Bank of Montreal 2000 Annual Report Download - page 87

Bank of Montreal Group of Companies Annual Report 2000 ■63
One technique that we use to reduce credit exposure is master net-
ting agreements with customers, which allow us to net amounts
due to/from a customer should the customer default on a contract.
The potential reduction in replacement cost under master netting
agreements was $4,763 as at October 31, 2000 and $2,658 as at Octo-
ber 31, 1999.
na = not applicable as weighted average rates are not meaningful.
US $ amounts are presented in Canadian $ equivalents.
Rates represent the weighted average interest rates which we are contractually committed
to pay/receive until the swap matures. The floating side of substantially all Canadian $ swaps is
based on the one-month or three-month Canadian Bankers’ Acceptance Rate. For US $ swaps
Transactions are conducted with counterparties in various geo-
graphic locations and industries. Based upon the ultimate risk, the
replacement cost of contracts is recorded from customers located in:
2000 1999
Canada $ 2,403 17% $ 1,930 20%
United States 7,022 51 4,437 46
Other countries 4,504 32 3,202 34
Total $ 13,929 100% $ 9,569 100%
the floating side is generally based on the one-month, three-month or six-month London
Interbank Offered Rate.
Basis swaps are floating interest rate swaps where amounts paid and received are based on
different indices or pricing periods.
Other swaps are contracts where the fixed side is denominated in a source currency other
than Canadian $ or US $.
The replacement cost of contracts is recorded from customers in the following industries:
2000 1999
Interest rate Foreign exchange Commodity Equity Interest rate Foreign exchange Commodity Equity
contracts contracts contracts contracts contracts contracts contracts contracts
Financial institutions $ 4,054 91% $ 4,210 81% $ 1,352 32% $ 62 88% $ 3,783 92% $ 3,680 82% $ 236 25% $ 4 37%
Other 395 9 974 19 2,873 68 9 12 332 8 830 18 698 75 6 63
Total $ 4,449 100% $ 5,184 100% $ 4,225 100% $ 71 100% $ 4,115 100% $ 4,510 100% $ 934 100% $ 10 100%
Set out below are the maturities and weighted average interest rates paid and received on interest rate contracts:
Term to maturity 2000 1999
Total Total
Within 1 to 3 3 to 5 5 to 10 Over 10 notional notional
1 year years years years years amount amount
Interest Rate Contracts Rate % Rate % Rate % Rate % Rate %
Fixed/Floating Swaps
Canadian $ pay fixed $ 21,884 5.80 $ 19,785 6.08 $ 10,871 6.14 $ 7,260 6.22 $ 2,042 6.34 $ 61,842 $ 58,642
Canadian $ receive fixed 20,125 5.88 25,099 5.88 11,840 6.25 14,570 5.93 1,808 6.32 73,442 70,976
US $ pay fixed 43,373 6.57 36,793 6.66 10,992 6.40 13,104 6.63 2,671 7.16 106,933 80,157
US $ receive fixed 30,885 6.37 23,515 6.42 11,000 6.52 12,197 6.62 2,814 7.31 80,411 71,230
Basis swaps 8,383 na 7,634 na 1,976 na 4,214 na 152 na 22,359 19,533
Other swaps 71,023 na 43,164 na 9,812 na 15,850 na 546 na 140,395 95,895
Total interest rate swaps 195,673 155,990 56,491 67,195 10,033 485,382 396,433
Forward rate agreements,
futures and options 400,145 na 71,254 na 29,519 na 22,779 na 3,391 na 527,088 412,305
Total Interest Rate Contracts 595,818 na 227,244 na 86,010 na 89,974 na 13,424 na 1,012,470 808,738
Foreign Exchange Contracts
Cross-currency swaps 683 na 460 na 10,405 na 2,637 na 1,087 na 15,272 14,884
Cross-currency interest
rate swaps 13,576 na 14,252 na 7,490 na 8,927 na 951 na 45,196 39,896
Forward foreign exchange
contracts, futures and options 251,642 na 12,930 na 1,186 na 530 na 28 na 266,316 268,703
Total Foreign Exchange Contracts 265,901 na 27,642 na 19,081 na 12,094 na 2,066 na 326,784 323,483
Commodity Contracts
Swaps 11,403 na 4,290 na 509 na 133 na – na 16,335 12,534
Futures and options 26,876 na 9,334 na 44 na – na – na 36,254 22,315
Total Commodity Contracts 38,279 na 13,624 na 553 na 133 na – na 52,589 34,849
Total Equity Contracts 10,281 na 168 na 146 na 103 na – na 10,698 3,463
Total $ 910,279 na $ 268,678 na $ 105,790 na $ 102,304 na $ 15,490 na $ 1,402,541 $ 1,170,533