Bank of Montreal 2012 Annual Report Download - page 142

Notes
Note 9: Special Purpose Entities
We enter into certain transactions in the ordinary course of business
which involve the establishment of special purpose entities (“SPEs”) to
facilitate or secure customer transactions and to obtain alternative
sources of funding. We are required to consolidate a SPE if we control
the vehicle. The following circumstances are considered when assessing
whether we, in substance, control the SPE and consequently are
required to consolidate:
‰the activities of the SPE are being conducted on our behalf according
to our specific business needs so that we obtain benefits from the
SPE’s operations;
‰we have the decision-making powers to obtain the majority of the
benefits of the activities of the SPE or, by setting up an “autopilot”
mechanism, we have delegated these decision-making powers;
‰we have rights to obtain the majority of the benefits of the SPE and
therefore may be exposed to risks incidental to the activities of the
SPE; or
‰we retain the majority of the residual or ownership risks related to
the SPE or its assets in order to obtain benefits from its activities.
We consider all aspects of the relationship between us and the SPE to
determine whether we ultimately have the power to govern the
financial and operating policies of the SPE, so as to obtain the majority
of the benefits from the SPE’s activities.
We perform a re-assessment of consolidation whenever there is a
change in the substance of the relationship.
A description of each SPE is included on the following page. Total assets in our unconsolidated SPEs and our exposure to losses are summarized in the
following table:
(Canadian $ in millions) 2012 2011
November 1,
2010
Exposure to loss
Total
assets Exposure to loss
Total
assets
Exposure
to loss
Total
assets
Undrawn
facilities (1)
Drawn
facilities
and loans
provided
Securities
held
Derivative
assets Total
Undrawn
facilities (1)
Drawn
facilities
and loans
provided
Securities
held
Derivative
assets Total Total
Unconsolidated
SPEs
Canadian customer
securitization
vehicles (2) 3,691 – 118 – 3,809 2,697 3,012 – 343 2 3,357 2,450 3,085 2,976
Structured finance
vehicles na na 10,324 – 10,324 26,500 na na 7,331 – 7,331 19,117 4,772 6,979
Total 3,691 – 10,442 – 14,133 29,197 3,012 – 7,674 2 10,688 21,567 7,857 9,955
(1) These facilities are backstop liquidity facilities provided to our Canadian customer
securitization vehicles. None of the backstop liquidity facilities provided to our Canadian
customer securitization vehicles related to credit support as at October 31, 2012 and 2011.
(2) Securities held in our Canadian customer securitization vehicles are comprised of asset-
backed commercial paper and are classified as trading securities and available-for-sale
securities. Assets held by all these vehicles relate to assets in Canada.
na – not applicable
Total assets in our consolidated SPEs and our exposure to losses are summarized in the following table, with the exception of our compensation
trusts, which are described in further detail below:
(Canadian $ in millions) 2012 2011
November 1,
2010
Exposure to loss
Total
assets Exposure to loss
Total
assets
Exposure
to loss
Total
assets
Undrawn
facilities
Drawn
facilities
and loans
provided
Securities
held
Derivative
assets Total (1)
Undrawn
facilities
Drawn
facilities
and loans
provided
Securities
held
Derivative
assets Total (1) Total (1)
Consolidated SPEs
Canadian customer
securitization
vehicles 7 – 574 – 581 574 20 – 89 – 109 89 396 196
U.S. customer
securitization
vehicle 4,144 58 – 2 4,204 3,378 3,775 116 – 5 3,896 3,348 4,158 4,074
Bank securitization
vehicles (2) – – 192 – 192 5,323 5,100 – 548 94 5,742 10,787 5,577 9,469
Credit protection
vehicle – Apex (3) 522 – 1,385 104 2,011 2,226 1,030 – 1,208 601 2,839 2,219 2,827 2,208
Structured
investment
vehicles 40 1,440 – 1 1,481 1,597 91 2,940 – 19 3,050 2,940 5,298 5,225
Capital and funding
trusts 2,973 11,132 842 91 15,038 14,972 2,459 8,596 1,162 94 12,311 12,520 11,873 10,950
Total 7,686 12,630 2,993 198 23,507 28,070 12,475 11,652 3,007 813 27,947 31,903 30,129 32,122
(1) We consolidate the SPEs in the table and as a result, all intercompany balances and
transactions between us and the consolidated SPEs are eliminated upon consolidation.
(2) Included in other liabilities is $5,186 million of asset-backed commercial paper and term
asset-backed securities funding our bank securitization vehicles ($10,292 million in 2011).
(3) Total assets include cash and interest bearing deposits of $2,069 million and securities of
$157 million ($2,052 million and $167 million, respectively in 2011).
BMO Financial Group 195th Annual Report 2012 139