TD Bank 2010 Annual Report Download - page 56

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TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS54
All third-party assets securitized by the Bank were originated in
Canada and sold to Canadian securitization structures. Details of the
Bank-administered multi-seller, ABCP conduits are as follows:
(millions of Canadian dollars) 2010 2009
Ratings profile of Expected Ratings profile of
Significant SPE asset class weighted- Significant SPE asset class
unconsolidated average life unconsolidated
SPEs AAA (years)1 SPEs AAA
Residential mortgage loans $ 1,637 $ 1,637 3.0 $ 2,311 $ 2,311
Credit card loans 500 500 1.7 500 500
Automobile loans and leases 1,561 1,561 1.7 2,487 2,487
Equipment loans and leases 306 306 1.1 428 428
Trade receivables 1,287 1,287 2.2 1,753 1,753
Total exposure $ 5,291 $ 5,291 2.2 $ 7,479 $ 7,479
(millions of Canadian dollars) 2010 2009
Positive (negative) Positive (negative)
Notional amount fair value Notional amount fair value
Funded
Purchased protection via Bank-issued credit linked notes $ – $ – $ 213 $ (40)
Unfunded
Sold protection 68 351
Positive fair value – –
Negative fair value (11) (198)
Purchased protection 91 131
Positive fair value 15 45
Negative fair value (7) (4)
EXPOSURE TO THIRD-PARTY ORIGINATED ASSETS SECURITIZED BY BANK-SPONSORED CONDUITS
TABLE 37
COLLATERALIZED DEBT OBLIGATIONS1
TABLE 38
1
Expected weighted-average life for each asset type is based upon each of the
conduit’s remaining purchase commitment for revolving pools and the expected
weighted-average life of the assets for amortizing pools.
1
This table excludes standard index tranche CDOs.
As at October 31, 2010, TD held $354 million (October 31, 2009 –
$848 million) of ABCP issued by Bank-sponsored multi-seller and
single-seller conduits within the trading securities category on
its
Consolidated Balance Sheet.
EXPOSURE TO THIRD PARTY SPONSORED CONDUITS
The Bank had no exposure to U.S. third party-sponsored conduits
arising from providing liquidity facilities as all liquidity facilities matured
in the second quarter of fiscal 2010 (October 31, 2009 – $160 million).
The Bank’s exposure to Canadian third party-sponsored conduits
in the form of margin funding facilities as at October 31, 2010 was
not significant.
The Bank does not have any exposure to U.S. subprime mortgages
via the CDOs disclosed above. The CDOs are referenced to corporate
debt securities. All exposures are managed within risk limits that have
been approved by the Bank’s Risk Management group and are hedged
with various financial instruments, including credit derivatives and
bonds within the trading portfolio, not included in this table. Counter-
party exposure on hedges is collateralized under Credit Support
Agreements (CSAs) and netting arrangements, consistent with other
over-the-counter (OTC) derivative contracts. The Bank’s CDO positions
OTHER INVESTMENT AND FINANCING PRODUCTS
Other Financing Transactions
In April 2010, the Bank exited transactions where it provided cost-
efficient financing through Canada-US partnership structures to U.S.
corporate clients through VIEs. The Bank no longer provides financing
to
these corporate clients under these arrangements and as at October 31,
2010, had no exposure to these VIEs (October 31, 2009 – $2.0 billion).
Exposure to Collateralized Debt Obligations
Since the decision was made in 2005 to exit the structured products
business, the Bank no longer originates Collateralized Debt Obligation
vehicles (CDOs). Total CDOs purchased and sold in the trading portfolio
as at October 31, 2010, were as follows:
are fair valued using valuation techniques with significant non-observ-
able market inputs. The potential effect of using reasonable possible
alternative assumptions for valuing these CDO positions would range
from a reduction in the fair value by $0.7 million (October 31, 2009 –
$7.5 million) to an increase in the fair value by $1.2 million (October 31,
2009 – $7.7 million). A sensitivity analysis was performed for all items
fair valued using valuation techniques with significant non-observable
market inputs and is disclosed in the “Critical Accounting Estimates” –
“Fair Value of Financial Instruments” section of this MD&A.