | 2 | -
RPV COMPANY | CAYMAN ISLANDS | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 1,324 | 1,324 | - | -
RWHC, INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 742 | 739 | - | 725 | 14
SAGE OG I, INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | - | - | - | -
SATICEM GESTIO SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 4 | 4 | - | 4 | -
SATICEM HOLDING SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 5 | 6 | - | 5 | -
SATICEM IMMOBILIARIA SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 15 | 15 | - | 15 | -
SATICEM IMMOBLES EN ARRENDAMENT SL | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 2 | 2 | - | 2 | -
SEGUROS BBVA BANCOMER SA DE CV GRUPO FINANCIERO BBVA BANCOMER | MEXICO | INSURANCES SERVICES | - | 100.00 | 100.00 | 335 | 4,199 | 3,865 | 124 | 210
SEGUROS PROVINCIAL CA | VENEZUELA | INSURANCES SERVICES | - | 100.00 | 100.00 | 7 | 7 | 7 | - | -
(*) Information on foreign companies at exchange rate on December 31, 2018
(**) These companies have an equity loan from CATALUNYA CAIXA INMOBILIARIA, S.A

F-262

Additional Information on Consolidated Subsidiaries and structured entities composing the BBVA Group (Continued)

|  |  | % Legal share of participation | Millions of Euros (*)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
SERVICIOS CORPORATIVOS BANCOMER, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 5 | 6 | 2 | 5 | -
SERVICIOS CORPORATIVOS DE SEGUROS, S.A. DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 3 | 17 | 14 | 2 | -
SERVICIOS EXTERNOS DE APOYO EMPRESARIAL, S.A DE C.V. | MEXICO | SERVICES | - | 100.00 | 100.00 | 10 | 26 | 15 | 8 | 2
SERVICIOS TECNOLOGICOS SINGULARES, S.A. | SPAIN | SERVICES | - | 100.00 | 100.00 | - | 1 | 1 | - | -
SIMPLE FINANCE TECHNOLOGY CORP. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 50 | 59 | 9 | 80 | (30)
SOCIEDAD DE ESTUDIOS Y ANALISIS FINANCIERO SA | SPAIN | SERVICES | 100.00 | - | 100.00 | 79 | 83 | 8 | 81 | (5)
SOCIEDAD GESTORA DEL FONDO PUBLICO DE REGULACION DEL MERCADO HIPOTECARIO SA | SPAIN | PAYMENT INSTITUIONS | 77.20 | - | 77.20 | - | - | - | - | -
SPORT CLUB 18 SA (**) | SPAIN | INVESTMENT COMPANY | 100.00 | - | 100.00 | 10 | 13 | 1 | 13 | (1)
TEXAS LOAN SERVICES LP | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1,129 | 1,130 | - | 1,112 | 17
TMF HOLDING INC. | UNITED STATES | INVESTMENT COMPANY | - | 100.00 | 100.00 | 15 | 22 | 8 | 14 | 1
TRIFOI REAL ESTATE SRL | ROMANIA | REAL ESTATE | - | 100.00 | 100.00 | 1 | 1 | - | 1 | -
TUCSON LOAN HOLDINGS, INC. | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 33 | 35 | - | 34 | 1
TURKIYE GARANTI BANKASI AS | TURKEY | BANKING | 49.85 | - | 49.85 | 5,509 | 59,390 | 51,556 | 6,670 | 1,163
UNIVERSALIDAD TIPS PESOS E-9 | COLOMBIA | FINANCIAL SERVICES | - | 100.00 | 100.00 | - | 49 | 20 | 27 | 2
UNNIM SOCIEDAD PARA LA GESTION DE ACTIVOS INMOBILIARIOS SA | SPAIN | REAL ESTATE | 100.00 | - | 100.00 | 359 | 1,038 | 496 | 500 | 42
UPTURN FINANCIAL INC | UNITED STATES | FINANCIAL SERVICES | - | 100.00 | 100.00 | 1 | 1 | - | 2 | (1)
URBANIZADORA SANT LLORENC SA | SPAIN | INACTIVE | 60.60 | - | 60.60 | - | - | - | - | -
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | SPAIN | SERVICES | - | 51.00 | 51.00 | - | 3 | 2 | - | -
(*) Information on foreign companies at exchange rate on December 31, 2018
(**) This company has an equity loan from BANCO BILBAO VIZCAYA ARGENTARIA, S.A.

F-263

APPENDIX II Additional information on investments joint ventures and associates in the BBVA Group

Acquisitions or increases of interest ownership in consolidated subsidiaries

|  |  | % Legal share of participation | Millions of Euros (**)
|  |  | Affiliate Entity Data
Company | Location | Activity | Direct | Indirect | Total | Net Carrying Amount | Assets 31.12.18 | Liabilities 31.12.18 | Equity 31.12.18 | Profit (Loss) 31.12.18
ASSOCIATES |  |  |  |  |  |  |  |  |  |
ADQUIRA ESPAÑA, S.A. | SPAIN | COMMERCIAL | - | 40.00 | 40.00 | 3 | 18 | 11 | 7 | 1
ATOM BANK PLC | UNITED KINGDOM | BANKING | 39.06 | - | 39.06 | 138 | 3,078 | 2,796 | 330 | (48)
AUREA, S.A. (CUBA) | CUBA | REAL ESTATE | - | 49.00 | 49.00 | 5 | 10 | 1 | 9 | 1
BANK OF HANGZHOU CONSUMER FINANCE CO LTD | CHINA | BANKING | 30.00 | - | 30.00 | 18 | 753 | 693 | 58 | 3
CANCUN SUN & GOLF COUNTRY CLUB, S.A.P.I. DE C.V. | MEXICO | REAL ESTATE | - | 33.33 | 33.33 | 27 | 75 | 22 | 52 | 1
COMPAÑIA ESPAÑOLA DE FINANCIACION DEL DESARROLLO SA | SPAIN | PUBLIC INSTITUTIONS | 16.67 | - | 16.67 | 22 | 138 | 6 | 124 | 9
COMPAÑIA PERUANA DE MEDIOS DE PAGO SAC (VISANET PERU) | PERU | ELECTRONIC MONEY ENTITIES | - | 20.96 | 20.96 | 2 | 49 | 37 | 4 | 8
DIVARIAN PROPIEDAD, S.A.U. | SPAIN | REAL ESTATE | - | - | 20.00 | 591 | 3,014 | 57 | 2,936 | 20
FIDEICOMISO F/00185 FIMPE - FIDEICOMISO F/00185 PARA EXTENDER A LA SOCIEDAD LOS BENEFICIOS DEL ACCESO A LA INFRAESTRUCTURA DE LOS MEDIOS DE PAGO ELECTRONICOS | MEXICO | FINANCIAL SERVICES | - | 28.50 | 28.50 | 3 | 12 | - | 12 | -
METROVACESA SA | SPAIN | REAL ESTATE | 9.44 | 11.41 | 20.85 | 508 | 2,577 | 184 | 2,402 | (9)
REDSYS SERVICIOS DE PROCESAMIENTO SL | SPAIN | FINANCIAL SERVICES | 20.00 | - | 20.00 | 12 | 121 | 60 | 51 | 11
ROMBO COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | - | 40.00 | 40.00 | 12 | 209 | 179 | 31 | (2)
SERVICIOS ELECTRONICOS GLOBALES SA DE CV | MEXICO | SERVICES | - | 46.14 | 46.14 | 9 | 18 | - | 17 | 1
SERVIRED SOCIEDAD ESPAÑOLA DE MEDIOS DE PAGO SA | SPAIN | FINANCIAL SERVICES | 28.72 | - | 28.72 | 9 | 38 | 8 | 27 | 3
SOLARISBANK AG | GERMANY | BANKING | - | 18.76 | 18.76 | 37 | 212 | 158 | 56 | (2)
TELEFONICA FACTORING ESPAÑA SA | SPAIN | FINANCIAL ASSETS | 30.00 | - | 30.00 | 4 | 59 | 46 | 7 | 6
TF PERU SAC | PERU | FINANCIAL ASSETS | - | 24.30 | 24.30 | 1 | 5 | 1 | 3 | 2
JOINT VENTURES (*) |  |  |  |  |  |  |  |  |  |
ADQUIRA MEXICO SA DE CV | MEXICO | COMMERCIAL | - | 50.00 | 50.00 | 2 | 5 | 2 | 3 | -
ALTURA MARKETS SOCIEDAD DE VALORES SA | SPAIN | SECURITIES DEALER | 50.00 | - | 50.00 | 69 | 2,711 | 2,574 | 127 | 10
COMPAÑIA MEXICANA DE PROCESAMIENTO SA DE CV | MEXICO | SERVICES | - | 50.00 | 50.00 | 7 | 15 | - | 14 | 1
CORPORACION IBV PARTICIPACIONES EMPRESARIALES, S.A. | SPAIN | INVESTMENT COMPANY | - | 50.00 | 50.00 | 29 | 63 | 5 | 58 | -
DESARROLLOS METROPOLITANOS DEL SUR, S.L. | SPAIN | REAL ESTATE | - | 50.00 | 50.00 | 13 | 77 | 52 | 25 | 1
FIDEICOMISO F/402770-2 ALAMAR | MEXICO | REAL ESTATE | - | 42.40 | 42.40 | 7 | 17 | - | 17 | -
FIDEICOMISO 1729 INVEX ENAJENACION DE CARTERA | MEXICO | REAL ESTATE | - | 32.25 | 32.25 | 55 | 171 | - | 171 | -
INVERSIONES PLATCO CA | VENEZUELA | FINANCIAL SERVICES | - | 50.00 | 50.00 | 1 | 2 | - | 4 | (2)
PROMOCIONS TERRES CAVADES, S.A. | SPAIN | REAL ESTATE | - | 39.11 | 39.11 | 4 | 15 | - | 15 | -
PSA FINANCE ARGENTINA COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | - | 50.00 | 50.00 | 10 | 96 | 76 | 22 | (2)
RCI COLOMBIA SA COMPAÑIA DE FINANCIAMIENTO | COLOMBIA | FINANCIAL SERVICES | - | 49.00 | 49.00 | 32 | 379 | 314 | 61 | 5
REAL ESTATE DEAL II SA | SPAIN | IN LIQUIDATION | 20.06 | - | 20.06 | 4 | 20 | - | 18 | 2
VITAMEDICA ADMINISTRADORA, S.A. DE C.V | MEXICO | SERVICES | - | 51.00 | 51.00 | 5 | 16 | 8 | 6 | 2
VOLKSWAGEN FINANCIAL SERVICES COMPAÑIA FINANCIERA SA | ARGENTINA | BANKING | - | 51.00 | 51.00 | 15 | 195 | 166 | 34 | (5)
(*) Joint ventures incorporated by the equity method.
(**) In foreign companies the exchange rate of December 31, 2018 is applied.

F-264

APPENDIX III Changes and notification of participations in the BBVA Group in 2018

Acquisitions or Increases of Interest Ownership in Consolidated Subsidiaries

|  |  | Millions of Euros | % of Voting Rights |  |
Company | Type of Transaction | Activity | Price Paid in the Transactions + Expenses directly attributable to the Transactions | Fair Value of Equity Instruments issued for the Transactions | % Participation (net) Acquired in the Year | Total Voting Rights Controlled after the Transactions | Effective Date for the Transaction (or Notification Date) | Category
ENTIDAD DE PROMOCION DE NEGOCIOS SA | ACQUISITION | RENT HOLDING | - | - | 0.02% | 99.88% | 10-May-18 | SUBSIDIARY
BBVA BROKER SA | ACQUISITION | INSURANCES SERVICES | - | - | 4.99% | 99.99% | 01-Oct-18 | SUBSIDIARY
BBVA HOLDING CHILE SA | FOUNDING AND SPLIT | INVESTMENT COMPANY | - | - | 100.00% | 100.00% | 23-Jan-18 | SUBSIDIARY
HOLVI DEUTSCHLAND SERVICE GMBH | FOUNDING | SERVICES | - | - | 100.00% | 100.00% | 01-May-18 | SUBSIDIARY
PERSONAL DATA BANK SLU | FOUNDING | SERVICES | - | - | 100.00% | 100.00% | 01-Jun-18 | SUBSIDIARY
DOMICILIA TREBOLBLUE SA | FOUNDING | HOLDING ENT. | - | - | 100.00% | 100.00% | 03-Jul-18 | SUBSIDIARY
ONUTPEN 2018 SL | FOUNDING | INVESTMENT COMPANY | - | - | 100.00% | 100.00% | 21-Aug-18 | SUBSIDIARY
GARANTI YATIRIM ORTAKLIGI AS | CAPITAL INCREASE | INVESTMENT COMPANY | - | - | 0.31% | 95.49% | 01-Dec-18 | SUBSIDIARY

### Changes and notification of participations in the BBVA Group in 2018 (continued)

### Disposals or Reduction of Interest Ownership in Consolidated Subsidiaries

|  |  | Millions of Euros | % of Voting Rights |  |
Company | Type of Transaction | Activity | Profit (Loss) in the Transaction | Changes in the Equity due to the transaction | % Participation Sold in the Year | Total Voting Rights Controlled after the Disposal | Effective Date for the Transaction (or Notification Date) | Category
BANCO BILBAO VIZCAYA ARGENTARIA (PORTUGAL) SA | MERGER | BANKING | - | - | 100.00% | - | 1-Oct-18 | SUBSIDIARY
PROMOCION EMPRESARIAL XX SA | MERGER | INVESTMENT COMPANY | - | - | 100.00% | - | 17-Dec-18 | SUBSIDIARY
BBVA RENTING, S.A. | MERGER | FINANCIAL SERVICES | - | - | 100.00% | - | 2-Jul-18 | SUBSIDIARY
BANCO BILBAO VIZCAYA ARGENTARIA CHILE, S.A. | DISPOSAL | BANKING | - | - | 68.19% | - | 6-Jul-18 | SUBSIDIARY
BBVA CORREDORES DE BOLSA LIMITADA | DISPOSAL | SECURITIES DEALER | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BBVA SOCIEDAD DE LEASING INMOBILIARIO, S.A. | DISPOSAL | FINANCIAL SERVICES | - | - | 97.49% | - | 6-Jul-18 | SUBSIDIARY
BBVA ASESORIAS FINANCIERAS, S.A. | DISPOSAL | FINANCIAL SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BBVA ASSET MANAGEMENT ADMINISTRADORA GENERAL DE FONDOS S.A. | DISPOSAL | FINANCIAL SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BBVA FACTORING LIMITADA (CHILE) | DISPOSAL | FINANCIAL SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BBVA CORREDORA TECNICA DE SEGUROS LIMITADA | DISPOSAL | INSURANCES SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BANCOMER FINANCIAL SERVICES INC. | MERGER | FINANCIAL SERVICES | - | - | 100.00% | - | 6-Dec-18 | SUBSIDIARY
APLICA TECNOLOGIA AVANZADA OPERADORA, S.A. DE C.V. | DISPOSAL | SERVICES | (8) | - | 100.00% | - | 18-Jul-18 | SUBSIDIARY
APLICA TECNOLOGIA AVANZADA SERVICIOS, S.A. DE C.V. | DISPOSAL | SERVICES | - | - | 100.00% | - | 18-Jul-18 | SUBSIDIARY
BBVA SUBORDINATED CAPITAL SOCIEDAD ANONIMA | LIQUIDATION | FINANCIAL SERVICES | - | - | 100.00% | - | 18-Dec-18 | SUBSIDIARY
BBVA SENIOR FINANCE SAU | LIQUIDATION | FINANCIAL SERVICES | - | - | 100.00% | - | 18-Dec-18 | SUBSIDIARY
BBVA INMOBILIARIA E INVERSIONES, S.A. | DISPOSAL | REAL ESTATE | 3 | - | 68.11% | - | 6-Jul-18 | SUBSIDIARY
HOMEOWNERS LOAN CORPORATION | LIQUIDATION | FINANCIAL SERVICES | - | - | 100.00% | - | 1-Dec-18 | SUBSIDIARY
BBVA RENTAS E INVERSIONES LIMITADA | MERGER | INVESTMENT COMPANY | - | - | 100.00% | - | 30-Apr-18 | SUBSIDIARY
BBVA SERVICIOS CORPORATIVOS LIMITADA | DISPOSAL | SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
DIVARIAN DESARROLLOS INMOBILIARIOS, S.L.U | DISPOSAL | REAL ESTATE | - | - | 100.00% | - | 10-Oct-18 | SUBSIDIARY
BBVA INVERSIONES CHILE, S.A. | DISPOSAL | INVESTMENT COMPANY | 863 | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
BBVA SEGUROS DE VIDA, S.A. | DISPOSAL | SERVICES | - | - | 100.00% | - | 6-Jul-18 | SUBSIDIARY
GUARANTY PLUS PROPERTIES, INC-1 | MERGER | FINANCIAL SERVICES | - | - | 100.00% | - | 31-Dec-18 | SUBSIDIARY
GUARANTY PLUS PROPERTIES LLC-2 | LIQUIDATION | FINANCIAL SERVICES | (1) | - | 100.00% | - | 1-Aug-18 | SUBSIDIARY
4D INTERNET SOLUTIONS, INC | LIQUIDATION | FINANCIAL SERVICES | - | - | 100.00% | - | 18-Dec-18 | SUBSIDIARY

