Fixed Income Quarterly—Banks
Page 5
Table 3: Wholesale Funding Maturities over the Next 12 Months
(C$ mm)
BMO
BNS
CM
NA
RY
TD
Total
44,065
49,687
Total 7,147 24,812 18,594 5,172 20,278 17,749
93,752
44,065 32,559 13,658
1,770 1,700
Senior unsecured medium-term notes Mortgage securitization
Covered bonds
Asset-backed Securities Subordinated liabilites
Total Unsecured
Total Secured
3,322 15,633 1,597 6,794 2,228 2,283
0 2 0 100
3,322 15,633
3,825 9,179
5,594 5,534 5,743 1,465
258
5,594
13,000
3,410 1,368 0 0 394
3,410
1,762
13,048 5,254 1,176
0 800
13,048
7,230
3,058 12,012 2,228 303 148
3,058
14,691
As at January 31, 2014
Source: Company Reports, BMO Capital Markets
Credit Ratings – On February 6, 2014, S&P published a Re- quest for Comment (RFC) on the proposed changes to the criteria for rating bank hybrid instruments. The RFC proposes to redefine the “standard notching” applied to all legacy hy- brid capital instruments from two to three notches below the stand-alone credit profile (SACP). In addition, S&P proposes to deduct an additional notch from the SACP for Tier 1 hybrid instruments with a mandatory conversion or write-down clause (i.e., NVCC). The additional notching is intended to factor in the risk of Tier 1 instruments absorbing losses before the point of non-viability due to the ability to defer coupon payments if the capital conservation and countercyclical capital buffers are breached.
Table 4: Potential Impact from S&P RFC on Tier 1 Capital
Scope – Applies to all existing and future Tier 1 instruments, including preferred shares and innovative Tier 1 hybrids. Existing subordinated debt will not be impacted as the coupon payments are non-deferrable.
Rating Impact – All existing non-NVCC Tier 1 hybrids and preferred shares could be downgraded one notch. In addition, NVCC Tier 1 hybrids and preferred shares could be sub- investment grade for BMO, CIBC, and National (Table 4).
Timing – Comments on the proposal were due by March 21, 2014. S&P indicated it will provide an update following the end of the comment period.
Issuer
"Legacy" Innovative Tier 1 Hybrids
"Legacy" Preferred Shares
NVCC Preferred Shares
Issuer
Current
Proposed
Notching
Current
Proposed
Notching
Current
Proposed
Notching
BMO BNS CM NA RY TD
BBB BBB- -1 BBB+ BBB -1 BBB BBB- -1 BBB BBB- -1 A- BBB+ -1 A- BBB+ -1
BBB BBB- -1 BBB+ BBB -1 BBB BBB- -1 BBB BBB- -1 A- BBB+ -1 A- BBB+ -1
BBB- BB+ -1 BBB BBB- -1 BBB- BB+ -1 BBB- BB+ -1 BBB+ BBB -1 BBB+ BBB -1
Source: BMO Capital Markets; S&P