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Note 6 - Risk Management | 6 Months Ended
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Jun. 30, 2019
Risk Management Abstract |
Risk Management Explanatory | 6. Risk management The principles and risk management policies, as well as tools and procedures established and implemented in the Group as of June 30, 2019 do not differ significan tly from those included in the consolidated financial s tatements of the Group for the year ended December 31, 2018 (see Note 7 of such financial statements). 6.1 Risk factors 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 thres holds. 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 risks that could affect the Group’s business trends. These risks are described in the fol lowing main sections: Macroeconomic and geopolitical risks Global growth is slowing in the face of protectionist pressures affecting the global industrial sector and international trade, although first quarter data indicates a certain degree of stabilizati on, supported by the strength of the service sector, strong employment and low inflation. This trend is occurring across all regions, with cyclical slowdown in the United States, the trend toward growth moderation in China and the continuation of lower gro wth in Europe. Thus, global growth is forecasted at around 3.3% in 2019 and 2020. However, the deterioration of trade negotiations between the United States and China since late April poses a major risk to the global economy. In terms of monetary policy, t he main central banks signaled their intention to adopt further measures that would provide a stimulus to counteract the high level of uncertainty in the economy, as well as the continued decrease in the long-term inflation outlook. The Federal Reserve, af ter raising its benchmark interest rate to 2.50% in December, laid the foundations to initiate interest rate reductions in the face of more moderate growth forecasts, weighed down by the trade threat and political uncertainty. For its part, the ECB strengt hened its accommodative monetary policy stance by approving a new liquidity provision program, postponing its commitment to maintain interest rates at current levels until mid-2020, and indicating that it has a range of instruments at its disposal to comba t growth and inflation risks, including the reduction of deposit rates or the renewal of the bond purchase program. Accordingly, interest rates will remain low in major economies, enabling emerging countries to gain room to maneuver. Regulatory and reputat ional 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 liqu idity 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 rigorou s 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 a ffect 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, the internal control model, the Code of Conduc t, the Corporate Principles in tax matters 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, etc.) but also opportunities (new framework of relations with customers, greater ability to adapt to their needs, new products and distribution channels, etc.). 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 huma n 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 financ ial sector is exposed to increasing litigation, so the financial institutions face a large number of proceedings of every kind, civil, criminal, administrative, litigation, as well as investigations from the supervisor, along several jurisdictions, which c onsequences are difficult to determine (including those procedures in which an undetermined number of applicants is involved, in which damages claimed are not easy to estimate, in which an exorbitant amount is claimed, in which new jurisdictional issues ar e introduced under creative non contrasted legal arguments and those which are at a very initial stage). In Spain, in many of the existing proceedings the plaintiffs claim, both before Spanish courts and in preliminary rulings before the Court of Justice o f the European Union, that a number of clauses usually included in a mortgage loan agreements with financial institutions are declared abusive (including mortgage costs clauses, early termination clauses, the use of certain reference interest rate s and ope ning fees). With regards to mortgage loan agreements with consumers linked to the IRPH index (average rate of mortgage loans for more than three years for the acquisition of free housing, granted by credit institutions in Spain), which is considered an "of ficial interest rate" by the mortgage transparency regulation, calculated by the Bank of Spain and published in the Spanish Official Gazette, the Spanish Supreme Court issued on December 14, 2017 ruling nº 669/2017 in which confirmed that it was not possib le to determine the lack of transparency of the interest rate of the loan from the mere fact of its reference to one or another official index, or consider it abusive according to Directive 93/13. As of the date of this report, there is still pending a pre liminary ruling resolution of the European Court of Justice which challenges the decision taken by the Spanish Supreme Court. In addition, the application of certain interest rates and other mandatory rules in certain revolving credit card agreements is al so being challenged in Spanish courts. This kind of resolution against the Group or other financial institutions may directly or indirectly affect the Group. The Group is also involved in antitrust proceedings in certain countries which could, among other things, give rise to sanctions or lead to lawsuits from third parties. T he Spanish judicial authorities are investigating the activities of the company Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt). Such investigation includes the provision of services to the Bank. In this regard, on 29 July 2019, the Bank was notified of the order from the Central Investigating Court number 6 of the National High Court, declaring the Bank as an official suspect (investigado) under preliminary proceedings 96/20 17 - piece number 9, for possible breaches of law related to bribery, revelation of secrets and corruption. The Bank has been collaborating proactively with the judicial authorities, sharing with the courts information of the 'forensic' investigation, curr ently ongoing, which was commissioned to PriceWaterhouseCoopers through its external lawyers Garrigues, together with Uría. The Bank is not authorized to publicly divulge this information given the requirement of not interfering with the judicial investiga tion. The criminal proceeding is at an incipient stage in the pre-trial phase and continues under secrecy order, so it is not possible to predict at this time the scope or duration of such proceeding or its possible outcome or implications for the Group, n otwithstanding the potential reputation risk of these proceedings. The Group constantly manages and monitors investigations, proceedings and legal or regulatory actions for the defense of its interests, making provisions (based on the number of litigations and the status of the proceedings or actions) to cover them when necessary. However, it is difficult to predict the outcome of investigations, legal or regula tory proceedings or actions to which the Bank is already a party, those that may arise in the fut ure or those in which other financial institutions are a party. Therefore, in the event of a change in the case law or unexpected results of some of these, the provisions recorded may be insufficient and may have a significant adverse effect on the Group's business, financial position and results. 6.2 Credit risk 6.2.1 Credit risk exposure In accordance with IFRS 7 “Financial Instruments: Disclosures”, the BBVA Group’s credit risk, not including its impairment losses, by headings in the balance sheets as of June 30, 2019 and 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 | June 2019 | Stage 1 | Stage 2 | Stage 3
Financial assets held for trading |  | 74.954 |  |  |
Debt securities | 9 | 32.274 |  |  |
Equity instruments | 9 | 5.555 |  |  |
Loans and advances | 9 | 37.125 |  |  |
Non-trading financial assets mandatorily at fair value through profit or loss |  | 4.918 |  |  |
Loans and advances | 10 | 1.052 |  |  |
Debt securities | 10 | 155 |  |  |
Equity instruments | 10 | 3.711 |  |  |
Financial assets designated at fair value through profit or loss | 11 | 1.403 |  |  |
Derivatives (trading and hedging) |  | 40.738 |  |  |
Financial assets at fair value through other comprehensive income |  | 63.396 | 63.396 | - | -
Debt securities | 12 | 60.750 | 60.750 | - | -
Equity instruments | 12 | 2.613 | 2.613 | - | -
Loans and advances to credit institutions | 12 | 33 | 33 | - | -