F-265

### Changes and notification of participations in the BBVA Group in 2018 (continued)

### Disposals or Reduction of Interest Ownership in Consolidated Subsidiaries

|  |  | Millions of Euros | % of Voting Rights |  |
Company | Type of Transaction | Activity | Profit (Loss) in the Transaction | Changes in the Equity due to the transaction | % Participation Sold in the Year | Total Voting Rights Controlled after the Disposal | Effective Date for the Transaction (or Notification Date) | Category
PARTICIPACIONES ARENAL, S.L. | LIQUIDATION | INVESTMENT COMPANY | - | - | 100.00% | 0.00% | 7-Aug-18 | SUBSIDIARY
CAIXASABADELL TINELIA, S.L. | MERGER | INVESTMENT COMPANY | - | - | 100.00% | 0.00% | 18-Jul-18 | SUBSIDIARY
HABITATGES INVERVIC, S.L. | LIQUIDATION | REAL ESTATE | - | - | 35.00% | 0.00% | 22-Feb-18 | SUBSIDIARY
PROCAMVASA, S.A. | LIQUIDATION | REAL ESTATE | - | - | 51.00% | 0.00% | 4-May-18 | SUBSIDIARY
CATALUNYACAIXA ASSEGURANCES GENERALS, S.A. | MERGER | INSURANCES SERVICES | - | - | 100.00% | 0.00% | 23-Jan-18 | SUBSIDIARY
VOLJA LUX, SARL | LIQUIDATION | INVESTMENT COMPANY | - | - | 71.78% | 0.00% | 29-Jan-19 | SUBSIDIARY
CX PROPIETAT, FII | LIQUIDATION | REAL ESTATE INVESTMENT | - | - | 94.96% | 0.00% | 30-Jun-18 | SUBSIDIARY
VOLJA PLUS SL | LIQUIDATION | INVESTMENT COMPANY | - | - | 75.40% | 0.00% | 1-Oct-18 | SUBSIDIARY
UNITARIA GESTION DE PATRIMONIOS INMOBILIARIOS SA | LIQUIDATION | REAL ESTATE | - | - | 100.00% | 0.00% | 20-Dec-18 | SUBSIDIARY
SCALDIS FINANCE, S.A. | LIQUIDATION | INVESTMENT COMPANY | - | - | 100.00% | 0.00% | 1-Apr-18 | SUBSIDIARY
ONUTPEN 2018 SL | DISPOSAL | INVESTMENT COMPANY | - | - | 100.00% | 0.00% | 31-Oct-18 | SUBSIDIARY
DOMICILIA TREBOLBLUE SA | MERGER | OTHER HOLDING | - | - | 100.00% | 0.00% | 19-Dec-18 | SUBSIDIARY

F-266

### Changes and notification of participations in the BBVA Group in 2018 (continued)

### Business Combinations and Other Acquisitions or Increases of Interest Ownership in Associates and Joint-Ventures Accounted for Under the Equity Method

|  |  | Millions of Euros | % of Voting Rights |  |
Company | Type of Transaction | Activity | Price Paid in the Transactions + Expenses Directly Attributable to the Transactions | Fair Value of Equity Instruments Issued for the Transactions | % Participation (Net) Acquired in the Year | Total Voting Rights Controlled After the Transactions | Effective Date for the Transaction (or Notification Date) | Category
LEVENT YAPILANDIRMA YONETIMI AS | FOUNDING | SERVICES | - | - | 22.13% | 22.13% | 14-Dec-18 | ASSOCIATED
ATOM BANK PLC | INCREASE TO WHICH OTHER MEMERS DO NOT ASSIST | BANKING | 99 | - | 9.16% | 39.06% | 01-May-18 | ASSOCIATED
SR2 SOCIEDAD DE MEDIOS DE PAGO S.A. | FOUNDING AND SPLIT | PAYMENT ENTITIES | 1 | - | 28.72% | 28.72% | 01-Jan-18 | ASSOCIATED
SOCIEDADE ALTITUDE SOFTWARE-SISTEMA E SERCIÇOS SA | FOUNDING | SERVICES | - | - | 31.55% | 31.55% | 02-Apr-18 | JOINT VENTURE
SISTEMAS DE TARJETAS Y MEDIOS DE PAGO SA | FOUNDING | PAYMENT ENTITIES | - | - | 18.11% | 18.11% | 30-Apr-18 | ASSOCIATED
SOLARISBANK AG | ACQUISITION | BANKING | 38 | - | 18.76% | 18.76% | 01-Oct-18 | ASSOCIATED
ANTHEMIS BBVA VENTURE PARTNERSHIP LLP | FOUNDING | INVESTMENT COMPANY | - | - | 75.00% | 75.00% | 01-Dec-18 | JOINT VENTURE
COMPAÑIA PERUANA DE MEDIOS DE PAGO SAC (VISANET PERU) | CAPITAL INCREASE | ELECTRONIC MONEY ENTITIES | - | - | 0.68% | 20.96% | 01-Aug-18 | ASSOCIATED

### Changes and notification of participations in the BBVA Group in 2018 (continued)

### Disposal or Reduction of Interest Ownership in Associates and Joint-Ventures Companies Accounted for Under the Equity Method

|  |  | Millions of Euros | % of Voting Rights |  |
Company | Type of Transaction | Activity | Profit (Loss) in the Transaction | % Participation Sold in the Year | Total Voting Rights Controlled after the Disposal | Effective Date for the Transaction (or Notification Date) | Category
FIDEICOMISO F/404180-2 BBVA BANCOMER SERVICIOS GOLF ZIBATA | DISPOSAL | REAL ESTATE | - | 30.00% | - | 15-Feb-18 | JOINT VENTURE
SISTARBANC S.R.L. | DISPOSAL | FINANCIAL SERVICES | - | 26.66% | - | 13-Sep-18 | ASSOCIATE
FIDEICOMISO F 403853- 5 BBVA BANCOMER SERVICIOS ZIBATA | DISPOSAL | REAL ESTATE | 22 | 30.00% | - | 15-Feb-18 | JOINT VENTURE
OPERADORA ZIBATA S. DE R.L. DE C.V. | DISPOSAL | SERVICES | - | 30.00% | - | 15-Feb-18 | ASSOCIATE
FERROMOVIL 3000, S.L. | DISPOSAL | SERVICES | 12 | 20.00% | - | 29-May-18 | JOINT VENTURE
FERROMOVIL 9000, S.L. | DISPOSAL | SERVICES | 8 | 20.00% | - | 29-May-18 | JOINT VENTURE
DIVARIAN PROPIEDAD, S.A.U. | DISPOSAL | REAL ESTATE | - | 80.00% | 20.00% | 10-Oct-18 | ASSOCIATE
TELEFONICA FACTORING CHILE, S.A. | DISPOSAL | FINANCIAL SERVICES | - | 24.30% | - | 06-Jul-18 | ASSOCIATE
ALTITUDE SOFTWARE SGPS, S.A. | MERGER | SERVICES | - | 31.55% | - | 01-Apr-18 | JOINT VENTURE
METROVACESA SA | DISPOSAL | REAL ESTATE | 2 | 7.66% | 20.85% | 06-Feb-18 | ASSOCIATE
TESTA RESIDENCIAL SOCIMI SAU | DISPOSAL | REAL ESTATE INVESTMENT TRUST | 28 | 26.87% | - | 21-Dec-18 | ASSOCIATE
PARQUE RIO RESIDENCIAL, S.L. | DISPOSAL | REAL ESTATE | 8 | 50.00% | - | 27-Apr-18 | JOINT VENTURE
AVANTESPACIA INMOBILIARIA, S.L. | DISPOSAL | REAL ESTATE | 3 | 30.01% | - | 28-Dec-18 | JOINT VENTURE
BATEC ORTO DISTRIBUCION S.L. | LIQUIDATION | COMMERCIAL | - | 100.00% | - | 07-Jun-18 | JOINT VENTURE
HABITATGES CIMIPRO, S.L. | LIQUIDATION | REAL ESTATE | - | 50.00% | - | 12-Mar-18 | JOINT VENTURE
SOLARVOLAR, S.L. | LIQUIDATION | REAL ESTATE | - | 45.00% | - | 08-Feb-18 | JOINT VENTURE
PROMOCIONES MIES DEL VALLE, S.L. | DILUTION EFFECT | REAL ESTATE | - | 51.00% | - | 01-Oct-18 | JOINT VENTURE
TEIN CENTRO TECNOLOGICO DEL PLASTICO, S.L. | DILUTION EFFECT | SERVICES | - | 40.00% | - | 01-Sep-18 | JOINT VENTURE
HABITATGES SOCIALS DE CALAF S.L | DISPOSAL | REAL ESTATE | - | 40.00% | - | 04-Apr-18 | JOINT VENTURE
SR2 SOCIEDAD DE MEDIOS DE PAGO S.A. | MERGER | PAYMENT ENTITIES | - | 28.72% | - | 01-Apr-18 | ASSOCIATE

F-267

APPENDIX IV Fully consolidated subsidiaries with more than 10% owned by non-Group shareholders as of December 31, 2018

|  | % of Voting Rights Controlled by the Bank
Company | Activity | Direct | Indirect | Total
BBVA BANCO CONTINENTAL SA | BANKING | - | 46.12 | 46.12
BANCO PROVINCIAL SA - BANCO UNIVERSAL | BANKING | 1.46 | 53.75 | 55.21
INVERSIONES BANPRO INTERNATIONAL INC NV | INVESTMENT COMPANY | 48.00 | - | 48.00
PRO-SALUD, C.A. | NO ACTIVITY | - | 58.86 | 58.86
INVERSIONES P.H.R.4, C.A. | NO ACTIVITY | - | 60.46 | 60.46
COMERCIALIZADORA CORPORATIVA SAC | FINANCIAL SERVICES | - | 50.00 | 50.00
DISTRITO CASTELLANA NORTE, S.A. | REAL ESTATE | - | 75.54 | 75.54
GESTION DE PREVISION Y PENSIONES SA | PENSION FUND MANAGEMENT | 60.00 | - | 60.00
URBANIZADORA SANT LLORENC SA | NO ACTIVITY | 60.60 | - | 60.60
F/403035-9 BBVA HORIZONTES RESIDENCIAL | REAL ESTATE | - | 65.00 | 65.00
F/253863 EL DESEO RESIDENCIAL | REAL ESTATE | - | 65.00 | 65.00
DATA ARCHITECTURE AND TECHNOLOGY S.L. | SERVICES | - | 51.00 | 51.00
FIDEICOMISO LOTE 6.1 ZARAGOZA | REAL ESTATE | - | 59.99 | 59.99
F/11395 FIDEICOMISO IRREVOCABLE DE ADMINISTRACION CON DERECHO DE REVERSION | REAL ESTATE | - | 42.40 | 42.40
VERIDAS DIGITAL AUTHENTICATION SOLUTIONS S.L. | SERVICES | - | 51.00 | 51.00
GARANTI EMEKLILIK VE HAYAT AS | INSURANCES | - | 84.91 | 84.91
FOMENTO Y DESARROLLO DE CONJUNTOS RESIDENCIALES S.L. | IN LIQUIDATION | - | 60.00 | 60.00
BBVA INFORMATION TECHNOLOGY ESPAÑA SL | SERVICES | 76.00 | - | 76.00
JALE PROCAM, S.L. | IN LIQUIDATION | - | 50.00 | 50.00

F-268

APPENDIX V BBVA Group’s structured entities. Securitization funds

|  |  | Millions of Euros
Securitization Fund (consolidated) | Company | Origination Date | Total Securitized Exposures at the Origination Date | Total Securitized Exposures as of December 31, 2018 (*)
AYT CAIXA SABADELL HIPOTECARIO I, FTA | BBVA SA | 07/2008 | 300 | 80
AYT HIPOTECARIO MIXTO IV, FTA | BBVA SA | 06/2005 | 100 | 18
AYT HIPOTECARIO MIXTO, FTA | BBVA SA | 03/2004 | 100 | 13
BBVA CONSUMER AUTO 2018-1 | BBVA SA | 06/2018 | 800 | 746
BBVA CONSUMO 6 FTA | BBVA SA | 10/2014 | 299 | 54
BBVA CONSUMO 7 FTA | BBVA SA | 07/2015 | 1,450 | 572
BBVA CONSUMO 8 FT | BBVA SA | 07/2016 | 700 | 502
BBVA CONSUMO 9 FT | BBVA SA | 03/2017 | 1,375 | 1,229
BBVA EMPRESAS 4 FTA | BBVA SA | 07/2010 | 1,700 | 37
BBVA LEASING 1 FTA | BBVA SA | 06/2007 | 2,500 | 43
BBVA PYME 10 FT | BBVA SA | 12/2015 | 780 | 201
BBVA RMBS 1 FTA | BBVA SA | 02/2007 | 2,500 | 1,000
BBVA RMBS 10 FTA | BBVA SA | 06/2011 | 1,600 | 1,150
BBVA RMBS 11 FTA | BBVA SA | 06/2012 | 1,400 | 1,006
BBVA RMBS 12 FTA | BBVA SA | 12/2013 | 4,350 | 3,197
BBVA RMBS 13 FTA | BBVA SA | 07/2014 | 4,100 | 3,138
BBVA RMBS 14 FTA | BBVA SA | 11/2014 | 700 | 488
BBVA RMBS 15 FTA | BBVA SA | 05/2015 | 4,000 | 3,185
BBVA RMBS 16 FT | BBVA SA | 05/2016 | 1,600 | 1,345
BBVA RMBS 17 FT | BBVA SA | 11/2016 | 1,800 | 1,576
BBVA RMBS 18 FT | BBVA SA | 11/2017 | 1,800 | 1,686
BBVA RMBS 2 FTA | BBVA SA | 03/2007 | 5,000 | 1,858
BBVA RMBS 3 FTA | BBVA SA | 07/2007 | 3,000 | 1,414
BBVA RMBS 5 FTA | BBVA SA | 05/2008 | 5,000 | 2,350
BBVA RMBS 9 FTA | BBVA SA | 04/2010 | 1,295 | 844
BBVA VELA SME 2017-1 | BBVA SA | 06/2017 | 3,000 | 1,321
BBVA VELA SME 2018 | BBVA SA | 03/2018 | 1,950 | 1,387
BBVA-5 FTPYME FTA | BBVA SA | 11/2006 | 1,900 | 11
BBVA-6 FTPYME FTA | BBVA SA | 06/2007 | 1,500 | 13
FTA TDA-22 MIXTO | BBVA SA | 12/2004 | 112 | 24
FTA TDA-27 | BBVA SA | 12/2006 | 275 | 87
FTA TDA-28 | BBVA SA | 07/2007 | 250 | 88
GAT ICO FTVPO 1, F.T.H | BBVA SA | jun.-09 | 358 | 84
GC FTGENCAT TARRAGONA 1 FTA | BBVA SA | 06/2008 | 283 | 23
HIPOCAT 10 FTA | BBVA SA | 07/2006 | 1,500 | 291
HIPOCAT 11 FTA | BBVA SA | 03/2007 | 1,600 | 299
HIPOCAT 7 FTA | BBVA SA | 06/2004 | 1,400 | 221
HIPOCAT 8 FTA | BBVA SA | 05/2005 | 1,500 | 261
HIPOCAT 9 FTA | BBVA SA | 11/2005 | 1,000 | 201
TDA 19 FTA | BBVA SA | 03/2004 | 200 | 25
TDA 20-MIXTO, FTA | BBVA SA | 06/2004 | 100 | 15
TDA 23 FTA | BBVA SA | 03/2005 | 300 | 53
TDA TARRAGONA 1 FTA | BBVA SA | 12/2007 | 397 | 116
VELA CORPORATE 2018-1 | BBVA SA | 12/2018 | 1,000 | 916

F-269

|  |  | Millions of Euros
Securitization Fund (not consolidated) | Company | Origination Date | Total Securitized Exposures at the Origination Date | Total Securitized Exposures as of December 31, 2018 (*)
FTA TDA-18 MIXTO | BBVA, S.A. | nov.-03 | 91 | 12
HIPOCAT 6 FTA | BBVA, S.A. | jul.-03 | 850 | 108
(*) Solvency scope.

