6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16

Under the Securities Exchange Act of 1934

For the month of March, 2021. Commission File Number: 1-14678

CANADIAN IMPERIAL BANK OF COMMERCE

(Translation of registrant’s name into English)

Commerce Court, Toronto, Ontario, Canada M5L 1A2

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☐                         Form 40-F  ☑

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                          

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                          

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934:

Yes  ☐                             No  ☑

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):                          

The information contained in this Form 6-K is incorporated by reference into the Registration Statements on Form S-8 File nos. 333-09874, 333-130283 and 333-218913, Form F-10 File no. 333-232417 and Form F-3 File nos. 333-219550, 333-220284 and 333-233663.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CANADIAN IMPERIAL BANK OF COMMERCE
Date: March 4, 2021	By:	/s/ Michelle Caturay
	Name:	Michelle Caturay
	Title:	Senior Vice-President, Associate General Counsel, Corporate Secretary and Chief Privacy Officer

EXHIBIT INDEX

Exhibit	Description of Exhibit
99.1	Management Proxy Circular (including Notice of Meeting)
99.2	Annual Report
99.3	Notice-and-Access Notice
99.4	Proxy Form

EX-99.1

Exhibit 99.1

Management Proxy Circular

Notice of Annual Meeting of Shareholders

April 8, 2021

Your participation is important. Please read this document and vote.

Notice of Annual Meeting of Shareholders

When:	Thursday, April 8, 2021, 10:30 a.m. Eastern Daylight Time (EDT)
Virtual Meeting:	We are holding our 2021 annual meeting virtually to continue protecting the health and safety of our shareholders, employees and other stakeholders from the ongoing impact of the COVID-19 pandemic. Please join our webcast at https://cibc.pividal.tv/agm2021 or on our phone line at 1 800 898-3989, passcode 6875673# (English) or 1 877 395-0279 passcode 9080240# (French).

At the meeting you will be asked to:

1. receive our financial statements for the year ended October 31, 2020 and the auditors’ report on the statements;

2. elect directors;

3. appoint auditors;

4. vote on an advisory resolution on our executive compensation approach;

5. vote on shareholder proposals; and

6. consider any other business properly brought before the meeting.

Voting instructions start on page 2 of our 2021 Management Proxy Circular (the “Circular”). Please read our Circular carefully.

Delivery of meeting materials by notice-and-access

Protecting the environment – We are proud to let you know that we have furthered our commitment to protect the environment by reducing the amount of paper we send to our shareholders. You have told us how important environmental sustainability is to you as shareholders and we are listening.

Our Management Proxy Circular – Starting this year, we are using notice-and-access to send our registered and non-registered shareholders the 2021 management proxy circular as permitted by the Canadian Securities Administrators and with the authorization of the Office of the Superintendent of Financial Institutions Canada. This means that our Circular will be posted online for you to access, rather than being printed and mailed to you. You will still receive a proxy form or a voting instruction form by mail so that you can vote your shares. You will also receive a notice with information about how you can access our Circular online and how to request a paper copy.

Our Annual Financial Statements and Management’s Discussion and Analysis – The way we send you our annual financial statements and management’s discussion and analysis (MD&A) depends on whether you are a registered shareholder or a non-registered shareholder.

You are a registered shareholder if you hold a paper share certificate in your name or your shares are held through the direct registration system. You are a non-registered shareholder if your shares are registered in the name of an intermediary, such as a bank, broker or trust company.

If you are a registered shareholder and you did not sign-up for e-delivery or opt out of receiving our annual financial statements, then we are required to send you our annual financial statements and you will receive a paper copy of our Annual Report with the notice.

If you are a non-registered shareholder, then we will use notice-and-access to send you our annual financial statements and MD&A as permitted by securities law so that you can access this material online the same way as our Circular.

Our Circular and Annual Report (the “meeting materials”) are available on the website of our transfer agent AST Trust Company (Canada) (AST) (www.meetingdocuments.com/astca/cibc), on our website (www.cibc.com), SEDAR (www.sedar.com) and EDGAR (www.sec.gov/edgar.shtml).

How to request a paper copy of the meeting materials

You may request a paper copy of the Circular or the Annual Report, free of charge, up to one year from the date the meeting materials were filed on SEDAR.

To make your request before the meeting, contact AST at www.meetingdocuments.com/astca/cibc or 1 888 433-6443 (toll free in Canada and the United States) or 416 682-3801 (other countries) or email fulfilment@astfinancial.com. Please follow AST’s instructions. A paper copy of the requested documents will be sent to you within three business days of your request. Please note that you will not receive another proxy form or voting instruction form so please retain your original form to vote your shares.

To ensure receipt of the paper copy before the voting deadline and meeting date, we estimate that your request must be received no later than 5:00 p.m. (EDT) on March 25, 2021. This reflects the three business day period for processing requests as well as typical mailing times.

To make your request on or after the date of the meeting, call AST at 1 888 433-6443 (toll free in Canada and the United States) or 416 682-3801 (other countries) or email fulfilment@astfinancial.com. The requested documents will be sent to you within ten calendar days of your request.

Eligibility to vote

There were 447,964,315 common shares outstanding on February 8, 2021, our record date. Holders of common shares on that date are eligible to vote at our meeting (subject to Bank Act (Canada) restrictions).

Your vote is important

We encourage you to read the Circular and vote before the meeting. For more information on how you can vote or appoint someone else to vote for you see “Voting” starting on page 2 of the Circular. Please vote as early as possible so that your shares are represented at the meeting. AST must receive your vote no later than 10:30 a.m. (EDT) on April 7, 2021.

You may also vote online at the virtual meeting, provided you follow certain steps. These steps are set out on pages 3 and 4 of the Circular.

Questions

If you have questions about notice-and-access or our virtual meeting, you may contact AST at 1 800 258-0499 (toll free in Canada and the United States) or 416 682-3860 (other countries).

Our Board and management would like to answer as many shareholder questions as possible during the meeting. We encourage you to submit questions in advance to the Corporate Secretary at corporate.secretary@cibc.com or mailed to CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2.

By Order of the Board

Michelle Caturay

Senior Vice-President, Associate General

Counsel and Corporate Secretary

February 16, 2021

Dear fellow shareholder,

We are pleased to invite you to attend CIBC’s Annual Meeting of Shareholders on Thursday, April 8, 2021, at 10:30 a.m. (EDT).

Engaging with you – The health and well-being of our team, clients, investors and communities remains our top priority. In line with the latest directives from public health and government authorities, this year’s meeting will be virtual. Shareholders will have the opportunity to attend the meeting online in real time regardless of their location, submit questions and vote. Please see our Circular for information on how to participate in our virtual meeting, the business to be conducted at the meeting, our executive compensation approach and our governance practices. You have the opportunity to vote and your vote matters!

Our purpose – This past year, amidst a global pandemic, we lived our purpose to help make your ambition a reality. This shared purpose is the foundation for the efforts of our team to work collaboratively to meet the needs of our clients. The investments we have made in building a client-focused culture were realized this year, as our team responded with urgency and focus to address immediate client needs created by the onset of the pandemic, and support our clients in keeping their long-term ambitions on track. Our bank played a critical role in supporting clients, including providing payment relief to those affected by the pandemic, and working closely with governments to administer critical relief programs. We continue to be there for clients affected by the pandemic with advice and solutions to address financial hardship.

Creating value – We delivered resilient business performance in 2020. Pre-provision earnings were up over 2019 and our capital position remained strong. Our investments in technology over the past several years to digitize and simplify our bank are allowing us to provide real-time remote support to our clients at a time when physical distancing has become the norm. These efforts are being recognized by our clients with our highest client experience scores on record.

We remain focused on meeting our responsibilities to support the long-term strength and prosperity of the people and communities we serve. This is true at the corporate level with our commitment to sustainability and our support for social and economic development, as well as at the individual level, where our generous team members give back, day in and day out.

Join us – At our meeting, you will hear more about CIBC’s 2020 performance and progress on our strategy. Board members and executive officers will be available to answer your questions.

We thank you for your continued support of CIBC and look forward to your participation in our virtual meeting at https://cibc.pividal.tv/agm2021 or by phone at 1 800 898-3989, passcode 6875673# (English) or 1 877 395-0279 passcode 9080240# (French). The meeting will be archived on our website until the next annual meeting.

Sincerely,

John P. Manley	Victor G. Dodig
Chair of the Board	President and Chief Executive Officer

Management Proxy Circular

In this 2021 Management Proxy Circular (the “Circular”) information is as at February 11, 2021. All dollar figures are in Canadian currency, unless indicated otherwise. ‘You’, ‘your’ and ‘shareholder’ mean common shareholders of CIBC.

Table of Contents

1	Business of the Meeting
2	Voting
6	Shareholder Proposals
14	Directors
	14	Director Nominees
	30	Director Compensation
34	Board Committee Reports
43	Statement of Corporate Governance Practices

61	Message to our Fellow Shareholders
65	Compensation Discussion and Analysis
	65	Compensation Philosophy, Practices and Governance
	67	Approach to Executive Compensation
	74	2020 Performance and Compensation
	83	Talent Management and Succession Planning
	84	Inclusion and Diversity

85	Compensation Disclosure
99	Other Information
	99	Indebtedness of Directors and Executive Officers
	101	Directors’ and Officers’ Liability Insurance
	101	Indemnification
	101	Information about CIBC
	101	Vote Results and Minutes of Meeting
	101	Contacting our Board of Directors
	101	Board of Directors’ Approval

Glossary of Acronyms

AFV	Accounting Fair Value
AML	Anti-Money Laundering
BPF	Business Performance Factor
bps	basis points
CD&A	Compensation Discussion and Analysis
CEO	Chief Executive Officer
CFO	Chief Financial Officer
COMR	Cost of Management Ratio
CRO	Chief Risk Officer
CSA	Canadian Securities Administrators
CX	Client Experience
DB	Defined Benefit
DSU	Deferred Share Unit
EPS	Earnings per Share
ESG	Environmental, Social and Governance
ESOP	Employee Stock Option Plan
ESPP	Employee Share Purchase Plan
EXCO	Executive Committee
EY	Ernst & Young LLP
FSB	Financial Stability Board
GAAP	Generally Accepted Accounting Principles
GPS	Goals Performance Success
IFRS	International Financial Reporting Standards

MD&A	Management’s Discussion and Analysis
MÉDAC	Mouvement d’éducation et de défense des actionnaires
NEO	Named Executive Officer
NIX	Non-interest expense to revenue
NYSE	New York Stock Exchange
options	Stock Options
PCAOB	Public Company Accounting Oversight Board (United States)
PSU	Performance Share Unit
ROE	Return on Equity
RSA	Restricted Share Award
S&P	Standard & Poor’s
SARs	Stock Appreciation Rights
SBU	Strategic Business Unit
SEC	U.S. Securities and Exchange Commission
SERP	Supplemental Executive Retirement Plan
TCFD	Task Force on Climate-related Financial Disclosure
TDC	Total Direct Compensation
TEB	Taxable equivalent basis
TSR	Total Shareholder Return
TSX	Toronto Stock Exchange

The CIBC Logo is a trademark of CIBC in Canada and other countries.

Business of the Meeting

1. Financial Statements

The consolidated financial statements for the year ended October 31, 2020 are in our 2020 Annual Report available at https://www.cibc.com/en/about-cibc/investor-relations.html.

2. Election of Directors   You will be asked to elect 14 director nominees to serve on our Board until the earlier of the next annual meeting or the director’s retirement from the Board. The Board recommends that you vote for each director nominee.   See pages 14 to 28 for information about our director nominees.  

3. Appointment of Auditors   You will be asked to appoint Ernst & Young LLP (EY) as auditors of CIBC. EY has served as the auditors of CIBC since December 2002. The Board recommends that you vote for EY as our auditors.   See page 37 for information on the Audit   Committee’s annual assessment of EY’s   effectiveness and audit quality and a   description of fees paid to the auditors.    

4. Advisory Resolution on our Executive Compensation Approach   You can have a “say on pay” by voting on an advisory resolution about our approach to executive compensation. Last year, 95% of shareholder votes were for our executive compensation approach. We consider the vote part of our shareholder engagement process. This vote is advisory under applicable law and does not diminish the Board’s role and responsibilities. Even though the resolution is not binding, the Board and Management Resources and Compensation Committee consider the results of the vote in making future executive compensation decisions.   See pages 61 to 84 for Message to our Fellow Shareholders and Compensation Discussion and Analysis.  

When reviewing its approach to executive compensation, the Committee considers shareholder feedback and any concerns that have been raised. If a concern is significant, we will disclose the Committee’s review process and the outcome of that review in our next management proxy circular. The Board recommends that you vote for the following advisory resolution on our approach to executive compensation.

RESOLVED that the shareholders accept the approach to executive compensation disclosed in CIBC’s management proxy circular for the 2021 Annual Meeting of Shareholders.

5. Shareholder Proposals You will be asked to vote on a shareholder proposal from the Mouvement d’education et de défense des actionnaires (MÉDAC) set out on page 6. The Board recommends that you vote against this proposal for the reasons explained in the Board’s response on page 6. In addition, MÉDAC withdrew seven shareholder proposals set out on pages 7 to 13.   See pages 6 to 13 for  shareholder proposals  and management’s  responses.   

Æquo Shareholder Engagement Services, on behalf of Comité syndical national de retraite Bâtirente inc., withdrew a shareholder proposal described on page 7.

Shareholder proposals for next year’s annual meeting must be submitted by November 18, 2021.

Each item being voted on requires the approval of a majority (more than 50%) of the votes cast by proxy or during the meeting by online ballot through the live webcast. For information on voting and appointing a proxyholder see pages 2 to 5.

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Voting

Who can vote

You are entitled to one vote for each common share you own on February 8, 2021, our record date. There were 447,964,315 outstanding common shares eligible to vote on that date.

Shares cannot be voted if they are beneficially owned by:

• the government of Canada or any of its agencies;

• the government of a province or any of its agencies;

• the government of a foreign country, any political subdivision of a foreign country or any of its agencies;

• a person who has acquired more than 10% of any class of our shares without Minister of Finance approval; or

• a person or entity controlled by a person that, in aggregate, are more than 20% of the eligible votes that may be cast unless permitted by the Minister of Finance.

Our directors and officers are not aware of any person or company that beneficially owns, directly or indirectly, or exercises control or direction over, more than 10% of the votes attached to any class of CIBC shares.

How to vote

There are two ways to vote your shares: before the meeting by proxy or during the meeting by online ballot through the live webcast. The voting process you follow depends on whether you are a registered shareholder or a non-registered shareholder.

Registered shareholders	Non-registered shareholders
You are a registered shareholder if you hold a paper share certificate in your name or your shares are held through the direct registration system.	You are a non-registered shareholder if your shares are registered in the name of an intermediary, such as a bank, broker or trust company.

   How to vote if you are a registered shareholder

If you are a registered shareholder you received a proxy form with a control number. If you did not receive this form, please contact AST at 1 800 258-0499 (toll free in Canada and the United States) or 416 682-3860 (other countries).You may vote by proxy before the meeting using the proxy form that was sent to you or you may vote during the meeting by online ballot through the live webcast.

If you want to vote by proxy before the meeting – To vote your shares by proxy, you may provide your voting instructions in one of these ways:

	Online – go to www.astvotemyproxy.com, enter the 13-digit control number on your proxy form and follow the instructions on the screen; or         – scan both sides of your proxy form and email it to proxyvote@astfinancial.com;
	Fax –  complete your proxy form and fax both sides to AST at 1 866 781-3111 (Canada and the United States) or 1 416 368-2502 (outside North America); or
	Mail – complete your proxy form and return it in the envelope provided.

Return your completed proxy by 10:30 a.m. (EDT) on April 7, 2021 to ensure your vote is counted. We encourage you to vote your shares early.

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Voting

If you want to vote during the meeting – To attend our virtual meeting and vote your shares during the meeting, do not complete or return your proxy form. You will be able to vote online in real time by completing an online ballot through the live webcast as long as you are connected to the internet and follow these steps.

Step 1	Log in at https://cibc.pividal.tv/agm2021 at least 15 minutes before the meeting starts and check browser compatibility. There must be internet connectivity for the duration of the meeting to vote.
Step 2	Select “Vote” and a separate browser will open. Enter the control number from your proxy form as your user name. Enter “cibc2021” (case sensitive) as your password. Any vote you cast at the meeting will revoke any proxy you previously submitted. If you do not wish to revoke a previously submitted proxy, you should not vote during the meeting.

If you want to appoint a proxyholder to vote during the meeting for you – You may appoint a proxyholder, other than management’s nominees, John Manley, Chair of the Board, and Victor Dodig, President and Chief Executive Officer, to attend, vote and act on your behalf at the meeting and any continuation or adjournment of the meeting. You should be sure your proxyholder is attending the meeting and is aware they have been appointed to vote your shares. To appoint a proxyholder you must follow these steps:

Step 1	Insert your proxyholder’s name in the space provided on your proxy form and return it online, by fax or mail as described on the previous page. The person you appoint as your proxyholder does not need to be a CIBC shareholder. You may leave the voting section blank, or you may provide voting instructions that your proxyholder must follow.
Step 2	You must register your proxyholder by calling AST at 1 866 751-6315 (within North America) or 1 212 235-5754 (outside North America) by 10:30 a.m. on April 7, 2021. AST will provide your proxyholder with a control number to vote during the meeting. If you do not take the additional step of registering your proxyholder with AST, your proxyholder will not receive a control number to vote your shares during the meeting.
Step 3	Your proxyholder should log in at https://cibc.pividal.tv/agm2021 at least 15 minutes before the meeting starts and check browser compatibility. There must be internet connectivity for the duration of the meeting to vote.
Step 4	Your proxyholder should select “Vote” and a separate browser will open. Your proxyholder will enter a user name and password. The user name is the control number emailed to your proxyholder after you registered your proxyholder with AST. The password is “cibc2021” and is case sensitive.

If you want to change your vote before the meeting – If you change your mind on the voting instructions you sent, you may revoke your proxy in one of these ways:

• If you returned your proxy form by fax or mail, you should sign a written statement that you revoke your proxy, provide your new instructions (or authorize your lawyer in writing to sign the statement) and send it to CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2, before 10:30 a.m. (EDT) on April 7, 2021.

• If you voted online, you may vote online again before 10:30 a.m. (EDT) on April 7, 2021, using the control number on your proxy form.

   How to vote if you are a non-registered shareholder

If you are a non-registered shareholder, you received a voting instruction form with a control number. If you did not receive this form, please contact the intermediary where your shares are registered. You may vote by proxy before the meeting using the voting instruction form that was sent to you or you may vote during the meeting by online ballot through the live webcast provided you follow the steps below to register yourself as a proxyholder.

If you want to vote by proxy before the meeting – To vote your shares by proxy, you may provide your voting instructions in one of these ways:

Online – go to www.proxyvote.com, enter the 16-digit control number on your voting instruction form and follow the instructions on the screen;

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Voting

	Mail – complete your voting instruction form and return it in the envelope provided; or
	Phone – call 1 800 474-7493 (English) or 1 800 474-7501 (French) and follow the prompts.

You must allow sufficient time for your intermediary to receive and act on your voting instructions by 10:30 a.m. (EDT) on April 7, 2021. Please check your voting instruction form for information on the deadline for returning your form.

If you want to vote during the meeting or appoint a proxyholder to vote for you – To attend and vote at our virtual meeting, or appoint a proxyholder to attend and vote for you, you or your proxyholder will be able to vote online in real time by completing an online ballot through the live webcast as long as you, or your proxyholder, are connected to the internet and follow these steps:

Step 1	If you want to attend and vote during the meeting you must insert your name in the space provided on your voting instruction form and return it online or by mail, as described above. Do not complete the voting section if you plan to vote at the meeting. If you want to appoint someone other than yourself, or management’s nominees, John Manley and Victor Dodig, as your proxyholder, to attend, vote and act for you at the meeting and any continuation or adjournment of the meeting, you must insert their name in the space provided on your voting instruction form and return it online or by mail, as described above. You may leave the voting section blank, or you may provide voting instructions that your proxyholder must follow. You should be sure your proxyholder is attending the meeting and is aware they have been appointed to vote your shares. The person you appoint as your proxyholder does not need to be a CIBC shareholder.
Step 2	You must register yourself, or your proxyholder by calling AST at 1 866 751-6315 (within North America) or 1 212 235-5754 (outside North America) by 10:30 a.m. on April 7, 2021. AST will provide you, or your proxyholder, with a control number to vote during the meeting. If you do not take the additional step of registering with AST, you, or your proxyholder, will not receive a control number to vote your shares during the meeting. If you are a non-registered shareholder in the United States and want to vote at the meeting, you must obtain a legal proxy form from your intermediary by following the steps on the voting instruction form sent to you, or if you have not received one, contact your intermediary to request a legal proxy form. After obtaining the legal proxy form, appoint yourself, or someone else, as proxyholder. For instructions on how to appoint yourself, or someone else, as proxyholder, see Step 1 above then register yourself or your proxyholder with AST. Legal proxies may be returned to AST by email at proxyvote@astfinancial.com or by mail: AST Trust Company (Canada), Attn: Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1 and must be labeled “Legal Proxy”. Please allow sufficient time for the return of your legal proxy by the cut-off date of 10:30 a.m. (EDT) on April 7, 2021.
Step 3	You or your proxyholder should log in at https://cibc.pividal.tv/agm2021 at least 15 minutes before the meeting starts and check browser compatibility. There must be internet connectivity for the duration of the meeting to vote.
Step 4	You or your proxyholder should select “Vote” and a separate browser will open. You or your proxyholder will enter a user name and password. The user name is the control number emailed to you or your proxyholder after you registered yourself or your proxyholder with AST. The password is “cibc2021” and is case sensitive.

If you want to change your vote before the meeting – If you change your mind on the voting instructions you sent through your intermediary and would like to change your vote or vote during the meeting, contact your intermediary to discuss whether this is possible and what procedures you need to follow.

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Voting

Other voting information

How your proxyholder will vote – If you have given voting instructions in your proxy form or voting instruction form, your proxyholder must vote according to those instructions. If you have not given voting instructions, your proxyholder will decide how to vote. Your proxyholder will also decide how to vote on any amendment or variation to any of the matters in the notice of meeting or any matters that are properly brought before the meeting.

You can vote:

FOR or WITHHOLD	•      on each director nominee •      on the appointment of auditors
FOR or AGAINST	•      the advisory resolution on our executive compensation approach
FOR, AGAINST or ABSTAIN	•      on the shareholder proposal

If the you blank or your space proxyholder on your proxy do not form give or specific voting instruction voting instructions, form, then or management’s you do not insert nominees, a name John in Manley and Victor Dodig will be appointed as your proxyholder and your shares will be voted:

FOR	•      each director nominee listed in the Circular •      the appointment of Ernst & Young LLP as auditors •      the advisory resolution on our executive compensation approach
AGAINST	•      the shareholder proposal

Confidentiality of your vote – To protect the confidentiality of your vote, AST counts proxies and tabulates the results independently and does not inform CIBC about how individual shareholders have voted except where required by law or where a shareholder’s comments are intended for management.

How we solicit proxies – We are soliciting proxies primarily by mail but CIBC employees may contact you by phone or in writing. CIBC pays any costs associated with proxy solicitation.

We reserve the right to accept late proxies and to waive or extend the proxy deadline with or without notice, but are under no obligation to accept or reject a late proxy.

If you want to attend the meeting as a guest – Non-registered shareholders and others who have not been duly appointed and registered with AST as proxyholders may attend the meeting as guests. Guests will not be able to vote at the meeting. You may attend the meeting as a guest in one of these ways:

	Online – go to https://cibc.pividal.tv/agm2021 to join the live webcast; or
	Phone – call 1 800 898-3989 passcode 6875673# (English) or 1 877 395-0279 passcode 9080240# (French) for an audio only experience.

Go Paperless!

Sign up for electronic delivery of our meeting materials and other continuous disclosure documents for future years. Enrolling is easy and electronic delivery is secure, free, convenient and environmentally friendly.

If you are a registered shareholder, go to https://ca.astfinancial.com/edelivery, select Canadian Imperial Bank of Commerce, complete the consent form and hit “submit”.

If you are a non-registered shareholder, go to www.proxyvote.com and use the control number provided on your voting instruction form.

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Shareholder Proposals

Shareholders will be asked to vote on a shareholder proposal from MÉDAC, 82 Sherbrooke Street West, Montreal, Québec H2X 1X3, telephone: 514 286-1155, email: admin@medac.qc.ca. MÉDAC’s proposal and supporting argument, and the Board’s response, are set out below.

Proposal No. 1

Circular Economy - It is proposed that the Bank produce a report on the loans it has made in recent years to support the circular economy.

Argument

According to the Institut de l’environnement, du développement durable et de l’économie circulaire du Québec, the circular economy is “a system of production, trade and consumption designed to optimize the use of resources at all stages of the life cycle of a good or service, taking a circular approach, while reducing the environmental footprint and contributing to the well-being of individuals and communities.”¹

Circular business models are rethinking systems and processes, starting at the design stage, to find opportunities to recycle, repair, reuse, repurpose or refurbish products and materials, in order to reduce waste and greenhouse gas emissions. In Canada, as a government publication states, many of our innovators and industries are seeing the benefits of using circular models to save money or open up new market opportunities – from turning pulp-and-paper-mill waste into renewable bioproducts to launching product buy-back programs that enhance customer interaction and recover usable materials such as metals and alloys. These innovative solutions are leading the way toward a more circular economy that benefits the environment while creating wealth and opportunities in industries.

This new approach cannot be developed without financing from Canadian banks. The objective of this proposal is to expand shareholders’ awareness of the Bank’s support for the growth of this new economy in recent years.

¹ http://instituteddec.org/themes/economie-circulaire/

The Board recommends that you vote against this proposal.

At CIBC, we are a strong supporter of circular business models and understand the important role that they can play in reducing the environmental impact on society.

Since 2006, we have procured paper from sources that are environmentally and socially responsible, with a preference for FSC-certified stock. At present, CIBC recognizes FSC as the most rigorous third-party certification, which guarantees that purchased forest products come from responsibly managed forests. By purchasing FSC-certified paper products, we are supporting the circular economy by promoting the regeneration of vital natural resources in responsibly managed forests. In 2020, more than 94% of our total paper use was FSC-certified. We also reduced our internal paper consumption in 2020 by 25%.

In 2019, 100% of our used electronics in Canada, the United States, the United Kingdom and the Asia-Pacific region were donated, reused, recycled or upcycled. Where feasible, we redeployed used electronics within the organization. Equipment sent for recycling was broken down into its individual material components and recycled or upcycled into new, innovative products. In 2019, we diverted 538 tonnes of e-waste from landfill.

A portion of our used electronics is donated to a not-for-profit, charitable organization in Canada that is helping to meet the need for computers in schools, public libraries and not-for-profit learning organizations. We have been the largest corporate supporter of the program since our partnership began in 1993. In 2019, we donated approximately 5,000 computer components to the program, which diverted more than 37,000 kilograms of electronic waste from landfills.

Lastly, CIBC supports the circular economy through our procurement practices and supplier partnerships. Our Environmentally Responsible Procurement Standard describes our requirements for the procurement of goods and services that may be associated with significant adverse environmental impacts. Through our supplier questionnaire, we ask our suppliers about the reuse, repair, refurbishment, remanufacturing and recycling of their products, including take-back programs.

We currently do not report on clients supporting the circular economy in our public disclosure. The content of our disclosure is guided by a detailed materiality assessment where we receive input from investors, clients, employees, non-governmental organizations (NGOs) and professional organizations around material topics. Our disclosure will continue to change as new material topics, such as the circular economy, emerge.

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Shareholder Proposals

Withdrawn Shareholder Proposals

Æquo Shareholder Engagement Services for Comité syndical national de retraite Bâtirente inc.

Æquo Shareholder Engagement Services submitted a shareholder proposal on behalf of Comité syndical national de retraite Bâtirente inc. requesting that CIBC adopt a corporate-wide target to achieve net-zero greenhouse gas emissions associated with its lending and investment activities as defined by best practice carbon accounting standards by 2050.

After discussion with CIBC, Æquo withdrew the proposal based on CIBC signing the requisite forms to join the Partnership for Carbon Accounting Financials and furthering the due diligence underway at CIBC during the course of the year, to measure emissions and develop metrics. CIBC will also consider setting targets in alignment with the Paris Climate Agreement and will report on its activities by the time of the next annual shareholders meeting.

MÉDAC

MÉDAC withdrew seven shareholder proposals after discussion with CIBC. At MÉDAC’s request, the text of each proposal, MÉDAC’s supporting statement and CIBC’s response are set out below.

1. Purpose and Commitment - It is proposed that the Board of Directors and management state the purpose of the Canadian Imperial Bank of Commerce as an organization and that a committee of the Board of Directors be instructed to monitor the implementation of the policies, commitments and initiatives put in place in order to give concrete expression to this new strategic orientation, in particular in connection with health, the environment, human resources, and stakeholder relations.

Argument

In August 2019, the Business Roundtable, an association whose members are the CEOs of large American corporations, published a statement asserting that the purpose of a corporation could not be limited to the pursuit of profit alone, and had to take into account all of the stakeholders who may be affected by its activity: customers, employees, suppliers, communities and shareholders. If corporations are of no social utility, they lose all purpose.

The purpose of a corporation refers to the manner in which it intends to play a role in society, beyond just its economic activity. Jean-Dominique Senard, Chairman of the Board of Renault, has said: “A corporation’s purpose brings together past and present; it is its DNA. It has no economic significance; rather, it falls into the realm of vision and meaning.”¹ Essentially, it is “the contribution that the corporation seeks to make to the key social, societal, environmental and economic issues in its business or industry by involving its key stakeholders.”

While many corporations have instituted a number of good initiatives in this direction over time, no purpose that would correspond to this definition can be discerned from the various institutional reports. In addition, there is no committee of the Board whose mandate is to coordinate all of the actions taken to give concrete expression to the purpose chosen. More specifically, that committee’s mission should be:

• to prepare and inform the work of the Board in implementing the policies, commitments and initiatives put in place by the Canadian Imperial Bank of Commerce;

• in connection with its strategic orientations, in particular health, the environment, and human resources;

• to dialogue with the various stakeholders regarding its progress in achieving those objectives and report to the Board on its meetings;

• to examine the systems for non-financial accountability and oversight and the key results of the non-financial information published by the Canadian Imperial Bank of Commerce;

• to inform shareholders about the various issues raised by its work.

In order for this concept of purpose to take on concrete form and not remain simply a marketing slogan, it must be given tangible expression in an institution’s governance practices.

In conclusion, we would note that for a growing number of investors, organizations that have no social utility cease to have a purpose.

¹ Jean-Dominique Senard: “Le sens et le pourquoi nourrissent la motivation”, Les Échos, June 8, 2018

https://business.lesechos.fr/directions-generales/innovation/innovation-sociale/0301754783119-jean-dominique-senard-president-de-michelin-le-sens-et-le-pourquoi-nourrissent-la-motivation-321483.php

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Shareholder Proposals

Board statement

In 2019, CIBC stated, and engaged our 44,000 employees around, our common purpose – to help make your ambition a reality. The word ‘your’ in our purpose statement represents all our key stakeholders: clients, employees, communities and shareholders. Externally, our purpose is clearly stated and disclosed in our Annual Report, Management Proxy Circular and Sustainability Report.

Our shared purpose has served as a galvanizing north star for our bank to accelerate our transformation and guide everything we do – how we act, how we operate and how we make decisions as we ensure sustainable value creation for all our stakeholders. Through strong leader and employee engagement, we have made significant progress to embed our purpose across the organization. This includes embedding our purpose in our strategy, Code of Conduct, learning and development, and performance measurement and management for all employees.

As a cornerstone of our strategic framework and enterprise value framework, our purpose guides our business decisions, our commitment to stakeholders, and the concrete initiatives we have undertaken to ensure our purpose is a fundamental part of how we do business. From our strategy, to how we engage with our clients, to our corporate giving program – our purpose underpins everything we do.

While our Board of Directors has overseen our multi-year purpose journey, from initial development, to enterprise-wide team engagement and strategic initiatives, to how we measure progress, the Board has committed to mandating the Corporate Governance Committee with responsibility to oversee CIBC’s alignment to our purpose and related initiatives.

2. Human Resources Committee with Full Committee Status - It is proposed that the Board of Directors revise the mandate of its compensation or human resources committee to include a more specific statement of its responsibilities in connection with the health, safety and wellness of all its employees.

Argument

Since the COVID-19 crisis began, employee health, safety and wellness have been a subject of growing concern for the senior management of our organizations. In addition to those concerns, employee talent development is important for meeting the challenges presented by new technologies.

The mandate and responsibilities of compensation or human resources committees should be adjusted in order to assure shareholders and other stakeholders that all strategies and policies are being put in place to address these concerns. At present, a large part of these committees’ work focuses on managing executive performance and compensation.

The purpose of this proposal is to ask that the Board of Directors revise the mandate of the human resources committee or create a specific committee whose mandate would be to assist it in carrying out its responsibilities in connection with deciding the vision and overseeing issues relating to employee health, safety and wellness, in particular as they relate to its strategies, policies, systems and practices in that regard and management of the associated risks. For example, the committee could be asked to address the following subjects: training and talent development, diversity, labour relations, pay equity, organizational culture, physical design of the workplace, impact of teleworking on employees’ health, both physical and mental, and employee engagement and satisfaction. These strategic aspects of human resources management should be disclosed in the management circular. This proposal is based on the standards and indicators adopted by the Sustainability Accounting Standards Board (SASB), which are often cited as a roadmap for standardizing human resources management information.

Employee health and wellness do not just supplement an organization’s strategy; they are essential to it, and that is our perspective in submitting this proposal.

Board statement

The mandate of our Management Resources and Compensation Committee (MRCC) outlines the MRCC’s responsibility to assist the Board of Directors in their global oversight of CIBC’s human capital strategy, including talent and total rewards, which incorporates health, safety and well-being, and the alignment with CIBC’s strategy, risk appetite and controls. The MRCC spends a significant portion of its time on human capital strategy, culture, talent management and succession planning.

The health, safety and well-being (including physical, emotional and financial well-being) of our team members is always a priority and this was even more critical during the COVID-19 pandemic. The Board, including our MRCC members, held a number of special meetings to discuss CIBC’s response to the pandemic. CIBC took a number of actions to support the health, safety and well-being of our team, such as: the immediate transition of the majority of our team members to work remotely, new safety measures and protocols for team members working onsite, continued pay for

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Shareholder Proposals

employees while on precautionary leaves, per diem pay for team members working onsite, increase in the amount of interest-free loans offered to all team members, top-up pay for part-time and casual employees, virtual access to medical professionals for team members and their families, and on-site nurses at key locations.

The MRCC’s report is included starting on page 39 of this Circular and highlights the topics discussed in 2020. CIBC’s response to COVID-19 for employees, clients and communities is one of those topics and includes discussion of an employee pulse check survey and issues related to employee health, safety and well-being; our return to the office strategy, which also has a specific focus on employee health, safety and well-being; talent management and succession planning for key leadership roles; progress against CIBC’s inclusion and diversity strategy; CIBC’s gender pay analysis; an update on our purpose, brand and marketing programs; real estate transformation; launch of CIBC’s new recognition program; and updates on the launch of CIBC’s modern human resources platform.

For more detailed information, see our Message to our Fellow Shareholders and Compensation Discussion and Analysis (CD&A), starting on page 61, “Talent Management and Succession Planning” on page 83 and “Inclusion and Diversity” on page 84.

Given the MRCC’s current responsibilities pertaining to the health, safety and well-being of our team members, the Board has committed to including these words specifically in the MRCC’s mandate.

3. Diversity Target - It is proposed that the Bank adopt a target of more than 40% for the composition of its Board of Directors for the next five years.

Argument

At the last annual meeting, this proposal received 9.0% support among shareholders who voted. At present, the Bank has adopted a target of 30% representation of each sex, while representation has exceeded 40% in the last two years.

Because banks often act as beacons of sound governance for small and medium-sized enterprises, failing to update the target may suggest that this objective is the ideal to be achieved. In fact, it is recognized that there are more competent women than there are positions to be filled and that various stereotypes and biases have impeded women’s access to these positions. With this in mind, it is therefore proposed that the Bank review its diversity policy with a view to raising the minimum representation of both sexes on their boards of directors to 40%.

Board statement

As set out in CIBC’s Board Diversity Policy, the Board seeks gender parity. Our Board is proud that the percentage of directors who are women will be 50% upon the election of the director nominees identified in this Circular at CIBC’s annual meeting. This calculation includes the CEO. In addition, the Board is proud to have announced on December 3, 2020, that CIBC’s successor Chair of the Board will be Katharine B. Stevenson, effective upon her election as a director at CIBC’s annual meeting.

The appointment or retirement of a single Board member has a notable impact on the percentage of men and women on the Board. In the coming years, that percentage will fluctuate as directors who reach their maximum term of service retire and new directors join. Therefore, the Board’s minimum target for gender diversity continues to be at least 30% women and at least 30% men.

In 2020, the Board updated CIBC’s Board Diversity Policy on the Board’s commitment to reflect the diversity of CIBC’s employees, clients and the communities CIBC serves. See “Inclusion and Diversity” on page 54 of our Circular for a detailed description of the Board Diversity Policy.

4. Virtual Meetings and Shareholders’ Rights - It is proposed that the Board of Directors adopt a policy stating the procedure for holding virtual annual meetings.

Argument

Over the last year, the banks and a number of other organizations have relied on new teleconferencing technologies for holding their annual general meetings, because of the pandemic. While MÉDAC is well aware that these new technologies were often being used by the organizations for the first time, it and other individuals or organizations that are submitting shareholder proposals or that would like to make comments or suggestions at these virtual meetings have unfortunately experienced problems that limited the extent to which they were able to participate. More specifically, our impression of the 2020 virtual annual meetings was as follows: “We were unfortunately unable to speak at these meetings, since it was impossible for shareholders to access the microphone during the virtual meetings. The only people who spoke at the meetings were representatives [of the companies]: the chairperson (of the Board, and thus of the meeting), the CEOs, etc.”¹ For small

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Shareholder Proposals

shareholders, this limited presence at annual meetings can have an impact on the success of their proposals in the long term, since they are unable to advocate for their proposals in person and thus build additional support for potential submission of their proposals in future.

These threats are a source of concern about participation by shareholders who, whether because dialogue with the issuer was fruitless or for some other reason, take the route of submitting shareholder proposals in management circulars and at annual meetings.

Experience with shareholder participation and shareholder proposals over the last 20 years has demonstrated the added value that they bring to governance, for example regarding separation of the office of president and CEO from that of chair of the Board of Directors, advisory votes on executive compensation, disclosure of fees paid to auditors and compensation advisors, women’s representation on boards of directors and in executive positions, access to proxies for nominating directors, etc.

We recommend that the Board of Directors adopt a policy stating the procedure for shareholder participation at virtual annual meetings:

• oral presentation of shareholder proposals by the individuals or organizations that submitted them, lasting at least as long as the time needed to read the proposals;

• visible electronic image of shareholders during their presentations and also of members of senior management;

• opportunity to ask spontaneous questions following management presentations;

• interaction in real time between shareholders and with the chairperson of the meeting;

• in the event that questions raised by shareholders cannot be addressed at the annual meeting, management answers to be put online, on the company’s website and in SEDAR, within ten days after the meeting is held.

¹ https://medac.qc.ca/1798/

Board statement

In March 2020 and December 2020, CIBC and certain other financial institutions obtained a court order to permit a virtual annual meeting as a proactive and precautionary measure to support public health protocols related to the COVID-19 pandemic and to help protect the health and well-being of our employees, clients, shareholders and communities.

For our 2020 annual meeting, we established and disclosed procedures enabling shareholders to:

• access the meeting by phone or online;

• vote online;

• view online images of our Board members and management;

• submit questions to our Board members and management in real time through the webcast and receive responses in real time;

• have sufficient time throughout the meeting to submit questions or comments by opening the webcast for questions at the beginning of the meeting rather than when the Q&A period started; and

• view an archived recording of the meeting at www.cibc.com when convenient for shareholders.

We are pleased that attendance at our 2020 virtual annual meeting increased by 168% compared to our 2019 annual meeting. We thank MÉDAC and other shareholders for their feedback on our 2020 virtual meeting. We considered that feedback, the virtual meetings at other Canadian public companies, and available technological solutions.

For our 2021 virtual annual meeting, we are pleased that we have more capability to provide a better shareholder experience with improvements to the quality of video presentations during the meeting; opportunity for shareholders to present their proposals published in our Circular live by video; the ability for shareholders to make comments or ask questions verbally by phone as well as in writing through the online webcast; and the ability for shareholders to submit questions in advance of the meeting by email or mail. We look forward to the time we can host an in-person annual meeting but for those shareholders who prefer the online experience, we will continue to evolve our approach based on shareholder feedback and available technological solutions.

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Shareholder Proposals

5. COVID-19 — Sharing the Burden of the Recovery Fairly - It is proposed that the Board of Directors disclose the actions taken by the organization to ensure that both the corporation’s executives and other employees bear their fair share of the economic recovery effort when the pandemic is over.

Argument

The 2008 economic crisis left a bitter taste in the mouths of some shareholders. While their stock portfolios saw sharp declines in value, senior executives and directors continued to receive what some considered to be excessive pay increases unrelated to the corporation’s performance. That situation paved the way for the introduction of the non-binding advisory vote relating to executive compensation and sullied the reputations of a number of organizations.

The current pandemic and economic crisis has forced some corporations to make difficult decisions, including having to lay off employees both temporarily and permanently. When it comes to executives and Board members, little information has been disclosed concerning actions taken in their regard in order to reduce the number of people in those positions or their compensation.

The objective of this proposal is to ask that the Board of Directors disclose the following information in the next management circular:

• The percentage and number of people laid off, both permanently and temporarily, as a result of the pandemic, for both executive and other employees;

• The percentage reduction in compensation applied to the two categories of employees;

• The discretion enjoyed by the compensation committee or the Board of Directors for granting pay increases to executives even though some performance objectives have not been achieved because of the economic crisis and pandemic;

• The adjustments made to the compensation policy for the coming years to reflect the declines in compensation that some of its employees may have suffered;

• Any other adjustment made to the policy for granting stock or stock options to compensate executives for earnings losses suffered in 2020.

Board statement

Throughout the COVID-19 pandemic, CIBC has been open in disclosing actions to support our employees, clients and communities. In February 2020, before the onset of the COVID-19 pandemic in Canada, we announced a restructuring charge of $339 million to cover severance from staff reductions affecting approximately 5% of employees in support of an enterprise-wide program to accelerate the delivery of our priorities, including improving efficiency. The restructuring was a difficult decision but necessary to adapt our cost structure in order to simplify, reinvest in and position our bank to further strengthen our relationships with our clients.

In March 2020, when the pandemic took hold with unexpected health and economic impacts, we put a temporary pause on implementing the planned staff reductions. We supported our employees by transitioning the majority of our team to work remotely and honoured our commitments to new hires and summer students. In addition, we provided a per diem payment to team members who were needed on site to support our clients, full pay to those whose hours were reduced temporarily to protect the health of our clients and employees, and additional paid time off.

As we disclose in our Circular, executive pay is based on Total Direct Compensation (TDC) targets which include annual salary and variable incentive awards. Targets are reviewed annually against market data and adjusted over time to ensure progression within the role is taken into account. The Board and MRCC review the TDC targets for the Named Executive Officers (NEOs) and other senior roles and only approve increases when required to appropriately align the executive’s pay with the market. In fiscal 2020, no reductions were made to salaries for executives or employees as a result of the COVID-19 pandemic. However, as discussed in our Message to our Fellow Shareholders and CD&A, based on CIBC’s fiscal 2020 performance, the calculated Business Performance Factor (BPF) was 94% and the Board approved a qualitative adjustment of -5% for our executives, in recognition of the impact of COVID-19 on our business, shareholders and communities. As a result, the BPF for our executives was 11% below our target and well below the maximum payout opportunity, while the reduction in the BPF for our employees was 10% below our target, ensuring that bonuses for those in more senior roles were impacted more than the rest of our employees during these challenging times.

We did not make any adjustments to the compensation policy to offset declines in compensation levels or to our stock option grant policy. As disclosed in our 2021 Proxy Circular, prior year stock options are out-of-the-money, shares are valued at less than their notional value, however, we have not made any adjustments to compensate our executives for losses suffered in 2020.

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Shareholder Proposals

6. Global Warming - It is proposed that the Bank produce a report on the loans it has made to projects with polluting impacts that lead to a significant rise in global temperatures.

Argument

The aim of the Paris Agreement is to keep the global temperature rise to 2°C and, if possible, to 1.5°C. According to Mark Carney, the former Governor of the Bank of Canada and the Bank of England, now the United Nations Special Envoy on Climate, the funds provided by banks and investment firms to support a number of large polluting projects will bring about an increase of 4°C, while the Paris Agreement seeks to keep the global temperature rise to 2°C or even 1.5°C.

He also says that the objectives of the Agreement are clear, but organizations’ policies are inconsistent; when the 20 largest energy companies in the world are responsible for a third of all carbon emissions on Earth, it is time, according to the Governor of the Bank of England, to put the brakes on the appetite of the financial system, which does not seem to be concerned about the climate emergency.

The purpose of this proposal is to ask that the Bank publish information about the amounts lent to projects that have significant impacts on global temperatures.

Board statement

CIBC has a strong commitment to climate action as demonstrated by our continued improvements in the areas of target setting, transparency and reporting. Communicating openly and regularly about our climate-related work is important to our stakeholders and it helps us track our progress and identify where we can improve. Our commitment to climate action was recognized by CDP, which gave us a score of A- for our 2020 disclosure - above the banking sector average score of B.

In 2019, we published our first report under the Task Force on Climate Related Financial Disclosure and committed to support $150 billion in environmental and sustainable finance by 2027. CIBC is committed to sustainable finance to help direct capital towards important development projects and innovations that address urgent environmental and social challenges. In 2020, we furthered our support and commitment:

• We increased lending and capital markets activities to businesses focused on sustainable development.

• We developed a green bond framework with our second-party opinion from Sustainalytics and issued our first green bond in October 2020.

• We supported $42.1 billion in environmental and sustainable financial activities, achieving a cumulative 28% of our 10-year target.

• We committed to become carbon neutral and source 100% of our electricity from renewable sources by 2024.

• We established a partnership with Bullfrog Power to offset 15,000 MWh of electricity use through the purchase of Ecologo certified renewable energy credits.

• We disclosed our Environmental Policy and Lending Policy, which include a statement related to not financing oil and gas exploration in the Arctic National Wildlife Refuge (ANWR).

• Through our partnerships with the United Nations Environment Program – Finance Initiative (UNEPFI) and the Canadian Standards Association (CSA), we are working with other stakeholders to enhance climate disclosure and ensure that financial instruments to support the transition to net zero include all sectors of our economy.

• We committed $1.25 million over five years to the Institute for Sustainable Finance (ISF), which is a partnership between Canadian banks and Canadian universities to advance sustainable finance and put Canada in a leadership position related to the transition of net zero.

We are committed to supporting our clients as they transition to a low carbon future and we recognize the important role banks will have in financing an orderly transition. According to Mark Carney, the former Governor of the Bank of Canada and the Bank of England, now the United Nations Special Envoy on Climate, “Certain people look at climate change and think they need to divest from energy companies, but they are very much part of the solution”. Transparency is extremely important and we have begun evaluating methodologies to measure the impact of our financing which we plan to disclose when available.

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Shareholder Proposals

7. Discretion of the Board of Directors and the Compensation Committee - It is proposed that the management circular expressly set out the benchmarks used by both of these bodies for revising the objectives associated with executive compensation and performance.

Argument

Over the last year, the health and economic crisis has certainly had an impact on key performance measures and the associated targets that executives had to meet during 2020. Have the Board of Directors and the human resources committee adjusted the objectives, if necessary, or have they used a special power to revise the compensation policy, given that performance in relation to the predetermined targets does not entirely reflect the overall quality of these executives’ performance?

The objective of this proposal is to ask that the corporation disclose precisely the adjustments made to key performance measures, to targets and to the associated compensation paid, for all executives, if such is the case.

Board statement

The CD&A section of CIBC’s Circular provides robust disclosure on our approach to executive compensation and performance. CIBC’s Board of Directors and the MRCC have not adjusted the objectives or used any special powers to revise the compensation policy in fiscal 2020.

As discussed on page 73 of our Circular, the Board and the MRCC have the discretion to adjust the calculated BPF based on qualitative factors including:

• relative performance vs. peers to assess our performance against key financial measures such as revenue and EPS growth;

• risk, to ensure compensation is aligned with our risk appetite and objectives by considering risk outcomes with adjustments being made only to reduce the BPF (or individual awards);

• unexpected outcomes and other items that either should be included or excluded from the performance that determines the BPF; and

• any other factors the MRCC and the Board consider appropriate.

When the Board and the MRCC make such discretionary adjustments to our BPF, we disclose the fact in our Circular. For example: on page 59 of our 2017 Circular, the first year that the BPF was introduced, we disclosed that the calculated BPF was 113.4% and the Board approved a qualitative adjustment of -4.4%, taking into consideration our Total Shareholder Return performance relative to our peer group and other items that the Board agreed should be considered in assessing the performance results used to calculate compensation; and on pages 60 and 71 of our 2018 Circular, we disclosed the fact that based on CIBC’s fiscal 2017 performance, the calculated BPF was 112.3% and that the Board approved a qualitative adjustment of -4.3% based on CIBC’s performance relative to our peer group.

As you can read in our current 2021 Circular, on page 62 of the Message to our Fellow Shareholders and page 74 in the CD&A, we have continued this approach to our disclosure and have noted that based on CIBC’s fiscal 2020 performance, the calculated BPF was 94% and that the Board approved a qualitative adjustment of -5%, in recognition of the impact of COVID-19 on our business, shareholders and our communities. As a result, the final BPF for our executives was 89%, 11% below our target and well below the maximum payout opportunity.

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Directors

Director Nominees

There are 14 director nominees. Each nominee was elected at the last annual meeting of shareholders on April 8, 2020, except Mary Lou Maher who is a new nominee.

On December 3, 2020, CIBC announced that The Honourable John Manley, current Chair of the Board, will retire at the close of our 2021 annual shareholders’ meeting and Katharine Stevenson will be the Chair of the Board effective on her re-election as a director at the meeting. In addition, Brent Belzberg retires at the close of our annual meeting. The Board would like to thank Mr. Manley and Mr. Belzberg for their years of dedicated service to the Board and to CIBC.

Information on each nominee starts on page 15. Below are key highlights about CIBC’s board composition if each nominee is elected by shareholders.

		2020 Overall Attendance     100%
		2020 Average votes FOR     99%
		Senior Leadership     Experience     100%
	For information about the nomination process see the Statement of Corporate Governance Practices – “Director Nomination Process” and “Director Tenure” starting on page 49.

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Directors

CHARLES J.G. BRINDAMOUR, Toronto, Ontario, Canada

	Skills: • Strategy		•  Risk Management/Risk Governance
Director since: 2020 Age: 50 Independent 2020 Shareholder votes in favour: 99.5%	•  Financial Services		•  Corporate Responsibility/Sustainability
	•  Financial Expertise		•  Public/Government Relations
	Principal occupation: Chief Executive Officer, Intact Financial Corporation
	Experience: Mr. Brindamour is Chief Executive Officer of Intact Financial Corporation, the largest provider of property and casualty insurance in Canada and a leading provider of specialty insurance in North America. Mr. Brindamour began his career with Intact in 1992 and has held progressively senior roles in Canada and abroad with Intact and its former affiliates. He was appointed President and Chief Executive Officer of Intact Financial Corporation in January 2008. Mr. Brindamour has deep experience in the North American financial services industry and is a respected business leader with more than 25 years of operating experience. In addition to the public company directorship noted below, Mr. Brindamour serves on the board of the Business Council of Canada, is Chair of the Board of the Geneva Association and co-founder of the Intact Centre for Climate Adaptation at the University of Waterloo. Mr. Brindamour is also a member of the 30% Club Canada.
	Education: Mr. Brindamour is a graduate of Laval University in Actuarial Sciences and an Associate of the Casualty Actuarial Society and was awarded an honorary Doctorate from HEC Montréal.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Intact Financial Corporation – since 2008	–
		Former:
		Hydro One – 2015 to 2018
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board (from February 2020): 6/6
		Risk Management Committee (from February 2020): 5/5

CIBC equity - Mr. Brindamour meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	12,532	0	12,532	1,362,479	1.8x
2020	11,604	0	11,604	1,253,928	1.7x

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Directors

NANCI E. CALDWELL, Woodside, California, USA

	Skills: • Strategy		•  Corporate Responsibility/Sustainability
Director since: 2015 Age: 62 Independent 2020 Shareholder votes in favour: 99.5%	•  Human Resources Management/ Compensation		•  Information Technology
	Principal occupation: Corporate Director
	Experience: Ms. Caldwell was Executive Vice-President and Chief Marketing Officer for PeopleSoft, Inc. from 2002 through 2004. She held increasingly senior and executive sales and marketing roles at Hewlett Packard Company in Canada and the US from 1982 to 2001. Ms. Caldwell has served on several public and private technology company boards since 2005 and has more than 25 years of operating experience in the global technology and software industries. In addition to the public company directorships listed below, Ms. Caldwell has served as a director on private company boards including RedPrairie, Inc., now known as JDA Software, LiveOps Inc., Sophos, plc and Network General Corporation.
	Education: Ms. Caldwell holds a Bachelor of Arts degree from Queen’s University and completed Western University’s Executive Marketing Management Program.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Citrix Systems, Inc. – since 2008	Independent Lead Director; Nominating and Corporate Governance (Chair); Compensation
		Equinix, Inc. – since 2015	Governance (Chair)
		Former:
		Donnelley Financial Solutions Inc. – 2016 to 2020 Talend – 2017 to 2020
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Management Resources and Compensation Committee: 6/6

CIBC equity - Ms. Caldwell has until December 4, 2022 to meet the equity ownership guideline(4)
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	7,209	0	7,209	783,762	0.8x
2020	4,582	0	4,582	495,131	0.5x

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Directors

MICHELLE L. COLLINS, Chicago, Illinois, USA

	Skills: • Financial Services		•  Financial Expertise
Director since: 2017 Age: 60 Independent 2020 Shareholder votes in favour: 99.7%	Principal occupation: President, Cambium LLC
	Experience: Ms. Collins has been President of Cambium LLC since 2007. Cambium is a Chicago-based business and financial advisory firm that serves small and medium-sized businesses. She brings 30 years of experience in corporate governance, investment banking, and private equity and has significant corporate board experience, having served as a director for several publicly traded companies across a wide range of industries. In addition to the public company directorship noted below, Ms. Collins is a director of CIBC Bancorp USA Inc., CIBC Bank USA, Health Care Service Corporation and Strategic Marketing Inc. and is a member of the Global Risk Institute. She is also a member of the Advisory Boards of Svoboda Capital Partners, LLC and Cedar Street Asset Management and has served on several philanthropic and non-profit boards, including the Chicago Public Library Foundation and the Museum of Science and Industry. Ms. Collins received the 2018 Spirit of Erikson Award from Erikson Institute in recognition of her 22 years of service on the board, including as chair from 2014 to 2017, and her commitment to children and families that Erikson serves. Ms. Collins also received the 2018 Outstanding Leader Award for Business from the YWCA in recognition of her distinguished career in business, her community involvement and willingness to take on leadership positions on impacting women’s lives and racial justice.
	Education: Ms. Collins holds a Bachelor of Arts degree in Economics from Yale University and a Master of Business Administration degree from Harvard University.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Ulta Beauty Inc. – since 2014	Audit; Nominating and Corporate Governance (Chair)
		Former:
		PrivateBancorp, Inc. – 2015 to 2017 (ceased to be a public company in 2017)
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Audit Committe (from April 2020): 3/3
		Risk Management Committee (to April 2020): 3/3

CIBC equity - Ms. Collins meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	1,357	10,064(6)	11,421	1,241,691	1.2x
2020	1,357	6,070(6)	7,427	802,562	0.8x

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Directors

PATRICK D. DANIEL, Calgary, Alberta, Canada

	Skills: • Strategy		•  Corporate Responsibility/Sustainability
Director since: 2009 Age: 74 Independent 2020 Shareholder votes in favour: 99.0%	•  Human Resources Management/Compensation		•  Information Technology
	Principal occupation: Corporate Director
	Experience: Mr. Daniel was President and Chief Executive Officer of Enbridge Inc. from 2001 to 2012. Prior to his appointment as President and CEO, he was a senior executive officer of Enbridge Inc. or its predecessor since 1994. Mr. Daniel is a past recipient of Canada’s Outstanding CEO of the Year award and Chair of the Daniel Family Foundation.
	Education: Mr. Daniel holds a Bachelor of Science degree from the University of Alberta and a Master of Science degree from the University of British Columbia.
		Other public company board directorships during last five years
		Former:
		Capital Power Corporation – 2015 to 2018 Cenovus Energy Inc. – 2009 to 2020
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Corporate Governance Committe (to April 2020): 3/3
		Management Resources and Compensation Committee (Chair): 6/6

CIBC equity - Mr. Daniel meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	10,100	26,451	36,551	3,973,825	5.3x
2020	10,100	23,504	33,604	3,631,248	4.8x

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Directors

LUC DESJARDINS, Toronto, Ontario, Canada

	Skills: • Strategy		•  Corporate Responsibility/Sustainability
Director since: 2009 Age: 68 Independent 2020 Shareholder votes in favour: 98.1%	•  Financial Services		•  Legal/Regulatory/Compliance
	•  Financial Expertise		•  Public/Government Relations
	•  Human Resources Management/Compensation		•  Information Technology
	Principal occupation: President and Chief Executive Officer, Superior Plus Corp.
	Experience: Mr. Desjardins has been President and Chief Executive Officer of Superior Plus Corp., a Toronto-based public company that provides propane distribution and marketing services and specialty chemical production, since 2011. Mr. Desjardins was an equity partner at The Sterling Group, LP from 2008 to 2011 and President and Chief Executive Officer of Transcontinental Inc. from 2004 to 2008. In addition to the public company directorship noted below, Mr. Desjardins is a director of Gestion Jourdan SEC, a member of the Chief Executives Organization and a member of the 30% Club Canada. Mr. Desjardins is also a recipient of the Harvard Presidents’ Seminar “Leader of Leaders” award and the Presidents’ Program in Leadership diploma from Harvard Business School.
	Education: Mr. Desjardins holds a Master of Business Administration degree from Université du Québec à Montréal and is a graduate of the Harvard Business School Management Development Program.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Superior Plus Corp. – since 2011	–
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Audit Committee: 6/6

CIBC equity - Mr. Luc Desjardins meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	11,366	4,066	15,432	1,677,767	2.2x
2020	11,366	2,451	13,817	1,493,065	2.0x

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Directors

VICTOR G. DODIG, Toronto, Ontario, Canada

	Skills: • Strategy		•  Human Resources Management/Compensation
Director since: 2014 Age: 55 Not Independent See “Director Independence” on page 45. 2020 Shareholder votes in favour: 99.7%	•  Financial Services		•  Corporate Responsibility/Sustainability
	•  Financial Expertise		•  Public/Government Relations
	•  Risk Management/Risk Governance
	Principal occupation: President and Chief Executive Officer, CIBC
	Experience: Mr. Dodig has been President and Chief Executive Officer of the CIBC group of companies since September 2014. He brings more than 25 years of extensive business and banking experience, including leading CIBC’s Wealth Management, Asset Management and Retail Banking businesses. Over his career, Mr. Dodig also led several businesses with UBS and Merrill Lynch in Canada and internationally, and was a management consultant with McKinsey & Company. Mr. Dodig serves on the Board of the C.D. Howe Institute and the Business Council of Canada. Mr. Dodig is a vocal advocate for inclusion in the workplace and is chair of the Inclusion and Diversity Leadership Council at CIBC and a co-chair of the BlackNorth Initiative. He serves as a member of the global Catalyst Board of Directors, is past Chair of the Catalyst Canada Advisory Board and past Chair of the 30% Club Canada. In 2017, Mr. Dodig was recognized as a Catalyst Canada Honours Champion for his leadership in advancing gender diversity.
	Education: Mr. Dodig holds a Master of Business Administration degree from the Harvard Business School where he was recognized as a Baker Scholar, a Diploma from the Institut d’études politiques in Paris and a Bachelor of Commerce degree from the University of Toronto (St. Michael’s College). He has received an honorary Doctor of Laws degree from Ryerson University.
		Other public company board directorships during last five years
		None
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7

Mr. Dodig does not receive compensation for his services as a director. For information on Mr. Dodig’s equity ownership, see “Equity ownership of NEOs at October 31, 2020” on page 88 of the Circular.

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Directors

KEVIN J. KELLY, Toronto, Ontario, Canada

	Skills: • Strategy		•  Human Resources Management/Compensation
Director since: 2013 Age: 65 Independent 2020 Shareholder votes in favour: 99.8%	•  Financial Services		•  Corporate Responsibility/Sustainability
	•  Financial Expertise		•  Legal/Regulatory/Compliance
	•  Risk Management/Risk Governance		•  Public/Government Relations
	Principal occupation: Corporate Director
	Experience: Mr. Kelly was Lead Director of the Ontario Securities Commission from 2010 to 2012 and Commissioner from 2006 to 2010. He has more than 30 years’ experience in wealth and asset management in Canada and the US. Mr. Kelly was President and Co-Chief Executive Officer of Wellington West Capital, Inc. from 2004 to 2005, President of Fidelity Brokerage Company in Boston from 2000 to 2003, President of Fidelity Investments Institutional Services Company from 1997 to 2000, President of Fidelity Canada from 1996 to 1997, and President and Chief Executive Officer of Bimcor Inc. from 1992 to 1996. Mr. Kelly is a director of CIBC Bancorp USA Inc., CIBC Bank USA and CIBC National Trust Company. Mr. Kelly is also a member of the Canadian Public Accountability Board.
	Education: Mr. Kelly holds a Bachelor of Commerce degree from Dalhousie University.
		Other public company board directorships during last five years
		None
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Audit Committee (to April 2020): 3/3
		Management Resources and Compensation Committee (from Aril 2020): 3/3

CIBC equity - Mr. Kelly meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	6,202	19,133	25,335	2,754,421	3.7x
2020	6,202	15,428	21,630	2,337,338	3.1x

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Directors

CHRISTINE E. LARSEN, Montclair, New Jersey, USA

	Skills: • Financial Services		•  Human Resources Management/Compensation
Director since: 2016 Age: 59 Independent 2020 Shareholder votes in favour: 99.8%	•  Risk Management/Risk Governance		•  Information Technology
	Principal occupation: Corporate Director
	Experience: Ms. Larsen was Senior Advisor to the Chief Executive Officer, First Data Corporation, a global payment technology solutions company, from January to March 2019. From 2013 to December 2018, Ms. Larsen was Executive Vice-President, Chief Operations Officer of First Data Corporation. Ms. Larsen held various progressively senior roles at JPMorgan Chase & Co. from 2006 to 2013. Before joining JPMorgan Chase, she held several leadership roles at Citigroup for 12 years. In addition to the public company directorship noted below, Ms. Larsen is a member of the Board of Trustees of Syracuse University and a member of the Borough of Manhattan Community College (CUNY) Foundation Board.
	Education: Ms. Larsen holds a Master of Library Science degree from Syracuse University (University Fellow) and a Bachelor of Arts (Phi Beta Kappa) degree from Cornell College.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Paya Holdings, Inc. – since 2020	Audit & Risk; Compensation (Chair)
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Risk Management Committee: 6/6

CIBC equity - Ms. Larsen has until April 5, 2023 to meets the equity ownership guideline(4)
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	8,083	0	8,083	878,784	0.9x
2020	5,868	0	5,868	634,096	0.7x

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Directors

NICHOLAS D. LE PAN, Ottawa, Ontario, Canada

	Skills: • Strategy		•  Human Resources Management/Compensation
Director since: 2008 Age: 69 Independent 2020 Shareholder votes in favour: 97.4%	•  Financial Services		•  Legal/Regulatory/Compliance
	•  Financial Expertise		•  Public/Government Relations
	•  Risk Management/Risk Governance
	Principal occupation: Corporate Director
	Experience: Mr. Le Pan was Superintendent of Financial Institutions for Canada from 2001 to 2006 and led the OSFI Supervision Sector, including the supervision programs for banks and other deposit-taking institutions from 1997 to 2000. He is past chair of the Canadian Public Accountability Board, which regulates auditors of public companies. Mr. Le Pan has been involved in various international and Canadian regulatory coordination efforts, including as Chairman of the Basel Accord Implementation Group and Vice-Chairman of the Basel Committee on Banking Supervision. He was actively involved in Group of Thirty reports, making recommendations on a new paradigm for relations between bank supervisors and boards enhancing oversight of risk culture and enhancing culture and conduct in systemically important banks. Mr. Le Pan is a member of Oliver Wyman’s North American Financial Services Senior Advisory Board and Chairs the C.D. Howe Institute Financial Services Research Initiative.
	Education: Mr. Le Pan holds a Bachelor of Arts (Honours) degree in Economics from Carleton University and a Master of Arts degree in Economics from the University of Toronto.
		Other public company board directorships during last five years
		None
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Audit Committee (Chair): 6/6

CIBC equity - Mr. Le Pan meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	4,946	9,945	14,891	1,618,950	2.2x
2020	3,852	9,354	13,206	1,427,040	1.9x

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Directors

MARY LOU MAHER, Toronto, Ontario, Canada

	Skills: • Financial Expertise		•  Human Resources Management/Compensation
New Director Nominee Age: 60 Independent 2020 Shareholder votes in favour: n/a	•  Risk Management/Risk Governance
	Principal occupation: Corporate Director
	Experience: Ms. Maher was Canadian Managing Partner, Quality and Risk, KPMG Canada from 2017 to February 2021. She was also Global Head of Inclusion and Diversity KPMG International for the same period. Ms. Maher has been with KPMG since 1983, in various executive and governance roles including Chief Financial Officer and Chief Human Resources Officer. She is a member of the World Economic Forum focused on Human Rights - the business perspective, the Alzheimer’s Society of Toronto, and has served on other not-for-profit boards including as Chair of Women’s College Hospital and member of the CPA Ontario Council. Ms. Maher created KPMG Canada’s first ever National Diversity Council and was the executive sponsor of pride@kpmg. Ms. Maher received the Wayne C. Fox Distinguished Alumni Award from McMaster University in recognition of her work on inclusion and diversity, was inducted into the Hall of Fame for the WXN 100 Top Most Powerful Women in Canada, received a Lifetime Achievement Award from Out on Bay Street (Proud Strong), and the Senior Leadership Award for Diversity from the Canadian Centre for Diversity and Inclusion.
	Education: Ms. Maher holds a Bachelor of Commerce degree from McMaster University and holds the designation of FCPA, FCA
		Other public company board directorships during last five years
		None
		2020 Board and committee membership and attendance
		n/a

CIBC equity - Ms. Maher has until April 7, 2026 to meet the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	1,028	0	1,028	111,764	0.2x

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Directors

JANE L. PEVERETT, West Vancouver, British Columbia, Canada

	Skills: • Strategy		•  Legal/Regulatory/Compliance
Director since: 2009 Age: 62 Independent 2020 Shareholder votes in favour: 98.1%	•  Financial Services		•  Public/Government Relations
	•  Financial Expertise
	Principal occupation: Corporate Director
	Experience: Ms. Peverett was President and Chief Executive Officer of British Columbia Transmission Corporation (BCTC) from 2005 to 2009 and Chief Financial Officer of BCTC from 2003 to 2005. She held progressively senior finance, regulatory and executive roles with Westcoast Energy Inc. from 1988 to 2003 and was President and Chief Executive Officer of Union Gas Limited from 2001 to 2003. In addition to the public company directorships listed below, Ms. Peverett is Chair of the Board of CSA Group.
	Education: Ms. Peverett holds a Bachelor of Commerce degree from McMaster University and a Master of Business Administration degree from Queen’s University. She is a Certified Management Accountant, a Fellow of the Society of Management Accountants and a member of the Institute of Corporate Directors with the designation ICD.D.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Canadian Pacific Railway Limited – since 2016	Audit and Finance (Chair); Corporate Governance and Nominating
		Capital Power Corporation – since 2019	Health, Safety & Environment; People, Culture, and Governance
		Northwest Natural Gas Company – since 2007	Finance (Chair); Governance; Organization and Executive Compensation; Public Affairs and Environmental Policy
		Former:
		Encana Corporation – 2003 to 2017 Hydro One Limited – 2015 to 2018
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Audit Committee: 6/6
		Corporate Governance Committee: 5/5

CIBC equity - Ms. Peverett meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	1,249	22,386	23,635	2,569,597	3.4x
2020	542	21,054	21,596	2,333,664	3.1x

Other:

Ms. Peverett was a director of Postmedia Network Canada Corp. (Postmedia) between April 2013 and January 2016. On October 5, 2016, Postmedia completed a recapitalization transaction pursuant to a court approved plan of arrangement under the Canada Business Corporations Act under which, approximately US$268.6 million of debt was exchanged for shares that represented approximately 98% of the outstanding shares at that time. Additionally, Postmedia repaid, extended and amended the terms of its outstanding debt obligations pursuant to the recapitalization transaction.

