XML 104 R49.htm IDEA: XBRL DOCUMENT v3.21.2
Fair Value of Financial Instruments (Tables)
 12 Months Ended
Oct. 31, 2021
Text Block [Abstract]  
Summary of Fair Values of Financial Instruments of Bank Using Valuation Methods and Assumption
The following table sets out the fair values of financial instruments of the Bank using the valuation methods and assumptions described above. The fair values disclosed do not include
non-financial
assets, such as property and equipment, investments in associates, precious metals, goodwill and other intangible assets.
 
   
2021
    
2020
  
As at October 31 ($ millions)  
Total fair
value
    
Total carrying
value
    
Total
 
fair
value
    
Total
carrying value
  
Assets:
                                
Cash and deposits with financial institutions
  
$
86,323
 
  
$
86,323
 
   $ 76,460     $ 76,460  
Trading assets
  
 
  146,312
 
  
 
  146,312
 
       117,839         117,839  
Securities purchased under resale agreements and securities borrowed
  
 
127,739
 
  
 
127,739
 
     119,747       119,747  
Derivative financial instruments
  
 
42,302
 
  
 
42,302
 
     45,065       45,065  
Investment securities – FVOCI and FVTPL
  
 
57,042
 
  
 
57,042
 
     79,745       79,745  
Investment securities – amortized cost
  
 
18,133
 
  
 
18,157
 
     32,129       31,644  
Loans
  
 
641,964
 
  
 
636,986
 
     612,368       603,263  
Customers’ liability under acceptances
  
 
20,404
 
  
 
20,404
 
     14,228       14,228  
Other financial assets
  
 
14,256
 
  
 
14,256
 
     12,700       12,700  
Liabilities:
                                
Deposits
  
 
798,335
 
  
 
797,259
 
     755,395       750,838  
Financial instruments designated at fair value through profit or loss
  
 
22,493
 
  
 
22,493
 
     18,899       18,899  
Acceptances
  
 
20,441
 
  
 
20,441
 
     14,305       14,305  
Obligations related to securities sold short
  
 
40,954
 
  
 
40,954
 
     31,902       31,902  
Derivative financial instruments
  
 
42,203
 
  
 
42,203
 
     42,247       42,247  
Obligations related to securities sold under repurchase agreements and securities lent
  
 
123,469
 
  
 
123,469
 
     137,763       137,763  
Subordinated debentures
  
 
6,733
 
  
 
6,334
 
     7,827       7,405  
Other financial liabilities
  
 
39,802
 
  
 
40,254
 
     43,776       42,660  
Changes in interest rates, credit spreads and liquidity costs are the main cause of changes in the fair value of the Bank’s financial instruments resulting in a favourable or unfavourable variance compared to carrying value. For the Bank’s financial instruments carried at cost or amortized cost, the carrying value is not adjusted to reflect increases or decreases in fair value due to market fluctuations, including those due to interest rate changes. For FVOCI investment securities, derivatives and financial instruments measured at FVTPL or designated as fair value through profit or loss, the carrying value is adjusted regularly to reflect the fair value.
Summary of Fair Value Hierarchy of Instruments Carried at Fair Value on a Recurring Basis
The following table outlines the fair value hierarchy of instruments carried at fair value on a recurring basis and of instruments not carried at fair value.
 
   
2021
    
2020
  
As at October 31 ($ millions)  
Level 1
    
Level 2
    
Level 3
    
Total
    
Level 1
    
Level 2
    
Level 3
    
Total
  
Instruments carried at fair value on a recurring basis:
                                                                
Assets:
                                                                
Precious metals
(1)
  
$
  –
 
  
$
  755
 
  
$
  –
 
  
$
  755
 
   $ –     $ 1,181     $ –     $ 1,181  
Trading assets
                                                                
Loans
  
 
–
 
  
 
8,113
 
  
 
–
 
  
 
8,113
 
     –       8,352       –       8,352  
Canadian federal government and government guaranteed debt
  
 
9,272
 
  
 
3,842
 
  
 
–
 
  
 
13,114
 
     9,154       3,882       –       13,036  
Canadian provincial and municipal debt
  
 
5,556
 
  
 