F-270

APPENDIX VI Details of the outstanding subordinated debt and preferred securities issued by the Bank or entities in the Group consolidated as of December 31, 2018, 2017 and 201 6

Outstanding as of December 31, 2018, 2017, and 2016 of subordinated issues

|  | Millions of Euros |  |
Issuer Entity and Issued Date(*) | Currency | December 2018 | December 2017 | December 2016 | Prevailing Interest Rate as of December 31, 2018 | Maturity Date
Issues in Euros |  |  |  |  |  |
BBVA, S.A |  |  |  |  |  |
February-07 | EUR | - | 255 | 255 | 0.47% | 16-Feb-22
March-08 | EUR | 125 | 125 | 125 | 6.03% | 3-Mar-33
July-08 | EUR | 100 | 100 | 100 | 6.20% | 4-Jul-23
February-14 | EUR | 1,500 | 1,500 | 1,500 | 7.00% | Perpetual
April-14 | EUR | 1,494 | 1,494 | - | 3.50% | 11-Apr-24
February-15 | EUR | 1,500 | 1,500 | 1,500 | 6.75% | Perpetual
April-16 | EUR | 1,000 | 1,000 | 1,000 | 8.88% | Perpetual
February-17 | EUR | 1,000 | 997 | - | 3.50% | 10-Feb-27
February-17 | EUR | 165 | 165 | - | 4.00% | 24-Feb-32
May-17 | EUR | 150 | 150 | - | 2.54% | 24-May-27
May-17 | EUR | 500 | 500 | - | 5.88% | Perpetual
September-18 | EUR | 990 | - | - | 5.87% | Perpetual
Various | EUR | 384 | 386 | 277 |  |
Subtotal | EUR | 8,906 | 8,171 | 4,756 |  |
BBVA SUBORDINATED CAPITAL, S.A.U. (*) |  |  |  |  |  |
October-05 | EUR | - | 99 | 99 | 0.47% | 13-Oct-20
April-07 | EUR | - | - | 68 | 0.57% | 4-Apr-22
May-08 | EUR | - | - | 50 | 3.00% | 19-May-23
July-08 | EUR | - | 20 | 20 | 6.11% | 22-Jul-18
April-14 | EUR | - | - | 1,500 | 3.50% | 11-Apr-24
Subtotal | EUR | - | 119 | 1,737 |  |
Others | EUR | - | - | - |  |
Total issued in Euros | EUR | 8,906 | 8,290 | 6,493 |  |
(*) The issuances of BBVA Subordinated Capital, S.A.U. are jointly, severally and unconditionally guaranteed by the Bank.

F-271

Outstanding as of December 31, 2018, 2017, and 2016 of subordinated issues (continued)

|  | Millions of Euros |  |
Issuer Entity and Issued Date | Currency | December 2018 | December 2017 | December 2016 | Prevailing Interest Rate as of December 31, 2018 | Maturity Date
Issues in foreign currency |  |  |  |  |  |
BBVA, S.A |  |  |  |  |  |
May-13 | USD | - | 1,251 | 1,423 | 9.00% | Perpetual
March-17 | USD | 105 | 100 | - | 5.70% | 31-Mar-32
November-17 | USD | 873 | 834 | - | 6.13% | Perpetual
May-18 | USD | 260 | - | - | 5.25% | 29-May-33
Subtotal | USD | 1,238 | 2,185 | 1,423 |  |
May-17 | CHF | 18 | 17 | - | 1.60% | 24-May-27
Subtotal | CHF | 18 | 17 | - |  |
BBVA GLOBAL FINANCE, LTD. (*) |  |  |  |  |  |
December-95 | USD | 169 | 162 | 189 | 7.00% | 1-Dec-25
Subtotal | USD | 169 | 162 | 189 |  |
BANCO BILBAO VIZCAYA ARGENTARIA, CHILE |  |  |  |  |  |
Different issues | CLP | - | 574 | 609 |  | Various
Subtotal | CLP | - | 574 | 609 |  |
BBVA BANCOMER, S.A. de C.V. |  |  |  |  |  |
May-07 | USD | - | - | 474 | 6,01% | 17-May-22
April-10 | USD | 874 | 831 | 947 | 7.25% | 22-Apr-20
March-11 | USD | 1,092 | 1,039 | 1,184 | 6.50% | 10-Mar-21
July-12 | USD | 1,311 | 1,247 | 1,421 | 6.75% | 30-Sep-22
November-14 | USD | 175 | 166 | 189 | 5.35% | 12-Nov-29
Jan-18 | USD | 874 | - | - | 5.13% | 18-Jan-33
Subtotal | USD | 4,325 | 3,283 | 4,214 |  |
BBVA PARAGUAY |  |  |  |  |  |
November-14 | USD | 19 | 17 | 19 | 6.75% | 05-Nov-21
November-15 | USD | 23 | 21 | 24 | 6.70% | 22-Nov-22
Subtotal | USD | 42 | 38 | 43 |  |
TEXAS REGIONAL STATUTORY TRUST I |  |  |  |  |  |
February-04 | USD | - | - | 47 | 3.13% | 17-Mar-34
Subtotal | USD | - | - | 47 |  |
(*) The issuances of BBVA Global Finance, Ltd, are guaranteed (secondary liability) by the Bank

F-272

Outstanding as of December 31, 2018, 2017, and 2016 of subordinated issues

|  | Millions of Euros |  |
Issuer Entity and Issued Date (continued) | Currency | December 2018 | December 2017 | December 2016 | Prevailing Interest Rate as of December 31, 2018 | Maturity Date
STATE NATIONAL CAPITAL TRUST I |  |  |  |  |  |
July-03 | USD | - | - | 14 | 3.32% | 30-Sep-33
Subtotal | USD | - | - | 14 |  |
STATE NATIONAL STATUTORY TRUST II |  |  |  |  |  |
March-04 | USD | - | - | 9 | 3.07% | 17-Mar-34
Subtotal | USD | - | - | 9 |  |
TEXASBANC CAPITAL TRUST I |  |  |  |  |  |
June-04 | USD | - | - | 24 | 2.88% | 23-Jul-34
Subtotal | USD | - | - | 24 |  |
COMPASS BANK |  |  |  |  |  |
March-05 | USD | 199 | 190 | 212 | 5.50% | 1-Apr-20
March-06 | USD | 62 | 59 | 65 | 5.90% | 1-Apr-26
September-07 | USD | - | - | 332 | 6.40% | 1-Oct-17
April-15 | USD | 611 | 584 | 655 | 3.88% | 10-Apr-25
Subtotal | - | 872 | 833 | 1,264 |  |
BBVA COLOMBIA, S.A. |  |  |  |  |  |
September-11 | COP | - | 28 | 32 | 8.31% | 19-Sep-18
September-11 | COP | 28 | 30 | 33 | 8.48% | 19-Sep-21
September-11 | COP | 42 | 44 | 49 | 8.72% | 19-Sep-26
February-13 | COP | 53 | 56 | 63 | 7.65% | 19-Feb-23
February-13 | COP | 44 | 46 | 52 | 7.93% | 19-Feb-28
November-14 | COP | 24 | 25 | 28 | 8.53% | 26-Nov-26
November-14 | COP | 43 | 45 | 51 | 8.41% | 26-Nov-34
January-00 | COP | (9) | - | - |  |
December-15 | COP | (9) | - | - |  |
Subtotal | COP | 215 | 273 | 308 |  |
April-15 | USD | 332 | 313 | 379 | 4.88% | 21-Apr-25
Subtotal | USD | 332 | 313 | 379 |  |
BANCO CONTINENTAL, S.A. |  |  |  |  |  |
September-07 | USD | - | - | 19 | 2.16% | 24-Sep-17
Subtotal | USD | - | - | 19 |  |
May-07 | PEN | - | - | 11 | 5.85% | 7-May-22
May-07 | PEN | 17 | 17 | 19 | 6.00% | 14-May-27
June-07 | PEN | 20 | 20 | 21 | 3.47% | 18-Jun-32
November-07 | PEN | 18 | 18 | 19 | 3.56% | 19-Nov-32
February-08 | PEN | 18 | 17 | 19 | 6.47% | 28-Feb-28
July-08 | PEN | 16 | 16 | 17 | 3.06% | 8-Jul-23
September-08 | PEN | 17 | 17 | 18 | 3.09% | 9-Sep-23
December-08 | PEN | 10 | 10 | 11 | 4.19% | 15-Dec-33
October-13 | PEN | 40 | 38 | 43 | 6.53% | 2-oct.-28
September-14 | PEN | 252 | 244 | 273 | 5.25% | 22-sep.-29
Subtotal | PEN | 410 | 395 | 451 |  |
TURKIYE GARANTI BANKASI A.S |  |  |  |  |  |
May-17 | USD | 652 | 623 | - | 6.13% | 24-May-27
Subtotal | USD | 652 | 623 | - |  |
Total issues in foreign currencies(Millions of Euros) |  | 8,274 | 8,695 | 8,994 |  |

F-273

Outstanding as of December 31, 2018, 2017, and 2016 of subordinated issues (Millions of euros)

| December 2018 | December 2017 | December 2016
Issuer Entity and Issued Date | Currency | Amount Issued | Currency | Amount Issued | Currency | Amount Issued
BBVA S.A |  |  |  |  |  |
December 2007 | EUR | - | EUR | - | EUR | 14
BBVA COLOMBIA SA | - | - | - | - | - | -
December 1993 | COP | 19 | PESO COL | - | PESO COL | -
BBVA PARAGUAY, S.A. | - | - | - | - | - | -
September 2005 | - | - | EUR | - | EUR | 86
September 2006 | - | - | EUR | - | EUR | 164
April 2007 | - | - | USD | - | USD | 569
BBVA International Preferred, S.A.U. | - | - | - | - | - | -
July 2007 | GBP | 35 | GBP | 35 | GBP | 36
Phoenix Loan Holdings Inc. | - | - | - | - | - | -
December 2000 | USD | 18 | USD | 18 | USD | 22
Caixa Terrasa Societat de Participacion | - | - | - | - | - | -
August 2005 | EUR | 52 | EUR | 51 | EUR | 51
Caixasabadell Preferents, S.A. | - | - | - | - | - | -
December 2004 | - | - | - | - | EUR | -
July 2006 | EUR | 56 | EUR | 56 | EUR | 53
Others | - | - | - | 1 | - | 1

F-274

APPENDIX VII Consolidated balance sheets held in foreign currency as of December 31, 2018, 2017 and 2016.

December 2018 (Millions of euros)
| USD | Mexican Pesos | Turkish Lira | Other Foreign Currencies | Total Foreign Currencies
Assets |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 15,184 | 6,869 | 476 | 5,547 | 28,076
Financial assets held for trading | 3,133 | 15,500 | 366 | 3,614 | 22,614
Non- Trading financial assets mandatorily at fair value through profit or loss | 650 | 2,303 | 3 | 58 | 3,014
Financial assets at fair value through comprehensive income | 16,566 | 4,704 | 3,031 | 2,931 | 27,232
Financial assets at amortized cost | 101,366 | 47,550 | 28,094 | 34,075 | 211,085
Joint ventures and associates | 5 | 54 | - | 267 | 326
Tangible assets | 670 | 1,964 | 1,007 | 850 | 4,490
Other assets | 3,444 | 2,911 | 1,361 | 2,879 | 10,595
Total | 141,019 | 81,856 | 34,336 | 50,221 | 307,433
Liabilities |  |  |  |  |
Financial liabilities held for trading | 2,372 | 13,626 | 360 | 1,507 | 17,864
Financial liabilities at amortized cost | 136,307 | 48,169 | 20,878 | 37,342 | 242,696
Other liabilities | 3,874 | 6,081 | 750 | 7,200 | 17,904
Total | 142,552 | 67,876 | 21,987 | 46,049 | 278,464

F-275

December 2017 (Millions of euros)
| USD | Mexican Pesos | Turkish Lira | Other Foreign Currencies | Total Foreign Currencies
Assets |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 17,111 | 4,699 | 827 | 4,264 | 26,902
Financial assets held for trading | 2,085 | 14,961 | 484 | 4,583 | 22,113
Available-for-sale financial assets | 14,218 | 8,051 | 4,904 | 3,010 | 30,183
Loans and receivables | 93,069 | 39,717 | 32,808 | 34,488 | 200,081
Investments in entities accounted for using the equity method | 5 | 124 | - | 147 | 276
Tangible assets | 659 | 1,953 | 1,289 | 673 | 4,573
Other assets | 7,309 | 5,041 | 4,426 | 18,662 | 35,438
Total | 134,456 | 74,546 | 44,738 | 65,826 | 319,566
Liabilities |  |  |  |  |
Financial liabilities held for trading | 935 | 5,714 | 506 | 533 | 7,688
Financial liabilities at amortized cost | 135,546 | 51,492 | 27,079 | 39,062 | 253,178
Other liabilities | 3,907 | 8,720 | 1,039 | 16,593 | 30,259
Total | 140,387 | 65,926 | 28,623 | 56,188 | 291,124

F-276

December 2016 (Millions of euros)
| USD | Mexican Pesos | Turkish Lira | Other Foreign Currencies | Total Foreign Currencies
Assets |  |  |  |  |
Cash, cash balances at central banks and other demand deposits | 15,436 | 4,947 | 426 | 4,547 | 25,357
Financial assets held for trading | 5,048 | 15,541 | 732 | 2,695 | 24,016
Available-for-sale financial assets | 18,525 | 9,458 | 4,889 | 5,658 | 38,530
Loans and receivables | 109,167 | 41,344 | 34,425 | 46,629 | 231,565
Investments in entities accounted for using the equity method | 5 | 135 | - | 106 | 247
Tangible assets | 788 | 2,200 | 1,376 | 844 | 5,207
Other assets | 4,482 | 5,214 | 5,219 | 4,358 | 19,273
Total | 153,451 | 78,839 | 47,066 | 64,839 | 344,194
Liabilities |  |  |  |  |
Financial liabilities held for trading | 3,908 | 5,957 | 693 | 1,426 | 11,983
Financial liabilities at amortized cost | 150,035 | 53,185 | 28,467 | 53,858 | 285,546
Other liabilities | 1,812 | 8,774 | 1,418 | 1,957 | 123,961
Total | 155,755 | 67,916 | 30,578 | 57,241 | 311,490

F-277

APPENDIX VIII. Quantitative information on refinancing and restructuring operations and other requirement under Bank of Spain Circular 6/2012

a) Quantitative information on refinancing and restructuring operations

The breakdown of refinancing and restructuring operations as of December 31, 2018, 2017 and 2016 is as follows:

| DECEMBER 2018 BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 75 | 111 | 46 | 64 | 52 | - | 15
Other financial corporations and individual entrepreneurs (financial business) | 252 | 13 | 29,360 | 5 | 3 | - | 6
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 44,271 | 4,483 | 15,493 | 4,177 | 2,200 | 221 | 3,148
Of which: financing the construction and property (including land) | 734 | 258 | 1,627 | 962 | 501 | 12 | 517
Rest homes (*) | 193,061 | 1,326 | 355,466 | 6,990 | 5,083 | 150 | 1,716
Total | 237,659 | 5,933 | 400,365 | 11,236 | 7,338 | 371 | 4,885

| Of which: IMPAIRED
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 46 | 65 | 12 | 16 | 8 | - | 10
Other financial corporations and individual entrepreneurs (financial business) | 133 | 4 | 29,320 | 4 | 2 | - | 5
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 25,420 | 2,723 | 9,922 | 2,777 | 1,192 | 100 | 2,773
Of which: financing the construction and property (including land) | 631 | 200 | 1,145 | 656 | 254 | 1 | 477
Rest homes (*) | 116,916 | 741 | 42,403 | 3,673 | 2,435 | 26 | 1,414
Total | 142,515 | 3,533 | 81,657 | 6,470 | 3,636 | 126 | 4,202

(*) Number of operations does not include Garanti Bank.

Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.

The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €682 million of collective impairment losses and €4,202 million of specific impairment losses.

F-278

| DECEMBER 2017 BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 69 | 105 | 135 | 430 | 112 | 302 | 18
Other financial corporations and individual entrepreneurs (financial business) | 4,727 | 36 | 93 | 8 | 1 | - | 21
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 113,464 | 4,672 | 17,890 | 6,258 | 3,182 | 251 | 3,579
Of which: financing the construction and property (including land) | 1,812 | 398 | 3,495 | 2,345 | 1,995 | - | 1,327
Rest homes (*) | 163,101 | 1,325 | 109,776 | 8,477 | 6,891 | 18 | 1,373
Total | 281,361 | 6,138 | 127,894 | 15,173 | 10,186 | 571 | 4,991

| Of which: IMPAIRED
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 50 | 72 | 45 | 29 | 22 | - | 16
Other financial corporations and individual entrepreneurs (financial business) | 126 | 5 | 16 | 2 | + | - | 5
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 95,427 | 2,791 | 10,994 | 4,144 | 1,983 | 66 | 3,361
Of which: financing the construction and property (including land) | 1,538 | 208 | 2,779 | 1,961 | 1,273 | - | 1,282
Rest homes (*) | 105,468 | 747 | 47,612 | 4,330 | 3,270 | 6 | 1,231
Total | 201,071 | 3,615 | 58,667 | 8,506 | 5,275 | 72 | 4,612

(*) Number of operations does not include Garanti Bank.

Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.

The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €378 million of collective impairment losses and €4,612 million of specific impairment losses.