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Directors

KATHARINE B. STEVENSON, Toronto, Ontario, Canada

	Skills: • Financial Services		•  Human Resources Management/Compensation
Director since: 2011 Age: 58 Independent 2020 Shareholder votes in favour: 99.6%	•  Financial Expertise		•  Corporate Responsibility/Sustainability
	•  Risk Management/Risk Governance
	Principal occupation: Corporate Director
	Experience: Ms. Stevenson brings extensive business and corporate governance experience, having served on numerous public company and not-for-profit boards in Canada and the US over the past two decades, where she has consistently assumed leadership roles. Previously, Ms. Stevenson was a financial executive in the telecommunications and banking sectors. In addition to the public company directorships listed below, Ms. Stevenson is a director of CIBC Bancorp USA Inc. and CIBC Bank USA and a member of the Board of Directors and the Executive Committee of St. Michael’s Hospital Foundation. Ms. Stevenson was named one of the 2018 Top 100 Most Powerful Women in Canada.
	Education: Ms. Stevenson holds a Bachelor of Arts degree (Magna Cum Laude) from Harvard University and is a member of the Institute of Corporate Directors with the designation ICD.D.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Capital Power Corporation – since 2017	Audit (Chair); People, Culture, and Governance
		Open Text Corporation – since 2018	Audit
		Former:
		CAE Inc. – 2007 to 2019
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Corporate Governance Committee (Chair): 5/5
		Management Resources and Compensation Committee: 6/6

CIBC equity - Ms. Stevenson meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	27,211	0	27,211	2,958,380	3.9x
2020	22,052	0	22,052	2,382,939	3.2x

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Directors

CMARTINE TURCOTTE, Ad.E., Verdun, Québec, Canada

	Skills: • Corporate Responsibility/Sustainability		•  Public/Government Relations
Director since: 2014 Age: 60 Independent 2020 Shareholder votes in favour: 99.8%	•  Legal/Regulatory/Compliance		•  Information Technology
	Principal occupation: Corporate Director
	Experience: Ms. Turcotte was Vice Chair, Québec of BCE Inc. and Bell Canada from 2011 to 2020. She was Chief Legal Officer of BCE from 1999 to 2008 and of Bell Canada from 2003 to 2008 and was Executive Vice-President and Chief Legal and Regulatory Officer of BCE and Bell Canada from 2008 to 2011. Ms. Turcotte has more than 25 years of strategic, legal and regulatory experience. In addition to the public company directorships noted below, Ms. Turcotte is Chair of Théâtre Espace Go Inc., a member of the Information Technology and Human Resources committees of the Board of Governors of McGill University, the Board of Directors of The Institute of Corporate Directors Québec, the McGill University Bicentennial Campaign Cabinet Executive Committee (and Faculty Advisory Board of the McGill Faculty of Medicine). Ms. Turcotte is a past recipient of the Canadian General Counsel Lifetime Achievement award, was inducted into the Hall of Fame of the Top 100 Most Powerful Women in Canada, received the title of Advocatus Emeritus from the Québec Bar Association for professional excellence and was awarded both the Queen’s Gold and Diamond Jubilee Medals in recognition of her contributions to Canada. Effective June 1, 2020, Ms. Turcotte was appointed Chairperson of the Judicial Compensation and Benefits Commission.
	Education: Ms. Turcotte holds a Bachelor degree in Civil Law and Common Law from McGill University and a Master of Business Administration degree from the London Business School.
		Other public company board directorships during last five years
		Current:	Current committee memberships:
		Empire Company Limited/Sobeys Inc. – since 2012	Audit; Corporate Governance (Chair); Nominating (Chair)
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Corporate Governance Committee: 5/5
		Management Resources and Compensation Committee: 6/6

CIBC equity - Ms. Turcotte meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	412	17,489	17,901	1,946,197	2.6x
2020	412	14,783	15,195	1,641,972	2.2x

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Directors

BARRY L. ZUBROW, West Palm Beach, Florida, USA

	Skills: • Strategy		•  Corporate Responsibility/Sustainability
Director since: 2015 Age: 67 Independent 2020 Shareholder votes in favour: 99.8%	•  Financial Services		•  Legal/Regulatory/Compliance
	•  Financial Expertise		•  Public/Government Relations
	•  Risk Management/Risk Governance		•  Information TechnologyRelations
	Principal occupation: President, ITB LLC
	Experience: Mr. Zubrow has been President of investment-management firm ITB LLC since 2003. He is also a lecturer at the University of Chicago Law School. Mr. Zubrow was a senior executive at JPMorgan Chase & Co. and The Goldman Sachs Group, Inc. and has more than 35 years of financial services experience. Mr. Zubrow is a director of CIBC Bancorp USA Inc., CIBC Bank USA, MIO Partners and Accellix. He serves on the Advisory Board of the Promontory Financial Group (an IBM company). Mr. Zubrow is also a director of the Juvenile Law Center and Berklee College of Music, Emeritus Manager of Haverford College, and a member of the Council on Foreign Relations.
	Education: Mr. Zubrow holds a Bachelor of Arts degree from Haverford College where he is an Emeritus Manager and former Chairman of the Board of Managers. He has a Master of Business Administration degree from the University of Chicago Graduate School of Business and a J.D. degree from the University of Chicago Law School.
		Other public company board directorships during last five years
		Former:
		Arc Logistics LP – 2013 to 2018	–
		2020 Board and committee membership and attendance
		Overall attendance: 100%
		Board: 7/7
		Risk Management Committe (Chair) 6/6

CIBC equity - Mr. Zubrow meets the equity ownership guideline
Year	Shares(1) (#)	DSUs(2) (#)	Total Shares/DSUs (#)	Total value of Shares/DSUs(3) ($)	Total as a multiple of share ownership guideline(5)
2021	9,294	323	9,617	1,045,560	1.0x
2020	7,793	0	7,793	842,112	0.9x

(1) “Shares” refers to the number of CIBC common shares a nominee beneficially owned, or exercised control or direction over on February 11, 2021 (the date of information in our 2021 management proxy circular) and February 17, 2020 (the date of information in our 2020 management proxy circular).

(2) “DSUs” refers to the number of deferred share units held by a nominee on February 11, 2021 and February 17, 2020.

(3) “Total value of Shares/DSUs” for 2021 and 2020 is calculated by multiplying “Total Shares/DSUs” by the closing price of a CIBC common share on the Toronto Stock Exchange on December 31, 2020 ($108.72) and December 31, 2019 ($108.06).

(4) In May 2019 the Board increased the director equity ownership guideline from $600,000 to $750,000. Directors who are still in the process of meeting the original guideline were given additional time to meet the new guideline.

(5) “Total as a multiple of share ownership guideline” was calculated by dividing “Total value of Shares/DSUs” by the equity share ownership guideline of $750,000. Directors who are US citizens and whose primary residence is in the US received their fees in US dollars and their share ownership guideline is in US dollars. For purposes of calculating US director ownership against the guideline, the US dollar amount has been converted to Canadian dollars using the WM/Reuters exchange rate of US$1.00 = C$1.3321 for 2020 and US$1.00 = C$1.2984 for 2019 reflecting the foreign exchange rate on the last trading day of the fiscal year.

(6) Includes DSUs earned for serving on the Boards of CIBC Bancorp USA Inc. and CIBC Bank USA.

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Directors

Board and committee meeting frequency and overall attendance in fiscal 2020

During fiscal 2020, directors attended 100% of regular Board and committee meetings, as set out below. For individual director nominee attendance, see biographical information starting on page 15. For information on director attendance expectations, see the Statement of Corporate Governance Practices – “Director Tenure – Meeting attendance record” on page 50.

	Number of Meetings		Overall Attendance
Board and Committees	Regular	Special	at Regular Meetings
Board	7	8	100%
Audit Committee	6	5	100%
Corporate Governance Committee	5	-	100%
Management Resources and Compensation Committee	6	-	100%
Risk Management Committee	6	7	100%

Attendance of directors not standing for re-election

Brent Belzberg and John Manley are retiring from the Board. During fiscal 2020, Mr. Manley attended 100% of all regular Board meetings and Mr. Belzberg attended 100% of all regular Board, Corporate Governance Committee and Risk Management Committee meetings.

Director attendance at the annual meeting of shareholders

CIBC encourages each member of the Board to attend its annual meeting of shareholders. All 2020 director nominees attended CIBC’s 2020 annual meeting.

Director nominee independence

The Board determined that each director nominee is independent except Victor Dodig because he is President and Chief Executive Officer of CIBC.

All members of the Board committees are independent under the Board’s independence standards. These standards incorporate the Affiliated Persons (Banks) Regulations, the New York Stock Exchange (NYSE) corporate governance rules, Canadian Securities Administrators (CSA) corporate governance guidelines and the Office of the Superintendent of Financial Institutions (Canada) Corporate Governance Guideline provisions and are available at www.cibc.com. For information about how the Board determines director independence, see the Statement of Corporate Governance Practices – “Director Independence” on page 45.

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Directors

Director nominee skills and experience

The table below shows the skills and experience of our director nominees in areas the Board considers important to CIBC. All director nominees have skills and experience acquired from senior level leadership in major organizations.

Skills and Experience

Strategy

✓

✓

✓

✓

✓

✓

✓

✓

✓

Financial Services

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Financial Expertise

✓

✓

✓

✓

✓

✓

✓

✓

✓

✓

Risk Management/Risk Governance

✓

✓

✓

✓

✓

✓

✓

✓

Human Resources Management/ Compensation

✓

✓

✓

✓

✓

✓

✓

✓

✓

Corporate Responsibility/Sustainability

✓

✓

✓

✓

✓

✓

✓

✓

✓

Legal/Regulatory/Compliance

✓

✓

✓

✓

✓

✓

Public/Government Relations

✓

✓

✓

✓

✓

✓

✓

✓

Information Technology

✓

✓

✓

✓

✓

✓

Director Compensation

CIBC’s director compensation program is designed to attract and retain people with the skills and experiences to act as directors of CIBC. The Corporate Governance Committee evaluates director compensation against companies in the financial services sector that are of comparable size, scope, market presence and complexity to CIBC. Based on these criteria, CIBC director compensation is targeted within the range of its comparator group: Bank of Montreal, National Bank of Canada, Royal Bank of Canada, Bank of Nova Scotia, the Toronto-Dominion Bank, Manulife Financial and Sun Life Financial.

The Corporate Governance Committee reviews CIBC’s director compensation program annually to make sure it aligns with the interests of our shareholders, is competitive with the market, and reflects best practices. The Committee also considers the evolving complexity of CIBC businesses and its regulatory environment; the increasing engagement of directors with regulators and other stakeholders; the workload and time commitment of Board members; and CIBC’s ability to remain competitive with peers in attracting and retaining directors with the expertise and experiences required for CIBC’s Board. Based on its review in May 2020, the Committee did not recommend any changes to director compensation for fiscal 2020.

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Directors

Director compensation components

The table below sets out the components of director compensation for fiscal 2020⁽¹⁾.

Annual Retainers
Cash (may be taken as cash, shares or DSUs(2))
Chair of the Board(3)	$195,000
Other Directors(4)	$100,000
Equity (may be taken as shares or DSUs)
Chair of the Board(3)	$230,000
Other Directors	$115,000
Committee Chair	$50,000
Committee membership in excess of one(5)	$15,000
Meeting Attendance and Travel Fees
Ad-hoc committees (per meeting)	$1,000
Travel (per trip)(6)	$2,000

(1) CIBC directors who are US citizens and whose primary residence is in the US are paid their director compensation in US dollars.

(2) A DSU (deferred share unit) is a bookkeeping entry credited quarterly to an account maintained for a director. The value of a director’s DSU account is payable in cash in a lump sum when he or she is no longer a director of CIBC or a subsidiary or affiliate of CIBC. The redemption value of a DSU is based on the value of the common shares of CIBC determined in accordance with the director equity plans. Directors are entitled to dividend equivalent payments that are credited quarterly in the form of additional DSUs at the same rate as dividends on common shares. DSUs do not entitle the holder to voting or other shareholder rights.

(3) The Chair of the Board receives no compensation as a director of CIBC other than the annual cash and equity retainers for the Chair of the Board.

(4) Paid for service on the Board and one committee.

(5) Paid for service on each additional committee in excess of one (excluding special ad-hoc committees and committee chairs).

(6) Paid for attending Board or committee meetings in person, where the distance from the director’s primary place of residence to the meeting location is 300 km or more.

Directors are reimbursed for travel, accommodation and other out-of-pocket expenses incurred in attending meetings and carrying out their duties as a director. In addition, CIBC pays the cost for administration of the office of the Chair of the Board. Independent directors do not receive stock options and do not participate in CIBC’s pension plans.

Restrictions on trading and hedging CIBC Securities

Directors are prohibited from using hedging strategies to offset a decrease in the market value of CIBC securities. For more information see page 89 “Restrictions on trading and hedging CIBC Securities”.

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Directors

Director compensation table

The table below sets out total compensation paid to independent directors during fiscal 2020 and includes compensation paid to directors who were asked to serve as directors on the board of CIBC subsidiaries.

	Fees Earned(2)						Allocation of Fees
	Annual Retainer		Committee     Member and Chair Retainers					Share-Based
Name(1) (all figures in C$)	Equity	Cash		Travel     Fees	All Other     Compensation	Total     Compensation	Cash	Common     Shares	DSUs
Brent S. Belzberg(3)	115,000	100,000	15,000	-	3,000	233,000	-	-	233,000
Charles J.G. Brindamour(4)	86,250	75,000	-	-	-	161,250	-	161,250	-
Nanci E. Caldwell(3)	154,273	134,150	-	5,451	3,998	297,872	143,599	154,273	-
Michelle L. Collins(3) (5)	154,273	134,150	-	5,451	263,464	557,338	253,782	-	303,556
Patrick D. Daniel	115,000	100,000	50,000	4,000	-	269,000	154,000	-	115,000
Luc Desjardins(3)	115,000	100,000	-	-	3,000	218,000	103,000	-	115,000
Linda S. Hasenfratz(3) (6)	57,500	50,000	3,000	-	10,000	120,500	56,750	53,750	-
Kevin J. Kelly(5)	115,000	100,000	-	-	179,834	394,834	179,834	-	215,000
Christine E. Larsen	154,273	134,150	-	5,451	-	293,874	106,064	187,810	-
Nicholas D. Le Pan	115,000	100,000	50,000	4,000	-	269,000	154,000	4115,000	-
John P. Manley(5)	230,000	195,000	-	-	246,439	671,439	246,439	425,000
Jane L. Peverett	115,000	100,000	15,000	4,000	-	234,000	119,000	115,000	-
Katharine B. Stevenson(5)	115,000	100,000	50,000	-	104,903	369,903	254,903	115,000	-
Martine Turcotte	115,000	100,000	15,000	4,000	-	234,000	88,250	-	145,750
Barry L. Zubrow(3) (5)	154,273	134,150	67,075	5,451	225,163	586,112	431,838	154,274	-
TOTAL	1,910,842	1,656,600	265,075	37,804	1,039,801	4,910,122	2,291,459	1,481,357	1,127,306

(1) Mr. Dodig did not receive compensation for his services as a director of CIBC. See “Summary compensation table” on page 85 for Mr. Dodig’s compensation as President and Chief Executive Officer.

(2) Amounts paid in US dollars to directors of CIBC who are US citizens and whose primary residence is in the US were converted to Canadian dollars using the WM/Reuters exchange rate as follows:

• US$1.00 = C$1.33 on February 13, 2020

• US$1.00 = C$1.39 on May 14, 2020

• US$1.00 = C$1.34 on August 13, 2020

• US$1.00 = C$1.30 on November 12, 2020

(3) The amounts reported under “All Other Compensation” include fees of $1,000 per meeting paid to Brent Belzberg, Nanci Caldwell, Luc Desjardins and Linda Hasenfratz for participating in three meetings of a Board committee established under CIBC’s Chair of the Board Succession and Selection Planning Process, and fees of $1,000 per meeting paid to Michelle Collins and Barry Zubrow for participating in four meetings on anti-money laundering with management. For US resident directors, these amounts were converted to US dollars at the rates set out in note (2).

(4) Mr. Brindamour joined the Board on February 20, 2020.

(5) The amounts reported under “All Other Compensation” include fees paid for serving on the boards and committees of CIBC Bancorp USA Inc. and CIBC Bank USA. Each of Ms. Collins, Mr. Kelly, Mr. Manley and Mr. Zubrow received US$135,000 for serving as a director of those subsidiaries. Ms. Collins received US$20,000 for serving as Chair of the Audit Committee. Mr. Zubrow received US$30,000 for serving as Chair of the Risk Committee. Mr. Manley received US$50,000 for serving as Chair of the Board. Ms. Stevenson joined the boards of CIBC Bancorp USA Inc. and CIBC Bank USA on April 7, 2020 and earned US$78,750 for serving as a director of those subsidiaries. US dollar amounts have been converted to Canadian dollars for purposes of this disclosure using the WM/Reuters exchange rate of US$1.00 = C$1.3321 reflecting the foreign exchange rate on the last trading day of fiscal 2020. Ms. Collins elected to receive some of this compensation in the form of DSUs.

(6) Ms. Hasenfratz retired from the Board on April 8, 2020. In honour of her service, a $10,000 donation was made to a registered Canadian charity selected by Ms. Hasenfratz.

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Directors

Director equity ownership guideline

The Board expects directors to hold at least 7.5 times the annual cash retainer of $100,000 ($750,000) in CIBC common shares and/or DSUs. Directors are expected to reach this ownership level within five years after joining the Board.

Directors must take $115,000 of their $215,000 annual retainer (54%) in either CIBC common shares or DSUs. The Chair of the Board must take $230,000 of the Chair’s $425,000 annual retainer (54%) in either CIBC common shares or DSUs. The requirement to receive these amounts in equity continues even after directors have reached the equity ownership guideline. Directors may also elect to take all or a portion of their cash retainers in CIBC common shares or DSUs.

Each nominee who is currently a director has met the equity ownership guideline except for Nanci Caldwell and Christine Larsen who are acquiring equity under our director compensation program to reach the equity ownership guideline by their target date.

Each director nominee’s equity ownership interest in CIBC is set out in their biography on pages 15 to 28.

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Board Committee Reports

The Board has four committees: Audit Committee, Corporate Governance Committee, Management Resources and Compensation Committee and Risk Management Committee. Each committee reports highlights of its 2020 activities below. Committee mandates can be found at www.cibc.com.

Report of the Audit Committee

The key responsibilities of the Audit Committee are to: (i) fulfill its responsibilities for reviewing the integrity of CIBC’s financial statements, related management’s discussion and analysis (MD&A) and internal control over financial reporting; (ii) monitor the system of internal control; (iii) monitor CIBC’s compliance with legal and regulatory requirements as they pertain to responsibilities under the Audit Committee Mandate; (iv) select the external auditors for shareholder approval; (v) review the qualifications, independence and audit quality of the external auditors and the performance of CIBC’s internal auditors; and (vi) act as the audit committee for certain federally regulated subsidiaries.

Responsibility

2020 Highlights

Financial Reporting and Internal Controls

•  Recommended Board approval of quarterly and annual financial statements. •  Reviewed significant areas of accounting and disclosure judgment and key audit matters, including those relating to: -  the measurement of expected credit losses under IFRS 9; -  the assessment of goodwill impairment; -  the valuation of financial instruments; -  acquisitions and dispositions; and -  tax, legal and restructuring-related provisions and disclosures. •  Reviewed the implementation of International Financial Reporting Standards (IFRS) 16, Leases effective November 1, 2019 and the status of future accounting standards, including IFRS 17 Insurance Contracts. •  Reviewed reports on internal controls over financial reporting from management and EY. •  Received regular updates from Internal Audit and Finance on the control environment. •  Reviewed the quarterly and annual fraud management report and approved the Fraud Risk Management Framework. •  Reviewed the status of the interest rate reform project, including related accounting developments. •  Monitored the impact of the pandemic on CIBC’s internal control environment.

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Board Committee Reports

External Auditors	•  Approved the scope of services, terms of engagement, annual audit plan and the associated fees of EY.
	•  Reviewed and discussed with EY key areas of risk of material misstatement of the financial statements, application of professional skepticism and significant auditor judgment, including changes necessary to respond to the pandemic.
	•  Discussed quarterly review results and annual audit findings with EY and reviewed key audit matters set out in the auditor’s report.
	•  Reviewed the annual written statement of objectivity and independence provided by EY.
	•  Pre-approved all EY engagements for non-audit services and fees in accordance with the Scope of Services of the Shareholders’ Auditors Policy.
	•  Commenced succession planning for EY audit partners.
	•  Completed a Periodic Comprehensive Review of the External Auditor and recommended their re-appointment for shareholder approval.
	•  Updated and monitored audit quality indicators.
Internal Audit Function	•  Approved the Internal Audit organizational framework and charter and Internal Audit’s audit plan including the audit scope and the overall risk assessment and monitored its execution, including changes necessary to respond to the pandemic.
	•  Reviewed Internal Audit’s report of CIBC’s risk governance framework and its assessment of the oversight by Finance, Risk Management and Compliance.
	•  Reviewed the performance goals and the effectiveness, and approved the mandate of the Chief Auditor.
	•  Recommended Board approval of the re-appointment of the Chief Auditor.
	•  Reviewed and approved succession plans for the Chief Auditor.
	•  Monitored Internal Audit compliance with regulatory expectations.
Finance Function	•  Approved the Finance organizational framework and recommended Board approval of Finance’s financial plan and staff resources.
	•  Reviewed management’s assessment of the effectiveness of the Finance function.
	•  Reviewed the performance goals and the effectiveness, and approved the mandate of and the succession plans for the Chief Financial Officer (CFO).
	•  Held special meetings to discuss the impact of the pandemic on Finance’s operating environment as well as expected credit loss allowances and other areas involving significant judgement.
Whistleblower Procedures	•  Approved the Whistleblower Policy and Procedures.
	•  Reviewed management’s quarterly Whistleblower Report.
Legal and Regulatory Developments	•  Received regular updates from the legal department on legal matters.
	•  Monitored regulatory developments, including updates from stakeholders on the effect of evolving regulatory expectations on CIBC’s businesses, as well as regular briefings on the results of regulatory reviews, benchmarking exercises and possible pandemic impacts.

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Board Committee Reports

Subsidiary Oversight	•  Acted as audit committee for certain federally regulated subsidiaries of CIBC.
	•  Reviewed the financial statements and management reports from the CFO of these regulated subsidiaries.
	•  Reviewed and discussed audit findings with EY and management.

Members of the Committee are Nicholas Le Pan (Chair), Michelle Collins, Luc Desjardins and Jane Peverett. Each Committee member is independent and “financially literate” as required by the NYSE and the CSA, and all members of the Committee are “audit committee financial experts” under the U.S. Securities and Exchange Commission (SEC) rules.

Audit Committee voluntarily reports on SEC matters

Management has primary responsibility for CIBC’s financial statements and the overall reporting process, including CIBC’s system of internal controls. The external auditors, EY, are responsible for performing an independent audit of CIBC’s consolidated financial statements in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), and an independent audit of internal control over financial reporting in accordance with the standards of the PCAOB. These audits serve as a basis for the auditors’ opinions included in the Annual Report addressing whether the consolidated financial statements fairly present CIBC’s financial position, results of operations, and cash flows in conformity with IFRS as issued by the International Accounting Standards Board. The Audit Committee’s responsibility is to monitor and oversee these processes.

The Audit Committee has reviewed and discussed the audited consolidated financial statements with management. In addition, the Audit Committee discussed with EY the matters required to be discussed by the PCAOB’s Statement on Auditing Standards No. 3101(Communications With Audit Committees) and Canadian Auditing Standard 260 (Communication With Those Charged With Governance) including matters relating to the conduct of the audit of CIBC’s consolidated financial statements and the assessment of the effectiveness of CIBC’s internal control over financial reporting under Section 404 of the US Sarbanes-Oxley Act of 2002.

EY provided to the Audit Committee a formal written statement describing all relationships between EY and CIBC that may reasonably be thought to bear on independence as required by PCAOB Rule 3526. The formal written statement includes confirmation that EY is independent within the meaning of the CPA Code of Professional Conduct of the Chartered Professional Accountants of Ontario and can continue to act as the Independent Registered Public Accounting Firm for CIBC.

Based on this review and these discussions, the Audit Committee recommended to the Board that the audited consolidated financial statements (i) be included in CIBC’s annual report filed with Canadian securities regulators on SEDAR (together with the external audit opinions on the consolidated financial statements prepared in accordance with both Canadian generally accepted auditing standards and the standards of the PCAOB and the external audit opinion on internal control over financial reporting in accordance with the standards of the PCAOB) for the year ended October 31, 2020 and (ii) be included in CIBC’s annual report on Form 40- F (together with the external audit opinion on the consolidated financial statements prepared in accordance with the standards of the PCAOB and the external audit opinion on internal control over financial reporting in accordance with the standards of the PCAOB) for the year ended October 31, 2020 for filing with the SEC. The Audit Committee also approved, subject to shareholder appointment, the selection of EY as CIBC’s external auditors.

This report has been adopted and approved by the members of the Audit Committee: Nicholas Le Pan (Chair), Michelle Collins, Luc Desjardins and Jane Peverett.

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Board Committee Reports

Annual assessment of external auditors’ effectiveness and service quality

As part of its oversight responsibilities, the Audit Committee conducts an annual assessment of EY’s effectiveness and service quality. For the 2020 audit period, the Audit Committee’s assessment considered such factors as (i) EY’s independence, including lead audit partner rotation requirements, objectivity and professional skepticism; (ii) the quality of their engagement team; (iii) the quality of their communications and interactions; (iv) the overall quality of the service provided; and (v) a review of management’s evaluation. The Audit Committee concluded that they were satisfied with the quality of audit services provided by EY for 2020.

As a safeguard against the concern that the long tenure of the same external audit firm may create institutional familiarity threats which may impede the ability of the external auditor to exercise appropriate professional skepticism, the Audit Committee conducted a comprehensive review of EY in 2020. The Audit Committee concluded from this review that they were satisfied with the quality of audit services provided by EY.

The Board recommends that Ernst & Young LLP be appointed by shareholders as auditors of CIBC until the close of the next annual meeting of shareholders.

Fees for services provided by external auditors

The fees EY billed for professional services for the fiscal years ended October 31, 2020 and October 31, 2019 are set out below.

Fees billed by EY
(unaudited, $ millions)	2020		2019
Audit fees(1)		24.0		22.3
Audit related fees(2)		2.2		1.7
Tax fees(3)		1.4		1.9
Other(4)		0		0.1
Total		27.6		26.0

(1) For the audit of CIBC’s annual financial statements and the audit of certain of its subsidiaries, as well as other services normally provided by the principal auditor in connection with CIBC’s statutory and regulatory filings. Audit fees also include the audit of internal controls over financial reporting under the standards of the PCAOB.

(2) For the assurance and related services that are reasonably related to the performance of the audit or review of CIBC’s financial statements, including accounting consultation, various agreed upon procedures and translation of financial reports.

(3) For tax compliance and advisory services.

(4) Includes fees for non-audit services.

Pre-approval policy

The Audit Committee pre-approves work performed by CIBC’s auditors. This approval process is explained in CIBC’s Policy on the Scope of Services of the Shareholders’ Auditors which is described under “Pre-Approval Policies and Procedures” in CIBC’s Annual Information Form dated December 2, 2020, and available at www.cibc.com.

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Board Committee Reports

Report of the Corporate Governance Committee

The key responsibilities of the Corporate Governance Committee are to oversee (i) CIBC’s corporate governance framework; (ii) CIBC Board and committee composition; (iii) evaluation of CIBC’s Board, committees and director effectiveness; (iv) director orientation and continuing education; and (v) CIBC’s corporate responsibility reporting, stakeholder engagement framework and matters relating to conduct.

Responsibility	2020 Highlights
Governance	•  Oversaw CIBC’s stakeholder engagement process with shareholders, shareholder advocacy groups, proxy governance advisory firms and regulators to foster transparent relationships and discuss CIBC’s governance practices and emerging trends. •  Reviewed governance regulatory developments, including the Federal Government’s Financial Consumer Protection Framework, and the Capital Markets Modernization Task Force report and recommendations. •  Approved new provisions in the Board Diversity Policy on the Board’s commitment to reflect the background and demographics of CIBC employees and the clients and communities CIBC serves such as people of colour, Indigenous peoples, persons with disabilities and members of the LGBTQ+ community. •  Reviewed director compensation and, based on market trends, made no changes. •  Reviewed and recommended Board approval of CIBC’s Statement of Corporate Governance Practices, responses to shareholder proposals, and governance disclosure in CIBC’s management proxy circular. •  Continued to focus on board governance and structure for CIBC Bancorp USA Inc. and CIBC Bank USA. •  Reviewed CIBC’s Sustainability Report, including disclosure of new environmental and social metrics and targets. •  Reviewed reports on managing Environment, Social and Governance (ESG) performance and realizing ESG opportunities. •  Reviewed CIBC climate reports in accordance with the requirements of the Task Force on Climate-Related Financial Disclosure as well as updates on CIBC’s $150 billion environmental and sustainable finance target.
Board and Committee Composition	•  Reviewed the composition, size, and collective skills and experiences of the boards of CIBC, CIBC Bancorp USA Inc. and CIBC Bank USA. •  Reviewed and recommended Board approval of changes in committee composition based on principles that guide committee membership and committee chair succession to balance seasoned views with fresh perspectives while fostering diversity and ensuring the committees retain core skills and experiences among their members. •  Continued Board renewal activities with support from an external consultant; considered director candidates who reflect broad aspects of diversity and experience; recruited a new director for nomination to the Board; and continued to focus on Board member succession planning. •  Reviewed and recommended Board approval of director nominees and determined their independence for service on the boards of CIBC, CIBC Bancorp USA Inc. and CIBC Bank USA.

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Board Committee Reports

Board and Committee Effectiveness

•  Oversaw the evaluation of the effectiveness of the Board, committees, Chair of the Board and Chief Executive Officer with the support of an independent external advisor, developed action plans and reviewed progress reports. •  Oversaw the administration of CIBC’s continuing education program for directors and exceeded the Board’s target of having at least 10% of time at Board and committee meetings dedicated to director development. •  Reviewed the effectiveness of management reports to the Board and committees and enhanced reporting to facilitate more time for meaningful discussion at meetings.

Conduct

•  Reviewed conduct and culture risk reports. •  Reviewed the administration of and adherence to CIBC’s Code of Conduct by team members and the Board. •  Acted as the conduct review committee for CIBC and its federally regulated Canadian subsidiaries and, as such, reviewed reports on related parties and policies to foster compliance with Bank Act (Canada) (the Bank Act) on related parties that may materially affect us, and reviewed the associated procedures for promoting compliance with the Bank Act. •  Reviewed, approved and monitored procedures for complying with consumer provisions under the Bank Act. •  Reviewed reports on oversight items related to the Financial Consumer Protection Framework and Bill C-86. •  Reviewed the effectiveness of CIBC’s procedures to handle client complaints and changes to improve client experience with the complaint resolution process. •  Reviewed CIBC’s global privacy management framework, privacy issue resolution; privacy risks mitigation in CIBC initiatives and privacy regulatory developments.

Members of the Committee are Katharine Stevenson (Chair), Brent Belzberg, Jane Peverett and Martine Turcotte. All members of the Committee are independent.

Report of the Management Resources and Compensation Committee

The Committee is responsible for assisting the Board of Directors in their global oversight of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls.

The Chair of the Committee and the Chair of the Board have written a letter to shareholders about CIBC’s approach to executive compensation, starting on page 61 of this Circular.

Responsibility

2020 Highlights

Performance, Compensation, Employment Arrangements and Ownership

•  Reviewed, approved or recommended Board approval of the Chief Executive Officer’s (CEO), Executive Committee’s (EXCO) and other key officers’ fiscal 2020 goals and measures, performance and compensation. •  Approved compensation for employees whose Total Direct Compensation (TDC) exceeds the materiality threshold determined by the Committee. •  Recommended Board approval in February 2020 of changes to compensation targets for EXCO members taking on new roles or expanded accountabilities. •  Reviewed adherence to share ownership guidelines for executives and Managing Directors (MDs). •  Approved changes to the Executive and MD Severance Guidelines. •  Reviewed a report on CIBC’s Gender Pay Analysis.

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Board Committee Reports

Talent and Succession	•  Recommended Board approval of changes to the EXCO and other key roles by executing on our succession plans to strategically address current and future needs. •  Recommended Board approval of the succession plans for the CEO and EXCO and reviewed progress on development plans for succession candidates for key leadership roles to ensure a robust pipeline. •  Recommended Board approval of the CEO emergency preparedness plan and the CEO succession planning process.
Human Capital Strategy and Culture	•  Reviewed key strategic initiatives of CIBC’s Human Capital Strategy, as well as broader initiatives covering people, culture and brand, including: (i) CIBC’s response to the COVID-19 pandemic for employees, clients and communities, as well as our return to the office strategy with a focus on the health, safety and well-being of our employees; (ii) an update of our purpose, brand and marketing programs; (iii) our real estate transformation; (iv) the launch of CIBC’s new recognition program, MomentMakers; (v) an update on the launch of CIBC’s modern human resources platform; and (vi) progress on CIBC’s inclusion and diversity strategy to ensure that our executives and our overall workforce reflect the communities we serve.
Compensation Risk, Incentive Funding, Philosophy, Policies and Plans	•  Approved CIBC’s compensation philosophy, methodology and governance. •  In a joint meeting with the Risk Management Committee, with input from the Chief Risk Officer, Chief Financial Officer, and Executive Vice- President (EVP), Purpose, Brand and Corporate Affairs, reviewed the alignment of compensation with business performance and risk. •  Recommended Board approval of aggregate annual incentive compensation funding and allocations for functional groups and strategic business units. •  Effective fiscal 2021, approved changes to the composition of the BPF, which drives our incentive funding by including enhancements to broaden and further strengthen our link between executive compensation and our strategic priorities, including adjusted revenue growth and ESG. •  Reviewed amendments to material and non-material compensation plans.
Pension	•  Approved changes to CIBC’s pension governance structure. •  Approved changes to the governance of US retirement plans. •  Reviewed the competitiveness of CIBC’s executive pension programs.
Governance and Controls	•  Reviewed an assessment of significant human resources risks and the effectiveness of related internal controls. •  Reviewed Internal Audit’s independent report on material compensation plans. •  Reviewed regulatory and governance updates related to executive compensation. •  Reviewed a report on conduct risk and the evolving regulatory environment. •  Recommended Board approval of the executive compensation disclosure in CIBC’s management proxy circular. •  Met with institutional investors to discuss aspects of CIBC’s executive compensation programs. •  Obtained advice from the Committee’s Independent Compensation Advisor on executive compensation matters.

Members of the Committee are Patrick Daniel (Chair), Nanci Caldwell, Kevin Kelly, Katharine Stevenson and Martine Turcotte. All members of the Committee are independent.

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Board Committee Reports

Report of the Risk Management Committee

The primary function of the Risk Management Committee is to assist the Board of Directors in fulfilling its responsibilities for defining CIBC’s risk appetite and overseeing CIBC’s risk profile and performance against the defined risk appetite. The Committee is also responsible for overseeing the identification, measurement, monitoring and controlling of CIBC’s principal business risks.

Responsibility

2020 Highlights

Principal Business Risks

•  Reviewed and recommended Board approval of CIBC’s risk appetite framework and risk appetite statement and approved CIBC’s strategic business unit (SBU) and functional group risk appetite statements. This included how CIBC’s risk appetite translates into actionable measures for CIBC’s SBUs and functional groups, alignment with strategic plans, as well as enhancements to strengthen CIBC’s Risk Management function to address evolving risks and regulatory frameworks. •  Held four education sessions covering management’s analysis (including emerging developments) of technology risk; the Canadian Consumer and the Retail Lending Book; funding, liquidity and capital overview; operational resilience; incentive compensation; cloud computing; and various treasury-related topics including structural interest rate risk management, funding liquidity, capital and asset liability management. •  Held special meetings to discuss potential risk impacts for CIBC, stress testing analysis, expected credit loss forecasts and to approve credit transactions to support clients following the onset of the pandemic. •  Reviewed Risk Management’s assessment of year-end compensation recommendations. •  Reviewed and recommended Board approval of the capital plan. •  Reviewed and approved refinements to various risk limits, funding, frameworks and policies, and associated compliance reporting. •  Monitored and reviewed reports on CIBC’s risk profile including management’s assessment of information technology risk and governance activities. •  Monitored top risk themes including pandemic related risks, information and cyber security, Canadian consumer debt and geopolitical developments. •  Reviewed management’s self-assessment of the design and operating effectiveness of the risk assessment processes relative to new strategies, products or services. •  Reviewed presentations on the risks associated with various business activities including leveraged lending, the Canadian Consumer and the Retail Lending Book, the commercial real estate and construction portfolio, CIBC Mellon, as well as regional reviews including CIBC FirstCaribbean International Bank. •  Reviewed management’s reports on stress testing relative to macro-economic conditions including an assessment of capital adequacy. •  Reviewed and approved certain lending commitments that exceeded management’s lending authority.

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Board Committee Reports

Risk Management and Compliance Functions

•  Reviewed and recommended Board approval of the Risk Management financial plan and staff resources. •  Approved the Compliance department’s Independent Oversight Activities and Compliance plan for fiscal 2021. •  Approved the Enterprise Anti-Money Laundering Group’s examination plan for fiscal 2021. •  Reviewed succession plans, goals and assessments of effectiveness of the Chief Risk Officer, Chief Compliance Officer and Chief Anti- Money Laundering Officer.

Compliance

•  Continued to monitor global regulatory developments, guidance and compliance with regulatory requirements. •  Provided oversight of Anti-Money Laundering (AML) and Anti- Terrorist Financing (ATF) activities through the AML sub-committee. •  Reviewed the Chief Compliance Officer’s quarterly reports on Compliance as well as Enterprise Anti-Money Laundering Group’s quarterly report and the Chief Anti-Money Laundering Officer’s annual report.

Members of the Committee are Barry Zubrow (Chair), Brent Belzberg, Charles Brindamour and Christine Larsen. All members of the Committee are independent.

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Statement of Corporate Governance Practices

Good governance is the foundation of our business and underpins CIBC’s purpose – to help make your ambition a reality. CIBC’s corporate governance framework guides the Board and management in fulfilling their responsibilities to CIBC and its stakeholders. As a recognized leader in corporate governance, we strive each year for continuous improvements to achieve excellence in governance. This statement of corporate governance practices was last reviewed and approved by the Board in February 2021.

The diagram below provides a snapshot of the relationships among the Board, management, shareholders, auditors and regulators.

Read about key elements of our governance practices:

44	Governance Structure	51	The Chief Executive Officer	54	Executive Compensation
44	Board Composition	51	The Chair of the Board	54	Inclusion and Diversity
44	Board Responsibilities	51	Board Committees	55	Talent Management and Succession Planning
45	Director Independence	52	Board Access to Independent Advisors and Management	55	CIBC Code of Conduct
48	Director Nomination Process	52	Director Orientation and Continuing Education	56	Corporate Sustainability
49	Director Tenure	54	Director Compensation	59	Subsidiary Governance
50	Annual Board Evaluation Process			59	Stakeholder Engagement

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Statement of Corporate Governance Practices

1.    Governance Structure

At the foundation of CIBC’s governance structure are knowledgeable, independent and effective directors. Documenting clear roles and responsibilities for the Board and its committees helps the Board supervise the management of CIBC’s business and affairs. Every year, the Board reviews and approves the mandates of the Board of Directors, Chair of the Board, Board Committees and a Board Committee Chair.   Find Mandates of   
the Board, Chair of    the Board, Board   
Committees and Board   
Committee Chair at   
www.cibc.com or   
www.sedar.com.     

2.    Board Composition

The composition of the Board and its committees is affected by legal requirements, CIBC’s strategic priorities and the annual Board evaluation process.

Legal requirements – The Board complies with legal and regulatory requirements on the qualifications, number, affiliation, residency and expertise of directors. These requirements come from the Bank Act (Canada) (the Bank Act), securities law, and stock exchanges that list CIBC shares.

Board size – The Corporate Governance Committee reviews Board size and composition annually. The Committee considers changes in legal requirements, best practices, the skills and experiences required to enhance the Board’s effectiveness and the number of directors needed to discharge the duties of the Board and its committees effectively. If each director nominee is elected at CIBC’s 2021 annual meeting, the size of the Board will be 14 directors.

Director skill set and competency matrix – The Corporate Governance Committee assesses the skills and experiences of Board members and reviews the composition of the Board and its committees annually using a competency matrix. The matrix lists desired skills and experiences under broad categories such as leadership, functional capabilities, market knowledge and board experience. The Corporate Governance Committee updates the matrix regularly to reflect the Board’s current and long-term needs, as well as CIBC’s strategic priorities. Each Board member self-assesses their skills and experiences identified in the matrix. The Corporate Governance Committee uses the results of the self-assessments to help identify gaps in the Board’s collective skill set, promote continuing education and determine committee composition. Mary Lou Maher is a new director nominee for election at our annual meeting on April 8, 2021. Ms. Maher brings to the Board more than 35 years of governance and executive experience within the audit sector of the financial services industry, with key strengths in enterprise risk management, corporate governance, and inclusion and diversity.

Information on the skills and experience of our director nominees in areas the Board considers important to CIBC is on page 30 of the 2021 Management Proxy Circular (the “Circular”).

3.    Board Responsibilities

The Board is responsible for supervising the management of CIBC’s business and affairs. The Mandate of the Board of Directors is incorporated into this document by reference. The Board’s key responsibilities are outlined below.

Culture of integrity – The Board oversees CIBC’s Code of Conduct and is responsible for satisfying itself about the culture of integrity throughout CIBC.

Strategic planning – The Board reviews and approves CIBC’s strategic, financial and capital plans, and monitors their effectiveness. In carrying out these responsibilities, the Board considers CIBC’s risk appetite, risk profile, capital and liquidity levels, emerging trends and the competitive environment.

Risk management – The Board approves CIBC’s risk appetite statement and, with support from the Risk Management Committee, oversees CIBC’s risk profile and processes to identify, measure, monitor and control CIBC’s principal risks.

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Statement of Corporate Governance Practices

Internal control – The Board approves CIBC’s control framework. With support from the Audit Committee, the Board oversees and monitors the integrity and effectiveness of CIBC’s internal controls, the overall control environment for managing business risks, accounting, financial and disclosure controls, operational controls, and legal and regulatory controls and the impact of any identified weaknesses in internal controls on management’s conclusions.

Human resources management – With support from the Management Resources and Compensation Committee, the Board oversees CIBC’s human capital strategy, including talent, succession planning and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls.

Corporate governance – With support from the Corporate Governance Committee, the Board establishes standards which allow the Board to function independently from management and Board policies that set out expectations and responsibilities of directors to contribute effectively to the Board’s operations.

Communications and disclosure – The Board reviews and monitors the effectiveness of CIBC’s communication framework, processes for maintaining effective stakeholder relationships and measures for receiving feedback from stakeholders.

4.    Director Independence

Director independence is an important part of how the Board satisfies its duty to supervise the management of CIBC’s business and affairs. The Board considers regulatory requirements, best practices and good judgment to define independence. In addition, the Board applies independence standards, which have tests to assess a director’s independence, as well as a description of relationships between CIBC and a director that would not affect a director’s independence. The Board and its committees promote independence by:   All director nominees  
are independent except  
Victor Dodig, President  
and CEO of CIBC.    

• reviewing the impact of any board interlocks (where two or more CIBC directors are on the board of another public company);

• retaining advisors when needed for independent advice and counsel;

• conducting regular in camera sessions of the Board and its committees without the Chief Executive Officer (CEO) or any other member of management;

• adhering to CIBC’s Director Tenure Policy and tenure limits (see “Director Tenure” on page 49);

• determining whether directors have a material interest in a transaction; and

• appointing an independent Chair of the Board to oversee the Board’s operations and decision-making.

Independence standards

The Board independence standards require a substantial majority of its directors to be independent. A director is considered independent only where the Board affirmatively determines that the director has no material relationship with CIBC, including as a partner, shareholder or officer of an organization that has a relationship with CIBC. A “material relationship” is a relationship that could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment and includes an indirect material relationship. In determining whether a director is independent, the Board applies standards that incorporate the Affiliated Persons (Banks) Regulations, the New York Stock Exchange (NYSE) corporate governance rules, Canadian Securities Administrators corporate governance guidelines and the Office of the Superintendent of Financial Institutions (Canada) Corporate Governance Guideline provisions. The Board determines the independence of a director when the Board approves director nominees to be named in the Circular and at other times if necessary or desirable. For example, if a director joins the Board mid-year, the Board makes a determination on the new director’s independence at that time. The Board bases its determination of independence primarily on questionnaires completed by each director nominee.

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Statement of Corporate Governance Practices

All members of the Audit Committee, Corporate Governance Committee, Management Resources and Compensation Committee and Risk Management Committee must be independent. Audit Committee members must satisfy additional independence standards under the US Sarbanes-Oxley Act of 2002. Management Resources and Compensation Committee members voluntarily adopted additional independence standards under the NYSE rules.

Immaterial relationships

The Board has identified immaterial relationships that do not affect a director’s independence (unless the Board decides otherwise based on a director’s circumstances). These “immaterial relationships” include:

• routine banking services where a director, their immediate family members or entities they control, receive personal banking services, loans and other financial services in the ordinary course of business from CIBC or one of its subsidiaries as long as the services are on market terms, comply with applicable laws and do not exceed the monetary thresholds in the Board’s independence standards; and

• the employment of an immediate family member of a director with CIBC or a subsidiary (provided the immediate family member is not the director’s spouse or an executive officer of CIBC or a subsidiary) and, as long as the compensation and benefits received by the family member were established by CIBC in accordance with policies and practices that apply to CIBC employees in comparable positions.

Outside board memberships

The Board does not limit the number of public companies on which a director may serve, but has strong expectations of Board members in managing time demands and increasing Board responsibilities. The Board recognizes that some directors have the time and ability to maintain the focus and commitment expected at CIBC’s Board and committee meetings as well as other public companies. The Board also recognizes that multiple public company board service enhances a director’s breadth and depth of experience and provides another means of staying abreast of topical issues, trends, governance practices and the evolving regulatory environment.   A director is required   to obtain approval from   the Chair of the Board   before joining a new   public company board.    

The Corporate Governance Committee believes it is important for directors to balance the insights gained from their roles on other boards (including as CEO) with the ability to prepare for, attend and participate effectively in their CIBC Board and committee meetings. As a result, the Committee monitors director performance to make sure directors continue to have the time and commitment to fulfill their obligations to CIBC’s Board. The Committee considers many factors when assessing director performance, including meeting attendance; individual contributions at meetings; results of the annual Board effectiveness evaluation; the role of the director on other boards; the time demands of outside activities; the industry, size, location and financial cycle of other public companies a director serves; and peer review feedback from one-on-one meetings between the Chair of the Board and each Board member. The Committee monitors the overboarding policies of proxy governance advisory firms and institutional shareholders, which have different numerical limits on the number of boards a director may serve. However, the Committee believes that monitoring director performance is more effective than setting a numerical limit on public company service.

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Statement of Corporate Governance Practices

Board interlocks

An “interlock” occurs when two or more CIBC directors are on the board of another public company. The Board does not restrict board interlocks but recognizes that it is important for directors to remain impartial and independent even if they have a common board membership. There is one interlocking board membership among CIBC’s directors.

Company	Director	Committee Memberships
Capital Power Corporation	Jane Peverett	Health, Safety & Environment; People, Culture, and Governance
	Katharine Stevenson	Audit (Chair); People, Culture, and Governance

The Corporate Governance Committee does not believe that this common board membership impacts the ability of these directors to act in the best interests of CIBC and does not impair their independence.

Service on other public company audit committees

No member of CIBC’s Audit Committee may be on the audit committee of more than two other public companies unless the Board determines that this simultaneous service does not impair the ability of the member to be effective on CIBC’s Audit Committee.

The Corporate Governance Committee reviews service on multiple audit committees as part of its assessment of a director’s performance by looking at the annual Board effectiveness evaluation; questionnaires completed by the directors each year to assess financial literacy; qualifications to be designated as an audit committee financial expert; time demands on the director; and the director’s background and related experience.

No member of CIBC’s Audit Committee is on the audit committee of more than two other public companies.

In camera sessions

The Board and each of its committees set aside time for in camera sessions at their meetings to have open and candid discussion without the CEO or other members of management. The sessions are led by the Chair of the Board at Board meetings and the chair of each committee at committee meetings.

Conflicts of interest

To promote the Board’s independent decision-making, CIBC has a process in place to identify and deal with director conflicts of interest. If directors or executive officers have an interest in a material transaction or agreement with CIBC that is being considered by the Board or a Board committee, they: 1) disclose that interest; 2) leave the meeting during Board or committee discussion; and 3) do not vote on the matter.

Independent Chair of the Board

The Chair of the Board meets the Board’s independence standards and the additional independence standards for the Audit Committee and the Management Resources and Compensation Committee. The Board believes that the Chair’s independence is important for leading the Board in carrying out its duties.

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Statement of Corporate Governance Practices

5.    Director Nomination Process

Nominating a new candidate for election

The Corporate Governance Committee oversees Board renewal and is responsible for recommending director candidates. The Committee creates a candidate profile outlining the desired skills and experiences that will deepen the Board’s collective skills and experiences and support CIBC’s strategic priorities. The Committee might use an external recruitment firm to identify potential candidates who meet the desired profile. The Committee also maintains a list of potential director candidates which includes recommendations from Board members, shareholders, clients and employees. Once the best candidates are identified, the Chair of the Board, Chair of the Corporate Governance Committee and other Board members meet with each candidate to discuss the candidate’s background, skills, experiences and ability to devote the time and commitment required to be on CIBC’s Board. The Corporate Governance Committee looks at each candidate’s integrity and suitability by obtaining references, verifying educational background, conducting a security check and assessing any potential conflicts, independence concerns or other issues.

There are mechanisms for shareholders and others to recommend director candidates:

• Under the Bank Act, shareholders may propose a director nominee to be included in CIBC’s proxy circular, provided they hold 5% of CIBC’s outstanding common shares.

• Under CIBC’s Proxy Access Policy, qualifying shareholders may submit director nominations to be included in CIBC’s proxy circular. This policy is aligned with the approach to proxy access in the United States, except where Canadian law requires CIBC to comply with different requirements on share ownership. The policy is available at www.cibc.com.

• A shareholder, client, employee or any other stakeholder may contact the Chair of the Board at any time to recommend director candidates. The Chair of the Board would then ask the Corporate Governance Committee to review the recommendation and report on the outcome of that review to the stakeholder.

Nominating an existing director for re-election

Before recommending an existing director for re-election to the Board, the Corporate Governance Committee reviews the director’s:

• continuing integrity and suitability;

• overall performance and capability to contribute effectively to the Board and its oversight responsibilities;

• compliance with CIBC’s Code of Conduct;

• attendance at regularly scheduled Board and committee meetings; and

• tenure on the Board.

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Statement of Corporate Governance Practices

6.    Director Tenure

CIBC has a Director Tenure Policy which outlines factors that affect a director’s tenure.

Term limits

Directors are elected by shareholders for a one-year term that expires at the next annual meeting. Under CIBC’s Director Tenure Policy, the maximum period of time a director can be on CIBC’s Board is the earlier of 15 years after joining the Board or 75 years of age. A director would not stand for re-election at the annual meeting following that event. The Corporate Governance Committee might recommend a director for re-election after the expiry of their maximum term if it is in the best interests of CIBC to do so. In addition, the Board Chair may serve a five-year term after initial appointment as Chair of the Board, regardless of age or number of years served as a director.

The Board believes that term limits help create a balance between the fresh perspective of a new director and the experience of a seasoned director. This chart shows the amount of time that the director nominees for election at the 2021 annual meeting have served on CIBC’s Board. The average tenure of the director nominees is seven years.

Resignation of a director

The Director Tenure Policy requires a director to provide notice of resignation to the Chair of the Board in certain circumstances, including:

• the director no longer satisfies the director qualification requirements under applicable law;

• there is a material change in the status of the director’s employment;

• the director accepts a role with a company or organization which could have a material conflict with CIBC;

• the director, or a company controlled by the director, causes CIBC to incur an irrecoverable loss; or

• the director becomes aware that personal circumstances might have an adverse impact on the reputation of CIBC.

The Corporate Governance Committee makes a recommendation to the Board on whether to accept a resignation. The director who tenders a resignation does not take part in the decision-making process.

Majority voting

In an uncontested election where shareholders are asked to vote on the election of a director, a director nominee who receives a greater number of shareholder votes that are “withheld” than “for” will immediately tender their resignation to the Board. An “uncontested election” means an election where the number of nominees for director equals the number of directors to be elected.	You can find our   majority voting policy at   www.cibc.com.
The Corporate Governance Committee will recommend that the Board accept the resignation absent exceptional circumstances. The Board will make its decision within 90 days after the election and issue a press release either announcing the resignation or explaining why it was not accepted. The director who tendered the resignation will not take part in the decision-making process.

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Statement of Corporate Governance Practices

Meeting attendance record

Regular Board and committee meetings are set about three years in advance. Special meetings are scheduled when required. A director is encouraged to attend all meetings and expected to attend at least 75% of all regularly scheduled Board and committee meetings, except where the Corporate Governance Committee determines that personal circumstances beyond the director’s control prevent the director from doing so. This standard is not applied to attendance at special Board or committee meetings which are called on short notice.

During fiscal 2020, directors attended 100% of regular Board and committee meetings. In addition, all 2020 director nominees attended CIBC’s 2020 annual meeting. See pages 15 to 29 of the Circular for information on Board and committee meeting attendance.

Former Chief Executive Officer

Under the Director Tenure Policy, the CEO would not be re-elected as a director after ceasing to act as CEO. However, the Corporate Governance Committee may recommend that a former CEO be re-elected as a director if in the best interests of CIBC to do so.

7.    Annual Board Evaluation Process

The Corporate Governance Committee oversees the annual evaluation of the performance and effectiveness of the Board, its committees, the CEO and individual directors. An external advisor conducts the evaluation to encourage candid feedback, maintain confidentiality and promote objectivity. The external advisor also provides information on the corporate governance practices and board processes of other public companies.   Every director  
participates in an annual  
self-assessment and  
peer review process.    

The evaluation includes:

• a survey completed by each director;

• a survey completed by senior executives on the performance of the CEO, the Board and the Board committees they support; and

• individual one-on-one meetings between each director and the Chair of the Board.

The surveys ask questions about the effectiveness of the Board and committees in addressing areas of focus in the current year, what was done well and what could be done better. The topics covered by the survey are Board leadership, the Board and CEO relationship, talent management and succession planning, strategy, compliance, risk management, stakeholder engagement, tone at the top, culture, director education, board composition and operations. The survey also asks for input on areas of focus for the coming year.

One-on-one meetings between each director and the Chair of the Board provide an opportunity for open discussion about the contributions of the director and other fellow board members to the Board and its committees, what the Board and committees could do better, other responsibilities the director might be interested in and other comments or recommendations the director might have about the operation and performance of the Board. The Chair of the Board reports to the Corporate Governance Committee on broad themes from these meetings and uses peer feedback to review individual director performance, identify opportunities for individual director development and succession planning for the Board and committees.

The Corporate Governance Committee reviews the performance of the Chair of the Board each year and the Chair of the Corporate Governance Committee provides director feedback to the Chair of the Board.

The evaluation process helps identify opportunities for continuing Board and director development and forms the basis of action plans for improving the Board’s operations. The Board and Board committees monitor progress against their action plan.

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Statement of Corporate Governance Practices

8.    The Chief Executive Officer

The CEO leads the management of CIBC’s business and affairs. In carrying out this responsibility, the CEO is responsible for duties relating to CIBC’s vision and values; strategy and operational direction; risk governance and internal control; financial information; human resources management; and effective communication with shareholders, clients, employees, regulators and other stakeholders.

9.    The Chair of the Board

The Chair of the Board is responsible for providing effective leadership of the Board, facilitating the operations and deliberations of the Board and overseeing the satisfaction of the Board’s mandate. In carrying out these responsibilities, the Chair of the Board presides over Board and shareholder meetings; leads director development; leads the Board in overseeing the development of CIBC’s strategic plan; coordinates execution of the Board’s mandate and action plans; and communicates with shareholders, clients, employees, regulators and other stakeholders.

10.    Board Committees

The Board has four committees. All committee members are independent. In determining committee membership, the Board tries to strike a balance between having members with the right experience and expertise on the committee and rotating membership to bring new ideas and insights.

The Audit Committee is responsible for reviewing the integrity of CIBC’s financial statements, related management’s discussion and analysis and internal control over financial reporting; monitoring the system of internal control; monitoring CIBC’s compliance with legal and regulatory requirements as they pertain to responsibilities under the Audit Committee Mandate; selecting the external auditors for shareholder approval; reviewing the qualifications, independence and audit quality of the external auditors and the performance of CIBC’s internal auditors; and acting as the audit committee for certain federally regulated subsidiaries. The Audit Committee also oversees succession planning for the Chief Financial Officer (CFO) and the Chief Auditor. The Audit Committee meets regularly with the external auditors, the CFO and the Chief Auditor. All Committee members are “audit committee financial experts” under the U.S. Securities and Exchange Commission rules.

The Corporate Governance Committee is responsible for overseeing CIBC’s corporate governance framework; Board and committee composition; evaluation of Board committees and director effectiveness; director orientation and continuing education; and CIBC’s corporate responsibility reporting, stakeholder engagement framework and matters relating to conduct.

The Management Resources and Compensation Committee is responsible for global oversight of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls. The Management Resources and Compensation Committee reviews and approves CIBC’s compensation philosophy, methodology and governance; recommends Board approval of annual incentive compensation funding; has duties relating to CIBC’s pension funds; and oversees the preparation of the compensation related disclosure in the Circular. The Management Resources and Compensation Committee reviews, approves or recommends Board approval of employment arrangements, goals and measures, performance, compensation, and succession plans for the CEO, Executive Committee members and other key officers.

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Statement of Corporate Governance Practices

The Risk Management Committee is responsible for assisting the Board in fulfilling its responsibilities for defining CIBC’s risk appetite and overseeing CIBC’s risk profile and performance against the defined risk appetite; overseeing the identification, measurement, monitoring and controlling of CIBC’s principal risks (including those impacting capital or liquidity); reviewing and approving key frameworks, policies and risk limits established to control CIBC’s exposures to its principal risks; and overseeing CIBC’s Risk Management function. The Risk Management Committee also provides input to the Management Resources and Compensation Committee on risk-related aspects of executive compensation decisions and oversees succession planning for the Chief Risk Officer (CRO), Chief Compliance Officer and Chief Anti-Money Laundering Officer.

11.    Board Access to Independent Advisors and Management

To assist the Board, the Chair of the Board and the Board committees in satisfying their responsibilities and to foster their independence, the Board, the Chair of the Board and the Board committees may retain independent advisors and set their compensation without consulting or obtaining approval of management. The Board, the Chair of the Board and the Board committees also have unrestricted access to management and employees of CIBC, as well as the external auditors. The Management Resources and Compensation Committee has an independent compensation advisor that reports directly to the Committee and does not do any other work for CIBC. The Audit Committee and Risk Management Committee retain an independent advisor periodically to review the effectiveness of Internal Audit, Finance, Compliance and Risk Management.

12.    Director Orientation and Continuing Education

CIBC’s Director Development Program provides continuing education to Board members. The program has two components: 1) orientation to help new directors become fully engaged as quickly as possible; and 2) continuing education to help directors understand new and emerging governance practices and regulatory developments related to the director’s Board and committee responsibilities. The Board and its    
committees dedicated     
18% of meeting    
time to educational    
presentations.    

New director orientation

CIBC has an orientation program for new directors which consists of written materials and orientation events. There is a director orientation manual that includes Board policies and procedures; CIBC’s by-law and organizational structure; CIBC’s strategic, financial and capital plans; the most recent annual and quarterly financial reports; and a summary of key business issues. In addition, a new director has separate one-on-one meetings with the Chair of the Board, the CEO and members of management. Management also hosts tours of CIBC businesses and operations. The committee chair arranges orientation sessions about the committee when a new director joins. To help a new director better understand the role of the Board and its committees and the commitment expected of a director, the Chair of the Board arranges for another Board member to act as mentor.

Continuing director education

During fiscal 2020, approximately 18% of agenda time was dedicated to continuing education, exceeding the Board’s target of 10%. The Chair of the Board is responsible for coordinating director education at the Board level. Each Board committee chair is responsible for coordinating director education at the committee level. Directors identify continuing education topics in many ways – at Board and committee meetings, in the annual board performance evaluations and through regular feedback to the Chair of the Board and committee chairs. Committee education sessions are open to all Board members.

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During fiscal 2020, directors participated in the following education sessions.

Attended	Session	Date
Board	•  Modernization of Our Bank	December 2019
	•  Investor Community Perspective on CIBC including Annual Report on Share Ownership	December 2019
	•  Purpose, Brand and Marketing	February 2020
	•  Digital Goal Planning	February 2020
	•  Technology Infrastructure & Innovation Strategy	August 2020
	•  Economic Update	August 2020
	•  People, Culture & Brand Strategy	August 2020
Audit   Committee	•  Data Governance and Controls	December 2019
	•  Treasury Control Environment and Data	December 2019
	•  IBOR	July 2020
	•  Ernst & Young’s Perspectives on Audit Committee Effectiveness	October 2020
	•  Artificial Intelligence and Machine Learning Controls	October 2020
Corporate   Governance   Committee	•  Report on Business Governance Ranking	December 2019
	•  Quarterly Governance Update	December 2019, February, May and August 2020
	•  Quarterly ESG Update	December 2019, February, May and August 2020
	•  Conduct Risk Report	February, May and August 2020
	•  Proxy Disclosure – Peer Bank Review	May 2020
Management   Resources and   Compensation   Committee	•  Stakeholder Engagement Update	December 2019, February, May and August 2020
	•  Regulatory Update	February, May, August and October 2020
	•  Conduct Risk and the Evolving Regulatory Environment	February 2020
	•  Canadian Banks Proxy Review	May 2020
	•  Market Pay and Performance Trends	October 2020
Risk   Management   Committee	•  Technology, Governance, Operations, Protection Review	December 2019
	•  Anti-Money Laundering – Emerging Risk in Australia	December 2019
	•  Conduct Risk	December 2019
	•  Leveraged Lending Portfolio Review	December 2019
	•  Climate Resilience	December 2019
	•  The Canadian Consumer and the Retail Lending Book	February 2020
	•  CIBC’s Structural Interest Rate Risk Management	February 2020
	•  Funding, Liquidity and Capital Overview	May 2020
	•  Enterprise-wide Stress Testing Review	May 2020
	•  Operational Resiliency	August 2020
	•  Incentive Compensation and an Overview of Assessing Risk in Compensation Decision-making	August 2020

The Board also encourages each director to participate in other continuing education, outside of Board and committee meetings. Directors receive an updated catalogue of internal and external educational opportunities periodically throughout the year. Individual director education consists of external courses; one-on-one sessions between a director and an internal or external expert on a specific topic; tours of CIBC businesses and operations; and educational reports posted to the Board website. CIBC pays the cost of all director continuing education relating to CIBC.

