TD Bank 2014 Annual Report Download - page 64

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS62
Counterparty credit risk comprises OTC derivatives, repo-style transac-
tions, trades cleared through central counterparties, and CVA RWA
(phased in at 57%). Non-counterparty credit risk includes loans and
advances to retail customers (individuals and small business), corporate
entities (wholesale and commercial customers), banks and govern-
ments, as well as holdings of debt, equity securities, and other assets
(including prepaid expenses, current and deferred income taxes, land,
building, equipment, and other depreciable property).
The Book size category consists of organic changes in book size and
composition (including new business and maturing loans) and, for the
fourth quarter of 2014, is mainly due to growth in derivatives, corpo-
rate, and commercial loans in the Wholesale and U.S. Retail segments
and across various portfolios in the Canadian Retail segment.
The Book quality category includes quality of book changes caused
by experience such as underlying customer behaviour or demographics,
including changes through model calibrations/realignments.
The Model updates category relates to model implementation,
changes in model scope, or any changes to address model malfunctions.
The Methodology and policy category impacts are methodology
changes to the calculations driven by regulatory policy changes, such
as new regulations.
Foreign exchange movements are mainly due to a change in the
U.S. dollar foreign exchange rate on the U.S. portfolios in the U.S.
Retail segment.
The Other category consists of items not described in the above
categories including changes in exposures not included under
advanced or standardized methodologies such as prepaid expenses,
current and deferred income taxes, land, building, equipment and
other depreciable property, and other assets.
The Movement in risk levels category reflects changes in risk due
to position changes and market movements. Increases in Canadian
provincial bonds drove the increase in contribution to RWA.
The Model updates category reflects updates to the model to reflect
recent experience and changes in model scope. Updates to the Bank’s
model to incorporate changes to the treatment of TD’s own debt, and
improvements in the quality of the data underlying the model, drove
the changes.
The Methodology and policy category reflects methodology changes
to the calculations driven by regulatory policy changes.
Foreign exchange movements and other are deemed not meaningful
since RWA exposure measures are calculated in Canadian dollars.
Therefore, no foreign exchange translation is required.
(billions of Canadian dollars) For the three months ended
October 31, 2014
October 31, 2013
Non-counterparty Counterparty Non-counterparty Counterparty
credit risk credit risk credit risk credit risk
Common Equity Tier 1 Capital RWA, balance at beginning of period $ 249.1 $ 16.4 $ 246.1 $ 17.6
Book size 4.0 1.3 5.8 (1.2)
Book quality (0.3) – (0.9) –
Model updates (0.1) – (0.6) –
Methodology and policy – – – –
Acquisitions and disposals – – – –
Foreign exchange movements 5.2 0.2 (0.7) –
Other 0.1 – (0.6) –
Total RWA movement 8.9 1.5 3.0 (1.2)
Common Equity Tier 1 Capital RWA, balance at end of period $ 258.0 $ 17.9 $ 249.1 $ 16.4
FLOW STATEMENT FOR RISK-WEIGHTED ASSETS – Disclosure for non-counterparty credit risk and
counterparty credit risk – Risk-weighted assets movement by key driver
TABLE 46
(billions of Canadian dollars) For the three months ended
October 31 July 31
2014 2014
RWA, balance at beginning of period $ 13.7 $ 12.8
Movement in risk levels 0.9 0.7
Model updates (0.2) 0.2
Methodology and policy – –
Acquisitions and disposals – –
Foreign exchange movements and other n/m1 n/m1
Total RWA movement 0.7 0.9
RWA, balance at end of period $ 14.4 $ 13.7
1 Not meaningful.
(billions of Canadian dollars) For the three months ended
October 31 July 31
2014 2014
RWA, balance at beginning of period $ 37.5 $ 36.7
Revenue generation 0.6 0.8
RWA, balance at end of period $ 38.1 $ 37.5
The movement in the Revenue generation category is mainly due
to an increase in gross income related to the U.S. Retail and Canadian
Retail segments.
FLOW STATEMENT FOR RISK-WEIGHTED ASSETS –
Disclosure for market risk – Risk-weighted assets
movement by key driver
TABLE 47
FLOW STATEMENT FOR RISK-WEIGHTED ASSETS
– Disclosure for operational risk – Risk-weighted
assets movement by key driver
TABLE 48