TD Bank 2012 Annual Report Download - page 170

TD BANK GROUP ANNUAL REPORT 2012 FINANCIAL RESULTS168
Retail Financial Assets Subject to the AIRB Approach by Risk Rating1
(millions of Canadian dollars) October 31, 2012
Low risk Normal risk Medium risk High risk Default Total
Loans
Residential mortgages2 $ 25,770 $ 15,508 $ 3,946 $ 1,541 $ 166 $ 46,931
Consumer instalment and other personal2 11,510 25,177 17,401 5,693 293 60,074
Credit card 970 2,282 2,894 1,720 59 7,925
Business and government3 334 2,349 2,349 1,187 75 6,294
Total loans 38,584 45,316 26,590 10,141 593 121,224
Off-balance sheet credit instruments 20,597 17,191 6,299 1,218 4 45,309
Total $ 59,181 $ 62,507 $ 32,889 $ 11,359 $ 597 $ 166,533
October 31, 2011
Loans
Residential mortgages2 $ 11,970 $ 17,554 $ 7,640 $ 1,671 $ 184 $ 39,019
Consumer instalment and other personal2 8,584 23,841 19,971 5,506 294 58,196
Credit card 892 2,212 2,887 1,857 62 7,910
Business and government3 259 2,190 2,241 1,370 73 6,133
Total loans 21,705 45,797 32,739 10,404 613 111,258
Off-balance sheet credit instruments 20,247 16,933 5,916 1,316 5 44,417
Total $ 41,952 $ 62,730 $ 38,655 $ 11,720 $ 618 $ 155,675
November 1, 2010
Loans
Residential mortgages2 $ 9,840 $ 12,659 $ 5,483 $ 1,578 $ 155 $ 29,715
Consumer instalment and other personal2 8,232 24,543 18,170 5,320 254 56,519
Credit card 714 2,012 2,848 2,301 61 7,936
Business and government3 218 1,944 2,088 1,355 71 5,676
Total loans 19,004 41,158 28,589 10,554 541 99,846
Off-balance sheet credit instruments 17,680 16,179 6,125 1,432 5 41,421
Total $ 36,684 $ 57,337 $ 34,714 $ 11,986 $ 546 $ 141,267
1
Credit exposures relating to the Bank’s insurance subsidiaries have been excluded.
The financial instruments held by the insurance subsidiaries are mainly comprised
of available-for-sale securities and securities designated at fair value through profit
or loss, which are carried at fair value on the Consolidated Balance Sheet.
2 Excludes CMHC insured exposures classified as sovereign exposure under Basel II
and therefore included in the non-retail category under the AIRB approach.
3 Business and government loans in the retail portfolio include small business loans.
REGULATORY CAPITAL
NOTE 33
The Bank manages its capital under guidelines established by OSFI. The
regulatory capital guidelines measure capital in relation to credit, market
and operational risks. The Bank has various capital policies, procedures
and controls which it utilizes to achieve its goals and objectives.
The Bank’s objectives include:
• To be an appropriately capitalized financial institution as
determined by:
– The Bank’s Risk Appetite Statement;
– Capital requirements defined by relevant regulatory authorities;
and,
– The Bank’s internal assessment of capital requirements consistent
with the Bank’s risk tolerance levels.
• To have the most economically achievable weighted average cost
of capital (after tax), consistent with preserving the appropriate mix
of capital elements to meet targeted capitalization levels.
• To ensure ready access to sources of appropriate capital, at
reasonable cost, in order to:
– Insulate the Bank from unexpected events;
– Facilitate acquisitions; or,
– Support business expansion.
• To support strong external debt ratings, in order to manage
the Bank’s overall cost of funds and to maintain accessibility to
required funding.
The Bank’s Total capital consists of two tiers of capital approved
under OSFI’s regulatory capital guidelines.
Tier 1 capital includes items such as common shares and preferred
shares, retained earnings, contributed surplus, innovative capital
instruments and qualifying non-controlling interests in subsidiaries.
Tier 1 capital is reduced by items such as goodwill and net intangible
assets (in excess of the 5% limit), 50% of the shortfall in allowances
related to the Internal Ratings Based (IRB) approach portfolios, 50%
of substantial investments, 50% of investments in insurance subsidiaries
and deductions from securitization investments.
Tier 2 capital includes items such as the collective allowance for
standardized portfolios and subordinated notes and debentures. Tier 2
capital is reduced by items such as 50% of the shortfall in allowances
related to IRB approach portfolios, 50% of substantial investments,
50% of investments in insurance subsidiaries and deductions from
securitization investments.
For regulatory capital purposes, insurance subsidiaries continue to
be deconsolidated and reported as a deduction from capital. Insurance
subsidiaries are subject to their own capital adequacy reporting such
as OSFI’s Minimum Continuing Capital Surplus Requirements and the
Minimum Capital Test. Currently, for regulatory capital purposes, all
the entities of the Bank are either consolidated or deducted from capi-
tal and there are no entities from which surplus capital is recognized.