F-279

| DECEMBER 2016 BALANCE OF FORBEARANCE (Millions of Euros)
| TOTAL
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 24 | 8 | 112 | 711 | 98 | 584 | 6
Other financial corporations and individual entrepreneurs (financial business) | 3,349 | 59 | 71 | 18 | 5 | - | 8
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 125,328 | 5,057 | 25,327 | 9,643 | 4,844 | 124 | 5,310
Of which: financing the construction and property (including land) | 1,519 | 496 | 5,102 | 4,395 | 694 | - | 2,552
Rest homes (*) | 116,961 | 1,550 | 103,868 | 9,243 | 7,628 | 18 | 1,474
Total | 245,662 | 6,674 | 129,378 | 19,615 | 12,576 | 726 | 6,798

| Of which: IMPAIRED
| Unsecured loans | Secured loans | Accumulated impairment or accumulated losses in fair value due to credit risk
|  |  |  |  | Maximum amount of secured loans that can be considered
| Number of operations | Gross carrying amount | Number of operations | Gross carrying amount | Real estate mortgage secured | Rest of secured loans
Credit institutions | - | - | - | - | - | - | -
General Governments | 12 | 8 | 53 | 33 | 27 | - | 4
Other financial corporations and individual entrepreneurs (financial business) | 131 | 8 | 22 | 2 | - | - | 5
Non-financial corporations and individual entrepreneurs (corporate non-financial activities) | 103,310 | 2,857 | 16,327 | 6,924 | 3,002 | 53 | 4,986
Of which: financing the construction and property (including land) | 1,191 | 304 | 4,188 | 3,848 | 494 | - | 2,499
Rest homes (*) | 72,199 | 672 | 47,767 | 4,366 | 3,271 | 3 | 1,285
Total | 175,652 | 3,545 | 64,169 | 11,325 | 6,300 | 57 | 6,281

(*) Number of operations does not include Garanti Bank.

Includes mortgage-backed real estate operations with loan to value ratio of greater than 1, and secured operations, other than transactions secured by real estate mortgage regardless of their loan to value ratio.

The accumulated impairment or accumulated losses in fair value due to credit risk correspond to €517 million of collective impairment losses and €6,281 million of specific impairment losses.

F-280

In addition to the restructuring and refinancing transactions mentioned in this section, loans that were not considered impaired or renegotiated have been modified based on the criteria set out in the accounting regulation that applies. These loans have not been classified as renegotiated or impaired, since they were modified for commercial or competitive reasons (for instance, to improve relationships with clients) rather than for economic or legal reasons relating to the borrower's financial situation.

The table below provides a roll forward of refinanced assets during 2018 and 2017:

Refinanced assets Roll forward. December 2018 (Millions of euros)
| Stages 1&2 | Stage 3 | TOTAL
| Risk | Coverage | Risk | Coverage | Risk | Coverage
Balance at the beginning | 9,191 | 378 | 12,120 | 4,612 | 21,311 | 4,991
(+) Additions | 1,599 | 397 | 1,417 | 767 | 3,017 | 1,164
(-) Decreases (payments or repayments) | (1,098) | (47) | (2,280) | (1,282) | (3,378) | (1,330)
(-) Foreclosures | - | - | (339) | (216) | (339) | (216)
(-) Write-offs | (2) | (1) | (857) | (606) | (859) | (607)
(+)/(-) Other | (2,524) | (45) | (58) | 927 | (2,582) | 882
Ending Balance | 7,166 | 682 | 10,003 | 4,202 | 17,169 | 4,885

Refinanced assets Roll forward. December 2017 (*) (Millions of euros)
| Normal | Impaired | TOTAL
| Risk | Coverage | Risk | Coverage | Risk | Coverage
Balance at the beginning | 11,418 | 517 | 14,869 | 6,281 | 26,288 | 6,798
(+) Additions | 3,095 | 182 | 1,614 | 599 | 4,709 | 781
(-) Decreases (payments or repayments) | (2,462) | (145) | (2,754) | (1,180) | (5,216) | (1,325)
(-) Foreclosures | (2) | - | (463) | (267) | (465) | (267)
(-) Write-offs | (63) | (2) | (1,667) | (1,413) | (1,730) | (1,415)
(+)/(-) Other | (2,795) | (174) | 521 | 593 | (2,275) | 419
Ending Balance | 9,191 | 378 | 12,120 | 4,612 | 21,311 | 4,991

(*) Data presenting under the accounting regulation that applied in 2017.

The table below provides a breakdown by segments of the forbearance operations (net of provisions) as of December 31, 2018 and 2017:

Forbearance operations. Breakdown by segments (Millions of euros)
| December 2018 | December 2017 | December 2016
Credit institutions | - | - | -
Central governments | 160 | 518 | 713
Other financial corporations and individual entrepreneurs (financial activity) | 13 | 24 | 69
Non-financial corporations and individual entrepreneurs (non-financial activity) | 5,512 | 7,351 | 9,390
Of which: Financing the construction and property development (including land) | 702 | 1,416 | 2,339
Households | 6,600 | 8,428 | 9,319
Total carrying amount | 12,284 | 16,321 | 19,491
Financing classified as non-current assets and disposal groups held for sale | - | - | -

F-281

NPL ratio by type of renegotiated loan

The non performing ratio of the renegotiated portfolio is defined as the impaired balance of renegotiated loans that shows signs of difficulties as of the closing of the reporting period, divided by the total payment outstanding in that portfolio.

As of December 31, 2018, the non performing ratio for each of the portfolios of renegotiated loans is as follows:

December 2018. NPL ratio renegotiated loan portfolio
| Ratio of Impaired loans - Past due
General governments | 47%
Commercial | 64%
Of which: Construction and developer | 70%
Other consumer | 53%

December 2017. NPL ratio renegotiated loan portfolio
| Ratio of Impaired loans - Past due
General governments | 19%
Commercial | 63%
Of which: Construction and developer | 79%
Other consumer | 52%

F-282

b) Qualitative information on the concentration of risk by activity and guarantees

Loans and advances to customers by activity (carrying amount)

December 2018 (Millions OF Euros)
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 30,488 | 1,056 | 7,750 | 1,729 | 1,856 | 1,119 | 3,514 | 588
2 Other financial institutions | 20,802 | 233 | 12,549 | 1,167 | 221 | 93 | 11,209 | 92
3 Non-financial institutions and individual entrepreneurs | 173,493 | 29,001 | 32,371 | 25,211 | 11,121 | 9,793 | 5,087 | 10,160
3.1 Construction and property development | 14,323 | 5,226 | 2,539 | 1,979 | 2,556 | 2,140 | 486 | 605
3.2 Construction of civil works | 7,775 | 1,082 | 620 | 703 | 285 | 195 | 200 | 319
3.3 Other purposes | 151,394 | 22,694 | 29,212 | 22,529 | 8,281 | 7,459 | 4,401 | 9,235
3.3.1 Large companies | 97,132 | 9,912 | 19,069 | 13,918 | 3,979 | 4,019 | 2,245 | 4,820
3.3.2 SMEs (**) and individual entrepreneurs | 54,262 | 12,782 | 10,143 | 8,611 | 4,302 | 3,440 | 2,156 | 4,416
4 Rest of households and NPISHs (***) | 163,068 | 109,578 | 5,854 | 21,974 | 27,860 | 33,200 | 21,490 | 10,908
4.1 Housing | 111,007 | 105,817 | 2,419 | 19,981 | 26,384 | 32,122 | 19,345 | 10,404
4.2 Consumption | 40,124 | 522 | 2,600 | 489 | 587 | 306 | 1,597 | 142
4.3 Other purposes | 11,938 | 3,239 | 835 | 1,505 | 888 | 772 | 547 | 362
6 TOTAL | 387,850 | 139,868 | 58,524 | 50,082 | 41,058 | 44,206 | 41,300 | 21,747
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 12,284 | 8,325 | 523 | 1,508 | 1,421 | 1,769 | 1,527 | 2,623

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises

(***) Nonprofit institutions serving households.

(****) Net of provisions

F-283

December 2017 (Millions of euros)
|  |  |  | Collateralized Credit Risk. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 32,294 | 998 | 7,167 | 1,540 | 179 | 475 | 532 | 5,440
2 Other financial institutions | 18,669 | 319 | 12,910 | 314 | 277 | 106 | 11,349 | 1,183
3 Non-financial institutions and individual entrepreneurs | 172,338 | 39,722 | 24,793 | 11,697 | 5,878 | 5,183 | 9,167 | 32,591
3.1 Construction and property development | 14,599 | 10,664 | 1,066 | 1,518 | 876 | 1,049 | 1,313 | 6,974
3.2 Construction of civil works | 7,733 | 1,404 | 521 | 449 | 358 | 289 | 162 | 667
3.3 Other purposes | 150,006 | 27,654 | 23,206 | 9,729 | 4,644 | 3,845 | 7,692 | 24,950
3.3.1 Large companies | 93,604 | 10,513 | 16,868 | 2,769 | 1,252 | 1,023 | 3,631 | 18,706
3.3.2 SMEs (**) and individual entrepreneurs | 56,402 | 17,142 | 6,338 | 6,960 | 3,392 | 2,823 | 4,061 | 6,244
4 Rest of households and NPISHs (***) | 165,024 | 114,558 | 8,395 | 19,762 | 22,807 | 25,595 | 22,122 | 32,667
4.1 Housing | 114,709 | 111,604 | 128 | 18,251 | 22,222 | 25,029 | 21,154 | 25,076
4.2 Consumption | 40,705 | 670 | 4,784 | 1,058 | 256 | 192 | 316 | 3,632
4.3 Other purposes | 9,609 | 2,284 | 3,483 | 452 | 330 | 374 | 652 | 3,959
6 TOTAL | 388,325 | 155,597 | 53,266 | 33,312 | 29,142 | 31,359 | 43,170 | 71,882
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 16,321 | 6,584 | 5,117 | 1,485 | 1,315 | 1,871 | 1,580 | 5,451

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-284

December 2016 (Millions of euros)
|  |  |  | Collateralized Credit Risk. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 34,820 | 4,722 | 3,700 | 380 | 715 | 1,266 | 2,740 | 3,320
2 Other financial institutions | 17,181 | 800 | 8,168 | 650 | 464 | 319 | 6,846 | 690
3 Non-financial institutions and individual entrepreneurs | 183,871 | 47,105 | 22,663 | 17,000 | 13,122 | 11,667 | 14,445 | 13,533
3.1 Construction and property development | 19,283 | 12,888 | 1,736 | 3,074 | 4,173 | 3,843 | 2,217 | 1,316
3.2 Construction of civil works | 8,884 | 1,920 | 478 | 508 | 547 | 469 | 379 | 494
3.3 Other purposes | 155,704 | 32,297 | 20,449 | 13,417 | 8,402 | 7,356 | 11,850 | 11,722
3.3.1 Large companies | 107,550 | 16,041 | 16,349 | 7,311 | 5,149 | 4,777 | 7,160 | 7,993
3.3.2 SMEs (**) and individual entrepreneurs | 48,154 | 16,257 | 4,100 | 6,106 | 3,253 | 2,579 | 4,689 | 3,729
4 Rest of households and NPISHs (***) | 178,781 | 129,590 | 5,257 | 21,906 | 24,764 | 34,434 | 34,254 | 19,489
4.1 Housing | 127,606 | 124,427 | 477 | 18,802 | 23,120 | 32,713 | 32,148 | 18,122
4.2 Consumption | 44,504 | 3,181 | 3,732 | 2,535 | 1,278 | 1,230 | 1,322 | 547
4.3 Other purposes | 6,671 | 1,982 | 1,048 | 569 | 366 | 491 | 784 | 820
6 TOTAL | 414,654 | 182,216 | 39,789 | 39,936 | 39,065 | 47,687 | 58,286 | 37,032
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 19,491 | 8,031 | 6,504 | 3,703 | 1,845 | 2,316 | 2,091 | 4,580

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-285

The information of the main geographic areas is as follows:

December 2018 (Millions Of Euros) BBVA, S.A.
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 17,828 | 390 | 572 | 68 | 209 | 94 | 575 | 15
2 Other financial institutions | 16,079 | 103 | 11,161 | 70 | 19 | 4 | 11,159 | 12
3 Non-financial institutions and individual entrepreneurs | 74,558 | 12,614 | 1,592 | 4,674 | 3,935 | 2,622 | 1,282 | 1,692
3.1 Construction and property development | 2,206 | 2,069 | 22 | 544 | 705 | 493 | 199 | 150
3.2 Construction of civil works | 4,877 | 991 | 70 | 327 | 247 | 178 | 63 | 246
3.3 Other purposes | 67,475 | 9,554 | 1,500 | 3,803 | 2,984 | 1,952 | 1,019 | 1,296
3.3.1 Large companies | 44,529 | 2,843 | 318 | 1,086 | 789 | 497 | 272 | 517
3.3.2 SMEs (**) and individual entrepreneurs | 22,947 | 6,711 | 1,182 | 2,717 | 2,195 | 1,455 | 747 | 779
4 Rest of households and NPISHs (***) | 94,129 | 79,755 | 413 | 15,476 | 19,737 | 22,511 | 13,128 | 9,315
4.1 Housing | 79,054 | 77,061 | 136 | 14,623 | 18,946 | 21,768 | 12,803 | 9,056
4.2 Consumption | 10,321 | 131 | 147 | 66 | 58 | 77 | 43 | 34
4.3 Other purposes | 4,754 | 2,563 | 130 | 786 | 733 | 667 | 282 | 225
6 TOTAL | 202,594 | 92,861 | 13,738 | 20,289 | 23,901 | 25,231 | 26,143 | 11,035
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 9,143 | 7,308 | 85 | 1,173 | 1,189 | 1,365 | 1,225 | 2,441

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-286

December 2018 (Millions Of Euros) Bancomer
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 5,725 | - | 2,612 | 762 | 730 | 88 | 720 | 312
2 Other financial institutions | 1,279 | 4 | 788 | 714 | 12 | 39 | 17 | 9
3 Non-financial institutions and individual entrepreneurs | 22,608 | 85 | 17,107 | 12,662 | 833 | 878 | 815 | 2,004
3.1 Construction and property development | 883 | 4 | 547 | 220 | 148 | 91 | 63 | 29
3.2 Construction of civil works | 354 | 3 | 257 | 208 | 5 | 7 | 25 | 14
3.3 Other purposes | 21,371 | 78 | 16,303 | 12,233 | 680 | 781 | 726 | 1,961
3.3.1 Large companies | 11,762 | 0 | 9,918 | 8,294 | 265 | 571 | 311 | 476
3.3.2 SMEs (**) and individual entrepreneurs | 9,609 | 78 | 6,385 | 3,939 | 415 | 209 | 415 | 1,485
4 Rest of households and NPISHs (***) | 20,198 | 8,714 | 5 | 901 | 1,833 | 3,874 | 1,847 | 264
4.1 Housing | 8,714 | 8,714 | - | 900 | 1,833 | 3,874 | 1,847 | 261
4.2 Consumption | 10,897 | - | - | - | - | - | - | -
4.3 Other purposes | 587 | - | 5 | 2 | 0 | 0 | 0 | 3
6 TOTAL | 49,810 | 8,804 | 20,511 | 15,038 | 3,409 | 4,880 | 3,399 | 2,589
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 486 | 236 | 148 | 128 | 51 | 82 | 89 | 34

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-287

December 2018 (Millions Of Euros) Compass Bank
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 908 | 129 | 693 | 161 | 179 | 163 | 267 | 52
2 Other financial institutions | 1,867 | 35 | 263 | 253 | 7 | 17 | 6 | 15
3 Non-financial institutions and individual entrepreneurs | 27,998 | 5,277 | 11,827 | 5,035 | 4,185 | 3,563 | 1,337 | 2,984
3.1 Construction and property development | 8,002 | 1,731 | 1,852 | 924 | 1,300 | 1,154 | 81 | 124
3.2 Construction of civil works | 297 | 6 | 265 | 150 | 18 | 5 | 98 | -
3.3 Other purposes | 19,699 | 3,540 | 9,711 | 3,961 | 2,866 | 2,405 | 1,158 | 2,860
3.3.1 Large companies | 16,293 | 2,790 | 8,074 | 3,317 | 2,331 | 1,876 | 903 | 2,438
3.3.2 SMEs (**) and individual entrepreneurs | 3,406 | 750 | 1,637 | 645 | 536 | 529 | 255 | 422
4 Rest of households and NPISHs (***) | 20,971 | 11,184 | 3,475 | 2,934 | 2,576 | 5,501 | 3,609 | 38
4.1 Housing | 13,364 | 10,989 | 2,255 | 2,198 | 2,146 | 5,317 | 3,559 | 23
4.2 Consumption | 4,051 | 0 | 664 | 169 | 337 | 124 | 31 | 3
4.3 Other purposes | 3,556 | 195 | 555 | 566 | 93 | 60 | 19 | 12
6 TOTAL | 51,744 | 16,625 | 16,259 | 8,384 | 6,947 | 9,244 | 5,219 | 3,090
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 625 | 241 | 237 | 55 | 97 | 213 | 109 | 5