4,298
 
  
 
–
 
  
 
9,854
 
     –       9,320       –       9,320  
US treasury and other US agencies’ debt
  
 
6,760
 
  
 
63
 
  
 
–
 
  
 
6,823
 
     5,182       –       –       5,182  
Other foreign governments’ debt
  
 
129
 
  
 
9,559
 
  
 
–
 
  
 
9,688
 
     9,230       3,415       –       12,645  
Corporate and other debt
  
 
2,595
 
  
 
9,185
 
  
 
40
 
  
 
11,820
 
     –       10,570       18       10,588  
Equity securities
  
 
85,688
 
  
 
160
 
  
 
1
 
  
 
85,849
 
     57,199       361       –       57,560  
Other
  
 
–
 
  
 
1,051
 
  
 
–
 
  
 
1,051
 
     1,156       –       –       1,156  
   
$
  110,000
 
  
$
36,271
 
  
$
41
 
  
$
146,312
 
   $   81,921     $ 35,900     $ 18     $ 117,839  
Investment securities
(2)
                                                                
Canadian federal government and government guaranteed debt
  
$
1,125
 
  
$
4,679
 
  
$
–
 
  
$
5,804
 
   $ 1,728     $ 15,100     $ –     $ 16,828  
Canadian provincial and municipal debt
  
 
1,937
 
  
 
3,218
 
  
 
–
 
  
 
5,155
 
     93       17,454       –       17,547  
US treasury and other US agencies’ debt
  
 
11,462
 
  
 
2,175
 
  
 
–
 
  
 
13,637
 
     11,930       1,299       –       13,229  
Other foreign governments’ debt
  
 
67
 
  
 
26,605
 
  
 
17
 
  
 
26,689
 
     14,101       13,798       23       27,922  
Corporate and other debt
  
 
10
 
  
 
1,319
 
  
 
27
 
  
 
1,356
 
     265       850       23       1,138  
Equity securities
  
 
2,879
 
  
 
218
 
  
 
1,304
 
  
 
4,401
 
     1,954       263       864       3,081  
   
$
17,480
 
  
$
38,214
 
  
$
1,348
 
  
$
57,042
 
   $ 30,071     $ 48,764     $ 910     $ 79,745  
Derivative financial instruments
                                                                
Interest rate contracts
  
$
–
 
  
$
13,124
 
  
$
1
 
  
$
13,125
 
   $ –     $ 21,013     $ 4     $ 21,017  
Foreign exchange and gold contracts
  
 
–
 
  
 
18,293
 
  
 
–
 
  
 
18,293
 
     –       17,943       –       17,943  
Equity contracts
  
 
184
 
  
 
3,513
 
  
 
21
 
  
 
3,718
 
     290       2,655       3       2,948  
Credit contracts
  
 
–
 
  
 
245
 
  
 
–
 
  
 
245
 
     –       480       –       480  
Commodity contracts
  
 
–
 
  
 
6,921
 
  
 
–
 
  
 
6,921
 
     –       2,677       –       2,677  
   
$
184
 
  
$
42,096
 
  
$
22
 
  
$
42,302
 
   $ 290     $ 44,768     $ 7     $ 45,065  
Liabilities:
                                                                
Deposits
  
$
–
 
  
$
175
 
  
$
–
 
  
$
175
 
   $ –     $ 73     $ –     $ 73  
Financial liabilities designated at fair value through profit or loss
  
 
–
 
  
 
   22,354
 
  
 
139
 
  
 
22,493
 
     –       18,899       –       18,899  
Obligations related to securities sold short
  
 
35,487
 
  
 
5,467
 
  
 
–
 
  
 
40,954
 
       25,584       6,318       –       31,902  
                 
Derivative financial instruments
                                                                
Interest rate contracts
  
 
–
 
  
 
13,148
 
  
 
15
 
  
 
13,163
 
     –       16,937       17       16,954  
Foreign exchange and gold contracts
  
 
–
 
  
 
18,171
 
  
 
–
 
  
 
18,171
 
     –       19,511       –       19,511  
Equity contracts
  
 
307
 
  
 
4,737
 
  
 
6
 
  
 