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13.     Director Compensation

CIBC’s director compensation program is designed to attract and retain people with the skills and experience to act as directors of CIBC. The Corporate Governance Committee reviews director compensation annually to make sure it aligns with the interests of CIBC shareholders, is competitive with the market and reflects best practices. The Corporate Governance Committee also reviews the workload, time commitment and responsibility of Board members. The Corporate Governance Committee may use an external advisor for advice on its director compensation policy and practices.

14.     Executive Compensation

The Management Resources and Compensation Committee oversees performance evaluation and compensation for the CEO, Executive Committee members and other key officers. When making incentive compensation decisions, the Management Resources and Compensation Committee looks at several factors, which include:

• CIBC’s financial performance and sustainability of earnings;

• simplification and efficiency initiatives;

• Environmental, Social and Governance metrics, including, adherence to CIBC’s risk appetite statement and controls, progress on client and employee experience results, and alignment with inclusion and diversity goals; and

• qualitative considerations, such as our performance compared to peers, and individual performance against goals approved by the Board or Committee with a focus on strategy execution.

The Management Resources and Compensation Committee considers input from the CFO, CRO and Executive Vice-President, Purpose, Brand and Corporate Affairs at a joint meeting with the Risk Management Committee where it reviews the alignment of compensation with business performance and risk, and recommends Board approval of aggregate annual incentive compensation and allocations to strategic business units and the functional groups. The Management Resources and Compensation Committee recommends for Board approval the annual incentive targets and individual compensation amounts for the CEO, Executive Committee members and other key officers, and approves compensation for any individual whose total compensation is above a certain materiality threshold.

15.     Inclusion and Diversity

CIBC believes that diverse teams working in an inclusive environment are more innovative, make better decisions, reduce risk and deliver better results to shareholders. As a result, it is imperative to promote and leverage diverse perspectives that reflect the background and demographics of CIBC employees and the clients and communities CIBC serves, including age, gender/gender identity, race/ethnicity, religion, ability, sexual orientation, and experiences.   The Board strives to promote diversity in board composition through the board renewal process which seeks the best director candidates with the desired complement of skills, expertise, experience and perspectives to fulfill the Board’s obligations and oversee CIBC’s strategic priorities effectively. CIBC’s Board Diversity Policy outlines the Board’s approach to creating and maintaining a gender-balanced and diverse membership and to increasing the inclusive leadership capabilities of its directors.   CIBC named one of Canada’s Best Diversity Employers for the past 10 years and included in the Bloomberg Gender Equality Index for the past 5 years.  

On gender diversity, the Board seeks to achieve gender parity. Given the number of directors, the Board has set a gender-balance target to be comprised of at least 30% women and at least 30% men.

On other aspects of diversity, the Board seeks to increase the degree to which its directors reflect the diversity of CIBC employees and the clients and communities CIBC serves in North America and around the globe while ensuring the collective skills, expertise and experiences of Board members address regulatory requirements, including appropriate representation of financial industry and risk management expertise.

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Given the number of directors, the Board has not set specific targets for people of colour, Indigenous peoples, persons with disabilities and members of the LGBTQ+ community. The Corporate Governance Committee ensures that CIBC’s Board renewal process (and the mandate of any external firm engaged to support Board renewal) includes director candidates from these communities in the pool of prospects and the short-list from which the Corporate Governance Committee identifies potential director candidates.

To assess progress against these objectives, directors voluntarily provide self-identification data to the Corporate Governance Committee annually.   Of the current director nominees: •  50% are women; •  one identifies as a person of colour, specifically as a member of the Black community; and •  one identifies as a member of the LGBTQ+ community.   40% of CIBC’s Executive Committee and 33% of executives in global board-approved roles are women.  

For more information, see “Inclusion and Diversity” on page 84 of the Circular, CIBC’s public webpage at www.cibc.com/inclusion and CIBC’s 2020 Sustainability Report at www.cibc.com.

16.     Talent Management and Succession Planning

CIBC is committed to developing employees at all levels of the organization and ensuring that the diversity of our workforce reflects the markets where we do business.

The Management Resources and Compensation Committee and the Board review regular updates on the progress of our talent strategy and the strength and diversity of our pipeline of future leaders. At least once a year, the Management Resources and Compensation Committee and the Board review succession plans for the CEO and Executive Committee members across various time frames to ensure that management and the Board have choices when appointing talent in key roles. The Management Resources and Compensation Committee and management also discuss talent deeper in the pipeline, with potential over a longer horizon to develop into senior roles in the organization.

The Management Resources and Compensation Committee also reviews the succession plans for positions identified as other key officer and critical roles; the Audit Committee reviews the succession plans of the CFO and Chief Auditor; and the Risk Management Committee reviews the succession plans of the CRO, Chief Compliance Officer and Chief Anti-Money Laundering Officer.

17.     CIBC Code of Conduct

The Code of Conduct (Code) is our playbook that identifies policies to guide our actions – an important element as we transform into a purpose-led organization and build a relationship-oriented bank for a modern world. This includes building an inclusive and client-focused culture that is underpinned by our core values of trust, teamwork and accountability. The Code applies to our team members – employees, contingent workers and members of the boards of directors of CIBC and its wholly-owned subsidiaries.

The Code sets out the following principles for how we behave as we help our clients achieve their ambitions:

• We act with honesty and integrity

• We ensure a respectful and safe workplace

• We identify and avoid conflicts

• We serve our clients and protect our brand, our investors and our environment

• We safeguard information of our clients and team members, and we protect other CIBC assets

• We cooperate with investigations

There is a training program on the Code and every year all team members must attest that they have read, understood and will always follow the Code.

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CIBC team members across the globe are required to speak up when they become aware of activities that they believe are inconsistent with the Code, or that might be damaging to CIBC or our stakeholders. There is no retaliation for speaking up. Our confidential Whistleblower Hotline, available 24/7 and in many languages, allows for anonymous reporting of concerns. Identifying information (including a caller’s name or telephone number) is not required to be shared with the hotline service provider and calls are not recorded. CIBC’s other ways to speak up and get advice include Human Resources/Employee Relations, Corporate Security or a Board member.

Changes to the Code are reviewed by the Board for approval. Legal requirements provide that CIBC’s Board of Directors must approve waivers for Board members and certain executive officers, and publicly disclose any waivers. No waiver has been granted to date.

18.     Corporate Sustainability    

Inspired by our purpose to help make your ambition a reality, we are integrating sustainability into everything we do, focusing on environmental, social and governance (ESG) matters of importance to our stakeholders.   Find CIBC’s Sustainability Report at www.cibc.com.  

Key elements of ESG governance at CIBC:

• Nine out of 14 director nominees identify corporate responsibility as a key area of skills and experiences.

• We believe that understanding stakeholder perspectives is vital to being a relationship focused bank. We engage with stakeholders in many ways. This past year, for instance, we conducted a materiality assessment to identify current issues of importance. Investor Relations held 13 ESG-related meetings with shareholders to listen to their feedback on our governance practices and talk about the interconnectivity between ESG and our strategy.

• There are annual goals and measures for the CEO and management team that pertain to ESG performance. These include impacts on client experience, employee engagement, and inclusion and diversity goals. For more information on how we further embed ESG into performance, see page 71 of the Circular.

The Corporate Governance Committee, Management Resources and Compensation Committee and Risk Management Committee have oversight accountabilities related to ESG governance at CIBC.

The Corporate Governance Committee mandate includes oversight of disclosure on CIBC’s approach to operating in an ethical, socially responsible and environmentally conscious manner. This includes reviewing highlights of CIBC’s 2020 Sustainability Report; Code of Conduct; client complaint processes; privacy matters; donations and community investments; and our stakeholder engagement practices.

The Management Resources and Compensation Committee oversees CIBC’s compensation framework and alignment of ESG performance goals with compensation. The Management Resources and Compensation Committee sets goals and measures for the CEO and Executive Committee members. These goals incorporate metrics for inclusion and diversity as well as environmental performance for certain employees, which are then incorporated into the goals and measures of other executives and team members across the bank.

The Risk Management Committee reviews and approves CIBC’s frameworks and policies on the identification and control of a variety of risks. This review includes CIBC’s Reputation Risk Management Framework.

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Governance Body	Summary of Responsibilities	2020 Activities Related to ESG
Board of Directors	Oversees CIBC’s strategic direction and implementation of an effective risk management culture.	•  Approved CIBC’s 2021 Code of Conduct, 2020 Statement of Corporate Governance Practices, responses to shareholder proposals on ESG matters and governance disclosure in CIBC’s management proxy circular. •  Reviewed progress on CIBC’s ESG metrics. •  Oversaw our multi-year purpose journey.
Corporate   Governance   Committee	Oversees CIBC’s corporate governance framework; Board and committee composition; evaluation of Board, committee and director effectiveness; director orientation and continuing education; and CIBC’s sustainability reporting, stakeholder engagement framework, disclosure on approach to acting in an ethical, socially responsible and environmentally conscious manner and the Conduct and Culture Risk Framework.	•  Participated in quarterly updates and development sessions with internal and external ESG leaders on enhancements to CIBC’s ESG framework in support of our corporate strategy and related ESG disclosure. •  Reviewed highlights of CIBC’s Sustainability Report. •  Reviewed reports on adherence to the Code of Conduct, conduct and culture risk, and related regulatory developments. •  Reviewed reports on global privacy risk management, privacy incidents, regulatory notification and changing privacy laws. •  Approved changes to the Board Diversity Policy that advance the Board’s commitment to reflect the background of CIBC team members, clients and communities. •  Reviewed climate reports in accordance with TCFD requirements, and updates on CIBC’s $150 billion environmental and sustainable finance target. •  Oversaw CIBC’s stakeholder engagement process to foster transparent relationships and discuss CIBC’s governance practices and emerging trends. •  Reviewed reports on managing ESG performance, realizing ESG opportunities and progress on ESG goals. •  Reviewed reports on complying with consumer provisions under the Bank Act, consumer protection activities, handling and resolving client complaints and CIBC’s approach to the Federal Government’s Financial Consumer Protection Framework.
Risk Management   Committee	Reviews and approves CIBC’s frameworks and policies on the identification and control of risks, including the Risk Management Framework and the Reputation Risk Policy.	•  Supervised key frameworks, policies and limits related to identifying, measuring, monitoring and controlling CIBC’s principal business risks, such as climate-sensitive risk exposures. •  Reviewed reports on enhancing existing environmental targets and setting new targets related to renewable energy and carbon neutrality. •  Reviewed reports on managing ESG performance, realizing ESG opportunities and progress towards achieving ESG goals, such as CIBC’s $150 billion environmental and sustainable finance target.
Management   Resources and   Compensation   Committee	Sets goals and measures for the CEO and Executive Committee members and looks at business performance and risks by considering the performance of CIBC and its businesses against financial and non-financial metrics, including client experience, culture, inclusion and diversity, risk appetite measures and compliance with governance, control and policy requirements, as well as their alignment to our corporate strategy.	•  Reviewed inclusion and diversity, employee engagement, gender pay, risk input into compensation, conduct risk and the evolving regulatory environment.

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Recent Milestones in Our Sustainability Journey

	2018	2019	2020
Environment	Announced greenhouse gas (GHG) emission intensity reduction target	Announced commitment to mobilize $150 billion in environmental and sustainable finance activities by 2027 Issued “Building a Sustainable Future” report aligned with the Task Force on Climate-related Financial Disclosures Set targets for carbon neutral operations and 100% renewable electricity use	Publicly disclosed our Corporate Environmental Policy CIBC Capital Markets offered ESG-linked loans as part of our “Green” products and services Issued first Green Bond in line with the ICMA Green Bond Principles
Social	Announced first Women in Leadership social bond framework in Canada Announced community investment target of $350 million by 2023	First Canadian bank to join the Valuable 500 (global disability initiative) Introduced 15 new ESG key performance indicators in areas such as Inclusion and Diversity, Small Business, Indigenous Banking, Privacy and Information Security Launched Code of Conduct for the Delivery of Banking Services to Seniors	Signatory to UN Women’s Empowerment Principles Endorsed BlackNorth Initiative to end anti-Black systemic racism CIBC Asset Management committed to Responsible Investment Association’s investor statement on diversity and inclusion Announced two-year, US$2 billion commitment to support businesses, consumers and our partners in the US
Governance	Aligned ESG disclosure with UN Sustainable Development Goals	Introduced personal performance measures related to climate change targets and strategy for our Chief Risk Officer Instituted quarterly review of environmental risk by Board committee Actively participated in industry working groups to develop a consistent and comparable approach to climate risk scenario analysis and disclosure Began obtaining limited assurance of key environmental and social metrics	Conducted formal, comprehensive materiality assessment, engaging internal and external stakeholders to better align our priorities and inform our ESG strategy development Progress towards achieving formalized ESG targets for incorporation into variable incentive pool calculation

CIBC received a score of A- from the CDP (formerly known as the Carbon Disclosure Project), improving from a B rating in 2019. This score demonstrates CIBC’s progress in environmental performance and reporting, and places CIBC among the highest ranking Canadian financial institutions and the top-tier of global banks.

CIBC also continues to be a constituent of the Dow Jones Sustainability Index (DJSI) North America and the FTSE4Good Index. Index members must meet globally recognized standards for ESG strategy, management and performance.

Read more about CIBC’s focus on ESG topics in our 2020 Sustainability Report.

CIBC is proud to be recognized by:

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19.     Subsidiary Governance

CIBC’s Enterprise Subsidiary Governance Framework provides guidance on the oversight responsibilities between the CIBC Board and its subsidiary boards, including certain subsidiary boards in the US region. The framework outlines key principles of CIBC’s enterprise-wide approach to subsidiary governance, including board composition, director selection criteria, tenure and board size. The framework supports CIBC’s multi-disciplinary approach to subsidiary governance through strategic business units; control and governance functions; the CIBC Board; subsidiary boards and reporting to those boards.

The Corporate Governance Committee is responsible for overseeing the framework and reviewing reports on governance matters relating to CIBC subsidiaries. See “Report of the Corporate Governance Committee” on page 38 of the Circular for information on the committee’s continuing work regarding oversight responsibilities and interconnectivity among the boards of CIBC and certain US legal entities. In keeping with its oversight responsibilities, the Corporate Governance Committee annually reviews guidance on board composition, director selection criteria, tenure and board size for certain US subsidiary boards (collectively, the “US Board”). To create interconnectivity between the US Board and the CIBC Board, the composition of the US Board includes CIBC board members with knowledge of CIBC strategy, risk appetite and operations. This enables the CIBC Board to oversee the US subsidiary operations effectively and facilitate the exchange of information. The US Board includes the Chair of the CIBC Board, Chair of the CIBC Risk Management Committee, and other members of the CIBC Board or Executive Committee the Corporate Governance Committee considers appropriate.

20.     Stakeholder Engagement

The Board and management believe that understanding the perspectives of CIBC’s stakeholders is key to being a relationship-oriented bank. Some of the ways CIBC engages with its stakeholders are set out below.   Disclosing material information to the market – CIBC’s disclosure policy outlines our commitment to promote consistent disclosure practices aimed at accurate, timely and broadly disseminated disclosure of material information about CIBC to the market. The Corporate Governance Committee reviews how management administers the policy annually. The Board reviews and approves changes to the policy. CIBC has a Disclosure Committee which meets with responsible officers each quarter to review CIBC’s interim or annual financial reports to shareholders and related earnings release, as well as controls around CIBC’s disclosure and financial reporting.   Feedback from     stakeholders provides      valuable input to the Board.  

Communication strategy – The Board reviews CIBC’s overall communication strategy annually to understand progress in furthering CIBC’s relationship with employees, clients, the investment community, the media, and government. The Chair of the Board and senior officers meet with shareholders, shareholder advocacy groups and others in the investment community to talk about CIBC’s approach to corporate governance, risk governance, talent management, executive compensation and emerging environmental, social and governance practices.

Whistleblowing and Confidential Whistleblower Hotline – The Audit Committee oversees CIBC’s Whistleblower Policy, which provides a framework for investigating and reporting concerns raised by CIBC employees, contingent workers or others (e.g., clients, suppliers and shareholders) about accounting, internal accounting controls or auditing matters at CIBC. In addition, CIBC employees, contingent workers and others can report concerns through the Whistleblower Hotline (online or by phone) about irregular business activities or behaviour that may expose CIBC to reputation risk, including fraud, integrity of financial reporting, ethics, actual or potential violations of CIBC’s Code of Conduct, or violations of a law or regulation. Reports to the Whistleblower Hotline are confidential and callers can choose to remain anonymous.

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Annual Meeting – CIBC’s annual meeting of shareholders is held at different locations across Canada so that directors and management can meet shareholders, clients and employees. The meeting is also conducted as a live webcast, so that all shareholders can participate.

“Say on Pay” – Shareholders can have a “say on pay” by voting on an advisory resolution on CIBC’s approach to executive compensation described in the Circular. The vote is advisory, not binding and does not diminish the Board’s roles and responsibilities. However, the Board and the Management Resources and Compensation Committee consider the results of this vote in making future executive compensation decisions.   Last year 95% of shareholder votes     were in favor of CIBC’s      approach to executive compensation.  

Hearing from shareholders – CIBC’s Investor Relations website at www.cibc.com contains helpful information about upcoming reporting dates, quarterly investor presentations, fact sheets on CIBC’s financial performance and webcast links. CIBC’s Investor Relations group welcomes dialogue with shareholders and potential investors.

Contacting CIBC’s Board

Anyone may contact the Board, the Chair of the Board, a Board committee or a director at corporate.secretary@cibc.com or CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2.

Requesting paper copies

Our statement of corporate governance practices refers to material available on CIBC’s website. Shareholders may send a request for printed copies of any of these materials to the Corporate Secretary at corporate.secretary@cibc.com or CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2.

We encourage you to join our digital movement and go paperless by accessing these materials at www.cibc.com.

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Message to our Fellow Shareholders

Responding, adapting and emerging stronger

Thanks to the collective efforts of our 44,000 employees, we responded to the immediate needs of our stakeholders – especially our clients and employees – in a crisis caused by the COVID-19 pandemic and the ensuing economic disruption. We also continued to make progress in building a relationship-oriented bank for a modern world that delivers superior client experience and shareholder returns. We executed on our strategy by focusing on four areas:

	Delivering a modern relationship-banking value proposition to our clients by continuing to strive to bring the best of CIBC to our clients with each interaction and every decision we make.
	Diversifying our earnings growth by creating a strong cross-border platform and thereby strengthening capabilities for our clients and deepening relationships across our bank.
	Optimizing our operational efficiency by driving growth, maintaining a strong focus on continuous improvement and keeping a careful eye on costs.
	Maintaining capital and balance sheet discipline by investing our resources aligned to our strategy to focus on growing our existing business over the next several years.

Living our purpose

The onset of the COVID-19 pandemic in early 2020 created unique challenges for all of our stakeholders. Recognizing the important role banks play in society, and acting in line with our shared purpose, our team worked together to deliver for our clients, each other, our communities and our shareholders.

• Supporting our Clients – recognizing the immediate need for payment and cash flow relief as a result of economic disruption, our bank was there for clients with loan and mortgage deferrals, credit relief, skip payment options, payment protection for our US clients, and special support for seniors and persons with disabilities, all with the goal of protecting our clients’ safety and financial well-being.

• Supporting our Teams – the health and well-being of our team members was at the heart of our response to the COVID-19 pandemic. We immediately transitioned the majority of our team to work remotely, and provided per diems to those who were needed on site to support our clients. In addition, we responded by instituting special payments, providing additional paid time off, leveraging our technology investments to stay connected virtually, and instituting other protocols to protect the health and well-being of our team members – all of which enabled us to perform at our best in support of our clients.

• Supporting our Communities – as normal fundraising options were disrupted, community organizations were under increased pressure. We increased donations to charities, including donations of $100,000 to the World Health Organization and $650,000 to local Canadian charities. We also created the Holidays for Heroes program where Canadians were invited to nominate a frontline health care worker to receive a future travel voucher, and the Future Heroes bursary fund to support first-year students across a range of health care programs.

• Supporting our Shareholders – we pivoted to a virtual platform for our 2020 Annual General Meeting so that you could vote online, hear about our progress and share your feedback. With travel restrictions in place for the balance of the year, our executives conducted numerous virtual roadshows with institutional investors to keep them informed of our initiatives and progress in response to the pandemic, as well as our investments to further our long-term growth strategy.

Guided by our purpose, we were the first bank among our peers to announce or proactively implement many of these initiatives. As a result of our focus and commitments to our clients, CIBC was recognized during the first wave of COVID-19 as the top performing brand among Canadian banks for the way we are supporting Canadians and their communities through the pandemic; and, in an enterprise-wide Pulse Check survey, our employees told us that they were proud of CIBC’s response to the pandemic.

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Message to our Fellow Shareholders

Aligning executive compensation with our strategic priorities

Our executive compensation program provides a direct connection between shareholders and our talent, ensuring we are able to attract, retain and motivate a talented team that drives long-term value. As part of our global oversight responsibilities, we consider our strategic objectives when determining executive compensation design and payout decisions, including: alignment with shareholder interests; motivating the successful achievement of our strategy; and adherence to our risk tolerance.

In 2020, the link between executive compensation and business performance was demonstrated through our Business Performance Factor (BPF), which is comprised of three key measures: financial performance measured by our adjusted diluted earnings per share (EPS) with a 50% weighting; simplification and efficiency measured by our adjusted non-interest expense to revenue (NIX) ratio with a 25% weighting; and client experience measured by our Client Experience (CX) Index with a 25% weighting. Incentive awards for all executives and most of our employees are based on our BPF and their individual performance. Individual performance is evaluated using a scorecard of role specific metrics in areas such as financial performance and Environmental, Social and Governance (ESG) performance. These metrics include aligning with our environmental objectives; client experience results; factoring in employee engagement; progressing on inclusion and diversity goals; building community; and fulfilling risk and control requirements. You can read more about this starting on page 71 of the Compensation Discussion and Analysis (CD&A).

When determining executive compensation for 2020, the Committee and Board also considered the strong leadership shown by our CEO and the Executive Committee (EXCO) as they successfully led CIBC with agility and purpose through this period of economic and societal uncertainty.

Looking forward to 2021, we have made changes to the performance measures that incorporate learnings from the past year and considered your feedback. Notably, we have revised our BPF for the 2021 fiscal year by replacing one measure (adjusted NIX ratio) with new measures, such as, adjusted revenue growth and ESG Index that we believe will broaden and further strengthen the link between executive compensation and our strategic priorities. We also added relative performance to several measures in addition to performance against our established plan. More specifically, for the 2021 fiscal year, we have made the following changes:

Performance Measure	Current weighting	New weighting
Adjusted diluted EPS	50%	35%
Adjusted operating leverage	not applicable	15%
Adjusted revenue growth	not applicable	15%
CX Index	25%	25%
ESG Index	not applicable	10%
Adjusted NIX ratio	25%	eliminated

Fiscal 2020 performance

In a very challenging environment, CIBC reported solid results in 2020, demonstrating the agility and resilience of our bank. We continued to focus on our purpose to make our clients’ ambitions a reality, make ongoing investments in our business, and demonstrate disciplined risk and expense management. These actions contributed to our resilience during the disruption caused by the COVID-19 pandemic and have positioned us well for the evolving macroeconomic environment. You can read more about CIBC’s and our business units’ performance in our 2020 Annual Report.

Key financial highlights include:

• Delivered adjusted net income⁽¹⁾ of $4.4 billion and adjusted diluted EPS⁽¹⁾ of $9.69.

• Delivered record adjusted pre-provision net income of $8.2 billion (taking adjusted income before income taxes⁽¹⁾ of $5.7 billion and adding back provision for credit losses⁽¹⁾ of $2.5 billion) which was 0.4% higher than the previous year.

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. For fiscal 2020, we used the non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in “Assessing financial performance and determining compensation” on page 73.

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• Maintained a strong Basel III Common Equity Tier 1 capital ratio of 12.1%.

• Returned 65% of profits to our common shareholders through dividends and share repurchases in fiscal 2020.

• Delivered above peer median Total Shareholder Return (TSR) in fiscal 2020 and on a three-year basis.

• Reported return on equity (ROE) of 10.0% and adjusted ROE⁽¹⁾ of 11.7% (reflects the division of adjusted net income attributable to common shareholders of $4.3 billion⁽²⁾by the average common shareholders’ equity of $36.8 billion).

• Reported adjusted NIX ratio of 55.8% (reflects the division of adjusted non-interest expenses⁽¹⁾ of $10.6 billion into adjusted total revenue (tax equivalent basis)⁽¹⁾ of $18.9 billion), which measures our operating efficiency, was slightly higher than 55.5% in 2019.

Other key performance highlights include:

• Demonstrated improvement in client experience year-over-year as a result of CIBC’s enhanced, closed-loop client feedback program that enables immediate response to client issues; data to inform the development of services and products that best meet client needs and ambitions; and a proactive approach to help clients respond to the pandemic.

• Named once again as one of Canada’s Top 100 Employers by Mediacorp Canada Inc., our ninth consecutive year with this honour.

• Continued modernization strategy with upgrades to our cash management, capital markets and payments platforms.

• Furthered our commitment to a sustainable economy:

– Hosted our first virtual Sustainability Conference.

– Issued an inaugural US$500 million, five-year Green Bond to help finance new and existing green projects, assets, and businesses that mitigate the risks and effects of climate change.

– Achieved 28% of our $150 billion sustainable financing target by 2027.

Based on CIBC’s fiscal 2020 performance, the calculated BPF was 94%. The Board approved a qualitative adjustment of -5%, particularly in recognition of the impact of COVID-19 on our business, shareholders and our communities. The final BPF was 89% for our executives, 11% below our target and well below the maximum potential payout opportunity, clearly aligning our executive compensation with our performance. Final incentive payouts incorporate individual performance as discussed on page 62 of this letter. You can read more about our incentive plan design and BPF determination starting on page 72 of the CD&A.

Compensation for our CEO

2020 pay

We reviewed Mr. Dodig’s performance in 2020 against his individual goals and approved Total Direct Compensation (TDC) of $9.01 million for fiscal 2020, which is approximately one million or 10% below his 2020 TDC target of $10.00 million. Mr. Dodig’s fiscal 2020 TDC is $0.50 million higher than 2019, driven by the TDC target increase approved in December 2019 to align his compensation more appropriately with the market. Mr. Dodig’s performance-based incentive compensation of $8.01 million is composed of a cash bonus of $1.60 million, grants of Performance Share Units (PSUs) of $5.13 million and stock options (options) with a compensation fair value of $1.28 million. In addition to being “performance-granted”, Mr. Dodig’s PSUs also have future performance-vesting conditions comprised of relative ROE and TSR performance. The Committee and Board believe these compensation decisions are supported by Mr. Dodig’s performance and strong leadership in successfully navigating CIBC through an uncharted course in the midst of economic and social uncertainty, while continuing to strengthen our purpose as an organization and advance CIBC’s long-term strategy.

2020 ownership

Mr. Dodig strongly believes in CIBC and its future. As of October 30, 2020, he owned $23.41 million worth of CIBC equity, which is 23.4 times his salary. This substantial ownership level creates significant long-term alignment with shareholders’ interests and mitigates against excessive risk taking.

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020Annual Report. For fiscal 2020, we used the non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in “Assessing financial performance and determining compensation” on page 73.

(2) Adjusted net income attributable to common shareholders of $4.3 billion reflects adjusted net income of $4.4 billion, less net income attributable to preferred shareholders and other equity instrument holders of $122 million and to non-controlling interests of $2 million.

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Message to our Fellow Shareholders

Mobilizing talent to build a stronger CIBC

Two of our most important accountabilities are further strengthening our talent and succession planning. In 2020, against the backdrop of market volatility and disruption, we continued to provide oversight for strategic talent moves across our EXCO and our broader executive team to capitalize on their collective strengths and experience to further our transformation and accelerate client-focused growth. Some notable highlights relating to our named executive officers (NEOs) are outlined below:

• Effective November 1, 2019, Hratch Panossian took on the role of Senior Executive Vice-President and Chief Financial Officer (CFO) and effective March 2, 2020, his role expanded to take on accountability for Enterprise Strategy.

• Effective March 2, 2020, Laura Dottori-Attanasio, former Chief Risk Officer (CRO), transitioned into the role of Senior Executive Vice-President and Group Head, Personal and Business Banking, assuming leadership of our largest business.

• Effective March 2, 2020, Harry Culham took on additional responsibility for Direct Financial Services, which includes Simplii Financial, Direct Investing and Advice in his expanded mandate as Senior Executive Vice-President and Group Head, Capital Markets and Direct Financial Services.

We made a number of other key changes effective March 2, 2020, by either transitioning EXCO members to different roles or expanding their mandate. In light of this, we postponed our annual review of the EXCO’s TDC targets from December 2019 to February 2020 when we approved the EXCO re-organization; at this time, prior to the full global impact of the first wave of the COVID-19 pandemic, we also approved TDC target changes for some of our NEOs to align compensation for their roles more appropriately with the market.

In addition, we have taken a bold stance to ensure we are developing talent and attracting the next generation of leaders that reflect the communities we serve. Some notable results are outlined below:

• We have increased the representation of women on the EXCO (which typically includes the CEO), from 27% in 2019 to 40% in 2020.

• We have increased the focus on inclusion and diversity at CIBC with our CEO taking on the role of Chair of CIBC’s Inclusion and Diversity Leadership Council.

• We joined in the efforts to stand against anti-Black systemic racism and to build a more inclusive bank and society with a variety of actions, one of which was our CEO taking on the role as co-chair of the BlackNorth initiative, created to encourage leading Canadian organizations to make specific commitments to combat anti-Black systemic racism.

• We were proud our efforts in this area were recognized when CIBC was named as one of Canada’s Best Diversity Employers for the tenth year in a row, and included in the Bloomberg Gender Equality Index for the fifth consecutive year.

You can read more about talent management, and inclusion and diversity at CIBC starting on page 83 of the CD&A.

Responding to shareholder feedback

We like to hear from our shareholders and proxy advisory firms. Some highlights of our discussions are below:

• We specifically linked ESG and executive compensation by including ESG related goals at the individual level for accountable officers and incorporating ESG into our BPF starting in 2021. See page 62 of this letter; and our CD&A starting on page 71 for expanded disclosure on how we are achieving this link in 2020.

• We increased disclosure on targets and results for the CX Index, which constitutes 25% of our BPF. See page 74 of the CD&A.

We welcome your feedback anytime by writing to us at corporate.secretary@cibc.com, or CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2.

The Committee and the Board are proud of the CIBC team and remain committed to ensuring long-term value for all the bank’s stakeholders. On behalf of the Committee and the Board, we thank you, our shareholders, for your continued support.

Sincerely,

Patrick D. Daniel	John P. Manley
Chair, Management Resources and Compensation Committee	Chair of the Board

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Compensation Discussion and Analysis

The Compensation Discussion and Analysis provides an overview of the governance of our executive compensation program, explains how CIBC compensates its executives and how we determined fiscal 2020 compensation for our NEOs.

Compensation Philosophy, Practices and Governance

At CIBC, our approach to compensation is based on three key principles:

  Align with CIBC’s business strategy, risk appetite, creation of sustainable shareholder value and the evolving regulatory environment     Support CIBC’s ability to attract, motivate and retain the right talent     Pay for performance and encourage behaviours aligned with CIBC’s purpose and values  

The following section summarizes how we reflect good governance and risk mitigation in our compensation programs. More information is provided on the following pages.

Compensation Governance Practices

• Align compensation approach with Financial Stability Board (FSB) Principles for Sound Compensation Practices and their Implementation Standards as adopted globally by regulators

• Align performance measures with CIBC’s Board-approved strategic plan

• Apply upside limits to individual incentive awards

• Align the vesting of compensation awards with the time horizon of risks

• Define minimum deferral levels and set minimum equity ownership levels for material risk takers

• Use performance and misconduct clawback provisions to enable CIBC to recover compensation in appropriate circumstances

• Determine compensation for employees in control functions independently from the performance of the business segments they oversee

• Determine compensation for the CEO considering both horizontal and vertical pay ratio analyses

• Assess the appropriateness of compensation by stress-testing different compensation scenarios and backtesting realizable pay

• Determine realizable and realized pay using relative and absolute metrics

• Require a “Double Trigger” in our Change of Control Policy (i.e., payment occurs only upon both a change of control and termination of employment)

• Limit bonus guarantees to new hires or for exceptional circumstances to no more than 12 months

• Ensure the Committee’s independent advisor provides advice on executive compensation matters, has the power to challenge recommendations from management and does not perform other work for CIBC

• Do not re-price or backdate options, or discount options at the time of grant

• Do not allow hedging designed to monetize or reduce market risk associated with equity-based compensation

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Compensation Discussion and Analysis

Committee composition

Members of the Committee, Patrick Daniel (Chair), Nanci Caldwell, Kevin Kelly, Katharine Stevenson and Martine Turcotte bring diverse skills and experiences, including leadership, human resources management/compensation, risk management and risk governance, that assist the Committee in making decisions on CIBC’s compensation policies and practices and fulfilling its mandate.

For information on the experience and educational background of the Committee members standing for re-election, see our director nominee biographies starting on page 15 and “Director nominee skills and experience” on page 30. For information on director education sessions provided to Committee members in fiscal 2020, see page 53.

Independent advice

The Committee has engaged Pay Governance LLC (Pay Governance) and its predecessors since 2006 to provide independent analysis and advice to the Committee on all executive compensation matters including compensation targets and annual compensation recommendations for the CEO and EXCO members.

The table below discloses the fees paid by the Committee over the past two fiscal years to Pay Governance. Pay Governance has not provided other services to CIBC in those years. As a result, the Committee believes Pay Governance is an independent advisor based on the U.S. Securities and Exchange Commission’s factors for evaluating advisor independence.

Executive Compensation Related Fees	2020		2019
	(US$)	(%)	(US$)	(%)
For Committee Work	190,000(1)	100	175,000(1)	100
For Management Work	—	—	—	—

(1) The 2020 fees equate to C$255,417 and the 2019 fees equate to C$232,628 when converted to Canadian dollars at the average WM/Reuters exchange rate of US$1.00 = C$1.3443 for 2020 and US$1.00 = C$1.3293 for 2019.

The Committee and the independent advisor meet in camera without management and the Chair of the Committee meets privately with the advisor. These discussions contribute to the Committee’s effectiveness in overseeing compensation.

The Committee engages external legal counsel and other advisors as required to provide expert advice or director education. The Committee also evaluates the independence of these outside advisors and considers any conflicts in advance.

CIBC’s Internal Audit group conducts an annual independent review of CIBC’s compensation governance practices and the alignment of those practices with regulatory standards, including the FSB’s Principles for Sound Compensation Practices and their Implementation Standards. The Committee reviews a report prepared by the Chief Auditor on the results of the review.

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Compensation Discussion and Analysis

Approach to Executive Compensation

Our executive compensation program aligns compensation with business and individual performance and incorporates a strategy-driven and risk-controlled approach.

Key design features

Align with CIBC Strategy		Compensation is aligned to our strategy of building a relationship-oriented bank for a modern world that delivers superior client experience and shareholder returns
Pay for Performance		Incentive compensation design reinforces “one CIBC team” aligned to overall bank performance, core strategic business unit performance and individual accomplishments
Attract and Retain Talent		Market competitiveness is assessed when setting compensation targets
Risk Management		Adherence to CIBC’s risk appetite and effective risk management objectives are considered in compensation design, incentive funding and individual payouts
Shareholder Interests		The creation of enduring shareholder value is reinforced by promoting share ownership for all employees and a significant equity deferral for executives
Good Corporate Governance		All compensation programs are designed and delivered based on sustainable good governance practices

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Compensation Discussion and Analysis

Compensation elements

CIBC’s executive compensation program includes direct compensation (salary and variable incentive awards) and indirect compensation (benefits, perquisites and retirement programs). The Committee reviews these components regularly to assess market competitiveness and continued alignment with our compensation philosophy.

Compensation Element	Focus	Purpose	Form	Performance Period
Direct Compensation
Salary (Fixed)		Provide competitive fixed pay based on job scope, skills, experience and market competitiveness.	Cash	1 year
Variable Incentive Award(1)		Align incentive compensation with business and individual performance. Individual short-, medium- and long-term grants/awards are based on predetermined fixed percentages for cash and deferred equity.
	Short-term	Annual cash bonus rewards the achievement of business objectives.	Cash(2)	1 year
	Medium-term	Deferred incentive focuses on performance over the medium-term.	PSUs	3 years
	Long-term	Deferred incentive motivates eligible executives to create sustainable shareholder value over the long-term.	Options	3 to 10 years
Indirect Compensation
Benefits		Invest in the health and wellness of executives and employees.	Group benefit programs	-
Perquisites		Executive perquisite offering may include club membership, annual health assessment and car benefits.	Annual allowance or reimbursement	-
Retirement Programs		Contribute to financial security after retirement.	Pension and Savings Plans(3)	-

(1) If an employee engages in misconduct that causes a significant financial loss to CIBC, or that causes a material restatement of the financial statements, CIBC may demand the repayment of cash or deferred incentive compensation awarded.

(2) Executives may elect to voluntarily defer some or all of the cash incentive received into deferred share units (DSUs) which increase equity ownership under CIBC’s guidelines and which only pay out following retirement, termination of employment or death.

(3) Competitive retirement income arrangements are provided to all employees. A Supplemental Executive Retirement Plan (SERP) is provided to certain executives at the level of Senior Vice-President and above (described on page 94). For any executive that joined the SERP or was promoted prior to January 1, 2016, credited service is based only on service while employed by CIBC and pensionable earnings are capped at a fixed dollar limit. For any executive that joined the SERP or was promoted after January 1, 2016, SERP benefits accrue on a fixed, flat dollar basis and service is credited only from the date they joined the SERP. This means SERP pension benefits at CIBC do not include service for years beyond those actually worked and the benefits do not automatically escalate with increases in compensation.

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Compensation Discussion and Analysis

Variable incentive award

Variable incentive awards are important in ensuring pay for performance alignment. Variable incentive awards for the CEO and EXCO members are awarded in cash and deferred equity-based compensation based on the weightings set out below:

	Cash Incentive Award (Short-term)	Deferred Incentive Award (Medium-and Long-term)
CEO	20%	80%
EXCO	30%	70%
		Deferred Incentive Mix
		PSUs         (Medium-term)	Options     (Long-term)
		80%	20%

Deferred incentive award

Deferred incentive awards are used to align executive compensation with mid- and long- term shareholder interests. CIBC’s deferred incentive award is granted utilizing the vehicles described below. More detail is provided starting on page 90.

Deferred Incentive Award Vehicle		Description
PSUs (Medium-term)	•  PSUs vest and settle in cash at the end of a three-year performance period. •  The percentage of PSUs which vest ranges from 75% to 125% based on CIBC’s ROE (or adjusted ROE, as applicable)(1) and TSR performance during the three-year performance period relative to Bank of Montreal, Bank of Nova Scotia, National Bank of Canada, Royal Bank of Canada and the Toronto-Dominion Bank. •  ROE (or adjusted ROE, as applicable) and TSR performance for CIBC and each peer bank are ranked from one (highest performance) to six (lowest performance). Based on CIBC’s ranking for each measure, over the three-year period, a performance factor is assigned using the following scale:
		Rank	Performance Factor
		1	125%
		2	115%
		3	105%
		4	95%
		5	85%
		6	75%
	•  The ROE (or adjusted ROE, as applicable) performance factor is averaged with the TSR performance factor to determine the final vesting percentage. •  The final vesting percentage is multiplied by the original number of PSUs granted, plus any additional units accumulated through reinvested dividend equivalents, to calculate the final number of PSUs which vest and pay out based on CIBC share value at that time. (See “2017 PSU vesting” on page 86 for actual calculation details). •  The Board has discretion to adjust the vesting percentage and may reduce it to 0% if it deems that a material event occurred during the three-year performance period which impacts CIBC’s financial or market performance relative to the peer group.

(1) For the F2020 PSU grants, and on a go-forward basis, CIBC has determined that vesting should be tied to adjusted ROE, instead of reported ROE. Use of the adjusted metric aligns with our overall approach to assessing CIBC’s underlying business performance in connection with executive compensation matters, as discussed in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

Deferred Incentive         Award Vehicle	Description
Options (Long-term)	•  Options vest 50% on the third and fourth anniversaries of the grant date and have a 10-year term. •  Future realizable value depends on shareholder value creation.
DSUs (Long-term)	•  DSUs settle in cash after the executive leaves CIBC, based on CIBC share value at that time. •  An executive can voluntarily elect to defer up to 100% of their cash incentive award into DSUs, which enhances the alignment of executive compensation with long-term shareholder return experience.

Establishing total direct compensation target

Total Direct Compensation (TDC) includes an executive’s annual salary and variable incentive award. Typically, at the beginning of each fiscal year, the Committee reviews and recommends TDC targets for the CEO and EXCO members for Board approval. Targets are reviewed against market data annually and adjusted over time to ensure that progression within the role is taken into account.

In 2020, the annual review of targets for EXCO members was postponed from the beginning of the fiscal year to align with the February 2020 EXCO re-organization, where roles and TDC target changes were approved by the Board.

When reviewing TDC targets, the Committee considers market data for the peer group, the relative size of peer organizations, the relative size and scope of the role and the incumbent’s experience. Market data is sourced from publicly available data and from benchmarking data provided by Korn Ferry Hay Group, an external service provider engaged by management that regularly conducts a syndicated study for Canada’s large financial institutions. For the US, additional benchmarking data is drawn from another external service provider engaged by management, namely Willis Towers Watson and their global financial services database.

Peer group

Compensation targets for the CEO and EXCO members are evaluated against financial services companies that are of comparable size, scope, market presence and complexity to CIBC. Based on these criteria, the CEO and EXCO roles are benchmarked against the other five major Canadian banks⁽¹⁾. For the CEO and CFO, the peer group is expanded to include the two largest Canadian insurance companies⁽¹⁾, as the market for these roles is comparable more broadly across the financial services industry. For the Group Head CIBC U.S. Region, the peer group also includes smaller regional and community banks in the US. The following chart shows CIBC’s relative position on certain key measures used to define its peer group.

(1) Peer group of five major Canadian banks: Bank of Montreal, Bank of Nova Scotia, National Bank of Canada, Royal Bank of Canada and the Toronto-Dominion Bank; and two Canadian Insurance companies: Manulife Financial and Sun Life Financial.

(2) As at October 31, 2020 for banks and September 30, 2020 for insurance companies.

(3) Year ended October 31, 2020 for banks and trailing 12 months ending September 30, 2020 for insurance companies.

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Compensation Discussion and Analysis

Pay mix

The charts below show the compensation elements as a percentage of fiscal 2020 target TDC for the CEO and EXCO members. The charts demonstrate the greater pay variability for the CEO and EXCO business leaders who are best positioned to affect business results over the long-term compared to the EXCO functional group heads in Finance, Risk Management, People, Culture and Brand, and Technology, Infrastructure and Innovation.

Establishing individual goals

At the beginning of each year, the Committee approves the annual goals and measures for the EXCO members and recommends the CEO’s goals and measures for Board approval.

The Audit Committee and the Risk Management Committee also review the annual goals and measures for the CFO and the CRO, respectively.

The annual goals and measures for the CEO and EXCO align with CIBC’s strategic priorities and include financial performance (achievement of financial and key business results, earnings growth by growing the franchise, simplification and efficiency initiatives) and ESG related metrics, including client experience, relevant to their role as described in the table below.

ESG Category		Metrics
Environmental		•   Alignment with environmental objectives (such as, sustainable financing and climate footprint)
Social		•   Client experience results •   Inclusive banking and financial education •   Employee engagement •   Employee inclusion and diversity goals •   Building community
Governance		•   Compliance with CIBC’s risk appetite statement •   Compliance with audit and compliance objectives •   Adherence to CIBC’s Code of Conduct

Assessing individual performance

At the end of each year, the Committee evaluates individual performance relative to key metrics for the CEO and EXCO members and provides its recommendation on the CEO’s individual performance to the Board for approval. In addition to the performance assessments for this group, the Committee reviews any risk, compliance, conduct or audit concerns to determine if there are any adjustments required to the evaluation of individual performance and the resulting variable incentive awards. In the case of the CFO and CRO, the Audit Committee and the Risk Management Committee, respectively, also provide their input into the Committee’s evaluation of individual performance. Following the evaluation of individual performance, the Committee recommends for Board approval the variable incentive awards for the CEO and EXCO members. See “Variable incentive plan design” below.

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Compensation Discussion and Analysis

Variable incentive plan design

The variable incentive plan, known as Goals Performance Success (GPS) for all executives, including the CEO and EXCO members, provides transparency with respect to how incentive awards are determined and a strong link between pay and performance. The variable incentive plan components are described below:

(1) Total Variable Compensation Target, expressed as a percentage of base salary earned in the fiscal year; and

(2) Performance Multiplier, which is comprised of both business performance and individual performance, equally weighted.

An executive’s GPS award is determined using these components, as described below:

GPS Award	=	Total Variable Compensation Target	X	Performance Multiplier
The GPS award is capped at a maximum of 150% of the target incentive award to mitigate undue risk taking. Under extreme circumstances, the GPS award may be reduced to zero to ensure pay for performance alignment. GPS awards for the CEO and EXCO members are approved by the Board.		Determined based on competitive market analysis conducted as part of the target setting process described under “Establishing total direct compensation target” on page 70. Varies by role, market and executive job level.		The Performance Multiplier incorporates both individual and business performance. Individual performance is assessed at the end of the year against strategically aligned goals as described under “Establishing individual goals” and “Assessing individual performance” on page 71. Business performance is determined based on absolute and relative business performance measured against Board-approved goals aligned to CIBC’s strategy. The Performance Multiplier for the CEO is approved by the Board and for EXCO members by the Committee. The Committee and Board have the ability to make adjustments at their discretion.

Performance Multiplier

The Performance Multiplier is comprised of both business performance and individual performance. The Business Performance Factor (BPF) forms part of the overall Performance Multiplier and can range from 0% to 125%. The BPF within the Performance Multiplier is determined based on performance against metrics that are aligned to CIBC’s strategic priorities with a focus on financial performance, operational efficiency and client experience.

The performance measures and relative weighting used to determine the BPF for fiscal 2020 are set out below:

Performance Measure	Measure Description	Weight
Adjusted diluted EPS vs. target	Measure of profitability, incorporating performance of all businesses and aligned to creating shareholder value	50%
Adjusted NIX ratio vs. target	Measure of operational efficiency that reflects how much it costs to earn a dollar	25%
CX Index(1)	Measure of client experience directly aligned to our client-focused strategy	25%

(1) The CX Index is a composite index that includes internal and external client surveys and client experience oriented metrics from Canadian Personal and Business Banking, Capital Markets, Canadian Commercial Banking and Wealth Management and US Commercial Banking and Wealth Management. These comprise the measures that drive the most impactful behaviours to help in our pursuit of becoming number one in the market in client experience.

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Compensation Discussion and Analysis

In addition to these performance measures, the Committee and Board have discretion to adjust the calculated BPF based on qualitative factors described below:

• relative performance vs. peers to assess our performance against key financial measures such as revenue and EPS growth;

• risk, to ensure compensation is aligned with our risk appetite and objectives by considering risk outcomes with adjustments being made only to reduce the BPF (or individual awards);

• unexpected outcomes and other items that either should be included or excluded from the performance that determines the BPF; and

• any other factors the Committee and the Board consider appropriate.

We look at various factors when designing our BPF. Looking forward to fiscal 2021, we have included adjusted revenue growth, adjusted operating leverage and formalized ESG as a fundamental component of the BPF construct. We have also added relative performance to several metrics, in addition to absolute performance. See “Message to our Fellow Shareholders” on page 62 for more details on the fiscal 2021 BPF.

Assessing financial performance and determining compensation

In assessing financial performance, the CFO, the CRO, the Committee and Board review results on a reported basis (in accordance with International Financial Reporting Standards) and an adjusted basis. Both perspectives are considered useful to understand performance. Adjusted measures are used to assess CIBC’s underlying business performance and as one element of measuring executive performance for compensation decision-making purposes. As discussed on the previous page for fiscal 2020, adjusted diluted EPS⁽¹⁾ and adjusted NIX⁽²⁾ ratio (also known as adjusted efficiency ratio), were key components used to determine the BPF. Going forward for fiscal 2021, adjusted NIX has been eliminated from our BPF, and two new adjusted measures, adjusted operating leverage and adjusted revenue growth, have been added. Additional adjusted measures considered by the Committee and the Board include: adjusted total revenue on a taxable equivalent basis (TEB)⁽³⁾, adjusted net income⁽⁴⁾ and adjusted ROE⁽⁵⁾. A further discussion of non-Generally Accepted Accounting Principles (GAAP) used by CIBC and a reconciliation of certain non-GAAP figures to the most closely comparable GAAP figures is disclosed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report.

Risk Management Committee and input from the CFO and the CRO

The Committee works closely with the Risk Management Committee and receives input throughout the year from the CFO and the CRO. The Committee and the Chair of the Risk Management Committee, with input from the CFO and the CRO, assess the alignment of business performance with CIBC’s risk appetite, which includes certain ESG factors such as conduct and culture, client related risk metrics and talent management metrics, and determine whether any risk adjustments are required to the BPF.

In addition, at year-end, the Committee and Risk Management Committee meet to review the alignment of business performance with CIBC’s risk appetite and both committees also review a report that includes information about individual risk and compliance issues arising during the year and the recommended impacts to individual performance assessments and compensation. Following this, if applicable, the Committee recommends for Board approval any changes to individual performance assessments and compensation for the CEO and EXCO members.

(1) Reported diluted EPS adjusted to remove the impact of items of note (including the amortization of intangibles, and certain items of significance that arise from time to time which management believes are not reflective of underlying business performance), and net of income taxes.

(2) Reported revenue and non-interest expenses adjusted, in each case, to remove the impact of items of note, and to gross up tax- exempt revenue to bring it to a TEB, as applicable.

(3) Reported total revenue, adjusted to remove the pre-tax impact of items of note, and to gross up tax-exempt revenue, as applicable.

(4) Reported net income, adjusted to remove the after-tax impact of items of note.

(5) Reported net income attributable to common shareholders adjusted to remove the impact of items of note, and net of income taxes.

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Compensation Discussion and Analysis

2020 Performance and Compensation

2020 Business Performance Factor

Performance Measure	2020 Target	2020 Actual	Result (Actual vs. Target)
Adjusted diluted EPS(1)	$12.32	$9.69	21% Below
Adjusted NIX(1) ratio	56.1%	55.8%	30 bps Below
CX Index	100%	100%	At

2020 Calculated BPF	94%
BPF Qualitative Adjustment	-5%
2020 Final BPF	89%

CIBC’s fiscal 2020 adjusted diluted EPS⁽¹⁾ was $9.69, 21% below target and 19% lower than fiscal 2019. Contributing to this were adjusted total revenue and adjusted net income, which were 1% higher and 18% lower than fiscal 2019, respectively, and 3% and 22% below target.

Operating efficiency, measured by the adjusted NIX⁽¹⁾ ratio, was 55.8%, slightly higher by 30 basis points (bps) compared to fiscal 2019 and better than target by 30 bps.

Our CX Index is a composite index that includes internal and external client surveys and client experience oriented metrics from Canadian Personal & Business Banking, Capital Markets, Canadian Commercial Banking and Wealth Management and US Commercial Banking and Wealth Management.

In a year marked by COVID-19, where client centricity was more important than ever before, the traditional quantitative measures used for measuring client experience could not reflect the extraordinary circumstances that our clients and our bank were facing. In light of COVID-19, client and business priorities shifted and our Client Experience program for fiscal 2020 was adjusted in a number of ways to respond to the pandemic.

Our collective focus on our purpose – to help make our clients’ ambitions a reality – contributed to our client experience improving in a very challenging environment as evidenced by:

• the largest Net Promoter Score improvement among Canada’s five largest banks in the IPSOS Customer Service Index, when comparing fiscal 2020 performance with fiscal 2019, as well as the IPSOS Financial Service Excellence awards for our mobile banking, live agent telephone banking and automated teller machines;

• our highest annual score in the 2020 J.D. Power Client Satisfaction study;

• our #1 ranking in customer satisfaction among Canada’s largest banks in the J.D. Power Mobile Banking app study;

• delivering the best overall mobile banking experience in Surviscor’s 2020 Canadian Mobile Banking scorCard review; and

• more than 90% of respondents to client surveys conducted by CIBC noting that their impression of CIBC has improved or is the same following CIBC’s response to COVID-19.

We achieved this by continuing to build deeper relationships with our clients, delivering personalized financial advice and enhancing the ability for our clients to engage with us when and where they choose.

In 2021, we will continue to build on this momentum to further enhance the quality and consistency of our service delivery to our clients, including continued focus on addressing complaints, investing in customer relationship management and digital goal planning programs and realizing the full potential of our new client feedback platform.

Based on CIBC’s fiscal 2020 performance, the calculated BPF was 94%. The Board approved a qualitative adjustment of -5% based on an assessment of various qualitative considerations, particularly the impact to our business, shareholders and our communities stemming from the COVID-19 pandemic.

After this discretionary reduction, the final fiscal 2020 BPF was 89% for our executives. There were no material risk incidents and, therefore, no risk adjustment was made to the BPF.

This BPF, along with the assessment of individual performance, formed the basis for fiscal 2020 NEO compensation as well as the compensation of all our EXCO members.

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. We use these non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

2020 NEO compensation

CIBC’s NEOs are the CEO, the CFO, and the three most highly compensated executive officers in fiscal 2020.

Mr. Dodig

As the President and CEO, Mr. Dodig is responsible for developing and executing CIBC’s Board-approved strategy and leading the day-to-day operations of CIBC. The COVID-19 pandemic posed many challenges for CIBC, as it did for most organizations. Throughout fiscal 2020, Mr. Dodig continued to instill a purpose-driven culture across all areas of the bank ensuring that our actions were aligned with the needs of our clients, employees, shareholders, and the communities in which we operate.   The Committee evaluated Mr. Dodig’s performance relative to his goals for fiscal 2020 and determined that he met his key deliverables despite the challenges associated with the COVID-19 pandemic. Mr. Dodig’s leadership and continued focus on building a relationship-oriented bank for a modern world and delivering on our purpose to help make our clients’ ambitions a reality helped steer the organization through this challenging year.

Mr. Dodig accomplished this by placing emphasis on the well-being of our teams, our clients, and our communities. The majority of our team was transitioned to work remotely and, for team members that needed to be onsite to support our clients, per diems were provided to help them safely navigate the challenges posed by the pandemic and additional precautions were implemented in all of our locations. Mr. Dodig led the team in recognizing the need to support our clients and team members immediately by implementing programs to help our client segments most likely to go into our banking centres, providing payment deferral options, and payment protection for our US clients. Under Mr. Dodig’s leadership, CIBC increased donations to charities and created the Holidays for Heroes program in recognition of the strain the pandemic was putting on our health care workers.

Under Mr. Dodig’s leadership, despite a weaker economic environment resulting from the pandemic, CIBC reported solid results in 2020 and the strong link to our purpose – to make our clients’ ambitions a reality – remained at the forefront of how we operate as we continued to make investments in our business while demonstrating disciplined expense management. Mr. Dodig has focused his leadership team on continuing to strengthen the resilience of our bank which continues to position CIBC well for the evolving macroeconomic environment. You can read more about these developments in the “Message to our Fellow Shareholders” starting on page 61.

In considering compensation for the CEO, the Board conducted a thorough review of Mr. Dodig’s performance relative to his key strategic priorities, highlights of which are outlined in the following table:

Key Strategic Priorities	Results
Diversify and accelerate our earnings growth	•  CIBC Bank USA Assets Under Management (AUM) year-over-year growth of 10% •  Increased US region earnings contribution from 6% in 2014 to 17% in 2020 •  Revenue from non-traditional Capital Markets clients up 5% year-over-year (includes cross referrals with other SBUs)
Deliver a modern relationship-banking value proposition	•  Ranked #1 in customer satisfaction among Canada’s largest banks in J.D. Power mobile banking app study •  Received top rank among the five major Canadian banks in consumer research asking Canadians about how their bank has responded to COVID-19 •  CIBC Bank USA Wealth ranked #2 in Barron’s best RIA (Registered Investment Advisor) ranking

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Compensation Discussion and Analysis

Accelerate our efficiency initiatives to transform our bank	•  Fiscal 2020 adjusted NIX ratio(1) of 55.8%, slightly higher than in 2019 (55.5%)
Advance our Purpose-driven culture	•  Advancements were made against the enterprise inclusion and diversity plan with women and visible minorities representing 33% and 20% of board-approved executive roles, respectively •  Victor took on the role of co-chair of the BlackNorth Initiative
Deliver Financial Results and Create Enduring Shareholder Value	•  Adjusted diluted EPS(1) of $9.69 was 21% below target and 19% lower than fiscal 2019 •  TSR is the ultimate measure of shareholder value. For the five years ended October 31, 2020, our TSR was 27.7%, which was below the Standard & Poor’s (S&P)/Toronto Stock Exchange (TSX) Composite Banks Index return over the same period of 35.3% while for the three years ended October 31, 2020, our TSR was 2.65%, which was above the S&P/TSX Composite Banks Index return over the same period of -5.74%

Based on our BPF of 89% and the Board’s assessment of his performance, the Board approved a fiscal 2020 GPS award for Mr. Dodig of $8.01 million, which was 89% of his target incentive opportunity and reflects a 7% increase over fiscal 2019, driven by the increase in his target for fiscal 2020. Effective November 1, 2019, Mr. Dodig’s target TDC was increased from $8.75 million to $10.00 million, to better align to peers and reflect his progression in the role. The percentage of his GPS award that is deferred remained at 80%. The details of the 2020 award are provided in the table below. Mr. Dodig received 90% of his target TDC for fiscal 2020.

Pay Element ($ unless otherwise noted)	2020		2019
Salary (Fixed)		1,000,000		1,000,000
Cash PSUs Options		1,602,000 5,126,400 1,281,600		1,501,950 4,806,240 1,201,560
Total GPS (Variable) % of Target GPS		8,010,000 89.0		7,509,750 96.9
TDC % of Target TDC		9,010,000 90.1		8,509,750 97.3

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. We use these non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

CEO realized and realizable pay

The chart and accompanying table below illustrate CIBC’s strong track record of aligning CEO pay to CIBC’s performance. The chart compares the current value of compensation awarded to CIBC’s CEO since fiscal 2016 to the value received by shareholders over the same period.

The table provides the underlying information reflected in the chart, including the CEO’s realized and realizable pay for each year. From fiscal 2016 to 2020, the current value of $100 invested by a shareholder is greater than the value of $100 in compensation awarded to CIBC’s CEO.

The current value of the CEO awards as at December 31, 2020 for the fiscal years noted represents the total of:

(1) realized pay received by the CEO (actual pay from awards received, dividend equivalents paid and options exercised); and

(2) potential realizable value of awards yet to be paid (unvested units and unexercised options if still outstanding).

Year	CEO	TDC Awarded   ($)		A Realized    Pay(1) ($)		B Realizable   Pay(2) ($)		A+ B = C Current    Value ($)		Period	To CEO(3)  ($)	To Shareholders(4)  ($)
2016	Dodig		8,793,500		8,861,591		2,966,708		11,828,299	10/31/2015 to 12/31/2020	135	142
2017	Dodig		8,938,000		8,360,642		0		8,360,642	10/31/2016 to 12/31/2020	94	135
2018	Dodig		9,526,100		3,131,524		5,484,483		8,616,007	10/31/2017 to 12/31/2020	90	114
2019	Dodig		8,509,750		2,501,950		4,818,694		7,320,644	10/31/2018 to 12/31/2020	86	109
2020	Dodig		9,010,000		2,602,000		5,059,205		7,661,205	10/31/2019 to 12/31/2020	85	104
Weighted Average											98	119

(1) Realized Pay is the sum of salary, cash incentive, the payout value of share units granted during the period, the dividend equivalents paid, and the value of options exercised during the period.

(2) Realizable Pay is the sum of the current value of unvested units granted during the period and the in-the-money value of vested and unvested options that are still outstanding. The realizable value for 2017 represents options granted in 2017 which are out-of-the-money as of December 31, 2020.

(3) Represents the actual value to the CEO for each $100 awarded in TDC for the fiscal year indicated, as at the end of the period.

(4) Represents the value of a $100 investment in CIBC common shares made on the first day of the period indicated, assuming reinvestment of dividends.

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Compensation Discussion and Analysis

Mr. Panossian

As CFO & Enterprise Strategy, Mr. Panossian is responsible for strategy and corporate development, financial planning and analysis, financial and management reporting, maintenance of accounting records, regulatory reporting, tax planning and compliance, treasury and balance sheet management and liaising with CIBC’s investors.   Mr. Panossian made a strong contribution to CIBC’s fiscal 2020 financial performance in a challenging market environment and in achievement of CIBC’s strategic and risk appetite targets. Mr. Panossian delivered on his core mandate while also implementing significant operational and business capability improvements throughout 2020 and is well positioned to continue to deliver against the Finance strategy in 2021.

In fiscal 2020, Mr. Panossian contributed to the advancement of CIBC’s strategy and led the Finance function in alignment with CIBC’s purpose and exceeded most key employee engagement targets for the functions under his leadership.

Mr. Panossian was successful in completing several key initiatives this year while working to transform our bank. Of note, he:

- established an ‘Investment Committee’ responsible for ensuring alignment between enterprise strategy and large investments across the organization;

- realized savings by focusing on projects centered on efficiency initiatives and revenue benefits;

- developed comprehensive, detailed strategic and financial key performance indicators across our businesses; and

- launched a Finance Modernization program as a key strategic priority for CIBC.

Based on our BPF of 89% and the CEO’s assessment of his individual performance, the Board approved a fiscal 2020 GPS award for Mr. Panossian of $1.71 million, which was below his target incentive opportunity. The increase in Mr. Panossian’s 2020 GPS award over fiscal 2019 is reflective of his promotion effective November 1, 2019 and increase to his target TDC. Mr. Panossian received a one-time DSU award of $0.10 million to demonstrate an investment in him and represent a commitment to progress his compensation to align with the market over time. The award will cliff vest five years following the grant date. The details are provided in the table below.

Pay Element ($)	2020		2019
Salary (Fixed)		500,000		350,000
Cash		513,975		395,010
PSUs		959,420		474,012
Options		239,855		118,503
Total GPS (Variable)		1,713,250		987,525
TDC		2,213,250		1,337,525
One-time DSU Award		100,000
Total Compensation including one-time DSU Award		2,313,250

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Compensation Discussion and Analysis

Mr. Culham

As Group Head of Capital Markets and Direct Financial Services, Mr. Culham is accountable for CIBC’s Capital Markets business and Direct Financial Services. CIBC’s Capital Markets business provides integrated credit and Capital Markets products, investment banking advisory services, corporate lending, and top-ranked research to corporate, government and institutional clients around the world. As of March 2, 2020, Mr. Culham also took on responsibility for Direct Financial Services, which includes Simplii Financial, Direct Investing and Advice and the Alternate Solutions Group. Mr. Culham is also accountable for the oversight of CIBC FirstCaribbean and CIBC Mellon.

Mr. Culham supported CIBC’s strategy with his contributions to the successful integration of Cleary Gull, the establishment of CIBC’s Luxembourg office and his leadership of the Capital Markets business. Under Mr. Culham’s leadership, the US region’s Capital Markets revenue was up 32% year-over-year and the partnerships formed with Bank USA and the Wealth businesses in Canada are driving increased opportunities for Cleary Gull.

Under Mr. Culham’s strong leadership, in spite of the challenging economic environment, the Capital Markets business reported fiscal 2020 adjusted net income⁽¹⁾ of $1,131 million which was 19% higher than prior year, despite higher provision for credit losses to reflect the weaker economy. The Capital Markets business reported revenue growth of 18% due to the client- focused strategy and strong intrabank connectivity, driving cross referrals. The newly created Direct Financial Services under Mr. Culham’s leadership is an exciting and differentiated opportunity for CIBC. Simplii Financial is performing well despite the rate environment, our Alternate Solutions Group has a proven ability to innovate and grow, and our direct brokerage business had a strong year and recently won the J.D. Power award for customer service. Combining these businesses with an agile approach positions us well to compete for the ‘do-it-yourself’ client and drive outsized growth in the coming years. Mr. Culham also met or exceeded most key employee engagement targets and talent management metrics for Capital Markets and he continued to advance CIBC’s purpose-driven culture.

Based on our BPF of 89% and the CEO’s assessment of his individual performance, the Board approved a fiscal 2020 GPS award for Mr. Culham of $6.53 million, which was below his target incentive opportunity. Mr. Culham elected to defer 30% of his fiscal 2020 cash incentive into DSUs which are payable when he leaves CIBC. The details are provided in the table below.

Pay Element ($)	2020		2019
Salary (Fixed)		500,000		500,000
Cash		1,957,777		2,000,700
PSUs		3,654,518		3,734,640
Options		913,630		933,660
Total GPS (Variable)		6,525,925		6,669,000
TDC		7,025,925		7,169,000

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. We use these non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

Mr. Capatides

As Group Head, CIBC U.S. Region, President and CEO, CIBC Bank USA, Mr. Capatides is responsible for middle market commercial banking, wealth management, private banking, and retail and digital banking in the US market.   Mr. Capatides made strong contributions to advancing CIBC’s strategy and purpose through his leadership of CIBC US Commercial Banking and Wealth Management which contributed fiscal 2020 adjusted net income⁽¹⁾ of $441 million, 39% lower than prior year reflecting the lower rate environment and higher provision for credit losses related to the COVID-19 pandemic; however, revenues were supported by a 10% growth in loans and a 40% growth in deposits.

Under Mr. Capatides’ leadership, US Commercial Banking and Wealth Management increased the number of strategic relationships by 21%. He focused the team on key client segments and 35% of loan growth was achieved through new offices or new initiatives. Mr. Capatides led our bank in conducting a very successful effort in assisting our clients with the Paycheck Protection Program designed to support small businesses in the US impacted by the COVID-19 pandemic.

