Bank of Montreal 2015 Annual Report Download - page 87

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Select Geographic Exposures
BMO’s geographic exposures are 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 as appropriate to assess our potential risk. Our exposure to European countries, as at October 31,
2015, 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 detailed by counterparty type, as well as by total commitments compared to the funded amount, in
the table on page 99. There has been a reduction in our exposures since October 31, 2014.
European Exposure by Country and Counterparty (1)
(Canadian $ in millions)
As at October 31, 2015
Funded
lending (2) Securities (3)(4) Repo-style transactions and derivatives (5)(6) Total net
exposureCountry Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total
GIIPS
Greece – – – – – – – – – –
Ireland (7) 8 – – – – 2 19 – 21 29
Italy 2 – – – – 2 5 – 7 9
Portugal – – – – – – – – – –
Spain 63 – – – – 4 – – 4 67
Total – GIIPS 73 – – – – 8 24 – 32 105
Eurozone (excluding GIIPS)
Germany 72 15 1 1,158 1,174 13 – – 13 1,259
Netherlands 245 520 13 131 664 9 15 – 24 933
Finland 1 – – 324 324 5 – – 5 330
Other (8) 322 – – 188 188 66 21 8 95 605
Total – Eurozone (excluding GIIPS) 640 535 14 1,801 2,350 93 36 8 137 3,127
Rest of Europe
Denmark 6 248 – 453 701 4 – – 4 711
Norway 26 897 – – 897 – – – – 923
United Kingdom 387 70 49 324 443 713 8 1 722 1,552
Other (8) 104 2 – 169 171 19 8 – 27 302
Total – Rest of Europe 523 1,217 49 946 2,212 736 16 1 753 3,488
Total – All of Europe (9) 1,236 1,752 63 2,747 4,562 837 76 9 922 6,720
As at October 31, 2014
Funded
lending (2) Securities (3) Repo-style transactions and derivatives (5)(6) Total net
exposureCountry Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total
Total – GIIPS 129 – – – – 55 7 – 62 191
Total – Eurozone (excluding GIIPS) 551 711 53 1,872 2,636 379 49 7 435 3,622
Total – Rest of Europe 1,162 2,254 44 537 2,835 714 14 2 730 4,727
Total – All of Europe (9) 1,842 2,965 97 2,409 5,471 1,148 70 9 1,227 8,540
(1) BMO has the following indirect exposures to Europe as at October 31, 2015:
– Collateral of €958 million to support trading activity in securities (€108 million from GIIPS) and €82 million of cash collateral held.
– Guarantees of $1.3 billion ($17 million to GIIPS).
(2) Funded lending includes loans (primarily trade finance).
(3) Securities include cash products, insurance investments and traded credit.
(4) BMO’s total net notional CDS exposure (embedded as part of the securities exposure in this table) to Europe was $153 million, with no net single-name* CDS exposure to GIIPS countries as at
October 31, 2015 (*includes a net position of $119 million (bought protection) on a CDS Index, of which 20% is comprised of GIIPS domiciled entities).
(5) Repo-style transactions are primarily with bank counterparties for which BMO holds collateral ($16 billion for Europe as at October 31, 2015).
(6) Derivatives amounts are marked-to-market, incorporating transaction netting where master netting agreements with counterparties have been entered into, and collateral offsets for counterparties
where a Credit Support Annex is in effect.
(7) Does not include Irish subsidiary reserves we are required to maintain with the Irish Central Bank of $76 million as at October 31, 2015.
(8) Includes countries with less than $300 million net exposure, with $25 million exposure to the Russian Federation as at October 31, 2015.
(9) Of our total net direct exposure to Europe, approximately 93% was to counterparties in countries with a rating of Aaa/AAA from at least one of Moody’s and S&P.
98 BMO Financial Group 198th Annual Report 2015