TD Bank 2014 Annual Report Download - page 156

TD BANK GROUP ANNUAL REPORT 2014 FINANCIAL RESULTS154
OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
NOTE 6
In the normal course of business, the Bank enters into numerous
contracts to buy and sell goods and services from various suppliers.
Some of these contracts may have netting provisions that allow for the
offset of various trade payables and receivables in the event of default
of one of the parties. While these are not disclosed in the following
table, the gross amount of all payables and receivables to and from
the Bank’s vendors is disclosed in the Other assets note in accounts
receivable and other items and in the Other liabilities note in accounts
payable, accrued expenses, and other items.
The Bank also enters into regular way purchases and sales of stocks
and bonds. Some of these transactions may have netting provisions
that allow for the offset of broker payables and broker receivables
related to these purchases and sales. While these are not disclosed
in the following table, the gross amount of receivables are disclosed
in Amounts receivable from brokers, dealers, and clients and payables
are disclosed in Amounts payable to brokers, dealers, and clients.
The following table provides a summary of the financial assets and
liabilities which are subject to enforceable master netting agreements
and similar arrangements, including amounts not otherwise set off in
the balance sheet, as well as financial collateral received to mitigate
credit exposures for these financial assets and liabilities. The gross
financial assets and liabilities are reconciled to the net amounts
presented within the associated balance sheet line, after giving effect
to transactions with the same counterparties that have been offset in
the balance sheet. Related amounts and collateral received that are
not offset on the balance sheet, but are otherwise subject to the same
enforceable netting agreements and similar arrangements, are then
presented to arrive at a net amount.
OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Bank enters into netting agreements with counterparties (such as
clearing houses) to manage the credit risks associated primarily with
repurchase and reverse repurchase transactions, securities borrowing
and lending, and over-the-counter and exchange-traded derivatives.
These netting agreements and similar arrangements generally allow
the counterparties to set-off liabilities against available assets received.
The right to set-off is a legal right to settle or otherwise eliminate all
or a portion of an amount due by applying against that amount an
amount receivable from the other party. These agreements effectively
reduce the Bank’s credit exposure by what it would have been if those
same counterparties were liable for the gross exposure on the same
underlying contracts.
Netting arrangements are typically constituted by a master netting
agreement which specifies the general terms of the agreement
between the counterparties, including information on the basis of the
netting calculation, types of collateral, and the definition of default
and other termination events for transactions executed under the
agreement. The master netting agreements contain the terms and
conditions by which all (or as many as possible) relevant transactions
between the counterparties are governed. Multiple individual transac-
tions are subsumed under this general master netting agreement,
forming a single legal contract under which the counterparties conduct
their relevant mutual business. In addition to the mitigation of credit
risk, placing individual transactions under a single master netting
agreement that provides for netting of transactions in scope also helps
to mitigate settlement risks associated with transacting in multiple
jurisdictions or across multiple contracts. These arrangements include
clearing agreements, global master repurchase agreements, and global
master securities lending agreements.
(millions of Canadian dollars) As at
October 31, 2014
Amounts subject to an enforceable
master netting arrangement or similar
agreement that are not set-off in
the Consolidated Balance Sheet1
Gross amounts Gross amounts
of recognized of recognized Net amount
financial financial of financial Amounts
instruments instruments instruments subject to an
before set-off in the presented in the enforceable
balance sheet Consolidated Consolidated master netting
netting Balance Sheet Balance Sheet agreement Collateral Net Amount
FINANCIAL ASSETS
Derivatives $ 69,488 $ 14,125 $ 55,363 $ 39,783 $ 8,278 $ 7,302
Securities purchased under
reverse repurchase agreements 94,877 19,846 75,031 6,828 68,127 76
Total 164,365 33,971 130,394 46,611 76,405 7,378
Financial Liabilities
Derivatives 64,901 14,125 50,776 39,783 6,353 4,640
Obligations related to securities sold
under repurchase agreements 65,433 19,846 45,587 6,828 38,757 2
Total $ 130,334 $ 33,971 $ 96,363 $ 46,611 $ 45,110 $ 4,642
October 31, 2013
FINANCIAL ASSETS
Derivatives $ 60,326 $ 10,865 $ 49,461 $ 37,919 $ 5,609 $ 5,933
Securities purchased under
reverse repurchase agreements 84,192 19,909 64,283 7,134 57,085 64
Total 144,518 30,774 113,744 45,053 62,694 5,997
Financial Liabilities
Derivatives 60,336 10,865 49,471 37,919 6,250 5,302
Obligations related to securities sold
under repurchase agreements 54,323 19,909 34,414 7,134 27,279 1
Total $ 114,659 $ 30,774 $ 83,885 $ 45,053 $ 33,529 $ 5,303
1
Excess collateral as a result of overcollateralization has not been reflected in
the table.