Mr. Capatides met or exceeded targets on most key employee engagement and talent management metrics for the functions under his leadership and he continued to advance our purpose-driven culture.

Based on our BPF of 89% and the CEO’s assessment of his individual performance, the Board approved a fiscal 2020 GPS award for Mr. Capatides of US$3.16 million, which was below his target incentive opportunity. The details are provided in the table below.

Pay Element (US$)	2020		2019
Salary (Fixed)		750,000		750,000
Cash		948,749		865,519
PSUs		1,770,999		1,615,635
Options		442,750		403,909
Total GPS (Variable)		3,162,498		2,885,063
TDC		3,912,498		3,635,063

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. We use these non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

Ms. Dottori-Attanasio

As Group Head, Personal and Business Banking, effective March 2, 2020, Ms. Dottori-Attanasio is responsible for advice, services and products to best meet the needs of clients through their preferred channels as CIBC seeks to help make their ambitions a reality. In her previous role as CRO, Ms. Dottori-Attanasio was responsible for strategic, market, credit, operational, liquidity and reputational risk, as well as compliance and anti-money laundering.   Ms. Dottori-Attanasio made a strong contribution in fiscal 2020 to advancing CIBC’s strategy and purpose through her leadership in both of her roles.  

Ms. Dottori-Attanasio’s focus on CIBC’s purpose significantly contributed to our COVID-19 response. The team demonstrated deep commitment to our clients, community and each other. The pandemic posed challenges for our clients and they needed us like never before and our team was there for them initiating creative approaches to help the populations that needed us the most. CIBC offered special support for seniors and persons with disabilities, reached out to clients directly to reduce the number of people having to go physically to a banking centre, implemented mortgage deferral options, credit card interest rate relief and support for small businesses.

CIBC’s Personal and Business Banking contributed fiscal 2020 adjusted net income⁽¹⁾ of $1,968 million, 20% lower than prior year as a result of the lower rate environment, lower transaction volumes and higher provision for credit losses to reflect the economic weakness. In spite of this, reported funds managed showed a 5% year-over-year growth and revenue was only slightly lower compared to last year. The team is also making progress in hiring diverse talent and turnover has reduced year-over-year.

Ms. Dottori-Attanasio advanced CIBC’s strategy by making significant progress in improving CIBC’s client experience results which are discussed on page 74.

In her previous role as CRO, Ms. Dottori-Attanasio supported the achievement of CIBC’s strategic objectives while ensuring CIBC managed risk effectively and complied with its risk appetite targets. Ms. Dottori-Attanasio led the Risk Management function in alignment with CIBC’s purpose and met many of the key talent management targets for businesses under her leadership.

Based on our BPF of 89% and the CEO’s assessment of her individual performance, the Board approved a fiscal 2020 GPS award for Ms. Dottori-Attanasio of $2.59 million which was below her target incentive opportunity. The details are provided in the table below.

Pay Element ($)	2020		2019
Salary (Fixed)		750,000		750,000
Cash		776,169		763,087
PSUs		1,448,849		1,424,430
Options		362,212		356,108
Total GPS (Variable)		2,587,230		2,543,625
TDC		3,337,230		3,293,625

(1) Adjusted results are non-GAAP measures and are discussed in the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report. We use these non-GAAP measures of adjusted diluted EPS and adjusted NIX ratio as elements in determining incentive compensation funding and measuring the performance of executives for executive compensation purposes as further explained in the “Assessing financial performance and determining compensation” section of this Circular on page 73.

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Compensation Discussion and Analysis

Backtesting of NEO total compensation versus TSR

The chart below compares CIBC’s cumulative TSR over the five-year period from November 1, 2015 through October 31, 2020, with the cumulative TSR of the S&P/TSX Composite and S&P/TSX Composite Banks indices over the same period. The change in annual NEO total compensation over this same period demonstrates the alignment of CIBC NEO pay with CIBC performance.

Five-year total return on $100 investment versus

CIBC NEO Total Compensation

Cumulative Return(1) (%)	2015		2016		2017		2018		2019		2020
CIBC		100.00		105.19		124.45		130.30		135.76		127.74
S&P/TSX Composite Index		100.00		112.70		125.63		121.35		137.38		134.22
S&P/TSX Composite Banks Index		100.00		116.68		143.55		141.99		156.55		135.31
CIBC NEO Total Compensation(2)		100.00		108.57		159.66		118.34		102.95		101.98

(1) With dividends reinvested.

(2) The 2015 CIBC NEO total compensation is expressed as $100 compared to total compensation for subsequent years. CIBC NEO total compensation includes salary, cash incentive, grant date value of equity incentive awards, the compensatory portion of the change in the accrued pension obligation in the year, and all other compensation as reported in the “Summary compensation table” on page 85 of this Circular. In 2016, CIBC determined that using the amounts for NEOs’ total compensation (instead of the amounts for TDC used in prior years), was more appropriate for the purposes of the foregoing disclosure and accordingly the amounts shown in the chart above for years prior to fiscal 2016 have been adjusted from those which appeared in prior proxy circulars. The 2017 CIBC NEO Total Compensation includes for Mr. Richman a deferred incentive award of US$8.20 (C$10.72) million, received upon the closing of CIBC’s acquisition of PrivateBancorp, Inc. The 2019 CIBC NEO Total Compensation shown includes only the five highest paid NEOs (six NEOs were disclosed in the 2019 proxy circular).

Cost of management ratio (COMR)⁽¹⁾

The table below summarizes CIBC NEO total compensation as a percentage of reported net income over the past three fiscal years. While the composition of NEOs may change from year to year, the fixed definition of executives included in this group allows for the comparability of compensation amounts between years.

Year	NEO Total Compensation(2)(4) ($000s)	Reported Net Income(3) ($000s)	NEO Total Compensation as a % of Reported Net Income(3)
2020	29,538	3,792,000	0.78
2019	29,817	5,121,000	0.58
2018	34,275	5,284,000	0.65

(1) COMR is not a defined term under Canadian securities legislation and is not a GAAP measure. As a result, CIBC’s COMR may not be comparable to that of other companies.

(2) CIBC NEO total compensation includes salary, cash incentive, grant date value of equity incentive awards, the compensatory portion of the change in the accrued pension obligation in the year, and all other compensation as reported in the “Summary compensation table” on page 85 of this Circular.

(3) COMR based on NEO total compensation as a percentage of adjusted net income was 0.66% for fiscal 2020, 0.55% for fiscal 2019 and 0.62% for fiscal 2018. For a further discussion of adjusted net income, see “Assessing financial performance and determining compensation” on page 73 and the Non-GAAP measures section starting on page 16 of CIBC’s 2020 Annual Report.

(4) For fiscal 2019, the NEO Total Compensation includes only the five highest paid NEOs (six NEOs were disclosed in the 2019 proxy circular).

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Compensation Discussion and Analysis

Talent Management and Succession Planning

Sustaining success over the long term will depend on our ability to build a strong, future-ready workforce; this entails being able to identify, develop and retain a pipeline of high-potential leaders. Our future-focused talent strategy concentrates on building the leadership capabilities required for future success, growing the strengths of our CIBC Team and collectively unlocking potential to ensure we are future-proofing our bank and strengthening our diverse talent pipelines to drive value for our bank today and tomorrow.

The Committee and Board review regular updates on the progress of our talent strategy, the strength and diversity of our pipeline of future leaders and the alignment of CIBC’s talent and business strategies. The Committee holds the CEO and EXCO members accountable for the progress of our talent strategy by setting specific goals on talent management, employee engagement and the strength of our leadership pipeline. Achievement against these goals is included in determining the performance and compensation for the CEO and EXCO members at the end of the year.

Throughout the year, the Committee conducts in-depth executive reviews focused on the strength and diversity of succession pools for key leadership roles across CIBC. At least once a year, the Committee and the Board review succession plans for the CEO and EXCO members across various time frames to ensure that management and the Board have choices when appointing talent in key roles. The Committee and management also discuss talent deeper in the pipeline, with potential over a longer horizon to develop into senior leaders in the organization.

In addition, the Committee reviews the progress of leadership development initiatives and receives reports on employee engagement, turnover, inclusion and diversity, external recognition of our workplace and other critical employee matters. CIBC continues to receive positive recognition as an employer, and in particular, for our work in the area of inclusion and diversity. We are confident that CIBC’s talent strategy is designed to attract and retain talented and engaged employees and leaders who are positioned to transform our bank and deliver on our purpose.

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Compensation Discussion and Analysis

Inclusion and Diversity

CIBC’s approach to inclusion and diversity emphasizes the importance of recruiting, retaining and advancing talent that reflects the communities we serve, growing the inclusive leadership capabilities of our people and making inclusion the way our bank does business. Each pillar of our strategy is tied to a strategic business outcome: fostering innovation, improving team performance and building stronger relationships with our clients.

Starting with our Board and our senior leadership team, CIBC’s commitment to inclusion and diversity is embedded into our bank’s talent and business strategies. Our senior leadership team and Board regularly assess progress against our inclusion and diversity goals and key performance indicators are considered during senior leaders’ annual performance assessments.

It remains a top organizational priority to close gaps where our workforce does not reflect the diversity of the clients and communities we serve. In 2020 we took concrete steps to accelerate progress and have set a new goal to have at least 4% of board-approved executive roles based in Canada held by leaders from the Black community by 2023. This forms part of the bank’s existing target to have at least 22% representation of visible minorities in board-approved executive roles by 2022. And, while we work towards achieving gender parity, we expect to have, at a minimum, 35% women in board-approved executive roles by the end of fiscal 2022. At the end of the 2020 fiscal year, 33% of these roles were held by women and 40% (4/10) of EXCO members (which typically includes the CEO) were women.

We have also made significant investments to increase the inclusive leadership capabilities of our team, including delivering Disrupting Unconscious Bias training to over 2,000 people managers and holding Blanket Exercises, interactive learning that supports reconciliation with Indigenous peoples, with over 200 senior leaders. In 2020, we launched new training for client-facing team members to help them disrupt unconscious bias, listen actively and demonstrate care for the unique needs of our clients.

CIBC is committed to helping all clients make their ambitions a reality. We work hard to strengthen financial literacy in Indigenous communities and help our clients through economic hardship caused by the COVID-19 pandemic. We also commit over $1 million each year to make banking more accessible to clients with a wide range of abilities, including seniors and persons with disabilities and, in 2020, partnered with the Government of Canada to create new opportunities for Black-led businesses through the Black Entrepreneurship Loan Fund.

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Compensation Disclosure

Summary compensation table

The table below shows the compensation earned in fiscal 2020, 2019, and 2018 by CIBC’s five NEOs.

Name and Principal Position	Year		Salary ($)		Share-based Awards(1) ($)		Option-based Awards(2) ($)		Non-equity Variable Incentive Awards(3) ($)		Pension Value(4) ($)		All Other   Compensation(5)   ($)		Total   Compensation   ($)
Victor Dodig		2020		1,000,000		5,126,400		1,281,600		1,602,000		666,000		2,250		9,678,250
CEO		2019		1,000,000		4,806,240		1,201,560		1,501,950		505,000		2,250		9,017,000
		2018		1,000,000		5,115,661		1,278,915		2,131,524		520,000		2,250		10,048,350
Hratch Panossian		2020		500,000		1,059,420		239,855		513,975		205,000		2,250		2,520,500
CFO & Enterprise		2019		350,000		474,012		118,503		395,010		39,000		2,250		1,378,775
Strategy		2018		320,959		480,432		120,108		400,360		38,000		2,250		1,362,109
Harry Culham		2020		500,000		3,654,518		913,630		1,957,777		214,000		2,250		7,242,175
Group Head, Capital		2019		500,000		3,734,640		933,660		2,000,700		150,000		2,250		7,321,250
Markets and Direct
Financial Services		2018		500,000		4,245,696		1,061,424		2,274,480		154,000		2,250		8,237,850
Michael Capatides(6)		2020		1,008,225		2,380,753		595,188		1,275,404		400,536		868,182		6,528,288
Group Head, CIBC U.S.		2019		996,975		2,147,664		536,916		1,150,534		325,789		982,712		6,140,590
Region, President and		2018		966,000		2,005,989		501,497		1,074,635		351,071		842,430		5,741,622
CEO, CIBC Bank USA
Laura Dottori-		2020		750,000		1,448,849		362,212		776,169		229,000		2,250		3,568,480
Attanasio		2019		750,000		1,424,430		356,108		763,087		163,000		2,250		3,458,875
Group Head,
Personal & Business		2018		750,000		1,603,925		400,981		859,244		170,000		2,250		3,786,400
Banking, Canada

(1) Amounts shown represent the grant date value of PSUs awarded under the PSU Plan for the specified fiscal years. The value of one PSU at grant is the average closing price of one CIBC common share on the TSX for the 10 trading days before December 1^st for the specified fiscal years. Mr. Panossian’s share-based award value includes a one-time C$100,000 DSU award granted in 2020. The value of one DSU at grant is the average closing price of one CIBC common share on the TSX for the 10 trading days before December 3^rd.

(2) Amounts shown are grant date fair values (compensation values) determined using a Black-Scholes model. For the specified fiscal years, the key model assumptions, accounting fair value (AFV) and variance between the compensation values and AFV are summarized in the tables below.

Measure	Grants made in December 2020 for fiscal 2020		Grants made in December 2019 for fiscal 2019		Grants made in December 2018 for fiscal 2018
Methodology	5-year Black-Scholes average		5-year Black-Scholes average		5-year Black-Scholes average
Risk-free rate (%)	0.80		1.58		2.27
Dividend yield (%)	5.27		5.24		4.88
Share price volatility (%)	17.3		15.1		19.4
Term (years)	10		10		10
Compensation value ($)	11.10		12.73		13.09
Name	2020		2019		2018
	AFV ($6.73 per option)	Variance ($)	AFV ($2.20 per option)	Variance ($)	AFV ($6.54 per option)	Variance ($)
Victor Dodig	776,965	504,635	207,590	993,970	638,965	639,950
Hratch Panossian	145,415	94,440	20,499	98,004	59,974	60,134
Harry Culham	553,886	359,744	161,306	772,354	530,309	531,115
Michael Capatides	349,953	245,235	92,649	444,267	257,761	243,736
Laura Dottori-Attanasio	219,593	142,619	61,525	294,582	200,340	200,641

(3) Non-equity Variable Incentive Awards consist entirely of the annual performance-based cash incentive. Executives may elect voluntarily to defer all or part of their annual incentive into DSUs. For 2020, 2019, and 2018, Mr. Culham elected to defer 30% of his cash incentive of $1,957,777, 50% of his cash incentive of $2,000,700 and 50% of his cash incentive of $2,274,480, respectively, into DSUs. Values will be converted to units based on the average share price in the 10 trading days preceding December 1, 2020.

(4) Amounts shown represent the “compensatory value” of changes in the pension obligation during the specified fiscal years. For Mr. Capatides, the amounts shown also include CIBC’s contributions to his US 401(k) savings plan of $12,536 in fiscal 2020, $14,789 in fiscal 2019 and $14,071 in fiscal 2018 converted to Canadian dollars at the average WM/Reuters exchange rate of US$1.00 = C$1.3443 for 2020, US$1.00 = C$1.3293 for 2019 and US$1.00 = C$1.2880 for 2018. In prior years, CIBC’s contributions to Mr. Capatides’ US 401(k) savings plan were included in the “All Other Compensation” column.

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Compensation Disclosure

(5) Amounts shown for Mr. Dodig, Mr. Panossian, Mr. Culham and Ms. Dottori-Attanasio represent CIBC’s contributions to their Employee Share Purchase Plan (ESPP) accounts.

For all NEOs, the amounts shown exclude the value of perquisites as they are less than $50,000 for each NEO. For the CEO, the amounts also exclude the value of any personal use of the CIBC plane by the CEO because he reimburses CIBC for this cost. The amounts shown also exclude dividend equivalent amounts earned on any PSU, Restricted Share Award (RSA) and/or DSU awards granted in prior years as the expected dividend equivalents were factored into the disclosed grant date fair value of the awards, as applicable. The reinvested dividend equivalent amounts for fiscal 2020, 2019 and 2018 are $936,933, $887,000 and $791,681, respectively, for Mr. Dodig; $70,953, $65,240 and $48,987 for Mr. Panossian; $974,696, $912,932 and $793,701 for Mr. Culham; $331,197, $338,471 and $311,583 in Canadian dollars for Mr. Capatides; and $316,545, $313,937 and $293,319 for Ms. Dottori-Attanasio.

Amounts shown for Mr. Capatides represent tax equalization payments made on his behalf for Canadian income taxes paid in excess of US income taxes.

(6) Compensation for Mr. Capatides is determined and paid in US dollars. All compensation figures, except for the Pension Value, have been converted to Canadian dollars at the average WM/Reuters exchange rate of US$1.00 = C$1.3443 for 2020, US$1.00 = C$1.3293 for 2019 and US$1.00 = C$1.2880 for 2018. Mr. Capatides’ Pension Value has been converted to Canadian dollars using the WM/Reuters spot exchange rate on October 31 of US$1.00 = C$1.3321 for 2020, US$1.00 = C$1.3169 for 2019 and US$1.00 = C$1.3163 for 2018.

Incentive plan awards – value vested or earned during the financial year

The table below includes information on the value of incentive plan awards vested or earned by each NEO during fiscal 2020.

Name	Value of Option-based Awards That Vested During the Year(1) ($)		Value of Share-based Awards That Vested and Paid Out During the Year(2) ($)		Value of Non-equity Variable Incentive Awards Earned During the Year(3) ($)
Victor Dodig		509,800		5,523,541		1,602,000
Hratch Panossian		27,147		487,257		513,975
Harry Culham		488,430		5,272,507		1,957,777
Michael Capatides		228,055		2,928,410		1,275,404
Laura Dottori-Attanasio		188,956		1,969,934		776,169

(1) Values shown are the difference between the exercise price of the awards and the closing price of CIBC common shares on the TSX on the vesting date. As the NEO may not have exercised the options on the vesting date or subsequently, the amount shown may not reflect an actual amount realized by the NEO.

(2) Values shown relate to the vesting and payment of PSUs in fiscal 2020. With respect to PSUs, the performance factor applied to the PSUs granted in December 2016 for fiscal 2016 to determine the final amount paid out to participants in December 2019 was 100%, based on CIBC’s ROE performance from November 1, 2016 to October 31, 2019.

(3) Values shown are the sum of annual performance-based cash incentives for fiscal 2020 disclosed in the Summary compensation table. Mr. Capatides’ annual cash bonus award was paid in US dollars and has been converted to Canadian dollars at an average WM/Reuters exchange rate for fiscal 2020 of US$1.00 = C$1.3443.

2017 PSU vesting

The vesting percentage for PSUs granted in 2017 that vested in December 2020 was 100% based on the average of the ROE performance factor of 95% and the TSR performance factor of 105%, resulting from a number four ranking in ROE and number three ranking in TSR over the three-year performance period. The vesting percentage calculation details for the specified fiscal year are shown in the table below. See “Deferred incentive award” starting on page 69 for the scale.

CIBC PSU Vesting Calculation for 2017 PSU Grants
	2018	2019	2020		Average		CIBC Rank	Performance		Vesting
ROE	16.6%	14.5%		10.0 %		13.7%	4		95%	100%
TSR	4.7%	4.2%		(5.9)%		1.0%	3		105%

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Compensation Disclosure

Incentive plan awards – outstanding option– and share-based awards

The table below shows the specified information for option-based and share-based awards previously awarded to the NEOs that remain outstanding as at October 31, 2020.

		Option-based Awards(1)										Share-based Awards(2)
Name	Compensation   Year	Securities           Underlying           Unexercised           Options           (#)		Option         Exercise         Price(3)          ($)		Option   Expiration   Date		Value of           Unexercised           in-the-           money           Options           ($)		Value of   Options       Exercised(4)(5)   ($)		Plan		Units or Shares   Not Vested   (#)		Market or   Payout Value   of Share-   based   Awards   Not Vested(6)   ($)		Market or   Payout Value   of Vested   Share-based   Awards   Not Paid Out   or Distributed   ($)
Victor Dodig	2013		—		90.52		08-Dec-2023		—		124,196
	2014		35,204		102.33		07-Dec-2024		—		—
	2015		51,544		97.81		06-Dec-2025		80,924		402,705
	2016		86,375		111.69		08-Dec-2026		—		—		DSU		—		—		2,711,842
	2017		78,271		120.02		13-Dec-2027		—		—		PSU		45,198		3,368,866		—
	2018		97,701		111.50		02-Dec-2028		—		—		PSU		50,446		3,759,988		—
	2019		94,359		109.87		08-Dec-2029		—		—		PSU		44,322		3,303,545		—
Hratch Panossian	2014		2,765		102.33		07-Dec-2024		—		—
	2015		4,503		97.81		06-Dec-2025		7,070		—
	2016		6,136		111.69		08-Dec-2026		—		—
	2017		6,161		120.02		13-Dec-2027		—		—		PSU		3,557		265,139		—
	2018		9,176		111.50		02-Dec-2028		—		—		PSU		4,738		353,115		—
	2019		9,307		109.87		08-Dec-2029		—		—		PSU		4,371		325,810		—
Harry Culham	2014		61,459		102.33		07-Dec-2024		—		—
	2015		81,000		97.81		06-Dec-2025		127,170		—		DSU		—		—		1,536,960
	2016		82,449		111.69		08-Dec-2026		—		—		DSU		—		—		776,578
	2017		73,715		120.02		13-Dec-2027		—		—		DSU		—		—		1,133,118
													PSU		42,567		3,172,732		—
	2018		81,087		111.50		02-Dec-2028		—		—		DSU		—		—		1,114,488
													PSU		41,867		3,120,568		—
	2019		73,321		109.87		08-Dec-2029		—		—		DSU		—		—		916,781
													PSU		34,440		2,566,986		—
Michael Capatides	2014		23,283		102.33		07-Dec-2024		—		—
	2015		37,820		97.81		06-Dec-2025		59,377		—
	2016		37,797		111.69		08-Dec-2026		—		—
	2017		32,889		120.02		13-Dec-2027		—		—		PSU		18,992		1,415,554		—
	2018		39,413		111.50		02-Dec-2028		—		—		PSU		20,350		1,516,782		—
	2019		42,113		109.87		08-Dec-2029		—		—		PSU		19,781		1,474,375		—
Laura Dottori-Attanasio	2015		15,668		97.81		06-Dec-2025		24,599		—		DSU		—		—		297,295
	2016		30,805		111.69		08-Dec-2026		—		—
	2017		27,699		120.02		13-Dec-2027		—		—		DSU		—		—		851,553
													PSU		15,995		1,192,175		—
	2018		30,633		111.50		02-Dec-2028		—		—		PSU		15,816		1,178,878		—
	2019		27,966		109.87		08-Dec-2029		—		—		PSU		13,136		979,075		—

(1) Options are in respect of CIBC common shares. Options generally vest 50% on the third anniversary and 50% on the fourth anniversary of the grant date.

(2) PSUs vest and are cash-settled at the end of three years and the number of units that vest is determined by CIBC’s ROE and TSR performance relative to CIBC’s compensation peer group.

The DSUs shown reflect annual performance-based incentive awards which have been deferred into DSUs by Mr. Dodig, Mr. Culham and Ms. Dottori-Attanasio. Such DSUs are fully vested but not payable until termination of employment, retirement or death.

For Mr. Panossian and Mr. Capatides, their RSAs vest and are cash-settled at the end of three years. The RSAs are a deferred incentive vehicle linked to CIBC share value as the vesting price is determined based on the average share price in the 10 trading days preceding the vest date.

(3) The option exercise price is equivalent to the closing market value of CIBC common shares on the trading day immediately preceding the date of grant.

(4) The value of options exercised during fiscal 2020 that were granted in previous years. Amounts are the proceeds received (the difference between the exercise price of the options and the market price of the CIBC common shares on the exercise date) before deductions for taxes and commissions.

(5) Amounts shown for Mr. Dodig relate to sale in December 2019 of 6,414 shares upon an exercise of his 2013 Employee Stock Option Plan (ESOP) grant and 33,000 shares upon an exercise of his 2015 ESOP grant. All proceeds were donated to charity.

(6) Amounts shown are the threshold payout values of 75% of the applicable units.

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Compensation Disclosure

Equity ownership of NEOs at October 31, 2020

All CIBC executives (including the NEOs) and Managing Directors are expected to hold a minimum amount of equity in CIBC. Equity ownership includes all shares held in the ESPP or personal investment accounts outside of CIBC, DSUs and PSUs. It does not include the value of any in-the-money option grants. Newly appointed executives and external hires have five years from their appointment date to meet the minimum guideline, while executives promoted to a more senior level have three years to meet the applicable guidelines. Share ownership guidelines extend into retirement for all NEOs and are noted in the table below.

The table below shows NEO equity ownership relative to the minimum guideline for their position.

	Minimum   Equity   Ownership   Guideline   (Multiple of   Salary)	Hold   Period   Following   Retirement   Date   (years)	Ownership(2)   (Multiple of   Salary)		Equity Ownership(1)
											Total(3)
									Direct Share
					DSUs		PSUs(2)		Holdings				Units
Name					($)		($)		($)		($)		(#)
Victor Dodig	8.0	2		23.4		2,711,842		13,909,866		6,789,303		23,411,011		235,571
Hratch Panossian(4)	5.0	1		3.3		-		1,258,752		376,501		1,635,253		16,455
Harry Culham	5.0	1		36.7		5,477,925		11,813,714		1,069,295		18,360,934		184,755
Michael Capatides(5)	5.0	1		7.2		-		5,875,614		1,385,854		7,261,468		73,068
Laura Dottori-Attanasio	5.0	1		8.1		1,148,849		4,466,836		467,295		6,082,980		61,209

(1) Amounts shown have been calculated using CIBC’s share price of $99.38 as at October 30, 2020 (the last trading day in the 2020 fiscal year).

(2) For purposes of determining Equity Ownership, PSUs are valued based on a performance factor of 100%.

(3) Amounts shown represent the aggregate number of CIBC common shares, DSUs, PSUs held.

(4) As a newly promoted Senior Executive Vice-President effective November 1, 2019, Mr. Panossian is on track to meet his share ownership guidelines by the end of fiscal 2022.

(5) For Mr. Capatides, his base salary has been converted from US dollars to Canadian dollars at an average WM/Reuters exchange rate for fiscal 2020 of US $1.00 = C$ 1.3443.

Securities authorized for issuance under equity compensation plans

The table below provides information at October 31, 2020 on common shares authorized for issuance under the ESOP and the PrivateBancorp Option Plans, which are the only CIBC equity compensation plans that provide for the issuance of shares from treasury.

	A		B		C
Equity Compensation Plans	Securities to be Issued upon Exercise of Outstanding Options (#)		Weighted-average Exercise Price of Outstanding Options ($)		Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities in column A) (#)
Approved by security holders		5,293,605		105.39		9,171,903
Not approved by security holders(1)		386,506		42.49		Nil
Total		5,680,111		100.39		9,171,903

(1) CIBC’s assumption of PrivateBancorp’s equity compensation plans in connection with its acquisition of PrivateBancorp, Inc. in June 2017 did not require approval by security holders under applicable securities legislation and stock exchange rules.

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Compensation Disclosure

Options outstanding and available for grant at December 31, 2020

The table below provides additional disclosure on options outstanding and available for grant under the ESOP and the options outstanding under the PrivateBancorp Plans.

	A				B				C = A+B
	Options Outstanding				Options Available for Grant				Total
Plan	(#)		% of Common Shares Outstanding		(#)		% of Common Shares Outstanding		(#)		% of Common Shares Outstanding
ESOP(1)		6,140,432		1.37		8,129,588		1.82		14,270,020		3.19
PrivateBancorp Plans(2)		353,447		0.08		Nil		Nil		353,447		0.08
Total		6,493,879		1.45		8,129,588		1.82		14,623,467		3.27

(1) At October 31, 2020, the total number of common shares issuable under options outstanding was 5,293,605, the total number of common shares issuable under options available for grant was 9,171,903 and the total number of common shares outstanding was 447,085,329.

(2) Upon the acquisition of PrivateBancorp, Inc. in June 2017, 1,119,211 CIBC common shares were reserved for issuance to settle outstanding PrivateBancorp option awards. These option awards were granted under the 2007 Long-Term Incentive Compensation Plan (2007 Plan), 2007 Strategic Long-Term Incentive Compensation Plan (Strategic Plan) and the 2011 Amended and Restated Incentive Compensation Plan (2011 Plan) (collectively, the PrivateBancorp Plans) and were converted into options to acquire CIBC shares based on the relative values of the PrivateBancorp, Inc. shares to the CIBC common shares pursuant to the acquisition.

CIBC’s limited use of options is reflected in the ratios shown in the table below, which are well within best practice guidelines.

Measure(1)	Year		ESOP		PrivateBancorp Plans
Dilution
•   number of options granted but not exercised/total number of common shares outstanding at the end of the fiscal year		2020		1.18%		0.09%
		2019		1.06%		0.10%
		2018		0.92%		0.15%
Overhang
•   (number of options available to be granted + options granted but not exercised)/total number of common shares outstanding at the end of the fiscal year		2020		3.24%		0.12%
		2019		3.30%		0.14%
		2018		3.37%		0.15%
Burn Rate(2)
•   total number of options granted in a fiscal year/weighted average number of common shares outstanding at the end of the fiscal year		2020		0.18%		—
		2019		0.20%		—
		2018		0.14%		—

(1) All figures are calculated as a percentage of common shares outstanding on October 31 of the specified fiscal years.

(2) The burn rate is expressed as a percentage calculated by dividing the number of options granted during the fiscal year (e.g., ESOP 818,290 for fiscal 2020) by the weighted average number of common shares outstanding at the end of the fiscal year (e.g., 445,434,923 for fiscal 2020).

Restrictions on trading and hedging CIBC Securities

To maintain the intended alignment between individual and shareholder interests, CIBC prohibits directors, officers and employees from using hedging strategies to offset a decrease in market value of CIBC securities. The policy specifically prohibits directly or indirectly:

• buying or selling call options, put options or forward derivative contracts with respect to CIBC shares;

• buying or selling any other over-the-counter derivative product used to hedge exposure to CIBC shares; and

• selling CIBC shares if they do not own or have not fully paid for them (i.e., a short sale).

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Compensation Disclosure

Deferred incentive compensation plans – key terms and conditions

The following tables summarize key terms and conditions of CIBC’s ESOP, PSU Plan and DSU Plan. The Committee and Board must approve changes to key terms and conditions and any other material amendments to these plans. Certain amendments to the ESOP are subject to shareholder approval. Annually, the Committee reviews an assessment by CIBC’s control functions of plan compliance with regulatory requirements and CIBC’s risk management, governance, control and policy requirements. When plan design changes and awards are recommended, the Committee reviews scenario analysis and backtesting to ensure the plan design objectives are achieved.

ESOP

Eligibility	•   Any full-time employee of CIBC (or any of its subsidiaries) as may be designated by the Committee.
Term	•   10 years from the date of grant (subject to a shorter term for changes in employment status or extension due to the application of trading restrictions as described below).
Vesting	•   Outstanding grants vest 50% on each of the third and fourth anniversaries of the grant date.
Exercise Price	•   Set by the Committee, but must not be less than the closing market price of CIBC common shares on the TSX on the trading day immediately preceding the date of grant. •   CIBC has established an option grant date policy that sets out a process for determining the date of grant for options, which is to be applied consistently to all options granted pursuant to the ESOP, and facilitates CIBC’s compliance with the requirements of the ESOP and the TSX for the grant of options. •   Where the Committee authorizes a grant of options at a time when CIBC’s internal trading restrictions are in effect or where the price of CIBC common shares otherwise does not reflect all material information known to management, the effective date of the grant is the date on which the trading restrictions have been removed or the third trading day after all material information regarding CIBC has been disclosed, respectively, unless a later date is specified by the Committee.
Securities Reserved for             Issue	•   The number of common shares which may be issued from treasury cannot exceed 52,634,500.
Individual and Insider Limits	•   Pursuant to the ESOP, the maximum number of common shares that may be issued to any one person upon the exercise of options may not exceed 5% of the number of common shares then outstanding; however, this number has been fixed at 1% of the number of CIBC common shares then issued and outstanding by resolution of the Committee. •   No options shall be granted to any participant if such grant could result in the number of CIBC common shares: (a) issued to insiders in any one year, or (b) issuable to insiders, at any time, in each case, pursuant to the exercise of options issued under the ESOP, or when combined with all other securities-based compensation arrangements, exceeding 10% of the issued and outstanding CIBC common shares.
Termination	•   Resignation or termination of employment with cause: options are forfeited after 30 days. •   Termination of employment without cause: unvested options continue to vest, and vested options remain outstanding and exercisable, for the length of the employee severance period. •   Retirement: options continue to vest and can be exercised subject to the original vesting and expiry dates, provided the participant is 55 years of age or older on retirement.
Blackout Period Extension	•   The term of options that are scheduled to expire during, or shortly after, a period in which the option holder is prohibited from exercising the option due to trading restrictions is automatically extended so that they expire 10 business days after any applicable trading restrictions end.
Stock Appreciation Rights (SARs)	•   CIBC may attach a term to options that up to 50% of the options granted can be exercised as SARs (there are currently no outstanding options with SARs attached to them).
Assignability	•   ESOP award recipients are generally not permitted to assign or transfer their options. An option recipient may assign their rights to, or to the benefit of, a spouse, minor child or minor grandchild, or a trust of which any combination of the option recipient and any of the foregoing are beneficiaries, with CIBC’s prior approval.

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Compensation Disclosure

Amendments

•   Shareholder approval is required for the following amendments (unless the change results from application of the anti-dilution provisions of the ESOP): –   increasing the number of common shares that can be issued under the ESOP; –   reducing the strike (exercise) price of an outstanding option; –   extending the expiry date of an outstanding option or amending the ESOP to permit the grant of an option with an expiry date of more than 10 years from the grant date; –   changing the provisions relating to the transferability of options, other than for estate settlement purposes; –   expanding the categories of individuals eligible to participate in the ESOP; –   amending the ESOP to provide for other types of compensation through equity issuance; –   removing or exceeding the insider participation limit contained in the ESOP; –   amending the ESOP’s amending provisions; or –   making any amendment to the ESOP for which shareholder approval is required under applicable laws or stock exchange rules. Beyond these material plan amendments, the Committee may make changes to the ESOP, or the administration thereof, from time to time without shareholder approval (such as administrative changes, of a drafting or clarifying nature or to address regulatory and other developments and setting the terms, conditions and mechanics of grant, including with respect to vesting, exercise and expiry). In setting and amending the terms of CIBC’s stock option plans, the Committee reviews and recommends the terms and conditions of any new plan or any change in the terms and conditions of any existing plan to the Board for approval.

Clawback

•   Grants are subject to clawback for misconduct(1).

(1) Any individual who engages in misconduct that results in a significant financial loss to CIBC or causes or caused a material restatement of CIBC’s financial statements will be required to repay to CIBC upon demand the total value of any gains arising from options that vested and were exercised within the 12 months preceding the date on which CIBC determined that such significant loss occurred or such material restatement of its financial statements is required due to the individual’s misconduct. In addition, all outstanding options that vested within the previous 12 months will be cancelled.

Misconduct is defined as (i) serious misconduct, (ii) fraud, (iii) a material breach of the terms and conditions of employment,(iv)willful breach of the provisions of CIBC’s Code of Conduct of sufficient gravity to justify the application of this provision,(v) the failure or willful refusal to substantially perform the grantee’s material duties and responsibilities, (vi) the conviction of the grantee for any crime involving fraud, misrepresentation or breach of trust, or (vii) any other circumstances sufficient for a termination of employment for cause.

PSU Plan⁽¹⁾

Grants	•   Grants are typically awarded as a dollar amount. •   Number of PSUs granted is based on the: - dollar value of the award; and - average closing price of CIBC common shares on the TSX for the 10 trading days before a fixed date.
Dividend Equivalents	•   Dividend equivalents are reinvested and paid out at the same time, and subject to the same performance conditions, as the underlying PSUs.
Performance Conditions	•   PSUs are subject to satisfaction of performance criteria at time of vesting based on CIBC’s TSR and adjusted ROE performance (or, for PSUs granted prior to F2020, reported ROE performance) compared with CIBC’s peer group.
Performance Period	•   Three years.
Vesting	•   Vest at the end of the three-year period.
Payout	•   Payouts vary from 75% to 125% of the value of the number of PSUs granted depending on performance against the criteria described above. The performance period spans the three fiscal years that begin on the first day of the fiscal year in which the grants were made. •   Vested PSUs pay out in cash, with each unit valued based on the average closing price of CIBC common shares on the TSX for the 10 trading days before a fixed date.
Clawback	•   Grants are subject to: - clawback in the event of misconduct(2); and - cancellation in certain cases for unexpected losses(3).

DSU Plan⁽¹⁾    

Grants	•   Grants are typically awarded as a dollar amount. •   Number of DSUs granted is based on the: - dollar value of the award; and - average closing price of CIBC common shares on the TSX for the 10 trading days preceding the fixed date.
Dividend Equivalents	•   Dividend equivalents are reinvested and paid out when the underlying DSUs are paid.
Deferral	•   DSUs allow for a longer payout deferral than the typical three-year limit in Canada.
Vesting	•   The Board has discretion to set the vesting period and any vesting conditions, which may include performance- related vesting conditions. •   When granted as part of a voluntary deferral of the executive’s cash incentive award, awards vest immediately.
Payout	•   Vested DSUs pay out in cash after the termination of employment, retirement or death, subject to Plan termination provisions and income tax requirements. •   The payout price of each DSU will be the average closing price of CIBC common shares on the TSX over the ten trading days preceding the payment date.
Clawback	•   Grants are subject to clawback for misconduct(2).

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Compensation Disclosure

(1) CIBC hedges its financial exposure resulting from changes in the CIBC share unit value through a total return swap arrangement with a third-party financial institution.

(2) Any individual who engages in misconduct that results in a significant financial loss to CIBC or causes or caused a material restatement of CIBC’s financial statements will be required to repay to CIBC upon demand the total value of any incentive payment made within the 12 months preceding the date on which CIBC determined that such significant loss occurred or such material restatement of its financial statements is required due to the individual’s misconduct. In addition, all unvested and any outstanding deferred incentive compensation (PSUs or DSUs) that vested within the previous 12 months will be cancelled. Misconduct for this purpose is defined in note (1) on the previous page.

(3) The performance clawback provisions provide that in the event of an unexpected loss for CIBC, the SBUs or key lines of business that is greater than, or equal to, the aggregate of the last three years of Net Income Before Tax, CIBC has discretion to cancel up to 100% of that year’s vesting PSUs, where CIBC determines a participant’s negligence or certain failures substantially contributed to the loss. The clawback can be applied to all or a group of individuals within the specific business unit where the significant unexpected loss occurred as well as in the associated functional group.

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Compensation Disclosure

Deferred incentive compensation plans assumed upon acquisition of PrivateBancorp, Inc. – terms and conditions

In connection with CIBC’s acquisition of PrivateBancorp, Inc., all outstanding options to purchase common stock of PrivateBancorp, Inc. were converted into options to purchase CIBC common shares and all the outstanding restricted stock awards of PrivateBancorp, Inc. were cancelled and replaced with CIBC RSAs, in each case on substantially the same terms and conditions as were applicable under the PrivateBancorp awards (including the same vesting terms).

The table below summarizes key terms and conditions of two plans assumed by CIBC upon the acquisition of PrivateBancorp, Inc. with outstanding treasury-settled awards. These are the 2007 Long-Term Incentive Compensation Plan (2007 Plan) and 2011 Amended and Restated Incentive Compensation Plan (2011 Plan). These two plans, together with the 2007 Strategic Long-Term Incentive Compensation Plan (Strategic Plan)⁽¹⁾ are collectively referred to as the PrivateBancorp Plans.

2007 Plan	Outstanding equity awards consist of vested, exercisable stock options with expiry dates through April 1, 2021.
2011 Plan	Outstanding equity awards consist of: 1) vested, exercisable stock options with expiry dates through 2021; 2) vested stock options which cliff vested in 2018 and 2019 with expiry dates through June 1, 2026; and 3) vested restricted stock award units subject to delayed settlement over a period into 2022.
Eligibility	•   Outstanding awards were originally granted as PrivateBancorp awards to employees and directors of PrivateBancorp or a subsidiary thereof, and converted and/or cancelled and replaced with CIBC awards in connection with the acquisition of PrivateBancorp, Inc. Except as necessary to facilitate the conversion, exchange or settlement, as the case may be, of PrivateBancorp awards which were outstanding under the plans at the time the plans were assumed by CIBC, no further awards have been or will be granted under the PrivateBancorp Plans.
Term	•   Stock options under each of the PrivateBancorp Plans generally have a term of 10 years from the date of grant.
Vesting	•   All equity awards under the 2007 Plan and the 2011 Plan are fully vested with the last vesting occurring in February 2020.
Exercise Price	•   The exercise price for each share of common stock covered by the non-qualified stock option grant was not less than one hundred percent (100%) of the fair market value of the common stock on the date of grant of such award.
Payout	•   For the 2011 plan, restricted stock award units are cash-settled. •   For vested restricted stock units, the dividends continue to accumulate and are paid out upon settlement.
Securities Reserved for Issue	•   The maximum number of CIBC common shares which may be issued from treasury under the 2007 Plan and the 2011 Plan shall not exceed 150,000 and 1,000,000, respectively.
Termination	•   The disposition of the grant of each award in the event of retirement, disability, death or other termination of a participant’s employment shall be as determined by the Committee and set forth in the award agreement.
Assignability	•   Except as provided below, no award may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of the stock options granted to a participant to be on terms that permit transfer by such participant to:
	(i)   the spouse, children or grandchildren of the participant (“Immediate Family Members”);
	(ii)  a trust or trusts for the exclusive benefit of the participant or such Immediate Family Members (or both); or
	(iii) a partnership in which the participant or such Immediate Family Members (or both) are the only partners, provided that:
	(A)  there may be no consideration for any such transfer;
	(B)  the award agreement pursuant to which such stock options are granted expressly provides for transferability in a manner consistent with the PrivateBancorp Plans; and
	(C)  subsequent transfers of transferred stock options shall be prohibited except those in accordance with the PrivateBancorp Plans.
Amendments	•   The Board may at any time and from time to time, alter, amend, suspend or terminate the plan in whole or in part, subject to any requirement of shareholder approval imposed by applicable law, rule or regulation. No termination, amendment, or modification of the plan shall adversely affect in any material way any award previously granted under the plan, without the written consent of the participant holding such award.
Clawback(2)	•   Awards are subject to recovery or “clawback” under the plan or any of CIBC’s policies applicable to the grantee.

(1) The Strategic Plan was also assumed by CIBC upon the acquisition of PrivateBancorp, Inc. However, no awards vested under the Strategic Plan since fiscal 2018 and it no longer has any outstanding awards.

(2) Allows for the recoupment of annual and long-term incentive compensation paid to executive officers if the criteria upon which it was based is determined to have been incorrect or incomplete, or where the recipient engaged in illegal, dishonest, fraudulent or intentional misconduct that materially impacted the size of the award. The clawback rights apply during the three-year period following the date that a bonus was made or the date that restrictions on restricted shares lapse.

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Compensation Disclosure

Retirement Benefits

All NEOs participate in Defined Benefit (DB) pension plans on the same basis as all other CIBC employees in either Canada or the US, which are subject to limitations defined by the Income Tax Act in Canada, or US tax regulations in the US.

Supplemental DB pension benefits for the NEOs (excluding Mr. Capatides, subject to the discussion below) are provided under a Supplemental Executive Retirement Plan (SERP). For the NEOs promoted before January 1, 2016, being Mr. Dodig, Mr. Culham and Ms. Dottori- Attanasio, the SERP provides for a final average earnings pension benefit for each year of pensionable service where earnings include a portion of incentive compensation up to a cap. This means that SERP benefits do not increase commensurate with earnings. For NEOs promoted on or after January 1, 2016, being Mr. Panossian, the SERP provides for a flat dollar pension accrual, which is irrespective of earnings, for service only from SERP appointment.

Mr. Capatides is also eligible for equivalent supplemental benefits on the same basis as the Canadian NEOs, except denoted in US dollars. Effective January 1, 2021, the DB pension plan covering US employees was frozen and the existing Defined Contribution 401(k) savings plan was enhanced. Notwithstanding the US DB pension plan freeze, Mr. Capatides will continue to earn supplemental benefit service credits after January 1, 2021.

Payment of SERP benefits, including for Mr. Capatides, is subject to compliance with certain non-solicitation and non-competition covenants.

Key provisions applicable to Mr. Dodig, Mr. Culham, Ms. Dottori-Attanasio and Mr. Capatides are summarized in the table below:

Pension Formula	•   2% of final average earnings per year of pensionable service (maximum of 35 years of service), offset by other CIBC-provided retirement income benefits.
	•   The overall annual pension payable to Mr. Dodig is subject to an overall limit of $1,000,000.
	•   For Mr. Capatides, his supplemental benefit is further offset by a notional monthly annuity representing his 401(k) matching contributions provided by CIBC.
Final Average Earnings	•   The sum of:
	–    the average of the best consecutive five years of salary in the last 10 years before retirement; and
	–    the average of the best five years of annual cash bonus awards in the last 10 years before retirement.
	•   Subject to the following limits:
	–    $2,300,000 for Mr. Dodig
	–    $913,500 for Mr. Culham and Ms. Dottori-Attanasio
	–    $1,216,873(1) for Mr. Capatides
Reduction for Early Retirement	•   Pensions are reduced by 4% for each year that retirement age precedes age 61 for Mr. Dodig and Mr. Capatides. •   For Mr. Culham and Ms. Dottori-Attanasio, pensions are reduced by 4% for each year that retirement age precedes age 61 for pension service accrued to December 31, 2012 and by 4% for each year that retirement precedes age 65 for pension service from January 1, 2013 forward.
Government Pension Adjustment	•   Pensions are reduced from age 65 by the maximum Canada/Québec Pension Plan benefit payable at that time. Mr. Capatides’ pension will be reduced by the maximum primary insurance amount payable from the Social Security Normal Retirement Age.
Form of Pension	•   Pension payments are made for the life of the executive. In the event of death of the executive, 50% of the pension is continued for the life of the executive’s spouse. Other optional forms of payment are made available on an actuarially equivalent basis.

(1) The limit on final average earnings for Mr. Capatides is US$913,500. This amount has been converted to Canadian dollars in the chart above using the October 31, 2020 WM/Reuters spot exchange rate of US$1.00 = C$1.3321.

The key provisions applicable to Mr. Panossian are summarized in the table below:

Pension Formula	•   A flat dollar accrual rate of $12,500 per year of SERP pensionable service only (maximum of 35 years of service).
Reduction for Early Retirement	•   Pensions are reduced by 4% for each year that retirement age precedes age 65.
Form of Pension	•   Pension payments are made for the life of the executive only. Other optional forms of payment are made available on an actuarially equivalent basis.
Vesting	•   Mr. Panossian’s SERP benefits are vested on attainment of age 55 and 5 years of service.

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Compensation Disclosure

The table below provides additional information related to NEO Defined Benefit pension obligations:

					Defined Benefit Plans
	Number of Years of Credited Service		Annual Benefits Payable Vested and Unvested(1) ($)				Opening Present Value of Defined Benefit Obligation(4) ($)		Compensatory Change(5) ($)		Non-Compensatory Change(6) ($)		Closing Present Value of Defined Benefit Obligation(7) ($)
Name			At October 31, 2020(2)		At Age 65(3)
Victor Dodig		15.3		702,000		1,000,000		8,794,000		666,000		1,032,000		10,492,000
Hratch Panossian		8.9		111,000		511,000		380,000		205,000		97,000		682,000
Harry Culham		12.2		116,000		332,000		1,121,000		214,000		119,000		1,454,000
Michael Capatides(8)		25.0		591,000		591,000		8,478,000		388,000		(281,000)		8,585,000
Laura Dottori-Attanasio		11.5		210,000		420,000		2,210,000		229,000		120,000		2,559,000

(1) These amounts represent the estimated annual pension payable at age 65 for vested and unvested credited service accrued to the date shown, assuming that final average earnings for SERP participants will be at or above the applicable SERP compensation limit. In addition to joining the SERP effective September 1, 2015, Mr. Culham has seven years of service credited under the CIBC Pension Plan that is not recognized under the SERP. Mr. Culham’s pension from the CIBC Pension Plan is equal to the maximum pension permitted to be paid from the CIBC Pension Plan as prescribed by the Income Tax Act, and is included in the amounts above. Mr. Panossian has 2.3 years of service credited under the CIBC Pension Plan which are not recognized under the SERP. For the NEOs except Mr. Panossian, the SERP pension in Canada will be offset by the maximum Canada Pension Plan benefit amount starting at age 65, and for Mr. Capatides, the maximum primary insurance amount under US Social Security starting at the Social Security Normal Retirement Age.

(2) The amounts shown are fully vested for all NEOs except for Mr. Panossian. Vested annual benefits payable to Mr. Panossian as at October 31, 2020 is $28,000. Mr. Panossian’s benefits vest in accordance with the terms of the SERP.

(3) Mr. Dodig is eligible to retire at age 61 with an unreduced pension estimated at $958,000 annually. Mr. Capatides is eligible to retire with an immediate unreduced pension of $591,000 annually. All other NEOs are eligible to retire with an unreduced pension at age 65. The CIBC Pension Plan benefits for Mr. Culham and Mr. Panossian were determined using the Income Tax Act limits applicable in 2020.

(4) These amounts represent the present value of the NEO’s projected pension earned for service up to October 31, 2019. Amounts have been calculated using the same actuarial assumptions used for CIBC’s financial statement disclosure. Key actuarial assumptions include:

– an annual discount rate of 3.07% (3.26% for Mr. Capatides);

– an annual compensation increase that varies by age and tenure of the executive before taking into account limits on final average earnings;

– no allowance for future increases in compensation limits or the different tax treatment of registered pension plans versus supplemental pension benefits; and

– assumed retirement dates reflecting CIBC Pension Plan experience.

(5) These amounts represent the fiscal 2020 annual service cost and, where applicable, the impact on present value of defined benefit obligations of any differences between actual and estimated earnings. Amounts have been calculated using the actuarial assumptions and discount rate of 3.14% up to January 31, 2020 and 2.80% up to October 31, 2020 (3.13% for Mr. Capatides in the US) consistent with the fiscal 2020 pension expense reported in CIBC’s financial statement disclosure.

(6) These amounts include interest on the opening present value of the defined benefit obligation, experience gains and losses other than those associated with compensation levels, differences in US/Canada exchange rates during the year and changes in actuarial assumptions.

(7) These amounts represent the present value of the NEO’s projected pension earned for service up to October 31, 2020. Amounts have been calculated using the same actuarial assumptions used for CIBC’s financial statement disclosure. Key actuarial assumptions include:

– an annual discount rate of 2.83% (2.85% for Mr. Capatides);

– an annual compensation increase that varies by age and tenure of the executive before taking into account limits on final average earnings;

– no allowance for future increases in compensation limits or the different tax treatment of registered pension plans versus supplemental pension benefits; and

– assumed retirement dates reflecting CIBC Pension Plan experience.

(8) Mr. Capatides’ estimated annual pension has been translated to Canadian dollars using the October 31, 2020 WM/Reuters spot exchange rate of US$1.00 = C$1.3321.

Mr. Capatides participates in the US 401(k) savings plan on the same basis as other US employees. Participants may choose to contribute up to 6% of their eligible earnings which will attract a 50% match from CIBC up to a maximum of 3%. From time to time, CIBC, at its discretion, may also remit additional non-discriminatory contributions to all US employees participating in the 401(k) savings plan. All contributions to the 401(k) savings plan are subject to applicable Internal Revenue Service limits.

The table below provides additional information related to NEO Defined Contribution pension obligations:

	Defined Contribution Plans
Name	Accumulated Value at start of year ($)	Compensatory Change(1) ($)	Accumulated value at end of year ($)
Michael Capatides(2)	2,564,448	12,536	2,601,890

(1) The compensatory change consists of the contributions made by CIBC into the member’s 401(k) account during the fiscal year converted to Canadian dollars at the average WM/Reuters exchange rate of US$1.00 = C$1.3443.

(2) The accumulated values have been converted to Canadian dollars using the WM/Reuters spot exchange rate on October 31 of US$1.00 = C$1.3321 for 2020 and US$1.00 = C$1.3169 for 2019.

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Compensation Disclosure

Change of Control contracts

CIBC adopted a Change of Control Policy in 2001. This policy, which covers certain senior executive officer roles, including all the NEOs, recognizes the importance to CIBC and our shareholders of neutralizing potential conflicts of interest and stabilizing key management roles in connection with potential or actual change of control activity. The underlying premise of the policy is that, under a change of control, no additional benefits would be conferred on an officer than would be otherwise provided under a standard severance arrangement, recognizing there are some distinct features to the Change of Control Policy related to the unique circumstances being addressed. The provisions of the policy are reviewed by the Committee on a regular basis for consistency with current best practice and to confirm that the list of officers to which the policy applies is appropriate. The key terms of the policy are the following:

Eligibility	•   Certain senior officers of CIBC, including each of the NEOs.
Coverage Period	•   24 months following the date of the change of control.
Trigger Events (i.e., “Double Trigger”)	•   The policy includes a “Double Trigger” where severance payouts, accelerated vesting of deferred incentive compensation and accrued pension occur only if both:
	(1)  a change of control event occurs; and
	(2)  the officer’s employment is terminated without cause or the officer resigns during the coverage period for one of the reasons listed below, as specified in the policy:
	–    a material reduction in the officer’s total compensation opportunities, job responsibilities, duties or reporting relationship;
	–    a material reduction in the officer’s title, unless the change is a result of a different titling structure or is to a title of essentially the same rank;
	–    a change in the officer’s work location that requires the officer to devote more than 50% of his/her working time over a period of three months at a location that is more than 50 miles/80 kilometers from his/her normal work location before the change of control event; or
	–    any other change in the officer’s employment constituting constructive dismissal under applicable law.
Severance Benefits	•   Upon the “Double Trigger”, the greater of:
	(1)  two times the sum of annual salary plus the greater of the average annual cash incentive for the three immediately preceding fiscal years, and the average target cash incentive for the three immediately preceding fiscal years(1); and
	(2)  the amount the officer may be entitled to under any employment contract (as disclosed in footnote (3) to the Termination and change of control benefits table on page 97) or applicable law.
Vesting of Deferred Incentive Compensation and Pension	•   Upon the “Double Trigger”, all deferred incentive compensation awards and any unvested accrued pension vest. For PSUs, the number of units vesting is determined by applying the relevant performance criterion for the period from the grant date to the termination date.
Pension Benefits	•   Upon the “Double Trigger”, and only for participants who were SERP members prior to May 27, 2015, pension is paid in accordance with the standard terms of the SERP but with two years of service added to credited service (subject to an overall cap of 35 years of service). For participants who became members of the SERP on or after May 27, 2015, additional service credits will only be provided when the participant qualifies under CIBC’s executive severance guidelines to have severance paid in the form of salary continuance.

(1) In addition, a cash amount of 10% of salary is paid in lieu of continued participation in CIBC’s pension, health and welfare benefits plans that would otherwise be payable during the severance period.

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Compensation Disclosure

Termination and change of control benefits

The table below summarizes estimated incremental payments, payables and benefits which each NEO would be contractually entitled to in the event of a termination without cause or change of control where the executive is terminated without cause or resigns during the coverage period for reasons specified in the Change of Control Policy. Amounts do not include any potential greater common law entitlements.

Name	Compensation Element	Estimated Incremental Payment at October 31, 2020(1)
		Termination Without Cause(2) ($)		Change of Control(3) ($)
Victor Dodig	Cash		0		5,525,000
	Deferred Compensation Incremental Value		0		0
	Benefits		0		200,000
	Total Incremental Payment		0		5,725,000
	Annual Pension Increment		0		92,000(4)
Hratch Panossian	Cash		1,910,897		1,913,333
	Deferred Compensation Incremental Value		0		0
	Benefits		100,000		100,000
	Total Incremental Payment		2,010,897		2,013,333
	Annual Pension Increment		0		108,000(4)
Harry Culham	Cash		2,577,653		5,155,305
	Deferred Compensation Incremental Value		0		0
	Benefits		50,000		100,000
	Total Incremental Payment		2,627,653		5,255,305
	Annual Pension Increment		0		0(4)
Michael Capatides	Cash		0		4,361,996
	Deferred Compensation Incremental Value		0		0
	Benefits		0		199,815
	Total Incremental Payment		0		4,561,811
	Annual Pension Increment		0		49,000(4)
Laura Dottori-Attanasio	Cash		3,099,000		3,120,000
	Deferred Compensation Incremental Value		0		0
	Benefits		0		150,000
	Total Incremental Payment		3,099,000		3,270,000
	Annual Pension Increment		0		37,000(4)

(1) No incremental amounts are payable upon retirement, resignation (other than for reasons specified in the Change of Control Policy) or termination with cause. In addition, no incremental amount would be received in respect of accelerated vesting of option- or share-based awards, if any, on the assumption that the discount rate applied to calculate the net present value of the accelerated entitlements is not greater than the rate at which the CIBC common shares would otherwise be expected to appreciate over the period of acceleration. For information regarding outstanding option- and share-based awards as at October 31, 2020, see “Incentive plan awards – outstanding option- and share-based awards” on page 87.

The Cash, Benefits and Annual Pension amounts for Mr. Capatides have been converted to Canadian dollars at the October 31, 2020 WM/Reuters spot exchange rate of US$1.00 = C$1.3321.

(2) Amounts shown as Cash for Mr. Panossian, Mr. Culham and Ms. Dottori-Attanasio represent entitlements to cash payments in lieu of notice. For Mr. Panossian, the cash payment is equal to two times the sum of base salary, average annual cash bonus for the prior three years and annual car allowance. For Mr. Culham, the cash payment is equal to the sum of annual salary and average annual cash bonus for the prior three years. For Ms. Dottori-Attanasio, the cash payment is equal to two times the sum of base salary and average cash bonus for the prior three years. The amounts shown as Benefits are in lieu of continued participation in CIBC’s pension, health and welfare benefit plans, equal to a cash payment of one-twelfth of 10% of the annual salary, multiplied by the length of severance payment period for Mr. Panossian, and equal to a cash payment of 10% of the annual salary for Mr. Culham.

For all NEOs, unvested PSU awards would continue to be eligible to vest and pay out over the normal schedule. Options would continue to be eligible to meet time-based vesting conditions over the severance period and expire at the end of the severance period.

(3) Amounts shown as Cash for all NEOs represent severance benefits upon a “double trigger” event. For information on the cash payments, see “Change of Control contracts” on page 96 of the Circular.

Amounts shown as Benefits are cash payments in lieu of continued participation in CIBC’s pension, health and welfare benefit plans. Each NEO would receive a cash payment equal to 10% of the amount representing salary in the Change of Control severance payment.

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Compensation Disclosure

(4) Annual Pension Increment amounts for Mr. Dodig, Mr. Capatides, Ms. Dottori-Attanasio and Mr. Panossian are the incremental annual lifetime pension amounts payable from their unreduced early retirement age (age 61 for Mr. Dodig, immediately for Mr. Capatides, and age 65 for Ms. Dottori-Attanasio and Mr. Panossian) as a result of being entitled to two years of additional credited service and any remaining vesting requirements being waived. Unlike the other NEOs, Mr. Panossian is not vested at October 31, 2020 and therefore his Annual Pension Increment amount consists of the value of waiving the vesting requirements and receiving two years of additional credited service.

The present values at October 31, 2020 of the Annual Pension Increment amounts are $1,538,000 for Mr. Dodig, $861,000 for Mr. Capatides, $481,000 for Ms. Dottori-Attanasio and $916,000 for Mr. Panossian. The actuarial assumptions used to determine the present values are consistent with the assumptions used for the October 31, 2020 year-end pension plan liabilities which are disclosed in CIBC’s financial statements, with the exception that the assumed retirement age is based on the first date of retirement eligibility. Payment of the Annual Pension amounts is subject to the NEO’s acceptance of certain non-solicitation and non-competition covenants. Annual Pension Increment amount is $0 for Mr. Culham as he joined the SERP after May 27, 2015, the date the Change of Control Policy was amended to eliminate the provision of additional pension service credit upon Change of Control.

Additional disclosure under the FSB and Basel Committee on Banking Supervision

The following table provides disclosure under Standard 15 of the FSB Principles for Sound Compensation Practices and their Implementation Standards and Pillar III of the Basel Committee.

For purposes of these tables, CIBC includes in the FSB terms “senior executive officers” and “employees whose actions have a material impact on the risk exposure of the firm”, the NEOs and those employees who CIBC has determined are “material risk takers” based upon an assessment of each role’s ability to have a material impact on the risk exposure to CIBC.

Amounts denominated in foreign currencies have been converted to Canadian dollars at exchange rates used in the annual compensation process. Other issuers that make disclosure of this type may include different officers and employees in these categories, so the amounts disclosed by CIBC may not be comparable to the amounts disclosed by other issuers.

Amounts and form of remuneration awarded(1)
	2020				2019
(All figures in $)	NEOs		Other Material Risk Takers		NEOs		Other Material Risk Takers
Fixed salary		3,800,000		37,500,000		5,000,000		38,300,000
Variable compensation
– Cash		6,100,000		75,700,000		7,300,000		79,000,000
– Equity		16,900,000		66,200,000		18,300,000		68,700,000
– Share-linked		16,900,000		66,200,000		18,300,000		68,700,000
– Other		—		—		—		—
Total variable compensation		23,000,000		141,900,000		25,600,000		147,700,000
Total remuneration		26,800,000		179,400,000		30,600,000		186,000,000
Number of beneficiaries		5		110		6		113
Deferred compensation awarded and paid out(2)
Awarded for the fiscal year		16,900,000		66,200,000		18,300,000		70,900,000
Payouts during the fiscal year(3)		16,700,000		70,400,000		15,600,000		63,200,000
Outstanding deferred compensation(4)
Vested		9,600,000		13,000,000		14,700,000		20,600,000
Unvested		37,300,000		178,300,000		54,400,000		216,400,000
Total		46,900,000		191,300,000		69,100,000		237,000,000
Implicit and explicit reductions(5)
Outstanding		17,300,000		131,400,000		25,500,000		153,000,000
Reductions
– Implicit		5,100,000		13,200,000		200,000		700,000
– Explicit		—		—		—		—

(1) Awards may have been granted and received during or after the fiscal year, but are in respect of the specified fiscal year.

(2) Amounts of deferred compensation awarded for, and paid out during, the specified fiscal years under current deferred compensation plans. Payouts include realized option gains (i.e., the difference between the market value and exercise price).

(3) Included in fiscal 2020 are amounts paid in December 2019 relating to fiscal 2018 and previous years and included in fiscal 2019 are amounts paid in December 2018.

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Compensation Disclosure

(4) All forms of deferred compensation that remain outstanding and which had not expired at the end of the specified fiscal years. Deferral periods are specified within the terms of the relevant plan and, for DSUs, extend until termination, retirement or death.

(5) Implicit and explicit reductions related to outstanding remuneration at the end of the specified fiscal years that was awarded in the prior fiscal year (e.g., 2020 amounts related to remuneration awarded in 2019). Implicit reductions result from decreases in the value of CIBC common shares or share units while explicit reductions result from the application of misconduct or performance clawbacks.

Other compensation paid

There were no guaranteed incentive compensation awards granted in fiscal 2020 for NEOs and other material risk takers (nil in fiscal 2019). Cash sign-on awards⁽¹⁾ granted in fiscal 2020 for two material risk takers were $730,000 (nil in fiscal 2019). No cash sign-on awards were granted to NEOs in fiscal 2020 or fiscal 2019. Severance amounts negotiated and settled in fiscal 2020 for eight material risk takers were $15,603,000 ($3,041,000 for three beneficiaries in fiscal 2019)⁽²⁾. Payouts in fiscal 2020 amounted to $7,435,000 ($1,181,000 in fiscal 2019). No severance was negotiated and settled with respect to NEOs in fiscal 2020 or 2019.

(1) Payouts in connection with the cash sign-on awards granted in the specified fiscal years to new hires may have been made in whole or in part in the specified fiscal year or in a subsequent fiscal year. Deferred sign-on awards are included in the “Outstanding deferred compensation” section of the table on the previous page.

(2) “Severance amounts” reflect the aggregate total amount payable by CIBC in connection with severance arrangements negotiated and settled (i.e., agreed to) in the applicable fiscal year, whether or not such amounts are payable during such fiscal year. The amounts shown in fiscal 2019 have been updated to reflect this approach (vs. the 2020 circular, which had excluded certain amounts not payable until subsequent to the 2019 fiscal year-end). “Payouts” reflect the aggregate severance amounts actually paid out by CIBC in the applicable fiscal year. The single highest amount of severance that CIBC negotiated and settled in fiscal 2020 was $4,960,000 ($1,650,000 in fiscal 2019).

Other Information

Indebtedness of Directors and Executive Officers

All transactions with directors and executive officers must be on market terms and conditions unless, in the case of banking products and services for executive officers, otherwise stipulated under approved policy guidelines that govern all employees. Any loans to directors and executive officers must also be made in accordance with the US Sarbanes-Oxley Act of 2002.

The table below shows outstanding indebtedness to CIBC or its subsidiaries incurred by directors, director nominees and executive officers of CIBC or its subsidiaries and their associates, other than routine indebtedness⁽¹⁾ as defined under Canadian securities law and indebtedness that had been entirely repaid by the date of this Circular.

Indebtedness of Directors and Executive Officers under (1) Securities Purchases and (2) Other Programs
Name and Principal Position	Involvement     of CIBC or     Subsidiary	Largest Amount Outstanding During Fiscal Year Ended October 31, 2020 ($)		Amount Outstanding at January 31, 2021 ($)		Financial Assisted Securities Purchases During Fiscal Year Ended October 31, 2020 (#)		Security for Indebtedness		Amount Forgiven During Fiscal Year Ended October 31, 2020 ($)
Securities Purchase Programs(2)
J. Hountalas, Group Head, Commercial Banking and Wealth Management, Canada	CIBC as lender		200,000		192,023		2,534		CIBC common shares		-
H. Panossian, CFO & Enterprise Strategy	CIBC as lender		200,000		191,349		1,833		CIBC common shares		-

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Other Information

(1) Routine indebtedness includes (i) loans made on terms no more favourable than loans to employees generally, for which the amount remaining unpaid does not exceed $50,000 at any time during the last completed financial year to any director, executive officer, or proposed nominee together with their associates; (ii) loans to full-time employees, fully secured against their residence and not exceeding their annual salary; (iii) loans other than to full-time employees, on substantially the same terms available to other customers with comparable credit and involving no more than the usual risk of collectability; and (iv) loans for purchases on usual trade terms, or for ordinary travel or expense advances, or similar reasons, with repayment arrangements in accordance with usual commercial practice.

