TD Bank 2002 Annual Report Download - page 71

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69
FINANCIAL RESULTS
Credit exposure of derivative financial instruments at year end
(millions of dollars) 2002 2001
Current Credit Risk- Current Credit Risk-
replace- equivalent weighted replace- equivalent weighted
ment cost1amount amount ment cost1amount amount
Interest rate contracts
Forward rate agreements $ 188 $ 273 $ 58 $ 153 $ 258 $ 57
Swaps 14,608 18,120 4,501 13,294 16,110 3,944
Options purchased 925 1,089 294 854 998 271
Total interest rate contracts 15,721 19,482 4,853 14,301 17,366 4,272
Foreign exchange contracts
Forward contracts 5,826 11,030 2,671 4,960 9,528 2,465
Swaps 416 1,015 294 352 911 272
Cross-currency
interest rate swaps 2,613 7,482 1,754 3,240 8,013 1,920
Options purchased 66 324 81 55 255 78
Total foreign exchange
contracts 8,921 19,851 4,800 8,607 18,707 4,735
Other contracts22,163 11,567 3,129 1,914 9,253 2,631
Total derivative financial
instruments $ 26,805 $ 50,900 $ 12,782 $ 24,822 $ 45,326 $ 11,638
Less impact of master netting
agreements and collateral 18,176 26,974 6,523 15,779 21,734 5,265
$ 8,629 $ 23,926 $ 6,259 $ 9,043 $ 23,592 $ 6,373
1Exchange traded instruments and forward foreign exchange contracts
maturing within 14 days are excluded in accordance with the guidelines
of the Office of the Superintendent of Financial Institutions Canada.
The total positive fair value of the excluded contracts at October 31, 2002
was $1,535 million (2001 – $425 million).
2Includes equity, commodity and credit derivatives.
Credit instruments
(millions of dollars) 2002 2001
Guarantees and standby letters of credit $ 8,767 $ 8,373
Documentary and commercial letters of credit 1,497 1,519
Commitments to extend credit
Original term to maturity of one year or less 45,472 47,736
Original term to maturity of more than one year 22,097 29,621
$ 77,833 $ 87,249
(a) In the normal course of business, the Bank enters into
various off-balance sheet commitments and contingent liability
contracts. The primary purpose of these contracts is to make
funds available for the financing needs of customers. The Bank’s
policy for requiring collateral security with respect to these
contracts and the types of collateral security held is generally
the same as for loans made by the Bank.
Guarantees and standby letters of credit represent irrevocable
assurances that the Bank will make payments in the event that
a customer cannot meet its obligations to third parties and
they carry the same credit risk, recourse and collateral security
requirements as loans extended to customers.
Documentary and commercial letters of credit are instruments
issued on behalf of a customer authorizing a third party to draw
drafts on the Bank up to a certain amount subject to specific
terms and conditions. The Bank is at risk for any drafts drawn
that are not ultimately settled by the customer, and the amounts
are collateralized by the goods to which they relate.
Commitments to extend credit represent unutilized portions of
authorizations to extend credit in the form of loans, customers’
liability under acceptances, guarantees and letters of credit.
The credit instruments reported below represent the maximum
amount of additional credit that the Bank could be obligated to
extend should contracts be fully utilized.
NOTE 16 Contingent liabilities and commitments