T ABLE 42


FLOW STATEMENT FOR RISK-WEIGHTED ASSETS – Disclosure for Non-Counterparty Credit Risk and Counterparty Credit Risk – Risk-Weighted Assets Movement by Key Driver


(millions of Canadian dollars) October 31, 2016


Non-counterparty credit risk


Common Equity Tier 1 Capital RWA, balance at beginning of period Book size


Book quality Model updates


Methodology and policy Acquisitions and disposals Foreign exchange movements Other


Total RWA movement Common Equity Tier 1 Capital RWA, balance at end of period


Counterparty credit risk is comprised of over-the-counter derivatives, repo-style transactions, trades cleared through central counterparties, and CVA RWA which was phased in at 64% for fiscal 2016 (2015 – 64%). Non-counterparty credit risk includes loans and advances to retail customers (individuals and small business), corporate entities (wholesale and commercial customers), banks and governments, 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 fiscal 2016, is mainly due to growth in commercial loans in the U.S. Retail segment 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. Effective the third quarter of 2016, OSFI approved the Bank to calculate the majority of the retail portfolio credit RWA in the U.S. Retail segment using the AIRB approach. RWA in counterparty credit risk decreased due to optimization in the potential future exposures calculation for certain derivatives allowed under the Basel III framework. 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 fluctuations in the U.S. dollar to Canadian dollar 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.


T ABLE 43


FLOW STATEMENT FOR RISK-WEIGHTED ASSETS – Disclosure for Market Risk – Risk-Weighted Assets Movement by Key Driver


(millions of Canadian dollars)


RWA, balance at beginning of period Movement in risk levels Model updates


Methodology and policy Acquisitions and disposals


Foreign exchange movements and other Total RWA movement


RWA, balance at end of period 1 Not meaningful.


For the years ended


October 31 October 31 2016


2015


$ 12,655.0 $ 14,376.0 548.0 –


n/m1


49.0 –


(992.0) (1,770.0) –


– n/m1 (444.0) (1,721.0) $ 12,211.0 $ 12,655.0


$ 308,164 18,589 2,556


(11,195) –


(318)


5,124 1,415


16,171 $ 324,335


Counterparty Non-counterparty credit risk


credit risk


$ 20,423 (527) (223)


(4,144) – –


432 –


(4,462) $ 15,961


$ 258,009 21,254 (679) (910) –


2,169


26,242 2,079


50,155 $ 308,164


For the years ended October 31, 2015 Counterparty


credit risk $ 17,917


680


(405) –


705 –


1,526 –


2,506 $ 20,423


The Movement in risk levels category reflects changes in risk due to position changes and market movements.


The Model updates category reflects updates to the model to reflect recent experience and changes in model scope.


The Methodology and policy category reflects methodology changes to the calculations driven by regulatory policy changes. Methodology changes related to debt specific risk drove the decrease in RWA. 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.


T ABLE 44


FLOW STATEMENT FOR RISK-WEIGHTED ASSETS – Disclosure for Operational Risk – Risk-Weighted Assets Movement by Key Driver


(millions of Canadian dollars)


RWA, balance at beginning of period Revenue generation Movement in risk levels Methodology and policy Acquisitions and disposals


RWA, balance at end of period For the years ended


October 31 October 31 2016


2015


$ 41,118 $ 38,092 790 –


6,093 –


$ 48,001 $ 41,118


The movement in the Revenue generation category is due to a change in gross income. The Movement in risk levels category primarily reflects changes in risk due to operational loss experience, business environment and internal control factors, scenario analysis and movements in foreign exchange. The Model updates category relates to model implementation, changes in model scope, or any changes to address model malfunctions. The Methodology and policy category reflects newly adopted methodology changes to the calculations driven by regulatory policy changes. Effective the third quarter of 2016, OSFI approved the Bank to use the AMA to calculate operational risk weighted assets.


3,026 – – –


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


61


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