(2) CIBC employees can obtain credit from CIBC to purchase CIBC common shares under CIBC’s employee loan program. All loans granted under the program have a maximum amortization of 15 years and interest rates are fixed at the time of purchase at CIBC’s prime rate or 5%, whichever is lower. The credit criteria of the program and the compensation level of the borrower are considered when determining the amount of credit granted. The balance of the loan and accrued interest will become due immediately on demand, at CIBC’s option, if the employee does not make a payment when due or if such amounts become due in accordance with any security held by CIBC for the loan (e.g. any security agreement, chattel mortgage, land mortgage, hypothec, etc.).

The table below shows the aggregate indebtedness to CIBC or its subsidiaries of current and former directors, executive officers and employees of CIBC and its subsidiaries. This amount does not include routine indebtedness described in note (1) above.

Aggregate Indebtedness(1)
Purpose	To CIBC or its Subsidiaries ($)	To Another Entity
Securities Purchase	383,372	—
Other	89,434,007	—

(1) Certain loans were made in US dollars. These amounts have been converted to Canadian dollars based on the January 29, 2021 WM/Reuters exchange rate of US$1.00 = C$1.27745.

100 C I B C    P R O X Y    C I R C U L A R

Other Information

Directors’ and Officers’ Liability Insurance

Effective November 1, 2020, CIBC purchased at its expense a directors’ and officers’ liability insurance policy that protects directors and officers against liability incurred by them while acting as directors and officers of CIBC and its subsidiaries. The insurance applies where CIBC does not, or is not permitted to, indemnify them. This insurance has a limit of $300 million per claim and in the aggregate for the twelve-month period ending November 1, 2021. There is no deductible. The annual premium for this policy is approximately $1.6 million.

Indemnification

Under the Bank Act and CIBC’s by-laws, CIBC indemnifies any director or officer of CIBC, any former director or officer of CIBC, and any other person who acts or acted at CIBC’s request as a director or officer of or in a similar capacity for another entity, and their heirs and personal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment reasonably incurred by them in respect of any civil, criminal, administrative, investigative or other proceeding in which they are involved because of that association with CIBC or other entity provided (i) the person acted honestly and in good faith with a view to the best interests of, as the case may be, CIBC or the other entity for which they acted at CIBC’s request as a director or officer or in a similar capacity; and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the person had reasonable grounds for believing that their conduct was lawful.

During fiscal 2020, CIBC paid approximately $490,480 as an advance for legal fees and disbursements on behalf of Gerald T. McCaughey, former President and Chief Executive Officer; Thomas D. Woods, former Senior Executive Vice-President and Vice-Chairman; Ken Kilgour, former Senior Executive Vice-President and Chief Risk Officer; and Brian G. Shaw, former Senior Executive Vice-President and Chief Executive Officer of CIBC World Markets Inc., in connection with the defence of the civil action entitled Howard Green and Anne Bell v. Canadian Imperial Bank of Commerce, et al, commenced in the Ontario Superior Court of Justice.

Information about CIBC

Financial information about CIBC is in our consolidated financial statements and MD&A for fiscal 2020. Additional information is available in our Circular, Annual Information Form, Annual Report and any subsequent interim financial statements and MD&A.

You can access these documents at www.cibc.com and www.sedar.com or obtain a printed copy free of charge by contacting Investor Relations at investorrelations@cibc.com or CIBC Investor Relations, 21 Melinda Street, Commerce Court East, Toronto, Ontario M5L 1G9.

Vote Results and Minutes of Meeting

Our vote results and the minutes of our meeting will be available at www.cibc.com. Vote results will also be filed on SEDAR at www.sedar.com.

Contacting our Board of Directors

You may contact the Board, the Chair of the Board, a Board committee or a Board member at corporate.secretary@cibc.com or CIBC Corporate Secretary’s Division, 199 Bay Street, Commerce Court West, Suite 4460, Toronto, Ontario M5L 1A2.

Board of Directors’ Approval

The Board approved the contents of this Circular and sending it to shareholders.

Michelle Caturay

Senior Vice-President, Associate

General Counsel and Corporate

Secretary

February 16, 2021

C I B C    P R O X Y    C I R C U L A R 101

Head Office	Investor Relations
199 Bay Street	Call: 416 813-3743
Commerce Court	Email: investorrelations@cibc.com
Toronto, Ontario M5L 1A2 Canada

All paper used in the production of CIBC’s 2021 Management Proxy Circular is Forest Stewardship Council^® (FSC^®) certified. This paper is acid free and elemental chlorine free. Only vegetable-based, low-VOC inks have been used.

EX-99.2

Exhibit 99.2

Annual Report 2020

Who we are   CIBC is a leading North American financial institution and ended 2020 with a market capitalization of $44 billion and a Basel III Common Equity Tier 1 capital ratio of 12.1%.   Across Personal and Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, our 44,000 employees provide a full range of financial products and services to 10 million personal banking, business, public sector and institutional clients in Canada, the U.S. and around the world.   Our purpose   CIBC’s purpose is to help make your ambition a reality.   Our strategy   At CIBC, our goal is to deliver superior client experience and top-tier shareholder returns while maintaining our financial strength. To achieve our ambition, we are executing on three strategic priorities:   1. Focusing on key client segments to accelerate our earnings growth   2. Simplifying and transforming to deliver a modern relationship-banking proposition   3. Advancing our purpose-driven culture   Creating value for our shareholders   At CIBC, we are committed to delivering sustainable earnings growth to our shareholders. We are guided by our purpose – to help make our clients’ ambition a reality – as we reinvest in our business to accelerate revenue growth and reduce our structural cost base while keeping a keen focus on industry-leading fundamentals in capital, expenses and risk management.        

Table of contents
2020 Performance at a glance
Environmental, social and governance (ESG) scorecard	i
Our response to COVID-19	ii
Message from the President and Chief Executive Officer	iv
Message from the Chair of the Board	ix
Enhanced Disclosure Task Force	x

Management’s discussion and analysis	1
Consolidated financial statements	99
Notes to the consolidated financial statements	114
Quarterly review	191
Ten-year statistical review	193
Glossary	196
Shareholder information	203

2020 performance at a glance Business mix % adjusted net income(1) 44% -6% Canadian Personal Corporate and Other and Business Banking 25% 62.8 Capital Markets 27% Client experience 2020 CIBC Canadian Commercial 10% Enterprise Net Banking and Wealth Promoter Score U.S. Commercial Banking Management and Wealth Management Reported revenue Reported earnings Adjusted earnings Dividend ($ billions) per share per share(1) ($/share) ($) ($) 18.6 18.7 11.65 11.19 12.21 11.92 5.60 5.82 17.8 5.32 8.22 9.69 18 19 20 18 19 20 18 19 20 18 19 20 (1) For additional information, see the “Non-GAAP measures” section of the MD&A.

Financial highlights
For the year ended October 31
(Canadian $ in billions, except as noted)	2020			2019
Financial results
Revenue		18.7			18.6
Provision for credit losses		2.5			1.3
Expenses		11.4			10.9
Reported/Adjusted net income(1)		3.8/4.4			5.1/5.4
Financial measures (%)
Reported/Adjusted efficiency ratio(1)		60.6/55.8			58.3/55.5
Reported/Adjusted return on common shareholders’ equity (ROE)(1)		10.0/11.7			14.5/15.4
Net interest margin		1.50			1.65
Total shareholder return		(5.9	)		4.2
Common share information
Reported/Adjusted earnings per share(1)		8.22/9.69			11.19/11.92
Market capitalization		44.4			50.0
Dividends (%)
Dividend yield		5.9			5.0
Reported/Adjusted dividend payout ratio(1)		70.7/60.0			49.9/46.9
Net income by strategic business unit
Canadian Personal and Business Banking		2.0			2.3
Canadian Commercial Banking and Wealth Management		1.2			1.3
U.S. Commercial Banking and Wealth Management		0.4			0.7
Capital Markets		1.1			1.0
(1)  For additional information, see the “Non-GAAP measures” section of the MD&A.

Financial scorecard
	Target	2020 reported results	2020 adjusted results(1)
Earnings per share (EPS) growth(2)	5%–10% annually	$8.22, down 27% from 2019	$9.69, down 19% from 2019
Return on equity (ROE)(2)	15%+	10.0%	11.7%
Efficiency ratio	52% run rate in 2022	60.6%, increased 230 basis points from 2019	55.8%, increased 30 basis points from 2019
Basel III CET1 ratio	Strong buffer to regulatory minimum	12.1%
Dividend payout ratio(2)	40%–50%	70.7%	60.0%
Total shareholder return	Outperform the S&P/TSX Composite Banks Index over a rolling five-year period	CIBC – 27.7% Banks Index – 35.3%
(1)  For additional information, see the “Non-GAAP measures” section of the MD&A. (2)  Through the cycle.

Environmental, social and governance (ESG) scorecard

Material topics	Target	2020 performance	Status
Client experience	• Continuous improvement	• CIBC Enterprise Net Promoter Score was 62.8, a two point increase from 2019	✓
Privacy and information security	• No privacy findings against CIBC by regulators	• 3 privacy findings against CIBC by regulators(1)	X(1)
Sustainable finance	• $150 billion in support for environmental and sustainable financing over 10 years (2018–2027)	• $15.7 billion in environmental and sustainable financing	✓ 28%(2) achieved to date ($42 billion)
Inclusive banking	• Engage 200,000 clients in financial education seminars and events over three years (2019–2021)	• 2020 performance will be updated in CIBC’s 2020 Sustainability Report	N/A
	• Provide $9 billion in new loans to SMEs over four years (2020–2023)	• $6.9 billion in new loans to small and medium-sized enterprises (SMEs)	✓ 77% achieved to date
	• Grow our commercial banking Indigenous business by 10% in 2020	• 23% growth in commercial banking Indigenous business	✓
Belonging at work	• At least 30% women and at least 30% men on the CIBC Board of Directors	• 40% women on the CIBC Board of Directors	✓
	• At a minimum, between 35% and 40% women in board-approved executive roles by 2022 (Global)	• 33% women in board-approved executive roles (Global)	✓
	• At least 22% visible minorities in board-approved executive roles by 2022 (Canada)	• 20% visible minorities in board-approved executive roles (Canada)	✓
	• 4% Black leaders in board-approved executive roles by 2023 (Canada)	• 3% leaders from the Black community in board-approved executive roles (Canada)	✓
	• 8–9% of external hires in 2020 are persons with disabilities (Canada)	• 5% of external hires are persons with disabilities (Canada)(3)	X(3)
	• 2% of external hires in 2020 are Indigenous peoples (Canada)	• 3% of external hires are Indigenous peoples (Canada)	✓
	• At least 5% of student recruitment from the Black community	• Student recruitment from the Black community	Starting in 2021
Employee engagement	• CIBC’s employee engagement score >109% of the Willis Towers Watson global financial services norm	• CIBC’s engagement score of 90% was 111% of the Willis Towers Watson global financial services norm	✓
	• Voluntary turnover <12.5% in 2020 (Canada)	• 7.3% voluntary turnover (Canada)	✓
	• 100% of employees will have performance reviews in 2020	• 100% of employees had performance reviews	✓
Community relationships	• $350 million in total corporate and employee giving over five years (2019-2023)	• Invested $75 million in community organizations across Canada and the U.S.	✓ 44% achieved to date ($154 million)
Business ethics	• 100% employee completion rate for ethical training on our Code of Conduct	• 100% of employees completed CIBC ethical training on our Code of Conduct	✓

(1) Cases against CIBC by the Office of the Privacy Commissioner of Canada.

(2) Represents the cumulative results of 2018 through 2020.

(3) The full picture of our hiring for persons with disabilities is likely not reflected due to low self-disclosure in the survey utilized for data collection.

CIBC  2020  ANNUAL  REPORT   i

Our response

to COVID-19

The COVID-19 pandemic triggered significant economic disruption and public health concerns around the world. From the largest corporations to families planning for their future, many clients faced a crisis that affected their immediate well-being and put their long-term ambitions at risk.

Drawing on our 153-year history of being there for our clients in challenging times, everyone across our bank immediately understood the role we needed to play – for our clients, for our communities, and for each other.

And we did.

From our teams in Asia and Europe who were first to initiate business continuity plans to support our clients through the pandemic, to our teams across North America who were proactive in preparing for this disruption and stepped forward when called on, our global team delivered for all of our stakeholders and honoured our history.

ii CIBC  2020  ANNUAL  REPORT

Our team

Our global team of 44,000 was the driving force behind our strong, client-focused response to the pandemic. Protecting their health and well-being, along with that of our clients and our communities, has been our top priority.

As public health measures were being enacted, an unprecedented 70% of our team members switched to working remotely. We stayed connected and focused on our clients thanks to our investments in technology and collaboration tools that facilitated a smooth transition.

For team members in vital roles who needed to be on-site, we implemented enhanced safety protocols and provided additional financial compensation, as well as activating back-up work locations and adjusting hours in our banking centres to ensure we continued to serve our clients. In addition, we provided employees with wellness resources and up to 10 additional paid days off to ensure they were taking care of themselves as they focused all of their efforts on supporting our clients through a challenging period.

In our 2020 employee survey, 88% of our team members said CIBC helped them manage their well-being during the pandemic. This was an important source of pride for our team members. We also saw our employee engagement score increase to 90, an all-time high for CIBC.

Our clients

As the disruption caused by COVID-19 created pressure on the finances of individuals, families and businesses alike, our entire bank leaned in with purpose as we leveraged the strength and commitment of our team to implement a range of support measures to help our clients during a challenging time.

During the year, we assisted more than 500,000 clients facing financial hardship through payment deferral programs on mortgages, loans and credit cards, and reduced interest rates on credit cards, in many cases providing financial relief proactively.

Throughout this period we worked to ensure our clients had access to much-needed funds being made available through government programs, including the Canada Emergency Business Account and the Paycheck Protection Program in the U.S. Recognizing the urgent need to provide financial support and relief quickly and in a radically simple way, in many cases our team launched fully digital solutions for clients.

In addition, we provided “front-of-the-line” access to seniors and persons with disabilities and proactively offered assistance to clients identified to have the greatest need. We’ve also supported our large corporate clients and entrepreneurs across our global footprint to ensure they, in turn, can take care of their teams and continue to play a role in moving our economy forward.

As a result of our focus and commitment to our clients, CIBC was recognized as the top performing brand during the first wave of the pandemic.

Our communities

As the impacts of COVID-19 continue to be felt across our communities, our promise is to help revive the sector by harnessing our investments and genuinely caring culture. This includes helping through our people and financial support.

To date Team CIBC has delivered nearly 1,000 hours of COVID-19 related volunteer time. In addition, we increased donations for those most at risk and reassured our community partners that our support would remain in place. Incremental donations included emergency funding for Community Food Centres Canada, United Way, Kids Help Phone, Canadian Blood Services and the American Red Cross. We also supported frontline health care workers with Aventura points to enable them to take a well-deserved break through our Holidays for Heroes program, as well as supporting the next generation of health care workers achieve their ambitions for a career in health care through the CIBC Future Heroes Fund Bursary Program.

And we continued our long-standing support for those fighting cancer, as we rallied behind a virtual CIBC Run for the Cure, attracting the participation of thousands of Canadians across the country.

CIBC  2020  ANNUAL  REPORT iii

Message from the President and Chief Executive Officer Resilient and focused on the future Drawing on our 153-year history of being there for our clients, we responded to the COVID-19 pandemic by living our purpose – to help make our clients’ ambitions a reality – while delivering a resilient financial performance and advancing our long-term growth strategy in 2020. Our clients are at the centre of everything we do. This year, more than any other in my time as CEO, our clients needed us – and I am very proud of how our team delivered. Victor G. Dodig President and Chief Executive Officer iv CIBC 2020 ANNUAL REPORT

iv CIBC  2020  ANNUAL  REPORT

Thanks to the tremendous efforts of our team of 44,000 employees globally, we are well positioned to succeed amidst a changing environment in the years ahead and contribute to a more inclusive, sustainable future.

Financials and 2020 review

Our bank reported earnings in 2020 of $3.8 billion or $4.4 billion on an adjusted basis, down 26% and 18% from last year, respectively, primarily as a result of the economic impact of the COVID-19 pandemic. Our capital position remained very strong, with a CET1 ratio of 12.1%, underscoring the strength of our balance sheet as we focus on growing our business in an uncertain economic environment.

Our clients are at the centre of everything we do. This year, more than any other in my time as CEO, our clients needed us – and I am very proud of how our team delivered.

As public health measures such as stay at home directives and physical distancing were introduced to slow the spread of COVID-19, we leveraged our investments in technology in recent years to support our clients. We moved quickly to enable digital-first solutions – including being the first bank to announce our readiness to accept Canada Emergency Business Account (CEBA) applications from business owners in Canada using a fully digital application.

We also acted in line with our purpose by being the first bank to announce reduced credit card interest rates for clients experiencing hardship. We established payment relief programs, as well as priority service for seniors in our banking centres and on the phone. In addition, we made calls to our senior clients to check on their well-being and to help them use mobile and online banking, which saw a surge in demand from clients 65 years of age and over as the pandemic set in. Our bank was recognized as the top performing brand during the peak of COVID-19, a reflection of the measures we took to help our clients.

Our decisive, early action made a challenging time more manageable. In 2020, our bank helped over 500,000 clients with payment relief, and advice when they needed us most.

Our team was the foundation of our client-focused response to the pandemic. At a time of significant disruption and uncertainty, many of our team members seamlessly transitioned to working remotely, while those who needed to be on site to perform essential work were able to do so safely. Our team was steadfast in the face of a challenge, and made a difference in the lives of our clients. I want to thank them for their professionalism and dedication.

Through the pandemic we remained focused on creating a relationship-oriented bank for a modern world. In 2020 we continued to reinvest for long-term growth.

Revenue by business segment

$8.5B	$4.1B	$2.1B	$3.5B
Canadian Personal and Business Banking	Canadian Commercial Banking and Wealth Management	U.S. Commercial Banking and Wealth Management	Capital Markets

CIBC  2020  ANNUAL  REPORT v

Message from the President and Chief Executive Officer

“

Inclusion is the cornerstone of our culture at CIBC. It is both an enabler of growth and a foundational element in our connected culture.

We continued to attract new clients and deliver growth in our Commercial Banking and Wealth Management businesses in the U.S. and Canada. In just one example of our relationship-focused approach to doing business, as the U.S. government rolled out relief programs for business owners to support payrolls, our team of relationship managers called every one of our commercial banking clients to evaluate their needs and work with them to determine if a loan through the relief program would be of help to their business.

Our focus on supporting growth in the private economy and the deep expertise of our relationship managers have helped us to build a robust, high-quality commercial banking portfolio in recent years, and have fueled growth in our wealth management business through new and deeper client relationships that cross business and personal needs. Despite the context of a challenging overall environment, our bank is well positioned to move these businesses forward, both in Canada and the U.S.

In Canadian Personal and Business Banking, we achieved our highest client experience scores on record as we continued to make investments in advice and in our digital capabilities – two areas that remain the foundation of client relationships and growth. In addition, we earned the highest overall satisfaction rating among the Big 5 banks from J.D. Power for our mobile banking app.

We continued to modernize our bank to make it easier for clients to get advice through virtual meetings, and implemented options such as eSignatures to allow clients to sign documentation without needing to leave their home. While we have a continued opportunity to accelerate growth in this area, there are encouraging signs that our efforts are producing results.

Amidst a highly volatile market, we were there with the advice and counsel to help our largest corporate clients navigate market conditions. Our diversified Capital Markets business delivered strong, high-quality growth in 2020, including robust results in our trading businesses, growth in the U.S. by working as a connected team, and continued revenue growth through connectivity by furthering the innovative remittance and foreign exchange services offered to personal banking and wealth management clients across our bank.

Strengthening our leadership team

As part of our long-term growth strategy, a number of members of our Executive Committee took on new or expanded accountabilities this year, as we continue to invest in the depth of our leadership team and position leaders to draw on their skills in new areas of our bank. This further strengthens our client-focused culture and connectivity across our bank in support of our clients.

vi CIBC  2020  ANNUAL  REPORT

    Building an inclusive, sustainable future   As the economy moves towards recovery, we all have an opportunity to reshape our future economy as one that is more inclusive and more sustainable, reflective of the full capabilities of our collective intellectual capital.   Inclusion is the cornerstone of our culture at CIBC. It is both an enabler of growth and a foundational element in our connected culture. But there is more we can do.   As social unrest grew in 2020, I had the opportunity to speak with many of our team members from the Black community and I heard first-hand their stories of the effects of racism in their personal and professional lives.   As a team, we are taking decisive action to eliminate racism in all its forms. I was proud to take on the role of co-Chair for the BlackNorth Initiative to help drive action on this important issue. Our bank also announced specific measures to attract and develop talented team members from the Black community, create new learning opportunities to help disrupt anti-Black racism and direct over $1,000,000 of our corporate donations to organizations supporting Black communities in North America. These measures are in addition to our existing commitments in hiring and developing people of colour, persons with disabilities and Indigenous peoples. A more inclusive bank is a stronger bank, better positioned to meet the needs of our clients.   Further, we have an opportunity to build a more sustainable economy through the coming economic recovery. Within our Capital Markets business we expanded our team of experts in sustainable finance and renewable energy again this year, and we held our first-ever Sustainability Conference bringing together industry leaders from a variety of sectors to map out a path to a more sustainable future. Across our bank, we continue to make progress on our own targets in areas such as a reduction in greenhouse gas emissions from our operations. As well, we have achieved $42 billion of our $150 billion sustainable finance target by 2027 as we support our clients in transitioning to the low-carbon economy of the future.      

CIBC  2020  ANNUAL  REPORT vii

Message from the President and Chief Executive Officer

Our bank has a proud tradition of supporting our communities, and our commitment continued in 2020. As charities and community organizations faced a shortfall in donations as a result of the pandemic, we contributed $750,000 to organizations that would face increased demand including food banks and mental health services. Later in the year, working together with the Canadian Cancer Society, we reimagined the CIBC Run for the Cure into a virtual event and helped to raise $2 million as a team for this vitally important cause.

Looking ahead to 2021 and beyond

The need for advice and the value of relationships amidst changing market conditions have never been higher. To attract new clients and drive growth, banks will need to invest in their infrastructure and advice capabilities to enable the right conversations with clients at this pivotal moment for so many families and businesses. We believe our strategy positions us well to succeed in this evolving market.

Our view is that clients will continue to embrace digital. It will form an important touchpoint as part of client relationships, for both everyday transactions and increasingly, for advice and virtual engagement. We will build on our leadership in this area.

The economic recovery will be led by the private economy, with mid-market businesses playing a major role. Our investments in this market pre-pandemic and our focus on our clients during the crisis will pay long-term dividends as growth returns. We will continue to enhance our capabilities in the U.S. and continue to invest in our team of relationship managers in Canada to help businesses navigate this challenging period. Relationships in this market are often multi-generational, and the foundation we are laying today as the relationship leader will have long-term benefits for our bank.

As well, we will continue to build on our differentiated Capital Markets business model, meeting the needs of our core clients while growing our recurring, fee-based earnings within this business as well as across our Wealth Management businesses.

Our bank is well positioned for the changes occurring in the market for financial services and in the broader economy. We’ve transformed our culture around our clients and we’ve lived our purpose at a time when relationships are becoming entrenched as the primary value proposition for financial institutions, which positions us well for continued growth.

We’re investing in our team – the foundation of our relationship-focused growth strategy. In 2021, we’ll begin moving in to CIBC Square, our new global headquarters, as part of a broader workforce modernization effort that will further the connectivity across our bank that enables our relationship-focused approach to meeting the needs of our clients. We were again recognized this year as one of Canada’s Top 100 employers and best diversity employers, a reflection of our focus on building an inclusive culture where every team member can achieve their ambitions.

I am incredibly proud of our CIBC team for their efforts during a crisis. I am equally proud of the work we’ve done together to be a leader in the economy of the future. Our bank is well positioned to help clients achieve their ambitions and drive growth in the years ahead.

Victor G. Dodig

President and Chief Executive Officer

viii CIBC  2020  ANNUAL  REPORT

Message from the Chair of the Board

Building a sustainable,

inclusive bank

2020 has been a challenging year for all of us! During this year of unprecedented difficulties, your Board has sought to maintain a long-term focus on the trends shaping our industry while offering our full support to management as CIBC moved decisively to meet the needs of clients amidst the global pandemic.

2020 was a year of renewal for your Board. We welcomed Charles Brindamour, Chief Executive Officer of Intact Financial Corporation as a Director, as Linda Hasenfratz retired from our Board after 15 years of outstanding service as a Director. We also oversaw succession planning across our senior management team, further developing leaders across the bank and bringing some new faces to the senior executive team. As we move into 2021, I am pleased that following her retirement, Mary Lou Maher, KPMG Canadian Managing Partner, Quality & Risk and Global Head of Inclusion and Diversity, will be put forward for election at our next annual meeting.

In 2020 we also took steps to accelerate our inclusion and diversity strategy, including a new goal to have 4% of board-approved executive roles based in Canada held by leaders from the Black community by 2023, as part of the bank’s broader target to have 22% representation of visible minorities in board-approved executive roles by 2022. While we seek to achieve gender parity on the Board, we are proud that 40% of your Board members are women, ahead of our target to have at least 30% women and men. In addition, the diversity policy of your Board was updated to emphasize the Board’s commitment to having its membership better reflect the demographics of CIBC employees and the clients and communities we serve.

After 16 years as a Director including the last six as your Chair of the Board, I will be retiring at the annual meeting in April. As I look back over my time as Chair, I believe we achieved much together. I am confident that CIBC has the right strategy, culture, and a deep leadership team to build a relationship-oriented bank for a modern world. I am pleased that Katharine B. Stevenson, who has served on the CIBC Board since 2011, has been appointed Chair of the Board, effective April 8, 2021, upon her election as a director at our annual meeting.

In closing, I would like to thank your CEO, Victor Dodig and your management team for their leadership throughout this year full of surprises. On behalf of your Board, I also would like to thank every member of CIBC’s team for their passion in living our purpose. We are grateful for everything you do.

The Honourable John P. Manley

Chair of the Board

CIBC  2020  ANNUAL  REPORT ix

Enhanced Disclosure Task Force

The Enhanced Disclosure Task Force (EDTF), established by the Financial Stability Board, released its report “Enhancing the Risk Disclosures of Banks” in 2012, which included thirty-two disclosure recommendations. The index below provides the listing of these disclosures, along with their locations. EDTF disclosures are located in our management’s discussion and analysis, consolidated financial statements, and supplementary packages, which may be found on our website (www.cibc.com). No information on CIBC’s website, including the supplementary packages, should be considered incorporated herein by reference.

Topics	Recommendations		Disclosures	Management’s discussion and analysis	Consolidated financial statements		Pillar 3 Report  and Supplementary regulatory capital disclosure
				Page references
General		1	Index of risk information – current page
		2	Risk terminology and measures (1)					71–72
		3	Top and emerging risks	50
		4	Key future regulatory ratio requirements	36, 39, 76, 78		166		9, 16
Risk governance, risk management and business model		5	Risk management structure	44, 45
		6	Risk culture and appetite	43, 46, 47
		7	Risks arising from business activities	48, 53
		8	Bank-wide stress testing	31, 49, 57, 71, 74
Capital adequacy and risk-weighted assets		9	Minimum capital requirements	31		166
		10	Components of capital and reconciliation to the consolidated regulatory balance sheet	36				8–11
		11	Regulatory capital flow statement	37				12
		12	Capital management and planning	39		166
		13	Business activities and risk-weighted assets	38, 53				4
		14	Risk-weighted assets and capital requirements	33, 38				4
		15	Credit risk by major portfolios	56–61				27–36
		16	Risk-weighted assets flow statement	38				4, 5
		17	Back-testing of models	48, 57, 70				69, 70
Liquidity		18	Liquid assets	75
Funding		19	Encumbered assets	75
		20	Contractual maturity of assets, liabilities and off-balance sheet instruments	79
		21	Funding strategy and sources	77
Market risk		22	Reconciliation of trading and non-trading portfolios to the consolidated balance sheet	69
		23	Significant trading and non-trading market risk factors	69–73
		24	Model assumptions, limitations and validation procedures	69–73
		25	Stress testing and scenario analysis	31, 71
Credit risk		26	Analysis of credit risk exposures	58–67		138–145, 186		6–7, 65–68
		27	Impaired loan and forbearance policies	55, 65, 85		116
		28	Reconciliation of impaired loans and the allowance for credit losses	65		139
		29	Counterparty credit risk arising from derivatives	55, 59		156–157		68, 35 (2)
		30	Credit risk mitigation	55, 61		156–157		20, 53, 68
Other risks		31	Other risks	80–82
		32	Discussion of publicly known risk events	80		179

(1) A detailed glossary of our risk and capital terminology is included on page 198.

(2) Included in supplementary financial information package.

x CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Management’s discussion and analysis

Management’s discussion and analysis (MD&A) is provided to enable readers to assess CIBC’s financial condition and results of operations as at and for the year ended October 31, 2020, compared with prior years. The MD&A should be read in conjunction with the audited consolidated financial statements. Unless otherwise indicated, all financial information in this MD&A has been prepared in accordance with International Financial Reporting Standards (IFRS or GAAP) and all amounts are expressed in Canadian dollars. Certain disclosures in the MD&A have been shaded as they form an integral part of the consolidated financial statements. The MD&A is current as of December 2, 2020. Additional information relating to CIBC, including the Annual Information Form, is available on SEDAR at www.sedar.com and on the United States (U.S.) Securities and Exchange Commission’s (SEC) website at www.sec.gov. No information on CIBC’s website (www.cibc.com) should be considered incorporated herein by reference. A glossary of terms used in the MD&A and the audited consolidated financial statements is provided on pages 196 to 202 of this Annual Report.

2	External reporting changes
2	Overview
2	CIBC’s strategy
2	Performance against objectives
5	Financial highlights
6	Economic and market environment
6	Year in review – 2020
6	Outlook for calendar year 2021
7	Significant events

8	Financial performance overview
8	2020 Financial results review
9	Net interest income and margin
9	Non-interest income
10	Trading activities (TEB)
10	Provision for credit losses
10	Non-interest expenses
11	Taxes
11	Foreign exchange
12	Fourth quarter review
13	Quarterly trend analysis
14	Review of 2019 financial performance
16	Non-GAAP measures

19	Strategic business units overview
20	Canadian Personal and Business Banking
22	Canadian Commercial Banking and Wealth Management
24	U.S. Commercial Banking and Wealth Management
26	Capital Markets
29	Corporate and Other
30	Financial condition
30	Review of condensed consolidated balance sheet
31	Capital management
41	Off-balance sheet arrangements

43	Management of risk
83	Accounting and control matters
83	Critical accounting policies and estimates
88	Accounting developments
89	Other regulatory developments
90	Related-party transactions
90	Policy on the Scope of Services of the Shareholders’ Auditor
90	Controls and procedures
91	Supplementary annual financial information

A NOTE ABOUT FORWARD-LOOKING STATEMENTS: From time to time, we make written or oral forward-looking statements within the meaning of certain securities laws, including in this Annual Report, in other filings with Canadian securities regulators or the SEC and in other communications. All such statements are made pursuant to the “safe harbour” provisions of, and are intended to be forward-looking statements under applicable Canadian and U.S. securities legislation, including the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements made in the “Message from the President and Chief Executive Officer”, “Overview – Performance against objectives”, “Economic and market environment – Outlook for calendar year 2021”, “Significant events”, “Financial performance overview – Taxes”, “Strategic business units overview – Canadian Personal and Business Banking”, “Strategic business units overview – Canadian Commercial Banking and Wealth Management”, “Strategic business units overview – U.S. Commercial Banking and Wealth Management”, “Strategic business units overview – Capital Markets”, “Financial condition – Capital management”, “Financial condition – Off-balance sheet arrangements”, “Management of risk – Risk overview”, “Management of risk – Top and emerging risks”, “Management of risk – Credit risk”, “Management of risk – Market risk”, “Management of risk – Liquidity risk”, “Accounting and control matters – Critical accounting policies and estimates”, “Accounting and control matters – Accounting developments”, “Accounting and control matters – Other regulatory developments” and “Accounting and control matters – Controls and procedures” sections of this report and other statements about our operations, business lines, financial condition, risk management, priorities, targets, ongoing objectives, strategies, the regulatory environment in which we operate and outlook for calendar year 2021 and subsequent periods. Forward-looking statements are typically identified by the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “forecast”, “target”, “objective” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could”. By their nature, these statements require us to make assumptions, including the economic assumptions set out in the “Economic and market environment – Outlook for calendar year 2021” section of this report, and are subject to inherent risks and uncertainties that may be general or specific. Given the continuing impact of the coronavirus (COVID-19) pandemic on the global economy, financial markets, and our business, results of operations, reputation and financial condition and the expectation that oil prices will remain well below year-ago levels, there is inherently more uncertainty associated with our assumptions as compared to prior periods. A variety of factors, many of which are beyond our control, affect our operations, performance and results, and could cause actual results to differ materially from the expectations expressed in any of our forward-looking statements. These factors include: the occurrence, continuance or intensification of public health emergencies, such as the COVID-19 pandemic, and any related government policies and actions; credit, market, liquidity, strategic, insurance, operational, reputation, legal, conduct, regulatory and environmental and related social risk; currency value and interest rate fluctuations, including as a result of market and oil price volatility; the effectiveness and adequacy of our risk management and valuation models and processes; legislative or regulatory developments in the jurisdictions where we operate, including the Organisation for Economic Co-operation and Development Common Reporting Standard, and regulatory reforms in the United Kingdom and Europe, the Basel Committee on Banking Supervision’s global standards for capital and liquidity reform, and those relating to bank recapitalization legislation and the payments system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments, including changes relating to economic or trade matters; the possible effect on our business of international conflicts and terrorism; natural disasters, disruptions to public infrastructure and other catastrophic events; reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services; increasing cyber security risks which may include theft or disclosure of assets, unauthorized access to sensitive information, or operational disruption; social media risk; losses incurred as a result of internal or external fraud; anti-money laundering; the accuracy and completeness of information provided to us concerning clients and counterparties; the failure of third parties to comply with their obligations to us and our affiliates or associates; intensifying competition from established competitors and new entrants in the financial services industry including through internet and mobile banking; technological change; global capital market activity; changes in monetary and economic policy; general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian household debt levels and global credit risks; our success in developing and introducing new products and services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate acquisitions and joint ventures; the risk that expected benefits of an acquisition, merger or divestiture will not be realized within the expected time frame or at all; and our ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Any forward-looking statements contained in this report represent the views of management only as of the date hereof and are presented for the purpose of assisting our shareholders and financial analysts in understanding our financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for other purposes. We do not undertake to update any forward-looking statement that is contained in this report or in other communications except as required by law.

CIBC 2020 ANNUAL REPORT 1

Management’s discussion and analysis

External reporting changes

The following external reporting changes were made in 2020.

Changes made to our business segments

• We changed the way that we allocate capital to our strategic business units (SBUs). Previously, we utilized an economic capital model to attribute capital to our SBUs and calculate segmented return on equity. Effective November 1, 2019, capital is allocated to the SBUs based on the estimated amount of regulatory capital required to support their businesses. Segmented return on equity is a non-GAAP measure (see the “Non-GAAP measures” section for additional details).

• The transfer pricing methodology used by Treasury was enhanced to align with the changes that we made to our capital allocation methodology as discussed above. Concurrently with this change, we also made other updates and enhancements to our funds transfer pricing methodology as well as minor updates to certain allocation methodologies.

Prior period amounts have been revised accordingly. The changes impacted the results of our SBUs and how we measure the performance of our SBUs. There was no impact on our consolidated financial results from these changes.

Adoption of IFRS 16 “Leases”

Effective November 1, 2019, we adopted IFRS 16 “Leases” (IFRS 16) using the modified retrospective approach, without restatement of comparative periods.

Overview

CIBC is a leading North American financial institution with a market capitalization of $44 billion and a Basel III Common Equity Tier 1 (CET1) ratio of 12.1% as at October 31, 2020. Through our four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets – CIBC provides a full range of financial products and services to 10 million personal banking, business, public sector and institutional clients in Canada, the U.S. and around the world. We have approximately 44,000 employees dedicated to providing our clients with banking solutions for a modern world, delivering consistent and sustainable earnings growth for our shareholders, and giving back to our communities.

CIBC’s strategy

At CIBC, our goal is to deliver superior client experience and top-tier shareholder returns while maintaining our financial strength. To achieve this, we are executing on three strategic priorities:

• Focusing on key client segments to accelerate our earnings growth;

• Simplifying and transforming to deliver a modern relationship-banking proposition; and

• Advancing our purpose-driven culture.

Performance against objectives

For many years, CIBC has reported a scorecard of financial measures that we use to evaluate and report on our progress to external stakeholders. These measures can be categorized into four key areas – earnings growth, operational efficiency, profitability, and balance sheet strength. We have set targets for each of these measures over the medium term, which we define as three to five years.

On March 11, 2020, the outbreak of COVID-19 was officially declared a pandemic by the World Health Organization (WHO). The COVID-19 pandemic has had a significant adverse impact on the global economy, and has negatively impacted our results in fiscal 2020. Until there is greater certainty concerning the dissemination of an effective mass-produced vaccine, the COVID-19 pandemic is expected to continue to impact our ability to achieve our performance objectives.

Earnings growth⁽¹⁾ To assess our earnings growth, we monitor our earnings per share (EPS). Our through-the-cycle target is an average annual EPS growth of 5% to 10%. In 2020, against a backdrop of a challenging economic environment, reported and adjusted⁽¹⁾ diluted EPS declined by 27% and 19%, respectively. Going forward, we are maintaining our target to deliver average annual EPS growth of 5% to 10% through the cycle. Reported diluted EPS ($)   Adjusted diluted EPS⁽¹⁾ ($)  

(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.

2 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Operational efficiency We have two metrics to measure operational efficiency: 1.  Efficiency ratio(1) To assess how well we use our resources to generate net income, we measure and monitor our efficiency ratio, defined as the ratio of non-interest expenses to total revenue. In 2020, our reported and adjusted(1) efficiency ratios were 60.6% and 55.8%, respectively, compared with 58.3% and 55.5% in 2019. 2.  Operating leverage(1) Operating leverage, defined as the difference between the year-over-year percentage change in revenue (on a taxable equivalent basis (TEB)) and year-over-year percentage change in non-interest expenses, is a measure of the relative growth rates of a bank’s revenue and expenses. In 2020, our reported and adjusted(1) operating leverage was (4.0)% and (0.6)%, respectively. Going forward, our target is to deliver positive operating leverage through the cycle, which will improve our efficiency ratio over time.	Reported efficiency ratio (%) Reported operating leverage (%)	Adjusted efficiency ratio(1) (%) Adjusted operating leverage(1) (%)
Profitability We have three metrics to measure profitability, including two shareholder value targets: 1.  Return on common shareholders’ equity (ROE)(1) ROE is a key measure of profitability. In 2020, our reported and adjusted(1) ROE were at 10.0% and 11.7%, respectively. Going forward, we will continue to target a strong ROE of at least 15% through the cycle.	Reported return on common shareholders’ equity (%)	Adjusted return on common shareholders’ equity(1) (%)
2.  Dividend payout ratio(1) We have consistently delivered adjusted(1) dividend payout ratios in the range of 40% to 50% of earnings to common shareholders. Our key criteria for considering dividend increases are our current level of payout relative to our target and our view on the sustainability of our current earnings level through the cycle. In 2020, our reported and adjusted(1) dividend payout ratios were 70.7% and 60.0%, respectively. Going forward, we will continue to target a dividend payout ratio of 40% to 50% through the cycle.	Reported dividend payout ratio (%)	Adjusted dividend payout ratio(1) (%)

(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.

CIBC 2020 ANNUAL REPORT 3

Management’s discussion and analysis

3.  Total shareholder return (TSR) TSR is the ultimate measure of shareholder value, and the output of delivering against the financial targets within our control. We have an objective to deliver a TSR that exceeds the industry average, which we have defined as the Standard & Poor’s (S&P)/Toronto Stock Exchange (TSX) Composite Banks Index, over a rolling five-year period. For the five years ended October 31, 2020, our TSR was 27.7%, which was below the Banks Index return over the same period of 35.3%. Rolling five-year TSR (%)  

Balance sheet strength Maintaining a strong balance sheet is foundational to our long-term success. Our goal is to maintain strong capital and liquidity positions. We look to constantly balance our objectives of holding a prudent amount of excess capital for unexpected events and environmental uncertainties, investing in our core businesses, growing through acquisitions and returning capital to our shareholders.   1.  Basel III Common Equity Tier 1 (CET1) ratio At the end of 2020, our Basel III CET1 ratio was 12.1%, well above the current regulatory target set by the Office of the Superintendent of Financial Institutions (OSFI) of 9.0%. In response to the COVID-19 pandemic, OSFI directed that all federally regulated financial institutions halt share buybacks and dividend increases until further notice.   2.  Liquidity Coverage Ratio (LCR) Our ability to meet our financial obligations is measured through the LCR ratio. It measures unencumbered high quality liquid assets (HQLA) that can be converted into cash to meet liquidity needs for a 30-calendar day liquidity stress scenario. The LCR standard requires that, absent a situation of financial stress, the value of the ratio be no lower than 100%. For the quarter ended October 31, 2020, our three-month daily average LCR was 145% compared to 125% for the same period last year. CET1 ratio (%)   Liquidity coverage ratio (%)  

Client experience

Our ambition is to be the leader in client experience as measured by external client surveys and our internal CIBC Enterprise Net Promoter Score (CIBC CXNPS). Our client-focused culture is resonating with the clients we serve as evidenced by our strongest scores to date from both the IPSOS Customer Service Index and the J.D. Power Client Satisfaction (SAT) study. Our internal CIBC CXNPS is a balanced weighting of internal net promoter scores across our businesses. As of October 31, 2020, the CIBC CXNPS score was 62.8, a 2-point increase over 2019.

CIBC was ranked the top performing brand during the pandemic as a result of our focus and commitment to clients. Over 90% of CIBC clients surveyed feel the same or more positive about CIBC as a result of our response to COVID-19. CIBC also received IPSOS Financial Service Excellence awards for our mobile banking, live agent telephone banking and ATMs.

Going forward, we will continue to build on this momentum to further enhance the quality and consistency of our service delivery to our clients in support of our purpose-driven culture and strategy to be a modern, innovative relationship-oriented bank.

4 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Financial highlights

As at or for the year ended October 31		2020			2019			2018			2017			2016
Financial results ($ millions)
Net interest income		$	11,044		$	10,551		$	10,065		$	8,977		$	8,366
Non-interest income			7,697			8,060			7,769			7,303			6,669
Total revenue			18,741			18,611			17,834			16,280			15,035
Provision for credit losses			2,489			1,286			870			829			1,051
Non-interest expenses			11,362			10,856			10,258			9,571			8,971
Income before income taxes			4,890			6,469			6,706			5,880			5,013
Income taxes			1,098			1,348			1,422			1,162			718
Net income		$	3,792		$	5,121		$	5,284		$	4,718		$	4,295
Net income attributable to non-controlling interests			2			25			17			19			20
Preferred shareholders and other equity instrument holders			122			111			89			52			38
Common shareholders			3,668			4,985			5,178			4,647			4,237
Net income attributable to equity shareholders		$	3,790		$	5,096		$	5,267		$	4,699		$	4,275
Financial measures
Reported efficiency ratio			60.6	%		58.3	%		57.5	%		58.8	%		59.7	%
Loan loss ratio (1)			0.26	%		0.29	%		0.26	%		0.25	%		0.31	%
Reported return on common shareholders’ equity			10.0	%		14.5	%		16.6	%		18.3	%		19.9	%
Net interest margin			1.50	%		1.65	%		1.68	%		1.66	%		1.64	%
Net interest margin on average interest-earning assets (2)			1.69	%		1.84	%		1.88	%		1.85	%		1.88	%
Return on average assets (3)			0.52	%		0.80	%		0.88	%		0.87	%		0.84	%
Return on average interest-earning assets (2)(3)			0.58	%		0.89	%		0.99	%		0.97	%		0.96	%
Reported effective tax rate			22.5	%		20.8	%		21.2	%		19.8	%		14.3	%
Common share information
Per share ($)	– basic earnings	$	8.23		$	11.22		$	11.69		$	11.26		$	10.72
	– reported diluted earnings		8.22			11.19			11.65			11.24			10.70
	– dividends		5.82			5.60			5.32			5.08			4.75
	– book value		84.05			79.87			73.83			66.55			56.59
Closing share price ($)			99.38			112.31			113.68			113.56			100.50
Shares outstanding (thousands)	– weighted-average basic		445,435			444,324			443,082			412,636			395,389
	– weighted-average diluted		446,021			445,457			444,627			413,563			395,919
	– end of period		447,085			445,342			442,826			439,313			397,070
Market capitalization ($ millions)		$	44,431		$	50,016		$	50,341		$	49,888		$	39,906
Value measures
Total shareholder return			(5.90	)%		4.19	%		4.70	%		18.30	%		5.19	%
Dividend yield (based on closing share price)			5.9	%		5.0	%		4.7	%		4.5	%		4.7	%
Reported dividend payout ratio			70.7	%		49.9	%		45.5	%		45.6	%		44.3	%
Market value to book value ratio			1.18			1.41			1.54			1.71			1.78
Selected financial measures – adjusted (4)
Adjusted efficiency ratio (5)			55.8	%		55.5	%		55.6	%		57.2	%		58.0	%
Adjusted return on common shareholders’ equity			11.7	%		15.4	%		17.4	%		18.1	%		19.0	%
Adjusted effective tax rate			21.8	%		20.6	%		20.0	%		20.3	%		16.6	%
Adjusted diluted earnings per share ($)		$	9.69		$	11.92		$	12.21		$	11.11		$	10.22
Adjusted dividend payout ratio			60.0	%		46.9	%		43.4	%		46.2	%		46.4	%
On- and off-balance sheet information ($ millions)
Cash, deposits with banks and securities		$	211,564		$	138,669		$	119,355		$	107,571		$	101,588
Loans and acceptances, net of allowance			416,388			398,108			381,661			365,558			319,781
Total assets			769,551			651,604			597,099			565,264			501,357
Deposits			570,740			485,712			461,015			439,706			395,647
Common shareholders’ equity			37,579			35,569			32,693			29,238			22,472
Average assets			735,492			639,716			598,441			542,365			509,140
Average interest-earning assets (2)			654,142			572,677			536,059			485,837			445,134
Average common shareholders’ equity			36,792			34,467			31,184			25,393			21,275
Assets under administration (AUA) (6)(7)			2,368,904			2,425,651			2,303,962			2,192,947			2,041,887
Assets under management (AUM) (7)			265,936			252,007			225,379			221,571			183,715
Balance sheet quality (All-in basis) and liquidity measures
Risk-weighted assets (RWA) ($ millions)
Total RWA		$	254,871		$	239,863			n/a			n/a			n/a
CET1 capital RWA			n/a			n/a		$	216,144		$	203,321		$	168,996
Tier 1 capital RWA			n/a			n/a			216,303			203,321			169,322
Total capital RWA			n/a			n/a			216,462			203,321			169,601
Capital ratios
CET1 ratio (8)			12.1	%		11.6	%		11.4	%		10.6	%		11.3	%
Tier 1 capital ratio (8)			13.6	%		12.9	%		12.9	%		12.1	%		12.8	%
Total capital ratio (8)			16.1	%		15.0	%		14.9	%		13.8	%		14.8	%
Leverage ratio			4.7	%		4.3	%		4.3	%		4.0	%		4.0	%
LCR (9)			145	%		125	%		128	%		120	%		124	%
Other information
Full-time equivalent employees			43,853			45,157			44,220			44,928			43,213

(1) The ratio is calculated as the provision for credit losses on impaired loans to average loans and acceptances, net of allowance for credit losses.

(2) Average interest-earning assets include interest-bearing deposits with banks, interest-bearing demand deposits with Bank of Canada, securities, cash collateral on securities borrowed, securities purchased under resale agreements, loans net of allowances, and certain sublease-related assets.

(3) Net income expressed as a percentage of average assets or average interest-earning assets.

(4) Adjusted measures are non-GAAP measures. Adjusted measures are calculated in the same manner as reported measures, except that financial information included in the calculation of adjusted measures is adjusted to exclude the impact of items of note. For additional information and a reconciliation of reported results to adjusted results, see the “Non-GAAP measures” section.

(5) Calculated on a TEB.

(6) Includes the full contract amount of AUA or custody under a 50/50 joint venture between CIBC and The Bank of New York Mellon of $1,861.5 billion as at October 31, 2020 (2019: $1,923.2 billion).

(7) AUM amounts are included in the amounts reported under AUA.

(8) Effective beginning in the second quarter of 2020, ratios reflect the expected credit loss (ECL) transitional arrangement announced by OSFI on March 27, 2020.

(9) Average for the three months ended October 31 for each respective year.

n/a Not applicable.

CIBC 2020 ANNUAL REPORT 5

Management’s discussion and analysis

Economic and market environment

Year in review – 2020

The North American outbreak of COVID-19 that occurred in the first quarter of 2020 represented a major shock to CIBC’s principal markets. Efforts to contain the pandemic in the spring of 2020, including the implementation of public health measures such as travel restrictions and physical distancing, resulted in a steep economic decline in Canada and the U.S., as governments on both sides of the border announced unprecedented fiscal and monetary stimulus measures to bolster the economy. The subsequent relaxation of these public health measures resulted in an uneven recovery that continues to leave both countries with a considerable gap to economic levels at the beginning of the year. Service industries in which physical distancing posed a major impediment were particularly hard-hit, along with the energy sector that faced a soft global demand environment. Impacts on household and business credit quality were cushioned but not eliminated by large-scale government assistance measures and deep cuts in interest rates in Canada and the U.S., with lower rates resulting in reduced lending margins in the banking system. In Canada, household credit growth slowed as sharply weaker non-mortgage credit demand offset growth in mortgages. Lower consumer spending had a negative impact on retail transaction volumes. Housing prices remained firm in most markets. Business credit demand picked up sharply early in the pandemic for liquidity needs, but then decelerated over the balance of the year on slower economic activity, while capital markets activity was boosted by strong corporate and government bond issuance. U.S. equity markets reached new highs in the summer, while Canadian equity markets recovered significantly from the initial lows.

Outlook for calendar year 2021

The COVID-19 pandemic continues to have a significant adverse impact on the near-term economic outlook for the global economy. Restrictions imposed by governments around the world to limit the impact of subsequent waves of infection, such as travel restrictions, physical distancing measures, and the closure of certain businesses, continue to disrupt the global economy, and will limit the scope for a further recovery until an effective mass-produced vaccine is in place. Recent positive developments related to vaccine development suggest regulatory approval and targeted usage could be expected by early 2021, but uncertainty remains surrounding the timing of mass production, distribution, public acceptance and the subsequent reduction in rates of infection. Our outlook assumes that mass vaccinations will be underway in mid-2021 and allow for stronger global recovery in the latter half of the year. Until then, we assume that temporary restraints on activity in response to subsequent waves will replace the near-complete restrictions that were in place in early and mid-2020. Growth will continue in sectors less impacted by physical distancing measures, but other sectors will experience periods of disruption when regulations are tightened in response to new waves of the virus. We generally expect to see stronger performance in the goods sector of the economy, but continued slack in the services sector. Constrained global activity and its implications on demand for fuel will also result in a slower recovery in crude oil prices through the first half of 2021.

In Canada, after a drop of approximately 5.5% in 2020, real gross domestic product (GDP) is expected to advance by about 4% in 2021, with more of the gains expected in the latter half of the calendar year. We expect that this will still leave the unemployment rate averaging over 8%, well above full employment levels. Both businesses and households will benefit from substantial government fiscal support through at least the first half of the year, which will reduce the impact of slower economic growth on insolvencies, business and household credit growth and retail transaction volumes relative to what would have occurred absent these measures. Government bond issuance will remain elevated to cover the resulting federal and provincial deficits. The Bank of Canada will maintain short-term interest rates at their current levels through 2021, although longer-term rates will drift higher as economic growth accelerates, and the central bank eases up on its asset purchase program.

In the U.S., real GDP is expected to grow by approximately 3.5% in 2021, after a similarly-scaled decline in 2020, with better gains expected in the latter half of next year. Our outlook assumes that the federal government will enact a second round of fiscal stimulus no later than early 2021 to provide enhanced support for households and businesses impacted by the pandemic, reducing its impact on insolvencies. With no growth over the two-year period of 2020–21, unemployment will average approximately 6.5% in 2021, well above full-employment levels. In response, we expect that the Federal Reserve will maintain near-zero short-term interest rates and continue to engage in asset purchases to slow the climb in long-term rates.

The economic challenges from the COVID-19 pandemic impact all our SBUs. From a credit perspective, all our loan portfolios will continue to be negatively impacted by the constrained economic activity associated with measures taken to contain the spread of infection, mitigated to an extent by large-scale government support and relief programs targeting both individuals and businesses. Deposit growth is likely to decelerate as businesses draw down on liquidity raised earlier in the pandemic, and as households spend a greater portion of their income as economic growth accelerates. The persistent low interest environment is expected to continue to have a negative impact on the net interest margins for all our SBUs.

For Canadian Personal and Business Banking, mortgage demand growth could see a deceleration, but will continue to remain well supported by low rates, while we expect to see a return to growth in non-mortgage credit demand as pandemic-related constraints begin to ease. Continued demand for business lending products is anticipated as small businesses look to weather the impact of the economic slowdown, but a slower pace of growth is expected relative to 2020.

Our Canadian and U.S. wealth management businesses are expected to benefit from a further economic recovery, with investors looking for alternatives to low rates on savings deposits.

Our Capital Markets business is expected to benefit from merger and acquisition activity as corporate consolidations increase in the aftermath of the pandemic, as well as increased equity issuance, but will be impacted by lower corporate bond issuance and lower trading revenues from the highs in 2020. Loan demand in our Canadian and U.S. commercial banking businesses could experience slower growth as the need for liquidity during the crisis eases, but will be supported by business expansion plans further into the year.

The economic outlook described above reflects numerous assumptions and uncertainties regarding the economic impact of the COVID-19 pandemic, which will ultimately depend on the speed at which an effective vaccine can be developed and administered on a mass scale, and the ability of governments, businesses and health-care systems to effectively limit the epidemiological and economic impacts of the current and possible future resurgences of the virus in the intervening period. The extent to which physical distancing policies restrict economic activity, and the level and effectiveness of government support during this intervening period are material to our expectations for the scale and timing of a further economic rebound in 2021. Expectations reflect currently available expert opinions and are subject to change as new information on transmissibility and epidemiology becomes available. As a result, actual experience may differ materially from expectations.

See the “Significant events” section for further details on the impact of the COVID-19 pandemic.

6 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Significant events

Impact of COVID-19

On March 11, 2020, the outbreak of COVID-19 was officially declared a pandemic by the WHO. As discussed in the “Economic and market environment” section, the COVID-19 pandemic continues to have a significant adverse impact on the global economy. Measures undertaken in the second quarter to contain the spread of the virus, including the closure of non-essential businesses, succeeded in curbing the initial spread of infection, allowing for partial easing of these measures in the third and fourth quarters. As a result, certain sectors of the economy have seen a resumption of activity. However there is a risk that the recent retightening of these measures enacted by governments and businesses in response to the resurgence in infection rates could impact economic activity beyond levels that were previously anticipated. The overall economy continues to operate below pre-pandemic levels in Canada, the U.S. and other regions where we operate. As a result, the COVID-19 pandemic continues to significantly impact our clients, our team, and our business.

Supporting our clients, team members, and communities during the COVID-19 pandemic

Initial measures to curb COVID-19 resulted in the closure or reduced operating hours at a number of our banking centre locations, as well as the provision of certain expanded benefits to our team members in light of the challenges posed by COVID-19. As governments subsequently eased physical distancing measures, we worked closely with regional authorities to align our business practices with prevailing guidelines in the regions in which we operate, resulting in the reopening of our banking centres and adjustment to the expanded employee benefits. We continue to work closely with the relevant government and health authorities as regions respond to the second wave of the pandemic to ensure the safety of our team members and clients. Steps taken to keep our team members and clients safe include the continued support of remote working arrangements and enhanced safety procedures and cleaning protocols. We also continue to support the organizations and charities that are taking care of our communities during this crisis.

We have been actively engaged in lending activities to support our clients who were experiencing financial hardship caused by the COVID-19 pandemic, including providing payment deferral programs on various products for personal, corporate and commercial banking clients, and voluntarily reducing interest rates on select credit cards. A number of these programs have now drawn to a close, with the number of additional clients seeking relief reducing significantly relative to prior quarters, resulting in a reduction in the outstanding balances for these programs. See the “CIBC client relief programs in response to COVID-19” section for further details.

We continue to be actively engaged with governments, monetary authorities and regulators in the jurisdictions in which we operate, and continue to support our clients through government-led relief programs. See the “Government lending programs in response to COVID-19” and “Off-balance sheet arrangements” sections and Note 2 to our consolidated financial statements for further details regarding our participation in these programs.

Impact on financial results

COVID-19 has negatively impacted our results in 2020. See the “2020 Financial results review” and “Strategic business units overview” sections for further details on our financial performance in 2020, including the impact of the COVID-19 pandemic.

On pages 2 to 4 of our 2020 Annual Report, we provided disclosure regarding our scorecard of financial measures that we use to evaluate our performance against our strategic objectives, including the targets that we have set for each of these measures over the medium term. Until there is greater certainty concerning the dissemination of an effective mass-produced vaccine, the COVID-19 pandemic is expected to continue to impact our ability to achieve our performance objectives.

The extent to which the COVID-19 pandemic continues to negatively impact our business, results of operations, reputation and financial condition, as well as our regulatory capital and liquidity positions, will depend on future developments, which are highly uncertain. See the “Economic and market environment” section and Note 6 to our consolidated financial statements for further details on how the COVID-19 pandemic has impacted our economic outlook.

Impact on risk environment

We enacted our business continuity plans in the second quarter upon the WHO declaring COVID-19 a pandemic and we developed business priorities and an operating model to support our clients, team members and communities throughout this crisis. See the “Top and emerging risks” section for further details on additional risks associated with the COVID-19 pandemic.

Unprecedented regulatory and central bank support

Governments, monetary authorities, regulators and financial institutions continue to take actions to support the economy, increase liquidity, mitigate unemployment, provide public assistance, provide regulatory flexibility and implement other measures intended to mitigate or counterbalance the adverse economic consequences of the pandemic. See the “Regulatory developments arising from the COVID-19 pandemic” section for further details on regulatory flexibility provided during the quarter in response to the COVID-19 pandemic, and the “Regulatory developments concerning liquidity” section for details on relevant funding and liquidity programs instituted to support market liquidity during this crisis.

Impact on significant accounting judgments and estimates

Ongoing economic uncertainty, including reduced short- and medium-term growth due to the decline in economic activity associated with physical distancing measures and market volatility impact our significant accounting estimates and judgments. While economic activity started to recover in the third and fourth quarters, we continue to be faced with unprecedented circumstances which lead to significant uncertainty regarding the ultimate outcome of the COVID-19 pandemic and its impact on economic growth and consumer behaviour. This results in higher inherent risk associated with estimating the impact of the COVID-19 pandemic on our consolidated financial statements and requires management to exercise significant judgment in certain areas, in particular in relation to determining the impact of the COVID-19 pandemic on ECL allowances. Further details can be found in the “Accounting and control matters” section, as well as in Note 2 to our consolidated financial statements.

Restructuring

During the first quarter of 2020, we recognized a restructuring charge of $339 million ($250 million after-tax) associated with ongoing efforts to transform our cost structure and simplify our bank, shown as an item of note. This charge consisted primarily of employee severance and related costs and was recognized in Corporate and Other. For additional information, see Note 23 to our consolidated financial statements.

CIBC 2020 ANNUAL REPORT 7

Management’s discussion and analysis

Sale of FirstCaribbean International Bank Limited

On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of FirstCaribbean International Bank Limited (CIBC FirstCaribbean) to GNB Financial Group Limited (GNB) for total consideration of approximately US$797 million, comprised of approximately US$200 million in cash and secured financing provided by CIBC for the remainder, subject to closing adjustments to reflect certain changes in CIBC FirstCaribbean’s book value. The closing of this transaction would result in CIBC retaining a 24.9% minority interest in CIBC FirstCaribbean, which would be accounted for as an investment in associate using the equity method.

In the fourth quarter of 2019, we recognized a goodwill impairment charge of $135 million as a result of the valuation implied from the definitive agreement with GNB. Commencing in the first quarter of 2020, the assets and liabilities of CIBC FirstCaribbean were treated as held for sale, and measured at the lower of their aggregate carrying amount and fair value less costs to sell, on the basis that the transaction was highly probable to close in 2020 subject to regulatory approvals. In the second quarter of 2020, we recognized an additional goodwill impairment charge of $28 million based on the estimated impact of the COVID-19 pandemic on the recoverable value of the 24.9% interest in CIBC FirstCaribbean that we expected to retain.

As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our revised expectations regarding the likelihood and timing of closing of a potential transaction, we concluded in the fourth quarter of 2020 that held for sale accounting is no longer appropriate. As a result, we were required to assess the recoverable amount of the remaining goodwill based on current market conditions rather than the definitive agreement with GNB. This assessment reflected revised expectations concerning the impact of the COVID-19 pandemic and led to the recognition of an additional goodwill impairment charge of $220 million. While we discontinued the application of held for sale accounting, we continue to pursue the transaction and the regulatory review process.

For additional information, see Note 4 and Note 9 to our consolidated financial statements.

Financial performance overview

This section provides a review of our consolidated financial results for 2020. A review of our SBU results follows on pages 19 to 28. Refer to page 14 for a review of our financial performance for 2019.

2020 Financial results review

Reported net income for the year was $3,792 million, compared with $5,121 million in 2019.

Adjusted net income⁽¹⁾ for the year was $4,447 million, compared with $5,444 million in 2019.

Reported diluted EPS for the year was $8.22, compared with $11.19 in 2019.

Adjusted diluted EPS⁽¹⁾ for the year was $9.69, compared with $11.92 in 2019.

2020

Net income was affected by the following items of note:

• $339 million ($250 million after-tax) restructuring charge primarily related to employee severance (Corporate and Other);

• $248 million ($248 million after-tax) goodwill impairment charges related to our controlling interest in CIBC FirstCaribbean of which $28 million was recognized in the second quarter and $220 million was recognized in the fourth quarter (Corporate and Other);

• $114 million ($84 million after-tax) charge related to the consolidation of our real estate portfolio (Corporate and Other);

• $105 million ($80 million after-tax) amortization of acquisition-related intangible assets ($6 million after-tax in Canadian Personal and Business Banking, $1 million after-tax in Canadian Commercial Banking and Wealth Management, $61 million after-tax in U.S. Commercial Banking and Wealth Management, and $12 million after-tax in Corporate and Other);

• $79 million ($58 million after-tax) gain as a result of plan amendments related to pension and other post-employment plans (Corporate and Other); and

• $70 million ($51 million after-tax) increase in legal provisions (Corporate and Other).

The above items of note increased non-interest expenses by $797 million and decreased income taxes by $142 million. In aggregate, these items of note decreased net income by $655 million.

2019

Net income was affected by the following items of note:

• $227 million ($167 million after-tax) charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in the new loyalty program (Canadian Personal and Business Banking);

• $135 million ($135 million after-tax) goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean (Corporate and Other);

• $109 million ($82 million after-tax) amortization of acquisition-related intangible assets ($7 million after-tax in Canadian Personal and Business Banking, $1 million after-tax in Canadian Commercial Banking and Wealth Management, $65 million after-tax in U.S. Commercial Banking and Wealth Management, and $9 million after-tax in Corporate and Other);

• $67 million ($49 million after-tax) of interest income related to the settlement of certain income tax matters (Corporate and Other);

• $45 million ($33 million after-tax net positive impact) in purchase accounting adjustments net of transaction and integration-related costs⁽²⁾ associated with the acquisitions of The PrivateBank, Geneva Advisors and Wellington Financial (income of $25 million after-tax in U.S. Commercial Banking and Wealth Management, and $8 million after-tax in Corporate and Other); and

• $28 million ($21 million after-tax) increase in legal provisions (Corporate and Other).

The above items of note increased revenue by $101 million and non-interest expenses by $488 million, and decreased income taxes by $64 million. In aggregate, these items of note decreased net income by $323 million.

(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.

(2) Transaction costs include legal and other advisory fees and interest adjustments relating to the obligation payable to dissenting shareholders. Integration costs are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the businesses of The PrivateBank (subsequently rebranded as CIBC Bank USA) and Geneva Advisors with CIBC, including enabling cross-sell opportunities and expansion of services in the U.S. market, the upgrade and conversion of systems and processes, project management, integration-related travel, severance, consulting fees and marketing costs related to rebranding activities. Purchase accounting adjustments, shown as an item of note from the fourth quarter of 2017 to the fourth quarter of 2019, include changes in the fair value of contingent consideration relating to the Geneva Advisors and Wellington Financial acquisitions. These items are recognized in Corporate and Other.

8 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Net interest income and margin

$ millions, for the year ended October 31	2020			2019			2018
Average interest-earning assets	$	654,142		$	572,677		$	536,059
Net interest income		11,044			10,551			10,065
Net interest margin on average interest-earning assets		1.69	%		1.84	%		1.88	%

Net interest income was up $493 million or 5% from 2019, primarily due to volume growth across our businesses, higher trading income and higher revenue from Capital Markets financing activities, partially offset by narrower margins driven by changes in the interest rate environment and interest rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients during the COVID-19 pandemic.