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-288

December 2018 (Millions Of Euros) Garanti Bank
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 94 | - | - | - | - | - | - | -
2 Other financial institutions | 529 | 63 | 29 | 1 | 21 | 31 | 20 | 18
3 Non-financial institutions and individual entrepreneurs | 24,485 | 5,812 | 427 | 1,724 | 1,381 | 1,901 | 521 | 712
3.1 Construction and property development | 2,184 | 921 | 53 | 238 | 287 | 306 | 83 | 60
3.2 Construction of civil works | 1,912 | - | - | - | - | - | - | -
3.3 Other purposes | 20,390 | 4,891 | 374 | 1,487 | 1,094 | 1,595 | 437 | 652
3.3.1 Large companies | 10,900 | 2,261 | 102 | 877 | 293 | 735 | 182 | 275
3.3.2 SMEs (**) and individual entrepreneurs | 9,490 | 2,630 | 272 | 610 | 800 | 860 | 255 | 377
4 Rest of households and NPISHs (***) | 11,030 | 3,404 | 28 | 958 | 2,367 | 71 | 32 | 3
4.1 Housing | 3,597 | 3,234 | 0 | 902 | 2,295 | 35 | 2 | 1
4.2 Consumption | 7,151 | 62 | 26 | 35 | 38 | 13 | 1 | 1
4.3 Other purposes | 281 | 107 | 2 | 20 | 34 | 24 | 29 | 1
6 TOTAL | 36,138 | 9,279 | 483 | 2,683 | 3,769 | 2,003 | 573 | 733
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 1,372 | 149 | 1 | 0 | 0 | 56 | 65 | 29

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-289

December 2018 (Millions Of Euros) Other Entities
|  |  |  | Collateralized loans and receivables -Loans and advances to customers. Loan to value
| Total (*) | Of which: Mortgage loans | Of which: Secured loans | Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100%
1 General governments | 5,932 | 538 | 3,873 | 738 | 737 | 774 | 1,952 | 209
2 Other financial institutions | 1,048 | 28 | 307 | 129 | 161 | 3 | 7 | 36
3 Non-financial institutions and individual entrepreneurs | 23,844 | 5,214 | 1,418 | 1,116 | 787 | 829 | 1,133 | 2,767
3.1 Construction and property development | 1,049 | 500 | 65 | 53 | 115 | 96 | 60 | 242
3.2 Construction of civil works | 336 | 82 | 29 | 18 | 15 | 5 | 13 | 59
3.3 Other purposes | 22,459 | 4,632 | 1,324 | 1,045 | 658 | 727 | 1,060 | 2,466
3.3.1 Large companies | 13,648 | 2,018 | 656 | 344 | 301 | 340 | 576 | 1,113
3.3.2 SMEs (**) and individual entrepreneurs | 8,811 | 2,613 | 667 | 701 | 356 | 387 | 484 | 1,353
4 Rest of households and NPISHs (***) | 16,740 | 6,521 | 1,934 | 1,705 | 1,346 | 1,242 | 2,874 | 1,287
4.1 Housing | 6,277 | 5,818 | 28 | 1,357 | 1,165 | 1,128 | 1,134 | 1,062
4.2 Consumption | 7,704 | 328 | 1,763 | 218 | 154 | 93 | 1,522 | 104
4.3 Other purposes | 2,759 | 375 | 143 | 130 | 27 | 21 | 218 | 121
6 TOTAL | 47,564 | 12,300 | 7,533 | 3,688 | 3,032 | 2,847 | 5,966 | 4,300
MEMORANDUM: |  |  |  |  |  |  |  |
Forbearance operations (****) | 658 | 391 | 52 | 152 | 84 | 53 | 40 | 113

(*) The amounts included in this table are net of impairment losses.

(**) Small and medium enterprises.

(***) Nonprofit institutions serving households.

(****) Net of provisions.

F-290

c) Information on the concentration of risk by activity and geographical areas.

December 2018 (Millions of euros)
| TOTAL(*) | Spain | European Union Other | America | Other
Credit institutions | 113,978 | 35,728 | 33,440 | 31,234 | 13,575
General governments | 123,382 | 53,686 | 11,081 | 50,092 | 8,523
Central Administration | 87,611 | 35,691 | 10,756 | 32,735 | 8,428
Other | 35,771 | 17,995 | 325 | 17,357 | 95
Other financial institutions | 49,166 | 13,784 | 17,977 | 15,345 | 2,061
Non-financial institutions and individual entrepreneurs | 226,487 | 70,536 | 24,565 | 87,419 | 43,967
Construction and property development | 17,697 | 3,497 | 244 | 10,113 | 3,843
Construction of civil works | 11,430 | 5,789 | 1,535 | 1,762 | 2,343
Other purposes | 197,361 | 61,250 | 22,786 | 75,543 | 37,781
Large companies | 137,150 | 36,964 | 22,114 | 53,423 | 24,649
SMEs and individual entrepreneurs | 60,211 | 24,286 | 672 | 22,120 | 13,132
Other households and NPISHs | 163,443 | 91,977 | 3,383 | 56,777 | 11,306
Housing | 111,007 | 78,414 | 765 | 28,034 | 3,794
Consumer | 40,124 | 10,303 | 629 | 22,036 | 7,155
Other purposes | 12,312 | 3,259 | 1,989 | 6,707 | 357
TOTAL | 676,456 | 265,710 | 90,447 | 240,867 | 79,432

(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and guarantees given and Contingent risks. The amounts included in this table are net of impairment losses.

F-291

December 2017 (Millions of euros)
| TOTAL(*) | Spain | European Union Other | America | Other
Credit institutions | 70,141 | 10,606 | 34,623 | 13,490 | 11,422
General governments | 121,863 | 55,391 | 11,940 | 44,191 | 10,341
Central Administration | 83,673 | 35,597 | 11,625 | 26,211 | 10,240
Other | 38,190 | 19,794 | 316 | 17,980 | 101
Other financial institutions | 48,000 | 19,175 | 14,283 | 12,469 | 2,074
Non-financial institutions and individual entrepreneurs | 228,227 | 78,507 | 20,485 | 80,777 | 48,458
Construction and property development | 18,619 | 4,623 | 339 | 8,834 | 4,822
Construction of civil works | 12,348 | 6,936 | 1,302 | 2,267 | 1,843
Other purposes | 197,260 | 66,948 | 18,843 | 69,676 | 41,793
Large companies | 134,454 | 43,286 | 17,470 | 48,016 | 25,681
SMEs and individual entrepreneurs | 62,807 | 23,662 | 1,373 | 21,660 | 16,112
Other households and NPISHs | 165,667 | 93,774 | 3,609 | 53,615 | 14,669
Housing | 114,710 | 81,815 | 2,720 | 24,815 | 5,361
Consumer | 40,705 | 8,711 | 649 | 22,759 | 8,587
Other purposes | 10,251 | 3,248 | 241 | 6,041 | 721
TOTAL | 633,899 | 257,453 | 84,940 | 204,542 | 86,964

(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and guarantees given and Contingent risks. The amounts included in this table are net of impairment losses.

F-292

December 2016 (Millions of euros)
| TOTAL(*) | Spain | European Union Other | America | Other
Credit institutions | 84,381 | 12,198 | 40,552 | 17,498 | 14,133
General governments | 134,261 | 61,495 | 14,865 | 47,072 | 10,829
Central Administration | 92,155 | 39,080 | 14,550 | 27,758 | 10,768
Other | 42,105 | 22,415 | 315 | 19,314 | 61
Other financial institutions | 47,029 | 16,942 | 14,881 | 12,631 | 2,576
Non-financial institutions and individual entrepreneurs | 249,322 | 69,833 | 26,335 | 98,797 | 54,357
Construction and property development | 23,141 | 5,572 | 371 | 11,988 | 5,209
Construction of civil works | 14,185 | 6,180 | 2,493 | 3,803 | 1,709
Other purposes | 211,996 | 58,080 | 23,471 | 83,005 | 47,439
Large companies | 158,356 | 35,514 | 22,074 | 64,940 | 35,828
SMEs and individual entrepreneurs | 53,640 | 22,566 | 1,397 | 18,065 | 11,611
Other households and NPISHs | 179,051 | 96,345 | 3,796 | 62,836 | 16,073
Housing | 127,607 | 85,763 | 3,025 | 32,775 | 6,044
Consumer | 44,504 | 7,230 | 642 | 27,398 | 9,234
Other purposes | 6,939 | 3,352 | 129 | 2,663 | 795
TOTAL | 694,044 | 256,813 | 100,428 | 238,834 | 97,968

(*) The definition of risk for the purpose of this statement includes the following items on the public balance sheet: Loans and advances to credit institutions, Loans and advances, Debt securities, Equity instruments, Other equity securities, Derivatives and hedging derivatives, Investments in subsidiaries, joint ventures and associates and guarantees given and Contingent risks. The amounts included in this table are net of impairment losses.

F-293

APPENDIX IX Additional information on Risk Concentration

a) Sovereign risk exposure

The table below provides a breakdown of exposure to financial assets (excluding derivatives and equity instruments), as of December 31, 2018, 2017 and 2016 by type of counterparty and the country of residence of such counterparty. The below figures do not take into account accumulated other comprehensive income, impairment losses or loan-loss provisions:

Risk Exposure by Countries (Millions of euros)
| Sovereign Risk
| December 2018 | December 2017 | December 2016
Spain | 52,970 | 54,625 | 60,434
Turkey | 7,998 | 9,825 | 10,478
Italy | 9,249 | 9,827 | 12,206
France | 122 | 383 | 518
Portugal | 529 | 722 | 586
Germany | 362 | 259 | 521
United Kingdom | 51 | 41 | 17
Ireland | - | - | -
Greece | - | - | -
Rest of Europe | 699 | 662 | 940
Subtotal Europe | 71,981 | 76,343 | 85,699
Mexico | 26,562 | 25,114 | 26,942
The United States | 18,645 | 14,059 | 16,039
Venezuela | 1 | 137 | 179
Rest of countries | 4,910 | 5,809 | 3,814
Subtotal Rest of Countries | 50,118 | 45,119 | 46,974
Total Exposure to Financial Instruments | 122,099 | 121,462 | 132,674

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.

F-294

Sovereign risk exposure in Europe

The table below provides a breakdown of the exposure of the Group’s credit institutions to European sovereign risk as of December 31, 2018 and 2017 by type of financial instrument and the country of residence of the counterparty, under EBA (European Banking Authority) requirements:

Exposure to Sovereign Risk by European Union Countries. December 2018 (Millions of euros)
|  | Debt securities | Loans and advances | Derivatives | Total | %
|  | Direct exposure | Indirect exposure
|  | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain |  | 5,237 | 43,236 | 1,264 | 57 | (15) | (3,224) | 1,130 | (1,117) | 46,568 | 79%
Italy |  | 1,726 | 8,270 | - | - | - | (795) | 210 | (298) | 9,112 | 15%
France |  | 591 | 77 | - | - | - | 150 | 1 | (32) | 787 | 1%
Germany |  | 310 | 334 | - | - | - | 182 | 74 | (87) | 813 | 1%
Portugal |  | 265 | 430 | 277 | 57 | (57) | 67 | 37 | (26) | 1,050 | 2%
United Kingdom |  | - | 45 | - | - | - | - | - | - | 45 | 0%
Greece |  | - | - | - | - | - | - | - | - | - | 0%
Hungary |  | - | - | - | - | - | - | - | - | - | 0%
Ireland |  | - | 548 | - | - | - | - | - | - | 548 | 1%
Rest of European Union |  | 300 | 31 | - | - | - | (36) | 3 | (3) | 295 | 0%
Total Exposure to Sovereign Counterparties (European Union) |  | 8,428 | 52,971 | 1,541 | 113 | (71) | (3,656) | 1,454 | (1,563) | 59,218 | 100%

This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€10,883 million as of December 31, 2018) is not included. Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

Exposure to Sovereign Risk by European Union Countries. December 2017 (Millions of euros)
| Debt securities | Loans and receivables | Derivatives | Total | %
| Direct exposure | Indirect exposure
| Financial Assets Held-for-Trading | Available-for-Sale Financial Assets | Held -to-maturity investment | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain | 7,065 | 14,029 | 5,754 | 22,101 | 1,513 | 62 | (15) | 591 | 1,082 | (773) | 51,410 | 75.3%
Italy | 4,606 | 4,292 | 2,349 | 55 | - | - | - | (57) | 648 | (237) | 11,657 | 17.1%
France | 622 | 8 | - | 27 | - | - | - | 329 | 15 | (19) | 983 | 1.4%
Germany | 517 | - | - | - | - | - | - | 826 | 26 | (17) | 1,352 | 2.0%
Portugal | 832 | 1 | - | 202 | 1,019 | 1 | (44) | 176 | 87 | (53) | 2,221 | 3.3%
United Kingdom | - | - | - | 37 | - | - | - | (2) | - | - | 35 | 0.1%
Greece | - | - | - | - | - | - | - | - | - | - | - | -
Hungary | - | - | - | - | - | - | - | - | - | - | - | -
Ireland | - | - | - | - | - | - | - | - | - | - | - | -
Rest of European Union | 38 | 505 | - | 32 | - | - | - | 31 | 5 | (5) | 607 | 0.9%
Total Exposure to Sovereign Counterparties (European Union) | 13,681 | 18,835 | 8,103 | 22,453 | 2,533 | 64 | (59) | 1,896 | 1,863 | (1,104) | 68,265 | 100.0%

F-295

This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€10,474 million as of December 31, 2017) is not included. Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

Exposure to Sovereign Risk by European Union Countries. December 2016 (Millions of euros)
| Debt securities | Loans and receivables | Derivatives (2) | Total | %
| Direct exposure | Indirect exposure
| Financial Assets Held-for-Trading | Available-for-Sale Financial Assets | Held -to-maturity investment | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain | 927 | 13,385 | 8,063 | 24,835 | 1,786 | 88 | (27) | (744) | 993 | (1,569) | 47,737 | 81.4%
Italy | 1,973 | 4,806 | 2,719 | 60 | - | - | - | (1,321) | 1,271 | (866) | 8,641 | 14.7%
France | 250 | - | - | 28 | - | - | - | (13) | 46 | (63) | 248 | 0.4%
Germany | 82 | - | - | - | - | - | - | (5) | 203 | (249) | 30 | 0.1%
Portugal | 54 | 1 | - | 285 | 1,150 | - | (215) | 10 | 1 | (6) | 1,280 | 2.2%
United Kingdom | - | - | - | 16 | - | - | - | (9) | 1 | - | 8 | 0.0%
Greece | - | - | - | - | - | - | - | - | - | - | - | 0.0%
Hungary | - | - | - | - | - | - | - | - | - | - | - | 0.0%
Ireland | - | - | - | - | - | - | - | - | - | - | - | 0.0%
Rest of European Union | 195 | 469 | - | 36 | - | - | - | 30 | 13 | (6) | 736 | 1.3%
Total Exposure to Sovereign Counterparties (European Union) | 3,482 | 18,660 | 10,783 | 25,259 | 2,936 | 88 | (242) | (2,053) | 2,527 | (2,759) | 58,680 | 100.0%

F-296

This table shows sovereign risk balances with EBA criteria. Therefore, sovereign risk of the Group’s insurance companies (€10,443 million as of December 31, 2016) is not included. Includes credit derivatives CDS (Credit Default Swaps) shown at fair value.

