$349 million ($243 million after tax) on a net basis in the fourth quarter of 2015. The restructuring initiatives were intended to reduce costs and manage expenses in a sustainable manner and to achieve greater operational efficiencies. These measures included process redesign and business restructuring, retail branch and real estate optimization, and organizational review and primarily related to asset impairments, exiting of lease agreements, employee severance and other personnel-related costs.
COMMITMENTS Credit-related Arrangements
In the normal course of business, the Bank enters into various commitments and contingent liability contracts. The primary purpose of these contracts is to make funds available for the financing needs of customers. The Bank’s policy for requiring collateral security with respect to these contracts and the types of collateral security held is generally the same as for loans made by the Bank. Financial and performance standby letters of credit represent irrevocable assurances that the Bank will make payments in the event that a customer cannot meet its obligations to third parties and they carry the same credit risk, recourse and collateral security requirements as loans extended to customers. Refer to the Guarantees section in this Note for further details.
Documentary and commercial letters of credit are instruments issued on behalf of a customer authorizing a third party to draw drafts on the Bank up to a certain amount subject to specific terms and conditions. The Bank is at risk for any drafts drawn that are not ultimately settled by the customer, and the amounts are collateralized by the assets to which they relate.
Commitments to extend credit represent unutilized portions of authorizations to extend credit in the form of loans and customers’ liability under acceptances. A discussion on the types of liquidity facilities the Bank provides to its securitization conduits is included in Note 10.
The values of credit instruments reported as follows represent the maximum amount of additional credit that the Bank could be obligated to extend should contracts be fully utilized.
Credit Instruments (millions of Canadian dollars)
Financial and performance standby letters of credit
Documentary and commercial letters of credit
Commitments to extend credit1 Original term to maturity of one year or less Original term to maturity of more than one year
Total 1
As at
October 31 October 31 2016
2015
$ 22,747 $ 21,046 436
330 41,096 106,274
40,477 90,803
$ 170,553 $ 152,656
Commitments to extend credit exclude personal lines of credit and credit card lines, which are unconditionally cancellable at the Bank’s discretion at any time.
In addition, as at October 31, 2016, the Bank is committed to fund $131 million (October 31, 2015 – $133 million) of private equity investments.
Long-term Commitments or Leases
The Bank has obligations under long-term non-cancellable leases for premises and equipment. Future minimum operating lease commitments for premises and for equipment, where the annual rental is in excess of $100 thousand, is estimated at $943 million for 2017; $896 million for 2018; $814 million for 2019, $720 million for 2020, and $4,582 million for 2021 and thereafter. Future minimum finance lease commitments where the annual payment is in excess of $100 thousand, is estimated at $27 million for 2017; $28 million for 2018; $26 million for 2019, $12 million for 2020, and $22 million for 2021 and thereafter. The premises and equipment net rental expense, included under Non-interest expenses in the Consolidated Statement of Income, was $1.1 billion for the year ended October 31, 2016 (October 31, 2015 – $1.1 billion; October 31, 2014 – $0.9 billion).
188 TD BANK GROUP ANNUAL REPORT 2016 FINANCIAL RESULTS ASSETS SOLD WITH RECOURSE
In connection with its securitization activities, the Bank typically makes customary representations and warranties about the underlying assets which may result in an obligation to repurchase the assets. These representations and warranties attest that the Bank, as the seller, has executed the sale of assets in good faith, and in compliance with relevant laws and contractual requirements. In the event that they do not meet these criteria, the loans may be required to be repurchased by the Bank.
GUARANTEES
The following types of transactions represent the principal guarantees that the Bank has entered into.
Assets Sold With Contingent Repurchase Obligations The Bank sells mortgage loans, which it continues to service, to the TD Mortgage Fund (the “Fund”), a mutual fund managed by the Bank. As part of its responsibilities, the Bank has an obligation to repurchase mortgage loans when they default or if the Fund experiences a liquidity event such that it does not have sufficient cash to honour unit-holder redemptions. On April 22, 2016, the Fund was discontinued and merged with another mutual fund managed by the Bank. The mortgages held by the Fund were not merged into the other mutual fund and as a result of the Fund’s discontinuation,
PLEDGED ASSETS AND COLLATERAL
In the ordinary course of business, securities and other assets are pledged against liabilities or contingent liabilities, including repurchase agreements, securitization liabilities, covered bonds, obligations related to securities sold short, and securities borrowing transactions. Assets are also deposited for the purposes of participation in clearing and payment systems and depositories or to have access to the facilities of central banks in foreign jurisdictions, or as security for contract settlements with derivative exchanges or other derivative counterparties.
Details of assets pledged against liabilities and collateral assets held or repledged are shown in the following table:
Sources and Uses of Pledged Assets and Collateral1 (millions of Canadian dollars)
Sources of pledged assets and collateral Bank assets
Cash and due from banks
Interest-bearing deposits with banks Loans
Securities Other assets Third-party assets2
Collateral received and available for sale or repledging Less: Collateral not repledged
Uses of pledged assets and collateral3 Derivatives
Obligations related to securities sold under repurchase agreements
Securities borrowing and lending
Obligations related to securities sold short Securitization Covered bond
Clearing systems, payment systems, and depositories Foreign governments and central banks Other
Total 1
2 3
163,040 150,125 (66,596)
96,444
12,595 53,103
37,874 22,481 34,601 28,668 4,521 1,480
37,861
Certain comparative amounts have been restated to conform with the presentation adopted in the current period.
Includes collateral received from reverse repurchase agreements, securities borrowing, margin loans, and other client activity.
Includes $19.1 billion of on-balance sheet assets that the Bank has pledged and that the counterparty can subsequently repledge as at October 31, 2016 (October 31, 2015 – $33.4 billion).
233,184 244,506
11,478 70,011
30,867 36,303 36,500 22,071 4,137 1,320
31,819 $ 233,184 $ 244,506
(51,678) 98,447
$ 187 $ 6,106
76,150 53,546 751
– 5,862
69,585 70,612 –
136,740 146,059 As at
October 31 October 31 2016
2015
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