Net interest margin on average interest-earning assets was down 15 basis points, primarily due to narrower margins largely due to the factors discussed above and excess liquidity costs.

Additional information on net interest income and margin is provided in the “Supplementary annual financial information” section.

Non-interest income

$ millions, for the year ended October 31	2020		2019		2018
Underwriting and advisory fees	$	468	$	475	$	420
Deposit and payment fees		781		908		877
Credit fees		1,020		958		851
Card fees		410		458		510
Investment management and custodial fees (1)(2)		1,382		1,305		1,247
Mutual fund fees (2)		1,586		1,595		1,624
Insurance fees, net of claims		386		430		431
Commissions on securities transactions		362		313		357
Gains (losses) from financial instruments measured/designated at fair value through profit or loss (FVTPL), net (3)		694		761		603
Gains (losses) from debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, net		9		34		(35	)
Foreign exchange other than trading		234		304		310
Income from equity-accounted associates and joint ventures (1)		79		92		121
Other		286		427		453
	$	7,697	$	8,060	$	7,769

(1) Custodial fees directly recognized by CIBC are included in Investment management and custodial fees. Our proportionate share of CIBC Mellon’s custodial fees are included within Income from equity-accounted associates and joint ventures.

(2) Investment management fees and mutual fund fees are driven by various factors, including the amount of AUM. Investment management fees in our asset management and private wealth management businesses are generally driven by the amount of AUM, while investment management fees in our retail brokerage business are driven by a combination of the amount of AUA and, to a lesser extent, other factors unrelated to the amount of AUA (e.g., flat fees on a per account basis).

(3) Includes $31 million of loss (2019: $54 million of loss; 2018: $46 million of income) relating to non-trading financial instruments measured/designated at FVTPL.

Non-interest income was down $363 million or 5% from 2019.

Deposit and payment fees were down $127 million or 14%, primarily due to lower client transaction activity in Canadian Personal and Business Banking as a result of the pandemic.

Credit fees were up $62 million or 6%, primarily due to growth in commercial loans.

Card fees were down $48 million or 10%, primarily due to lower client transaction activity as a result of the pandemic and an interchange rate change in Canadian Personal and Business Banking.

Investment management and custodial fees were up $77 million or 6%, primarily due to asset growth in our wealth management businesses.

Commissions on securities transactions were up $49 million or 16%, primarily due to higher trading volume in our retail brokerage business.

Gains (losses) from financial instruments measured/designated at FVTPL, net were down $67 million or 9%, primarily due to lower trading income, partially offset by Treasury activities.

Foreign exchange other than trading was down $70 million or 23%, primarily due to Treasury activities.

Other was down $141 million or 33%, primarily due to lower sublease revenue relating to our adoption of IFRS 16 in the current year that was largely offset in interest income and non-interest expenses, and mark-to-market losses related to economic hedges of certain non-trading activities that were largely offset in net interest income.

CIBC 2020 ANNUAL REPORT 9

Management’s discussion and analysis

Trading activities (TEB)

$ millions, for the year ended October 31	2020			2019		2018
Trading income consists of:
Net interest income (1)	$	904		$	633	$	856
Non-interest income		725			815		557
	$	1,629		$	1,448	$	1,413
Trading income by product line:
Interest rates	$	528		$	300	$	246
Foreign exchange		674			585		573
Equities		280			386		452
Commodities		182			117		94
Other		(35	)		60		48
	$	1,629		$	1,448	$	1,413

(1) Includes TEB adjustment of $183 million (2019: $177 million; 2018: $278 million) reported within Capital Markets. See “Strategic business units overview” section for further details.

Trading income was up $181 million or 13% from 2019, primarily due to higher interest rates, foreign exchange and commodities trading income, partially offset by lower equity trading income.

Net interest income comprises interest and dividends relating to financial assets and liabilities associated with trading activities, net of interest expense and interest income associated with funding these assets and liabilities. Non-interest income includes realized and unrealized gains and losses on securities mandatorily measured at FVTPL and income relating to changes in fair value of derivative financial instruments. Trading activities and related risk management strategies can periodically shift income between net interest income and non-interest income. Therefore, we view total trading revenue as the most appropriate measure of trading performance.

Provision for credit losses

$ millions, for the year ended October 31	2020		2019			2018
Provision for (reversal of) credit losses – impaired
Canadian Personal and Business Banking	$	640	$	809		$	760
Canadian Commercial Banking and Wealth Management		162		159			15
U.S. Commercial Banking and Wealth Management		133		68			67
Capital Markets		106		90			8
Corporate and Other		24		21			102
		1,065		1,147			952
Provision for (reversal of) credit losses – performing
Canadian Personal and Business Banking		579		87			(19	)
Canadian Commercial Banking and Wealth Management		141		4			(10	)
U.S. Commercial Banking and Wealth Management		354		5			12
Capital Markets		175		63			(38	)
Corporate and Other		175		(20	)		(27	)
		1,424		139			(82	)
	$	2,489	$	1,286		$	870

Provision for credit losses was up $1,203 million or 94% from 2019. Provision for credit losses on performing loans was up $1,285 million, mainly due to increased provisions related to the COVID-19 pandemic. Provision for credit losses on impaired loans was down $82 million, due to lower insolvencies and write-offs in credit cards and personal lending, reflecting the impact of the client relief programs and government support, partially offset by higher provisions in business and government loans.

For further details regarding provision for credit losses in our SBUs, refer to the “Strategic business units overview” section.

Non-interest expenses

$ millions, for the year ended October 31	2020		2019		2018
Employee compensation and benefits
Salaries	$	3,529	$	3,081	$	2,934
Performance-based compensation		1,948		1,873		1,966
Benefits		782		772		765
		6,259		5,726		5,665
Occupancy costs		944		892		875
Computer, software and office equipment		1,939		1,874		1,742
Communications		308		303		315
Advertising and business development		271		359		327
Professional fees		203		226		226
Business and capital taxes		117		110		103
Other		1,321		1,366		1,005
	$	11,362	$	10,856	$	10,258

Non-interest expenses were up $506 million or 5% from 2019.

Employee compensation and benefits were up $533 million or 9%, primarily due to a restructuring charge primarily related to employee severance, shown as an item of note, higher performance-based compensation and additional employee benefits provided to support our employees during the COVID-19 pandemic, partially offset by a gain as a result of plan amendments related to pension and other post-employment plans, shown as an item of note.

10 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Occupancy costs were up $52 million or 6%, primarily due to a charge related to the consolidation of our real estate portfolio associated with our upcoming move to our new global headquarters, shown as an item of note, partially offset by lower occupancy costs related to adoption of IFRS 16 in the current year that were largely offset by higher interest expenses.

Advertising and business development were down $88 million or 25%, primarily due to lower spending driven by the impact of the COVID-19 pandemic.

Other expenses were down $45 million or 3%, as the prior year included a charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in the new loyalty program, partially offset by higher goodwill impairment relative to the prior year, and an increase in legal provisions, with all of these shown as items of note.

Taxes

$ millions, for the year ended October 31	2020			2019			2018
Income taxes	$	1,098		$	1,348		$	1,422
Indirect taxes (1)
Goods and Services Tax (GST), Harmonized Sales Tax (HST) and sales taxes		411			418			354
Payroll taxes		292			271			271
Capital taxes		79			76			68
Property and business taxes		76			72			77
Total indirect taxes		858			837			770
Total taxes	$	1,956		$	2,185		$	2,192
Reported effective tax rate		22.5	%		20.8	%		21.2	%
Total taxes as a percentage of net income before deduction of total taxes		34.0	%		29.9	%		29.3	%

(1) Certain amounts are based on a paid or payable basis and do not factor in capitalization and subsequent amortization.

Income taxes include those imposed on CIBC as a Canadian legal entity, as well as on our domestic and foreign subsidiaries. Indirect taxes comprise GST, HST and sales, payroll, capital, property and business taxes. Indirect taxes are included in non-interest expenses.

Total income and indirect taxes were down $229 million from 2019.

Income tax expense was $1,098 million, down $250 million from 2019. This was primarily due to lower income, partially offset by an unfavourable impact of changes in the proportion of income subject to varying rates of tax in different jurisdictions. The prior year also included a net tax recovery of $38 million resulting from the Enron settlement discussed below, largely offset by a $28 million revaluation of certain deferred tax assets due to tax rate changes enacted by the Barbados government in the first quarter of 2019.

Indirect taxes were up $21 million, primarily due to increased payroll taxes, including social security contributions.

The U.S. Tax Cuts and Jobs Act (U.S. tax reforms) reduced the U.S. federal corporate income tax rate effective in 2018 and introduced other important changes to U.S. corporate income tax laws including a Base Erosion Anti-Abuse Tax (BEAT) that subjects certain payments from a U.S. corporation to foreign related parties to additional taxes. The Internal Revenue Service periodically releases proposed and final regulations to implement aspects of the U.S. tax reforms, including BEAT. CIBC continues to evaluate the impact of these regulations on our U.S. operations.

In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related legal expenses (the Enron expenses). In January 2019, CIBC entered into a settlement agreement (the Agreement) with the CRA that provides certainty with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax recovery in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of the Enron expenses that are expected to be deductible in the United States (the U.S. deduction). The U.S. deduction has not been agreed to by the Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.

The CRA has reassessed CIBC approximately $1,115 million of additional income tax by denying the tax deductibility of certain 2011 to 2015 Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. The dividends that were subject to the reassessments are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. It is possible that subsequent years may be reassessed for similar activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts have been accrued in the consolidated financial statements.

Foreign exchange

The estimated impact of U.S. dollar translation on key lines of our consolidated statement of income, as a result of changes in average exchange rates, is as follows:

	2020			2019			2018
	vs.			vs.			vs.
$ millions, for the year ended October 31	2019			2018			2017
Estimated increase (decrease) in:
Total revenue	$	50		$	124		$	(55	)
Provision for credit losses		9			7			(2	)
Non-interest expenses		26			66			(30	)
Income taxes		3			5			(3	)
Net income		12			46			(20	)
Impact on EPS:
Basic	$	0.03		$	0.10		$	(0.05	)
Diluted		0.03			0.10			(0.05	)
Average USD appreciation (depreciation) relative to CAD		1.1	%		3.2	%		(1.5	)%

CIBC 2020 ANNUAL REPORT 11

Management’s discussion and analysis

Fourth quarter review

$ millions, except per share amounts, for the three months ended									2020								2019 (1)
		Oct. 31		Jul. 31		Apr. 30			Jan. 31		Oct. 31		Jul. 31		Apr. 30		Jan. 31
Revenue
Canadian Personal and Business Banking		$	2,139	$	2,056	$	2,079		$	2,214	$	2,225	$	2,240	$	2,126	$	2,164
Canadian Commercial Banking and Wealth Management			1,028		1,013		1,025			1,055		1,026		1,019		998		984
U.S. Commercial Banking and Wealth Management (2)			515		514		518			507		502		509		474		479
Capital Markets (2)			792		1,000		824			871		740		752		756		712
Corporate and Other (2)			126		125		132			208		279		212		188		226
Total revenue		$	4,600	$	4,708	$	4,578		$	4,855	$	4,772	$	4,732	$	4,542	$	4,565
Net interest income		$	2,792	$	2,729	$	2,762		$	2,761	$	2,801	$	2,694	$	2,460	$	2,596
Non-interest income			1,808		1,979		1,816			2,094		1,971		2,038		2,082		1,969
Total revenue			4,600		4,708		4,578			4,855		4,772		4,732		4,542		4,565
Provision for credit losses			291		525		1,412			261		402		291		255		338
Non-interest expenses			2,891		2,702		2,704			3,065		2,838		2,670		2,588		2,760
Income before income taxes			1,418		1,481		462			1,529		1,532		1,771		1,699		1,467
Income taxes			402		309		70			317		339		373		351		285
Net income		$	1,016	$	1,172	$	392		$	1,212	$	1,193	$	1,398	$	1,348	$	1,182
Net income (loss) attributable to:
Non-controlling interests		$	1	$	2	$	(8	)	$	7	$	8	$	6	$	7	$	4
Equity shareholders			1,015		1,170		400			1,205		1,185		1,392		1,341		1,178
EPS	– basic	$	2.21	$	2.56	$	0.83		$	2.64	$	2.59	$	3.07	$	2.96	$	2.61
	– diluted		2.20		2.55		0.83			2.63		2.58		3.06		2.95		2.60

(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(2) Capital Markets and U.S. Commercial Banking and Wealth Management revenue and income taxes are reported on a TEB with an equivalent offset in the revenue and income taxes of Corporate and Other.

Compared with Q4/19

Net income for the quarter was $1,016 million, down $177 million or 15% from the fourth quarter of 2019.

Net interest income was down $9 million, primarily due to narrower margins, lower treasury revenue and interest income related to the settlement of certain income tax matters in the same quarter last year, shown as an item of note, partially offset by volume growth across our businesses, higher trading income and higher revenue from financing activities in Capital Markets.

Non-interest income was down $163 million or 8%, primarily due to lower trading income, and lower deposit and payment fees.

Provision for credit losses was down $111 million or 28% from the same quarter last year. Provision for credit losses on performing loans was up $41 million, primarily due to an unfavourable impact of model parameter updates in Canadian Personal and Business Banking and negative credit migration in U.S. Commercial Banking and Wealth Management. Provision for credit losses on impaired loans was down $152 million, largely due to lower insolvencies and write-offs in credit cards and personal lending, reflecting the impact of the client relief programs and government support.

Non-interest expenses were up $53 million or 2%, primarily due to charges related to the consolidation of our real estate portfolio and goodwill impairment related to our controlling interest in CIBC FirstCaribbean, both shown as items of note. The increase was partially offset by a gain as a result of plan amendments related to pension and other post-employment plans this quarter, and an increase in legal provisions in the same quarter last year, both shown as items of note, and lower performance-based compensation this quarter.

Income tax expense was up $63 million or 19%, despite lower income, primarily due to the goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean, which is not deductible for tax purposes.

Compared with Q3/20

Net income for the quarter was down $156 million or 13% from the prior quarter.

Net interest income was up $63 million or 2%, primarily due to volume growth in Canadian Personal and Business Banking and higher trading income.

Non-interest income was down $171 million or 9%, primarily due to lower trading income.

Provision for credit losses was down $234 million or 45% from the prior quarter. Provision for credit losses on performing loans was down $112 million, primarily due to an unfavourable change to our economic outlook in the third quarter, partially offset by increased provisions due to various model parameter updates and unfavourable credit migration in certain portfolios this quarter. Provision for credit losses on impaired loans was down $122 million, due to lower insolvencies and write-offs in personal lending, reflecting the impact of the client relief programs and government support, along with lower provisions in business and government loans.

Non-interest expenses were up $189 million or 7%, primarily due to charges for goodwill impairment related to our controlling interest in CIBC FirstCaribbean and the consolidation of our real estate portfolio, both shown as items of note. The increase was partially offset by a gain as a result of plan amendments related to pension and other post-employment plans this quarter and an increase in legal provisions in the prior quarter, both shown as items of note.

Income tax expense was up $93 million or 30%, despite lower income, primarily due to the goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean, which is not deductible for tax purposes.

12 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Quarterly trend analysis

Our quarterly results are modestly affected by seasonal factors. The second quarter has fewer days as compared with the other quarters, generally leading to lower earnings. The summer months (July – third quarter and August – fourth quarter) typically experience lower levels of market activity, which affects our brokerage, investment management, and Capital Markets activities.

Revenue

Canadian Personal and Business Banking revenue has benefited from volume growth, as well as margins widening earlier in the period, with headwinds due to margins and fee income arising in the second to fourth quarters of 2020 due to the COVID-19 pandemic.

Canadian Commercial Banking and Wealth Management has continued to benefit from increases in both commercial banking deposit and loan volumes, although recent periods have seen muted loan growth as a result of the impact of the government’s public health measures on a number of businesses across Canada due to the COVID-19 pandemic. In wealth management, recent market volatility has impacted AUA and AUM balances.

U.S. Commercial Banking and Wealth Management revenue reflects recent net interest margin pressure, offset by the impact of strong organic growth through to the second quarter of 2020, and fee income growth.

Capital Markets revenue is influenced, to a large extent, by market conditions affecting client trading and underwriting activity. The first and third quarters of 2020 included higher trading revenue.

Corporate and Other included the impact of changes relating to our adoption of IFRS 16 in the current year that were largely offset in non-interest expenses (see Note 8 to our consolidated financial statements for further details regarding the impact of our transition to IFRS 16). The fourth quarter of 2019 included interest income related to the settlement of certain income tax matters.

Provision for credit losses

Provision for credit losses is dependent upon the credit cycle in general, on the credit performance of the loan portfolios, and changes in economic outlook. As a result of the impact of the COVID-19 pandemic beginning in the second quarter of 2020, our loan portfolios were negatively impacted by the decline in economic activity associated with physical distancing measures, mitigated to an extent by large-scale government support and relief programs targeting both individuals and businesses. There is considerable judgment involved in the estimation of credit losses in the current environment. The ultimate impact of the COVID-19 pandemic will depend on the speed at which an effective vaccine can be administered on a mass scale, and the ability of governments, businesses and health-care systems to effectively limit the epidemiological and economic impacts of expected resurgences of the virus in the intervening period. The extent to which the recommended public health measures restrict economic activity and the level and effectiveness of government support during this intervening period are material to our expectations for a continued economic rebound in 2021 and our resulting provision for credit losses.

The significant increase in provision for credit losses on performing loans in the second and, to a lesser extent, in the third and fourth quarters of 2020 reflects the impacts of the COVID-19 pandemic and continued pressure on oil prices, and has impacted all of our SBUs. We also recognized provisions on performing loans throughout 2019, reflective of the impact of certain unfavourable changes to our economic outlook over that period.

In Canadian Personal and Business Banking, the fourth quarter of 2019 included higher provision on impaired loans in the personal lending portfolio. The third and fourth quarters of 2020 included lower insolvencies and write-offs in credit cards. The decrease in insolvencies was in line with the national Canadian trend, as a result of limited consumer filing channels. The low level of write-offs was due to assistance offered to clients from our payment deferral programs, as well as from government support.

In Canadian Commercial Banking and Wealth Management, there were higher provisions on impaired loans since the first quarter of 2019 compared with the second half of 2018. The first, third and fourth quarters of 2020, and the fourth quarter of 2019, included provisions on one fraud-related impairment.

In U.S. Commercial Banking and Wealth Management, the third quarter of 2019 and the second half of 2020 included higher provisions on impaired loans. Impaired loan provisions in the U.S. remain elevated with no industry or sector trends.

In Capital Markets, the first quarter of 2019 included higher provisions on impaired loans due to an impaired loan in the utility sector. The second half of 2019 and the second and third quarters of 2020 included higher provisions on impaired loans in the oil and gas sector.

In Corporate and Other, provisions on impaired loans remained relatively stable across 2019 and 2020.

Non-interest expenses

Non-interest expenses have fluctuated over the period largely due to changes in employee-related compensation and benefits, spending on strategic initiatives, and movement in foreign exchange rates. The first quarter of 2019 included a charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in its new loyalty program. The fourth quarter of 2019 and the second and fourth quarters of 2020 included a goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean. The fourth quarter of 2019 and the third quarter of 2020 included increases in legal provisions in Corporate and Other, shown as an item of note. The first quarter of 2020 included a restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. The fourth quarter of 2020 included a charge related to the consolidation of our real estate portfolio as a result of our upcoming move to our new global headquarters and a gain as a result of plan amendments related to pension and other post-employment plans.

Income taxes

Income taxes vary with changes in income subject to tax, and the jurisdictions in which the income is earned. Taxes can also be affected by the impact of significant items and the level of tax-exempt income.

CIBC 2020 ANNUAL REPORT 13

Management’s discussion and analysis

Review of 2019 financial performance

$ millions, for the year ended October 31		Canadian Personal and Business Banking		Canadian Commercial Banking and Wealth Management		U.S. Commercial Banking and Wealth Management (1)		Capital Markets (1)			Corporate and Other  (1)			CIBC Total
2019 (2)	Net interest income	$	6,372	$	1,205	$	1,381	$	1,253		$	340		$	10,551
	Non-interest income		2,383		2,822		583		1,707			565			8,060
	Total revenue		8,755		4,027		1,964		2,960			905			18,611
	Provision for (reversal of) credit losses		896		163		73		153			1			1,286
	Non-interest expenses		4,745		2,106		1,119		1,516			1,370			10,856
	Income (loss) before income taxes		3,114		1,758		772		1,291			(466	)		6,469
	Income taxes		825		471		90		337			(375	)		1,348
	Net income (loss)	$	2,289	$	1,287	$	682	$	954		$	(91	)	$	5,121
	Net income (loss) attributable to:
	Non-controlling interests	$	–	$	–	$	–	$	–		$	25		$	25
	Equity shareholders		2,289		1,287		682		954			(116	)		5,096
2018 (2)	Net interest income	$	6,151	$	1,091	$	1,231	$	1,432		$	160		$	10,065
	Non-interest income		2,444		2,745		529		1,503			548			7,769
	Total revenue		8,595		3,836		1,760		2,935			708			17,834
	Provision for (reversal of) credit losses		741		5		79		(30	)		75			870
	Non-interest expenses		4,395		2,067		1,023		1,492			1,281			10,258
	Income (loss) before income taxes		3,459		1,764		658		1,473			(648	)		6,706
	Income taxes		919		478		97		387			(459	)		1,422
	Net income (loss)	$	2,540	$	1,286	$	561	$	1,086		$	(189	)	$	5,284
	Net income (loss) attributable to:
	Non-controlling interests	$	–	$	–	$	–	$	–		$	17		$	17
	Equity shareholders		2,540		1,286		561		1,086			(206	)		5,267

(1) Capital Markets and U.S. Commercial Banking and Wealth Management revenue and income taxes are reported on a TEB with an equivalent offset in the revenue and income taxes of Corporate and Other.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

The following discussion provides a comparison of our results of operations for the years ended October 31, 2019 and 2018.

Overview

Net income for 2019 was $5,121 million, compared with $5,284 million in 2018. The decrease in net income of $163 million was due to higher non-interest expenses and a higher provision for credit losses, partially offset by higher revenue.

Consolidated CIBC

Net interest income

Net interest income was up $486 million or 5% from 2018, primarily due to volume growth across our businesses, wider spreads in Canadian Personal and Business Banking, and the impact of foreign exchange translation, partially offset by lower trading income and narrower spreads in U.S. Commercial Banking and Wealth Management. 2019 also included interest income related to the settlement of certain income tax matters, shown as an item of note.

Non-interest income

Non-interest income was up $291 million or 4% from 2018, primarily due to an increase in trading income and credit fees.

Provision for credit losses

Provision for credit losses was up $416 million or 48% from 2018. Provision for credit losses on performing loans was up $221 million from 2018, as 2018 included a reduction in allowance driven by an economic outlook that had improved since our adoption of IFRS 9 “Financial Instruments” (IFRS 9) on November 1, 2017, while 2019 included an increase in allowance, reflective of the impact of certain unfavourable changes to our economic outlook, as well as unfavourable credit migration in certain portfolios. Provision for credit losses on impaired loans was up $195 million, due to higher provisions including one fraud-related impairment in Canadian Commercial Banking and Wealth Management, higher provisions in the utility and the oil and gas sectors within Capital Markets, higher provisions and write-offs in personal lending within Canadian Personal and Business Banking, partially offset by lower provisions in CIBC FirstCaribbean, included in Corporate and Other, as 2018 included losses on sovereign loans resulting from the Barbados government debt restructuring, of which $28 million was shown as an item of note in the fourth quarter of 2018.

Non-interest expenses

Non-interest expenses were up $598 million or 6% from 2018, primarily due to a charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in the new loyalty program, a goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean, and an increase in legal provisions, all shown as items of note, and higher spending on strategic initiatives.

Income taxes

Income tax expense was down $74 million or 5% from 2018, primarily due to net tax adjustments, resulting from the U.S. tax reforms enacted in the first quarter of 2018, shown as an item of note, as well as lower income in 2019, partially offset by lower tax-exempt income and the goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean, which is not deductible for tax purposes. 2019 also included a net tax recovery of $38 million resulting from the Enron settlement, largely offset by a $28 million revaluation of certain deferred tax assets due to tax rate charges enacted by the Barbados government in the first quarter of 2019.

14 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Revenue by segment

Canadian Personal and Business Banking

Revenue was up $160 million or 2% from 2018, primarily due to wider spreads and volume growth, partially offset by lower fee income.

Canadian Commercial Banking and Wealth Management

Revenue was up $191 million or 5% from 2018. Commercial banking revenue was up primarily due to volume growth from loans and deposits, and higher fees. Wealth management revenue was up primarily due to higher investment management and custodial fees driven by higher AUM and AUA, wider spreads, and volume growth, partially offset by lower commission revenue and mutual fund fees.

U.S. Commercial Banking and Wealth Management

Revenue was up $204 million or 12% from 2018. Commercial banking revenue was up primarily due to volume growth, and the impact of foreign exchange translation, partially offset by narrower spreads and lower revenue from the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, shown as an item of note. Wealth management revenue was up primarily due to volume growth, higher investment management and custodial fees driven by higher AUM, and the impact of foreign exchange translation, partially offset by narrower spreads.

Capital Markets

Revenue was up $25 million or 1% from 2018. Global markets revenue was up primarily due to higher revenue from our interest rate trading business, global markets financing activities, and our commodities and equity trading business, largely offset by lower revenue from our equity derivatives trading business. Corporate and investment banking revenue was down primarily due to lower investment portfolio gains, lower equity underwriting activity, and lower revenue from our run-off business, partially offset by higher corporate banking and advisory revenue.

Corporate and Other

Revenue was up $197 million or 28% from 2018. International banking revenue was up as 2018 included incremental ECL on debt securities in CIBC FirstCaribbean, as a result of the Barbados government restructuring its public debt, of which $61 million was shown as an item of note in the fourth quarter of 2018. 2019 also reflected a favourable impact from foreign exchange translation and better performance in CIBC FirstCaribbean. Other revenue was up primarily due to a lower TEB adjustment and interest income related to the settlement of certain income tax matters, shown as an item of note, partially offset by lower treasury revenue and lower income from equity-accounted associates and joint ventures.

CIBC 2020 ANNUAL REPORT 15

Management’s discussion and analysis

Non-GAAP measures

We use a number of financial measures to assess the performance of our business lines as described below. Some measures are calculated in accordance with GAAP (IFRS), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not be comparable to similar measures used by other companies. Investors may find these non-GAAP measures useful in understanding how management views underlying business performance.

Adjusted measures

Management assesses results on a reported and adjusted basis and considers both as useful measures of performance. Adjusted results remove items of note from reported results and are used to calculate our adjusted measures noted below. Items of note include the amortization of intangible assets, and certain items of significance that arise from time to time which management believes are not reflective of underlying business performance. We believe that adjusted measures provide the reader with a better understanding of how management assesses underlying business performance and facilitates a more informed analysis of trends. While we believe that adjusted measures may facilitate comparisons between our results and those of some of our Canadian peer banks, which make similar adjustments in their public disclosure, it should be noted that there is no standardized meaning for adjusted measures under GAAP.

We also adjust our results to gross up tax-exempt revenue on certain securities to a TEB, being the amount of fully taxable revenue, which, were it to have incurred tax at the statutory income tax rate, would yield the same after-tax revenue.

Adjusted diluted EPS

We adjust our reported diluted EPS to remove the impact of items of note, net of income taxes, to calculate the adjusted EPS.

Adjusted efficiency ratio

We adjust our reported revenue and non-interest expenses to remove the impact of items of note and gross up tax-exempt revenue to bring it to a TEB, to calculate the adjusted efficiency ratio.

Adjusted operating leverage

We adjust our reported revenue and non-interest expenses to remove the impact of items of note and gross up tax-exempt revenue to bring it to a TEB, to calculate the adjusted operating leverage.

Adjusted dividend payout ratio

We adjust our reported net income attributable to common shareholders to remove the impact of items of note, net of income taxes, to calculate the adjusted dividend payout ratio.

Adjusted return on common shareholders’ equity

We adjust our reported net income attributable to common shareholders to remove the impact of items of note, net of income taxes, to calculate the adjusted ROE.

Adjusted effective tax rate

We adjust our reported income before income taxes and reported income taxes to remove the impact of items of note, to calculate the adjusted effective tax rate.

Allocated common equity

Common equity is allocated to the SBUs based on the estimated amount of regulatory capital required to support their businesses. Unallocated common equity is reported in Corporate and Other. Allocating capital on this basis provides a consistent framework to evaluate the returns of each SBU commensurate with the risk assumed.

Segmented return on equity

We use return on equity on a segmented basis as one of the measures for performance evaluation and resource allocation decisions. While return on equity for total CIBC provides a measure of return on common equity, return on equity on a segmented basis provides a similar metric based on an allocation of regulatory capital to our SBUs. As a result, segmented return on equity is a non-GAAP measure. Segmented return on equity is calculated as net income attributable to common shareholders for each SBU expressed as a percentage of average allocated common equity.

16 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a consolidated basis.

$ millions, for the year ended October 31	2020			2019			2018			2017			2016
Operating results – reported
Total revenue	$	18,741		$	18,611		$	17,834		$	16,280		$	15,035
Provision for credit losses		2,489			1,286			870			829			1,051
Non-interest expenses		11,362			10,856			10,258			9,571			8,971
Income before income taxes		4,890			6,469			6,706			5,880			5,013
Income taxes		1,098			1,348			1,422			1,162			718
Net income		3,792			5,121			5,284			4,718			4,295
Net income attributable to non-controlling interests		2			25			17			19			20
Net income attributable to equity shareholders		3,790			5,096			5,267			4,699			4,275
Diluted EPS ($)	$	8.22		$	11.19		$	11.65		$	11.24		$	10.70
Impact of items of note (1)
Revenue
Settlement of certain income tax matters (2)	$	–		$	(67	)	$	–		$	–		$	–
Purchase accounting adjustments (3)		–			(34	)		(63	)		(9	)		–
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from the Barbados government debt restructuring		–			–			61			–			–
Gain on the sale and lease back of certain retail properties		–			–			–			(299	)		–
Fees and charges related to the launch of Simplii Financial and the related wind-down of President’s Choice Financial		–			–			–			3			–
Gain, net of related transaction costs, on the sale of our minority investment in American Century Investments		–			–			–			–			(428	)
Gain, net of related transaction and severance costs, on the sale of a processing centre		–			–			–			–			(59	)
Loss (income) from the structured credit run-off business		–			–			–			–			(19	)
Amortization of acquisition-related intangible assets (4)		–			–			–			–			1
Impact of items of note on revenue		–			(101	)		(2	)		(305	)		(505	)
Provision for credit losses
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from the Barbados government debt restructuring		–			–			(28	)		–			–
Transaction and integration-related costs as well as purchase accounting adjustments (5)		–			–			–			(35	)		–
Increase (decrease) in collective allowance (6)		–			–			–			18			(109	)
Loan losses in our exited European leveraged finance portfolio		–			–			–			–			(40	)
Impact of items of note on provision for credit losses		–			–			(28	)		(17	)		(149	)
Expenses
Amortization of acquisition-related intangible assets (4)		(105	)		(109	)		(115	)		(41	)		(29	)
Transaction and integration-related costs as well as purchase accounting adjustments (5)		–			11			(79	)		(78	)		–
Charge related to the consolidation of our real estate portfolio		(114	)		–			–			–			–
Gain as a result of plan amendments related to pension and other post-employment plans		79			–			–			–			–
Restructuring charge (7)		(339	)		–			–			–			(134	)
Goodwill impairment (8)		(248	)		(135	)		–			–			–
Increase in legal provisions (2)		(70	)		(28	)		–			(45	)		(77	)
Charge for payment made to Air Canada (9)		–			(227	)		–			–			–
Fees and charges related to the launch of Simplii Financial and the related wind-down of President’s Choice Financial		–			–			–			(95	)		–
Gain, net of related transaction and severance costs, on the sale of a processing centre		–			–			–			–			(6	)
Loss (income) from the structured credit run-off business		–			–			–			–			(16	)
Impact of items of note on expenses		(797	)		(488	)		(194	)		(259	)		(262	)
Total pre-tax impact of items of note on net income		797			387			220			(29	)		(94	)
Settlement of certain income tax matters (2)		–			(18	)		–			–			–
Transaction and integration-related costs as well as purchase accounting adjustments (3)(5)		–			(12	)		2			31			–
Amortization of acquisition-related intangible assets (4)		25			27			30			13			8
Charge related to the consolidation of our real estate portfolio		30			–			–			–			–
Gain as a result of plan amendments related to pension and other post-employment plans		(21	)		–			–			–			–
Restructuring charge (7)		89			–			–			–			36
Increase in legal provisions (2)		19			7			–			12			21
Charge for payment made to Air Canada (9)		–			60			–			–			–
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from the Barbados government debt restructuring		–			–			19			–			–
Charge from net tax adjustments resulting from U.S. tax reforms		–			–			(88	)		–			–
Gain on the sale and lease back of certain retail properties		–			–			–			(54	)		–
Fees and charges related to the launch of Simplii Financial and the related wind-down of President’s Choice Financial		–			–			–			27			–
Increase (decrease) in collective allowance (6)		–			–			–			(5	)		29
Gain, net of related transaction costs, on the sale of our minority investment in American Century Investments		–			–			–			–			(45	)
Gain, net of related transaction and severance costs, on the sale of a processing centre		–			–			–			–			(6	)
Loss (income) from the structured credit run-off business		–			–			–			–			(1	)
Loan losses in our exited European leveraged finance portfolio		–			–			–			–			10
Income tax recovery due to the settlement of transfer pricing-related matters		–			–			–			–			30
Income tax recovery arising from a change in our expected utilization of tax loss carryforwards		–			–			–			–			15
Impact of items of note on income taxes		142			64			(37	)		24			97
Total after-tax impact of items of note on net income		655			323			257			(53	)		(191	)
After-tax impact of items of note on non-controlling interests		–			–			5			–			–
After-tax impact of items of note on net income attributable to equity shareholders		655			323			252			(53	)		(191	)
Impact of items of note on diluted EPS ($)	$	1.47		$	0.73		$	0.56		$	(0.13	)	$	(0.48	)

For footnotes, see next page.

CIBC 2020 ANNUAL REPORT 17

Management’s discussion and analysis

$ millions, for the year ended October 31	2020		2019		2018		2017		2016
Operating results – adjusted (10)
Total revenue (11)	$	18,741	$	18,510	$	17,832	$	15,975	$	14,530
Provision for credit losses		2,489		1,286		842		812		902
Non-interest expenses		10,565		10,368		10,064		9,312		8,709
Income before income taxes		5,687		6,856		6,926		5,851		4,919
Income taxes		1,240		1,412		1,385		1,186		815
Net income		4,447		5,444		5,541		4,665		4,104
Net income attributable to non-controlling interests		2		25		22		19		20
Net income attributable to equity shareholders		4,445		5,419		5,519		4,646		4,084
Adjusted diluted EPS ($)	$	9.69	$	11.92	$	12.21	$	11.11	$	10.22

(1) Reflects the impact of items of note on our adjusted results as compared with our reported results.

(2) Recognized in Corporate and Other.

(3) Includes the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, shown as an item of note from the fourth quarter of 2017 to the fourth quarter of 2019, recognized in U.S. Commercial Banking and Wealth Management.

(4) Amortization of acquisition-related intangible assets is recognized in the SBU of the acquired business or Corporate and Other. A summary is provided in the table below.

Canadian Personal and Business Banking (pre-tax)	$    (8	)	$    (9	)	$    (12	)	$    (5	)	$    (6	)
Canadian Personal and Business Banking (after-tax)	(6	)	(7	)	(9	)	(4	)	(5	)
Canadian Commercial Banking and Wealth Management (pre-tax)	(1	)	(1	)	(1	)	(1	)	(1	)
Canadian Commercial Banking and Wealth Management (after-tax)	(1	)	(1	)	(1	)	(1	)	(1	)
U.S. Commercial Banking and Wealth Management (pre-tax)	(83	)	(88	)	(91	)	(27	)	(11	)
U.S. Commercial Banking and Wealth Management (after-tax)	(61	)	(65	)	(65	)	(16	)	(6	)
Corporate and Other (pre-tax)	(13	)	(11	)	(11	)	(8	)	(11	)
Corporate and Other (after-tax)	(12	)	(9	)	(10	)	(7	)	(9	)

(5) Transaction costs include legal and other advisory fees and interest adjustments relating to the obligation payable to dissenting shareholders. Integration costs are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the businesses of The PrivateBank (subsequently rebranded as CIBC Bank USA) and Geneva Advisors with CIBC, including enabling cross-sell opportunities and expansion of services in the U.S. market, the upgrade and conversion of systems and processes, project management, integration-related travel, severance, consulting fees and marketing costs related to rebranding activities. Purchase accounting adjustments, shown as an item of note from the fourth quarter of 2017 to the fourth quarter of 2019, include changes in the fair value of contingent consideration relating to the Geneva Advisors and Wellington Financial acquisitions. These items are recognized in Corporate and Other.

(6) Relates to collective allowance (prior to the adoption of IFRS 9), except for: (i) residential mortgages greater than 90 days delinquent; (ii) personal loans and scored small business loans greater than 30 days delinquent; (iii) net write-offs for the card portfolio; and (iv) the collective allowance related to CIBC Bank USA, which were all reported in the respective SBUs.

(7) Restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. This charge consists primarily of employee severance and related costs and was recognized in Corporate and Other.

(8) Goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean recognized in Corporate and Other with $28 million recognized in the second quarter of 2020 and $220 million recognized in the fourth quarter of 2020.

(9) Charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in its new loyalty program recognized in Canadian Personal and Business Banking.

(10) Adjusted to exclude the impact of items of note.

(11) Excludes TEB adjustments of $183 million (2019: $179 million; 2018: $280 million). Our adjusted efficiency ratio is calculated on a TEB.

$ millions, for the year ended October 31	Canadian Personal and Business Banking			Canadian Commercial Banking and Wealth Management		U.S. Commercial Banking and Wealth Management		Capital Markets		Corporate and Other			CIBC Total
2020         Reported net income (loss)	$	1,962		$	1,202	$	380	$	1,131	$	(883	)	$	3,792
After-tax impact of items of note		6			1		61		–		587			655
Adjusted net income (loss) (1)	$	1,968		$	1,203	$	441	$	1,131	$	(296	)	$	4,447
2019 (2)     Reported net income (loss)	$	2,289		$	1,287	$	682	$	954	$	(91	)	$	5,121
After-tax impact of items of note		174			1		40		–		108			323
Adjusted net income (loss) (1)	$	2,463		$	1,288	$	722	$	954	$	17		$	5,444
2018 (2)     Reported net income (loss)	$	2,540		$	1,286	$	561	$	1,086	$	(189	)	$	5,284
After-tax impact of items of note		9			1		27		–		220			257
Adjusted net income (loss) (1)	$	2,549		$	1,287	$	588	$	1,086	$	31		$	5,541
2017         Reported net income (loss)	$	2,420		$	1,138	$	203	$	1,090	$	(133	)	$	4,718
After-tax impact of items of note		(170	)		1		19		–		97			(53	)
Adjusted net income (loss) (1)	$	2,250		$	1,139	$	222	$	1,090	$	(36	)	$	4,665
2016         Reported net income (loss)	$	2,160		$	991	$	87	$	992	$	65		$	4,295
After-tax impact of items of note		(25	)		2		6		28		(202	)		(191	)
Adjusted net income (loss) (1)	$	2,135		$	993	$	93	$	1,020	$	(137	)	$	4,104

(1) Non-GAAP measure.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

18 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Strategic business units overview

CIBC has four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets. These SBUs are supported by the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups, which all form part of Corporate and Other. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines.

External reporting changes were made in the first quarter of 2020 which affected the results of our SBUs. See the “External reporting changes” section for additional details.

Business unit allocations

Revenue, expenses, and other balance sheet resources related to certain activities are generally allocated to the lines of business within the SBUs.

Treasury activities impact the financial results of the SBUs. Each line of business within our SBUs is charged or credited with a market-based cost of funds on assets and liabilities, respectively, which impacts the revenue performance of the SBUs. Consistent with the external reporting changes made in the first quarter of 2020 (see the “External reporting changes” section for additional details), this market-based cost of funds takes into account the cost of maintaining sufficient regulatory capital to support business requirements, including the cost of preferred shares. Once the interest and liquidity risks inherent in our client-driven assets and liabilities are transfer priced into Treasury, they are managed within CIBC’s risk framework and limits. The residual financial results associated with Treasury activities are reported in Corporate and Other, with the exception of certain Treasury activities in U.S. Commercial Banking and Wealth Management, which are reported in that SBU. Capital is attributed to the SBUs in a manner that is intended to consistently measure and align the costs with the underlying benefits and risks associated with SBU activities. Earnings on unattributed capital remain in Corporate and Other. Effective November 1, 2019, capital is attributed to the SBUs based on the estimated amount of regulatory capital required to support their businesses (see the “External reporting changes” section for additional details). We review our transfer pricing methodologies on an ongoing basis to ensure they reflect changing market environments and industry practices.

To measure and report the results of operations of the lines of business within our Canadian Personal and Business Banking and Canadian Commercial Banking and Wealth Management SBUs, we use a Product Owner/Customer Segment/Distributor Channel allocation management model. The model uses certain estimates and methodologies to process internal transfers between lines of business for sales, renewals and trailer commissions. Periodically, the sales, renewals and trailer commission rates paid to customer segments for certain products/services are revised and applied prospectively.

The non-interest expenses of the functional and support groups are generally allocated to the business lines within the SBUs based on appropriate criteria and methodologies. The basis of allocation is reviewed periodically to reflect changes in support to business lines. Other costs not directly attributable to business lines remain in Corporate and Other.

We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs.

Revenue, taxable equivalent basis

The SBUs evaluate revenue on a TEB. In order to arrive at the TEB amount, the SBUs gross up tax-exempt revenue on certain securities to a TEB, being the amount of fully taxable revenue, which, were it to have incurred tax at the statutory income tax rate, would yield the same after-tax revenue. Simultaneously, an equivalent amount is booked as an income tax expense resulting in no impact on the net income of the SBUs. This measure enables comparability of revenue arising from both taxable and tax-exempt sources. The total TEB adjustments of the SBUs are offset in revenue and income tax expense in Corporate and Other.

CIBC 2020 ANNUAL REPORT 19

Management’s discussion and analysis

Canadian Personal and Business Banking

Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, products and services through banking centres, as well as through direct, mobile and remote channels.

Our business strategy

Our goal is to build a modern consumer and small business relationship bank to help our clients achieve their ambitions by focusing on three key strategic priorities:

• Winning at relationships

• Delivering market-leading solutions

• Being easy to bank with

2020 progress

In 2020, we continued to make progress on our strategy while managing against the challenges brought on by the COVID-19 pandemic. The change in the economic environment due to the pandemic resulted in lower client transaction activity and associated fee income, and the shift in client spending and savings patterns resulted in lower demand for certain lending products and strong growth in deposit balances. Our continued focus on our three key strategic priorities served us well at a time where clients needed us most.

Winning at relationships

• Led the way during the COVID-19 pandemic by being first to announce convenient ways to access financial relief for personal clients and business owners, including mortgage deferral options and credit card interest rate relief; reducing banking centre locations and hours and having team members work from home to help flatten the curve; providing special support and care for seniors and persons with disabilities, including the “You’re Next” policy; and implementing income protection for team members.

• Proactively reached out to clients throughout the COVID-19 pandemic by email and personal phone calls to offer assistance. This includes reaching out to hundreds of thousands of seniors by telephone to help them with their banking.

• Worked with the Federal Government to make it easy for clients to access government programs in response to the COVID-19 pandemic.

• Expanded our business banking specialist team in support of our relationship-based strategy focused on entrepreneurs at all life stages, from start up to expansion, to managing cash flow and business transition.

• Helped our clients build their financial knowledge and confidence by offering financial literacy seminars and national education events. Topics included women and wealth and cash flow planning, as well as financial literacy for parents with young children, newcomers, seniors and business owners.

• Selected a new client relationship management platform to further transform banking experiences for our clients, with a focus on end-to-end digitization, advanced analytics, and speed to market.

• Supported 10 Indigenous communities across the Yukon as the new community banking services partner, providing specialized financial services to First Nations and other local governments, businesses, communities and community organizations.

• Recognized frontline health-care workers with 30 million Aventura points to help them recharge and reconnect with family.

Delivering market-leading solutions

• Rolled out CIBC Goal Planner, a holistic financial planning tool, allowing our Imperial Service advisors to better understand our clients’ ambitions and spend more time with our clients having advice conversations.

• Introduced new alerts to our mobile banking functionality, including the CIBC Smart Balance Alert which proactively notifies clients when they are short of funds for an upcoming scheduled payment.

• Announced Revival Rewards to help restart the economy and support local restaurants, by offering our clients 2x points, miles or cash back when using their CIBC credit card to dine-in or take-out from local restaurants.

• Launched our CIBC Aventura Visa Infinite Privilege Card, which offers a premium travel experience and exceptional benefits to our clients.

• Partnered with Parkland Fuel Corporation on a new Journie Rewards program, to help our clients save at over 1,300 Ultramar, Pioneer, and Chevron stations in Canada.

• Started the CIBC Internationally Trained Dentist Program to help newcomers realize their ambition to become accredited, practicing dentists in Canada.

Being easy to bank with

• Expanded Global Money Transfer for Business to over 20 additional countries, increasing our reach to over 90 countries where clients can send money overseas.

• Achieved the largest year-over-year Net Promoter Score (NPS) growth of the top 5 Canadian banks in the IPSOS Customer Service Index.

• Achieved our highest annual score in the 2020 J.D. Power Client Satisfaction (SAT) study.

• Earned top ranking in customer satisfaction for mobile banking apps by J.D. Power.

• Named best consumer digital bank in North America by Global Finance, based on servicing digital customers, success in getting clients to use digital offerings, breadth of product offerings, as well as web/mobile site design and functionality.

• Continued to significantly invest in technology and innovation to make it easier for our clients to bank with us including expanding our e-signature tool, redesigning business borrowing pages on cibc.com, and introducing eStatements for Personal Line of Credit accounts.

• Launched Advice for Today to provide timely online financial advice and information to help Canadians through the COVID-19 pandemic.

20 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

2020 financial review

Revenue(1) ($ billions)	Net income(1) ($ billions)	Efficiency ratio(1) (%)	Average loans and acceptances(2) ($ billions)	Average deposits ($ billions)

(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(2) Loan amounts are stated before any related allowances.

Our focus for 2021

Our objective is to deliver sustainable, market-leading performance with a focus on helping our clients achieve their ambitions. Our strategy is comprised of three key priorities:

• Provide our team with the tools to deliver an excellent experience for our clients;

• Deliver personalized advice to our clients in a way that is meaningful to them; and

• Introduce more opportunities for our clients to deal with us digitally.

Results⁽¹⁾

$ millions, for the year ended October 31	2020			2019 (2)			2018 (2)
Revenue	$	8,488		$	8,755		$	8,595
Provision for (reversal of) credit losses
Impaired		640			809			760
Performing		579			87			(19	)
Provision for credit losses		1,219			896			741
Non-interest expenses		4,603			4,745			4,395
Income before income taxes		2,666			3,114			3,459
Income taxes		704			825			919
Net income	$	1,962		$	2,289		$	2,540
Net income attributable to:
Equity shareholders	$	1,962		$	2,289		$	2,540
Efficiency ratio		54.2	%		54.2	%		51.1	%
Return on equity (3)		28.8	%		35.7	%		40.7	%
Average allocated common equity (3)	$	6,808		$	6,403		$	6,245
Average assets ($ billions)	$	262.0		$	259.1		$	259.1
Average loans and acceptances ($ billions)	$	259.3		$	256.7		$	257.0
Average deposits ($ billions)	$	194.6		$	177.4		$	166.7
Full-time equivalent employees		12,879			13,431			14,086

(1) For additional segmented information, see Note 31 to the consolidated financial statements.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3) For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income was down $327 million or 14% from 2019, primarily due to higher provision for credit losses and lower revenue, partially offset by lower non-interest expenses.

Revenue

Revenue was down $267 million or 3% from 2019, primarily due to narrower margins largely due to changes in the interest rate environment and interest rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients during the COVID-19 pandemic, and lower fees driven by lower client transaction activity, partially offset by volume growth.

Provision for credit losses

Provision for credit losses was up $323 million or 36% from 2019. The current year included a higher provision for credit losses on performing loans related to the COVID-19 pandemic and an unfavourable impact from model parameter updates. Provision for credit losses on impaired loans was down due to lower insolvencies and write-offs in credit cards and personal lending, mainly due to the impact of client relief programs and government support.

Non-interest expenses

Non-interest expenses were down $142 million or 3% from 2019, primarily due to a charge for a payment made to Air Canada to secure our participation in its new loyalty program last year, shown as an item of note, partially offset by higher spending on strategic initiatives and additional employee benefits provided to support our employees during the COVID-19 pandemic.

Income taxes

Income taxes were down $121 million or 15% from 2019, primarily due to lower income.

Average assets

Average assets were up $2.9 billion or 1% from 2019, primarily due to growth in residential mortgages.

CIBC 2020 ANNUAL REPORT 21

Management’s discussion and analysis

Canadian Commercial Banking and Wealth Management

Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services to middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to institutional investors.

Our business strategy

We are focused on building and enhancing client relationships, being Canada’s leader in financial advice and generating long-term consistent growth. To deliver on this, our three key strategic priorities are:

• Delivering and deepening client relationships through a full service, solutions-based approach that includes commercial and private banking, as well as wealth management services

• Continuing to invest in financial planning to further our role as a leader in financial advice

• Simplifying and optimizing our business to align with changing market dynamics to better meet the needs of our clients

2020 progress

In 2020, despite an uncertain economic operating environment and volatile markets we continued to make progress on our strategic priorities of deepening client relationships and providing market leading financial advice. In commercial banking, we saw slower loan growth and elevated levels of deposit growth as our clients were prudently conserving cash flow, strengthening their financial position, and adjusting to the challenging environment. In wealth management, we responded to our clients’ needs with an increased level of technology enabled touch-points, providing reassurance and financial advice as market volatility created uncertainty.

Delivering and deepening client relationships through a full service, solutions-based approach that includes commercial and private banking, as well as wealth management services

• Increased partnership referrals to deepen client relationships across CIBC and better meet the needs of our clients.

• Expanded CIBC Innovation Banking coverage focused on growing geographies and segments, in order to extend our service offering to technology and innovation clients across North America.

• Continued to closely collaborate with clients to meet their needs during this difficult period while actively monitoring and managing credit exposure.

Continuing to invest in financial planning to further our role as a leader in financial advice

• Upgraded the financial planning capabilities and capacity of our team through the addition of new analytical tools to support deeper advisory conversations.

• Leveraged our Integrated Wealth Offer to bring differentiated value to clients through enhanced financial planning services and expertise from across our bank.

• Expanded our Private Banking team capabilities in order to be at the cross-section of all high-net-worth client needs.

Simplifying and optimizing our business to align with changing market dynamics to better meet the needs of our clients

• Continued momentum with our CIBC Smart Investment Solutions — all-in-one portfolios that blend active and passive investment strategies to deliver on value and expertise.

• Further modernized our investment fulfillment and solutions, driving efficiencies and savings for both our clients and our shareholders.

2020 financial review

Revenue(1) ($ billions)	Net income(1) ($ millions)	Efficiency ratio(1) (%)	Average loans(2) ($ billions)	Average deposits ($ billions)
Average commercial banking loans(2)(3) ($ billions)	Average commercial banking deposits ($ billions)		Assets under administration and management(4) ($ billions)	Canadian retail mutual funds and exchange-traded funds ($ billions)

(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(2) Loan amounts are stated before any related allowances.

(3) Comprises loans and acceptances and notional amount of letters of credit.

(4) AUM amounts are included in the amounts reported under AUA.

22 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Our focus for 2021

To build on our momentum across Canadian Commercial Banking and Wealth Management, we will continue to help our clients achieve their ambitions by:

• Delivering focused, risk-controlled growth in our Commercial Bank;

• Accelerating the growth of Private Wealth Management; and

• Evolving our Asset Management business in response to client needs.

Results⁽¹⁾

$ millions, for the year ended October 31	2020			2019 (2)			2018 (2)
Revenue
Commercial banking	$	1,663		$	1,633		$	1,461
Wealth management		2,458			2,394			2,375
Total revenue		4,121			4,027			3,836
Provision for (reversal of) credit losses
Impaired		162			159			15
Performing		141			4			(10	)
Provision for credit losses		303			163			5
Non-interest expenses		2,179			2,106			2,067
Income before income taxes		1,639			1,758			1,764
Income taxes		437			471			478
Net income	$	1,202		$	1,287		$	1,286
Net income attributable to:
Equity shareholders	$	1,202		$	1,287		$	1,286
Efficiency ratio		52.9	%		52.3	%		53.9	%
Return on equity (3)		18.6	%		21.7	%		23.7	%
Allocated common equity (3)	$	6,454		$	5,929		$	5,417
Average assets ($ billions)	$	65.8		$	62.6		$	55.7
Average loans ($ billions)	$	68.2		$	64.7		$	57.8
Average deposits ($ billions)	$	71.1		$	60.2		$	53.2
AUA ($ billions)	$	287.7		$	289.1		$	269.0
AUM ($ billions)	$	188.9		$	182.4		$	164.6
Full-time equivalent employees		4,984			5,048			4,999

(1) For additional segmented information, see Note 31 to the consolidated financial statements.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3) For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income was down $85 million or 7% from 2019, primarily due to a higher provision for credit losses and higher non-interest expenses, partially offset by higher revenue.

Revenue

Revenue was up $94 million or 2% from 2019.

Commercial banking revenue was up $30 million or 2%, primarily due to volume growth and the impact of an additional day in the current year, partially offset by narrower margins and lower fees.

Wealth management revenue was up $64 million or 3%, primarily due to higher investment management and custodial fees driven by higher average AUM and AUA and higher commission revenue, as well as higher foreign exchange revenue reflecting higher trading volume in our full-service brokerage business, partially offset by lower mutual fund fees.

Provision for credit losses

Provision for credit losses was up $140 million from 2019. The current year included a higher provision for credit losses on performing loans related to the COVID-19 pandemic. Provision for credit losses on impaired loans was comparable with the prior year.

Non-interest expenses

Non-interest expenses were up $73 million or 3% from 2019, primarily due to higher employee-related compensation and higher spending on strategic initiatives.

Income taxes

Income taxes were down $34 million or 7% from 2019, primarily due to lower income.

Average assets

Average assets were up $3.2 billion or 5% from 2019, primarily due to growth in commercial loans.

Assets under administration

AUA were comparable with 2019. AUM amounts are included in the amounts reported under AUA.

CIBC 2020 ANNUAL REPORT 23

Management’s discussion and analysis

U.S. Commercial Banking and Wealth Management

U.S. Commercial Banking and Wealth Management delivers commercial banking and private wealth services across the U.S., as well as personal and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and high-net-worth families.

Our business strategy

Our focus is on developing deep, profitable relationships leveraging the full complement of CIBC’s products and services across our North American platform. To deliver on this, our three key strategic priorities are:

• Adding new client relationships in commercial banking and wealth management while maintaining our focus on asset quality as well as loan and deposit portfolio diversification

• Expanding relationships with existing clients by leveraging cross border and cross business capabilities

• Investing appropriately in the growth of our business while managing expenses

2020 progress

In 2020, our continued focus on deep-rooted relationship banking helped attract new clients and guide existing relationships through a challenging economic environment. This approach continues to generate strong loan, deposit and AUM/AUA growth which in turn, coupled with diligent expense control, helped mitigate revenue pressures associated with margin compression experienced throughout the industry. Our offering of products and services continues to expand as we leverage cross-border capabilities and maintain investment in process, technology and client needs.

Adding new client relationships in commercial banking and wealth management while maintaining our focus on asset quality as well as loan and deposit portfolio diversification

• Maintained focus on strong asset quality especially as clients managed through impacts of the pandemic-related economic downturn.

• At the onset of the pandemic, leveraged our relationship banking approach to reach out to commercial businesses and ensure they had access to various government relief programs and other options to manage their short-term cash flow.

• Drove solid loan and deposit growth given market conditions, including continued expansion of our private banking business with existing commercial and wealth clients.

• Generated strong growth in AUM and AUA, bolstered by the performance of our investment strategies through a volatile year.

Expanding relationships with existing clients by leveraging cross border and cross business capabilities

• Leveraged a strong partnership with Capital Markets to provide a wider range of products and services to U.S. commercial and wealth clients, contributing to non-interest income.

• Advanced the implementation of CRM initiatives to further the connectivity between teams, providing a consolidated view of client needs and making it easier to engage the broader team in meeting the full relationship needs of our clients.

• Continued to refine client-facing processes, making it easier for clients to bank with us, including offering remote account open capabilities to retail banking clients and enhancing our servicing platform for our commercial banking clients to create efficiencies for our teams in meeting client needs.

Investing appropriately in the growth of our business while managing expenses

• Maintained a disciplined approach to expenses while investing for growth and enabling our team to work efficiently in the pandemic environment.

• Continued to maintain a diversified funding strategy through our commercial, private banking and retail clients.

2020 financial review

	Revenue(1) ($ billions)	Net income(1) ($ millions)	Efficiency ratio(1) (%)
Average loans(2) ($ billions)	Average deposits ($ billions)		Average commercial banking loans(2) ($ billions)	Assets under administration and management(3) ($ billions)

(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(2) Loan amounts are stated before any related allowances.

(3) AUM amounts are included in the amounts reported under AUA.

24 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Our focus for 2021

To build on our momentum across U.S. Commercial Banking and Wealth Management, we will continue to focus on helping our clients achieve their ambitions by:

• Continuing to grow organically with new clients as well as expanding our services to existing clients across commercial, private wealth and capital markets;

• Leveraging our national footprint, including within our specialty banking groups; and

• Investing appropriately in the growth of our business in order to improve our client experience while also achieving greater scale and efficiencies.

Results⁽¹⁾

$ millions, for the year ended October 31	2020			2019 (2)			2018 (2)
Revenue
Commercial banking (3)	$	1,432		$	1,353		$	1,194
Wealth management		622			611			566
Total revenue (4)(5)		2,054			1,964			1,760
Provision for (reversal of) credit losses
Impaired		133			68			67
Performing		354			5			12
Provision for credit losses		487			73			79
Non-interest expenses		1,133			1,119			1,023
Income before income taxes		434			772			658
Income taxes (4)		54			90			97
Net income	$	380		$	682		$	561
Net income attributable to:
Equity shareholders	$	380		$	682		$	561
Efficiency ratio		55.2	%		57.0	%		58.1	%
Return on equity (6)		4.1	%		7.9	%		7.2	%
Allocated common equity (6)	$	9,266		$	8,616		$	7,822
Average assets ($ billions)	$	55.2		$	47.5		$	41.2
Average loans ($ billions)	$	42.5		$	35.6		$	30.4
Average deposits ($ billions)	$	35.5		$	27.2		$	22.3
AUA ($ billions)	$	97.6		$	89.7		$	80.0
AUM ($ billions)	$	76.4		$	68.8		$	60.0
Full-time equivalent employees		2,101			2,113			1,947

(1) For additional segmented information, see Note 31 to the consolidated financial statements.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3) Certain information has been reclassified to conform to the presentation adopted in the first quarter of 2020. Commercial banking now includes the Other line of business, which includes the treasury activities relating to CIBC Bank USA, as these activities primarily support the commercial banking line of business.

(4) Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of nil (2019: $2 million; 2018: $2 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.

(5) Included $20 million of income relating to the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank (2019: $35 million; 2018: $55 million).

(6) For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income was down $302 million or 44% from 2019, primarily due to higher provision for credit losses, partially offset by higher revenue.

Revenue

Revenue was up $90 million or 5% from 2019.

Commercial banking revenue was up $79 million or 6%, primarily due to volume growth and the impact of foreign exchange translation, partially offset by narrower margins.

Wealth management revenue was up $11 million or 2%, primarily due to volume growth, higher investment management and custodial fees driven by higher AUM and the impact of foreign exchange translation, partially offset by narrower margins.

Provision for credit losses

Provision for credit losses was up $414 million from 2019. The current year included a higher provision for credit losses on performing loans primarily related to the COVID-19 pandemic. Provision for credit losses on impaired loans was up mainly due to impairments as a result of certain borrower-specific issues across various sectors.

Non-interest expenses

Non-interest expenses were up $14 million or 1% from 2019, primarily due to higher employee-related compensation, the impact of foreign exchange translation, and higher spending on strategic initiatives, partially offset by lower business development costs, driven by the impact of the COVID-19 pandemic.

Income taxes

Income taxes were down $36 million or 40% from 2019, primarily due to lower income.

Average assets

Average assets were up $7.7 billion or 16% from 2019, primarily due to growth in loans, including loans made under the Paycheck Protection Program (PPP).

Assets under administration

AUA were up $7.9 billion or 9% from 2019, primarily due to the impact of foreign exchange rates, net sales, and market appreciation. AUM amounts are included in the amounts reported under AUA.

CIBC 2020 ANNUAL REPORT 25

Management’s discussion and analysis

Capital Markets

Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking solutions and top-ranked research to corporate, commercial, government and institutional clients around the world.

Our business strategy

Our goal is to deliver leading capital markets solutions to our North American and international clients by providing best-in-class insight, advice and execution. To enable CIBC’s strategy and priorities, we collaborate with our partners across our bank to deepen and enhance client relationships. Our three key strategic priorities are:

• Being the leading capital markets platform in Canada for our core clients

• Building a North American client platform with global capabilities

• Increasing connectivity across CIBC to deliver greater value and a better experience for our clients

2020 progress

In 2020, despite an uncertain economic environment and volatile markets we continued to make progress on our strategic priorities of deepening client relationships, growing in the U.S. and enhancing connectivity across the bank. Global markets had a strong year. Revenue was up as we worked closely with our clients to help them manage their exposures and access global markets. Corporate and investment banking had solid growth this year as a result of higher loans, debt issuances and deposits as we helped manage the funding and liquidity needs of our clients.

Being the leading capital markets platform in Canada for our core clients

• Delivered on our purpose by meeting the needs of our clients, helping them through the pandemic by managing their funding and liquidity needs with expert advice for the long term.

• Supported our clients by investing in our talent, further developing our proprietary technology, expanding our structuring expertise and advice, and leveraging our market expertise.

• Continued to hold leadership positions in syndicated loans, debt and equity underwriting, advisory services, equity trading, commodities and foreign exchange.

• Strengthened our platform by continuing to evolve our research coverage framework and provide specialized advice and solutions, aligned to the macro trends influencing the global economy and our clients, including renewable energy, private capital, technology and innovation.

• Established our first continental Europe office in Luxembourg to deliver enhanced capital markets capabilities for clients and provide more options for corporate and institutional investors in Canada and the U.S. to access global markets.

Building a North American client platform with global capabilities

• Continued to drive growth in the U.S. through a strong partnership across our business and close connectivity with U.S. Commercial Banking and Wealth Management.

• Issued our inaugural Green Bond Framework to help mobilize capital and develop market-based solutions to support investments that shape a more sustainable economy.

• Issued our inaugural Green Bond to help finance new and existing green projects, assets and businesses that mitigate the risks and effects of climate change.

• Established our Sustainability Advisory team to meet the needs of clients as they transition to the lower-carbon economy of the future, and expanded research coverage in the renewables and clean energy sector, building on our client-focused growth strategy.

Increasing connectivity across CIBC to deliver greater value and a better experience for our clients

• Expanded CIBC’s Global Money Transfer service by increasing partnerships and product enhancements, supporting payment solutions to over 130 countries.

• Engaged with clients virtually to help them navigate volatile markets by hosting conference calls and podcasts, and providing industry-leading economic research and insights.

As a leading capital markets franchise in Canada and banking partner to our clients around the world, Capital Markets acted as:

• Exclusive financial advisor and sole underwriter to Starlight Investments and Kingsett Capital on the acquisition of Northview Apartment REIT for $4.9 billion and associated acquisition financing, also lead on the initial public offering of units of Northview Canadian High Yield Residential Fund, a newly-formed, three-year closed end fund, in connection with the transaction;

• Joint lead arranger on WESCO Distribution Inc.’s US$3.215 billion senior unsecured bond bridge facility, joint bookrunner on the US$1.5 billion 5-year and US$1.325 billion 8-year senior notes offerings, joint bookrunner and joint lead arranger on the US$1.1 billion ABL Revolver and participant in the US$1.025 billion securitization; net proceeds of the transactions were used to support the parent company, WESCO International, Inc.’s transformational US$4.5 billion acquisition of Anixter International, Inc. and to refinance existing debt;

• Exclusive financial advisor and private placement agent to Superior Plus Corp. on a US$260 million equity investment by Brookfield Asset Management through exchangeable preferred stock;

• Exclusive financial advisor to Ontario Teachers’ Pension Plan on its sale of BluEarth Renewables LP to DIF Infrastructure;

• Exclusive financial advisor, lead debt underwriter, lead swap agent and sole deal contingent hedge counterparty to a Korean-based consortium comprised of Shinhan Investment Corp., Samtan Co., Ltd, EIP Investment Corp. and KDB KIAMCO on its acquisition of Riverstone Holdings LLC’s 50% interest in Utopia Pipeline, a 268-mile ethane pipeline;

• Coordinating lead arranger, administrative agent and depository agent on the construction and operation financing of D.E. Shaw Renewable Investments’ (DESRI) 198-megawatt Illinois solar portfolio; the transaction marks CIBC’s fifth lending transaction with DESRI since August 2017, solidifying the bank’s relationship with one of the most active developers in the U.S. renewables market; and

• As a leading Canadian underwriter of Green Bonds, CIBC acted as a Senior Co-Lead Manager for the Province of Ontario’s $1.5 billion Green Bond offering as well as Joint Bookrunner (lead-left) for Brookfield Renewable Partners’ $425 million Green Medium Term Note offering.

