TD Bank 2014 Annual Report Download - page 66

TD BANK GROUP ANNUAL REPORT 2014 MANAGEMENT’S DISCUSSION AND ANALYSIS64
FUTURE CHANGES IN BASEL
Future Regulatory Capital Developments
In December 2013, BCBS published a second consultative document
proposing a revised securitization framework. The proposal aims to
enhance current methodologies for calculating securitization RWA by
making them more risk sensitive and limiting over-reliance on rating
agencies. While the second consultative document yields capital
requirements that are lower than those produced in the first consulta-
tive document, it would still generally increase the current risk weights
of securitization exposures.
In January 2014, the BCBS issued an update to the exposure
measure calculation and disclosure requirements of the Basel III lever-
age ratio framework. The leverage ratio was initially announced in the
Basel III framework in December 2010 and, similar to the ACM, is
intended to serve as a supplementary measure to risk-based capital
requirements, with the objective of constraining the build-up of excess
leverage in the banking sector. The January 2014 update made
changes to the exposure measure calculation which are expected to
result in a favourable impact to the Bank’s Basel III leverage ratio. In
July 2014, TD received its authorized leverage ratio from OSFI, which
has been communicated on a bilateral basis. In October 2014, OSFI
released its final guideline for the Leverage Ratio Requirements and
replaces the ACM with the leverage ratio on January 1, 2015. While
the Basel III leverage ratio has been reported to OSFI on a bilateral
basis since 2013, public disclosure of the ratio will commence as part
of TD’s first quarter 2015 reporting. The Bank expects to meet OSFI’s
authorized leverage ratio as at January 1, 2015.
On August 1, 2014, the Department of Finance released a public
consultation paper (the “Bail-in Consultation”) regarding a proposed
Taxpayer Protection and Bank Recapitalization regime (commonly
referred to as “bail-in”) which outlines their intent to implement a
comprehensive risk management framework for Canada’s D-SIBs. Refer
to the section on “Regulatory Developments Concerning Liquidity and
Funding” in this document for more details.
As part of adopting final Basel III rules in the U.S., effective
January 1, 2014, the Bank’s U.S. holding company and major U.S.
retail bank subsidiaries commenced reporting available regulatory
capital on a U.S. Basel III basis. RWA will continue to be reported
according to the U.S. general risk-based capital rules (namely
“Basel I”), until January 1, 2015, when the Bank’s U.S. holding
company and major U.S. retail bank subsidiaries will report both
available regulatory capital and RWA on a U.S. Basel III basis.
In February 2014, the U.S. Federal Reserve Board released final
rules on Enhanced Prudential Standards for large Foreign Bank
Organizations and U.S. Bank Holding Companies (BHCs). As a result
of these rules, TD will be required to consolidate 90% of its U.S. legal
entity ownership interests under a single top-tier U.S. Intermediate
Holding Company (IHC) by July 1, 2016, and consolidate 100% of its
U.S. legal entity ownership interest by July 1, 2017. The IHC will be
subject to the same extensive capital, liquidity, and risk management
requirements as large BHCs.
(millions of shares/units, except as noted) As at
October 31 October 31
2014 2013
Number of Number of
shares/units shares/units
Common shares outstanding 1,846.2 1,838.9
Treasury shares – common (1.6) (3.9)
Total common shares 1,844.6 1,835.0
Stock options
Vested 7.1 8.8
Non-vested 12.3 13.2
Series O2 – 17.0
Series P 10.0 10.0
Series Q 8.0 8.0
Series R 10.0 10.0
Series S3 5.4 5.4
Series T3 4.6 4.6
Series Y4 5.5 5.5
Series Z4 4.5 4.5
Series AA5 – 10.0
Series AC6 – 8.8
Series AE7 – 12.0
Series AG8 – 15.0
Series AI9 – 11.0
Series AK10 – 14.0
Series 111 20.0 –
Series 312 20.0 –
Total preferred shares – equity 88.0 135.8
Treasury shares – preferred – (0.1)
Total preferred shares 88.0 135.7
Capital Trust Securities (thousands of shares)
Trust units issued by TD Capital Trust III:
TD Capital Trust III Securities – Series 2008 1,000.0 1,000.0
Debt issued by TD Capital Trust IV:
TD Capital Trust IV Notes – Series 1 550.0 550.0
TD Capital Trust IV Notes – Series 2 450.0 450.0
TD Capital Trust IV Notes – Series 3 750.0 750.0
1 For further details, including the principal amount, conversion and exchange
features, and distributions, see Note 21 to the Consolidated Financial Statements.
2 On October 31, 2014, the Bank redeemed all of its outstanding Class A First
Preferred Shares, Series O, at a redemption price of $25 per share.
3 On July 31, 2013, the Bank converted 4.6 million of its 10 million non-cumulative
5-year Rate Reset Preferred Shares, Series S, on a one-for-one basis, into non-
cumulative Floating Rate Preferred Shares, Series T of the Bank.
4 On October 31, 2013, the Bank converted 4.5 million of its 10 million non-
cumulative 5-year Rate Reset Preferred Shares, Series Y, on a one-for-one basis,
into non-cumulative Floating Rate Preferred Shares, Series Z of the Bank.
5 On January 31, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AA, at a redemption price of $25 per share.
6 On January 31, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AC, at a redemption price of $25 per share.
7 On April 30, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AE, at a redemption price of $25 per share.
8 On April 30, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AG, at a redemption price of $25 per share.
9 On July 31, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AI, at a redemption price of $25 per share.
10 On July 31, 2014, the Bank redeemed all of its outstanding 5-Year Rate
Reset Preferred Shares, Series AK, at a redemption price of $25 per share.
11 On June 4, 2014, the Bank issued 20 million non-cumulative 5-Year Rate
Reset Preferred Shares, Series 1 (Series 1 shares) for gross cash consideration
of $500 million, which included NVCC Provisions to ensure loss absorbency at
the point of non-viability. If the NVCC Provisions were to be triggered, the maxi-
mum number of common shares that could be issued based on the formula for
conversion applicable to the Series 1 shares, and assuming there are no declared
and unpaid dividends on the Series 1 shares or Series 2 shares, as applicable,
would be 100 million.
12 On July 31, 2014, the Bank issued 20 million non-cumulative 5-Year Rate
Reset Preferred Shares, Series 3 (Series 3 shares) for gross cash consideration
of $500 million, which included NVCC Provisions to ensure loss absorbency at
the point of non-viability. If the NVCC Provisions were to be triggered, the maxi-
mum number of common shares that could be issued based on the formula for
conversion applicable to the Series 3 shares, and assuming there are no declared
and unpaid dividends on the Series 3 shares or Series 4 shares, as applicable,
would be 100 million.
OUTSTANDING EQUITY AND SECURITIES
EXCHANGEABLE/CONVERTIBLE INTO EQUITY1
TABLE 49