BBVA(BBAR) - 2022 Q4 - Annual Report

PART I Item 3. Key Information This section outlines the principal risks facing the company, categorized into those related to Argentina's volatile economic and political environment, risks specific to the Argentine financial system and BBVA Argentina's operations, and legal and regulatory challenges Risks Relating to Argentina The company's business is significantly affected by Argentina's economic and political instability, including periods of low/negative growth, high inflation, and currency devaluation - The company's business is significantly affected by Argentina's economic and political instability, which includes periods of low/negative growth, high inflation, and currency devaluation[23][24] - High inflation poses a significant risk, with the Consumer Price Index (CPI) reaching 94.8% in 2022, requiring the application of IAS 29 for hyperinflationary economies in the financial statements[37][38][39] - Argentina's high levels of public spending and fiscal deficits, financed partly by monetary issuance from the Central Bank, could negatively affect the economy and the company's access to financial markets[43][45][46] - Exchange controls and restrictions on capital inflows/outflows, reinstated in 2019 and tightened, could materially adversely affect public sector activity and the Bank's business[56][57][58] - Fluctuations in the value of the Argentine peso remain a key risk, with the nominal exchange rate rising 72.4% in 2022 while inflation was 94.8%, indicating a real appreciation of the official exchange rate[70][76] Risks Relating to the Argentine Financial System and to BBVA Argentina The Bank faces liquidity issues due to the short-term deposit base, increased competition from less regulated FinTechs, and risks from its sovereign rating and IT system dependencies - The short-term structure of the Argentine financial system's deposit base, mostly transactional and a small fraction of GDP, could lead to liquidity issues and limit long-term financial intermediation[98][103] - The Bank faces increased competition from non-bank competitors like FinTechs and BigTechs, which are often less heavily regulated, potentially affecting the Bank's competitive position and operations[115][116] - The Bank's credit ratings are significantly influenced by Argentina's sovereign rating, with recent downgrades or negative outlooks from agencies like Fitch and S&P potentially limiting its access to financing[123][125] - The financial industry's increasing dependency on IT systems exposes the Bank to risks of system failures, cyber-attacks, and electronic fraud, which have been increasing[126][127][129] - As a subsidiary of the BBVA Group, the Bank could be adversely affected by activities across the group, such as the ongoing judicial investigation in Spain into BBVA's relationship with Cenyt, which could damage its reputation[119][122][123] - The Bank is subject to restrictions on its ability to pay dividends, with the Central Bank suspending distributions and later enabling limited payments with prior authorization[162][163][164] Legal, Regulatory and Compliance Risks The Bank operates in a highly regulated and unstable environment, facing risks of non-compliance, restrictive regulations, and legal challenges from consumer protection laws and alleged exchange operation breaches - The Bank operates in a highly regulated environment, subject to rules from the Central Bank, CNV, and UIF, where non-compliance can lead to sanctions, including the revocation of its banking license[167][168][170] - The regulatory framework for financial institutions is unstable, with numerous restrictive regulations enacted since the Fernández administration took office, affecting interest rates, fees, credit lines, and dividend distributions[172][176][181] - The Consumer Protection Law and Credit Card Law may limit the Bank's rights, affecting its ability to determine charges and fees, which could adversely impact business and results of operations[183][184][185] - The Bank is exposed to significant compliance risks, including anti-money laundering, anti-corruption laws (like FCPA), and data protection, with criminal proceedings opened by the BCRA related to alleged breaches of exchange operations regulations[188][189][191] Item 4. Information on the Company This section details the company's history, business operations, organizational structure, and the regulatory landscape, including recent Argentine economic developments, an overview of the Bank's segments, subsidiaries, statistical information, and the complex Argentine banking regulatory framework Recent Political and Economic Developments in Argentina Argentina's economy experienced high political and economic instability in 2022, with significant inflation and Central Bank rate hikes | Indicator | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | GDP Growth | -9.9% | 10.3% | 5.2% | | Inflation (CPI) | 36.1% | 50.9% | 94.8% | | Primary Fiscal Deficit (% of GDP) | 6.5% | 2.0% | 2.4% | | Trade Surplus (US$ million) | 12,530 | 14,750 | 6,923 | - In 2022, Argentina's economy experienced high political and economic instability, with three different Ministers of Economy during the year, and Sergio Massa's appointment bringing some calm to markets with a focus on reducing the fiscal deficit and accumulating reserves[210] - The Central Bank raised the monetary policy rate from 38% in January 2022 to 75% in September 2022 to combat accelerating inflation, resulting in the monetary base growing 42.4% in 2022[230][231] A. History and Development of the Company The company, originally incorporated in 1886, changed its name to Banco BBVA Argentina S.A. in 2019 and has recently engaged in strategic investments and corporate restructuring - Originally incorporated as Banco Francés del Río de la Plata S.A. on October 14, 1886, the company changed its name to Banco BBVA Argentina S.A. in 2019[235][236] - The Bank has recently engaged in strategic investments and corporate restructuring, including the merger with BBVA Francés Valores S.A. in 2021 and participation in the incorporation of digital payment companies Play Digital S.A. (2020) and Openpay Argentina S.A. (2021)[238][239][240] B. Business Overview BBVA Argentina is a leading private financial institution offering retail and corporate banking services nationwide, with significant digital client penetration and a multi-channel distribution network - BBVA Argentina is one of the leading private financial institutions in Argentina, a subsidiary of Banco Bilbao Vizcaya Argentaria S.A. (BBVA), offering retail and corporate banking services nationwide[242] Financial Highlights (As of Dec 31, 2022) | Metric | As of Dec 31, 2022 | | :--- | :--- | | Total Consolidated Assets | Ps. 1,951.9 billion | | Total Loan Portfolio | Ps. 717.1 billion | | Total Deposits | Ps. 1,313.8 billion | | Total Shareholders' Equity | Ps. 361.4 billion | | Consolidated Net Profit (FY 2022) | Ps. 57.9 billion | - As of December 31, 2022, the Bank had a 6.6% market share of total private deposits and 9.1% of total private loans (on a consolidated basis)[246] - The Bank operates through a multi-channel distribution network including 243 branches, 881 ATMs, and 854 self-service terminals, complemented by a modern internet and mobile banking platform[251] - Digital client penetration is significant, with 2.3 million active retail digital clients (61.8% penetration) and 2.0 million active retail mobile clients (55.4% penetration) as of December 31, 2022, with digital sales accounting for 83.9% of total retail sales in units in 2022[260] C. Organizational Structure Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) is the controlling shareholder of BBVA Argentina, holding a majority stake and various interests in financial and investment management subsidiaries and associated companies - As of December 31, 2022, Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) owned 66.55% of BBVA Argentina's capital stock, making it the controlling shareholder[315] Key Subsidiaries | Subsidiary | Ownership % | Principal Activity | | :--- | :--- | :--- | | PSA Finance Argentina Cía. Financiera S.A. | 50.00% | Financial institution | | BBVA Asset Management Argentina S.A.U. | 100.00% | Investment fund manager | | Volkswagen Financial Services S.A. | 51.00% | Financial institution | | Consolidar AFJP S.A. (in liquidation) | 53.89% | Pension fund manager | - The Bank holds a 40% interest in the joint venture Rombo Compañía Financiera S.A., the main finance company for Renault's dealer network[346][348] - The Bank has minority stakes in several associated companies, including BBVA Seguros Argentina S.A. (12.22%), Interbanking S.A. (11.11%), Play Digital S.A. (10.88%), and OpenPay Argentina S.A. (12.51%)[350] D. Property, plants and equipment The Bank owns its principal executive offices in Buenos Aires and operates a network of 243 retail branches, with a near-even split between owned and leased properties - The Bank's principal executive offices are located at Av. Córdoba 111, Buenos Aires, Argentina, in a property it owns[364] - As of December 31, 2022, the Bank's network consisted of 243 retail branches, with 114 (47%) located in owned properties and 129 (53%) in leased properties[365][251] E. Selected statistical information The Bank's financial performance in 2022 was characterized by significant net interest income, a predominantly fixed-rate loan portfolio, and high average real rates on peso time deposits due to inflation Financial Performance (in thousands of Argentine pesos) | (in thousands of Argentine pesos) | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Total