26 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Capital Markets awards and recognition

• Ranked the most accurate foreign exchange forecaster globally for Q1 2020 by Bloomberg

• Named Canadian Structured Product Issuer of the Year by mtn-i

• Named North American financial advisor of the year in 2020 for 20 deals closed in 2019 with a valuation of US$25 billion by Infrastructure Journal

• Named the Best Consumer Digital Bank in North America by Global Finance magazine, as part of its World’s Best Digital Banks 2019 Report

• Global M&A Network

• U.S.A. Middle Markets Small Mid-Markets Deal of the Year (Healthcare) for the sale of Applewhite Dental Partners LLC, a portfolio company of Tonka Bay Equity Partners, to Coredental Group, a portfolio company of NMS Capital

2020 financial review

Revenue(1) ($ billions)	Net income(1) ($ millions)	Efficiency ratio(1) (%)
Average value-at-risk (VaR) ($ millions)	Revenue – Global markets(1) ($ millions)	Revenue – Corporate and investment banking(1) ($ millions)

(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

Our focus for 2021

To support our bank’s long-term objectives, Capital Markets remains focused on delivering profitable growth by deepening client relationships and collaborating with our partners across our bank to help make our clients’ ambitions a reality. We will continue to do this by:

• Maintaining our focused approach to client coverage in Canada;

• Growing our North American platform by further expanding our U.S. reach and broadening the services offered to clients; and

• Strengthening our connectivity, technology and innovation efforts to bring more of our bank’s offerings to our clients.

CIBC 2020 ANNUAL REPORT 27

Management’s discussion and analysis

Results⁽¹⁾

$ millions, for the year ended October 31	2020			2019 (2)			2018 (2)
Revenue
Global markets	$	2,143		$	1,729		$	1,694
Corporate and investment banking		1,344			1,231			1,241
Total revenue (3)		3,487			2,960			2,935
Provision for (reversal of) credit losses
Impaired		106			90			8
Performing		175			63			(38	)
Provision for (reversal of) credit losses		281			153			(30	)
Non-interest expenses		1,634			1,516			1,492
Income before income taxes		1,572			1,291			1,473
Income taxes (3)		441			337			387
Net income	$	1,131		$	954		$	1,086
Net income attributable to:
Equity shareholders	$	1,131		$	954		$	1,086
Efficiency ratio		46.9	%		51.2	%		50.8	%
Return on equity (4)		16.8	%		15.4	%		20.7	%
Allocated common equity (4)	$	6,731		$	6,188		$	5,234
Average assets ($ billions)	$	221.1		$	184.6		$	166.2
Full-time equivalent employees		1,470			1,449			1,396

(1) For additional segmented information, see Note 31 to the consolidated financial statements.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3) Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of $183 million (2019: $177 million; 2018: $278 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.

(4) For additional information, see the “Non-GAAP measures” section.

Financial overview

Net income was up $177 million or 19% from 2019, primarily due to higher revenue, partially offset by a higher provision for credit losses and higher non-interest expenses.

Revenue

Revenue was up $527 million or 18% from 2019.

Global markets revenue was up $414 million or 24%, primarily due to higher revenue from our interest rate, foreign exchange and commodities trading businesses and higher revenue from financing activities, partially offset by lower revenue from our equity derivatives trading business.

Corporate and investment banking revenue was up $113 million or 9%, primarily due to higher debt and equity underwriting activity and higher corporate banking revenue, partially offset by lower advisory revenue.

Provision for (reversal of) credit losses

Provision for credit losses was up $128 million from 2019. The current year included a higher provision for credit losses on performing loans related to the impact of the COVID-19 pandemic and continued pressure on oil prices. Provision for credit losses on impaired loans was up, primarily due to higher provisions in the oil and gas sector, partially offset by lower provisions in the utility sector.

Non-interest expenses

Non-interest expenses were up $118 million or 8% from 2019, primarily due to higher spending on strategic initiatives and higher employee-related compensation.

Income taxes

Income taxes were up $104 million or 31% from 2019, primarily due to higher income.

Average assets

Average assets were up $36.5 billion or 20% from 2019, primarily due to an increase in derivatives valuation, higher loan balances and securities purchased under resale agreements.

28 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Corporate and Other

Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines.

Results⁽¹⁾

$ millions, for the year ended October 31	2020			2019 (2)			2018 (2)
Revenue
International banking	$	734		$	798		$	657
Other		(143	)		107			51
Total revenue (3)		591			905			708
Provision for (reversal of) credit losses
Impaired		24			21			102
Performing		175			(20	)		(27	)
Provision for credit losses		199			1			75
Non-interest expenses		1,813			1,370			1,281
Loss before income taxes		(1,421	)		(466	)		(648	)
Income taxes (3)		(538	)		(375	)		(459	)
Net income (loss)	$	(883	)	$	(91	)	$	(189	)
Net income (loss) attributable to:
Non-controlling interests	$	2		$	25		$	17
Equity shareholders		(885	)		(116	)		(206	)
Full-time equivalent employees		22,419			23,116			21,792

(1) For additional segmented information, see Note 31 to the consolidated financial statements.

(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.

(3) Revenue and income taxes of Capital Markets and U.S. Commercial Banking and Wealth Management are reported on a TEB. The equivalent amounts are offset in the revenue and income taxes of Corporate and Other. Accordingly, revenue and income taxes include a TEB adjustment of $183 million (2019: $179 million; 2018: $280 million).

Financial overview

Net loss was up $792 million from 2019, primarily due to higher non-interest expenses, lower revenue and a higher provision for credit losses.

Revenue

Revenue was down $314 million from 2019.

International banking revenue was down $64 million, primarily due to lower revenue in CIBC FirstCaribbean as a result of narrower margins and lower fees.

Other revenue was down $250 million, primarily due to lower treasury revenue largely as a result of excess liquidity costs, interest income related to the settlement of certain income tax matters in the prior year, shown as an item of note, and due to lower revenue relating to our adoption of IFRS 16 in the current year that was largely offset in non-interest expenses (see Note 8 to our consolidated financial statements for further details regarding the impact of our transition to IFRS 16).

Provision for (reversal of) credit losses

Provision for credit losses was up $198 million from 2019. The current year included a higher provision for credit losses on performing loans related to the impact of the COVID-19 pandemic. Provision for credit losses on impaired loans was comparable with the prior year.

Non-interest expenses

Non-interest expenses were up $443 million from 2019, primarily due to charges related to restructuring, the consolidation of our real estate portfolio, higher goodwill impairment related to our controlling interest in CIBC FirstCaribbean relative to the prior year, and an increase in legal provisions, all shown as items of note, partially offset by a gain as a result of plan amendments related to pension and other post-employment plans, also shown as an item of note, and lower occupancy costs related to our adoption of IFRS 16 as noted above.

Income taxes

Income tax benefit was up $163 million from 2019, primarily due to higher expenses.

CIBC 2020 ANNUAL REPORT 29

Management’s discussion and analysis

Financial condition

Review of condensed consolidated balance sheet

$ millions, as at October 31	2020		2019
Assets
Cash and deposits with banks	$	62,518	$	17,359
Securities		149,046		121,310
Securities borrowed or purchased under resale agreements		74,142		59,775
Loans and acceptances		416,388		398,108
Derivative instruments		32,730		23,895
Other assets		34,727		31,157
	$	769,551	$	651,604
Liabilities and equity
Deposits	$	570,740	$	485,712
Obligations related to securities lent or sold short or under repurchase agreements		89,440		69,258
Derivative instruments		30,508		25,113
Acceptances		9,649		9,188
Other liabilities		22,167		19,069
Subordinated indebtedness		5,712		4,684
Equity		41,335		38,580
	$	769,551	$	651,604

Assets

Total assets as at October 31, 2020 were up $117.9 billion or 18% from 2019, including an increase of approximately $2 billion due to the appreciation of the U.S. dollar.

Cash and deposits with banks increased by $45.2 billion or 260%, primarily due to higher short-term placements in Treasury.

Securities increased by $27.7 billion or 23%, primarily due to increases in debt securities in Canadian governments, U.S. Treasury and other agencies, and corporate debt, mainly in Treasury. Further details on the composition of securities are provided in the “Supplementary annual financial information” section and Note 5 to the consolidated financial statements.

Securities borrowed or purchased under resale agreements increased by $14.4 billion or 24%, primarily due to client-driven activities.

Net loans and acceptances increased by $18.3 billion or 5%, primarily due to increases in Canadian mortgage loans, and U.S. and Canadian business and government loans. Further details on the composition of loans and acceptances are provided in the “Supplementary annual financial information” section and Note 6 to the consolidated financial statements.

Derivative instruments increased by $8.8 billion or 37%, largely driven by increases in interest rate, foreign exchange and equity derivatives valuation.

Other assets increased by $3.6 billion or 11%, primarily due to an increase in broker receivables and the recognition of right-of-use assets in the current year as a result of our adoption of IFRS 16 (see Note 8 to our consolidated financial statements for additional details), partially offset by decreases in current tax receivable and collateral pledged for derivatives.

Liabilities

Total liabilities as at October 31, 2020 were up $115.2 billion or 19% from 2019, including an increase of approximately $2 billion due to the appreciation of the U.S. dollar.

Deposits increased by $85.0 billion or 18%, primarily due to domestic retail volume growth and increased wholesale funding. Further details on the composition of deposits are provided in the “Supplementary annual financial information” section and Note 11 to the consolidated financial statements.

Obligations related to securities lent or sold short or under repurchase agreements increased by $20.2 billion or 29%, primarily due to our participation in the Bank of Canada’s enhanced term repo program (see the “Regulatory developments concerning liquidity – Developments related to the COVID-19 pandemic” section) and client-driven activities.

Derivative instruments increased by $5.4 billion or 21%, largely driven by increases in equity, interest rate and foreign exchange derivatives valuation.

Acceptances increased by $0.5 billion or 5%, driven by client activities.

Other liabilities increased by $3.1 billion or 16%, primarily due to the recognition of lease liabilities in the current year as a result of our adoption of IFRS 16, as noted above, and an increase in collateral received for derivatives.

Subordinated indebtedness increased by $1.0 billion or 22%, mainly due to an issuance in the third quarter of 2020. For further details see the “Capital management” section.

Equity

Equity as at October 31, 2020 increased $2.8 billion or 7% from 2019, primarily due to a net increase in retained earnings, which includes an increase of $0.1 billion related to the adoption of IFRS 16, as noted above, and the issuance of the limited recourse capital note. For further details see the “Capital management” section.

30 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Capital management

Our capital strength protects our depositors and creditors from risks inherent in our businesses. Our overall capital management objective is to maintain a strong and efficient capital base that:

• Acts as a buffer to absorb unexpected losses while providing sustainable returns to our shareholders;

• Enables our frontline businesses to grow and execute on our strategy;

• Demonstrates balance sheet strength and our commitment to prudent balance sheet management; and

• Supports us in maintaining a favourable credit standing and raising additional capital or other funding on attractive terms.

We actively manage our capital to maintain a strong and efficient capital base that provides balance sheet strength, enables our businesses to grow and execute on our strategy, and meets regulatory requirements.

Capital management and planning framework

CIBC maintains a capital management policy that helps us achieve our capital management objectives. Our capital management policy is reviewed and approved by the Board of Directors (the Board) in support of our Internal Capital Adequacy Assessment Process (ICAAP). The policy includes guidelines that relate to capital strength, capital mix, dividends and return of capital, and unconsolidated capital adequacy of regulated entities, based on regulatory requirements and our risk appetite. The key guideline relates to our capital strength, which is foundational to our financial strength and supports growth. The guideline on dividends and return of capital is intended to balance the need for retaining capital for strength and growth, while providing an adequate return to our shareholders. The level of capital and capital ratios is continually monitored relative to our regulatory minimums and internal targets and the amount of capital required may change in relation to CIBC’s business growth, risk appetite, and business and regulatory environment, including changes in accounting policies.

Capital planning is a crucial element of our overall financial planning process and establishment of strategic objectives and is developed in accordance with the capital management policy. Each year, a capital plan and three-year outlook are established as part of the financial plan, which establishes targets for the coming year and business plans to achieve those targets. The capital plan is also stress-tested as a part of our enterprise-wide stress testing process to ensure CIBC is adequately capitalized through severe but plausible stress scenarios (see the “Enterprise-wide stress testing” section for further details). Our capital position and forecasts are monitored throughout the year and assessed against the capital plan.

The Board, with endorsement from the Risk Management Committee, provides overall oversight of CIBC’s capital management through the approval of our risk appetite, capital policy and plan. The Risk Management Committee is provided with regular updates on our capital position including performance to date, updated forecasts, as well as any material regulatory developments that may impact our future capital position. Treasury is responsible for the overall management of capital including planning, forecasting, and execution of the plan, with senior management oversight provided by the Global Asset Liability Committee.

Enterprise-wide stress testing

We perform enterprise-wide stress testing on at least an annual basis and the results are an integral part of our ICAAP, as defined by Pillar 2 of the Basel III Accord, wherein we identify and measure our risks on an ongoing basis in order to ensure that the capital available is sufficient to cover all risks across CIBC, including the impacts of stress testing. We maintain a process which determines plausible but stressed economic scenarios such as global recessions and housing price shocks, and then apply these stress scenarios to our bank-wide exposures to determine the impact on the consolidated statement of income, RWA requirements, and consequently, key capital ratios. This helps us analyze the potential risks within our portfolios and establish prudent capital levels in excess of the regulatory minimum requirements. All of the elements of capital are monitored throughout the year and the capital plan is adjusted as appropriate.

Management determines the range of scenarios to be tested. Macroeconomic stress test scenarios are designed to be both severe and plausible and designed to be consistent with OSFI’s stress testing framework to ensure that they are comprehensive.

The following diagram summarizes the enterprise-wide stress testing process including the development of scenarios, identification of risk drivers and linkages to our other bank-wide ICAAP processes. The process includes syndication with our economists and lines of business to ensure scenarios are relevant to our businesses and there is a consistent interpretation of the scenarios across CIBC.

CIBC 2020 ANNUAL REPORT 31

Management’s discussion and analysis

Stress test scenarios are designed to capture a wide range of macroeconomic and financial variables that are relevant to assess the impact on our specific portfolios. This includes, for example, GDP, unemployment, house prices, interest rates and equity prices.

The stress testing process is comprehensive using a bottoms-up analysis of each of our bank-wide portfolios, and results are analyzed on a product, location and sector basis. Our stress testing approach combines the use of statistical models and expert judgment to ensure the results are reasonable in estimating the impacts of the stress scenarios.

Stress testing methodologies and results are subject to a detailed review and challenge from both our lines of business and Risk Management. Stress testing results are presented for review to the Risk Management Committee and are also shared with the Board and OSFI. The results of our enterprise-wide stress testing are used to highlight any vulnerabilities and ensure we remain well capitalized against regulatory and management expectations.

A key objective of the enterprise-wide stress tests is to identify key areas of exposure and foster discussion of management actions that would be taken to mitigate the impact of stress scenarios. Reverse stress testing is also integrated into our recovery and resolution planning process to determine worst case scenarios that would result in CIBC reaching the point of non-viability from which remedial actions are then considered.

Additional information on stress testing is provided in the “Management of risk” section.

Recovery plan

Federally regulated financial institutions must maintain robust and credible recovery plans that identify options to restore financial strength and viability when under severe stress. CIBC continues to maintain and update its recovery plan in line with OSFI requirements.

Resolution plan

In 2019, the Canada Deposit Insurance Corporation (CDIC) issued guidance for a comprehensive resolution plan. CDIC considers it a priority to ensure that banks undertake the necessary work to create resolution plans, demonstrate feasibility, and address any impediments to ensure resolvability can be achieved in an orderly fashion. CIBC continues to develop its resolution plan deliverables in line with guidance, in anticipation of submission to CDIC by October 2021.

Regulatory capital requirements under Basel III

Our regulatory capital requirements are determined in accordance with guidelines issued by OSFI, which are based upon the capital standards developed by the Basel Committee on Banking Supervision (BCBS).

Regulatory capital consists of CET1, Tier 1 and Tier 2 capital. The tiers of regulatory capital indicate increasing quality/permanence and the ability to absorb losses. The major components of our regulatory capital are summarized as follows:

(1) Excluding accumulated other comprehensive income (AOCI) relating to cash flow hedges and changes to fair value option (FVO) liabilities attributable to changes in own credit risk.

(2) OSFI has provided regulatory flexibility by implementing transitional arrangements for the treatment of expected loss provisioning, such that part of the allowances that would otherwise be included in Tier 2 capital will instead qualify for inclusion in CET1 capital subject to certain scalars and limitations until fiscal 2022. See the “Continuous enhancement to regulatory capital requirements” section for additional details.

Qualifying regulatory capital instruments must be capable of absorbing loss at the point of non-viability of the financial institution. Non-qualifying Tier 1 and Tier 2 capital instruments are excluded from regulatory capital at a rate of 10% per annum until November 2021, at which point they will have no regulatory value.

OSFI requires all institutions to achieve target capital ratios which include buffers. Targets may be higher for certain institutions at OSFI’s discretion. CIBC, along with Bank of Montreal, Bank of Nova Scotia, National Bank of Canada, Royal Bank of Canada, and the Toronto-Dominion Bank, have been designated by OSFI as domestic systemically important banks (D-SIBs) in Canada. D-SIBs are subject to a CET1 surcharge equal to 1.0% of RWA and a Domestic Stability Buffer (DSB) requirement intended to address Pillar 2 risks that are not adequately captured in the Pillar 1 capital requirements. The DSB is currently set at 1.0%, but can range from 0% to 2.5% of RWA (see the “Continuous enhancement to regulatory capital requirements” section for details regarding the reduction in the DSB requirement that was effective March 13, 2020). Additionally, banks need to hold an incremental countercyclical capital buffer equal to their weighted-average buffer requirement in Canada and across certain other jurisdictions where they have private sector credit exposures. OSFI’s current targets are summarized below:

As at October 31, 2020	Minimum			Capital conservation buffer			D-SIB buffer			Pillar 1 targets (1)			Domestic Stability Buffer			Target including all buffer requirements
CET1 ratio		4.5	%		2.5	%		1.0	%		8.0	%		1.0	%		9.0	%
Tier 1 capital ratio		6.0	%		2.5	%		1.0	%		9.5	%		1.0	%		10.5	%
Total capital ratio		8.0	%		2.5	%		1.0	%		11.5	%		1.0	%		12.5	%

(1) The countercyclical capital buffer applicable to CIBC is insignificant as at October 31, 2020.

32 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Capital adequacy requirements are applied on a consolidated basis consistent with our financial statements, except for our insurance subsidiaries (CIBC Cayman Reinsurance Limited and CIBC Life Insurance Company Limited), which are excluded from the regulatory scope of consolidation. The basis of consolidation applied to our financial statements is described in Note 1 to the consolidated financial statements. CIBC Life Insurance Company Limited is subject to OSFI’s Life Insurance Capital Adequacy Test.

Risk-weighted assets

The following table provides a summary of permissible regulatory capital approaches and those adopted by CIBC:

Risk category	Permissible regulatory capital approaches	Approach adopted by CIBC
Credit risk (1)	Basel provides three approaches for calculating credit risk capital requirements: •    Standardized •    Foundation •    Advanced internal ratings-based (AIRB) OSFI expects financial institutions in Canada with Total capital in excess of $5 billion to use the AIRB approach for all material portfolios and credit businesses.	We have adopted the AIRB approach for the majority of our credit portfolios. Under this methodology, we utilize our own internal estimates to determine probability of default (PD), loss given default (LGD), maturity, and exposure at default (EAD) for lending products and securities. We utilize the standardized approach for credit portfolios within CIBC Bank USA and CIBC FirstCaribbean. We periodically review portfolios under the standardized approach for consideration of adoption of the AIRB approach.
	OSFI provides two approaches for calculating counterparty credit risk (CCR) for derivatives and transactions: •    Standardized Approach (SA-CCR) •    Internal Model Method (IMM)	Effective April 30, 2020, CIBC has adopted the IMM approach for calculating CCR exposure for qualifying derivative transactions. Certain transactions remain under the SA-CCR approach.
	OSFI provides four approaches for calculating CCR for repo-style transactions: •    Comprehensive approach, with supervisory haircuts •    Comprehensive approach, with own estimate haircuts •    Repo VaR approach •    IMM	The comprehensive approach, with supervisory haircuts, is used for credit risk mitigation for repo-style transactions.
	Permitted approaches for equity positions in the banking book (which includes equity investments in funds) include: •    Standardized •    Market-based •    Look-through •    Mandate-based •    Fall-back	We use the standardized approach for equity positions in the banking book and both the look-through and mandate-based approaches for equity investments in funds.
	Basel provides the following approaches for calculating capital requirements for securitization positions: •    Internal Ratings-Based Approach (SEC-IRBA) •    Internal Assessment Approach (SEC-IAA) •    External Ratings-Based Approach (SEC-ERBA) •    Standardized Approach (SEC-SA)	We use SEC-IRBA, SEC-ERBA, SEC-IAA, and SEC-SA for securitization exposures in the banking book.
Market risk	Market risk capital requirements can be determined under the following approaches: •    Standardized •    Internal models Internal models involve the use of internal VaR models to measure market risk and determine the appropriate capital requirement. The stressed VaR and incremental risk charge (IRC) also form part of the internal models approach.	We use the internal models approach to calculate market risk capital. Our internal market risk models comprise VaR, stressed VaR, IRC and a capital charge for risk not captured in VaR. We also use SEC-ERBA for trading book securitization positions.
Operational risk	Operational risk capital requirements can be determined under the following approaches: •    Basic indicator approach •    Standardized approach	We use the standardized approach based on OSFI rules to calculate operational risk capital.

(1) Includes CCR.

Since the introduction of Basel II in 2008, OSFI has prescribed a capital floor requirement for institutions that use the AIRB approach for credit risk.

CIBC 2020 ANNUAL REPORT 33

Management’s discussion and analysis

Continuous enhancement to regulatory capital requirements

The BCBS and OSFI have published a number of proposals for changes to the existing regulatory capital requirements to strengthen the regulation, supervision, and practices of banks with the overall objective of enhancing financial stability. The discussion below provides a summary of BCBS and OSFI publications that have been issued since our 2019 Annual Report.

Regulatory developments arising from the COVID-19 pandemic

Both the BCBS and OSFI have announced a number of changes as a result of the COVID-19 pandemic and to respond to changes in market conditions. These announcements are summarized in the tables below.

BCBS

March 27, 2020 Deferral of Basel III standards The Group of Central Bank Governors and Heads of Supervision (GHOS), which is the oversight body for the BCBS, announced that the implementation timelines for upcoming Basel III standards would be deferred in order to increase the operational capacity of banks and supervisors to respond to the COVID-19 pandemic. See the “Basel III reforms” and “Revised Pillar 3 disclosure requirements” sections below for additional details.

April 3, 2020 Measures to alleviate the impact of COVID-19 The BCBS announced measures to alleviate the impact of COVID-19, including: •    Publication of “Measures to reflect the impact of COVID-19”, which includes technical clarifications to ensure appropriate treatment of loans subject to payment deferral relief and government guarantees; •    Deferral of the final two implementation phases of the framework for margin requirements for non-centrally cleared derivatives by one year, from 2021 to 2022; and •    Deferral of the implementation of the revised global systemically important banks (G-SIB) framework by one year, from 2021 to 2022 (see the “Global systemically important banks – public disclosure requirements” section below).

OSFI

March 13, 2020 Measures to support the resilience of financial institutions	OSFI announced measures to support the resilience of financial institutions, which included: •    An immediate reduction of the DSB (see the “Domestic Stability Buffer” section below); and •    Halting dividend increases or share buybacks for all federally regulated financial institutions effective immediately (see the “Capital initiatives” section below).
March 27, 2020 Update issued on August 31, 2020 Actions to address operational issues stemming from COVID-19	On March 27, 2020, OSFI announced actions to address operational issues stemming from COVID-19, including: •    For the purpose of determining capital requirements under the Capital Adequacy Requirements (CAR) Guideline for loans (including mortgages) that are granted payment deferral relief, the payment status will, for the duration of the relief period, be based on the payment status of these loans immediately prior to the deferral. On August 31, 2020, OSFI provided updates to this special capital treatment: •    Loans granted payment deferrals before August 31 will continue to be treated as performing loans for the duration of the deferral period, subject to a maximum of six calendar months from the effective date of the deferral; •    Loans granted new payment deferrals after August 30 and on or before September 30 will be treated as performing loans for the duration of the deferral, subject to a maximum of three calendar months from the approval date of the deferral; and •    Loans granted payment deferrals with approval dates after September 30, 2020 will not be eligible for the special capital treatment. •    Transitional arrangements for the capital treatment of expected loss provisioning (see the “Transitional arrangements for the capital treatment of expected loss provisioning” section below); •    A temporary increase for at least one year in the covered bond limit, which represents the percentage of total assets permitted to be pledged as collateral for covered bonds by a deposit-taking institution, from 5.5% to 10%; •    Deferral of the implementation timeline of the Basel III reforms in Canada (see the “Basel III reforms” section below); •    A delay in the implementation date of the revised Pillar 3 disclosure requirements finalized by the BCBS in December 2018 (see the “Revised Pillar 3 disclosure requirements” section below); •    Confirmation that no outflow needs to be recognized in the LCR for bankers’ acceptances sold to the Bank of Canada under the Bankers’ Acceptance Purchase Facility (BAPF) (see the “Regulatory developments concerning liquidity” section for additional details); •    A temporary reduction of stressed value-at-risk multipliers used in the determination of market risk capital requirements for institutions using internal models; and •    Removal of funding valuation adjustment hedges related to derivative transactions from the calculation of market risk capital to address an asymmetry in the existing requirements.
March 30, 2020 Capital treatment of programs to support COVID-19 efforts	OSFI provided guidance on the capital requirements applicable to government-supported lending programs created in response to COVID-19 (see Note 2 to our consolidated financial statements for additional details on these programs). The capital requirements applicable to the various programs are summarized below: •    Loans administered under the Canada Emergency Business Account (CEBA) are excluded from the calculation of capital and leverage ratios. •    For capital purposes, the government-guaranteed portion of loans under the Export Development Canada (EDC) program may be considered sovereign risk, with the remainder treated as a loan to the borrower. The entire amount of the loan is included in the exposure measure used for calculating the leverage ratio. •    A bank’s portion of a loan made under the Business Development Bank of Canada (BDC) co-lending program for small and medium-sized enterprises should be included in the calculation of capital and leverage ratios.
April 9, 2020 Update issued on November 5, 2020 Additional actions to address issues stemming from COVID-19	On April 9, 2020, OSFI announced additional measures and regulatory flexibility to support COVID-19 efforts, including: •    Exposures arising from central bank reserves and sovereign-issued securities that qualify as HQLA may be excluded from the exposure measure for leverage ratio purposes. On November 5, 2020, applicability of this measure was extended by six months, until December 31, 2021. •    The current capital floor factor was reduced from 75% to 70%, effective April 9, 2020. The reduction is expected to remain in place until the domestic implementation of the Basel III capital output floor (see the “Basel III reforms” section below).

34 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Transitional arrangements for the capital treatment of expected loss provisioning

In response to the COVID-19 pandemic, OSFI has introduced transitional arrangements for ECL provisioning that are available under the Basel Framework. These transitional arrangements were effective immediately upon being announced by OSFI on March 27, 2020 and result in a portion of allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount of ECL allowances eligible for inclusion in CET1 capital is determined based on the increase in stage 1 and stage 2 allowances relative to balances as at January 31, 2020 as a baseline. This amount is then adjusted for tax effects and is subject to a scaling factor that will decrease over time. The scaling factor has been set at 70% for fiscal 2020, 50% for fiscal 2021, and 25% for fiscal 2022. For exposures under the internal ratings-based (IRB) approach, the lower of this amount and excess allowances otherwise eligible for inclusion in Tier 2 capital is included as CET1 capital under the transitional arrangements.

Basel III reforms

On March 27, 2020, the GHOS announced the deferral of the implementation of the Basel III reforms in order to increase the operational ability of banks and supervisors to respond to the COVID-19 pandemic. On March 27, 2020, OSFI similarly announced that implementation of the Basel III reforms would be delayed consistent with the GHOS announcement. The implementation dates applicable to CIBC for the outstanding Basel III reforms following these announcements are summarized below.

Revised leverage ratio framework and introduction of G-SIB buffer	November 1, 2022
Revisions to the standardized and IRB approaches to credit risk	November 1, 2022
Changes to Basel III capital output floor requirements	November 1, 2022
Revised operational risk framework	November 1, 2022
Revised CVA framework	November 1, 2023
Revised market risk framework (also referred to as the “fundamental review of the trading book” or FRTB)	November 1, 2023

Domestic Stability Buffer

In response to COVID-19 and market conditions, OSFI announced an immediate reduction in the DSB requirement from 2.0% to 1.0% for all D-SIBs effective March 13, 2020. This reduction superseded a previously announced increase in the DSB from 2.0% to 2.25%, which was to have been effective April 30, 2020, and decreased OSFI’s target capital ratios, including all buffers, for CET1, Tier 1 and Total capital to 9.0%, 10.5% and 12.5%, respectively. On June 23, 2020, OSFI announced that the DSB would remain unchanged at 1.0%.

Revised Pillar 3 disclosure requirements

Consistent with the GHOS announcement on March 27, 2020 that the implementation date of the revised Pillar 3 disclosure requirements finalized in December 2018 would be deferred by one year, on March 27, 2020, OSFI also announced that the implementation date for Canadian deposit-taking institutions would be no earlier than November 1, 2022.

Global systemically important banks – public disclosure requirements

On July 5, 2018, the BCBS issued “Global systemically important banks: revised assessment methodology and the higher loss absorbency requirement” as a result of the first review of the G-SIB framework. The revised assessment methodology was to be effective by the 2021 G-SIB assessment. As part of the measures announced by the BCBS in response to COVID-19, the effective date for the revised assessment methodology has been deferred by one year and will now be effective for the 2022 G-SIB assessment.

Total loss absorbing capacity requirements

Beginning in the first quarter of 2022, D-SIBs will be required to maintain a supervisory target total loss absorbing capacity requirements (TLAC) ratio (which is comprised of a minimum risk-based TLAC ratio of 21.5% plus the then applicable DSB) and a minimum TLAC leverage ratio of 6.75%. TLAC is required to ensure that a non-viable bank will have sufficient loss absorbing capacity, through its regulatory capital and bail-in eligible instruments, to support its recapitalization. In accordance with the Department of Finance’s Bank recapitalization (Bail-in) conversion regulations, senior debt issued by D-SIBs on or after September 23, 2018, with an original term to maturity of more than 400 days (including explicit or embedded options) that is unsecured or partially secured is subject to bail-in. Consumer deposits, certain derivatives, covered bonds, and certain structured notes are not eligible for bail-in.

Other regulatory capital developments

OSFI capital ruling

On July 15, 2020, OSFI published a capital ruling on a new financial instrument, a Limited Recourse Capital Note (LRCN), relative to the eligibility criteria set out in the CAR Guideline. Consideration was given to economic substance over legal form, and the potential impact on financial stability, particularly in times of stress. The resulting capital ruling provides that the LRCNs can qualify as Additional Tier 1 regulatory capital, subject to certain limitations and disclosure requirements. Refer to the “Capital initiatives” section for further details related to the LRCNs issued in the fourth quarter of 2020.

CIBC will continue to monitor and prepare for developments impacting regulatory capital requirements and disclosures.

CIBC 2020 ANNUAL REPORT 35

Management’s discussion and analysis

Regulatory capital and ratios

The components of our regulatory capital and ratios under Basel III are presented in the table below:

$ millions, as at October 31	2020			2019
Common Equity Tier 1 (CET1) capital: instruments and reserves
Directly issued qualifying common share capital plus related stock surplus	$	14,025		$	13,716
Retained earnings		22,119			20,972
AOCI (and other reserves)		1,435			881
Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)		128			126
CET1 capital before regulatory adjustments		37,707			35,695
CET1 capital: regulatory adjustments
Prudential valuation adjustments		24			32
Goodwill (net of related tax liabilities)		5,177			5,375
Other intangibles other than mortgage-servicing rights (net of related tax liabilities)		1,662			1,658
Deferred tax assets excluding those arising from temporary differences (net of related tax liabilities)		24			24
Defined benefit pension fund net assets (net of related tax liabilities)		206			138
Other deductions or regulatory adjustments to CET1 as determined by OSFI (1)		(592	)		–
Other		330			761
Total regulatory adjustments to CET1 capital		6,831			7,988
CET1 capital		30,876			27,707
Additional Tier 1 (AT1) capital: instruments
Directly issued qualifying AT1 instruments plus related stock surplus (2)		3,575			2,825
Directly issued capital instruments subject to phase out from AT1 (3)		302			302
AT1 instruments issued by subsidiaries and held by third parties (amount allowed in AT1)		22			17
AT1 capital		3,899			3,144
Tier 1 capital (T1 = CET1 + AT1)		34,775			30,851
Tier 2 capital: instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus (4)		5,035			4,015
Directly issued capital instruments subject to phase out from Tier 2		628			630
Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in Tier 2)		29			23
General allowances		502			335
Tier 2 capital (T2)		6,194			5,003
Total capital (TC = T1 + T2)	$	40,969		$	35,854
Total RWA	$	254,871		$	239,863
Capital ratios
CET1 ratio		12.1	%		11.6	%
Tier 1 capital ratio		13.6	%		12.9	%
Total capital ratio		16.1	%		15.0	%

(1) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain adjustments and limitations until 2022.

(2) Comprised of non-viability contingent capital (NVCC) preferred shares and LRCN.

(3) Comprised of CIBC Tier 1 Notes – Series B due June 30, 2108.

(4) Comprised of certain debentures which qualify as NVCC.

CET1 ratio

The CET1 ratio at October 31, 2020 increased 0.5% from October 31, 2019, driven by the increase in CET1 capital partially offset by the impact of an increase in RWA. The increase in CET1 capital was primarily the result of internal capital generation (net income less dividends), an increase in AOCI, and common share issuance partially offset by share repurchases prior to cessation of the issuer bid upon OSFI’s March 13, 2020 announcement (see the “Continuous enhancement to regulatory capital requirements” section for further details). While the impact of a higher provision for credit losses on performing loans reduced net income, the impact on CET1 capital was mitigated by the impact of the elimination of the deduction in relation to our expected loss shortfall calculation as well as the ECL transitional arrangement which was effective beginning in the second quarter of 2020 (see the “Transitional arrangements for the capital treatment of expected loss provisioning” section for further details). The COVID-19 pandemic had a less significant impact on our expected loss calculation for regulatory capital purposes, as the parameters used in this calculation reflect long-run experience which incorporates periods of downturn that are applied to the most recently available risk ratings. This contrasts with ECL recognized for accounting purposes, which uses point-in-time parameters based on updated forward-looking information that are more reflective of the current economic environment than the long-term parameters used for regulatory capital.

The increase in total RWA was primarily due to organic growth, movements in portfolios and risk levels, changes in regulatory requirements and the impact of foreign exchange translation, partially offset by methodology and parameter updates. The impact of COVID-19 on RWA growth, as well as regulatory expected losses, was partially mitigated by CIBC client relief programs and government support targeting both individuals and businesses in response to the COVID-19 pandemic (see the “Regulatory developments arising from the COVID-19 pandemic” section for further details) that tempered the increase in the delinquency rates that may have otherwise occurred, reductions in balances and utilization rates from lower client spending during the pandemic and the use of the most recently available risk ratings. In addition, the net increase in risk levels primarily relating to market risk RWA was more than offset by the impact of measures introduced by OSFI in response to the COVID-19 pandemic as discussed in the “Regulatory developments arising from the COVID-19 pandemic” section.

We anticipate that the combined impact of our expected loss calculation for regulatory capital purposes and credit risk RWA will act as a headwind to the positive impact of earnings growth on our CET1 ratio in future periods to the extent balances increase, utilization and delinquency rates increase and risk ratings and other credit scores deteriorate in line with our forward-looking information.

36 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Tier 1 capital ratio

The Tier 1 capital ratio at October 31, 2020 increased 0.7% from October 31, 2019, primarily due to the factors affecting the CET1 ratio noted above, as well as an issuance of limited recourse capital notes during the fourth quarter of 2020. See the “Capital initiatives” section below for further details.

Total capital ratio

The Total capital ratio at October 31, 2020 increased 1.1% from October 31, 2019, primarily due to the factors affecting the Tier 1 capital ratio noted above, as well as an issuance of subordinated indebtedness during the third quarter of 2020. See the “Capital initiatives” section below for further details.

Movement in total regulatory capital

Changes in regulatory capital under Basel III are presented in the table below:

$ millions, for the year ended October 31	2020			2019
CET1 capital
Balance at beginning of year	$	27,707		$	24,641
Shares issued in lieu of cash dividends (add back)		144			194
Other issue of common shares		227			183
Purchase of common shares for cancellation		(68	)		(30	)
Premium on purchase of common shares for cancellation		(166	)		(79	)
Net income attributable to equity shareholders		3,790			5,096
Preferred and common share dividends		(2,714	)		(2,599	)
Change in AOCI balances included in regulatory capital
Net foreign currency translation adjustments		180			(31	)
Net change in securities measured at FVOCI		189			196
Net change in cash flow hedges		161			131
Net change in post-employment defined benefit plans		80			(220	)
Change in shortfall of allowance to expected losses		575			72
Change in goodwill and other intangible assets		194			117
Other, including change in regulatory adjustments (1)(2)		577			36
CET 1 capital balance at end of year	$	30,876		$	27,707
AT1 capital
Balance at beginning of year	$	3,144		$	3,267
AT1 eligible capital issues (3)		750			575
Phase-out of innovative Tier 1 notes		–			(251	)
Redeemed		–			(452	)
Other, including change in regulatory adjustments (2)		5			5
AT1 capital balance at end of year	$	3,899		$	3,144
Tier 2 capital
Balance at beginning of year	$	5,003		$	4,322
New Tier 2 eligible capital issues		1,000			1,500
Redeemed		(32	)		(1,000	)
Other, including change in regulatory adjustments (2)		223			181
Tier 2 capital balance at end of year	$	6,194		$	5,003
Total capital balance at end of year	$	40,969		$	35,854

(1) Includes the net impact on retained earnings as at November 1, 2019 from the adoption of IFRS 16. See Note 8 for additional details.

(2) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain adjustments and limitations until 2022.

(3) Includes preferred shares and LRCNs.

CIBC 2020 ANNUAL REPORT 37

Management’s discussion and analysis

Components of risk-weighted assets

The components of our RWA and corresponding minimum total capital requirements are presented in the table below:

$ millions, as at October 31	2020				2019
	RWA		Minimum total capital required (1)		RWA		Minimum total capital required  (1)
Credit risk (2)
Standardized approach
Corporate	$	41,836	$	3,347	$	39,131	$	3,130
Sovereign		2,460		197		2,411		193
Banks		326		26		454		36
Real estate secured personal lending		2,859		229		2,597		208
Other retail		939		75		911		73
Trading book		787		63		468		37
Equity		494		40		606		48
Securitization		1,031		82		707		57
		50,732		4,059		47,285		3,782
AIRB approach (3)
Corporate		83,326		6,666		76,182		6,095
Sovereign (4)		2,911		233		2,227		178
Banks		2,995		240		3,082		247
Real estate secured personal lending		20,228		1,618		18,557		1,485
Qualifying revolving retail		14,484		1,159		15,605		1,248
Other retail		9,022		722		8,890		711
Equity		423		34		395		32
Trading book		5,200		416		6,684		535
Securitization		1,704		136		815		65
Adjustment for scaling factor		8,315		665		7,898		632
		148,608		11,889		140,335		11,228
Other credit RWA (5)		12,152		972		10,134		811
Total credit risk (before adjustment for CVA phase-in)		211,492		16,920		197,754		15,821
Market risk (Internal Models and IRB Approach)
VaR		1,309		105		1,073		86
Stressed VaR		1,626		130		2,478		198
Incremental risk charge		2,192		175		2,574		206
Securitization and other		731		58		407		33
Total market risk		5,858		468		6,532		523
Operational risk		30,319		2,426		28,587		2,287
Total RWA before adjustments for CVA phase-in	$	247,669	$	19,814	$	232,873	$	18,631
CVA capital charge
Total RWA	$	7,202	$	576	$	6,990	$	559
Total RWA after adjustments for CVA phase-in
Total RWA	$	254,871	$	20,390	$	239,863	$	19,190

(1) Refers to the minimum standard established by the BCBS before the application of the capital conservation buffer and any other capital buffers that may be established by regulators from time to time. It is calculated by multiplying RWA by 8%.

(2) Credit risk includes CCR, which comprises derivative and repo-style transactions. Credit risk for CIBC Bank USA and CIBC FirstCaribbean are calculated under the standardized approach.

(3) Includes RWA relating to equity investments in funds and certain commercial loans which are determined using the supervisory slotting approach.

(4) Includes residential mortgages insured by Canada Mortgage and Housing Corporation (CMHC), an agency of the Government of Canada, and government-guaranteed student loans.

(5) Comprises RWA relating to derivative and repo-style transactions cleared through qualified central counterparties (QCCPs), settlement risk, and other assets that are subject to the credit risk framework but are not included in the standardized or IRB frameworks, including other balance sheet assets that are risk-weighted at 100%, significant investments in the capital of non-financial institutions that are risk-weighted at 1,250%, and amounts below the thresholds for deduction that are risk-weighted at 250%.

The increase in RWAs was primarily due to organic growth, movement in portfolio and risk levels, changes in book quality, the implementation of IFRS 16 in the first quarter of 2020 and the impact of foreign exchange translation, partially offset by methodology and parameter updates.

The increase in credit risk RWA was primarily due to organic growth, movement in portfolio and risk levels, changes in regulatory requirements and the impact of foreign exchange translation, partially offset by methodology and parameter updates.

The decrease in market risk RWA was driven by capital model and methodology updates, partially offset by movement in risk levels, which includes changes in open positions and the market rates affecting these positions.

The increase in operational risk RWAs was driven by changes in the gross income, as defined by OSFI.

38 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Leverage ratio

The Basel III capital standards include a non-risk-based capital metric, the leverage ratio, to supplement risk-based capital requirements. The leverage ratio is defined as Tier 1 capital divided by the leverage ratio exposure. The leverage ratio exposure is defined under the rules as the sum of:

(i) On-balance sheet assets less Tier 1 capital regulatory adjustments;

(ii) Derivative exposures;

(iii) Securities financing transaction exposures; and

(iv) Off-balance sheet exposures (such as commitments, direct credit substitutes, letters of credit, and securitization exposures).

OSFI expects federally regulated deposit-taking institutions to have leverage ratios that meet or exceed 3.0%. This minimum may be higher for certain institutions at OSFI’s discretion. See the “Continuous enhancement to regulatory capital requirements” section below for recently announced capital measures impacting the leverage ratio.

$ millions, as at October 31	2020			2019
Tier 1 capital	$	34,775		$	30,851
Leverage ratio exposure		741,760			714,343
Leverage ratio		4.7	%		4.3	%

The leverage ratio at October 31, 2020 increased 0.4% from October 31, 2019, primarily driven by an increase in Tier 1 capital, partially offset by the impact of an increase in leverage ratio exposure. The increase in leverage ratio exposure was driven by increases in off-balance sheet, derivative, and securities financing transaction exposures, partially offset by a reduction in on-balance sheet exposures reflecting the exclusion of certain amounts as permitted by OSFI in respect of exposures arising from central bank reserves and sovereign-issued securities that qualify as HQLA (see the “Regulatory developments arising from the COVID-19 pandemic” section for further details).

Capital initiatives

In conjunction with OSFI’s March 13, 2020 announcement to decrease the DSB to 1.0%, OSFI also announced that it expects all federally regulated financial institutions to cease dividend increases and share buybacks for the time being, in order to ensure that the additional capital available is used to support Canadian lending activities. The following were the main capital initiatives undertaken in 2020:

Normal course issuer bid

Our normal course issuer bid expired on June 3, 2020. During the year, we purchased and cancelled 2,208,600 common shares under this bid at an average price of $106.03 for a total amount of $234 million.

Dividends

On February 25, 2020, the Board approved an increase in our quarterly common share dividend from $1.44 per share to $1.46 per share for the quarter ended April 30, 2020.

Common and preferred share dividends are declared quarterly at the discretion of the Board. The declaration and payment of dividends is governed by Section 79 of the Bank Act (Canada), the terms of the preferred shares, and the terms of the Tier 1 notes issued by CIBC Capital Trust, as explained in Notes 16 and 17 to the consolidated financial statements.

Shareholder investment plan (the plan)

Effective with the October 28, 2016 dividend, CIBC has elected to issue shares from Treasury to fulfill the requirements of the plan. Pursuant to the plan, we issued 1,534,320 common shares for consideration of $144 million for the year ended October 31, 2020.

Preferred shares

Non-cumulative Rate Reset Class A Preferred Shares Series 41 (NVCC)

Holders of the Non-cumulative Rate Reset Class A Preferred Shares Series 41 (NVCC) (Series 41 shares) had the option to convert their shares into Non-cumulative Floating Rate Class A Preferred Shares Series 42 (NVCC) (Series 42 shares) on a one-for-one basis on January 31, 2020. As the conditions for conversion were not met, no Series 42 shares were issued, and all of the Series 41 shares remain outstanding. The dividend on the Series 41 shares was reset to 3.909%, payable quarterly as and when declared by the Board, effective for the five-year period commencing January 31, 2020.

Non-cumulative Rate Reset Class A Preferred Shares Series 43 (NVCC)

Holders of the Non-cumulative Rate Reset Class A Preferred Shares Series 43 (NVCC) (Series 43 shares) had the option to convert their shares into Non-cumulative Floating Rate Class A Preferred Shares Series 44 (NVCC) (Series 44 shares) on a one-for-one basis on July 31, 2020. As the conditions for conversion were not met, no Series 44 shares were issued, and all of the Series 43 shares remain outstanding. The dividend on the Series 43 shares was reset to 3.143%, payable quarterly as and when declared by the Board, effective for the five-year period commencing July 31, 2020.

See the “Outstanding share data” section below and Note 16 to the consolidated financial statements for further details.

Limited Recourse Capital Notes

On September 16, 2020, we issued $750 million principal amount of 4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness). The Notes mature on October 28, 2080 and bear interest at a fixed rate of 4.375% per annum (paid semi-annually) until October 28, 2025. Starting on October 28, 2025, and every five years thereafter until October 28, 2075, the interest rate will be reset to the then current five-year Government of Canada bond yield plus 4.000% per annum.

Concurrently with the issuance of the Notes, we issued Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares Series 53 (NVCC) (the Series 53 Preferred Shares) which are held in a newly formed trust (the Limited Recourse Trust) that is consolidated by CIBC and as a result the Series 53 Preferred Shares are eliminated in CIBC’s consolidated financial statements. In the event of non-payment by CIBC of the principal amount of, interest on, or redemption price for, the Notes when due, the sole remedy of each Note holder is limited to that holder’s proportionate share of the Series 53 Preferred Shares held in the Limited Recourse Trust.

Subject to regulatory approval we may redeem the Notes, in whole or in part, every five years during the period from September 28 to and including October 28, commencing in 2025, at par.

The Notes and the Series 53 Preferred Shares carry standard NVCC provisions necessary for them to qualify as Tier 1 regulatory capital under Basel III. Upon the occurrence of a Trigger Event, each Series 53 Preferred Share held in the Limited Recourse Trust will automatically and

CIBC 2020 ANNUAL REPORT 39

Management’s discussion and analysis

immediately be converted without the consent of Note holders into a variable number of common shares which will be delivered to Note holders in satisfaction of the principal amount of, and accrued and unpaid interest on, all of the Notes. All claims of Note holders against CIBC under the Notes will be extinguished upon receipt of such common shares.

The Notes are compound instruments with both equity and liability features as payments of interest and principal in cash are made at our discretion as the sole recourse of each Note holder in the event of non-payment will be limited to that holder’s proportionate share of the Series 53 Preferred Shares held in the Limited Recourse Trust. The liability component of the Notes has a nominal value and, as a result, the full proceeds received upon the issuance of the Notes have been presented as equity and any interest payments paid thereon are accounted for as equity distributions.

Subordinated indebtedness

On July 21, 2020, we issued $1.0 billion principal amount of 2.01% Debentures due July 21, 2030 (NVCC) (subordinated indebtedness). The Debentures bear interest at a fixed rate of 2.01% per annum (paid semi-annually) until July 21, 2025, and at the three-month Canadian dollar bankers’ acceptance rate plus 1.28% per annum thereafter (paid quarterly) until maturity on July 21, 2030.

Outstanding share data

The table below provides a summary of our outstanding shares, NVCC capital instruments, and the maximum number of common shares issuable on conversion/exercise:

	Shares outstanding						Minimum conversion price per common share		Maximum number of common shares issuable on conversion/exercise
$ millions, except number of shares and per share amounts, as at November 27, 2020	Number of shares			Amount
Common shares		447,092,959		$	13,908
Treasury shares – common shares		(11,820	)		(1	)
Preferred shares (1)(2)
Series 39 (NVCC)		16,000,000		$	400		$	5.00		80,000,000
Series 41 (NVCC)		12,000,000			300			5.00		60,000,000
Series 43 (NVCC)		12,000,000			300			5.00		60,000,000
Series 45 (NVCC)		32,000,000			800			5.00		160,000,000
Series 47 (NVCC)		18,000,000			450			5.00		90,000,000
Series 49 (NVCC)		13,000,000			325			5.00		65,000,000
Series 51 (NVCC)		10,000,000			250			5.00		50,000,000
Treasury shares – preferred shares (1)(2)		–			–
Limited recourse capital notes (2)(4)
4.375% Limited recourse capital notes Series 1 (NVCC)		n/a			750			5.00		150,000,000
Subordinated indebtedness (2)(3)
3.42% Debentures due January 26, 2026 (NVCC)		n/a			1,000			5.00		300,000,000
3.45% Debentures due April 4, 2028 (NVCC)		n/a			1,500			5.00		450,000,000
2.95% Debentures due June 19, 2029 (NVCC)		n/a			1,500			5.00		450,000,000
2.01% Debentures due July 21, 2030 (NVCC)		n/a			1,000			5.00		300,000,000
Stock options outstanding										5,624,458

(1) Upon the occurrence of a Trigger Event, each share is convertible into a number of common shares, determined by dividing the par value of $25.00 plus declared and unpaid dividends by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per share (subject to adjustment in certain events as defined in the relevant prospectus supplement). Preferred shareholders do not have the right to convert their shares into common shares.

(2) The maximum number of common shares issuable on conversion excludes the impact of declared but unpaid dividends and accrued interest.

(3) Upon the occurrence of a Trigger Event, the Debentures are convertible into a number of common shares, determined by dividing 150% of the par value plus accrued and unpaid interest by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per common share (subject to adjustment in certain events as defined in the relevant prospectus supplement).

(4) Upon the occurrence of a Trigger Event, the Series 53 Preferred Shares held in the Limited Recourse Trust in support of the Notes are convertible into a number of common shares, determined by dividing the par value of $1,000 by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per common share (subject to adjustment in certain events as defined in the relevant prospectus supplement). See Note 16 to the consolidated financial statements for details on our preferred share and other equity instruments rights and privileges.

n/a Not applicable.

The occurrence of a “Trigger Event” would result in conversion of all of the outstanding NVCC instruments described above, which would represent a dilution impact of 83% based on the number of CIBC common shares outstanding as at October 31, 2020. As described in the CAR Guideline, a Trigger Event occurs when OSFI determines the bank is or is about to become non-viable and, if after conversion of all contingent instruments and consideration of any other relevant factors or circumstances, it is reasonably likely that its viability will be restored or maintained; or if the bank has accepted or agreed to accept a capital injection or equivalent support from a federal or provincial government, without which OSFI would have determined the bank to be non-viable.

In addition to the potential dilution impacts related to the NVCC instruments discussed above, as at October 31, 2020, $19,925 million (2019: $8,986 million) of our outstanding liabilities were subject to conversion to common shares under the bail-in regime. Under the bail-in regime there is no fixed and pre-determined contractual conversion ratio for the conversion of the specified eligible shares and liabilities of CIBC that are subject to a bail-in conversion into common shares, nor are there specific requirements regarding whether liabilities subject to a bail-in conversion are converted into common shares of CIBC or any of its affiliates. CDIC determines the timing of the bail-in conversion, the portion of the specified eligible shares and liabilities to be converted and the terms and conditions of the conversion, subject to parameters set out in the bail-in regime. See the “Total loss absorbing capacity requirements” section for further details.

Preferred share and other equity instruments rights and privileges

See Note 16 to the consolidated financial statements for details on our preferred share and other equity instruments rights and privileges.

40 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Off-balance sheet arrangements

We enter into off-balance sheet arrangements in the normal course of our business. We consolidate all of our sponsored trusts that securitize our own assets.

Non-consolidated structured entities (SEs)

We manage and administer a single-seller conduit and several CIBC-sponsored multi-seller conduits in Canada. The multi-seller conduits acquire direct or indirect ownership or security interests in pools of financial assets from our clients and finance the acquisitions by issuing asset-backed commercial paper (ABCP) to investors. The single-seller conduit acquires financial assets and finances these acquisitions through a credit facility provided by a syndicate of financial institutions. The sellers to the conduits may continue to service the assets and may be exposed to credit losses realized on these assets, typically through the provision of over-collateralization or another form of credit enhancement. The conduits may obtain credit enhancement from third-party providers.

We generally provide the multi-seller conduits with commercial paper backstop liquidity facilities, securities distribution, and provide both the single and multi-seller conduits with accounting, cash management, and operations services. The liquidity facilities for the managed and administered multi-seller conduits require us to provide funding, subject to the satisfaction of certain conditions with respect to the conduits, for ABCP not placed with external investors. We may also purchase ABCP issued by the multi-seller conduits for market-making purposes.

We are required to maintain certain short-term and/or long-term debt ratings with respect to the liquidity facilities that we provide to the sponsored multi-seller conduits. If we are downgraded below the level specified under the terms of those facilities, we must provide alternative satisfactory liquidity arrangements, such as procuring an alternative liquidity provider that meets the minimum rating requirements.

We may also act as the counterparty to derivative contracts entered into by a multi-seller conduit in order to convert the yield of the underlying assets to match the needs of the multi-seller conduit’s investors or to mitigate the interest rate, basis, and currency risk within the conduit.

We earn fees for providing services related to the non-consolidated single-seller and multi-seller conduits, such as backstop liquidity facilities, distribution, transaction structuring, and conduit administration. These fees totalled $65 million in 2020 (2019: $54 million). All fees earned in respect of activities with the conduits are on a market basis.

As at October 31, 2020, the amount funded for the various asset types in the multi-seller conduits amounted to $8.4 billion (2019: $7.1 billion). The estimated weighted-average life of these assets was 2.0 years (2019: 1.6 years). Our holdings of commercial paper issued by the non-consolidated sponsored multi-seller conduits that offer commercial paper to external investors were $12 million (2019: $26 million). Our committed backstop liquidity facilities to these conduits were $10.5 billion (2019: $8.8 billion). We also provided credit facilities of $50 million (2019: $50 million) to these conduits.

We participated in a syndicated facility for a three-year commitment, with two years remaining, of $700 million to the single-seller conduit that provides funding to franchisees of a major Canadian retailer. Our portion of the commitment was $130 million (2019: $130 million). As at October 31, 2020, we funded $86 million (2019: $87 million) through the issuance of bankers’ acceptances and prime loans.

We engage one or more of the four major rating agencies, DBRS Limited (DBRS), Fitch Ratings Inc. (Fitch), Moody’s Investors Service, Inc. (Moody’s), and S&P, to opine on the credit ratings of asset-backed securities (ABS) issued by our sponsored securitization vehicles. In the event that ratings differ between rating agencies, we use the lower rating.

We also have investments in and provide loans, liquidity and credit facilities to certain other third-party and CIBC-managed SEs. The on-balance sheet exposure related to these SEs is included in the consolidated financial statements.

Our on- and off-balance sheet amounts related to the SEs that are not consolidated are set out in the table below. For additional details on our SEs, see Note 7 to the consolidated financial statements.

$ millions, as at October 31						2020							2019
	Investments and loans (1)		Liquidity, credit facilities and commitments			Written credit derivatives (2)		Investments and loans (1)		Liquidity, credit facilities and commitments			Written credit derivatives  (2)
Single-seller and multi-seller conduits	$	107	$	8,390	(3)	$	–	$	113	$	7,137	(3)	$	–
Third-party structured vehicles – continuing		3,560		2,880			–		3,345		2,358			–
Structured vehicles run-off		3		13			130		3		13			139
Other		340		140			–		332		127			–

(1) Excludes securities issued by, retained interest in, and derivatives with entities established by CMHC, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal Home Loan Banks, Federal Farm Credit Bank, and Student Loan Marketing Association. $3 million (2019: $3 million) of the exposures related to structured vehicles run-off were hedged.

(2) Disclosed amounts reflect the outstanding notional of written credit derivatives. The negative fair value recorded on the consolidated balance sheet was $107 million (2019: $112 million). Notional of $123 million (2019: $130 million) was hedged with credit derivatives protection from third parties. The fair value of these hedges net of CVA was $98 million (2019: $104 million). An additional notional of $7 million (2019: $9 million) was hedged through a limited recourse note.

(3) Excludes an additional $2.1 billion (2019: $1.6 billion) relating to our backstop liquidity facilities provided to the multi-seller conduits as part of their commitment to fund purchases of additional assets. Also excludes $12 million (2019: $26 million) of our direct investments in the multi-seller conduits which we consider investment exposure.

CIBC 2020 ANNUAL REPORT 41

Management’s discussion and analysis

Other financial transactions

In the second quarter of 2020, in response to the COVID-19 pandemic, we entered into an arrangement with the Government of Canada to facilitate the advancing of loans to CIBC clients who are qualifying borrowers under the CEBA program. As CIBC’s involvement in the CEBA program is to administer the CEBA loans, and the funding and risks and rewards associated with the loans, including exposure to payment defaults and principal forgiveness, are assumed by the Government of Canada, loans advanced under the CEBA program are not recognized on our consolidated balance sheet. As part of our involvement in the CEBA program, we receive a fee that is intended as a reimbursement of costs that we incur to administer the loans. For further details regarding this program as well as other government lending programs that we participated in, refer to Note 2 to our consolidated financial statements.

We are the sponsor of several mutual and pooled funds, in the form of trusts. We are the administrator of these funds. In addition, we may act in other capacities, including custodian, trustee, and broker. We earn fees at market rates from these trusts. We do not guarantee either principal or returns to investors in these funds. We act as a trustee of a number of personal trusts and have a fiduciary responsibility to act in the best interests of the beneficiaries of the trusts. We earn a fee for acting as a trustee. We also participate in transactions to modify the cash flows of trusts managed by third-party asset managers to create investments with specific risk profiles, or to assist clients in the efficient management of other risks. Typically, these involve the use of derivative products, which transfer the risks and returns to or from a trust.

Derivatives

We participate in derivatives transactions, as a market maker facilitating the needs of our clients or as a principal to manage the risks associated with our funding, investing and trading strategies. All derivatives are recorded at fair value on our consolidated balance sheet. See Notes 13 and 24 to the consolidated financial statements for details on derivative contracts and the risks associated with them.

Credit-related arrangements

Credit-related arrangements are generally off-balance sheet instruments and are typically entered into to meet the financing needs of clients. In addition, there are certain exposures for which we could be obligated to extend credit that are not recorded on the consolidated balance sheet. For additional details of these arrangements, see the “Liquidity risk” section and Note 22 to the consolidated financial statements.

Guarantees

A guarantee is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor failed to make payment when due in accordance with the original or modified terms of a debt instrument. Guarantees include credit derivatives protection sold and standby and performance letters of credit, as discussed in Notes 13 and 22 to the consolidated financial statements, respectively.

42 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Management of risk

We have provided certain disclosures required under IFRS 7 “Financial Instruments – Disclosures” (IFRS 7) related to the nature and extent of risks arising from financial instruments in the MD&A, as permitted by that IFRS standard. These disclosures are included in the “Risk overview”, “Credit risk”, “Market risk”, “Liquidity risk”, “Operational risk”, “Reputation and legal risks”, “Conduct risk”, and “Regulatory compliance risk” sections.

43	Risk overview
44	Risk governance structure
45	Risk management structure
46	Risk management process
46	Risk appetite statement
47	Risk input into performance and compensation
47	Risk policies and limits
48	Risk identification and measurement
49	Stress testing
49	Risk treatment and mitigation
49	Risk monitoring and reporting
50	Top and emerging risks
53	Risks arising from business activities
54	Credit risk
54	Governance and management
54	Policies

55	Process and control
56	Risk measurement
58	Exposure to credit risk
61	Credit quality of portfolios
65	Credit quality performance
66	Loans contractually past due but not impaired
66	Exposure to certain countries and regions
67	Selected exposures in certain activities
67	Settlement risk
67	Securitization activities
68	Market risk
68	Governance and management
68	Policies
68	Market risk limits
68	Process and control
68	Risk measurement
69	Trading activities

72	Non-trading activities
73	Pension risk
74	Liquidity risk
74	Governance and management
74	Policies
74	Risk measurement
75	Liquid assets
77	Funding
79	Contractual obligations
80	Other risks
80	Strategic risk
80	Insurance risk
80	Operational risk
81	Technology, information and cyber security risk
81	Reputation and legal risks
82	Conduct risk
82	Regulatory compliance risk
82	Environmental and related social risk

Risk overview

CIBC faces a wide variety of risks across all of its areas of business. Identifying and understanding risks and their impact allows CIBC to frame its risk appetite and risk management practices. Defining acceptable levels of risk, and establishing sound principles, policies and practices for managing risks, is fundamental to achieving consistent and sustainable long-term performance, while remaining within our risk appetite.

Our risk appetite defines tolerance levels for various risks. This is the foundation for our risk management culture and our risk management framework.

Our risk management framework includes:

• CIBC, SBU and functional group-level risk appetite statements;

• Risk frameworks, policies, procedures and limits to align activities with our risk appetite;

• Regular risk reports to identify and communicate risk levels;

• An independent control framework to identify and test the design and operating effectiveness of our key controls;

• Stress testing to consider the potential impact of changes in the business environment on capital, liquidity and earnings;

• Proactive consideration of risk mitigation options in order to optimize results; and

• Oversight through our risk-focused committees and governance structure.

Managing risk is a shared responsibility at CIBC. Business units and risk management professionals work in collaboration to ensure that business strategies and activities are consistent with our risk appetite. CIBC’s approach to enterprise-wide risk management aligns with the three lines of defence model:

(i) As the first line of defence, CIBC’s SBUs and functional groups own the risks and are accountable and responsible for identifying and assessing risks inherent in their activities in accordance with the CIBC risk appetite. In addition, they establish and maintain controls to mitigate such risks. The first line of defence may include governance groups within the relevant area to facilitate the control framework and other risk-related processes. Control groups provide subject matter expertise to the business lines and/or implement and maintain enterprise-wide control programs and activities. While control groups collaborate with the lines of business in identifying and managing risk, they also challenge risk decisions and risk mitigation strategies.

(ii) The second line of defence is independent from the first line of defence and provides an enterprise-wide view of specific risk types, guidance and effective challenge to risk and control activities. Risk Management is the primary second line of defence. Risk Management may leverage or rely on subject matter expertise of other groups (e.g., third parties or control groups) to better inform their independent assessments, as appropriate.

(iii) As the third line of defence, CIBC’s internal audit function provides reasonable assurance to senior management and the Audit Committee of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal controls as part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

A strong risk culture and communication between the three lines of defence are important characteristics of effective risk management.

We continuously monitor our risk profile against our defined risk appetite and related limits, taking action as needed to maintain an appropriate balance of risk and return. Monitoring our risk profile includes forward-looking analysis of sensitivity to local and global market factors, economic conditions, and geo-political and regulatory environments that influence our overall risk profile.

Regular and transparent risk reporting and discussion at senior management committees facilitates communication of risks and discussion of risk management strategies across the organization.

CIBC 2020 ANNUAL REPORT 43

Management’s discussion and analysis

Risk governance structure

Our risk governance structure is illustrated below:

Board of Directors (the Board): The Board oversees the enterprise-wide risk management program through approval of our risk appetite, control framework and supporting risk management policies and limits. The Board accomplishes its mandate through its Audit, Risk Management, Management Resources and Compensation, and Corporate Governance committees, described below.

Audit Committee (AC): The Audit Committee reviews the overall design and operating effectiveness of internal controls and the control environment, including controls over the risk management process.

Risk Management Committee (RMC): This committee assists the Board in fulfilling its responsibilities for defining CIBC’s risk appetite and overseeing CIBC’s risk profile and performance against the defined risk appetite. This includes oversight of key frameworks, policies and risk limits related to the identification, measurement, monitoring and controlling of CIBC’s principal business risks.

Management Resources and Compensation Committee (MRCC): This committee is responsible for assisting the Board in its global oversight of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls.

Corporate Governance Committee (CGC): This committee is responsible for assisting the Board in fulfilling its corporate governance oversight responsibilities.

Executive Committee (ExCo): The ExCo, led by the Chief Executive Officer (CEO) and including the executives reporting directly to the CEO, is responsible for setting business strategy and for monitoring, evaluating and managing risks across CIBC. The ExCo is supported by the following management governance committees:

• Global Asset Liability Committee (GALCO): This committee, which comprises members from the ExCo and senior Treasury, Risk Management and lines of business executives, provides oversight regarding capital management, funding and liquidity management, and asset liability management. It also provides strategic direction regarding structural interest rate risk and structural foreign exchange risk postures, approval of funds transfer pricing policies/parameters and approval of wholesale funding plans.

• Global Risk Committee (GRC): This committee, which comprises selected members of the ExCo and senior leaders from the lines of business, Risk Management and other functional groups, provides a forum for discussion and oversight of risk appetite, risk profile and risk-mitigation strategies. Key activities include reviewing and providing input regarding CIBC’s risk appetite statements; monitoring risk profile against risk appetite, reviewing and evaluating business activities in the context of risk appetite; and identifying, reviewing, and advising on current and emerging risk issues and associated mitigation plans.

44 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Risk management structure

The Risk Management group, led by our Chief Risk Officer (CRO), is responsible for setting risk strategies and for providing independent oversight of the businesses. Risk Management works to identify, assess, mitigate, monitor and control risks associated with business activities and strategies, and is responsible for providing an effective challenge to the lines of business.