5,050
 
     599       2,133       2       2,734  
Credit contracts
  
 
–
 
  
 
30
 
  
 
–
 
  
 
30
 
     –       53       –       53  
Commodity contracts
  
 
–
 
  
 
5,789
 
  
 
–
 
  
 
5,789
 
     –       2,995       –       2,995  
   
$
307
 
  
$
41,875
 
  
$
21
 
  
$
42,203
 
   $ 599     $ 41,629     $ 19     $ 42,247  
 
 
 
 
 
 
 
 
 
Instruments not carried at fair value
(3)
:
                                                                
Assets:
                                                                
Investment securities – amortized cost
  
$
3,714
 
  
$
14,417
 
  
$
2
 
  
$
18,133
 
   $ 4,946     $ 26,864     $ 319     $ 32,129  
Loans
(4)
  
 
–
 
  
 
–
 
  
 
   400,565
 
  
 
   400,565
 
     –       –         374,767         374,767  
                 
Liabilities:
                                                                
Deposits
(4)
  
 
–
 
  
 
290,341
 
  
 
–
 
  
 
290,341
 
     –         307,457       –       307,457  
Subordinated debentures
  
 
–
 
  
 
6,733
 
  
 
–
 
  
 
6,733
 
     –       7,827       –       7,827  
Other liabilities
  
 
–
 
  
 
24,414
 
  
 
209
 
  
 
24,623
 
     –       26,831       –       26,831  
 
(1)
The fair value of precious metals is determined based on quoted market prices and forward spot prices, where applicable.
(2)
Excludes debt investment securities measured at amortized cost of $18,157 (October 31, 2020 - $31,644).
(3)
Represents the fair value of financial assets and liabilities where the carrying amount is not a reasonable approximation of fair value.
(4)
Represents fixed rate instruments.
Summary of Changes in Level 3 Instruments Carried at Fair Value
The following table summarizes the changes in Level 3 instruments carried at fair value for the year ended October 31, 2021.
All positive balances represent assets and negative balances represent liabilities. Consequently, positive amounts indicate purchases of assets or settlements of liabilities and negative amounts indicate sales of assets or issuances of liabilities.
 
   
As at October 31, 2021
  
($ millions)  
Fair value
November 1
2020
    
Gains/(losses)
recorded in
income
    
Gains/(losses)
recorded in
OCI
    
Purchases/
Issuances
    
Sales/
Settlements
    
Transfers
into/out of
Level 3
    
Fair value
October 31
2021
    
Change in
unrealized
gains/(losses)
recorded in
income for
instruments
still held
(1)
  
Trading assets
                                                                
Corporate and other debt
   $ 18    
$
7
 
  
$
–
 
  
$
28
 
  
$
(22
) 
  
$
9
 
  
$
40
 
  
$
1
 
Equity securities
     –    
 
–
 
  
 
–
 
  
 
–
 
  
 
(72
) 
  
 
73
 
  
 
1
 
  
 
–
 
      18    
 
7
 
  
 
–
 
  
 
28
 
  
 
(94
) 
  
 
82
 
  
 
41
 
  
 
1
 
                 
Investment securities
                                                                
Other foreign governments’ debt
     23    
 
–
 
  
 
(6
) 
  
 
–
 
  
 
–
 
  
 
–
 
  
 
17
 
  
 
n/a
 
Corporate and other debt
     23    
 
1
 
  
 
(4
) 
  
 
7
 
  
 
–
 
  
 
–
 
  
 
27
 
  
 
1
 
Equity securities
     864    
 
287
 
  
 
51
 
  
 
253
 
  
 
(180
) 
  
 
29
 
  
 
1,304
 
  
 
287
 
      910    
 
288
 
  
 
41
 
  
 
260
 
  
 
(180
) 
  
 
29
 
  
 
1,348
 
  
 
288
 
                 
Derivative financial instruments – assets
                                                                
Interest rate contracts
     4    
 
(1
) 
  
 
–
 
  
 
10
 
  
 
(9
 )  
 
(3
) 
  
 
1
 
  
 
(1
) 
Equity contracts
     3    
 
4
 
  
 
–
 
  
 