interest-earning assets (Avg. balance) | 1,372,615,179 | 1,325,476,697 | 1,038,226,803 | | Total interest-bearing liabilities (Avg. balance) | 963,538,037 | 994,804,380 | 765,062,471 | | Net Interest Income | 338,818,327 | 241,186,669 | 226,548,038 | | Net Interest Margin | 24.68% | 18.20% | 21.82% | - The loan portfolio as of December 31, 2022, totaled Ps. 737.99 billion, with the majority (66.74%) maturing within 3 months, and the largest segment being 'To the non-financial private sector and residents abroad' at Ps. 733.51 billion[380][381] - The vast majority of the loan portfolio (Ps. 723.54 billion out of Ps. 737.99 billion) is at a fixed rate as of December 31, 2022[382][383] - The composition of deposits is dominated by non-interest-bearing checking accounts and interest-bearing savings and time deposits, with the average real rate paid on peso time deposits in 2022 being 54.91%, up from 36.78% in 2021, reflecting the high inflation environment[389][391] F. The Argentine Banking System and its Regulatory Framework The Argentine banking system is supervised by the Central Bank, which enforces strict capital and liquidity requirements based on Basel III principles, and operates a deposit guarantee system - The Argentine banking system is supervised by the Central Bank (BCRA), which sets technical ratios for indebtedness, liquidity, credit concentration, and foreign exchange positions, and conducts regular inspections[397][398] - Financial institutions must comply with minimum capital requirements based on Basel III principles, including a 4.5% common equity ratio, 6% Tier 1 capital ratio, and 8% total capital ratio, plus a capital conservation buffer of 2.5%[427][428] - As of December 31, 2022, BBVA Argentina's total capital to risk-weighted assets ratio was 25.1% under Central Bank rules, significantly exceeding the minimum requirement[449][450] - The Bank must maintain a Liquidity Coverage Ratio (LCR) of at least 1.00, and as of December 31, 2022, BBVA Argentina's LCR was 348%, indicating a strong liquidity position[451][452][454] - The Deposit Guarantee System, managed by SEDESA, covers deposits up to Ps. 1.5 million per person per deposit as of year-end 2022, increasing to Ps. 6 million from January 1, 2023[535][537][539] G. Cybersecurity and Fraud Management BBVA's security strategy focuses on cybersecurity, data protection, physical security, and fraud management, reinforced by biometric authentication and a 24x7 global response team - BBVA's security strategy is based on four pillars: cybersecurity, data protection, physical security, and security in business processes/fraud management[544] - In 2022, security measures were reinforced, including the use of facial biometrics for remote client onboarding and transaction completion, and enhancing security in high-risk business processes[545][546] - The BBVA Group operates a 24x7 Global Computer Emergency Response Team (CERT) complemented by a local Security Operation Center (SOC) to detect and respond to cyberattacks[550] Item 5. Operating and Financial Review and Prospects This section provides management's discussion and analysis of the Bank's financial condition and results of operations, covering the impact of Argentina's macroeconomic conditions, recent regulatory changes, and critical accounting policies, detailing a significant increase in net profit for 2022 driven by higher net interest income in a high-inflation environment, and discussing liquidity sources, capital adequacy, and key economic and business trends A. Operating Results The Bank achieved a significant increase in net profit for 2022, driven by strong net interest income growth in a high-inflation environment, while also improving its non-performing loan ratio Consolidated Operating Results (in thousands of Argentine pesos) | (in thousands of Argentine pesos) | FY 2022 | FY 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | 338,818,327 | 240,283,465 | 41.0% | | Gross Income | 368,271,721 | 267,955,970 | 37.4% | | Profit for the Year | 57,960,678 | 18,224,239 | 218.0% | | Profit Attributable to Owners | 58,841,292 | 18,307,836 | 221.4% | | Basic EPS (in pesos) | 96.03 | 29.88 | 221.4% | - Net interest income grew by 41.0% in 2022 compared to 2021, primarily due to a 50.4% increase in interest income, driven by higher returns on government securities (LELIQ and CER-linked bonds) in a high-inflation environment, partially offset by a 63.2% increase in interest expenses mainly from higher rates on time deposits[597][604][608] - The loss on net monetary position increased by 65.6% to Ps. 133.6 billion in 2022, reflecting the significant impact of Argentina's 94.8% inflation rate on the Bank's monetary assets and liabilities[597][645][647] - The non-performing loan (NPL) ratio improved, decreasing to 1.13% at year-end 2022 from 1.87% at year-end 