As of December 31, 2018, 2017 and 2016 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:

Maturities of Sovereign Risks European Union. December 2018 (Millions of euros)
|  | Debt securities | Loans and advances | Derivatives | Total | %
|  | Direct exposure | Indirect exposure
|  | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain |  | 5,237 | 43,236 | 1,264 | 57 | (15) | (3,224) | 1,130 | (1,117) | 46,568 | 79%
Up to 1 Year |  | 2,821 | 13,381 | 383 | 1 | - | (3,224) | 1,130 | (1,117) | 13,375 | 23%
1 to 5 Years |  | 761 | 7,904 | 640 | 42 | (8) | - | - | - | 9,340 | 16%
Over 5 Years |  | 1,654 | 21,950 | 242 | 13 | (7) | - | - | - | 23,853 | 40%
Rest of European Union |  | 3,192 | 9,735 | 277 | 57 | (57) | (431) | 324 | (446) | 12,651 | 21%
Up to 1 Year |  | 1,155 | 2,328 | 220 | - | (5) | (865) | 297 | (355) | 2,776 | 5%
1 to 5 Years |  | 250 | 1,184 | 57 | 57 | - | 10 | 16 | (24) | 1,548 | 3%
Over 5 Years |  | 1,787 | 6,224 | - | - | (52) | 423 | 12 | (67) | 8,327 | 14%
Total Exposure to European Union Sovereign Counterparties |  | 8,428 | 52,971 | 1,541 | 113 | (71) | (3,656) | 1,454 | (1,563) | 59,218 | 100%

Maturities of Sovereign Risks European Union. December 2017 (Millions of euros)
| Debt securities | Loans and receivables | Derivatives | Total | %
| Direct exposure | Indirect exposure
| Financial Assets Held-for-Trading | Available-for-Sale Financial Assets | Held -to-maturity investment | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain | 7,065 | 14,029 | 5,754 | 22,101 | 1,513 | 62 | (15) | 591 | 1,082 | (773) | 51,410 | 75%
Up to 1 Year | 1,675 | 3,363 | 2,900 | 7,852 | 69 | 1 | - | 591 | 1,082 | (773) | 12,312 | 25%
1 to 5 Years | 2,196 | 1,335 | 106 | 7,978 | 1,131 | 44 | (1) | - | 0 | - | 16,883 | 19%
Over 5 Years | 3,195 | 9,332 | 2,747 | 6,271 | 314 | 17 | (14) | - | - | - | 22,215 | 32%
Rest of European Union | 6,616 | 4,806 | 2,349 | 352 | 1,019 | 1 | (44) | 1,305 | 781 | (331) | 16,856 | 25%
Up to 1 Year | 2,212 | 1,663 | 1,895 | 54 | 466 | 1 | (6) | 744 | 756 | (252) | 3,614 | 11%
1 to 5 Years | 2,932 | 192 | - | 162 | 3 | 0 | - | 243 | 17 | (21) | 7,313 | 5%
Over 5 Years | 1,473 | 2,951 | 454 | 137 | 550 | - | (38) | 318 | 8 | (58) | 5,928 | 8%
Total Exposure to European Union Sovereign Counterparties | 13,681 | 18,835 | 8,103 | 22,453 | 2,533 | 64 | (59) | 1,896 | 1,863 | (1,104) | 68,265 | 100%

F-297

Maturities of Sovereign Risks European Union. December 2016 (Millions of euros)
| Debt securities | Loans and receivables | Derivatives | Total | %
| Direct exposure | Indirect exposure
| Financial Assets Held-for-Trading | Available-for-Sale Financial Assets | Held -to-maturity investment | Notional value | Fair value + | Fair value - | Notional value | Fair value + | Fair value -
Spain | 927 | 13,385 | 8,063 | 24,835 | 1,786 | 88 | (27) | (744) | 993 | (1,569) | 47,737 | 81%
Up to 1 Year | 913 | 889 | 1,989 | 9,087 | - | - | - | (736) | 993 | (1,564) | 11,571 | 20%
1 to 5 Years | 1,272 | 3,116 | 3,319 | 7,059 | 1,209 | 32 | (1) | (3) | - | - | 16,004 | 27%
Over 5 Years | (1,259) | 9,380 | 2,755 | 4,595 | 577 | 56 | (27) | (6) | - | (4) | 16,068 | 27%
Rest of European Union | 2,554 | 5,275 | 2,719 | 424 | 1,150 | - | (215) | (1,309) | 1,534 | (1,191) | 10,943 | 19%
Up to 1 Year | (395) | 38 | - | 2 | - | - | - | (1,721) | 1,507 | (1,054) | (1,623) | -3%
1 to 5 Years | 1,535 | 2,050 | 1,958 | 247 | 381 | - | (12) | 194 | 19 | (50) | 6,322 | 11%
Over 5 Years | 1,414 | 3,186 | 761 | 175 | 770 | - | (203) | 218 | 8 | (86) | 6,243 | 11%
Total Exposure to European Union Sovereign Counterparties | 3,482 | 18,660 | 10,783 | 25,259 | 2,936 | 88 | (242) | (2,053) | 2,527 | (2,759) | 58,680 | 100%

F-298

b) Concentration of risk on activities in the real-estate market in Spain

Quantitative information on activities in the real-estate market in Spain

The following quantitative information on real-estate activities in Spain has been prepared using the reporting models required by Bank of Spain Circular 5/2011, of November 30.

As of December 31, 2018, 2017 and 2016, exposure to the construction sector and real-estate activities in Spain stood at €11,045, €11,981 and €15,285 million, respectively. Of that amount, risk from loans to construction and real-estate development activities accounted for €3,183, €5,224 and €7,930 million, respectively, representing 1.7%, 2.9% and 5.0% of loans and advances to customers of the balance of business in Spain (excluding the general governments) and 0.5%, 0.8% and 1.1% of the total assets of the Consolidated Group.

Lending for real estate development of the loans as of December 31, 2018, 2017 and 2016 is shown below:

December 2018. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of euros)
| Gross Amount | Drawn Over the Guarantee Value | Accumulated impairment
Financing to construction and real estate development (including land) (Business in Spain) | 3,183 | 941 | (537)
Of which: Impaired assets | 875 | 440 | (463)
Memorandum item: |  |  |
Write-offs | 2,619 |  |
Memorandum item: |  |  |
Total loans and advances to customers, excluding the General Governments (Business in Spain) | 183,196 |  |
Total consolidated assets (total business) | 676,689 |  |
Impairment and provisions for normal exposures | 4,938 |  |

December 2017. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of euros)
| Gross Amount | Drawn Over the Guarantee Value | Accumulated impairment
Financing to construction and real estate development (including land) (Business in Spain) | 5,224 | 2,132 | (1,500)
Of which: Impaired assets | 2,660 | 1,529 | (1,461)
Memorandum item: |  |  |
Write-offs | 2,289 |  |
Memorandum item: |  |  |
Total loans and advances to customers, excluding the General Governments (Business in Spain) | 174,014 |  |
Total consolidated assets (total business) | 690,059 |  |
Impairment and provisions for normal exposures | (5,843) |  |

December 2016. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of euros)
| Gross Amount | Drawn Over the Guarantee Value | Accumulated impairment
Financing to construction and real estate development (including land) (Business in Spain) | 7,930 | 3,449 | (2,944)
Of which: Impaired assets | 5,095 | 2,680 | (2,888)
Memorandum item: |  |  |
Write-offs | 2,061 |  |
Memorandum item: |  |  |
Total loans and advances to customers, excluding the General Governments (Business in Spain) | 159,492 |  |
Total consolidated assets (total business) | 731,856 |  |
Impairment and provisions for normal exposures | (5,830) |  |

F-299

The following is a description of the real estate credit risk based on the types of associated guarantees:

Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase (Millions of euros)
| 2018 | 2017 | 2016
Without secured loan | 324 | 552 | 801
With secured loan | 2,859 | 4,672 | 7,129
Terminated buildings | 1,861 | 2,904 | 3,875
Homes | 1,382 | 2,027 | 2,954
Other | 479 | 877 | 921
Buildings under construction | 432 | 462 | 760
Homes | 408 | 439 | 633
Other | 24 | 23 | 127
Land | 566 | 1,306 | 2,494
Urbanized land | 364 | 704 | 1,196
Rest of land | 202 | 602 | 1,298
Total | 3,183 | 5,224 | 7,930

As of December 31, 2018, 2017 and 2016, 58.5%, 55.6%, and 48.9% of loans to developers were guaranteed with buildings (74.3%, 69.8% and 76.2%, are homes), and only 17.8%, 25.0% and 31.5% by land, of which 64.3%, 53.9% and 48.0% are in urban locations, respectively.

The table below provides the breakdown of the financial guarantees given as of December 31, 2018, 2017 and 2016:

Financial guarantees given (Millions of euros)
| December 2018 | December 2017 | December 2016
Houses purchase loans | 48 | 64 | 62
Without mortgage | 24 | 12 | 18

F-300

The information on the retail mortgage portfolio risk (housing mortgage) as of December 31, 2018, 2017 and 2016 is as follows:

December 2018. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase. (Millions of euros)
| Gross amount | Of which: impaired loans
Houses purchase loans | 80,159 | 3,852
Without mortgage | 1,611 | 30
With mortgage | 78,548 | 3,822

December 2017. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase. (Millions of euros)
| Gross amount | Of which: impaired loans
Houses purchase loans | 83,505 | 4,821
Without mortgage | 1,578 | 51
With mortgage | 81,927 | 4,770

December 2016. Financing Allocated by credit institutions to Construction and Real Estate Development and lending for house purchase. (Millions of euros)
| Gross amount | Of which: impaired loans
Houses purchase loans | 87,874 | 4,938
Without mortgage | 1,935 | 93
With mortgage | 85,939 | 4,845

The loan to value (LTV) ratio of the above portfolio is as follows:

LTV Breakdown of mortgage to households for the purchase of a home (Business in Spain) (Millions of euros)"
| Total risk over the amount of the last valuation available (Loan To Value-LTV)
| Less than or equal to 40% | Over 40% but less than or equal to 60% | Over 60% but less than or equal to 80% | Over 80% but less than or equal to 100% | Over 100% | Total
Gross amount 2018 | 14,491 | 18,822 | 21,657 | 13,070 | 10,508 | 78,548
of which: Impaired loans | 204 | 323 | 507 | 610 | 2,178 | 3,822
Gross amount 2017 | 14,485 | 18,197 | 20,778 | 14,240 | 14,227 | 81,927
of which: Impaired loans | 293 | 444 | 715 | 897 | 2,421 | 4,770
Gross amount 2016 | 13,780 | 18,223 | 20,705 | 15,967 | 17,264 | 85,939
of which: Impaired loans | 306 | 447 | 747 | 962 | 2,383 | 4,845

Outstanding home mortgage loans as of December 31, 2018, 2017 and 2016 had an average LTV of 49%, 51%, and 47% respectively.

The breakdown of foreclosed, acquired, purchased or exchanged assets from debt from loans relating to business in Spain, as well as the holdings and financing to non-consolidated entities holding such assets is as follows:

F-301

Information about Assets Received in Payment of Debts (Business in Spain) (Millions of euros)
| December 2018
| Gross Value | Provisions | Of which: Valuation adjustments on impaired assets, from the time of foreclosure | Carrying Amount
Real estate assets from loans to the construction and real estate development sectors in Spain. | 2,165 | 1,252 | 828 | 913
Terminated buildings | 991 | 445 | 274 | 546
Homes | 588 | 245 | 144 | 343
Other | 403 | 200 | 130 | 203
Buildings under construction | 209 | 131 | 96 | 78
Homes | 194 | 117 | 85 | 77
Other | 15 | 14 | 11 | 1
Land | 965 | 676 | 458 | 289
Urbanized land | 892 | 633 | 421 | 259
Rest of land | 73 | 43 | 37 | 30
Real estate assets from mortgage financing for households for the purchase of a home | 1,797 | 932 | 331 | 865
Rest of foreclosed real estate assets | 348 | 192 | 40 | 156
Equity instruments, investments and financing to non-consolidated companies holding said assets | 1,345 | 234 | 234 | 1,111
Total | 5,655 | 2,610 | 1,433 | 3,045

Additionally, in December 2018, there was an increase of BBVA, S.A.’s stake in Garanti Yatirim Ortakligi AS through its contribution to the capital increase carried out by the latter entity.

Information about Assets Received in Payment of Debts (Business in Spain) (Millions of euros)
| December 2017
| Gross Value | Provisions | Of which: Valuation adjustments on impaired assets, from the time of foreclosure | Carrying Amount
Real estate assets from loans to the construction and real estate development sectors in Spain. | 6,429 | 4,350 | 2,542 | 2,079
Terminated buildings | 2,191 | 1,184 | 606 | 1,007
Homes | 1,368 | 742 | 366 | 626
Other | 823 | 442 | 240 | 381
Buildings under construction | 541 | 359 | 192 | 182
Homes | 521 | 347 | 188 | 174
Other | 20 | 12 | 4 | 8
Land | 3,697 | 2,807 | 1,744 | 890
Urbanized land | 1,932 | 1,458 | 1,031 | 474
Rest of land | 1,765 | 1,349 | 713 | 416
Real estate assets from mortgage financing for households for the purchase of a home | 3,592 | 2,104 | 953 | 1,488
Rest of foreclosed real estate assets | 1,665 | 905 | 268 | 760
Equity instruments, investments and financing to non-consolidated companies holding said assets | 1,135 | 325 | 273 | 810
Total | 12,821 | 7,684 | 4,036 | 5,137

Additionally, in March 2017, there was an increase of BBVA, S.A.’s stake in Testa Residencial through its contribution to the capital increase carried out by the latter entity by contributing assets from the Bank’s real estate assets.

F-302

Information about Assets Received in Payment of Debts (Business in Spain) (Millions of euros)
| December 2016
| Gross Value | Provisions | Of which: Valuation adjustments on impaired assets, from the time of foreclosure | Carrying Amount
Real estate assets from loans to the construction and real estate development sectors in Spain. | 8,017 | 5,290 | 2,790 | 2,727
Finished buildings | 2,602 | 1,346 | 688 | 1,256
Homes | 1,586 | 801 | 408 | 785
Other | 1,016 | 545 | 280 | 471
Buildings under construction | 665 | 429 | 203 | 236
Homes | 642 | 414 | 195 | 228
Other | 23 | 15 | 8 | 8
Land | 4,750 | 3,515 | 1,899 | 1,235
Urbanized land | 3,240 | 2,382 | 1,364 | 858
Rest of land | 1,510 | 1,133 | 535 | 377
Real estate assets from mortgage financing for households for the purchase of a home | 4,332 | 2,588 | 1,069 | 1,744
Rest of foreclosed real estate assets | 1,856 | 1,006 | 225 | 850
Foreclosed equity instruments | 1,240 | 549 | 451 | 691
Total | 15,445 | 9,433 | 4,535 | 6,012

As of December 31, 2018, 2017 and 2016, the gross book value of the Group’s real-estate assets from corporate financing of real-estate construction and development was €2,165, €6,429 and €8,017 million, respectively, with an average coverage ratio of 57.8%, 67.7% and 66.0%, respectively.

The gross book value of real-estate assets from mortgage lending to households for home purchase as of December 31, 2018, 2017 and 2016, amounted to €1,797, €3,592 and €4,332 million, respectively, with an average coverage ratio of 51.9%, 58.6% and 59.7%.

As of December 31, 2018, 2017 and 2016, the gross book value of the BBVA Group’s total real-estate assets (business in Spain), including other real-estate assets received as debt payment, was €4,310, €11,686 and €14,205 million, respectively. The coverage ratio was 55.1%, 63.0% and 62.5%, respectively.

F-303

c) Concentration of risk by geography

Below is a breakdown of the balances of financial instruments recorded 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 impairment losses or loan-loss provisions:

Risks by Geographical Areas. December 2018 (millions of euros)
| Spain | Europe, Excluding Spain | Mexico | USA | Turkey | South America | Other | Total
Derivatives | 3,979 | 16,055 | 1,550 | 7,057 | 161 | 1,150 | 583 | 30,536
Equity instruments (*) | 3,228 | 3,669 | 2,459 | 1,139 | 29 | 212 | 207 | 10,944
Debt securities | 43,777 | 14,908 | 23,134 | 16,991 | 8,048 | 5,274 | 1,312 | 113,445
Central banks | - | - | - | - | - | 1,982 | 71 | 2,052
General governments | 36,553 | 10,675 | 20,891 | 13,276 | 7,887 | 2,431 | 164 | 91,877
Credit institutions | 1,130 | 1,821 | 573 | 74 | 155 | 297 | 463 | 4,514
Other financial corporations | 5,769 | 1,048 | 227 | 2,595 | 5 | 432 | 114 | 10,190
Non-financial corporations | 325 | 1,364 | 1,443 | 1,046 | 1 | 132 | 500 | 4,812
Loans and advances | 177,077 | 43,034 | 55,248 | 62,193 | 45,285 | 40,007 | 7,089 | 429,933
Central banks | 294 | - | - | - | 3,688 | 342 | 1,674 | 6,110
General governments | 16,671 | 329 | 5,727 | 5,369 | 99 | 1,923 | 453 | 30,572
Credit institutions | 5,422 | 13,600 | 1,476 | 696 | 956 | 984 | 639 | 23,774
Other financial corporations | 4,616 | 10,893 | 1,303 | 2,255 | 766 | 637 | 304 | 20,773
Non-financial corporations | 51,942 | 14,317 | 22,426 | 32,480 | 26,813 | 18,518 | 3,852 | 170,349
Households | 98,131 | 3,783 | 24,316 | 21,393 | 12,963 | 17,602 | 168 | 178,355
Total Risk in Financial Assets | 228,061 | 77,666 | 82,392 | 87,381 | 53,523 | 46,644 | 9,191 | 584,858
Loan commitments given | 32,582 | 21,983 | 14,503 | 32,136 | 7,914 | 8,590 | 1,252 | 118,959
Financial guarantees given | 3,242 | 1,708 | 1,528 | 796 | 6,900 | 989 | 1,291 | 16,454
Other Commitments given | 15,995 | 9,229 | 532 | 2,118 | 2,230 | 2,782 | 2,213 | 35,098
Off-balance sheet exposures | 51,819 | 32,920 | 16,563 | 35,050 | 17,043 | 12,360 | 4,756 | 170,511
Total Risks in Financial Instruments | 279,880 | 110,586 | 98,955 | 122,430 | 70,567 | 59,004 | 13,947 | 755,369

(*) Equity instruments are shown net of valuation adjustment.