Financial assets at amortized cost |  | 443.162 | 394.884 | 32.230 | 16.048
Loans and advances to central banks |  | 5.582 | 5.582 | - | -
Loans and advances to credit institutions |  | 10.862 | 10.739 | 113 | 10
Loans and advances to customers |  | 389.306 | 341.582 | 31.724 | 15.999
Debt securities |  | 37.412 | 36.981 | 392 | 39
Total financial assets risk |  | 628.572 | 458.280 | 32.230 | 16.048
Total loan commitments and financial guarantees | 30 | 174.621 | 164.314 | 9.389 | 918
Total maximum credit exposure |  | 803.193 |  |  |
Maximum Credit Risk Exposure (Millions of Euros)
| Notes | December 2018 | Stage 1 | Stage 2 | Stage 3
Financial assets held for trading |  | 59.581 |  |  |
Debt securities | 9 | 25.577 |  |  |
Equity instruments | 9 | 5.254 |  |  |
Loans and advances | 9 | 28.750 |  |  |
Non-trading financial assets mandatorily at fair value through profit or loss |  | 5.135 |  |  |
Loans and advances | 10 | 1.803 |  |  |
Debt securities | 10 | 237 |  |  |
Equity instruments | 10 | 3.095 |  |  |
Financial assets designated at fair value through profit or loss | 11 | 1.313 |  |  |
Derivatives (trading and hedging) |  | 38.249 |  |  |
Financial assets at fair value through other comprehensive income |  | 56.365 | 56.362 | 3 | -
Debt securities | 12 | 53.737 | 53.734 | 3 | -
Equity instruments | 12 | 2.595 | 2.595 | - | -
Loans and advances to credit institutions | 12 | 33 | 33 | - | -
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 |  | 592.571 | 440.993 | 30.905 | 16.394
Total loan commitments and financial guarantees | 30 | 170.511 | 161.404 | 8.120 | 987
Total maximum credit exposure |  | 763.082 |  |  |
The breakdown by country and Stage of the maximum credit risk exposure, the provisions recognized and the carrying amount of the loans and advances to customers as of June 30, 2019 and 2018 is shown below:
June 2019
| Gross exposure | Accumulated impairment | Carrying amount
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
Spain (*) | 174.609 | 13.510 | 9.061 | 197.180 | (748) | (740) | (3.932) | (5.420) | 173.860 | 12.771 | 5.129 | 191.760
The United States | 48.971 | 6.222 | 730 | 55.923 | (193) | (326) | (213) | (732) | 48.778 | 5.896 | 516 | 55.190
Mexico | 51.450 | 3.600 | 1.289 | 56.339 | (690) | (379) | (833) | (1.901) | 50.760 | 3.221 | 456 | 54.438
Turkey (**) | 32.859 | 5.687 | 3.093 | 41.639 | (179) | (559) | (1.614) | (2.353) | 32.680 | 5.128 | 1.478 | 39.286
South America (***) | 32.906 | 2.698 | 1.807 | 37.411 | (371) | (259) | (1.096) | (1.726) | 32.535 | 2.439 | 712 | 35.685
Others | 788 | 7 | 19 | 814 | (1) | (1) | (17) | (18) | 787 | 6 | 2 | 796
Total (****) | 341.582 | 31.724 | 15.999 | 389.306 | (2.182) | (2.263) | (7.706) | (12.151) | 339.400 | 29.462 | 8.293 | 377.155
(*) Spain includes all countries where BBVA, S.A. operates. (**) Turkey includes all countries in which Garanti BBVA operates. (***) In South America, BBVA Group operates in Argentina, Chile, Colombia, Paraguay, Peru, Uruguay and Venezuela. (****) The amount of the accumulated impairment includes the provisions recorded for credit risk over the remaining expected lifetime of purchased financial instruments. Those provisions were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc, S.A.
December 2018
| Gross exposure | Accumulated impairment | Carrying amount
| Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total
Spain (*) | 172.599 | 12.827 | 10.021 | 195.447 | (713) | (877) | (4.284) | (5.874) | 171.886 | 11.951 | 5.737 | 189.574
The United States | 50.665 | 5.923 | 733 | 57.321 | (206) | (299) | (153) | (658) | 50.459 | 5.624 | 580 | 56.663
Mexico | 48.354 | 3.366 | 1.138 | 52.858 | (640) | (373) | (737) | (1.750) | 47.714 | 2.992 | 401 | 51.107
Turkey (**) | 34.883 | 6.113 | 2.722 | 43.718 | (171) | (591) | (1.479) | (2.241) | 34.712 | 5.523 | 1.244 | 41.479
South America (***) | 31.947 | 2.436 | 1.715 | 36.098 | (338) | (234) | (1.084) | (1.656) | 31.609 | 2.202 | 631 | 34.442
Others | 756 | 8 | 19 | 783 | - | (1) | (18) | (19) | 755 | 7 | 1 | 763
Total (****) | 339.204 | 30.673 | 16.348 | 386.225 | (2.070) | (2.374) | (7.755) | (12.199) | 337.134 | 28.299 | 8.593 | 374.027
