XML 69 R34.htm IDEA: XBRL DOCUMENT v3.20.4
Derivative and Hedging Instruments (Tables)
 12 Months Ended
Dec. 31, 2020
Text block [abstract]  
Summary of Gross Notional Amount and Fair Value of Derivative Instruments
The following table presents gross notional amount and fair value of derivative instruments by the underlying risk exposure.
 
As at December 31,
 
2020
     2019 
    Notional
amount		  Fair value     Notional
amount		  Fair value 
Type of hedge
 Instrument type Assets  Liabilities     Assets  Liabilities 
Qualifying hedge accounting relationships
                            
Fair value hedges
 Interest rate swaps 
$
82
 
 
$
1
 
 
$
–
 
     
$
350
 
 
$
–
 
 
$
5
 
  Foreign currency swaps 
 
57
 
 
 
–
 
 
 
4
 
     
 
86
 
 
 
3
 
 
 
1
 
Cash flow hedges
 Foreign currency swaps 
 
1,756
 
 
 
24
 
 
 
468
 
     
 
1,790
 
 
 
39
 
 
 
407
 
  Equity contracts 
 
127
 
 
 
6
 
 
 
–
 
     
 
132
 
 
 
16
 
 
 
–
 
Net investment hedges
 Forward contracts 
 
628
 
 
 
1
 
 
 
10
 
     
 
2,822
 
 
 
7
 
 
 
22
 
Total derivatives in qualifying hedge accounting relationships
 
 
2,650
 
 
 
32
 
 
 
482
 
      5,180   65   435 
Derivatives not designated in qualifying hedge accounting relationships
                            
  Interest rate swaps 
 
287,182
 
 
 
21,332
 
 
 
12,190
 
     
 
283,172
 
 
 
15,159
 
 
 
8,140
 
  Interest rate futures 
 
16,750
 
 
 
–
 
 
 
–
 
     
 
13,069
 
 
 
–
 
 
 
–
 
  Interest rate options 
 
11,622
 
 
 
663
 
 
 
–
 
     
 
12,248
 
 
 
423
 
 
 
–
 
  Foreign currency swaps 
 
31,491
 
 
 
838
 
 
 
1,659
 
     
 
26,329
 
 
 
606
 
 
 
1,399
 
  Currency rate futures 
 
3,467
 
 
 
–
 
 
 
–
 
     
 
3,387
 
 
 
–
 
 
 
–
 
  Forward contracts 
 
38,853
 
 
 
3,833
 
 
 
565
 
     
 
33,432
 
 
 
2,337
 
 
 
273
 
  Equity contracts 
 
15,738
 
 
 
1,092
 
 
 
66
 
     
 
14,582
 
 
 
853
 
 
 
37
 
  Credit default swaps 
 
241
 
 
 
3
 
 
 
–
 
     
 
502
 
 
 
6
 
 
 
–
 
 
 Equity futures 
 
10,984
 
 
 
–
 
 
 
–
 
     
 
10,576
 
 
 
–
 
 
 
–
 
Total derivatives not designated in qualifying hedge accounting relationships
 
 
416,328
 
 
 
27,761
 
 
 
14,480
 
      397,297   19,384   9,849 
Total derivatives
 
$
  418,978
 
 
$
  27,793
 
 
$
  14,962
 
     $  402,477  $  19,449  $  10,284 
Summary of Gross Notional Amount by Remaining Term to Maturity, Total Fair Values (Including Accrued Interest), Credit Risk Equivalent and Risk Weighted Amount by Contract Type
The following table presents fair values of derivative instruments by the remaining term to maturity. The fair values disclosed below do not incorporate the impact of master netting agreements. Refer to note 8.
 
  Remaining term to maturity    
As at December 31, 2020
 
Less than
1 year
  
1 to 3
years
  
3 to 5
years
  
Over 5
years
  Total 
Derivative assets
 
$
1,656
 
 
$
3,524
 
 
$
1,228
 
 
$
21,385
 
 
$
27,793
 
Derivative liabilities
 
 
386
 
 
 
250
 
 
 
555
 
 
 
13,771
 
 
 
14,962
 
   
  Remaining term to maturity    
As at December 31, 2019
 
Less than
1 year
  
1 to 3
years
  
3 to 5
years
  
Over 5
years
  Total 
Derivative assets
 $  1,248  $  1,659  $  1,309  $  15,233  $  19,449 
Derivative liabilities
  332   145   218   9,589   10,284 
 
The following table presents gross notional amount by the remaining term to maturity, total fair value (including accrued interest), credit risk equivalent and risk-weighted amount by contract type.
 
