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P. 91 2018 Pillar 3 Disclosures
Annex
of the operation in which only automatic
classification factors are considered, or in which
no factor other than the automatic factors has
had a critical influence. This is the case, among
others, for operations classified in this category
because the account holder has outstanding
amounts over thirty days old.
v. Those classified as standard operations under
special monitoring due to belonging to a group of
operations with similar credit risk characteristics
(“homogeneous risk group”). This is the case,
among others, for groups of operations classified
in this category due to the account holder
belonging to groups, such as geographical areas
or economic activity sectors in which weaknesses
are observed.
vi. Those classified as standard risk.
Credit risk because of country risk
Classification of operations according to credit risk
due to country risk: Debt instruments not valued at
fair value through profit or loss, as well as off-balance
exposures, irrespective of the holder, will be analysed
to determine credit risk due to country risk. To this
effect, country risk comprises risk where holders are
resident in a particular country due to circumstances
other than usual business risk. Country risk comprises
sovereign risk, transfer risk and other risks derived from
international financial activity.
Operations will be grouped according to the following:
a) Group 1. This group will include operations where the
parties bound reside in:
i) Countries of the European Economic Area.
ii) Switzerland, the United States, Canada, Japan,
Australia and New Zealand, aside from in the
event of a significant deterioration of the
country’s country risk profile, in which case they
will be classified according to that.
b) Group 2. This group will include operations where the
parties bound reside in low-risk countries.
c) Group 3. This group will include, at least, operations
where the parties bound reside in countries showing
significant macroeconomic deterioration, which it is
believed could affect the country’s payment capacity.
d) Group 4. This group will include, at least, operations
where the parties bound reside in countries showing
far-reaching macroeconomic deterioration, which it is
believed could affect the country’s payment capacity.
This group will include operations charged to countries
in group 3 which are experiencing a worsening of the
indicators mentioned in the previous group.
e) Group 5. This group will include, at least, operations
where the parties bound reside in countries showing
prolonged issues with resolving their debt, with the
possibility of repayment considered to be doubtful.
f) Group 6. This group will include operations for which it
is considered there is a remote chance the sums will
be recovered, due to circumstances attributable to the
country. In all cases this group will include operations
where the parties bound reside in countries that have
renounced their debts, or who have not attended to
depreciation and amortisation nor interest payments for
a period of four years.
At 31 December 2018 the bank applies the estimation
percentages and criteria established in Annex IX of
Bank of Spain Circular 4/2017 of 27 November, which
came into force on 1 January 2018.
A