12
 
  
 
–
 
  
 
2
 
  
 
21
 
  
 
4
(2)
 
                 
Derivative financial instruments – liabilities
                                                                
Interest rate contracts
     (17 )   
 
(11
 )  
 
–
 
  
 
(70
) 
  
 
60
 
  
 
23
 
  
 
(15
) 
  
 
(11
 )
(3)
 
Equity contracts
     (2 )   
 
4
 
  
 
–
 
  
 
(14
) 
  
 
–
 
  
 
6
 
  
 
(6
) 
  
 
4
(2)
 
      (12 )   
 
(4
 )  
 
–
 
  
 
(62
) 
  
 
51
 
  
 
28
 
  
 
1
 
  
 
(4
 )
                 
Financial liabilities designated at fair value through profit or loss
     –    
 
(2
) 
  
 
–
 
  
 
(101
) 
  
 
–
 
  
 
(36
) 
  
 
(139
) 
  
 
(2
) 
Total
   $    916    
$
   289
    
$
   41
    
$
   125
    
$
  (223
 )  
$
   103
    
$
1,251
    
$
   283
  
 
(1)
These amounts represent the gains and losses from fair value changes of Level 3 instruments still held at the end of the period that are recorded in the Consolidated Statement of Income.
(2)
Certain unrealized gains and losses on derivative assets and liabilities are largely offset by
mark-to-market
changes on other instruments included in trading revenues in the Consolidated Statement of Income, since these instruments act as an economic hedge to certain derivative assets and liabilities.
(3)
Certain unrealized losses on interest rate derivative contracts are largely offset by
mark-to-market
changes on embedded derivatives on certain deposit liabilities in the Consolidated Statement of Income.
The following table summarizes the changes in Level 3 instruments carried at fair value for the year ended October 31, 2020.
 
   
As at October 31, 2020
  
($ millions)  
Fair value
November 1
2019
    
Gains/(losses)
recorded in
income
(1)
    
Gains/(losses)
recorded
in OCI
    
Purchases/
Issuances
    
Sales/
Settlements
    
Transfers
into/out of
Level 3
    
Fair value
October 31
2020
  
Precious metals
   $ –     $ 1     $ –     $ 23     $ (24 )    $ –     $ –  
Trading assets
     18       6       –       22       (28 )      –       18  
Investment securities
       920         13         7         257       (259 )      (28 )        910  
Derivative financial instruments
     (60 )      14       –       (21 )           32          23       (12 ) 
 
(1)
Gains or losses for items in Level 3 may be offset with losses or gains on related hedges in Level 1 or Level 2.
Summary of Significant Unobservable Inputs Used in Measuring Financial Instruments Categorized as Level 3
The table below sets out information about significant unobservable inputs used in measuring financial instruments categorized as Level 3 in the fair value hierarchy.
 
    
Valuation technique
       
Significant unobservable inputs
       
Range of estimates for
unobservable inputs
(1)
         
Changes in fair value
from reasonably
possible alternatives
($ millions)
               
Investment securities
          
General Partner valuations
                    
               
Private equity securities
(2)
   Market comparable       per net asset value         97%          
               
 
  
 
  
 
   Capitalization rate  
 
     3%    
 
   (51)/51
               
Derivative financial instruments
                                
               
Interest rate contracts
   Option pricing       Interest rate                    
 
   model  
 
   volatility  
 
  
 
 37% - 66%
 
  
 
   (10)/10
               
Equity contracts
   Option pricing       Equity volatility         2% - 112%          
 
   model  
 
  
Correlation
  
 
     0% - 97%    
 
   (3)/3
               
Financial liabilities designated at fair value through profit or loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
   Option pricing       Interest rate                    
 
   model  
 
   swaption volatility  
 
     20% - 273%    
 
   (11)/11
 
(1)
The range of estimates represents the actual lowest and highest level inputs used to fair value financial instruments within each financial statement category.
(2)
The valuation of private equity securities utilizes net asset values as reported by fund managers. Net asset values are not considered observable as the Bank cannot redeem these instruments at such values. The range for net asset values per unit or price per share has not been disclosed for these instruments since the valuations are not model-based.