  Remaining term to maturity (notional amounts)     Fair value     
Risk-
weighted
amount
(2)
 
As at December 31, 2020
 Under 1
year		  1 to 5 years  Over 5 years  Total      Positive  Negative  Net  Credit risk
equivalent
(1)
 
Interest rate contracts
                                        
OTC swap contracts
 
$
7,567
 
 
$
20,852
 
 
$
110,166
 
 
$
138,585
 
     
$
21,803
 
 
$
(12,816
) 
 
$
8,987
 
 
$
8,773
 
 
$
1,181
 
Cleared swap contracts
 
 
2,314
 
 
 
18,784
 
 
 
127,581
 
 
 
148,679
 
     
 
432
 
 
 
(424
) 
 
 
8
 
 
 
–
 
 
 
–
 
Forward contracts
 
 
11,092
 
 
 
18,355
 
 
 
1,259
 
 
 
30,706
 
     
 
3,739
 
 
 
(462
) 
 
 
3,277
 
 
 
603
 
 
 
80
 
Futures
 
 
16,750
 
 
 
–
 
 
 
–
 
 
 
16,750
 
     
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
Options purchased
 
 
1,572
 
 
 
3,922
 
 
 
6,128
 
 
 
11,622
 
 
 
 
 
 
 
664
 
 
 
–
 
 
 
664
 
 
 
665
 
 
 
93
 
Subtotal
 
 
39,295
 
 
 
61,913
 
 
 
245,134
 
 
 
346,342
 
     
 
26,638
 
 
 
(13,702
) 
 
 
12,936
 
 
 
10,041
 
 
 
1,354
 
Foreign exchange
                                        
Swap contracts
 
 
1,670
 
 
 
8,490
 
 
 
23,144
 
 
 
33,304
 
     
 
855
 
 
 
(2,195
) 
 
 
(1,340
) 
 
 
2,979
 
 
 
327
 
Forward contracts
 
 
8,741
 
 
 
34
 
 
 
–
 
 
 
8,775
 
     
 
95
 
 
 
(113
) 
 
 
(18
) 
 
 
160
 
 
 
18
 
Futures
 
 
3,467
 
 
 
–
 
 
 
–
 
 
 
3,467
 
     
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
Credit derivatives
 
 
192
 
 
 
49
 
 
 
–
 
 
 
241
 
     
 
3
 
 
 
–
 
 
 
3
 
 
 
–
 
 
 
–
 
Equity contracts
                                        
Swap contracts
 
 
1,227
 
 
 
289
 
 
 
–
 
 
 
1,516
 
     
 
43
 
 
 
(51
) 
 
 
(8
) 
 
 
384
 
 
 
46
 
Futures
 
 
10,984
 
 
 
–
 
 
 
–
 
 
 
10,984
 
     
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
Options purchased
 
 
8,168
 
 
 
6,181
 
 
 
–
 
 
 
14,349
 
 
 
 
 
 
 
1,051
 
 
 
(15
) 
 
 
1,036
 
 
 
5,116
 
 
 
664
 
Subtotal including accrued interest
 
 
73,744
 
 
 
76,956
 
 
 
268,278
 
 
 
418,978
 
     
 
28,685
 
 
 
(16,076
) 
 
 
12,609
 
 
 
18,680
 
 
 
2,409
 
Less accrued interest
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
 
 
 
 
892
 
 
 
(1,114
) 
 
 
(222
) 
 
 
–
 
 
 
–
 
Total
 
$
73,744
 
 
$
76,956
 
 
$
268,278
 
 
$
418,978
 
 
 
 
 
 
$
27,793
 
 
$
 (14,962
) 
 
$
  12,831
 
 
$
18,680
 
 
$
2,409
 
      
  Remaining term to maturity (notional amounts)     Fair value     
Risk-
weighted
amount
(2)
 
As at December 31, 2019
 Under 1
year		  1 to 5 years  Over 5 years  Total      Positive  Negative  Net  Credit risk
equivalent
(1)
 
