The Bank’s IAA process is subject to all of the key elements and principles of the Bank’s risk governance structure, and is managed in the same way as outlined in this “Credit Risk” section. The Bank uses the results of the IAA in all aspects of its credit risk management, including performance tracking, control mechanisms, management reporting, and the calculation of capital. Under the IAA, exposures are multiplied by OSFI prescribed risk weights to calculate RWA for capital purposes.
Market Risk
Trading Market Risk is the risk of loss in financial instruments or the balance sheet due to adverse movements in market factors such as interest rates, foreign exchange rates, equity prices, commodity prices, credit spreads, volatilities, and correlations from trading activities.
MARKET RISK LINKAGE TO THE BALANCE SHEET The following table provides a breakdown of the Bank’s balance sheet into assets and liabilities exposed to trading and non-trading market
T ABLE 49 MARKET RISK LINKAGE TO THE BALANCE SHEET (millions of Canadian dollars) October 31, 2016 Balance
Assets subject to market risk Interest-bearing deposits with banks Trading loans, securities, and other Derivatives
Financial assets designated at fair value through profit or loss
Available-for-sale securities Held-to-maturity securities
Securities purchased under reverse repurchase agreements
Loans
Customers’ liability under acceptances Investment in TD Ameritrade Other assets1
Assets not exposed to market risk Total Assets
Liabilities subject to market risk Trading deposits Derivatives
Securitization liabilities at fair value
Other financial liabilities designated at fair value through profit or loss
Deposits Acceptances Obligations related to securities sold short
Obligations related to securities sold under repurchase agreements
Securitization liabilities at amortized cost Subordinated notes and debentures Other liabilities1
Liabilities and Equity not exposed to market risk
Total Liabilities and Equity 1
$
53,714 $ 99,257 72,242
4,283
107,571 84,395
86,052
589,529 15,706 7,091 1,769
55,358 1,176,967
79,786 65,425 12,490
190
773,660 15,706 33,115
48,973 17,918 10,891 15,526
103,287 Trading Non-trading sheet market risk market risk
92,282 63,931
258 $ 53,456 $ 6,975 8,311
– – –
1,728 – – – – –
158,199 3,876
60,221 12,490
177 – –
29,973 3,657
– – –
– Relates to retirement benefits, insurance, and structured entity liabilities. 4,283
107,571 84,395
84,324
589,529 15,706 7,091 1,769 –
963,410
75,910 5,204 –
13
773,660 15,706 3,142
45,316 17,918 10,891 15,526
–
Balance sheet
market risk
42,483 $ 95,157 69,438
4,378
88,782 74,450
97,364
547,775 16,646 6,683 1,545
59,672 1,104,373
74,759 57,218 10,986
1,415
695,576 16,646 38,803
67,156 22,743 8,637
11,866 98,568
89,372 58,144
As at October 31, 2015
Trading Non-trading market risk
219 $ 42,264 5,785
– – –
13,201 – – – – –
160,936 2,231
52,752 10,986
1,402 – –
33,594 12,376
– – –
–
88,782 74,450
84,163
547,775 16,646 6,683 1,545 –
883,765
72,528 4,466 –
13
695,576 16,646 5,209
54,780 22,743 8,637
11,866 –
$ 1,176,967 $ 110,394 $ 963,286 $ 1,104,373 $ 113,341 $ 892,464 Interest rate
Foreign exchange, interest rate Interest rate
Interest rate
Equity, interest rate Interest rate Interest rate
Interest rate Interest rate Interest rate Interest rate
Non-trading market risk – primary risk sensitivity
Interest rate Interest rate
11,294 Equity, foreign exchange, interest rate 4,378
Interest rate
Foreign exchange, interest rate Foreign exchange, interest rate
Interest rate Interest rate Interest rate Equity
Interest rate
Non-Trading Market Risk is the risk of loss in financial instruments, the balance sheet or in earnings, or the risk of volatility in earnings from non-trading activities such as asset-liability management or investments, predominantly from interest rate, foreign exchange and equity risks.
The Bank is exposed to market risk in its trading and investment portfolios, as well as through its non-trading activities. In the Bank’s trading and investment portfolios, it is an active participant in the market, seeking to realize returns for TD through careful management of its positions and inventories. In the Bank’s non-trading activities, it is exposed to market risk through the everyday banking transactions that the Bank’s customers execute with TD.
The Bank complied with the Basel III market risk requirements as at October 31, 2016, using the Internal Model Approach.
risks. Market risk of assets and liabilities included in the calculation of VaR and other metrics used for regulatory market risk capital purposes is classified as trading market risk.
82 TD BANK GROUP ANNUAL REPORT 2016 MANAGEMENT’S DISCUSSION AND ANALYSIS
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