TD Bank 2003 Annual Report Download - page 79

Download and view the complete annual report

Please find page 79 of the 2003 TD Bank annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Financial Results 77
The Bank enters into derivative financial instruments, as
described below, for trading and for risk management purposes.
Interest rate swaps involve the exchange of fixed and floating
interest payment obligations based on a predetermined notional
amount. Foreign exchange swaps involve the exchange of the
principal and fixed interest payments in different currencies.
Cross-currency interest rate swaps involve the exchange of both
the principal amount and fixed and floating interest payment
obligations in two different currencies.
Forward rate agreements are contracts fixing an interest rate
to be paid or received on a notional amount of specified maturity
commencing at a specified future date.
Foreign exchange forward contracts are commitments to pur-
chase or sell foreign currencies for delivery at a specified date in
the future at a fixed rate.
Futures are future commitments to purchase or deliver a
commodity or financial instrument on a specified future date at a
specified price. Futures are traded in standardized amounts on
organized exchanges and are subject to daily cash margining.
Options are agreements between two parties in which the
writer of the option grants the buyer the future right, but not
the obligation, to buy or to sell, at or by a specified date, a
specific amount of a financial instrument at a price agreed when
the option is arranged. The writer receives a premium for selling
this instrument.
The Bank also transacts equity, commodity and credit deriva-
tives in both the exchange and over-the-counter markets.
Notional principal amounts, upon which payments are based,
are not indicative of the credit risk associated with derivative
financial instruments.
Interest rate risk
(billions of dollars)
Total Non-
Floating Within 3 months within 1 year to Over interest
2002 rate 3 months to 1 year 1 year 5 years 5 years sensitive Total
Total assets $131.4 $ 41.2 $ 26.2 $ 198.8 $ 48.3 $5.1 $ 25.8 $278.0
Total liabilities and
shareholders’ equity 97.8 62.9 39.8 200.5 32.7 3.7 41.1 278.0
On-balance sheet position 33.6 (21.7) (13.6) (1.7) 15.6 1.4 (15.3) –
Off-balance sheet position – (15.8) 9.5 (6.3) 6.2 .1 – –
Net position $ 33.6 $(37.5) $ (4.1) $ (8.0) $21.8 $1.5 $ (15.3) $ –
Interest rate risk by currency
(billions of dollars)
Total Non-
Floating Within 3 months within 1 year to Over interest
2003 rate 3 months to 1 year 1 year 5 years 5 years sensitive Total
Canadian currency
on-balance sheet position $14.7 $ 6.8 $ 1.1 $ 22.6 $12.8 $(1.3) $ (34.3) $ (.2)
Foreign currency
on-balance sheet position 24.8 (28.0) (2.9) (6.1) 3.8 .4 2.1 .2
On-balance sheet position 39.5 (21.2) (1.8) 16.5 16.6 (.9) (32.2) –
Canadian currency
off-balance sheet position – (23.7) 1.2 (22.5) 7.9 1.3 – (13.3)
Foreign currency
off-balance sheet position – 10.6 5.2 15.8 (2.4) (.1) – 13.3
Off-balance sheet position – (13.1) 6.4 (6.7) 5.5 1.2 – –
Net position $39.5 $(34.3) $ 4.6 $ 9.8 $22.1 $ .3 $(32.2) $ –
NOTE 18 Derivative financial instruments