(*) Spain includes all countries where BBVA, S.A. operates. (**) Turkey includes all countries in which Garanti BBVA operates. (***) In South America, BBVA Group operates in Argentina, Chile, Colombia, Paraguay, Peru, Uruguay and Venezuela. (****) The amount of the accumulated impair ment includes the provisions recorded for credit risk over the remaining expected lifetime of purchased financial instruments. Those provisions were determined at the moment of the Purchase Price Allocation and were originated mainly in the acquisition of Catalunya Banc, S.A. The disclosure of loans and advances at amortized cost covered by collateral, at June 30, 2019 and December 31, 2018, is the following:
Guarantees received (Millions of Euros)
| June 2019 | December 2018
Value of collateral | 156.190 | 158.268
Of which: guarantees normal risks under special monitoring | 13.874 | 14.087
Of which: guarantees non-performing risks | 4.668 | 5.068
Value of other guarantees | 25.330 | 16.897
Of which: guarantees normal risks under special monitoring | 2.186 | 1.519
Of which: guarantees non-performing risks | 509 | 502
Total value of guarantees received | 181.521 | 175.165
The breakdown by counterparty and product of loans and advances, net of i mpairment losses, as well as the gross carrying amount by type of product, classified in the different headings of the assets, as of June 30, 2019 and December 31, 2018 is shown below:
June 2019 (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | Gross carrying amount
On demand and short notice | - | 7 | - | 192 | 2.689 | 616 | 3.503 | 3.686
Credit card debt | - | 11 | 1 | 3 | 1.935 | 13.459 | 15.409 | 16.619
Trade receivables |  | 1.007 | - | 364 | 14.937 | 96 | 16.404 | 16.688
Finance leases | - | 227 | - | 6 | 8.201 | 405 | 8.838 | 9.198
Reverse repurchase loans | - | 116 | 260 | 4 | 3 | - | 383 | 386
Other term loans | 5.534 | 27.407 | 3.609 | 6.752 | 135.393 | 159.780 | 338.475 | 348.547
Advances that are not loans | 41 | 880 | 7.009 | 2.022 | 1.147 | 549 | 11.648 | 11.711
LOANS AND ADVANCES | 5.575 | 29.655 | 10.879 | 9.342 | 164.305 | 174.906 | 394.661 | 406.836
By secured loans |  |  |  |  |  |  |  |
Of which: mortgage loans collateralized by immovable property |  | 1.102 | 15 | 270 | 25.319 | 111.314 | 138.021 | 141.562
Of which: other collateralized loans | - | 8.758 | 172 | 1.081 | 28.409 | 6.621 | 45.041 | 45.922
By purpose of the loan |  |  |  |  |  |  |  |
Of which: credit for consumption |  |  |  |  |  | 41.636 | 41.636 | 44.403
Of which: lending for house purchase |  |  |  |  |  | 110.423 | 110.423 | 111.949
By subordination |  |  |  |  |  |  |  |
Of which: project finance loans |  |  |  |  | 13.554 |  | 13.554 | 13.871
December 2018 (Millions of Euros)
| Central banks | General governments | Credit institutions | Other financial corporations | Non-financial corporations | Households | Total | Gross carrying amount
On demand and short notice | - | 10 | - | 151 | 2.833 | 648 | 3.641 | 3.834
Credit card debt | - | 8 | 1 | 2 | 2.328 | 13.108 | 15.446 | 16.495
Trade receivables |  | 948 | - | 195 | 16.190 | 103 | 17.436 | 17.716
Finance leases | - | 226 | - | 3 | 8.014 | 406 | 8.650 | 9.077
Reverse repurchase loans | - | 293 | 477 | - | - | - | 770 | 772
Other term loans | 3.911 | 26.839 | 2.947 | 7.030 | 133.573 | 157.760 | 332.060 | 342.264
Advances that are not loans | 29 | 1.592 | 5.771 | 2.088 | 984 | 498 | 10.962 | 11.025
LOANS AND ADVANCES | 3.941 | 29.917 | 9.196 | 9.468 | 163.922 | 172.522 | 388.966 | 401.183
By secured loans |  |  |  |  |  |  |  |
Of which: mortgage loans collateralized by immovable property |  | 1.056 | 15 | 219 | 26.784 | 111.809 | 139.883 | 144.005
Of which: other collateralized loans | - | 7.179 | 285 | 1.389 | 31.393 | 6.835 | 47.081 | 47.855
By purpose of the loan |  |  |  |  |  |  |  |
Of which: credit for consumption |  |  |  |  |  | 40.124 | 40.124 | 42.736
Of which: lending for house purchase |  |  |  |  |  | 111.007 | 111.007 | 112.952
By subordination |  |  |  |  |  |  |  |
Of which: project finance loans |  |  |  |  | 13.973 |  | 13.973 | 14.286
of which: project finance loans | 17.658 |  |  |  |  | 17.027 |  |
6.2.2 Past due but not impaired and impaired secured loans risks The tables below provide details by counterpart and by product of past due risks not considered to be impaired, as of June 30, 2019 and Dece mber 31, 2018, listed by their first past-due date; as well as the breakdown of the debt securities and loans and advances individually and collectively estimated, and the specific allowances for individually estimated and for collectively estimated.
