Fair value measurement (Tables)

12 Months Ended

Oct. 31, 2018

Summary of fair value of financial instruments

Fair value of financial instruments

IFRS 9

Carrying value

$ millions, as at October 31

Amortized
cost

Mandatorily
measured
at FVTPL

Designated
at FVTPL

Fair value
through
OCI

Total

Fair

value

Fair value
over (under)
carrying value

2018

Financial assets

Cash and deposits with banks

17,637

–

17,691

–

Securities

12,876

52,394

184

36,210

101,664

101,507

(157

)

Cash collateral on securities borrowed

5,488

–

5,488

–

Securities purchased under resale agreements

40,128

3,322

–

43,450

–

Loans

Residential mortgages

207,523

–

207,535

205,868

(1,667

)

Personal

42,577

–

42,577

42,559

(18

)

Credit card

12,255

–

12,255

–

Business and government

92,605

16,424

–

109,029

108,917

(112

)

Derivative instruments

–

21,431

–

21,431

–

Customers’ liability under acceptances

10,265

–

10,265

–

Other assets

10,230

–

10,230

–

Financial liabilities

Deposits

Personal

163,113

–

766

–

163,879

163,642

(237

)

Business and government

233,174

–

6,975

–

240,149

240,374

225

Bank

14,380

–

14,380

–

Secured borrowings

42,481

–

126

–

42,607

42,868

261

Derivative instruments

–

20,973

–

20,973

–

Acceptances

10,296

–

10,296

–

Obligations related to securities sold short

–

13,782

–

13,782

–

Cash collateral on securities lent

2,731

–

2,731

–

Obligations related to securities sold under repurchase agreements

30,840

–

30,840

–

Other liabilities

13,030

–

13,142

–

Subordinated indebtedness

4,080

–

4,080

4,340

260

IAS 39

Carrying value

$ millions, as at October 31

Amortized
cost

Trading

Designated
at fair value

Fair value
through
OCI

Total

Fair

value

Fair value
over (under)
carrying value

2017

Financial assets

Cash and deposits with banks

13,735

417

–

14,152

–

Securities

2,435

50,679

148

40,157

93,419

93,406

(13

)

Cash collateral on securities borrowed

5,035

–

5,035

–

Securities purchased under resale agreements

38,933

–

1,450

–

40,383

–

Loans

Residential mortgages

207,056

–

207,068

206,135

(933

)

Personal

40,442

–

40,442

40,438

)

Credit card

11,992

–

11,992

–

Business and government

83,222

14,010

–

97,232

97,188

(44

)

Derivative instruments

–

24,342

–

24,342

–

Customers’ liability under acceptances

8,824

–

8,824

–

Other assets

7,386

–

7,386

–

Financial liabilities

Deposits

Personal

158,690

–

637

–

159,327

159,302

(25

)

