The following table summarizes the securitized asset types that did not qualify for derecognition, along with their associated securitization liabilities as at October 31.


Financial Assets Not Qualifying for Derecognition Treatment as Part of the Bank’s Securitization Programs (millions of Canadian dollars)


Fair


Nature of transaction Securitization of residential mortgage loans


Other financial assets transferred related to securitization1 Total


Associated liabilities2 1


Includes asset-backed securities, asset-backed commercial paper, cash, repurchase agreements, and Government of Canada securities used to fulfill funding requirements of the Bank’s securitization structures after the initial securitization of mortgage loans.


Other Financial Assets Not Qualifying for Derecognition The Bank enters into certain transactions where it transfers previously recognized commodities and financial assets, such as, debt and equity securities, but retains substantially all of the risks and rewards of those assets. These transferred assets are not derecognized and the transfers are accounted for as financing transactions. The most common transactions of this nature are repurchase agreements and securities lending agreements, in which the Bank retains substantially all of the associated credit, price, interest rate, and foreign exchange risks and rewards associated with the assets.


The following table summarizes the carrying amount of financial assets and the associated transactions that did not qualify for derecognition, as well as their associated financial liabilities as at October 31.


Other Financial Assets Not Qualifying for Derecognition1 (millions of Canadian dollars)


Carrying amount of assets Nature of transaction Repurchase agreements2,3 Securities lending agreements


Total


Carrying amount of associated liabilities3


1 2 As at


October 31 October 31 2016


2015


$ 9,676 $ 24,007 14,023


23,699


13,967 37,974


$ 9,474 $ 23,954


Certain comparative amounts have been restated to conform with the presentation adopted in the current period.


Includes $3.7 billion, as at October 31, 2016, of assets related to repurchase agreements or swaps that are collateralized by physical precious metals (October 31, 2015 – $4.9 billion).


3 Associated liabilities are all related to repurchase agreements. 2


October 31, 2016 Carrying


value


$ 26,930 3,342


30,272 $ (30,766) amount


$ 26,742 3,342


30,084 $ (30,407) Fair value


$ 30,355 3,173


33,528 $ (34,142) As at


October 31, 2015 Carrying


amount


$ 30,211 3,170


33,381 $ (33,729)


Includes securitization liabilities carried at amortized cost of $18 billion as at October 31, 2016 (October 31, 2015 – $23 billion), and securitization liabilities carried at fair value of $12 billion as at October 31, 2016 (October 31, 2015 – $11 billion).


TRANSFERS OF FINANCIAL ASSETS QUALIFYING FOR DERECOGNITION


Transferred financial assets that are derecognized in their entirety where the Bank has a continuing involvement


Continuing involvement may arise if the Bank retains any contractual rights or obligations subsequent to the transfer of financial assets. Certain business and government loans securitized by the Bank are derecognized from the Bank’s Consolidated Balance Sheet. In instances where the Bank fully derecognizes business and government loans, the Bank may be exposed to the risks of transferred loans through a retained interest. As at October 31, 2016, the fair value of retained interests was $31 million (October 31, 2015 – $38 million). There are no expected credit losses on the retained interests of the securitized business and government loans as the underlying mortgages are all government insured. A gain or loss on sale of the loans is recognized immediately in other income after considering the effect of hedge accounting on the assets sold, if applicable. The amount of the gain or loss recognized depends on the previous carrying values of the loans involved in the transfer, allocated between the assets sold and the retained interests based on their relative fair values at the date of transfer. For the year ended October 31, 2016, the trading income recognized on the retained interest was $2 million (October 31, 2015 – $3 million). Certain portfolios of U.S. residential mortgages originated by the Bank are sold and derecognized from the Bank’s Consolidated Balance Sheet. In certain instances, the Bank has a continuing involvement to service those loans. As at October 31, 2016, the carrying value of these servicing rights was $25 million (October 31, 2015 – $20 million) and the fair value was $28 million (October 31, 2015 – $26 million). A gain or loss on sale of the loans is recognized immediately in other income. The gain (loss) on sale of the loans for the year ended October 31, 2016, was $24 million (October 31, 2015 – $12 million).


156 TD BANK GROUP ANNUAL REPORT 2016 FINANCIAL RESULTS


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