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2018 Pillar 3 Disclosures
Credit and dilution risks
Counterparty credit risk
4 | 4.4
Counterparty credit risk is understood as the credit risk arising from derivatives, repurchase
operations, securities or commodities lending, margin lending transactions or long settlement
transactions carried out by the bank.
The details of the exposure to counterparty risk through derivative and securities financing
operations at 31 December 2018, are set out below:
Measurements
Positive fair value of the contracts
1,524,690
Minus: Effect of netting agreements
1,320,154
Credit exposure after netting
204,536
Minus: Effect of the guarantees received
0
Credit exposure after netting and guarantees
204,536
Thousands of euros.
For the calculation of the minimum capital required associated with counterparty credit risk at
31 December 2018, the bank applied the market price valuation method, in accordance with the
terms of the standards set out in Part Three, Title II, Chapter 6 of Regulation (EU) No. 575/2013.
By way of summary, it can be stated that, for derivatives operations, the value of the exposure is
determined by adding the cost of replacement of all contracts with a positive value (established
by means of attribution of a market price to the contracts and operations) and the amount of
the potential future exposure of each instrument or operation, calculated in accordance with
the terms of Article 274 of Regulation (EU) No. 575/2013. In the calculation of the amount of the
potential risk, the scales contained in Table 1 of the aforementioned article were applied.
Credit derivatives
At year-end 2018, the bank held no credit derivatives.
Impact in collateral in the case of a reduction
in the bank’s credit rating
The impact is extremely low in view of the fact that practically all of the collateral agreements
currently in force do not have an agency rating as a factor that conditions the elements
contained therein. Of the five contracts that have the Minimum Transfer Amount linked to the
rating, three would be amended in the event the bank is at levels Baa1/BBB + or lower, and two
if the investment grade is lost. The impact on liquidity would not be considered relevant in any
of these cases.
4.4.1
4.4.2