T ABLE 35


EXPOSURE TO EUROPE – Gross European Lending Exposure by Country (millions of Canadian dollars) October 31, 2016 Country


GIIPS Greece


Italy Ireland


Portugal Spain


Total GIIPS


Rest of Europe Belgium


Finland France


Germany


Netherlands Sweden


Switzerland


United Kingdom Other3


Total Rest of Europe Total Europe


1


Includes interest-bearing deposits with banks, funded loans, and banker’s acceptances.


2 Includes undrawn commitments and letters of credit. $ Direct1 –


170 – – –


170 – 71


830 788 970 282 562


3,117 5


6,625 $ 6,795 3


Loans and Commitments Indirect2


Total $


– 4 – –


153 157


273 13


541 948 444 4


746


1,716 6


4,691 $ 4,848 $ –


174 – –


153 327


273 84


1,371 1,736 1,414 286


1,308 4,833 11


11,316 $ 11,643 $ Direct1 –


204 – –


63 267 – 61 179


1,730 744 193 662


2,581 135


6,285 $ 6,552 As at October 31, 2015


Loans and Commitments Indirect2


Total $


– 3 – –


47 50


4,834 24


495 915 525 4


838


2,142 6


9,783 $ 9,833 $ –


207 – –


110 317


4,834 85


674


2,645 1,269 197


1,500 4,723 141


16,068 $ 16,385


Other European exposure is distributed across 9 countries (October 31, 2015 – 10 countries), each of which has a net exposure including loans and commitments, derivatives, repos and securities lending, and trading and investment portfolio below $1 billion as at October 31, 2016, and October 31, 2015.


Of the Bank’s European exposure, approximately 98% (October 31, 2015 – 99%) is to counterparties in countries rated AA or better by either Moody’s Investor Services (Moody’s) or Standard & Poor’s (S&P), with the majority of this exposure to the sovereigns themselves and to well-rated, systemically important banks in these countries. Derivatives and securities repurchase transactions are completed on a collateralized basis. The vast majority of derivatives exposure is offset by cash collateral while the repurchase transactions are backed largely by government securities rated A+ or better by either Moody’s or S&P, and cash. Additionally, the Bank has exposure to well-rated corporate issuers in Europe where the Bank also does business with their related entities in North America.


In addition to the European exposure identified above, the Bank also has $8.9 billion (October 31, 2015 – $8.8 billion) of direct exposure to supranational entities with European sponsorship and indirect exposure including $0.2 billion (October 31, 2015 – $1.6 billion) of European collateral from non-European counterparties related to repurchase and securities lending transactions that are margined daily. As part of the Bank’s usual credit risk and exposure monitoring processes, all exposures are reviewed on a regular basis. European exposures are reviewed monthly or more frequently as circumstances dictate and are periodically stress tested to identify and understand any potential vulnerabilities. Based on the most recent reviews, all European exposures are considered manageable.


EXPOSURE TO ACQUIRED CREDIT-IMPAIRED LOANS ACI loans are generally loans with evidence of incurred credit loss where it is probable at the purchase date that the Bank will be unable to collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the acquisition date may include statistics such as past due status and credit scores. ACI loans are initially recorded at fair value and, as a result, no allowance for credit losses is recorded on the date of acquisition. ACI loans were acquired through the acquisitions of FDIC-assisted transactions, which include FDIC covered loans subject to loss sharing agreements with the FDIC, South Financial, Chrysler Financial, and a credit card portfolio within the U.S. strategic cards portfolio. The following table presents the unpaid principal balance, carrying value, counterparty-specific allowance, allowance for individually insignificant impaired loans, and the net carrying value as a percentage of the unpaid principal balance for ACI loans.


TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS


55


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