Bank of Montreal 2012 Annual Report Download - page 140

Notes
Contractual Maturities of Financial Liabilities
Financial liabilities are comprised of trading and non-trading liabilities. As liabilities in trading portfolios are typically held for short periods of time,
they are not included in the following table.
Contractual maturities of on-balance sheet non-trading financial liabilities as at October 31, 2012 were as follows:
(Canadian $ in millions) Less than 1 year
1to3
years
3to5
years
Over 5
years No fixed maturity Total
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
November 1,
2010
On-Balance Sheet
Financial Instruments
Deposits (1) 115,100 105,548 22,611 25,359 16,216 13,666 1,449 4,196 164,025 149,303 319,401 298,072 246,368
Subordinated debt 198 267 389 474 498 537 4,769 6,304 ––5,854 7,582 5,567
Capital trust securities (2) 46 463 473 519 ––––––519 982 1,470
Other financial liabilities 57,978 54,726 8,306 12,295 7,663 6,639 7,978 7,227 360 436 82,285 81,323 86,558
(1) Excludes interest payments and structured notes designated under the fair value option.
(2) For the BMO Tier 1 Notes – Series A, we have incorporated cash flows for principal and interest
to the first redemption date at the option of the Trust (see Note 18 for redemption date).
The balances for on-balance sheet financial liabilities in the table above will not agree with
those in our consolidated financial statements as this table incorporates all cash flows, on an
undiscounted basis, including both principal and interest.
Contractual maturities of off-balance sheet financial liabilities as at October 31, 2012 were as follows:
(Canadian $ in millions)
Less than
1 year
1to3
years
3to5
years
Over 5
years
No fixed
maturity Total
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Off-Balance Sheet Financial
Instruments
Commitments to extend credit (1) 14,161 23,960 18,087 17,775 24,800 16,655 2,937 1,288 ––59,985 59,678
Operating leases 274 252 469 438 359 347 700 724 ––1,802 1,761
Financial guarantee contracts (1) 28,469 39,224 ––––––––28,469 39,224
Purchase obligations (2) 518 704 517 759 286 196 207 55 ––1,528 1,714
(1) A large majority of these commitments expire without being drawn upon. As a result, the
total contractual amounts may not be representative of the funding likely to be required for
these commitments.
(2) We have five significant outsourcing contracts. In 2012, we have extended the contract for
five years with an external service provider for technology and payment processing services.
Also in 2012, we have extended the contract for seven years with an external service
provider for various human resources activities including payroll processing, benefits
administration and other services. In 2010, we have entered into a nine year contract with
an external service provider for the processing of various credit card account portfolios and
other services. In 2008, we have entered into a five year contract with an external service
provider which grants us the right to issue Air Miles in Canada to our customers. In 2000, we
have entered into a 15 year contract with an external service provider for cheque
processing, statement production, mail distribution, ABM envelope processing and wholesale
lockbox processing.
Note 7: Guarantees
In the normal course of business, we enter into a variety of guarantees.
Guarantees include contracts where we may be required to make
payments to a counterparty, based on changes in the value of an asset,
liability or equity security that the counterparty holds, due to changes in
an underlying interest rate, foreign exchange rate or other variable. In
addition, contracts under which we may be required to make payments
to reimburse the counterparty for a loss if a third party does not perform
according to the terms of a contract or does not make payments when
due under the terms of a debt instrument, and contracts under which
we provide indirect guarantees of the indebtedness of another party,
are considered guarantees.
Guarantees that qualify as derivatives are accounted for in
accordance with the policy for derivative instruments (see Note 10).
For guarantees that do not qualify as a derivative, the liability is initially
recorded at fair value, which is generally the fee to be received.
Subsequently guarantees are recorded at the higher of the initial fair
value, less amortization to recognize any fee income earned over the
period, and the best estimate of the amount required to settle the
obligation. Any increase in the liability is reported in the Consolidated
Statement of Income.
The most significant guarantees are as follows:
Standby Letters of Credit and Guarantees
Standby letters of credit and guarantees represent our obligation to
make payments to third parties on behalf of another party if that party
is unable to make the required payments or meet other contractual
requirements. The maximum amount payable under standby letters of
credit and guarantees totalled $11,851 million as at October 31, 2012
($11,880 million in 2011). The majority of these have a term of one year
or less. Collateral requirements for standby letters of credit and
guarantees are consistent with our collateral requirements for loans.
A large majority of these commitments expire without being drawn
upon. As a result, the total contractual amounts may not be
representative of the funding likely to be required for these
commitments.
As at October 31, 2012, $29 million ($45 million in 2011) was
included in other liabilities related to guaranteed parties that were
unable to meet their obligation to third parties (see Note 4). No other
amount was included in our Consolidated Balance Sheet as at
October 31, 2012 and 2011 related to these standby letters of credit
and guarantees.
Backstop and Other Liquidity Facilities
Backstop liquidity facilities are provided to asset-backed commercial
paper (“ABCP”) programs administered by either us or third parties as an
alternative source of financing in the event that such programs are
unable to access ABCP markets or when predetermined performance
measures of the financial assets owned by these programs are not met.
The terms of the backstop liquidity facilities do not require us to
advance money to these programs in the event of bankruptcy of the
borrower. The facilities’ terms are generally no longer than one year, but
can be several years.
The maximum amount payable under these backstop and other
liquidity facilities totalled $4,467 million as at October 31, 2012
($3,708 million in 2011). As at October 31, 2012, $107 million was
outstanding from facilities drawn in accordance with the terms of the
backstop liquidity facilities ($84 million in 2011).
Credit Enhancement Facilities
Where warranted, we provide partial credit enhancement facilities
to transactions within ABCP programs administered by either us or
third parties. Credit enhancement facilities are included in backstop
liquidity facilities.
BMO Financial Group 195th Annual Report 2012 137