F-304

Risks by Geographical Areas. December 2017 (Millions of euros)
| Spain | Europe, Excluding Spain | Mexico | USA | Turkey | South America | Other | Total
Derivatives | 6,336 | 20,506 | 1,847 | 4,573 | 113 | 977 | 921 | 35,273
Equity instruments (*) | 3,539 | 4,888 | 2,050 | 991 | 36 | 333 | 71 | 11,908
Debt securities | 44,773 | 15,582 | 21,594 | 13,280 | 10,601 | 5,861 | 1,450 | 113,141
Central banks | 49 | - | - | 2,734 | - | 2,685 | - | 5,468
General governments | 36,658 | 11,475 | 19,323 | 8,894 | 9,668 | 2,246 | 221 | 88,485
Credit institutions | 1,364 | 2,095 | 289 | 98 | 884 | 387 | 752 | 5,869
Other financial corporations | 6,492 | 994 | 337 | 3,026 | 7 | 315 | 194 | 11,365
Non-financial corporations | 259 | 1,018 | 1,645 | 1,262 | 42 | 228 | 234 | 4,688
Loans and advances | 185,597 | 41,426 | 50,352 | 54,315 | 56,062 | 42,334 | 4,585 | 434,670
Central banks | - | 626 | - | - | 5,299 | 1,375 | - | 7,300
General governments | 18,116 | 352 | 5,868 | 5,165 | 152 | 2,354 | 398 | 32,405
Credit institutions | 5,564 | 15,493 | 1,889 | 789 | 1,073 | 1,145 | 345 | 26,297
Other financial corporations | 7,769 | 6,231 | 588 | 1,732 | 1,297 | 664 | 270 | 18,551
Non-financial corporations | 54,369 | 14,615 | 19,737 | 29,396 | 31,691 | 19,023 | 3,345 | 172,175
Households | 99,780 | 4,110 | 22,269 | 17,233 | 16,550 | 17,773 | 227 | 177,942
Total Risk in Financial Assets | 240,245 | 82,401 | 75,842 | 73,159 | 66,812 | 49,504 | 7,027 | 594,990
Loan commitments given | 31,100 | 16,203 | 1,691 | 29,539 | 2,944 | 11,664 | 1,126 | 94,268
Financial guarantees given | 4,635 | 1,427 | 82 | 717 | 7,993 | 1,174 | 519 | 16,546
Other Commitments given | 25,279 | 9,854 | 1,582 | 1,879 | 1,591 | 3,750 | 1,804 | 45,738
Off-balance sheet exposures | 61,014 | 27,484 | 3,356 | 32,134 | 12,527 | 16,588 | 3,450 | 156,552
Total Risks in Financial Instruments | 301,259 | 109,885 | 79,198 | 105,293 | 79,339 | 66,092 | 10,477 | 751,542

(*) Equity instruments are shown net of valuation adjustment.

F-305

Risks by Geographical Areas. December 2016 (Millions of euros)
| Spain | Europe, Excluding Spain | Mexico | USA | Turkey | South America | Other | Total
Derivatives | 7,143 | 26,176 | 2,719 | 4,045 | 175 | 1,359 | 1,339 | 42,955
Equity instruments (*) | 4,641 | 2,303 | 2,383 | 831 | 57 | 316 | 706 | 11,236
Debt securities | 49,355 | 20,325 | 22,380 | 18,043 | 11,695 | 7,262 | 1,923 | 130,983
Central banks | - | - | - | - | - | 2,237 | 16 | 2,253
General governments | 40,172 | 14,282 | 19,771 | 11,446 | 10,258 | 2,257 | 240 | 98,426
Credit institutions | 1,781 | 2,465 | 257 | 112 | 1,331 | 1,459 | 869 | 8,275
Other financial corporations | 6,959 | 1,181 | 352 | 4,142 | 15 | 347 | 379 | 13,376
Non-financial corporations | 443 | 2,397 | 2,000 | 2,343 | 90 | 961 | 418 | 8,653
Loans and advances | 187,717 | 45,075 | 52,230 | 61,739 | 61,090 | 58,020 | 5,067 | 470,938
Central banks | - | 158 | 21 | - | 5,722 | 2,994 | - | 8,894
General governments | 20,741 | 424 | 7,262 | 4,593 | 217 | 1,380 | 256 | 34,873
Credit institutions | 5,225 | 19,154 | 1,967 | 1,351 | 1,194 | 1,515 | 1,011 | 31,416
Other financial corporations | 5,339 | 6,213 | 1,171 | 1,648 | 1,620 | 886 | 214 | 17,091
Non-financial corporations | 54,112 | 14,818 | 19,256 | 34,330 | 34,471 | 26,024 | 3,371 | 186,384
Households | 102,299 | 4,308 | 22,552 | 19,818 | 17,866 | 25,221 | 216 | 192,281
Total Risk in Financial Assets | 248,856 | 93,880 | 79,712 | 84,657 | 73,016 | 66,956 | 9,036 | 656,112
Loan commitments given | 31,477 | 19,219 | 13,060 | 34,449 | 2,912 | 5,161 | 976 | 107,254
Financial guarantees given | 1,853 | 3,504 | 121 | 819 | 9,184 | 2,072 | 714 | 18,267
Other Commitments given | 16,610 | 14,154 | 1,364 | 2,911 | 2,002 | 3,779 | 1,771 | 42,592
Off-balance sheet exposures | 49,940 | 36,878 | 14,545 | 38,179 | 14,098 | 11,012 | 3,461 | 168,113
Total Risks in Financial Instruments | 298,796 | 130,757 | 94,257 | 122,836 | 87,114 | 77,968 | 12,497 | 824,225

The breakdown of the main figures in the most significant foreign currencies in the accompanying consolidated balance sheets is set forth in Appendix VII.

F-306

The breakdown of loans and advances in the heading of Loans and receivables, impaired by geographical area as of December 31, 2018, 2017 and 2016 is as follows:

Impaired Financial Assets by geographic area (Millions of euros)
| December 2018 | December 2017 | December 2016
Spain | 10,025 | 13,318 | 16,812
Rest of Europe | 225 | 549 | 704
Mexico | 1,138 | 1,124 | 1,152
South America | 1,715 | 1,468 | 1,589
The United States | 733 | 631 | 975
Turkey | 2,520 | 2,311 | 1,693
Rest of the world | 2 | - | -
IMPAIRED RISKS | 16,359 | 19,401 | 22,925

F-307

Glossary

Additional Tier 1 Capital | Includes: Preferred stock and convertible perpetual securities and deductions.
Adjusted acquisition cost | The acquisition cost of the securities less accumulated amortizations, plus interest accrued, but not net of any other valuation adjustments.
Amortized cost | The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus, the cumulative amortization using the effective interest rate method of any difference between the initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
Associates | Companies in which the Group has a significant influence, without having control. Significant influence is deemed to exist when the Group owns 20% or more of the voting rights of an investee directly or indirectly.
Available-for-sale financial assets | Available-for-sale (AFS) financial assets are debt securities that are not classified as held-to-maturity investments or as financial assets designated at fair value through profit or loss (FVTPL) and equity instruments that are not subsidiaries, associates or jointly controlled entities and have not been designated as at FVTPL. The AFS category belongs to IAS 39 standard, replaced by “Financial Assets at fair value through other comprehensive income” under IFRS 9.
Baseline macroeconomic scenarios | IFRS 9 requires that an entity must evaluate a range of possible outcomes when estimating provisions and measuring expected credit losses, through macroeconomic scenarios. The baseline macroeconomic scenario presents the situation of the particular economic cycle.
Basic earnings per share | Calculated by dividing “Profit attributable to Parent Company” corresponding to ordinary shareholders of the entity by the weighted average number of shares outstanding throughout the year (i.e., excluding the average number of treasury shares held over the year).
Basis risk | Risk arising from hedging exposure to one interest rate with exposure to a rate that reprices under slightly different conditions.
Business combination | A business combination is a transaction, or any other event, through which a single entity obtains the control of one or more businesses.
Business Model | The assessment as to how an asset shall be classified is made on the basis of both the business model for managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI Criterion). Financial assets are classified on the basis of its business model for managing the financial assets. The Group’s business models shall be determined at a level that reflects how groups of financial assets are managed together to achieve a particular business objective and generate cash flows.
Cash flow hedges | Those that hedge the exposure to variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect profit or loss.
Commissions | Income and expenses relating to commissions and similar fees are recognized in the consolidated income statement using criteria that vary according to their nature. The most significant income and expense items in this connection are: · Fees and commissions relating linked to financial assets and liabilities measured at fair value through profit or loss, which are recognized when collected. · Fees and commissions arising from transactions or services that are provided over a period of time, which are recognized over the life of these transactions or services. · Fees and commissions generated by a single act are accrued upon execution of that act.

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Consolidated statements of cash flows | The indirect method has been used for the preparation of the consolidated statement of cash flows. This method starts from the entity’s consolidated profit and adjusts its amount for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with cash flows classified as investment or finance. As well as cash, short-term, highly liquid investments subject to a low risk of changes in value, such as cash and deposits in central banks, are classified as cash and equivalents. When preparing these financial statements the following definitions have been used: · Cash flows: Inflows and outflows of cash and equivalents. · Operating activities: The typical activities of credit institutions and other activities that cannot be classified as investment or financing activities. · Investing activities: The acquisition, sale or other disposal of long-term assets and other investments not included in cash and cash equivalents or in operating activities. · Financing activities: Activities that result in changes in the size and composition of the Group’s equity and of liabilities that do not form part of operating activities.
Consolidated statements of changes in equity | The consolidated statements of changes in equity reflect all the movements generated in each year in each of the headings of the consolidated equity, including those from transactions undertaken with shareholders when they act as such, and those due to changes in accounting criteria or corrections of errors, if any. The applicable regulations establish that certain categories of assets and liabilities are recognized at their fair value with a charge to equity. These charges, known as “Valuation adjustments” (see Note 31), are included in the Group’s total consolidated equity net of tax effect, which has been recognized as deferred tax assets or liabilities, as appropriate.
Consolidated statements of recognized income and expenses | The consolidated statements of recognized income and expenses reflect the income and expenses generated each year. Such statement distinguishes between income and expenses recognized in the consolidated income statements and “Other recognized income (expenses)” recognized directly in consolidated equity. “Other recognized income (expenses)” include the changes that have taken place in the year in the “Valuation adjustments” broken down by item. The sum of the changes to the heading “Other comprehensive income ” of the consolidated total equity and the consolidated profit for the year comprise the “Total recognized income/expenses of the year”.
Consolidation method | Method used for the consolidation of the accounts of the Group’s subsidiaries. The assets and liabilities of the Group entities are incorporated line-by-line on the consolidate balance sheets, after conciliation and the elimination in full of intragroup balances, including amounts payable and receivable. Group entity income statement income and expense headings are similarly combined line by line into the consolidated income statement, having made the following consolidation eliminations: a) income and expenses in respect of intragroup transactions are eliminated in full. b) profits and losses resulting from intragroup transactions are similarly eliminated. The carrying amount of the parent's investment and the parent's share of equity in each subsidiary are eliminated.
Contingencies | Current obligations of the entity arising as a result of past events whose existence depends on the occurrence or non-occurrence of one or more future events independent of the will of the entity.
Contingent commitments | Possible obligations of the entity that arise from past events and whose existence depends on the occurrence or non-occurrence of one or more future events independent of the entity’s will and that could lead to the recognition of financial assets.

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Control | An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. An investor controls an investee if and only if the investor has all the following: a) Power; An investor has power over an investee when the investor has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the investee’s returns. b) Returns; An investor is exposed, or has rights, to variable returns from its involvement with the investee when the investor’s returns from its involvement have the potential to vary as a result of the investee’s performance. The investor’s returns can be only positive, only negative or both positive and negative. c) Link between power and returns; An investor controls an investee if the investor not only has power over the investee and exposure or rights to variable returns from its involvement with the investee, but also has the ability to use its power to affect the investor’s returns from its involvement with the investee.
Correlation risk | Correlation risk is related to derivatives whose final value depends on the performance of more than one underlying asset (primarily, stock baskets) and indicates the existing variability in the correlations between each pair of assets.
Credit Valuation Adjustment (CVA) | An adjustment to the valuation of OTC derivative contracts to reflect the creditworthiness of OTC derivative counterparties.
Current service cost | Current service cost is the increase in the present value of a defined benefit obligation resulting from employee service in the current period.
Current tax assets | Taxes recoverable over the next twelve months.
Current tax liabilities | Corporate income tax payable on taxable profit for the year and other taxes payable in the next twelve months.
Debit Valuation Adjustment (DVA) | An adjustment made by an entity to the valuation of OTC derivative liabilities to reflect within fair value the entity’s own credit risk.
Debt certificates | Obligations and other interest-bearing securities that create or evidence a debt on the part of their issuer, including debt securities issued for trading among an open group of investors, that accrue interest, implied or explicit, whose rate, fixed or benchmarked to other rates, is established contractually, and take the form of securities or book-entries, irrespective of the issuer.
Default | An asset will be considered as defaulted whenever it is more than 90 days past due.
Deferred tax assets | Taxes recoverable in future years, including loss carry forwards or tax credits for deductions and tax rebates pending application.
Deferred tax liabilities | Income taxes payable in subsequent years.
Defined benefit plans | Post-employment obligation under which the entity, directly or indirectly via the plan, retains the contractual or implicit obligation to pay remuneration directly to employees when required or to pay additional amounts if the insurer, or other entity required to pay, does not cover all the benefits relating to the services rendered by the employees when insurance policies do not cover all of the corresponding post-employees benefits.
Defined contribution plans | Defined contribution plans are retirement benefit plans under which amounts to be paid as retirement benefits are determined by contributions to a fund together with investment earnings thereon. The employer's obligations in respect of its employees current and prior years' employment service are discharged by contributions to the fund.

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Deposits from central banks | Deposits of all classes, including loans and money market operations, received from the Bank of Spain and other central banks.
Deposits from credit institutions | Deposits of all classes, including loans and money market operations received, from credit entities.
Deposits from customers | Redeemable cash balances received by the entity, with the exception of debt certificates, money market operations through counterparties and subordinated liabilities, which are not received from either central banks or credit entities. This category also includes cash deposits and consignments received that can be readily withdrawn.
Derivatives | The fair value in favor (assets) or again (liabilities) of the entity of derivatives not designated as accounting hedges.
Derivatives - Hedging derivatives | Derivatives designated as hedging instruments in an accounting hedge. The fair value or future cash flows of those derivatives is expected to offset the differences in the fair value or cash flows of the items hedged.
Diluted earnings per share | 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 corresponding to ordinary shareholders of the entity, 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.).
Dividends and retributions | Dividend income collected announced during the year, corresponding to profits generated by investees after the acquisition of the stake.
Early retirements | Employees that no longer render their services to the entity but which, without being legally retired, remain entitled to make economic claims on the entity until they formally retire.
Economic capital | Methods or practices that allow banks to consistently assess risk and attribute capital to cover the economic effects of risk-taking activities.
Effective interest rate (EIR) | Discount rate that exactly equals the value of a financial instrument with the cash flows estimated over the expected life of the instrument based on its contractual period as well as its anticipated amortization, but without taking the future losses of credit risk into consideration.
Employee expenses | All compensation accrued during the year in respect of personnel on the payroll, under permanent or temporary contracts, irrespective of their jobs or functions, irrespective of the concept, including the current costs of servicing pension plans, own share based compensation schemes and capitalized personnel expenses. Amounts reimbursed by the state Social Security or other welfare entities in respect of employee illness are deducted from personnel expenses.
Equity | The residual interest in an entity's assets after deducting its liabilities. It includes owner or venturer contributions to the entity, at incorporation and subsequently, unless they meet the definition of liabilities, and accumulated net profits or losses, fair value adjustments affecting equity and, if warranted, non-controlling interests.
Equity instruments | An equity instrument that evidences a residual interest in the assets of an entity, that is after deducting all of its liabilities.
Equity instruments issued other than capital | Includes equity instruments that are financial instruments other than “Capital” and “Equity component of compound financial instruments”.
Equity Method | Is a method of accounting whereby the investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. The investor’s profit or loss includes its share of the investee’s profit or loss and the investor’s other comprehensive income includes its share of the investee’s other comprehensive income.

