TD Bank 2009 Annual Report Download - page 70

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS66
Accuracy and Completeness of Information on Customers
and Counterparties
In deciding whether to extend credit or enter into other transactions
with customers and counterparties, the Bank may rely on information
furnished by or on behalf of such other parties, including financial
statements and other financial information. The Bank may also rely on
the representations of customers and counterparties as to the accuracy
and completeness of such information. The Bank’s financial condition
and earnings could be negatively impacted to the extent it relies on
financial statements or information that do not comply with GAAP,
that are materially misleading, or that do not fairly present, in all
material respects, the financial condition and results of operations of
the customers and counterparties.
Accounting Policies and Methods Used by the Bank
The accounting policies and methods the Bank utilizes determine how
the Bank reports its financial condition and results of operations, and
they may require management to make estimates or rely on assump-
tions about matters that are inherently uncertain. Such estimates and
assumptions may require revisions and changes to them may materially
adversely affect the Bank’s results of operations and financial condition.
BANK SPECIFIC FACTORS
Adequacy of the Bank’s Risk Management Framework
The Bank’s risk management framework is made up of various processes
and strategies for managing risk exposure and includes an Enterprise
Risk Appetite Framework. Types of risk to which the Bank is subject
include credit, market (including equity and commodity), liquidity,
interest rate, operational, reputational, insurance, strategic, foreign
exchange, regulatory, legal, and other risks. There can be no assurance
that the Bank’s framework to manage risk, including such framework’s
underlying assumptions and models, will be effective under all conditions
and circumstances. For example, the volatile nature of current market
disruptions may lead to uncertainty with respect to underlying efforts to
mitigate or reverse these disruptions. If the Bank’s risk management
framework proves ineffective, whether because it does not keep pace
with changing Bank or market circumstances or otherwise, the Bank
could suffer unexpected losses and could be materially adversely affected.
New Products and Services to Maintain or Increase Market Share
The Bank’s ability to maintain or increase its market share depends,
in part, on its ability to innovate and adapt products and services to
evolving industry standards. There is increasing pressure on financial
services companies to provide products and services at lower prices as
well as to increase the convenience features, such as longer branch
hours. This can reduce the Bank’s net interest income and revenue
from fee-based products and services, increase the Bank’s expenses
and, in turn, negatively impact net income. In addition, the widespread
adoption of new technologies could require the Bank to make substan-
tial expenditures to modify or adapt existing products and services.
The Bank might not be successful in introducing new products and
services, achieving market acceptance of its products and services,
and/or developing and maintaining loyal customers.
Acquisitions and Strategic Plans
The Bank regularly explores opportunities to acquire other financial
services companies or parts of their businesses directly or indirectly
through the acquisition strategies of its subsidiaries. The Bank under-
takes thorough due diligence before completing an acquisition but
it is possible that unanticipated factors could arise and there is no
assurance that the Bank will achieve its financial or strategic objectives
or anticipated cost savings following acquisitions and integration
efforts. The Bank’s or a subsidiary’s ability to successfully complete an
acquisition is often subject to regulatory and shareholder approvals,
and the Bank cannot be certain when or if, or on what terms and
conditions, any required approvals will be granted. The Bank’s financial
performance is also influenced by its ability to execute strategic plans
developed by management. If these strategic plans do not meet with
success or there is a change in strategic plans, the Bank’s earnings
could grow more slowly or decline.
Ability to Attract and Retain Key Executives
The Bank’s future performance depends to a large extent on the avail-
ability of qualified people and the Bank’s ability to attract, develop,
and retain key executives. There is intense competition for the best
people in the financial services sector. Although it is the goal of the
Bank’s management resource policies and practices to attract, develop
and retain key executives employed by the Bank or an entity acquired
by the Bank, there is no assurance that the Bank will be able to do so.
Business Infrastructure
Third parties provide key components of the Bank’s business infra-
structure such as voice and data communications and network access.
Given the high volume of transactions we process on a daily basis,
the Bank is reliant on such third party provided services to successfully
deliver our products and services. Despite our contingency plans and
those of our third party service providers, disruptions in internet,
network access or other voice or data communication services could
adversely affect the Bank’s ability to deliver products and services
to customers and to otherwise conduct business.
Changes to Our Credit Ratings
There can be no assurance that the Bank’s credit ratings and rating
outlooks from rating agencies such as Moody’s Investors Service, Stan-
dard & Poor’s, Fitch Ratings, or DBRS will not be lowered or that these
ratings agencies will not issue adverse commentaries about the Bank.
Such changes could potentially result in higher financing costs and
reduce access to capital markets. A lowering of credit ratings may also
affect the Bank’s ability to enter into normal course derivative or hedging
transactions and impact the costs associated with such transactions.