TD Bank 2009 Annual Report Download - page 81

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS 77
As at Oct. 31, 20091
Senior long-term
Ratings agency Short-term debt rating debt rating and outlook
Moody’s P–1 Aaa negative
S&P A–1+ AA– stable
Fitch F–1+ AA– stable
DBRS R–1 (high) AA stable
1The above ratings are for The Toronto-Dominion Bank legal entity. A more extensive
listing, including subsidiaries’ ratings, is available on the Bank’s website at
http://www.td.com/investor/credit.jsp. Credit ratings are not recommendations to
purchase, sell or hold a financial obligation inasmuch as they do not comment on
market price or suitability for a particular investor. Ratings are subject to revision or
withdrawal at any time by the rating organization.
We have a large base of stable retail and commercial deposits, making
up over 70% of total funding. In addition, we have an active whole-
sale funding program to provide access to widely diversified funding
sources, including asset securitization. Our wholesale funding is diversi-
fied geographically, by currency and by distribution network. We
maintain limits on the amounts of deposits that we can hold from any
one depositor so that we do not overly rely on one or a small group
of customers as a source of funding. When deposit levels exceed these
limits, the excess amount must be invested in highly liquid assets and,
as a result, is not used to fund our Wholesale Banking requirements.
We also limit the wholesale funding that can mature in a given time
period. These funding limits are designed to address the risks of opera-
tional complexity in selling assets and reduced asset liquidity in a
systemic market event and also serve to limit our exposure to large
CREDIT RATINGS
TABLE 43
TERM FUNDING SOURCES
TABLE 44
(billions of Canadian dollars) 2009 2008
Assets securitized $19.6 $ 7.5
Senior debt – medium and long term –15.6
Subordinated debt –4.0
Preferred shares and capital trust securities 3.3 2.5
Total $ 22.9 $ 29.6
CONTRACTUAL OBLIGATIONS
The Bank has contractual obligations to make future payments on
operating and capital lease commitments, certain purchase obligations
and other liabilities. These contractual obligations have an impact
on the Bank’s short-term and long-term liquidity and capital resource
needs. The table below summarizes the remaining contractual
maturity for certain undiscounted financial liabilities and other
contractual obligations.
liability maturities. While we were managing under the Systemic
Market Event scenario certain funding limits were reduced to further
limit this exposure.
Over the last year, governments and central banks around the world,
including the government of Canada, have introduced a variety
of programs to address adverse funding market conditions and add
liquidity to markets. During this period we used certain short term
central bank facilities as the opportunity to enhance our liquidity posi-
tion permitted but always subject to strict utilization limits. We have
also participated in the Insured Mortgage Purchase Program (IMPP)
for National Housing Act Mortgage-Backed Securities as a source of
reasonably priced term funding. We continue to explore all opportuni-
ties to access expanded or lower cost funding on a sustainable basis.
(millions of Canadian dollars) 2009 2008
Over 1 year Over 3 to Over
Within 1 year to 3 years 5 years 5 years Total Total
Deposits1$ 308,211 $ 48,852 $ 11,742 $ 22,229 $ 391,034 $ 375,694
Subordinated notes and debentures – 449 150 11,784 12,383 12,436
Operating lease commitments 569 1,013 840 1,784 4,206 3,324
Capital lease commitments 20 37 14 15 86 58
Capital trust securities 895 – – – 895 894
Network service agreements 99 – – – 99 322
Automated banking machines 139 207 143 – 489 194
Contact centre technology 34 89 – – 123 115
Software licensing and equipment maintenance 97 69 – – 166 157
Total $ 310,064 $ 50,716 $ 12,889 $ 35,812 $ 409,481 $ 393,194
CONTRACTUAL OBLIGATIONS BY REMAINING MATURITY
TABLE 45
1As the timing of deposits payable on demand, and deposits payable after notice,
is non-specific and callable by the depositor, obligations have been included as
less than one year.
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people and systems or from external sources.
Operating a complex financial institution exposes our businesses
to a broad range of operational risks, including failed transaction
processing and documentation errors, fiduciary and information
breaches, technology failures, business disruption, theft and fraud,
workplace injury and damage to physical assets as a result of internal
or outsourced business activities. The impact can result in significant
financial loss, reputational harm or regulatory censure and penalties.
Operational risk is embedded in all our business activities including
the practices for managing other risks such as credit, market and
liquidity risk. We must manage operational risk so that we can create
and sustain shareholder value, successfully execute our business strate-
gies, operate efficiently and provide reliable, secure and convenient
access to financial services. We maintain a formal Bank-wide operational
risk management framework that emphasizes a strong risk manage-
ment and internal control culture throughout the Bank.
Under Basel II, we use the Standardized Approach to operational
risk for our domestic and international operations and the Basic Indicator
Approach for operations of our U.S. Personal and Commercial Banking
segment. Over time, we plan to implement the more sophisticated
Advanced Measurement Approach for operational risk.
FUNDING