Bank of Montreal 1999 Annual Report Download - page 99

Bank of Montreal Group of Companies 1999 Annual Report 93
One technique that we use to reduce credit exposure is master
netting agreements with customers, which allow us to net
amounts due to/from a customer should the customer default
on a contract. The potential reduction in replacement cost
under master netting agreements was $2,658 as at October 31,
1999 and $4,715 as at October 31, 1998.
na = not applicable as weighted average rates are not meaningful.
US $ amounts are presented in Canadian $ equivalents.
Rates represent the weighted average interest rates which we are contractually committed
to pay/receive until the swap matures. The floating side of substantially all Canadian $ swaps
is
based on the one-month or three-month Canadian Bankers’ Acceptance Rate. For US $ swaps
Transactions are conducted with counterparties in various
geographic locations and industries. Based upon the ultimate
risk, the replacement cost of contracts is recorded from cus-
tomers located in:
1999 1998
Canada $ 1,930 20% $ 3,554 28%
United States 4,437 46 4,349 34
Mexico 70 1 16
–
Other countries 3,132 33 4,913 38
Total $ 9,569 100% $ 12,832 100%
the floating side is generally based on the one-month, three-month or six-month London
Interbank Offered Rate.
Basis swaps are floating interest rate swaps where amounts paid and received are based
on different indices or pricing periods.
Other swaps are contracts where the fixed side is denominated in a source currency
other than Canadian $ or US $.
The replacement cost of contracts is recorded from customers in the following industries:
1999 1998
Interest rate Foreign exchange Commodity Equity Interest rate Foreign exchange Commodity Equity
contracts contracts contracts contracts contracts contracts contracts contracts
Financial institutions $ 3,783 92% $ 3,680 82% $ 236 25% $ 4 37% $ 3,778 85% $ 6,495 81% $ 90 24% $ 8 100%
Other 332 8 830 18 698 75 6 63 686 15 1,495 19 280 76 ––
Total $ 4,115 100% $ 4,510 100% $ 934 100% $ 10 100% $ 4,464 100% $ 7,990 100% $ 370 100% $ 8 100%
Set out below are the maturities and weighted average interest rates paid and received on interest rate contracts:
Term to maturity 1999 1998
Total Total
Within 1 to 3 3 to 5 5 to 10 Over 10 notional notional
1 year years years years years amount amount
Interest Rate Contracts Rate Rate Rate Rate Rate
Fixed/Floating Swaps %%%%%
Canadian $ pay fixed $ 28,181 5.18 $ 14,773 5.73 $ 11,142 5.96 $ 4,161 6.06 $ 385 5.76 $ 58,642 $ 56,452
Canadian $ receive fixed 27,629 5.28 17,593 5.82 13,278 5.88 11,884 5.81 592 5.98 70,976 70,531
US $ pay fixed 36,619 5.73 20,997 5.91 11,042 5.95 9,856 6.24 1,643 6.93 80,157 60,384
US $ receive fixed 31,452 5.52 17,598 5.88 11,136 5.80 9,589 5.99 1,455 6.92 71,230 55,735
Basis swaps 6,772 na 6,622 na 857 na 4,988 na 294 na 19,533 5,700
Other swaps 38,334 na 36,327 na 9,055 na 11,992 na 187 na 95,895 54,810
Total interest rate swaps 168,987 113,910 56,510 52,470 4,556 396,433 303,612
Forward rate agreements,
futures and options 310,277 na 48,040 na 12,349 na 38,854 na 2,785 na 412,305 275,816
Total Interest Rate Contracts 479,264 na 161,950 na 68,859 na 91,324 na 7,341 na 808,738 579,428
Foreign Exchange Contracts
Cross-currency swaps 1,253 na 766 na 10,251 na 2,176 na 438 na 14,884 5,345
Cross-currency interest
rate swaps 11,924 na 12,049 na 6,759 na 8,208 na 956 na 39,896 28,598
Forward foreign exchange
contracts, futures and
options 258,413 na 8,721 na 1,056 na 497 na 16 na 268,703 363,266
Total Foreign
Exchange Contracts 271,590 na 21,536 na 18,066 na 10,881 na 1,410 na 323,483 397,209
Commodity Contracts
Swaps 7,854 na 3,948 na 519 na 213 na
– na 12,534 7,611
Futures and options 19,722 na 2,503 na 83 na 7na – na 22,315 8,500
Total Commodity Contracts 27,576 na 6,451 na 602 na 220 na – na 34,849 16,111
Total Equity Contracts 3,229 na 16 na 173 na 45 na – na 3,463 1,003
Total $ 781,659 na $ 189,953 na $ 87,700 na $ 102,470 na $ 8,751 na $1,170,533 $ 993,751