Interest rate contracts
                                        
OTC swap contracts
 $5,105  $22,288  $112,863  $140,256      $15,627  $(8,910)  $6,717  $6,891  $957 
Cleared swap contracts
  3,932   11,499   127,835   143,266       238   (240)   (2)   –   – 
Forward contracts
  11,709   15,089   1,283   28,081       2,312   (253)   2,059   398   53 
Futures
  13,069   –   –   13,069       –   –   –   –   – 
Options purchased
  1,266   4,454   6,528   12,248  
 
 
 
  423   –   423   560   77 
Subtotal
  35,081   53,330   248,509   336,920       18,600   (9,403)   9,197   7,849   1,087 
Foreign exchange
                                        
Swap contracts
  998   7,519   19,688   28,205       642   (1,864)   (1,222)   2,515   279 
Forward contracts
  8,173   –   –   8,173       32   (42)   (10)   138   16 
Futures
  3,387   –   –   3,387       –   –   –   –   – 
Credit derivatives
  275   227   –   502       6   –   6   –   – 
Equity contracts
                                        
Swap contracts
  1,233   164   –   1,397       43   (16)   27   236   29 
Futures
  10,576   –   –   10,576       –   –   –   –   – 
Options purchased
  6,604   6,633   80   13,317  
 
 
 
  821   (20)   801   3,418   448 
Subtotal including accrued interest
  66,327   67,873   268,277   402,477       20,144   (11,345)   8,799   14,156   1,859 
Less accrued interest
  –   –   –   –  
 
 
 
  695   (1,061)   (366)   –   – 
Total
 $  66,327  $  67,873  $  268,277  $  402,477  
 
 
 
 $  19,449  $(10,284)  $  9,165  $  14,156  $  1,859 
 
(1)
Credit risk equivalent is the sum of replacement cost and the potential future credit exposure. Replacement cost represents the current cost of replacing all contracts with a positive fair value. The amounts take into consideration legal contracts that permit offsetting of positions. The potential future credit exposure is calculated based on a formula prescribed by OSFI.
(2)
Risk-weighted amount represents the credit risk equivalent, weighted according to the creditworthiness of the counterparty, as prescribed by OSFI.
Summary of Fair Value and the Fair Value Hierarchy of Derivative Instruments
Fair value and the fair value hierarchy of derivative instruments
 
As at December 31, 2020
 Fair value  Level 1  Level 2  Level 3 
Derivative assets
                
Interest rate contracts
 
$
25,735
 
 
$
–
 
 
$
21,902
 
 
$
3,833
 
Foreign exchange contracts
 
 
957
 
 
 
–
 
 
 
957
 
 
 
–
 
Equity contracts
 
 
1,098
 
 
 
–
 
 
 
1,051
 
 
 
47
 
Credit default swaps
 
 
3
 
 
 
–
 
 
 
3
 
 
 
–
 
Total derivative assets
 
$
27,793
 
 
$
–
 
 
$
23,913
 
 
$
3,880
 
Derivative liabilities
                
Interest rate contracts
 
$
12,652
 
 
$
–
 
 
$
12,271
 
 
$
381
 
Foreign exchange contracts
 
 
2,244
 
 
 
–
 
 
 
2,239
 
 
 
5
 
Equity contracts
 
 
66
 
 
 
–
 
 
 
15
 
 
 
51
 
Total derivative liabilities
 
$
14,962
 
 
$
–
 
 
$
14,525
 
 
$
437
 
     
As at December 31, 2019
 Fair value  Level 1  Level 2  Level 3 
Derivative assets
                
Interest rate contracts
 $17,894  $–  $15,801  $2,093 
Foreign exchange contracts
  680   –   680   – 
Equity contracts
  869   –   821   48 
Credit default swaps
  6   –   6   – 
Total derivative assets
 $19,449  $–  $  17,308  $  2,141 
Derivative liabilities
                
Interest rate contracts
 $8,397  $–  $7,730  $667 
Foreign exchange contracts
  1,850   –   1,849   1 
Equity contracts
  37   –   20   17 
Total derivative liabilities
 $  10,284  $  –  $9,599  $685 
Summary of Recognized Gains Losses on Derivatives and Hedged Items in Fair Value Hedges in Investment Income
The Company recognizes gains and losses on derivatives and the related hedged items in fair value hedges in investment income. These investment gains (losses) are shown in the following table.
 