2021, due to positive credit portfolio performance, particularly in the wholesale segment[644] B. Liquidity and Capital Resources The Bank maintains a strong capital position, with consolidated excess capital of Ps. 207.7 billion, despite a decrease in its deposit base and liquid assets ratio in 2022 - The Bank's primary source of funds is its deposit base, which totaled Ps. 1,313.8 billion at December 31, 2022, a decrease from Ps. 1,379.8 billion at year-end 2021[664] - The ratio of liquid assets (cash, cash equivalents, and FVTPL assets) to total deposits was 25.03% at December 31, 2022, compared to 32.31% at year-end 2021[663] - As of December 31, 2022, the Bank had consolidated excess capital of Ps. 207.7 billion pursuant to Central Bank rules, demonstrating compliance with capital requirements[680] - The Bank has a program for issuing corporate bonds up to US$500 million, extended until 2028, with its subsidiaries having outstanding principal and interest of Ps. 191.2 million as of December 31, 2022, while the Bank itself had no outstanding corporate bonds[664][665] D. Trend Information The Argentine financial system remains under-penetrated, suggesting growth potential if macroeconomic conditions normalize, while the Bank continues to prioritize its digitalization strategy amidst global banking sector turmoil - The Argentine financial system remains small and under-penetrated compared to regional peers, suggesting potential for growth if inflation and interest rates normalize[705] - The Bank expects loan demand to grow in line with or slightly below inflation in the near term, driven by high interest rates and a lack of investment, with excess liquidity likely continuing to be invested in Central Bank instruments and treasury bonds[710] - The Bank's digitalization strategy remains a key component of its future plans, aiming to build on the accelerated adoption of digital tools by customers during the pandemic and improve customer satisfaction through tools like the Net Promoter Score[713] - Recent turmoil in the U.S. and European banking sectors (e.g., Silicon Valley Bank, Credit Suisse) is noted as a potential risk, as the operating environment for financial services can be highly correlated during times of stress[704] Item 6. Directors, Senior Management and Employees This section provides details on the Bank's leadership and workforce, including the Board of Directors and senior management, their compensation, the structure and function of board committees, and employee statistics - The Board of Directors consists of a minimum of three and a maximum of nine directors elected for three-year terms, with Lorenzo de Cristóbal de Nicolás serving as Chairman as of the report date[714][716] - The aggregate compensation paid to all directors and officers for the fiscal year ended December 31, 2022, was Ps. 1,444.26 million[729] - The Bank has an Audit Committee composed of three independent directors, which assists the Board in monitoring internal controls, financial statements, and external auditors[740][741] Employee Statistics | Employee Category | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | :--- | | Main office | 4,011 | 3,863 | 3,118 | | Branches | 1,877 | 2,000 | 2,901 | | Total | 5,888 | 5,863 | 6,019 | Item 7. Major Shareholders and Related Party Transactions This section details the ownership structure and transactions with related entities, confirming that Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) and its subsidiary BBV América S.L. collectively held a controlling interest of 66.1% of the Bank's ordinary shares as of March 31, 2023, and that all related party transactions were conducted on market terms Beneficial Ownership (as of Mar 31, 2023) | Beneficial Owner | % of Shares Outstanding (as of Mar 31, 2023) | | :--- | :--- | | Banco Bilbao Vizcaya Argentaria S.A. | 39.97% | | BBV América SL (controlled by BBVA) | 26.13% | | The Bank of New York Mellon (as ADS holder) | 16.78% | | Administración Nacional de Seguridad Social | 7.06% | - As of December 31, 2022, BBVA's total equity interest in the Bank was 66.55%[768] - All financing and transactions with related parties were conducted in the ordinary course of business on substantially the same terms as those for comparable transactions with unrelated parties and did not involve more than the normal risk of collectability[770] Item 8. Financial Information This section addresses legal proceedings and the Bank's dividend policy, noting the Bank's involvement in several legal and regulatory actions related to alleged violations of anti-money laundering and exchange regulations, and highlighting that dividend distributions are subject to numerous restrictions and require prior Central Bank authorization - The Bank is involved in several legal proceedings, including actions from the UIF for alleged