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Code of conduct 03 Mar 2016

What is principle-adjusted return?

The world of business resorts to a series of ratios – Return on Assets (ROA), Return on Equity (ROE), Return on Investment (ROI) or Risk-Adjusted Return (RAR) – to gauge a company’s profitability and activity.

We at BBVA strive to help our company achieve the best results. But besides what and how much we achieve, we worry about how those results are achieved. That is why we also talk about principle-adjusted return, one of the levers on which we have built our distinctive banking model, which we call responsible banking.

The principles that inspire our business are integrity, prudence and transparency. Integrity, as a reflection of the ethicality that guides our actions and our relationships with stakeholders. Prudence, understood as precaution when taking risks. Transparency, as the maxim to offer access to clear and truthful information, within the limits of the rule of law.

Our corporate governance model, regulatory compliance systems, risk management policies and business model are all a reflection of our commitment to abide by these principles in the way we run our business: taking responsibility of how it affects people’s lives and society.

And we do this out of our own conviction and, also, out of the need to restore the financial sector’s reputation, in an increasingly regulated environment where consumers are more aware than ever of their rights.

How does this Principle-Adjusted Return maxim translate into practice? A clear way to put it is this: not everything goes. Let’s see some specific examples based on BBVA’s experience.

When we talk about integrity, a good example is the code of conduct. This code defines, among other things the rules and guidelines to prevent conflicts of interest, corruption, commitments in Human Rights related matters. Standards and rules to guide how we interact with our customers, our co-workers, the company and society as a whole.

Regarding prudence, a good reference is responsible lending. Here we include topics such as lending taking into account the repayment capacity of customers to prevent overborrowing, define realistic repayment plans with respect to the loans granted, be prudent in the relationship between the amount lent and the value of the collaterals, avoid sales techniques that may cause borrowers to take out loans that do not fit their needs, establishing an adequate debt renegotiation policy.

As regards transparency, I would underscore the importance of transparency and clarity with our customers to make sure they always understand what they sign. Only thus will it be possible to build a balanced and mutually beneficial long-term relationship, key to build confidence and loyalty.

In the case of BBVA, we’re hard at work on this, through our TCR Communication project, where TCR stands for Transparent, Clear and Responsible, the three key concepts we are progressively integrating in all points of contact with our customers.

Through this principle-adjusted return model, we aim to become the best bank for our customers and for society,  offering the best banking solutions, in a responsible manner, and helping people make the best financial decisions, and, ultimately, make lead better lives.

 

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