Business and government

220,050

–

5,572

–

225,622

225,955

333

Bank

13,789

–

13,789

–

Secured borrowings

40,634

–

334

–

40,968

41,391

423

Derivative instruments

–

23,271

–

23,271

–

Acceptances

8,828

–

8,828

–

Obligations related to securities sold short

–

13,713

–

13,713

–

Cash collateral on securities lent

2,024

–

2,024

–

Obligations related to securities sold under repurchase agreements

27,971

–

27,971

–

Other liabilities

9,782

126

–

9,917

–

Subordinated indebtedness

3,209

–

3,209

3,541

332

Summary of derivative financial instruments

Fair value of derivative instruments


$ millions, as at October 31								2018									2017
		Positive			Negative			Net			Positive			Negative			Net
Held for trading
Interest rate derivatives
Over-the-counter	– Forward rate agreements	$	113		$	8		$	105		$	56		$	44		$	12
	– Swap contracts		4,603			5,901			(1,298	)		6,968			7,220			(252	)
	– Purchased options		92			–			92			153			–			153
	– Written options		–			100			(100	)		–			168			(168	)
			4,808			6,009			(1,201	)		7,177			7,432			(255	)
Exchange-traded	– Purchased options		1			–			1			–			–			–
	– Written options		–			–			–			–			153			(153	)
			1			–			1			–			153			(153	)
Total interest rate derivatives			4,809			6,009			(1,200	)		7,177			7,585			(408	)
Foreign exchange derivatives
Over-the-counter	– Forward contracts		2,916			2,655			261			3,603			3,097			506
	– Swap contracts		4,825			4,979			(154	)		6,028			6,012			16
	– Purchased options		240			–			240			217			–			217
	– Written options		–			233			(233	)		–			243			(243	)
			7,981			7,867			114			9,848			9,352			496
Total foreign exchange derivatives			7,981			7,867			114			9,848			9,352			496
Credit derivatives
Over-the-counter	– Credit default swap contracts – protection purchased		115			13			102			130			31			99
	– Credit default swap contracts – protection sold		3			131			(128	)		11			148			(137	)
Total credit derivatives			118			144			(26	)		141			179			(38	)
Equity derivatives
Over-the-counter			1,951			2,340			(389	)		1,197			2,323			(1,126	)
Exchange-traded			1,659			1,490			169			1,541			936			605
Total equity derivatives			3,610			3,830			(220	)		2,738			3,259			(521	)
Precious metal derivatives
Over-the-counter			63			29			34			40			74			(34	)
Exchange-traded			143			229			(86	)		186			50			136
Total precious metal derivatives			206			258			(52	)		226			124			102
Other commodity derivatives
Over-the-counter			2,527			838			1,689			1,138			775			363
Exchange-traded			67			258			(191	)		84			1			83
Total other commodity derivatives			2,594			1,096			1,498			1,222			776			446
Total held for trading			19,318			19,204			114			21,352			21,275			77
Held for ALM
Interest rate derivatives
Over-the-counter	– Forward rate agreements		–			1			(1	)		1			–			1
	– Swap contracts		773			243			530			1,065			300			765
	– Purchased options		11			–			11			3			–			3
	– Written options		–			8			(8	)		–			2			(2	)
Total interest rate derivatives			784			252			532			1,069			302			767
Foreign exchange derivatives
Over-the-counter	– Forward contracts		117			7			110			87			14			73
	– Swap contracts		1,205			1,461			(256	)		1,707			1,631			76
	– Purchased options		–			–			–			1			–			1
	– Written options		–			–			–			–			1			(1	)
Total foreign exchange derivatives			1,322			1,468			(146	)		1,795			1,646			149
Credit derivatives
Over-the-counter	– Credit default swap contracts – protection purchased		–			3			(3	)		–			3			(3	)
	– Credit default swap contracts – protection sold		–			–			–			–			–			–
Total credit derivatives			–			3			(3	)		–			3			(3	)
Equity derivatives
Over-the-counter			7			46			(39	)		126			44			82
Total equity derivatives			7			46			(39	)		126			44			82
Other commodity derivatives
Over-the-counter			–			–			–			–			1			(1	)
Total other commodity derivatives			–			–			–			–			1			(1	)
Total held for ALM			2,113			1,769			344			2,990			1,996			994
Total fair value			21,431			20,973			458			24,342			23,271			1,071
Less: effect of netting			(11,789	)		(11,789	)		–			(13,977	)		(13,977	)		–
		$	9,642		$	9,184		$	458		$	10,365		$	9,294		$	1,071

Changes in fair value of financial assets and liabilities in level 3

The following table presents the changes in fair value of financial assets and liabilities in Level 3. These instruments are measured at fair value utilizing non-observable market inputs. We often hedge positions with offsetting positions that may be classified in a different level. As a result, the gains and losses for assets and liabilities in the Level 3 category presented in the table below do not reflect the effect of offsetting gains and losses on the related hedging instruments that are classified in Level 1 and Level 2.