anti-money laundering violations and criminal proceedings from the BCRA related to alleged breaches of exchange operation regulations[783][785] - Dividend distribution is heavily regulated by the Central Bank (BCRA), which, after a two-year ban, allowed a limited distribution in 2022, and for 2023, initially reinstated a suspension but later amended it to allow distribution of up to 40% of distributable profit with prior authorization[786][791][792] Item 9. The Offer and Listing This section provides information on the trading of the Bank's securities, detailing that its shares are listed on the Buenos Aires stock exchange (BYMA) and its American Depositary Shares (ADSs) are listed on the NYSE and Madrid Stock Exchange, along with historical price data and an overview of Argentine market regulation - The Bank's ordinary shares are listed on the BYMA (ticker: BBAR), and its ADSs (1 ADS = 3 ordinary shares) are listed on the NYSE (ticker: BBAR) and the Madrid Stock Exchange (ticker: XBBAR)[793] Historical Share and ADS Prices | Period | BYMA Share Price (ARS) | NYSE ADS Price (USD) | | :--- | :--- | :--- | | 2022 High | 455.20 | 3.90 | | 2022 Low | 185.25 | 2.15 | | 2021 High | 288.90 | 4.48 | | 2021 Low | 126.45 | 2.54 | Item 10. Additional Information This section covers key corporate and regulatory details, including the Bank's bylaws, material contracts, Argentina's complex exchange controls with restrictions on debt repayment, exports, imports, and dividend transfers, and a summary of Argentine and U.S. federal income tax consequences for shareholders D. Exchange Controls Argentina maintains significant exchange controls, impacting foreign debt repayment, export repatriation, import payments, and foreign currency purchases for individuals and legal entities, as well as dividend transfers abroad - Argentina has significant exchange controls, reinstated in September 2019 and tightened since, requiring repayment of foreign debt principal and interest to be settled through the official exchange market and subject to timing restrictions[830][832] - Exporters are required to repatriate and settle foreign currency proceeds within specified timeframes, while importers face a complex approval system (SIRA) that determines their access to the exchange market for goods payments[833][835] - Individuals are limited to purchasing US$200 per month for savings, with purchases on credit/debit cards abroad counting towards this limit, and legal entities require prior Central Bank approval to purchase foreign currency for investment purposes[837][838] - The transfer of profits and dividends abroad to non-resident shareholders requires prior approval from the Central Bank, with limited exceptions[839][840] E. Taxation Argentina applies a progressive corporate income tax rate and a withholding tax on dividends, while capital gains from publicly traded shares are generally tax-exempt for non-residents, and the Bank is responsible for paying the Personal Property Tax on behalf of its shareholders - For fiscal years starting on or after January 1, 2021, Argentina applies a progressive corporate income tax rate scale (25%, 30%, 35%), and dividends paid from profits generated in these years are subject to a 7% withholding tax[848] - Capital gains from the sale of shares or ADSs by non-resident beneficiaries are generally tax-exempt, provided the beneficiary does not reside in a non-cooperating jurisdiction and the securities are publicly offered and traded on authorized markets[854] - The Bank is responsible for paying the Personal Property Tax (at a 0.50% rate) on behalf of its shareholders, calculated on the value of the shareholders' equity from the last balance sheet[860] Item 11. Quantitative and Qualitative Disclosures About Market Risk This section details the Bank's comprehensive risk management framework, covering credit, financial (market, liquidity, interest rate), and non-financial risks, utilizing a Value at Risk (VaR) model for market risk, conducting stress tests, and managing interest rate sensitivity and foreign exchange risk - The Bank's risk management framework is structured around Credit Risk, Financial Risk (market, liquidity, interest rate), and Non-Financial Risk, with a focus on prudence and anticipation[876][878] - The Bank uses a Value at Risk (VaR) model to estimate the maximum potential loss in its trading portfolio, with the average daily trading VaR for 2022 being Ps. 141.13 million and a maximum of Ps. 263.07 million[912][915] - As of December 31, 2022, a hypothetical 500 basis point increase in interest rates would reduce the Bank's net portfolio value by Ps. 2.34 billion but increase its net interest income by approximately Ps. 14.41 billion[925][927] - The Bank's foreign exchange risk management aims to minimize the impact of currency fluctuations, with a net