For the year ended December 31, 2020
 
Hedged items in qualifying
fair value hedging
relationships
 Gains (losses)
recognized on
derivatives		  Gains (losses)
recognized for
hedged items		  Ineffectiveness
recognized in
investment
income		 
Interest rate swaps
 
Fixed rate liabilities
 
$
4
 
 
$
  (2
) 
 
$
  2
 
Foreign currency swaps
 
Fixed rate assets
 
 
  (2
) 
 
 
3
 
 
 
1
 
Total
 
 
 
$
2
 
 
$
1
 
 
$
3
 
     
For the year ended December 31, 2019
 
Hedged items in qualifying
fair value hedging
relationships
 Gains (losses)
recognized on
derivatives		  Gains (losses)
recognized for
hedged items		  Ineffectiveness
recognized in
investment
income		 
Interest rate swaps
 
Fixed rate liabilities
 $8  $(6)  
$
2
 
Foreign currency swaps
 
Fixed rate assets
  (1)   2   1 
Total
 
 
 $7  $(4)  $3 
Summary of Effects of Derivatives in Cash Flow Hedging Relationships
The effects of derivatives in cash flow hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Comprehensive Income are shown in the following table.
 
For the year ended December 31, 2020
 Hedged items in qualifying
cash flow hedging
relationships		 Gains (losses)
deferred in
AOCI on
derivatives		  Gains (losses)
reclassified
from AOCI into
investment
income		  Ineffectiveness
recognized in
investment
income		 
Foreign currency swaps
 
Fixed rate assets
 
$
1
 
 
$
–
 
 
$
–
 
  
Floating rate liabilities
 
 
  (64
) 
 
 
14
 
 
 
–
 
  
Fixed rate liabilities
 
 
(14
) 
 
 
(2
) 
 
 
–
 
Equity contracts
 
Stock-based compensation
 
 
(2
) 
 
 
16
 
 
 
–
 
Total
 
 
 
$
(79
) 
 
$
28
 
 
$
–
 
     
For the year ended December 31, 2019
 Hedged items in qualifying
cash flow hedging
relationships		 Gains (losses)
deferred in
AOCI on
derivatives		  Gains (losses)
reclassified
from AOCI into
investment
income		  Ineffectiveness
recognized in
investment
income		 
Foreign currency swaps
 
Fixed rate assets
 $(2)  $1  $  – 
  
Floating rate liabilities
  (40)     37   – 
  
Fixed rate liabilities
  (41)   (35)   – 
Forward contracts
 
Forecasted expenses
     –   (9)   – 
Equity contracts
 
Stock-based compensation
  35   (9)   – 
Total
 
 
 $(48)  $(15)  $– 
Summary of Effects of Net Investment Hedging Relationships
The effects of net investment hedging relationships on the Consolidated Statements of Income and the Consolidated Statements of Other Comprehensive Income are shown in the following table.
 
For the year ended December 31, 2020
 Gains (losses)
deferred in AOCI		  Gains (losses)
reclassified from
AOCI into
investment income		  Ineffectiveness
recognized in
investment
income		 
Non-functional
currency denominated debt
 
$
161
 
 
$
–
 
 
$
–
 
Forward contracts
 
 
(53
) 
 
 
–
 
 
 
–
 
Total
 
$
108
 
 
$
–
 
 
$
–
 
For the year ended December 31, 2019
 Gains (losses)
deferred in AOCI		  Gains (losses)
reclassified from
AOCI into
investment income		  Ineffectiveness
recognized in
investment
income		 
Non-functional
currency denominated debt
 $279  $ –  $ – 
Forward contracts
  80   –   – 
Total
 $  359  $–  $– 
Summary of Investment Income on Derivatives Not Designated in Qualifying Hedge Accounting Relationships
Investment income on derivatives not designated in qualifying hedge accounting relationships
 
For the years ended December 31,
 
2020
  2019 
Interest rate swaps
 
$
2,423
 
 $1,483 
Interest rate futures
 
 
894
 
  571 
Interest rate options
 
 
291
 
  96 
Foreign currency swaps
 
 
(55
) 
  (242) 
Currency rate futures
 
 
(47
) 
  88 
Forward contracts
 
 
   3,785
 
  2,815 
Equity futures
 
 
(1,111
) 
  (2,436) 
Equity contracts
 
 
322
 
  277 
Credit default swaps
 
 
(4
) 
  (3) 
Total
 
$
6,498
 
 $  2,649