										Net gains (losses) included in income ⁽¹⁾
$ millions, for the year ended October 31	IAS 39 Opening balance			Reclassification upon adoption of IFRS 9⁽²⁾			IFRS 9 Opening balance			Realized⁽³⁾			Unrealized⁽³⁾⁽⁴⁾			Net unrealized gains (losses) included in OCI⁽⁵⁾			Transfer in to Level 3			Transfer out of Level 3			Purchases		Issuances			Sales			Settlements			Closing balance
2018
Securities mandatorily measured at FVTPL (2017: Trading securities)
Corporate equity	$	32		$	10		$	42		$	2		$	(3	)	$	–		$	–		$	–		$	–	$	–		$	(3	)	$	(32	)	$	6
Corporate debt		–			–			–			–			–			–			–			–			26		–			–			–			26
Mortgage- and asset-backed		3			707			710			3			9			–			12			–			95		–			(105	)		(405	)		319
Securities designated at FVTPL (2017: FVO securities)
Asset-backed		94			(94	)		–			–			–			–			–			–			–		–			–			–			–
Loans mandatorily measured at FVTPL (2017: Trading loans)
Business and government		103			363			466			–			(5	)		(5	)		–			(2	)		704		91			(171	)		(596	)		482
Debt securities measured at FVOCI (2017: AFS debt securities)
Government issued or guaranteed		–			–			–			–			–			–			479			–			–		–			(479	)		–			–
Corporate debt		4			–			4			(5	)		1			–			–			–			26		–			(26	)		–			–
Mortgage- and asset-backed		1,674			(1,674	)		–			–			–			–			–			–			–		–			–			–			–
Equity securities designated at FVOCI (2017: AFS equity securities)
Corporate equity		289			(10	)		279			(3	)		(2	)		5			–			–			219		–			(213	)		–			285
Derivative instruments
Interest rate		28			–			28			–			(20	)		–			–			–			–		–			–			(8	)		–
Credit		130			–			130			(17	)		2			–			–			–			–		–			–			–			115
Equity		38			–			38			–			(27	)		–			12			(1	)		109		–			–			(24	)		107
Total assets	$	2,395		$	(698	)	$	1,697		$	(20	)	$	(45	)	$	–		$	503		$	(3	)	$	1,179	$	91		$	(997	)	$	(1,065	)	$	1,340
Deposits and other liabilities⁽⁶⁾	$	(369	)	$	–		$	(369	)	$	–		$	117		$	–		$	(126	)	$	81		$	–	$	(226	)	$	–		$	100		$	(423	)
Derivative instruments
Interest rate		(20	)		–			(20	)		–			(79	)		–			–			–			–		–			–			(10	)		(109	)
Credit		(148	)		–			(148	)		17			(2	)		–			–			–			–		–			–			2			(131	)
Equity		(77	)		–			(77	)		–			40			–			(71	)		46			–		(147	)		–			90			(119	)
Total liabilities	$	(614	)	$	–		$	(614	)	$	17		$	76		$	–		$	(197	)	$	127		$	–	$	(373	)	$	–		$	182		$	(782	)
2017
Trading securities
Corporate equity	$	40			n/a			n/a		$	–		$	4		$	–		$	–		$	–		$	–	$	–		$	–		$	(12	)	$	32
Mortgage- and asset-backed		496			n/a			n/a			2			(3	)		–			–			–			–		–			–			(492	)		3
FVO securities
Asset-backed		94			n/a			n/a			3			8			–			–			–			–		–			–			(11	)		94
Trading loans
Business and government		–			n/a			n/a			–			1			–			–			–			13		101			(8	)		(4	)		103
AFS securities
Corporate equity		344			n/a			n/a			71			(10	)		(46	)		–			–			40		27			(137	)		–			289
Corporate debt		5			n/a			n/a			–			(1	)		–			–			–			–		–			–			–			4
Mortgage- and asset-backed		1,947			n/a			n/a			5			–			(5	)		–			–			653		–			–			(926	)		1,674
Derivative instruments
Interest rate		31			n/a			n/a			–			(2	)		–			–			–			1		–			–			(2	)		28
Credit		140			n/a			n/a			(11	)		1			–			–			–			–		–			–			–			130
Equity		24			n/a			n/a			–			19			–			6			(19	)		21		–			–			(13	)		38
Total assets	$	3,121			n/a			n/a		$	70		$	17		$	(51	)	$	6		$	(19	)	$	728	$	128		$	(145	)	$	(1,460	)	$	2,395
Deposits and other liabilities⁽⁶⁾	$	(506	)		n/a			n/a		$	–		$	(101	)	$	–		$	(15	)	$	65		$	–	$	(191	)	$	–		$	379		$	(369	)
Derivative instruments
Interest rate		(35	)		n/a			n/a			–			14			–			–			1			–		–			–			–			(20	)
Credit		(197	)		n/a			n/a			20			–			–			–			–			–		–			–			29			(148	)
Equity		(42	)		n/a			n/a			–			(25	)		–			(41	)		35			–		(22	)		–			18			(77	)
Total liabilities	$	(780	)		n/a			n/a		$	20		$	(112	)	$	–		$	(56	)	$	101		$	–	$	(213	)	$	–		$	426		$	(614	)

(1)	Cumulative AOCI gains or losses related to equity securities designated at FVOCI are reclassified from AOCI to retained earnings at the time of disposal or derecognition.

(2)	Certain reclassifications have been made upon adoption of IFRS 9. See Note 1 for more details about our transition to IFRS 9 on November 1, 2017.

(3)	Includes foreign currency gains and losses related to debt securities measured at FVOCI.

(4)	Comprises unrealized gains and losses relating to these assets and liabilities held at the end of the reporting year.

(5)	Foreign exchange translation on loans mandatorily measured at FVTPL held by foreign operations is included in OCI.