liability position in foreign currency of Ps. 5.58 billion as of December 31, 2022[928][678] PART II Item 15. Controls and Procedures This section confirms the effectiveness of the Bank's internal controls, with management concluding that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, a conclusion supported by an unqualified audit opinion from Pistrelli, Henry Martin y Asociados S.R.L. (Ernst & Young) - Management, including the CEO and CFO, evaluated the Bank's disclosure controls and procedures and concluded they were effective as of December 31, 2022[937] - Management concluded that the Bank's internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[939] - The independent registered public accounting firm, Pistrelli, Henry Martin y Asociados S.R.L. (Member of Ernst & Young Global Limited), issued an unqualified opinion on the effectiveness of the Bank's internal control over financial reporting as of December 31, 2022[940][943] Item 16C. Principal Accountant Fees and Services This section details the fees paid to the Bank's independent external auditors, totaling Ps. 258.02 million for Pistrelli, Henry Martin y Asociados S.R.L. (Ernst & Young) in 2022 and Ps. 370.18 million for KPMG in 2021 Auditor Fees (in millions of pesos) | (in millions of pesos) | 2022 (EY) | 2021 (KPMG) | | :--- | :--- | :--- | | Audit fees | 257.30 | 348.05 | | Audit-related fees | 0.72 | 21.72 | | Tax fees | — | — | | All other fees | — | 0.41 | | Total fees | 258.02 | 370.18 | Item 16G. Corporate Governance This section outlines the significant differences between BBVA Argentina's corporate governance practices, governed by Argentine law, and NYSE standards for U.S. companies, including variations in independent director requirements, committee composition, and non-management director meetings - As a non-U.S. company listed on the NYSE, BBVA Argentina may follow its home country corporate governance practices in lieu of most NYSE requirements[958] - Unlike NYSE standards which require a majority of independent directors, Argentine law does not, though the Bank's Audit Committee is required to have a majority of independent directors[960][970] - Argentine law does not require regularly scheduled executive meetings of non-management directors without management present, a practice mandated by NYSE Section 303A.03[964] PART III Item 18. Financial Statements This section contains the Bank's audited consolidated financial statements for the fiscal years ended December 31, 2022, 2021, and 2020, prepared in accordance with IFRS as issued by the IASB, including reports from independent registered public accounting firms, consolidated statements, and detailed notes Report of Independent Registered Public Accounting Firm Independent auditors issued unqualified opinions on the Bank's consolidated financial statements for 2022 and the two-year period ended 2021, with the 2022 audit identifying impairment of financial assets as a critical audit matter - Pistrelli, Henry Martin y Asociados S.R.L. (Ernst & Young) issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2022, stating they present fairly the financial position in conformity with IFRS-IASB[990] - KPMG issued an unqualified opinion on the consolidated financial statements for the two-year period ended December 31, 2021[1002] - A critical audit matter identified for the 2022 audit was the impairment of financial assets, specifically the allowance for credit losses, due to the complexity and significant estimation involved in the Expected Credit Loss (ECL) model[994][995] Notes to the Consolidated Financial Statements The financial statements are prepared under IFRS-IASB in thousands of Argentine pesos, restated for hyperinflation, and the impairment model (IFRS 9) classifies financial instruments into three stages based on credit risk, incorporating forward-looking macroeconomic information for ECL calculation - The financial statements are prepared in accordance with IFRS-IASB and are expressed in thousands of Argentine pesos, restated to the measuring unit current as of December 31, 2022, to reflect the hyperinflationary status of the Argentine economy as required by IAS 29[1057][1063] - The impairment model (IFRS 9) classifies financial instruments into three stages based on credit risk, with Stage 1 using a 12-month Expected Credit Loss (ECL), while Stages 2 (significant risk increase) and 3 (impaired) use a lifetime ECL[1102] - The Bank's ECL calculation incorporates forward-looking macroeconomic information, using a baseline scenario plus upside and downside scenarios, with Real GDP growth being the primary indicator[1114][1197] - The Bank has adopted a new definition of default (NDoD) effective after November 2021 to enhance the definition of credit-impaired assets (Stage 3), which is treated as a change in accounting estimate[1105]