June 2019 (Millions of Euros)
| Stage 1 | Stage 2 | 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 | - | - | - | - | - | - | - | - | 18
Loans and advances | 4.414 | 281 | - | 5.143 | 2.547 | - | 583 | 551 | 2.851
General governments | 109 | 32 | - | 6 | 1 | - | 13 | - | 20
Credit institutions | 6 | 5 | - | - | - | - | - | - | -
Other financial corporations | 163 | 2 | - | 4 | 1 | - | - | - | 6
Non-financial corporations | 1.153 | 170 | - | 1.711 | 918 | - | 158 | 187 | 1.410
Households | 2.982 | 71 | - | 3.423 | 1.628 | - | 412 | 363 | 1.416
TOTAL | 4.414 | 281 | - | 5.143 | 2.547 | - | 583 | 551 | 2.870
On demand (call) and short notice (current account) | 263 | 1 | - | 32 | 50 | - | 1 | 2 | 35
Credit card debt | 239 | 6 | - | 659 | 114 | - | 5 | 27 | 130
Trade receivables | 29 | 14 | - | 40 | 145 | - | 5 | 3 | 59
Finance leases | 297 | 20 | - | 76 | 103 | - | 16 | 46 | 90
Other term loans | 3.577 | 186 | - | 4.336 | 2.133 | - | 555 | 473 | 2.532
Advances that are not loans | 10 | 54 | - | - | 1 | - | - | - | 5
Of which: mortgage loans collateralized by immovable property | 1.623 | 46 | - | 2.115 | 1.122 | - | 461 | 375 | 1.247
Of which: other collateralized loans | 341 | 21 | - | 945 | 169 | - | 22 | 28 | 162
Of which: credit for consumption | 985 | 27 | - | 1.266 | 461 | - | 27 | 50 | 376
Of which: lending for house purchase | 1.384 | 30 | - | 1.819 | 941 | - | 333 | 257 | 707
Of which: project finance loans | 34 | - | - | 8 | 188 | - | - | - | 52
December 2018 (Millions of Euros)
| Stage 1 | Stage 2 | 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
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
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
The breakdown of loans and advances, within financial assets at amortized cost, impaired and accumulated impairment, as well as the gross carrying amount, by counterparties as of June 30, 2019 and December 31, 2018 is as follows:
June 2019 (Millions of Euros)
| Gross carrying amount | Non-performing loans and advances | Accumulated impairment | Non-performing loans and advances as a % of the total
Central banks | 5.582 | - | (8) | -
General governments | 29.167 | 104 | (92) | 0,4%
Credit institutions | 10.862 | 10 | (16) | 0,1%
Other financial corporations | 9.405 | 17 | (63) | 0,2%
Non-financial corporations | 170.149 | 8.484 | (6.270) | 5,0%
Households | 180.585 | 7.394 | (5.725) | 4,1%
LOANS AND ADVANCES | 405.750 | 16.009 | (12.174) | 3,9%
December 2018 (Millions of Euros)
| Gross carrying amount | Non-performing loans and advances | Accumulated impairment | Non-performing loans and advances as a % of the total
Central banks | 3.947 | - | (6) | -
General governments | 28.632 | 128 | (84) | 0,4%
Credit institutions | 9.175 | 10 | (12) | 0,1%
Other financial corporations | 9.490 | 11 | (22) | 0,1%
Non-financial corporations | 169.764 | 8.372 | (6.260) | 4,9%
Households | 178.339 | 7.838 | (5.833) | 4,4%
LOANS AND ADVANCES | 399.347 | 16.359 | (12.217) | 4,1%
The changes during the six months ended June 30, 2019 and the year ended December 31, 2018 of impaired financial assets and contingent risks are as follow:
Changes in Impaired Financial Assets and Contingent Risks (Millions of Euros)
| June 2019 | December 2018
Balance at the beginning | 17.134 | 20.590
Additions | 4.817 | 9.792
Decreases (*) | (2.940) | (6.909)
Net additions | 1.877 | 2.883
Amounts written-off | (1.734) | (5.076)
Exchange differences and other | (522) | (1.264)
Balance at the end | 16.755 | 17.134
(*) Reflects the total amount of impaired loans derecognized from the consolidated balance sheet throughout the period as a result of mortgage foreclosures and real estate assets received in lieu of payment as well as monetary recoveri es. 6.2.3 Impairment losses Below are the changes in the six months ended June 30, 2019, and the year ended December 31, 2018 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:
Changes in the accumulated impairment losses (Millions of Euros)
| June 2019 | December 2018
Opening balance | 12.295 | 14.004
Increase in impairment losses charged to income | 6.110 | 9.070
Stage 1 | 1.117 | 1.411
Stage 2 | 1.334 | 1.071
Stage 3 | 3.659 | 6.589
Decrease in impairment losses charged to income | (4.118) | (4.547)
Stage 1 | (922) | (1.469)
Stage 2 | (944) | (799)
Stage 3 | (2.252) | (2.279)
Transfer to written-off loans, exchange differences and other | (2.022) | (6.231)
Closing balance | 12.265 | 12.295

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