Bank of Montreal 2013 Annual Report Download - page 66

Enterprise-Wide Risk Management
Surjit Rajpal
Chief Risk Officer
BMO Financial Group
As a diversified financial services company active in banking, investment, insurance and
wealth management services, we are exposed to a variety of risks that are inherent in carrying
out our business activities. As such, having a disciplined and integrated approach to managing
risk is fundamental to the success of our operations. Our risk management framework seeks to
provide appropriate and independent risk oversight across the enterprise and is essential to
building competitive advantage and stability.
Strengths and Value Drivers Priorities
‰ Comprehensive and consistent risk frameworks that encompass all ‰ Continue to invest in key risk areas of stress testing and market risk.
risks within the enterprise. ‰ Streamline and simplify risk processes to drive greater effectiveness
‰ Risk appetite statement and metrics that shape business strategies and efficiency.
across the organization.
‰ Sustained cultural mindset of continuous improvement that drives 2013 Accomplishments
greater consistency and efficiency in managing risk.
‰ Significantly reduced the level of our impaired assets by 15% year
over year.
Challenges ‰ Augmented our stress testing capabilities and integrated them into
‰ Heightened pace, volume and complexity of regulatory requirements our strategic and business planning processes.
and expectations. ‰ Enhanced our operational risk capabilities in line with the Basel II
‰ Prolonged low growth economic environment, coupled with low Advanced Measurement Approach expectations.
interest rates and marketplace uncertainty, requires greater vigilance ‰ Continued to build out our Risk-IT infrastructure in line with regu-
in balancing risk and return. latory expectations for improved risk data aggregation and
reporting capabilities.
Gross Impaired
Loan Formations
Gross Impaired
Loan Balances* ($ millions)
Provision for
Credit Losses ($ millions)
Total Allowance for
Credit Losses* ($ millions)
M&I purchased performing loan portfolio
Total bank (excluding M&I purchased
performing loans)
M&I purchased performing loan portfolio
Total bank (excluding M&I purchased
performing loans)
581
1,297
514
1,269
447
1,259
444
1,221
2,581 2,098
2,894 2,685 2,976
1,762
2,544
1,888 1,680
2,330 1,992
3,101
1,563
2,449
Level of new impaired formations
was 21% lower year over year,
reflecting decreases in both our
consumer and commercial
portfolios.
($ millions)
2010 2011 20132012 2010
The total provision for credit losses
was lower year over year, reflect-
ing lower provisions across our
consumer and commercial loan port-
folios and all our operating groups.
2010 2011
The total allowance for credit
losses was stable year over
year and remains adequate.
*Excludes allowances related
to Other Credit Instruments.
*Excludes purchased credit impaired loans.
2010 2011 201320122011 20132012
Specific allowances
Collective allowance
Collective provision
Specific provisions
Adjusted specific provisions
20132012
Gross impaired loans were 15%
lower year over year, reflecting
lower levels in both Canada and
the United States.
1,049
1,126
86
1,108
762
3
599
(10)
471 359
Adjusted results in this Enterprise-Wide Risk Management section are non-GAAP and are discussed in the Non-GAAP Measures section on page 34.
Text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of the MD&A form an integral part of the 2013 annual consolidated finan-
cial statements. They present required disclosures as set out by the International Accounting Standards Board in IFRS 7, Financial Instruments – Disclosures, which permits
cross-referencing between the notes to the financial statements and the MD&A. See Note 1 on page 130 and Note 6 on page 142 of the financial statements.
MD&A
BMO Financial Group 196th Annual Report 2013 77