(6)	Includes FVO deposits of $112 million (2017: $40 million) and net bifurcated embedded derivative liabilities of $311 million (2017: $329 million).

n/a	Not applicable.

Valuation techniques and quantitative information about significant non-observable inputs used in level 3 financial instruments

Quantitative information about significant non-observable inputs

Valuation techniques using one or more non-observable inputs are used for a number of financial instruments. The following table discloses the valuation techniques and quantitative information about the significant non-observable inputs used in Level 3 financial instruments:


									Range of inputs
$ millions, as at October 31	2018			Valuation techniques			Key non-observable inputs		Low			High
Securities mandatorily measured at FVTPL
Corporate equity	$	6			Adjusted net asset value	⁽¹⁾		Net asset value		n/a			n/a
					Valuation multiple			Earnings multiple		17.1			17.1
Corporate debt		26			Discounted cash flow			Discount rate		7.5	%		7.5	%
Mortgage- and asset-backed		319			Discounted cash flow			Credit spread		0.9	%		2.3	%
					Market proxy or direct broker quote			Market proxy or direct broker quote		–	%		0.5	%
Equity securities designated at FVOCI
Corporate equity
Limited partnerships		210			Adjusted net asset value	⁽¹⁾		Net asset value		n/a			n/a
Private companies		75			Valuation multiple			Revenue multiple		1.5			6.9
					Discounted cash flow			Discount rate		18.9	%		18.9	%
Loans mandatorily measured at FVTPL
Business and government		482			Discounted cash flow			Credit spread		0.6	%		0.7	%
					Discounted cash flow			Discount rate		4.8	%		4.8	%
Derivative instruments
Credit		115			Market proxy or direct broker quote			Market proxy or direct broker quote		–	%		18.5	%
Equity		107			Option model			Market volatility		13.4	%		13.4	%
								Market correlation		33.3	%		88.4	%
Total assets	$	1,340
Deposits and other liabilities	$	(423	)		Option model			Market volatility		7.7	%		39.2	%
								Market correlation		(100.0	) %		100.0	%
Derivative instruments
Interest rate		(109	)		Proprietary model	⁽²⁾		n/a		n/a			n/a
					Option model			Market volatility		12.0	%		26.8	%
Credit		(131	)		Market proxy or direct broker quote			Market proxy or direct broker quote		–	%		18.5	%
Equity		(119	)		Option model			Market correlation		20.2	%		97.4	%
Total liabilities	$	(782	)

(1)	Adjusted net asset value is determined using reported net asset values obtained from the fund manager or general partner of the limited partnership and may be adjusted for current market levels where appropriate.

(2)	Using valuation techniques which we consider to be non-observable.

n/a	Not applicable.

Not measured at fair value in statement of financial position but for which fair value is disclosed [member]

Summary of fair value of financial instruments

The table below presents the fair values by level within the fair value hierarchy for those assets and liabilities in which fair value is not assumed to equal the carrying value:

Level 1

Level 2

Level 3

Quoted market price

Valuation technique –
observable market inputs

Valuation technique –
non-observable market inputs

Total

2018

Total

2017

$ millions, as at October 31

2018

2017

2018

2017

2018⁽¹⁾

2017

Financial assets

Amortized cost securities (2017: HTM securities)

–

12,283

2,422

436

–

12,719

2,422

Loans

Residential mortgages

–

205,856

206,123

205,856

206,123

Personal

–

42,559

40,438

42,559

40,438

Credit card

–

12,255

11,992

12,255

11,992

Business and government

–

92,493

83,178

92,493

83,178

Investment in equity-accounted associates⁽¹⁾

–

192

–

101

164

101

356

Financial liabilities

Deposits

Personal

–

48,116

43,047

1,989

1,524

50,105

44,571

Business and government

–

120,612

117,461

1,489

1,801

122,101

119,262

Bank

–

10,003

8,568

–

10,003

8,568

Secured borrowings

–

38,612

37,995

4,130

3,062

42,742

41,057

Subordinated indebtedness

–

4,340

3,541

–

4,340

3,541

(1)	See Note 25 for details of our equity-accounted associates.

