Bank of Montreal 2014 Annual Report Download - page 77

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Select Geographic Exposures
BMO’s geographic exposure is subject to a country risk management
framework that incorporates economic and political assessments, and
management of exposure within limits based on product, entity and the
country of ultimate risk. We closely monitor our European exposure, and
our risk management processes incorporate stress tests where appro-
priate to assess our potential risk. Our exposure to European countries,
as at October 31, 2014, including Greece, Ireland, Italy, Portugal and
Spain (GIIPS), is set out in the tables that follow.
The table below outlines total net portfolio exposures for funded
lending, securities (inclusive of credit default swap (CDS) activity), repo-
style transactions and derivatives. Funded lending is further broken
down by counterparty type, as well as by total commitments compared
to the funded amount, in the table on page 89.
European Exposure by Country and Counterparty (9) (Canadian $ in millions)
As at October 31, 2014
Funded
lending (1) Securities (2)(8) Repo-style transactions and derivatives (3)(4) Total
Country Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total
Net
exposure
GIIPS
Greece – – – – – – – – – –
Ireland (5) 8–– ––422 –4452
Italy 69 – – – – 5 5 – 10 79
Portugal – – – – – 1 – – 1 1
Spain 52 – – – – 7 – – 7 59
Total – GIIPS 129 – – – – 55 7 – 62 191
Eurozone (excluding GIIPS)
France 26 – 15 64 79 205 – – 205 310
Germany 85 – 24 1,301 1,325 52 – – 52 1,462
Netherlands 239 711 8 113 832 78 1 – 79 1,150
Finland – – – 394 394 – – – – 394
Other (6) 201 – 6 – 6 44 48 7 99 306
Total – Eurozone (excluding GIIPS) 551 711 53 1,872 2,636 379 49 7 435 3,622
Rest of Europe
Denmark 12 577 – 322 899 – – – – 911
Norway 15 1,281 – – 1,281 28 – – 28 1,324
Russian Federation 330 – – – – – – – – 330
Sweden 93 299 – 12 311 1 – – 1 405
Switzerland 215 1 – – 1 199 – – 199 415
United Kingdom 497 96 44 203 343 486 14 2 502 1,342
Other (6) ––––––––– –
Total – Rest of Europe 1,162 2,254 44 537 2,835 714 14 2 730 4,727
Total – All of Europe (7) 1,842 2,965 97 2,409 5,471 1,148 70 9 1,227 8,540
As at October 31, 2013
Funded
lending (1) Securities (2) Repo-style transactions and derivatives (3)(4) Total
Country Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total
Net
exposure
Total – GIIPS 79 – – – – 5 2 – 7 86
Total – Eurozone (excluding GIIPS) 462 626 42 2,111 2,779 113 6 1 120 3,361
Total – Rest of Europe 956 2,058 40 674 2,772 153 19 – 172 3,900
Total – All of Europe (7) 1,497 2,684 82 2,785 5,551 271 27 1 299 7,347
(1) Funded lending includes loans (primarily trade finance).
(2) Securities include cash products, insurance investments and traded credit.
(3) Repo-style transactions are primarily with bank counterparties for which BMO holds
collateral ($15 billion for Europe as at October 31, 2014).
(4) Derivatives amounts are marked-to-market, incorporating transaction netting and, for
counterparties where a Credit Support Annex is in effect, collateral offsets.
(5) Does not include Irish subsidiary reserves we are required to maintain with the Irish Central
Bank of $76 million as at October 31, 2014.
(6) Includes countries with less than $300 million net exposure.
(7) Of our total net direct exposure to Europe, approximately 89% was to counterparties in
countries with a rating of Aaa/AAA from at least one of Moody’s and S&P.
(8) BMO’s total net notional CDS exposure (embedded as part of the securities exposure table)
to Europe was $555 million, with no net single-name* CDS exposure to GIIPS countries as at
October 31, 2014 (*includes a net position of $254 million (bought protection) on a CDS
Index, of which 20% is comprised of GIIPS domiciled entities).
(9) BMO has the following indirect exposures to Europe as at October 31, 2014:
– Collateral of €571 million to support trading activity in securities (€27 million from GIIPS)
and €127 million of cash collateral being held.
– Guarantees of $986 million ($8 million to GIIPS).
88 BMO Financial Group 197th Annual Report 2014