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Exchange/translation differences | Exchange differences (P&L): Includes the earnings obtained in currency trading and the differences arising on translating monetary items denominated in foreign currency to the functional currency. Exchange differences (valuation adjustments): those recorded due to the translation of the financial statements in foreign currency to the functional currency of the Group and others recorded against equity.
Expected Credit Loss (ECL) | Expected credit losses are a probability-weighted estimate of credit losses over the expected life of the financial instrument. Hence, credit losses are the present value of expected cash shortfalls. The measurement and estimate of these expected credit losses should reflect: 1. An unbiased and probability-weighted amount. 2. The time value of money by discounting this amount to the reporting date using a rate that approximates the EIR of the asset, and 3. Reasonable and supportable information that is available without undue cost or effort. The expected credit losses must be measured as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate or an approximation thereof (forward looking).
Exposure at default | EAD is the amount of risk exposure at the date of default by the counterparty.
Fair value | 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.
Fair value hedges | Derivatives that hedge the exposure to changes in the fair value of assets and liabilities or firm commitments that have not be recognized, or of an identified portion of said assets, liabilities or firm commitments, attributable to a specific risk, provided it could affect the income statement.
Financial Assets at Amortized Cost | Financial assets that do not meet the definition of financial assets designated at fair value through profit or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their instrumentation or maturity.
Financial Assets at fair value through other comprehensive income | Financial instruments with determined or determinable cash flows and in which the entire payment made by the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category includes both the investments from the typical lending activity as well as debts contracted by the purchasers of goods, or users of services, that form part of the entity’s business. It also includes all finance lease arrangements in which the consolidated subsidiaries act as lessors.
Financial guarantees | Contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs when a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument, irrespective of its instrumentation. These guarantees may take the form of deposits, technical or financial guarantees, insurance contracts or credit derivatives.
Financial guarantees given | Transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts.
Financial instrument | A financial instrument is any contract that gives rise to a financial asset of one entity and to a financial liability or equity instrument of another entity.
Financial liabilities at amortized cost | Financial liabilities that do not meet the definition of financial liabilities designated at fair value through profit or loss and arise from the financial entities' ordinary activities to capture funds, regardless of their instrumentation or maturity.
Goodwill | Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not able to be individually identified and separately recognized.

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Gross income | Sum of net interest income, dividend income, share of profit or loss entities accounted for using the equity method, net fee and commission income, net gains and losses on financial assets and liabilities, net exchange differences and net other operating income.
Hedges of net investments in foreign operations | Foreign currency hedge of a net investment in a foreign operation.
Held for trading (assets and liabilities) | Financial assets and liabilities acquired or incurred primarily for the purpose of profiting from variations in their prices in the short term. This category also includes financial derivatives not qualifying for hedge accounting, and in the case of borrowed securities, financial liabilities originated by the firm sale of financial assets acquired under repurchase agreements or received on loan (“short positions”).
Held-to-maturity investments | Held-to-maturity investments are financial assets traded on an active market, with fixed maturity and fixed or determinable payments and cash flows that an entity has the positive intention and financial ability to hold to maturity. The Held-to-maturity category belongs to IAS 39 standard, replaced by IFRS 9.
Impaired financial assets | An asset is credit-impaired according to IFRS 9 if one or more events have occurred and they have a detrimental impact on the estimated future cash flows of the asset. Evidence that a financial asset is credit-impaired includes observable data about the following events: a) significant financial difficulty of the issuer or the borrower, b) a breach of contract (e.g. a default or past due event), c) a lender having granted a concession to the borrower – for economic or contractual reasons relating to the borrower’s financial difficulty – that the lender would not otherwise consider, d) it becoming probable that the borrower will enter bankruptcy or other financial reorganization, e) the disappearance of an active market for that financial asset because of financial difficulties, or f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
Income from equity instruments | Dividends and income on equity instruments collected or announced during the year corresponding to profits generated by investees after the ownership interest is acquired. Income is recognized gross, i.e., without deducting any withholdings made, if any.
Insurance contracts linked to pensions | The fair value of insurance contracts written to cover pension commitments.
Inventories | Assets, other than financial instruments, under production, construction or development, held for sale during the normal course of business, or to be consumed in the production process or during the rendering of services. Inventories include land and other properties held for sale at the real estate development business.
Investment properties | Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for own use or sale in the ordinary course of business.
Joint arrangement | An arrangement of which two or more parties have joint control.
Joint control | The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

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Joint operation | A joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets of the arrangement and obligations for the liabilities. A joint venturer shall recognize the following for its participation in a joint operation: a) its assets, including any share of the assets of joint ownership; b) its liabilities, including any share of the liabilities incurred jointly; c) income from the sale of its share of production from the joint venture; d) its share of the proceeds from the sale of production from the joint venturer; and e) its expenses, including any share of the joint expenses. A joint venturer shall account for the assets, liabilities, income and expenses related to its participation in a joint operation in accordance with IFRS applicable to the assets, liabilities, income and expenses specific question.
Joint venture | A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venturer shall recognize its interest in a joint venture as an investment and shall account for that investment using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures.
Leases | A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments the right to use an asset for an agreed period of time, a stream of cash flows that is essentially equivalent to the combination of principal and interest payments under a loan agreement. a) A lease is classified as a finance lease when it substantially transfers all the risks and rewards incidental to ownership of the asset forming the subject-matter of the contract. b) A lease will be classified as operating lease when it is not a financial lease.
Liabilities included in disposal groups classified as held for sale | The balance of liabilities directly associated with assets classified as non-current assets held for sale, including those recognized under liabilities in the entity's balance sheet at the balance sheet date corresponding to discontinued operations.
Liabilities under insurance contracts | The technical reserves of direct insurance and inward reinsurance recorded by the consolidated entities to cover claims arising from insurance contracts in force at period-end.
Loans and advances to customers | Loans and receivables, irrespective of their type, granted to third parties that are not credit entities.
Loans and receivables | Financial instruments with determined or determinable cash flows and in which the entire payment made by the entity will be recovered, except for reasons attributable to the solvency of the debtor. This category includes both the investments from the typical lending activity (amounts of cash available and pending maturity by customers as a loan or deposits lent to other entities, and unlisted debt certificates), as well as debts contracted by the purchasers of goods, or users of services, that form part of the entity’s business. It also includes all finance lease arrangements in which the consolidated subsidiaries act as lessors. The Loans and receivables category belongs to IAS 39 standard, replaced by “Financial Assets at Amortized Cost” under IFRS 9.
Loss given default (LGD) | It 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.
Mortgage-covered bonds | Financial asset or security created from mortgage loans and backed by the guarantee of the mortgage loan portfolio of the entity.
Net operating income | Gross income less administrative costs and amortization.
Non performing financial guarantees given | The balance of non performing risks, whether for reasons of default by customers or for other reasons, for financial guarantees given. This figure is shown gross: in other words, it is not adjusted for value corrections (loan loss reserves) made.

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Non Performing Loans (NPL) | The balance of non performing risks, whether for reasons of default by customers or for other reasons, for exposures on balance loans to customers. This figure is shown gross: in other words, it is not adjusted for value corrections (loan loss reserves) made.
Non-controlling interests | The net amount of the profit or loss and net assets of a subsidiary attributable to associates outside the group (that is, the amount that is not owned, directly or indirectly, by the parent), including that amount in the corresponding part of the consolidated earnings for the period.
Non-current assets and disposal groups held for sale | A non-current asset or disposal group, whose carrying amount is expected to be realized through a sale transaction, rather than through continuing use, and which meets the following requirements: a) it is immediately available for sale in its present condition at the balance sheet date, i.e. only normal procedures are required for the sale of the asset. b) the sale is considered highly probable.
Non-monetary assets | Assets and liabilities that do not provide any right to receive or deliver a determined or determinable amount of monetary units, such as tangible and intangible assets, goodwill and ordinary shares subordinate to all other classes of capital instruments.
Option risk | Risks arising from options, including embedded options.
Other financial assets/liabilities at fair value through profit or loss | Instruments designated by the entity from the inception at fair value with changes in profit or loss. An entity may only designate a financial instrument at fair value through profit or loss, if doing so more relevant information is obtained, because: a) It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes called "accounting mismatch") that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. It might be acceptable to designate only some of a number of similar financial assets or financial liabilities if doing so a significant reduction (and possibly a greater reduction than other allowable designations) in the inconsistency is achieved. b) The performance of a group of financial assets or financial liabilities is managed and evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity´s key management personnel. These are financial assets managed jointly with “Liabilities under insurance and reinsurance contracts” measured at fair value, in combination with derivatives written with a view to significantly mitigating exposure to changes in these contracts' fair value, or in combination with financial liabilities and derivatives designed to significantly reduce global exposure to interest rate risk. These headings include customer loans and deposits effected via so-called unit-linked life insurance contracts, in which the policyholder assumes the investment risk.
Other Reserves | This heading is broken down as follows: i) Reserves or accumulated losses of investments in subsidiaries, joint ventures and associate: include the accumulated amount of income and expenses generated by the aforementioned investments through profit or loss in past years. ii) Other: includes reserves different from those separately disclosed in other items and may include legal reserve and statutory reserve.
Other retributions to employees long term | Includes the amount of compensation plans to employees long term.

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Own/treasury shares | The amount of own equity instruments held by the entity.
Past service cost | It is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits.
Post-employment benefits | Retirement benefit plans are arrangements whereby an enterprise provides benefits for its employees on or after termination of service.
Probability of default (PD) | It 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.
Property, plant and equipment/tangible assets | Buildings, land, fixtures, vehicles, computer equipment and other facilities owned by the entity or acquired under finance leases.
Provisions | Provisions include amounts recognized to cover the Group’s current obligations arising as a result of past events, certain in terms of nature but uncertain in terms of amount and/or cancellation date.
Provisions for contingent liabilities and commitments | Provisions recorded to cover exposures arising as a result of transactions through which the entity guarantees commitments assumed by third parties in respect of financial guarantees granted or other types of contracts, and provisions for contingent commitments, i.e., irrevocable commitments which may arise upon recognition of financial assets.
Provisions for pensions and similar obligation | Constitutes all provisions recognized to cover retirement benefits, including commitments assumed vis-à-vis beneficiaries of early retirement and analogous schemes.
Provisions or (-) reversal of provisions | Provisions recognized during the year, net of recoveries on amounts provisioned in prior years, with the exception of provisions for pensions and contributions to pension funds which constitute current or interest expense.
Refinanced Operation | An operation which is totally or partially brought up to date with its payments as a result of a refinancing operation made by the entity itself or by another company in its group.
Refinancing Operation | An operation which, irrespective of the holder or guarantees involved, is granted or used for financial or legal reasons related to current or foreseeable financial difficulties that the holder(s) may have in settling one or more operations granted by the entity itself or by other companies in its group to the holder(s) or to another company or companies of its group, or through which such operations are totally or partially brought up to date with their payments, in order to enable the holders of the settled or refinanced operations to pay off their loans (principal and interest) because they are unable, or are expected to be unable, to meet the conditions in a timely and appropriate manner.
Renegotiated Operation | An operation whose financial conditions are modified when the borrower is not experiencing financial difficulties, and is not expected to experience them in the future, i.e. the conditions are modified for reasons other than restructuring.
Repricing risk | Risks related to the timing mismatch in the maturity and repricing of assets and liabilities and off-balance sheet short and long-term positions.

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Restructured Operation | An operation whose financial conditions are modified for economic or legal reasons related to the holder's (or holders') current or foreseeable financial difficulties, in order to enable payment of the loan (principal and interest), because the holder is unable, or is expected to be unable, to meet those conditions in a timely and appropriate manner, even if such modification is provided for in the contract. In any event, the following are considered restructured operations: operations in which a haircut is made or assets are received in order to reduce the loan, or in which their conditions are modified in order to extend their maturity, change the amortization table in order to reduce the amount of the installments in the short term or reduce their frequency, or to establish or extend the grace period for the principal, the interest or both; except when it can be proved that the conditions are modified for reasons other than the financial difficulties of the holders and, are similar to those applied on the market on the modification date for operations granted to customers with a similar risk profile.
Retained earnings | Accumulated net profits or losses recognized in the income statement in prior years and retained in equity upon distribution.
Securitization fund | A fund that is configured as a separate equity and administered by a management company. An entity that would like funding sells certain assets to the securitization fund, which, in turn, issues securities backed by said assets.
Share premium | The amount paid in by owners for issued equity at a premium to the shares' nominal value.
Shareholders' funds | Contributions by stockholders, accumulated earnings recognized in the income statement and the equity components of compound financial instruments.
Short positions | Financial liabilities arising as a result of the final sale of financial assets acquired under repurchase agreements or received on loan.
Significant increase in credit risk | In order to determine whether there has been a significant increase in credit risk for lifetime expected losses recognition, the Group has develop a two-prong approach: a) Quantitative criterion: based on comparing the current expected probability of default over the life of the transaction with the original adjusted expected probability of default. The thresholds used for considering a significant increase in risk take into account special cases according to geographic areas and portfolios. b) Qualitative criterion: most indicators for detecting significant risk increase are included in the Group's systems through rating/scoring systems or macroeconomic scenarios, so quantitative analysis covers the majority of circumstances. The Group will use additional qualitative criteria when it considers it necessary to include circumstances that are not reflected in the rating/score systems or macroeconomic scenarios used.
Significant influence | Is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. If an entity holds, directly or indirectly (i.e. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (i.e. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence. The existence of significant influence by an entity is usually evidenced in one or more of the following ways: a) representation on the board of directors or equivalent governing body of the investee; b) participation in policy-making processes, including participation in decisions about dividends or other distributions; c) material transactions between the entity and its investee; d) interchange of managerial personnel; or e) provision of essential technical information.

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Solely Payments of Principle and Interest (SPPI) | The assessment as to how an asset shall be classified is made on the basis of both the business model for managing the financial asset and the contractual cash flow characteristic of the financial asset (SPPI Criterion). To determine whether a financial asset shall be classified as measured at amortized cost or FVOCI, a Group assesses (apart from the business model) whether the cash flows from the financial asset represent, on specified dates, solely payments of principal and interest on the principal amount outstanding (SPPI).
Stages | IFRS 9 classifies financial instruments into three categories, which depend on the evolution of their credit risk from the moment of initial recognition. The first category includes the transactions when they are initially recognized - without significant increase in credit risk (Stage 1); the second comprises the operations for which a significant increase in credit risk has been identified since its initial recognition - significant increase in credit risk (Stage 2) and the third one, the impaired operations Impaired (Stage 3). The transfer logic is defined in a symmetrical way, whenever the condition that triggered a transfer to Stage 2 is no longer met, the exposure will be transferred to Stage 1. In the case of forbearances transferred to stage 2, as long as the loan is flagged as forbearance it will keep its status as Stage 2. However, when the loan is not flagged as forbearance it will be transferred back to Stage 1.
Structured credit products | Special financial instrument backed by other instruments building a subordination structure.
Structured Entities | A structured entity 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 any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some or all of the following features or attributes: a) restricted activities. b) a narrow and well-defined objective, such as to effect a tax-efficient lease, carry out research and development activities, provide a source of capital or funding to an entity or provide investment opportunities for investors y passing on risks and rewards associated with the assets of the structured entity to investors. c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support. d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).
Subordinated liabilities | Financing received, regardless of its instrumentation, which ranks after the common creditors in the event of a liquidation.
Subsidiaries | Companies over which the Group exercises control. An entity is presumed to have control over another when it possesses the right to oversee its financial and operational policies, through a legal, statutory or contractual procedure, in order to obtain benefits from its economic activities. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one half of an entity's voting power, unless, exceptionally, it can be clearly demonstrated that ownership of more than one half of an entity's voting rights does not constitute control of it. Control also exists when the parent owns half or less of the voting power of an entity when there is: a) an agreement that gives the parent the right to control the votes of other shareholders; b) power to govern the financial and operating policies of the entity under a statute or an agreement; power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; c) power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
Tax liabilities | All tax related liabilities except for provisions for taxes.
Territorial bonds | Financial assets or fixed asset security issued with the guarantee of portfolio loans of the public sector of the issuing entity.

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Tier 1 Capital | Mainly includes: Common stock, parent company reserves, reserves in consolidated companies, non-controlling interests, deductions and others and attributed net income.
Tier 2 Capital | Mainly includes: Subordinated, preferred shares and non- controlling interest.
Unit-link | This is life insurance in which the policyholder assumes the risk. In these policies, the funds for the technical insurance provisions are invested in the name of and on behalf of the policyholder in shares of Collective Investment Institutions and other financial assets chosen by the policyholder, who bears the investment risk.
Value at Risk (VaR) | Value at Risk (VaR) is the basic variable for measuring and controlling the Group’s market risk. This risk metric estimates the maximum loss that may occur in a portfolio’s market positions for a particular time horizon and given confidence level VaR figures are estimated following two methodologies: a) VaR without smoothing, which awards equal weight to the daily information for the immediately preceding last two years. This is currently the official methodology for measuring market risks vis-à-vis limits compliance of the risk. b) VaR with smoothing, which weighs more recent market information more heavily. This is a metric which supplements the previous one. VaR with smoothing adapts itself more swiftly to the changes in financial market conditions, whereas VaR without smoothing is, in general, a more stable metric that will tend to exceed VaR with smoothing when the markets show less volatile trends, while it will tend to be lower when they present upturns in uncertainty.
Yield curve risk | Risks arising from changes in the slope and the shape of the yield curve.

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