Bank of Montreal 2014 Annual Report Download - page 88

MD&A
Total wholesale funding outstanding, consisting of negotiable
marketable securities, was $156.4 billion at October 31, 2014, with
$35.6 billion sourced as secured funding and $120.8 billion sourced as
unsecured funding. The mix and maturities of BMO’s wholesale term
funding are outlined in the table below. Additional information on
deposit maturities can be found in Note 32 on page 186.
BMO maintains a sizeable portfolio of unencumbered liquid assets,
totalling $171.0 billion as at October 31, 2014, that can be monetized to
meet potential funding requirements, as described in the Unencumbered
Liquid Assets section above.
Diversification of our wholesale funding sources is an important part
of our overall liquidity management strategy. BMO’s wholesale funding
activities are well diversified by jurisdiction, currency, investor segment,
instrument and maturity profile. BMO maintains ready access to long-
term wholesale funding through various borrowing programs, including
a European Note Issuance Program, Canadian and U.S. Medium-Term
Note Programs, Canadian and U.S. mortgage securitizations, Canadian
credit card securitizations, covered bonds and Canadian and U.S. senior
(unsecured) deposits.
BMO’s wholesale funding plan ensures sufficient funding capacity is
available to execute business strategies. The funding plan considers
expected maturities, as well as asset and liability growth projected for
our businesses in our forecasting and planning process, and assesses
funding needs against available potential sources. The funding plan is
approved annually by the RRC and is regularly updated throughout the
year to incorporate actual results and updated forecast information.
Wholesale Funding Maturities (1) (Canadian $ in millions)
As at October 31, 2014
Less than
1 month
1to3
months
3to6
months
6to12
months
Subtotal
less than
1 year
1to2
years
Over
2 years Total
Deposits from banks (2) 7,885 4,187 674 175 12,921 – – 12,921
Certificates of deposit and commercial paper 13,348 19,553 12,906 7,215 53,022 817 – 53,839
Bearer deposit notes 1,037 1,774 15 221 3,047 – – 3,047
Asset-backed commercial paper (ABCP) 866 896 1,105 60 2,927 – – 2,927
Senior unsecured medium-term notes – 500 3,779 5,016 9,295 12,561 20,853 42,709
Senior unsecured structured notes (3) 13 362 15 168 558 49 1,257 1,864
Covered bonds and Securitizations ––––––– –
Mortgage securitizations – 334 1,510 601 2,445 2,110 12,844 17,399
Covered bonds – – – 2,254 2,254 1,691 3,667 7,612
Credit card securitizations – – 42 895 937 1,880 2,194 5,011
Subordinated debt (4) – – – 322 322 – 6,091 6,413
Other (5) ––––––2,677 2,677
Total 23,149 27,606 20,046 16,927 87,728 19,108 49,583 156,419
Of which: ––––––– –
Secured 866 1,230 2,657 3,810 8,563 5,681 21,382 35,626
Unsecured 22,283 26,376 17,389 13,117 79,165 13,427 28,201 120,793
Total (6) 23,149 27,606 20,046 16,927 87,728 19,108 49,583 156,419
(1) Wholesale funding excludes repo transactions and bankers’ acceptances, which are disclosed in the contractual maturity table in Note 32 of the financial statements. Wholesale funding also excludes
ABCP issued by certain ABCP conduits that are not consolidated for financial reporting purposes.
(2) Except for deposits from banks, which primarily consist of bank deposits sourced to support trading activities, unsecured funding refers to funding through the issuance of marketable, negotiable
securities.
(3) Primarily issued to non-institutional investors.
(4) Includes certain subordinated debt instruments reported as deposits or other liabilities for accounting purposes. Subordinated debt is reported in this table in accordance with recommended EDTF
disclosures.
(5) Refers to FHLB advances.
(6) Total wholesale funding consists of Canadian-dollar-denominated funding of $53.9 billion and U.S.-dollar and other foreign-denominated funding of $102.5 billion as at October 31, 2014.
Regulatory Developments
In 2014, OSFI finalized its Liquidity Adequacy Requirements (LAR) guide-
line. The guideline outlines the approach and methodology for a number
of liquidity metrics and tools that OSFI will use to monitor and assess
the adequacy of Canadian banks’ liquidity, including the Liquidity
Coverage Ratio (LCR), Net Cumulative Cash Flow (NCCF) and others.
Under the guideline, Canadian banks will be required to maintain an LCR
above 100% effective January 1, 2015. As at October 31, 2014, the bank
comfortably exceeds the LCR minimum.
In 2014, the Basel Committee on Banking Supervision (BCBS) issued
its final paper on LCR disclosure standards and OSFI published a LCR
common disclosure template. Canadian banks are required to comply
with the new disclosure standards beginning in the second quarter of
the 2015 fiscal year reporting period.
In October 2014, BCBS published its final Net Stable Funding Ratio
(NSFR) rules. The NSFR is the ratio of the available amount of stable
funding (one year or greater) to the required amount of stable funding.
BMO believes OSFI will engage with the industry to discuss domestic
implementation of the NSFR in 2015. The NSFR is effective
January 1, 2018.
Canada’s Department of Finance issued for comment in August 2014
a Consultation Paper outlining the proposed bail-in regime applicable to
Canada’s domestic systemically important banks (D-SIBs), including BMO.
The proposed bail-in regime would grant to the Government of Canada
the power to permanently convert “eligible liabilities” of the D-SIB into
common equity and to permanently cancel existing common shares if
certain preconditions are met. Under the proposed bail-in regime,
eligible liabilities would consist only of senior unsecured debt that is
issued after the implementation date of the bail-in regime, tradable and
transferable, and with an original term of over 400 days. D-SIBs would
be subject to a Higher Loss Absorbency (HLA) requirement to be met
through the sum of regulatory capital and long-term senior debt that is
directly issued by the parent bank of between 17% and 23% of risk-
weighted assets (RWA). The Consultation Paper also requested com-
ments with respect to potentially instituting a bank holding company
structure in Canada to better support the regime for bank resolutions.
Comments on the Consultation Paper were due in September 2014.
Material presented in a blue-tinted font above is an integral part of the 2014 annual consolidated financial statements (see page 77).
BMO Financial Group 197th Annual Report 2014 99