At fair value [member]

Summary of Fair Value of Financial Instruments

The table below presents the fair values of financial instruments by level within the fair value hierarchy:


	Level 1						Level 2						Level 3
	Quoted market price						Valuation technique – observable market inputs						Valuation technique – non-observable market inputs						Total 2018			Total 2017
$ millions, as at October 31	2018			2017			2018			2017			2018			2017			Total 2018			Total 2017
Financial assets
Deposits with banks	$	–		$	–		$	54		$	417		$	–		$	–		$	54		$	417
Securities mandatorily measured and designated at FVTPL (2017: Trading and FVO securities)
Government issued or guaranteed		4,264			2,403			16,328	⁽¹⁾		13,103	⁽¹⁾		–			–			20,592			15,506
Corporate equity		25,140			30,737			208			255			6			32			25,354			31,024
Corporate debt		–			–			3,675			2,256			26			–			3,701			2,256
Mortgage- and asset-backed		–			–			2,612	⁽²⁾		1,944			319			97	⁽²⁾		2,931			2,041
		29,404			33,140			22,823			17,558			351			129			52,578			50,827
Loans mandatorily measured at FVTPL (2017: Trading loans)
Business and government		–			–			15,942			13,907			482			103			16,424			14,010
Residential mortgages		–			–			12			12			–			–			12			12
		–			–			15,954			13,919			482			103			16,436			14,022
Debt securities measured at FVOCI (2017: AFS debt securities)
Government issued or guaranteed		2,844			4,299			24,763			21,015			–			–			27,607			25,314
Corporate debt		–			–			4,543			5,152			–			4			4,543			5,156
Mortgage- and asset-backed		–			–			3,498			7,544			–			1,674			3,498			9,218
		2,844			4,299			32,804			33,711			–			1,678			35,648			39,688
Equity securities designated at FVOCI (2017: AFS equity securities)
Corporate equity		42			28			235			152			285			289			562			469
		42			28			235			152			285			289			562			469
Securities purchased under resale agreements measured at FVTPL (2017: FVO securities purchased under resale agreements)		–			–			3,322			1,450	⁽³⁾		–			–			3,322			1,450
Derivative instruments
Interest rate		–			–			5,593			8,218			–			28			5,593			8,246
Foreign exchange		–			–			9,303			11,643			–			–			9,303			11,643
Credit		–			–			3			11			115			130			118			141
Equity		1,727			1,541			1,783			1,285			107			38			3,617			2,864
Precious metal		–			–			206			226			–			–			206			226
Other commodity		143			270			2,451			952			–			–			2,594			1,222
		1,870			1,811			19,339			22,335			222			196			21,431			24,342
Total financial assets	$	34,160		$	39,278		$	94,531		$	89,542		$	1,340		$	2,395		$	130,031		$	131,215
Financial liabilities
Deposits and other liabilities⁽⁴⁾	$	–		$	–		$	(7,556	)	$	(6,309	)	$	(423	)	$	(369	)	$	(7,979	)	$	(6,678	)
Obligations related to securities sold short		(4,443	)		(7,291	)		(9,339	)		(6,422	)		–			–			(13,782	)		(13,713	)
		(4,443	)		(7,291	)		(16,895	)		(12,731	)		(423	)		(369	)		(21,761	)		(20,391	)
Derivative instruments
Interest rate		–			–			(6,152	)		(7,867	)		(109	)		(20	)		(6,261	)		(7,887	)
Foreign exchange		–			–			(9,335	)		(10,998	)		–			–			(9,335	)		(10,998	)
Credit		–			–			(16	)		(34	)		(131	)		(148	)		(147	)		(182	)
Equity		(1,489	)		(937	)		(2,268	)		(2,289	)		(119	)		(77	)		(3,876	)		(3,303	)
Precious metal		–			–			(258	)		(124	)		–			–			(258	)		(124	)
Other commodity		(487	)		(203	)		(609	)		(574	)		–			–			(1,096	)		(777	)
		(1,976	)		(1,140	)		(18,638	)		(21,886	)		(359	)		(245	)		(20,973	)		(23,271	)
Total financial liabilities	$	(6,419	)	$	(8,431	)	$	(35,533	)	$	(34,617	)	$	(782	)	$	(614	)	$	(42,734	)	$	(43,662	)

(1)	Includes $52 million related to securities designated at FVTPL (2017: included $54 million related to FVO securities).

(2)	Includes $132 million (2017: $94 million) related to FVO asset-backed securities.

(3)	Certain securities purchased under resale agreements were designated at fair value by electing the FVO under IAS 39. These securities are measured at FVTPL under IFRS 9.

(4)	Comprises FVO deposits of $7,517 million (2017: $5,947 million), net bifurcated embedded derivative liabilities of $350 million (2017: $596 million), FVO other liabilities of $17 million (2017: $9 million), and other financial liabilities measured at fair value of $95 million (2017: $126 million).