The current structure is illustrated below:

The Risk Management group performs several important activities including:

• Developing CIBC’s risk appetite and associated management control metrics;

• Setting risk strategy to manage risks in alignment with our risk appetite and business strategy;

• Establishing and communicating risk frameworks, policies, procedures and limits to control risks in alignment with risk strategy;

• Measuring, monitoring and reporting on risk levels;

• Identifying and assessing emerging and potential strategic risks;

• Deciding on transactions that fall outside of risk limits delegated to business lines; and

• Ensuring compliance with applicable regulatory and anti-money laundering (AML) requirements.

The following key groups within Risk Management, independent of the originating businesses, contribute to our management of risk:

• Capital Markets Risk Management – This group provides independent oversight of the measurement, monitoring and control of market risks (both trading and non-trading), and trading credit risk (also called counterparty credit risk) across CIBC’s portfolios, and effective challenge and sound risk management oversight to the treasury/liquidity management function within CIBC.

• Global Credit Risk Management – This group is responsible for the adjudication and oversight of credit risks (including transaction-specific environmental and related social risk) associated with our commercial, corporate and wealth management activities, management of the risks in our investment portfolios, as well as management of special loan portfolios.

• Global Operational Risk Management – This group is responsible for designing and implementing effective operational risk management and control programs, and providing effective challenge to and monitoring of all operational risks globally, including (but not limited to) technology risk, information security risk, fraud risk, model risk, and third party risk. In addition, the team has global accountability for corporate risk insurance programs, reputation risks, risk policy and governance, and risk transformation programs.

• Risk Analytics and Credit Decisioning – This group manages credit risk in personal and business products (such as residential mortgages, credit cards, personal loans/lines of credit, small business loans) offered through various distribution channels and performs analytics to optimize retail credit performance, along with collections, fraud, and AML outcomes.

• Enterprise Risk Management – This group is responsible for enterprise-wide analysis, including the measuring and monitoring of risk appetite, enterprise-wide stress testing and reporting, loan loss reporting, risk models and model quantification, economic and regulatory capital methodologies, as well as risk data management. In addition, this group identifies and manages environmental risk, including the physical and transition risks associated with climate change.

• Compliance and Global Regulatory Affairs – This group is responsible for designing and implementing an effective enterprise-wide framework to manage and mitigate regulatory compliance risk. In addition, it provides oversight of conduct and culture risk (including sales practice risk), performs effective challenge on compensation plan changes, and conducts examinations on business units/activities using a risk-based approach. This group also builds and maintains credible relationships with our prudential, market, conduct and securities regulators and acts as a liaison between the regulators and CIBC.

CIBC 2020 ANNUAL REPORT 45

Management’s discussion and analysis

• Enterprise Anti-Money Laundering – This group is responsible for all aspects of compliance with and oversight of requirements relating to AML, anti-terrorist financing (ATF), and sanctions measures. Enterprise Anti-Money Laundering provides advice to all businesses and functional groups globally and is responsible for providing an enterprise-wide view of money laundering, terrorist financing and sanctions risks, as well as guidance and effective independent challenge to control activities. Furthermore, Enterprise Anti-Money Laundering executes a risk-based approach to deter, detect and report suspected money laundering, terrorist financing and sanctioned activities, in accordance with their policies and supporting standards.

• U.S. Risk Management – This group carries out the mandate of CIBC Risk Management at a regional level under the leadership of the U.S. CRO, with oversight from the U.S. Risk Management Committee. The group provides independent oversight for the identification, management, measurement, monitoring and mitigation of risks in the U.S.

Risk management process

Our risk management process is illustrated below:

Risk appetite statement

CIBC’s risk appetite statement defines the amount of risk we are willing to assume in pursuit of our strategic and financial objectives. Our guiding principle is to practice sound risk management, supported by strong capital and funding positions, as we pursue our client-focused strategy. In defining our risk appetite, we take into consideration our purpose, vision, values, strategy and objectives, along with our risk capacity (defined by regulatory constraints). It defines how we conduct business, which is to be consistent with the following objectives:

• Safeguarding our reputation and brand;

• Doing the right thing for our clients/stakeholders;

• Engaging in client-oriented businesses that we understand;

• Make our client’s goals our own in a professional and radically simple manner;

• Maintaining a balance between risk and returns;

• Retaining a prudent attitude towards tail and event risk;

• Meeting regulatory expectations and/or identifying and having plans in place to address any issues in a timely manner;

• Achieving/maintaining an AA rating; and

• Meeting/exceeding stakeholders’ expectations with respect to the Environment, Social and Governance (ESG) criteria.

CIBC’s risk appetite statement contains metrics with limits that define our risk tolerance levels. In addition, we have SBU and functional group risk appetite statements that are integrated with the overall CIBC risk appetite statement that further articulate our business level risk tolerances.

CIBC’s risk appetite statement is reviewed annually in conjunction with our strategic, financial and capital planning cycle to ensure alignment and is approved annually by the Board. To help ensure CIBC stays within its risk appetite, the Board, RMC, and senior management regularly receive and review reporting on our risk profile against the risk appetite limits.

All strategic business decisions, as well as day-to-day business decisions, are governed by our risk appetite framework. Strategic decisions are evaluated to ensure that the risk exposure is within our risk appetite. Day-to-day activities and decisions are governed by our framework of risk tolerance limits, policies, standards and procedures that support our risk appetite statement.

Risk culture

Risk culture refers to desired attitudes and behaviours relative to risk taking. At CIBC, we strive to achieve a consistent and effective risk culture by:

• Promoting, through both formal and informal channels, a shared accountability of risk identification, management and mitigation;

• Cultivating an environment of transparency, open communication and robust discussion of risk;

• Setting the appropriate “tone at the top” through clear communication and reinforcement; and

• Identifying behaviours that are and are not aligned with risk appetite, and reinforcing appropriate behaviours.

Every year, all employees are required to complete formal training on risk appetite, reputation risk, operational risk, code of conduct, AML and other key risk topics. By taking this mandatory training, all employees develop a basic knowledge of risk management in support of our risk culture. This training is supplemented by our risk appetite statement, risk management priorities, documents on our internal website and internal news releases. In addition, we have policies, procedures and limits in place that govern our day-to-day business activity, with escalation procedures for limit breaches outlined accordingly.

46 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Risk input into performance and compensation

Throughout the year, the Risk Management team manages various compensation risk reviews. These reviews are part of the second line of defence responsibilities to review and challenge new compensation plans, changes to existing compensation plans, and compensation plans that will be closed. All compensation plans are rated as either high-risk or low-risk with high-risk compensation plans requiring approval from the CRO.

At each year-end, Risk Management provides an assessment of adherence to risk appetite and material risk matters across CIBC. Risk Management also considers a number of risk inputs to identify matters which may directly impact individual compensation awards and/or performance ratings. Annually, Risk Management reviews the assessment with both the RMC and the MRCC.

The MRCC oversees the performance management and compensation process. The MRCC is responsible for assisting the Board in its global oversight of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls. The MRCC’s key compensation-related responsibilities include:

• Approving CIBC’s compensation philosophy and any material changes to CIBC’s compensation principles or practices;

• Approving new material compensation policies and material changes to existing material compensation policies;

• Reviewing and recommending for Board approval new material compensation plans or changes to existing material compensation plans;

• Assessing the appropriateness and alignment of compensation relative to actual business performance and risks;

• Reviewing and recommending for Board approval incentive compensation funding and allocations, based on an assessment of business performance and risk;

• Reviewing and recommending for Board approval individual compensation target and compensation for the ExCo, including the CEO and other key officers; and

• Approving individual compensation for employees with total direct compensation above a certain materiality threshold.

Risk policies and limits

Our risk policies and limits framework is intended to ensure that risks are appropriately identified, measured, monitored and controlled in accordance with our risk appetite. For most risks, we have developed an overarching framework document that sets out the key principles for managing the associated risks and our key risk policies and limits. This framework is supported by standards, guidelines, processes, procedures and controls that govern day-to-day activities in our businesses. Oversight is provided by management committees, as well as the Board/Board committees.

Key risk policies and limits are illustrated below:

CIBC 2020 ANNUAL REPORT 47

Management’s discussion and analysis

Risk identification and measurement

Risk identification and measurement are important elements of our risk management framework. Risk identification is a continuous process, generally achieved through:

• Regular assessment of risks associated with lending and trading credit exposures;

• Ongoing monitoring of trading and non-trading portfolios;

• Assessment of risks in new business activities and processes;

• Assessment of risks in complex and unusual business transactions; and

• Regular monitoring of the overall risk profile considering market developments and trends, and external and internal events.

Risk Management maintains a “Risk Register” to list all material risks facing CIBC. The inventory is based on the risks inherent in CIBC’s businesses and updated through various processes, illustrated in the following chart, to reflect changes in the nature of the risks we are facing. The Risk Register is used to support our ICAAP, either explicitly in the economic and regulatory capital calculations, or implicitly through the buffer of actual capital over economic capital and regulatory capital.

The decision to register a new risk is based on a risk assessment through our risk identification processes and includes criteria such as severity, measurability and probability. Furthermore, the decision to hold capital for a new risk is also based on whether the risk is being mitigated, and whether capital is deemed to be a suitable mitigant.

We have enterprise-wide methodologies, models and techniques in place to measure both the quantitative and qualitative aspects of risks, appropriate for the various types of risks we face. These methodologies, models and techniques are subject to independent assessment and review to ensure that the underlying logic remains sound, that model risks have been identified and managed, that use of the models continues to be appropriate and outputs are valid.

Risk is usually measured in terms of expected loss, unexpected loss, and economic capital.

Expected loss

Expected loss represents the loss that is statistically expected to occur in the normal course of business, with adjustments for conservatism, in a given period of time.

In respect of credit risk, the parameters used to measure expected loss are PD, LGD and EAD. These parameters are updated regularly and are based on our historical experience through the cycle and benchmarking of credit exposures. The PD, LGD and EAD parameters used for regulatory capital purposes are not adjusted for forward-looking information.

For trading market risks, VaR is a statistical technique used to measure risk. VaR is an estimate of the loss in market value for a given level of confidence that we would expect to incur in our trading portfolio due to an adverse one-day movement in market rates and prices. We also use stressed VaR to replicate our VaR over a period when relevant market factors are in distress.

For trading credit risks associated with market value based products, we use models to estimate exposure relative to the value of the portfolio of trades with each counterparty, giving consideration to market rates and prices.

Unexpected loss and economic capital

Unexpected loss is the statistical estimate of the amount by which actual losses might exceed expected losses over a specified time horizon, computed at a given confidence level. We use economic capital to estimate the level of capital needed to protect us against unexpected losses. Economic capital allows us to assess performance on a risk-adjusted basis.

We also use techniques such as sensitivity analysis and stress testing to help ensure that the risks remain within our risk appetite and that our capital is adequate to cover those risks. Our stress testing program includes evaluation of the potential effects of various economic and market scenarios on our risk profile, earnings and capital. Refer to the “Capital management” section for additional details.

Model risk management

Model risk management encompasses sound development, independent validation, and ongoing monitoring and review of the models as well as governance and controls that are proportionate to the risks. Our model inventory includes, but is not limited to, models that relate to risk measurement (including VaR, economic and regulatory capital), pricing, credit risk rating and scoring models, credit models for the calculation of loss severity and stress testing, and models for the calculation of ECL under IFRS 9. CIBC’s approach to provide effective governance and oversight for model risk management comprises the following key elements:

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• Governance and oversight by management committees, including the Model and Parameter Risk Committee (MPRC), senior management and the Board;

• Policies, procedures and standards to outline applicable roles and responsibilities of the various oversight groups and to provide guidance to identify, measure, control and monitor model risk throughout the model’s life cycle; and

• Controls for key operational aspects of model risk management including maintaining a model inventory, model risk ranking, model risk attestation and ongoing monitoring and reporting.

The MPRC is a subcommittee of the GRC and is responsible for reviewing and approving proposals for new and/or modified regulatory, economic capital and financial reporting models and provides oversight of CIBC’s regulatory, economic capital and financial reporting models and parameters for credit, market and operational risks. The MPRC has accountability and responsibility for model and parameter approvals, parameter performance monitoring, validation oversight, and policy oversight.

Model risk mitigation policies

We have policies, procedures, standards and controls to ensure effective model risk management for CIBC. A model review and validation is the independent effective challenge that documents the model risk and ensures models are sound and CIBC can rely on their output. The model review and validation process includes:

• Review of model documentation;

• Comprehensive, systematic testing of key model parameters on implementation to ensure results are as expected;

• Replication of the risk quantification process to determine whether the model implementation is faithful to the model specifications;

• Review of whether the model/parameter concepts and assumptions are appropriate and robust;

• Accuracy testing to assess the calibration and accuracy of the risk components including, for example, the discriminative power of rating systems and the reasonableness of capital parameters;

• Sensitivity testing to analyze the sensitivity of model/parameter outputs to model/parameter assumptions and key inputs;

• Scenario and stress testing of the model outputs to key inputs;

• Back-testing by comparing actual results with model-generated risk measures;

• Benchmarking to other models and comparable internal and external data;

• Review of the internal usage of the model/parameter applications to ensure consistency of application;

• Reporting of model status to the MPRC, supported through an up-to-date inventory of regulatory models and parameters;

• A quarterly attestation process for model owners in order to ensure compliance with the Model Risk and Validation Policy; and

• A comprehensive validation report is prepared that identifies the conditions for valid application of the model and summarizes these findings to the model owners, developers and users.

Once a model has been approved for use, ongoing monitoring becomes a joint responsibility of model users, owners and validators.

Stress testing

Stress testing supplements our other risk management tools by providing an estimate of the potential impacts of plausible but stressed economic scenarios and risk factors. Results of stress testing are interpreted in the context of our risk appetite, including metrics for capital adequacy. Enterprise-wide stress testing, capital planning and financial planning processes are integrated for a comprehensive information system. See the “Financial condition” section for detailed discussion on our enterprise-wide stress testing.

Risk treatment and mitigation

Risk treatment and mitigation is the implementation of options for modifying risk levels. CIBC pursues risk mitigation options in order to control its risk profile in the context of its risk appetite. CIBC’s objective is to proactively consider risk mitigation options in order to optimize results.

Discussions regarding potential risk mitigation strategies are held between Risk Management and the lines of business, and at the GRC or GALCO and at the RMC for governance and oversight, as appropriate. In evaluating possible strategies, considerations include costs and benefits, residual risks (i.e., risks that are retained), secondary risks (i.e., those caused by the risk mitigation actions), and appropriate monitoring and review to track results.

Risk controls

Our risk management framework also includes a comprehensive set of risk controls, designed to ensure that risks are being appropriately identified and managed. Our risk controls are part of CIBC’s overall Control Framework, developed based on the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) widely accepted “Internal Control – Integrated Framework”. The Control Framework also draws on elements of the OSFI Supervisory Framework and Corporate Governance Guidelines.

The Board, primarily through the RMC, approves certain credit risk limits and delegates specific transactional approval authorities to the CEO or jointly to the CEO and CRO. The RMC must approve transactions that exceed delegated authorities. Delegation of authority to business units is controlled to ensure decision-making authorities are restricted to those individuals with the necessary experience levels. In addition, CIBC has rigorous processes to identify, evaluate and remediate risk control deficiencies in a timely manner. Regular reporting is provided to the RMC to evidence compliance with risk limits. Risk limits and the delegation of authority to the CEO or jointly to the CEO and CRO are reviewed annually by the RMC.

Risk monitoring and reporting

To monitor CIBC’s risk profile and facilitate evaluation against the risk appetite statement, a number of measurement metrics have been established, with regular reporting against these metrics provided to the GRC and the RMC. This reporting enables decisions on growth and risk mitigation strategies.

Exposures are also regularly monitored against limits, with escalation protocols for limit excesses, should they occur. Escalation protocols ensure awareness at appropriate levels and facilitate management of excesses that is consistent with our risk appetite.

Regular management reports on each risk type are also prepared to facilitate monitoring and control of risk at a more granular level.

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Management’s discussion and analysis

Top and emerging risks

We monitor and review top and emerging risks that may affect our future results, and take action to mitigate potential risks. We perform in-depth analyses, which can include stress testing our exposures relative to the risks, and provide updates and related developments to the Board on a regular basis. Top and emerging risks are those that we consider to have potential negative implications that are material for CIBC. This section describes those top and emerging risks, as well as regulatory and accounting developments that are material for CIBC.

Pandemic outbreaks

The COVID-19 pandemic and the restrictions imposed by governments around the world to limit its spread have disrupted the global economy, financial markets, supply chains and business productivity in unprecedented and unpredictable ways, and have limited economic activity in Canada, the U.S. and other regions where we operate. While the economy has rebounded significantly relative to the trough of the downturn in the second quarter of 2020, the recovery has been uneven. Looking ahead, we expect a slow recovery in the first half of 2021, accelerating again thereafter and returning to pre-pandemic levels by 2022.

We are closely monitoring the continuously evolving impacts of the COVID-19 pandemic. COVID-19 has adversely affected our business and uncertainty remains as to the full impact of COVID-19 on the global economy, financial markets, and our business, results of operations, reputation and financial condition, including our regulatory capital, liquidity positions and our ability to meet regulatory and other requirements. The ultimate impacts will depend on future developments that are highly uncertain, such as the scope, severity and duration of the pandemic, including the ongoing fallout from the current second wave, subsequent resurgences of infection, actions taken by governments, monetary authorities, regulators, financial institutions and other third parties in response to subsequent waves, the extent of physical distancing measures, as well as business closures and travel restrictions mandated by governments. Recent positive developments related to vaccine development suggest regulatory approval and targeted usage could be expected by early 2021, but uncertainty remains surrounding the timing of mass production, distribution, public acceptance and the subsequent reduction in rates of infection.

A substantial amount of our business involves extending credit or otherwise providing financial resources to individuals, companies, industries or governments that have likely been adversely impacted by the pandemic, hindering their ability to meet original loan terms and potentially impacting their ability to repay their loans. While our estimate of ECL on performing loans considers the likelihood and extent of future defaults and impairments, given the inherent uncertainty caused by COVID-19, actual experience may differ materially from our current estimates. To the extent that business activity does not increase in line with our expectations due to the impact of subsequent waves of infection, or if unemployment continues to rise and clients default on loans beyond our current expectations, we may recognize further credit losses beyond those in fiscal 2020. The effectiveness of various government support programs in place for individuals and businesses as well as the timing of a vaccine may also impact our expectations. Similarly, because of changing economic and market conditions, we may be required to recognize losses, impairments, or reductions in other comprehensive income (OCI) in future periods relating to other assets that we hold.

Net interest income is significantly impacted by market interest rates. Interest rate cuts by the Bank of Canada and the U.S. Federal Reserve in response to COVID-19 have negatively impacted our net interest income. The overall effect of lower, or potentially negative, interest rates cannot be predicted and depends on future actions that the Bank of Canada and the U.S. Federal Reserve may take to increase or reduce targeted rates in response to COVID-19 or other factors.

We have taken multiple steps to support our clients through these challenging times (see the “CIBC client relief programs in response to COVID-19” section for further details). Governments, monetary authorities, regulators and financial institutions have also taken actions to support the economy, increase liquidity, mitigate unemployment, provide temporary financial assistance and regulatory flexibility, and implement other measures intended to mitigate or counterbalance the adverse economic consequences of the pandemic. We continue to work with regulators and governments across the jurisdictions in which we operate to support and facilitate government programs assisting clients. The unprecedented nature, scope and speed of these actions, while essential to mitigate the economic damage of the crisis, present additional risks for CIBC. These government programs are complex, and our participation may cause additional operational, compliance, legal and reputational risks that could result in litigation, government action or other forms of loss. Furthermore, there can be no assurance as to the effectiveness of these programs, which will depend on the duration and scale of COVID-19 and will differ by region and industry, with varying degrees of benefit to our clients.

The COVID-19 pandemic has elevated operational pressure and risks for CIBC in the areas of business interruption, fraud, third-party management, transaction processing and cyber security.

We continue to operate within our business continuity plans which were enacted upon the WHO declaring COVID-19 a pandemic. We have continued to evaluate and adapt our operating model, including our return to office strategy which has been modified in light of the second wave of COVID-19. As the infection rate rises in our surrounding communities, continuous monitoring and consistent application of our Health & Safety protocols continue, in line with government and public health authorities’ guidelines. The possibility of widespread illness amongst our clients and team members poses additional business and operational risk, and we continue to prioritize the health and safety of our clients and team members while meeting our clients’ needs during these challenging times. Remote work arrangements continue to be in place, and we anticipate that they will continue at least throughout the next quarter.

Overall, our organization has adapted well. Relevant operational risk metrics continue to track at an acceptable level. Our technology risk management practices remain resilient and adaptable. While a more stable environment has been observed, uncertainty remains around the operational impact from the prolonged pandemic environment, as well as risk introduced through recently implemented business changes. Operational resilience and sustainability remain our key areas of focus. We will continue to monitor our risk posture and trends to ensure operational risks are managed appropriately and in a timely manner.

If the COVID-19 pandemic is prolonged beyond our expectations, or further diseases emerge that give rise to similar effects, the adverse impact on the economy could deepen and result in further volatility and declines in financial markets. Moreover, it remains uncertain how the macroeconomic environment, societal and business norms will be impacted following this pandemic. Unexpected developments in financial markets, regulatory environments, or consumer behaviour and confidence may have adverse impacts on our business, results of operations, reputation and financial condition, for a substantial period of time.

Commodity prices

While the effects of the COVID-19 pandemic continue to play out in financial markets, we have seen historic lows in crude oil prices, beyond those experienced in December 2018, with unprecedented negative prices reflected near the end of April 2020 for one-month West Texas Intermediate futures contracts. While oil prices have partially recovered since the lows of April, future price volatility remains a concern given the potential impact on global demand due to the second wave of COVID-19. Clients in our oil and gas portfolio continue to be assessed on the basis of our enhanced risk metrics that reflect our current environment, and our portfolio is monitored in a prudent manner. Precious metals and other commodities also

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Management’s discussion and analysis

remain volatile as COVID-19 affects their supply and demand, with gold prices peaking in 2020. We continue to closely monitor our overall commodity exposure in these volatile markets.

Geo-political risk

The level of geo-political risk escalates at certain points in time. While the specific impact on the global economy and on global credit and capital markets would depend on the nature of the event, in general, any major event could result in instability and volatility, leading to widening spreads, declining equity valuations, flight to safe-haven currencies and increased purchases of gold. In the short run, market volatility could hurt the net income of our trading and non-trading market risk positions. Geo-political risk could reduce economic growth, and in combination with the potential impacts on commodity prices and the recent rise of protectionism, could have serious negative implications for general economic and banking activities. Current areas of concern include:

• Global uncertainty and market repercussions pertaining to the spread of COVID-19, including concerns related to the current and subsequent waves of infection, and the development of an effective mass-produced vaccine;

• Carry-over impact from the oil production dispute between Saudi Arabia and Russia;

• Ongoing U.S. and China relations and trade issues;

• Diplomatic tensions and the trade dispute between Canada and China;

• Relations between the U.S. and Iran;

• Anti-government protests in Hong Kong; and

• Uncertainty regarding the outcome of Brexit, given the need for Britain to negotiate a trade agreement with the European Union.

While it is impossible to predict where new geo-political disruption will occur, we do pay particular attention to markets and regions with existing or recent historical instability to assess the impact of these environments on the markets and businesses in which we operate.

Canadian consumer debt and the housing market

Historic growth of debt levels, primarily driven by higher mortgage debt, had been tempered by the Bank of Canada’s interest rate increases in 2017–2018, regulatory measures that include revised mortgage underwriting guidelines (B-20 guidelines) and taxes on foreign ownership. These measures, combined with a previous low unemployment environment, have had their intended effect as debt-to-income ratios flattened in 2018–2019. To counter the economic impact due to COVID-19, the government put in place several relief programs, the Bank of Canada cut interest rates and CIBC assisted clients by offering temporary relief programs across all retail products. The housing market outlook in the short term is expected to remain fairly stable. We believe that the probability of a severe housing crash that generates significant losses for mortgage portfolios remains low. Currently, we qualify variable rate mortgage borrowers using the Bank of Canada five-year fixed benchmark rate, which is typically higher than the variable rate by approximately two percentage points and is required as part of the B-20 guidelines. We run our enterprise-wide statistical stress tests at lower home prices to determine potential direct losses and have also conducted stress tests to assess the impact of rising unemployment rates on borrowers’ ability to repay loan obligations.

Disintermediation risk

Canadian banking clients are increasingly shifting their service transactions from brick-and-mortar banking centres to digital platforms. Competitive pressure from digital disruptors, both global technology leaders and smaller financial technology entrants, is increasing and the risk of disintermediation continues to grow due to the level of sophistication of these non-traditional competitors, and increased adoption of emerging technologies. Blockchain is one such technology that enables parties to transact with one another without the need for centralized third-party intermediaries such as banks. Cryptocurrencies, such as Bitcoin, are a specific application of blockchain with the potential for disintermediation. However, widespread adoption as a substitute for government-issued currency does not appear to be a near-term prospect due to several shortcomings such as their high volatility and limited regulation. Advances in artificial intelligence (AI) and automation also have the potential to transform business models over time including the delivery of financial services advice through automated processes. CIBC is maturing its AI capabilities with a focus on maintaining customer confidence and trust by building AI practices that apply principles such as fairness, ethics, transparency and security.

We manage disintermediation risk through strategic reviews as well as investment in emerging channels, in data and analytics capabilities, and in technology and innovation in general, to meet our clients’ changing expectations, while working to reduce our cost structure and simplify operations. We maintain a central and coordinated approach to innovation and have received numerous industry awards related to banking innovation and digital and mobile banking.

Interbank Offered Rate (IBOR) transition

Interest rate benchmarks including the London Interbank Offered Rate (LIBOR) and other similar benchmarks, are being reformed and replaced by new risk-free rates that are largely based on traded markets. The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. The FCA and the ICE Benchmark Administrator recently announced a consultation process that may lead to a change in the expected timing of cessation of certain currencies and tenors of LIBOR, which CIBC will closely monitor. As IBORs are widely referenced by large volumes of derivative, loan and cash products, the transition presents a number of risks to CIBC, and the industry as a whole. These transition risks include market risk (in the eventuality that new basis risks emerge), model risk, operational risk (as processes are changed or newly introduced), legal risk (as contracts are revised) and conduct risk (in ensuring clients are adequately informed/prepared). CIBC has established a comprehensive enterprise-wide program to manage and coordinate all aspects of the transition, including the identification and mitigation of these risks. See the “Other regulatory developments” section for further details.

Anti-money laundering

Money laundering, terrorist financing activities and other related crimes pose a great threat to the stability and integrity of a country’s financial sector and its broader economy. In recognition of this threat, the international community has made the fight against these illegal activities a priority. CIBC is committed to adhering to all regulatory requirements pertaining to AML and ATF and implementing best practices to minimize the impact of such activities. In Canada, amendments to the regulations under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act were published in July 2019 to improve the effectiveness of Canada’s AML/ATF regime. CIBC continues to make progress on ensuring our compliance with the new regulations once they come into effect. As such, we have implemented procedures, processes and controls with respect to client due diligence, record keeping and reporting to ensure that relevant regulatory obligations are met in each jurisdiction and we have implemented mandatory annual AML/ATF training for all employees.

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Management’s discussion and analysis

U.S. banking regulation

Our U.S. operations are subject to supervision by the Board of Governors of the Federal Reserve System (Federal Reserve), and are also subject to a comprehensive federal and state regulatory framework. Our wholly owned subsidiary, CIBC Bancorp USA Inc. (CIBC Bancorp), is a financial holding company subject to regulation and supervision by the Federal Reserve under the Bank Holding Act of 1956, as amended. CIBC Bank USA, our Illinois-chartered bank, is subject to regulation by the U.S. Federal Deposit Insurance Corporation (FDIC) and the Illinois Department of Financial and Professional Regulation. CIBC’s New York branch is subject to regulation and supervision by the New York Department of Financial Services and the Federal Reserve. Certain market activities of our U.S. operations are subject to regulation by the SEC and the U.S. Commodity Futures Trading Commission, as well as other oversight bodies.

The scope of these regulations could impact our business in a number of ways. For example, both CIBC Bancorp and CIBC Bank USA are required to maintain minimum capital ratios in accordance with Basel III rules adopted by the U.S. bank regulatory agencies, which differ in some respects from Canada’s Basel III rules. Under the U.S. bank regulatory framework, both CIBC and CIBC Bancorp are expected to provide a source of strength to the subsidiary bank and may be required to commit additional capital and other resources to CIBC Bank USA in the event that its financial condition were to deteriorate, whether due to overall challenging economic conditions in the U.S., or because of business-specific issues. The Federal Reserve (in the case of CIBC Bancorp) and the FDIC (in the case of CIBC Bank USA) also have the ability to restrict dividends paid by CIBC Bancorp or CIBC Bank USA, which could limit our ability to receive distributions on our capital investment in our U.S. banking operations.

Furthermore, the Federal Reserve and the FDIC could also restrict our ability to grow our U.S. banking operations, whether through acquisitions or organically, if, among other things, they have supervisory concerns about risk management, AML or compliance programs and practices, governance and controls, and/or capital and liquidity adequacy at CIBC Bancorp, CIBC Bank USA or our New York branch, as applicable.

The U.S. regulatory environment continues to evolve and future legislative and regulatory developments may impact CIBC.

Technology, information and cyber security risk

Financial institutions like CIBC are evolving their business processes to leverage innovative technologies and the internet to improve client experience and streamline operations. At the same time, cyber threats and the associated financial, reputation and business interruption risks have also increased. These risks continue to be actively managed by us through strategic risk reviews, enterprise-wide technology and information security programs, with the goal of maintaining overall cyber-resilience that prevents, detects, and responds to threats such as data breaches, malware, unauthorized access, and denial-of-service attacks, which can result in damage to CIBC systems and information, theft or disclosure of confidential information, unauthorized or fraudulent activity, and service disruption.

Given the importance of electronic financial systems, including secure online and mobile banking provided by CIBC to its clients, CIBC monitors the changing environment globally, including cyber threats, mitigation strategies and evolving regulatory requirements, in order to improve our controls and processes to protect our systems and client information. In addition, we perform cyber security preparedness, testing, and recovery exercises to validate our defences, benchmark against best practices and provide regular updates to the Board. CIBC has well-defined cyber incident response protocols and playbooks in the event that a security incident or breach occurs. CIBC also has cyber insurance coverage to help mitigate against certain potential losses associated with cyber incidents. CIBC’s insurance coverage is subject to various terms and provisions, including limits on the types and amounts of coverage relating to losses arising from cyber incidents. We periodically assess our insurance coverage based on our risk tolerance and limits. Despite our commitment to information and cyber security, and given the rapidly evolving threat and regulatory landscape, coupled with a changing business environment, it is not possible for CIBC to identify all cyber risks or implement measures to prevent or eliminate all potential incidents from occurring. However, CIBC monitors its risk profile for changes and continues to refine approaches to security protection and service resilience to minimize the impact of any incidents that may occur.

Third party risk

CIBC’s Board and senior management recognize the establishment of third-party relationships as important to CIBC’s business model and therefore leverage them to achieve CIBC’s business objectives. With the introduction of new technologies, new foreign jurisdictions and increasing reliance on sub-contractors, the third-party landscape continues to evolve. While such relationships may benefit CIBC through reduced costs, innovation, improved performance and increased business competitiveness, they also can introduce risks of failure or disruption to CIBC through breakdowns in people, processes or technology or through external events that impact these third parties.

To mitigate third-party risks, prepare for future third-party risks and changing regulatory expectations, and to ensure existing processes and internal controls are operating effectively, CIBC relies on its strong risk culture and established Third Party Risk Management program, which includes policies, procedures, expertise and resources dedicated to third-party risk management. The program identifies and manages risks that arise from third-party relationships from the point of planning through the life cycle of the business arrangement and supports the maintenance of collaborative relationships that advance CIBC’s strategic direction and operational needs within our risk appetite.

Climate risk

The physical effects of climate change such as heat waves, water stress and flooding, along with regulations designed to mitigate climate change, will have a measurable impact on communities and the economy. As the world transitions to a low-carbon economy, we are committed to understanding and responsibly managing the relevant impacts of climate change on our business activities. While CIBC has relatively low direct carbon emissions given we are a service-based company, many of our clients operate in businesses that currently face or will face new carbon emission standards in the foreseeable future.

There is an increasing demand for disclosure around climate-related risk identification and mitigation and we support the disclosure framework developed by the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD reporting framework provides stakeholders with consistent, material climate-related disclosures that are comparable across sectors, industries and countries. A key recommendation by the TCFD is the use of climate-related scenario analysis as a way to provide insight into how physical and transition risks of climate change might impact a business over time. Along with many other global banks, we are participating in the United Nations Environment Programme Finance Initiative (UNEP FI) and the TCFD, in order to accelerate our progress and ensure consistency in the approach to effective climate scenario analysis. Developing a comprehensive TCFD report is a journey that is expected to take several years. We are proactively collaborating with peer banks to ensure consistency and comparability as we improve the completeness of our TCFD reporting.

See the “Environmental and related social risk” section for additional information.

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Corporate transactions

CIBC seeks out acquisition and divestiture opportunities that align with its strategy, risk appetite and financial goals. The ability to successfully execute on our strategy to integrate acquisitions, and the ability to anticipate and manage risks associated with such corporate transactions are subject to certain factors such as receiving regulatory and shareholder approval on a timely basis and on favourable terms, retaining clients and key personnel, realizing synergies and efficiencies, controlling integration and acquisition costs, among others, and changes in general business and economic conditions.

Although many of the factors are beyond CIBC’s control, their impact is partially mitigated by conducting due diligence before completing the transaction and developing and executing appropriate plans. However, such corporate transactions involve inherent uncertainty and we cannot determine all potential events, facts and circumstances and there could be an adverse impact on CIBC’s operations and financial performance following such corporate transactions.

Regulatory developments

See the “Taxes”, “Capital management”, “Liquidity risk” and “Accounting and control matters” sections for additional information on regulatory developments.

Accounting developments

See the “Accounting and control matters” section and Note 32 to the consolidated financial statements for additional information on accounting developments.

Risks arising from business activities

The chart below shows our business activities and related risk measures based upon regulatory RWA and allocated common equity as at October 31, 2020:

(1) Includes CCR of $193 million, which comprises derivatives and repo-style transactions.

(2) Includes CCR of $16,784 million, which comprises derivatives and repo-style transactions.

(3) Includes CCR of $143 million, which comprises derivatives and repo-style transactions.

(4) Effective November 1, 2019, capital is now allocated to the SBUs based on the estimated amount of regulatory capital required to support their businesses. Previously, we utilized an economic capital model to attribute capital to our SBUs and calculate segmented return on equity. For additional information, see the “External reporting changes” section. Allocated common equity is a non-GAAP measure. For additional information, see the “Non-GAAP measures” section. Allocated common equity amounts shown in this table reflect average balances.

(5) Under the previous economic capital model, interest rate risk in the banking book was considered a component of market risk. Effective November 1, 2019, the composition of risks relating to allocated common equity is based on the Basel III definitions of credit risk, market risk, and operational risk.

(6) Represents allocated common equity relating to capital deductions, such as goodwill and intangible assets, in accordance with the rules in OSFI’s CAR Guideline.

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Management’s discussion and analysis

Credit risk

Credit risk is the risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.

Credit risk arises out of the lending businesses in each of our SBUs. Other sources of credit risk consist of our trading activities, which include our over-the-counter (OTC) derivatives, debt securities, and our repo-style transaction activity. In addition to losses on the default of a borrower or counterparty, unrealized gains or losses may occur due to changes in the credit spread of the counterparty, which could impact the carrying or fair value of our assets.

Governance and management

Credit risk is managed through the three lines of defence model. Frontline businesses and control groups must assess and manage the risks associated with their activities. They own the risks and the controls that mitigate the risks – this is the first line of defence.

The second line of defence is Risk Management, which takes a broader, independent view and is responsible for the adjudication and oversight of credit risks associated with CIBC’s commercial, corporate and wealth management activities.

Internal audit is the third line of defence, providing reasonable assurance to senior management and the Audit Committee of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

Senior management reports to the GRC and RMC at least quarterly on material credit risk matters, including material credit transactions, compliance with limits, portfolio trends, impaired loans and credit loss provisioning levels. Provision for credit losses is reviewed by the RMC and the Audit Committee quarterly.

Specific to the management of credit risk, Risk Management is mandated to provide enterprise-wide oversight of the management of credit risk in CIBC’s credit portfolios, including the measurement, monitoring and control of credit risk and the management of credit risk models. Key groups in Risk Management with credit risk responsibility include:

Capital Markets Risk Management: This group is responsible for independent oversight of the measurement, monitoring and control of traded and non-traded market risk, liquidity risk and trading credit risk, including adjudication of trading credit facilities for banks, non-bank financial entities, prime brokerage clients and central clearing counterparties. In addition, Capital Markets Risk Management is responsible for the risk management of sovereign and country risk, securitizations and the oversight of the Global Collateral Finance framework covering repos and securities lending.

Global Credit Risk Management: This group is responsible for the adjudication and oversight of credit risks (including transaction-specific environmental and related social risk) associated with our commercial, corporate and wealth management credit portfolios, management of the risks in our investment portfolios, as well as management of special loan portfolios.

Model Validation, Global Operational Risk Management: This group is responsible for the oversight of model validation practices. Model validation constitutes the independent set of processes, activities and ongoing documentary evidence that models and parameters are sound and CIBC can rely on their output.

Enterprise Risk Management: This group is responsible for enterprise-wide analysis, including enterprise-wide stress testing and reporting, risk data systems and models, as well as economic and regulatory capital methodologies.

Retail Analytics and Credit Decisioning: This group manages credit risk in personal and small business products offered through the various distribution channels (e.g., residential mortgages, credit cards, personal loans/lines of credit, small business loans) and performs analytics to optimize retail credit performance, along with collections, fraud, and AML outcomes.

U.S. Risk Management: This group carries out the mandate of CIBC Risk Management at a regional level and provides independent oversight of the identification, management, measurement, monitoring and control of credit risks in the U.S. Commercial Banking and Wealth Management SBU.

Adjudication and oversight above delegated levels is provided by the CRO, GRC and RMC.

Policies

To control credit risk, prudent credit risk management principles are used as a base to establish policies, standards and guidelines that govern credit activities as outlined by the credit risk management policy.

The credit risk management policy supplements CIBC’s risk management framework and risk appetite framework, and together with CIBC’s portfolio concentration limits for credit exposures, CIBC’s common risk/concentration risk limits for credit exposures, and other supporting credit risk policies, standards and procedures, assists CIBC in achieving its desired risk profile by providing an effective foundation for the management of credit risk.

Credit risk limits

The RMC approves Board limits, and exposures above Board limits require reporting to, or approval of, the RMC. Management limits are approved by the CRO. Usage is monitored to ensure risks are within allocated management and Board limits. Exposures above management limits require the approval of the CRO. Business lines may also impose lower limits to reflect the nature of their exposures and target markets. This tiering of limits provides for an appropriate hierarchy of decision making and reporting between management and the RMC. Credit approval authority flows from the Board and is further cascaded to officers in writing. The Board’s Investment and Lending Authority Resolution sets thresholds above which credits require reporting to, or approval of, the RMC, ensuring an increasing level of oversight for credits of higher risk. CIBC maintains country limits to control exposures within countries outside of Canada and the U.S.

54 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Credit concentration limits

At a bank-wide level, credit exposures are managed to promote alignment to our risk appetite statement, to maintain the target business mix and to ensure that there is no undue concentration of risk. We set limits to control borrower concentrations by risk-rating band for large exposures (i.e., risk-rated credits). Direct loan sales, credit derivative hedges, or structured transactions may also be used to reduce concentrations. We also have a set of portfolio concentration limits in place to control exposures by country, industry, product and activity. Further, our policies require limits to be established as appropriate for new initiatives and implementation of strategies involving material levels of credit risk. Concentration limits represent the maximum exposure levels we wish to hold on our books. In the normal course, it is expected that exposures will be held at levels below the maximums. The credit concentration limits are reviewed and approved by the RMC at least annually.

Credit concentration limits are also applied to our retail lending portfolios to mitigate concentration risk. We not only have concentration limits to individual borrowers and geographic regions, but also to different types of credit facilities, such as unsecured credits, rental occupancy purpose credits, condominium secured credits and mortgages with a second or third charge where we are behind another lender. In addition, we limit the maximum insured mortgage exposure to private insurers in order to reduce counterparty risk.

Credit risk mitigation

We may mitigate credit risk by obtaining a pledge of collateral, which improves recoveries in the event of a default. Our credit risk management policies include verification of the collateral and its value and ensuring that we have legal certainty with respect to the assets pledged. Valuations are updated periodically depending on the nature of the collateral, legal environment, and the creditworthiness of the counterparty. The main types of collateral include: (i) cash or marketable securities for securities lending and repurchase transactions; (ii) cash or marketable securities taken as collateral in support of our OTC derivatives activity; (iii) charges over operating assets such as inventory, receivables and real estate properties for lending to small business and commercial borrowers; and (iv) mortgages over residential properties for retail lending.

In certain circumstances we may use third-party guarantees to mitigate risk. We also obtain insurance to reduce the risk in our real estate secured lending portfolios, the most material of which relates to the portion of our residential mortgage portfolio that is insured by CMHC, an agency of the Government of Canada.

We mitigate the trading credit risk of OTC derivatives, securities lending and repurchase transactions with counterparties by employing the International Swaps and Derivatives Association (ISDA) Master Agreement, as well as Credit Support Annexes (CSAs) or similar master and collateral agreements. See Note 13 to the consolidated financial statements for additional details on the risks related to the use of derivatives and how we manage these risks.

ISDA Master Agreements and similar master and collateral agreements, such as the global master repurchase agreement and global master securities lending agreement, facilitate cross transaction payments, prescribe close-out netting processes, and define the counterparties’ contractual trading relationship. In addition, the agreements formalize non-transaction-specific terms. Master agreements serve to mitigate our credit risk by outlining default and termination events, which enable parties to close out of all outstanding transactions in the case of a negative credit event on either party’s side. The mechanism for calculating termination costs in the event of a close-out are outlined in the master agreement; this allows for the efficient calculation of a single net obligation of one party to another.

CSAs and other collateral agreements are often included in ISDA Master Agreements or similar master agreements governing securities lending and repurchase transactions. They mitigate CCR by providing for the exchange of collateral between parties when a party’s exposure to the other exceeds agreed upon thresholds, subject to a minimum transfer amount. CSAs and other collateral agreements which operate with master agreements also designate acceptable collateral types, and set out rules for re-hypothecation and interest calculation on collateral. Collateral types permitted under CSAs and other master agreements are set through our trading credit risk management documentation procedures. These procedures include requirements around collateral type concentrations.

Consistent with global initiatives to improve resilience in the financial system, we will clear derivatives through central counterparties (CCPs) where feasible. Credit derivatives may be used to reduce industry sector concentrations and single-name exposure.

Forbearance policy

We employ forbearance techniques to manage client relationships and to minimize credit losses due to default, foreclosure or repossession. In certain circumstances, it may be necessary to modify a loan for reasons related to a borrower’s financial difficulties, reducing the potential of default. Troubled debt restructurings are subject to our normal quarterly impairment review which considers, amongst other factors, covenants and/or payment delinquencies. Loan loss provisions are adjusted as appropriate.

In retail lending, forbearance techniques include interest capitalization, amortization amendments and debt consolidations. We have a set of eligibility criteria which allow our Client Account Management team to determine suitable remediation strategies and propose products based on each borrower’s situation.

The solutions available to corporate and commercial clients vary based on the individual nature of the client’s situation and are undertaken selectively where it has been determined that the client has or is likely to have repayment difficulties servicing its obligations. Covenants often reveal changes in the client’s financial situation before there is a change in payment behaviour and typically allow for a right to reprice or accelerate payments. Solutions may be temporary in nature or may involve other special management options.

Process and control

The credit approval process is centrally controlled, with all significant credit requests submitted to a credit adjudication group within Risk Management that is independent of the originating businesses. Approval authorities are a function of the risk and amount of credit requested. In certain cases, credit requests must be escalated to senior management, the CRO, or to the RMC for approval.

After initial approval, individual credit exposures continue to be monitored. A formal risk assessment is completed at least annually for all risk rated accounts, including review of assigned ratings. Higher risk-rated accounts are subject to closer monitoring and are reviewed at least quarterly. Collections and specialized loan workout groups handle the day-to-day management of high risk loans to maximize recoveries.

Limited approval authorities were delegated to customer contact centres and originating businesses, to ensure we had the ability to respond to customer requests for payment relief on a timely basis as a result of the COVID-19 pandemic. We are closely monitoring these payment relief programs, to ensure that credit performance is realized as expected, including controls on the overall number of deferrals, and maintaining daily monitoring of delinquencies and insolvencies.

CIBC 2020 ANNUAL REPORT 55

Management’s discussion and analysis

Risk measurement

Exposures subject to AIRB approach

Under the AIRB approach we are required to categorize exposures to credit risk into broad classes of assets with different underlying risk characteristics. This asset categorization may differ from the presentation in our consolidated financial statements. Under the AIRB approach, credit risk is measured using the following three key risk parameters⁽¹⁾:

• PD – the probability that the obligor will default within the next 12 months.

• EAD – the estimate of the amount which will be drawn at the time of default.

• LGD – the expected severity of loss as the result of the default, expressed as a percentage of the EAD.

Our credit risk exposures are divided into business and government and retail portfolios. Regulatory models used to measure credit risk exposure under the AIRB approach are subject to CIBC’s model risk management process.

(1) These parameters differ from those used in the calculation of ECL under IFRS 9. See the “Accounting and control matters” section for further details.

Business and government portfolios (excluding scored small business) – risk-rating method

The portfolios comprise exposures to corporate, sovereign, and bank obligors. Our adjudication process and criteria includes assigning an obligor default rating that reflects our estimate of the financial strength of the borrower, and a facility rating or LGD rating that reflects the collateral amount and quality applicable to secured exposures, the seniority position of the claim, and the capital structure of the borrower for unsecured exposures.

The obligor rating takes into consideration our financial assessment of the obligor, the industry, and the economic environment of the region in which the obligor operates. Where a guarantee from a third party exists, both the obligor and the guarantor will be assessed. While our obligor rating is determined independently of external ratings for the obligor, our risk-rating methodology includes a review of those external ratings.

CIBC employs a 20-point master internal obligor default rating scale that broadly maps to external agencies’ ratings as presented in the table below.

	CIBC	S&P	Moody’s
Grade	rating	equivalent	equivalent
Investment grade	00–47	AAA to BBB-	Aaa to Baa3
Non-investment grade	51–67	BB+ to B-	Ba1 to B3
Watch list	70–80	CCC+ to C	Caa1 to Ca
Default	90	D	C

We use quantitative modelling techniques to assist in the development of internal risk-rating systems. The risk-rating systems have been developed through analysis of internal and external credit risk data, supplemented with expert judgment. The risk ratings are used for portfolio management, risk limit setting, product pricing, and in the determination of regulatory and economic capital.

Our credit process is designed to ensure that we approve applications and extend credit only where we believe that our client has the ability to repay according to the agreed terms and conditions.

Our credit framework of policies and limits defines our appetite for exposure to any single name or group of related borrowers, which is a function of the internal risk rating. We generally extend new credit only to borrowers in the investment and non-investment grade categories noted above. Our credit policies are also defined to manage our exposure to concentration in borrowers in any particular industry or region.

In accordance with our process, each obligor is assigned an obligor default rating and the assigned rating is mapped to a PD estimate that represents a long-run average one-year default likelihood. For corporate obligors, PD estimates are calculated using joint maximum likelihood techniques based on our internal default rate history by rating category and longer dated external default rates as a proxy for the credit cycle to arrive at long-run average PD estimates. Estimates drawn from third party statistical default prediction models are used to supplement the internal default data for some rating bands where internal data is sparse. For small and medium corporate enterprises, PD estimates are developed using only internal default history. For bank and sovereign obligors, PD estimates are derived from an analysis based on external default data sets and supplemented with internal data where possible. We examine several different estimation methodologies and compare results across the different techniques. In addition, we apply the same techniques and estimation methodologies to analogous corporate default data and compare the results for banks and sovereigns to the corporate estimates for each technique. A regulatory floor is applied to PD estimates for corporate and bank obligors.

Each facility is assigned an LGD rating and each assigned rating is mapped to an LGD estimate that considers economic downturn conditions. For corporate obligors, LGD estimates are primarily derived from internal historical recovery data. Time to resolution is typically 1 to 2 years for most corporate obligors, and 1 to 4 years in the real estate sector. LGD values are based on discounted post-default cash flows for resolved accounts and include material direct and indirect costs associated with collections. External data is used in some cases to supplement our analysis. Economic downturn periods are identified for each portfolio by examining the history of actual losses, default rates and LGD. For bank and sovereign exposures, LGD estimates are primarily driven by expert judgment supplemented with external data and benchmarks where available. Appropriate adjustments are made to LGD estimates to account for various uncertainties associated with estimation techniques and data limitations, including adjustments for unresolved accounts.

EAD is estimated based on the current exposure to the obligor together with possible future changes in that exposure driven by factors such as the available undrawn credit commitment amount and the obligor default rating. EAD estimates are primarily based on internal historical loss data supplemented with comparable external data. Economic downturn periods are identified for each portfolio by examining the historical default rates and actual EAD factors.

Appropriate adjustments are made to PD, LGD and EAD estimates to account for various uncertainties associated with estimation techniques and data limitations, including adjustments for unresolved accounts (for LGD).

A simplified risk-rating process (slotting approach) is used for part of our uninsured Canadian commercial mortgage portfolio, which comprises non-residential mortgages and multi-family residential mortgages. These exposures are individually rated on our rating scale using a risk-rating methodology that considers the property’s key attributes, which include its loan-to-value (LTV) and debt service ratios, the quality of the property, and the financial strength of the owner/sponsor. All exposures are secured by a lien over the property. In addition, we have insured multi-family residential mortgages, which are not treated under the slotting approach, but are instead treated as sovereign exposures.

56 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Retail portfolios

Retail portfolios are characterized by a large number of relatively small exposures. They comprise: real estate secured personal lending (residential mortgages and personal loans and lines secured by residential property); qualifying revolving retail exposures (credit cards, overdrafts and unsecured lines of credit); and other retail exposures (loans secured by non-residential assets, unsecured loans including student loans, and scored small business loans).

We use scoring models in the adjudication of new retail credit exposures, which are based on statistical methods of analyzing the unique characteristics of the borrower, to estimate future behaviour. In developing our models, we use internal historical information from previous borrowers, as well as information from external sources, such as credit bureaus. The use of credit scoring models allows for consistent assessment across borrowers. There are specific guidelines in place for each product, and our adjudication decision will take into account the characteristics of the borrower, any guarantors, and the quality and sufficiency of the collateral pledged (if any). The lending process will include documentation of, where appropriate, satisfactory identification, proof of income, independent appraisal of the collateral and registration of security.

Retail portfolios are managed as pools of homogeneous risk exposures, using external credit bureau scores and/or other behavioural assessments to group exposures according to similar credit risk profiles. These pools are established through statistical techniques. Characteristics used to group individual exposures vary by asset category; as a result, the number of pools, their size, and the statistical techniques applied to their management differ accordingly.

The following table maps the PD bands to various risk levels:

Risk level	PD bands
Exceptionally low		0.01%–0.20%
Very low		0.21%–0.50%
Low		0.51%–2.00%
Medium		2.01%–10.00%
High		10.01%–99.99%
Default		100%

For the purposes of the AIRB approach for retail portfolios, additional PD, LGD and EAD segmentation into homogenous risk exposures is established through statistical techniques. The principal statistical estimation technique is decision trees benchmarked against alternative techniques such as regression and random forests.

Within real estate secured lending, we have two key parameter estimation models: mortgages and real estate secured personal lines of credit. Within qualifying revolving retail, we have three key parameter estimation models: credit cards, overdraft, and unsecured personal lines. A small percentage of credit cards, overdraft, and unsecured line accounts that do not satisfy the requirements for qualifying revolving retail are grouped into other retail parameter models. Within other retail, we have three key parameter models: margin lending, personal loans, and scored small business loans. Each parameter model pools accounts according to characteristics such as: delinquency, current credit bureau score, internal behaviour score, estimated current LTV ratio, account type, account age, utilization, outstanding balance, or authorized limit.

PD is estimated as the average default rate over an extended period based on internal historical data, generally for a 5-to-10-year period, which is adjusted using internal historical data on default rates over a longer period or comparable external data that includes a period of stress. A regulatory floor is applied to our PD estimate for all retail exposures with the exception of insured mortgages and government-guaranteed loans.

LGD is estimated based on observed recovery rates over an extended period using internal historical data. In determining our LGD estimate, we exclude any accounts that have not had enough time since default for the substantial majority of expected recovery to occur. This recovery period is product-specific and is typically in the range of 1 to 3 years. Accounts that cure from default and return to good standing are considered to have zero loss. We simulate the loss rate in a significant downturn based on the relationship(s) between LGD and one or more of the following: PD; housing prices, cure rate, and recovery time; or observed LGD in periods with above-average loss rates. We apply appropriate adjustments to address various types of estimation uncertainty including sampling error and trending. A regulatory floor is applied to all real estate secured exposures with the exception of insured mortgages.

EAD for revolving products is estimated as a percentage of the authorized credit limit based on the observed EAD rates over an extended period using historical data. We simulate the EAD rate in a significant downturn based on the relationship(s) between the EAD rate and PD and/or the observed EAD rate in periods with above-average EAD rates. For term loan products, EAD is set equal to the outstanding balance.

We apply appropriate adjustments to PD, LGD and EAD to address various types of estimation uncertainty including sampling error and trending.

Back-testing

We monitor the three key risk parameters – PD, EAD and LGD – on a quarterly basis for our business and government portfolios and on a monthly basis for our retail portfolios. Every quarter, the back-testing results are reported to OSFI and are presented to the business and Risk Management senior management for review and challenge. For each parameter, we identify any portfolios whose realized values are significantly above or significantly below expectations and then test to see if this deviation is explainable by changes in the economy. If the results indicate that a parameter model may be losing its predictive power, we prioritize that model for review and update.

Stress testing

As part of our regular credit portfolio management process, we conduct stress testing and scenario analyses on our portfolio to quantitatively assess the impact of various historical, as well as hypothetical, stressed conditions, versus limits determined in accordance with our risk appetite. Scenarios are selected to test our exposures to specific industries (e.g., oil and gas and real estate), products (e.g., mortgages and cards), or geographic regions (e.g., Europe and Caribbean). Results from stress testing are a key input into management decision making, including the determination of limits and strategies for managing our credit exposure. See the “Real estate secured personal lending” section for further discussion on our residential mortgage portfolio stress testing.

CIBC 2020 ANNUAL REPORT 57

Management’s discussion and analysis

Exposure to credit risk

The portfolios are categorized based upon how we manage the business and the associated risks. Gross credit exposure amounts presented in the table below represent our estimate of EAD, which is net of derivative master netting agreements and CVA but is before allowance for credit losses or credit risk mitigation. Gross credit exposure amounts relating to our business and government portfolios are reduced for collateral held for repo-style transactions, which reflects the EAD value of such collateral. Non-trading equity exposures are not included in the table below as they have been deemed immaterial under the OSFI guidelines, and hence are subject to 100% risk-weighting.

$ millions, as at October 31					2020						2019
	AIRB approach (1)		Standardized approach		Total		AIRB approach (1)		Standardized approach		Total
Business and government portfolios
Corporate
Drawn	$	102,342	$	36,603	$	138,945	$	96,444	$	32,292	$	128,736
Undrawn commitments		49,473		7,339		56,812		44,732		6,244		50,976
Repo-style transactions		139,677		–		139,677		122,776		1		122,777
Other off-balance sheet		14,085		1,016		15,101		14,540		981		15,521
OTC derivatives		10,858		786		11,644		14,125		596		14,721
		316,435		45,744		362,179		292,617		40,114		332,731
Sovereign
Drawn		133,077		22,664		155,741		73,036		13,301		86,337
Undrawn commitments		8,354		–		8,354		6,421		–		6,421
Repo-style transactions		38,904		–		38,904		21,404		–		21,404
Other off-balance sheet		1,553		–		1,553		1,624		–		1,624
OTC derivatives		2,187		2		2,189		3,094		2		3,096
		184,075		22,666		206,741		105,579		13,303		118,882
Banks
Drawn		12,846		1,241		14,087		12,689		1,862		14,551
Undrawn commitments		1,552		16		1,568		1,771		6		1,777
Repo-style transactions		24,228		–		24,228		25,472		–		25,472
Other off-balance sheet		59,761		–		59,761		61,532		–		61,532
OTC derivatives		5,805		21		5,826		9,355		18		9,373
		104,192		1,278		105,470		110,819		1,886		112,705
Gross business and government portfolios		604,702		69,688		674,390		509,015		55,303		564,318
Less: collateral held for repo-style transactions		187,832		–		187,832		157,415		–		157,415
Net business and government portfolios		416,870		69,688		486,558		351,600		55,303		406,903
Retail portfolios
Real estate secured personal lending
Drawn		231,527		4,799		236,326		222,933		4,177		227,110
Undrawn commitments (2)		31,390		–		31,390		20,777		1		20,778
		262,917		4,799		267,716		243,710		4,178		247,888
Qualifying revolving retail
Drawn		18,701		–		18,701		19,784		–		19,784
Undrawn commitments (2)		53,085		–		53,085		49,709		–		49,709
Other off-balance sheet		271		–		271		275		–		275
		72,057		–		72,057		69,768		–		69,768
Other retail
Drawn		14,869		1,326		16,195		13,478		1,268		14,746
Undrawn commitments (2)		2,819		28		2,847		2,584		26		2,610
Other off-balance sheet		35		–		35		36		–		36
		17,723		1,354		19,077		16,098		1,294		17,392
Total retail portfolios		352,697		6,153		358,850		329,576		5,472		335,048
Securitization exposures		12,276		3,509		15,785		10,688		3,511		14,199
Gross credit exposure		969,675		79,350		1,049,025		849,279		64,286		913,565
Less: collateral held for repo-style transactions		187,832		–		187,832		157,415		–		157,415
Net credit exposure (3)	$	781,843	$	79,350	$	861,193	$	691,864	$	64,286	$	756,150

(1) Includes exposures subject to the supervisory slotting approach.

(2) Increases in EAD in the current year include the impact of certain parameter updates in our regulatory models that were made in the first quarter of 2020 as part of our ongoing monitoring and review process.

(3) Excludes exposures arising from derivative and repo-style transactions that are cleared through QCCPs as well as credit risk exposures arising from other assets that are subject to the credit risk framework but are not included in the standardized or IRB frameworks, including other balance sheet assets that are risk-weighted at 100%, significant investments in the capital of non-financial institutions that are risk-weighted at 1,250%, settlement risk, and amounts below the thresholds for deduction that are risk-weighted at 250%.

Net credit exposure increased by $105 billion in 2020, due to increases in our deposits with sovereigns and securities holdings, as well as business growth in our North American lending portfolios.

58 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Exposures subject to the standardized approach⁽¹⁾

Exposures within CIBC Bank USA, CIBC FirstCaribbean and certain exposures to individuals for non-business purposes do not have sufficient historical data to support the AIRB approach for credit risk, and are subject to the standardized approach. The standardized approach utilizes a set of risk weightings defined by the regulators, as opposed to the more data intensive AIRB approach. A detailed breakdown of our standardized credit risk exposures by risk-weight category, before considering the effect of credit risk mitigation strategies and before allowance for credit losses, is provided below.

$ millions, as at October 31	Risk-weight category														2020		2019
	0%		20%		35%		50%		75%		100%		150%		Total		Total
Corporate	$	–	$	–	$	–	$	–	$	–	$	45,592	$	152	$	45,744	$	40,114
Sovereign		17,648		3,442		–		138		–		906		532		22,666		13,303
Banks		–		1,189		–		1		–		78		10		1,278		1,886
Real estate secured personal lending		–		–		1,742		–		2,883		170		4		4,799		4,178
Other retail		–		–		–		–		1,289		59		6		1,354		1,294
	$	17,648	$	4,631	$	1,742	$	139	$	4,172	$	46,805	$	704	$	75,841	$	60,775

(1) See “Securitization exposures” section for securitization exposures that are subject to the standardized approach.

We use credit ratings from S&P and Moody’s to calculate credit risk RWA for certain exposures under the standardized approach, including securities issued by sovereigns and their central banks (sovereigns), banks and corporates, and deposits with sovereigns and banks. This includes S&P and Moody’s issuer-specific credit ratings for securities issued by sovereigns and corporates, the S&P country credit rating for the country of incorporation for securities issued by banks, and deposits with banks, and the S&P country credit rating for deposits with central banks. The RWA calculated using credit ratings from these agencies represents 2.7% of credit risk RWA under the standardized approach.

Trading credit exposures

We have trading credit exposure (also called counterparty credit exposure) that arises from our OTC derivatives and our repo-style transactions. The nature of our derivatives exposure and how it is mitigated is further explained in Note 13 to the consolidated financial statements. Our repo-style transactions consist of our securities bought or sold under repurchase agreements, and our securities borrowing and lending activity.

The PD of our counterparties is estimated using models consistent with the models used for our direct lending activity. Due to the fluctuations in the market values of interest rates, exchange rates, and equity and commodity prices, counterparty credit exposure cannot be quantified with certainty at the inception of the trade. Counterparty credit exposure is estimated using the current fair value of the exposure, plus an estimate of the maximum potential future exposure due to changes in the fair value. Credit risk associated with these counterparties is managed within the same process as our lending business, and for the purposes of credit adjudication, the exposure is aggregated with any exposure arising from our lending business. The majority of our counterparty credit exposure benefits from the credit risk mitigation techniques discussed above, including daily re-margining, and posting of collateral.

We are also exposed to wrong-way risk. Specific wrong-way risk arises when CIBC receives financial collateral issued (or an underlying reference obligation of a transaction is issued) by the counterparty itself, or by a related entity that would be considered to be part of the same common risk group. General wrong-way risk arises when the exposure and/or collateral pledged to CIBC is highly correlated to that of the counterparty. Exposure to wrong-way risk with derivative counterparties is monitored by Capital Markets Risk Management. Where we may be exposed to wrong-way risk, our adjudication procedures subject those transactions to a more rigorous approval process. The exposure may be hedged with other derivatives to further mitigate the risk that can arise from these transactions.

We establish a CVA for expected future credit losses from each of our derivative counterparties. The expected future credit loss is a function of our estimates of the PD, the estimated loss in the event of default, and other factors such as risk mitigants.

Rating profile of OTC derivative mark-to-market (MTM) receivables

$ billions, as at October 31			2020					2019
	Exposure (1)
Investment grade	$	7.46		74.9	%	$	5.40		82.4	%
Non-investment grade		2.40		24.1			1.12		17.1
Watch list		0.07		0.7			0.02		0.3
Default		0.03		0.3			0.01		0.2
Unrated		–		–			–		–
	$	9.96		100.0	%	$	6.55		100.0	%

(1) MTM of the OTC derivative contracts is after the impact of master netting agreements, but before any collateral.

Concentration of exposures

Concentration of credit risk exists when a number of obligors are engaged in similar activities, or operate in the same geographic areas or industry sectors, and have similar economic characteristics so that their ability to meet contractual obligations is similarly affected by changes in economic, political, or other conditions.

CIBC 2020 ANNUAL REPORT 59

Management’s discussion and analysis

Geographic distribution⁽¹⁾

The following table provides a geographic distribution of our business and government exposures under the AIRB approach, net of collateral held for repo-style transactions.

$ millions, as at October 31, 2020	Canada		U.S.		Europe		Other		Total
Drawn	$	173,199	$	55,051	$	8,396	$	11,619	$	248,265
Undrawn commitments		45,684		9,717		2,402		1,576		59,379
Repo-style transactions		7,787		4,022		1,241		1,927		14,977
Other off-balance sheet		59,188		9,422		6,138		651		75,399
OTC derivatives		9,926		3,770		3,279		1,875		18,850
	$	295,784	$	81,982	$	21,456	$	17,648	$	416,870
October 31, 2019	$	237,234	$	73,900	$	23,150	$	17,316	$	351,600

(1) Classification by country is primarily based on domicile of debtor or customer.

Business and government exposure by industry groups

The following table provides an industry-wide breakdown of our business and government exposures under the AIRB approach, net of collateral held for repo-style transactions.

			Undrawn		Repo-style		Other off-		OTC		2020		2019
$ millions, as at October 31	Drawn		commitments		transactions		balance sheet		derivatives		Total		Total (1)
Commercial mortgages	$	8,373	$	47	$	–	$	–	$	–	$	8,420	$	7,544
Financial institutions		81,967		7,673		14,318		66,312		9,775		180,045		140,284
Retail and wholesale		5,167		3,652		–		225		239		9,283		9,142
Business services		7,047		3,264		18		595		215		11,139		11,000
Manufacturing – capital goods		2,791		2,036		–		365		205		5,397		5,898
Manufacturing – consumer goods		3,455		2,052		–		214		95		5,816		6,024
Real estate and construction		30,216		8,257		142		1,166		871		40,652		38,358
Agriculture		6,771		1,767		–		26		196		8,760		8,575
Oil and gas		9,649		8,532		–		1,039		2,305		21,525		21,813
Mining		1,363		2,931		–		723		114		5,131		5,326
Forest products		490		515		–		205		29		1,239		1,324
Hardware and software		1,227		890		–		45		27		2,189		1,751
Telecommunications and cable		335		1,126		–		408		326		2,195		2,234
Broadcasting, publishing and printing		457		154		–		2		52		665		801
Transportation		5,768		2,596		–		262		1,287		9,913		8,877
Utilities		9,189		7,066		–		2,707		1,177		20,139		15,747
Education, health, and social services		3,096		1,194		6		150		296		4,742		4,541
Governments		70,904		5,627		493		955		1,641		79,620		62,361
	$	248,265	$	59,379	$	14,977	$	75,399	$	18,850	$	416,870	$	351,600

(1) Certain information has been reclassified to conform to the presentation adopted in the current year. The presentation of commercial mortgages has been changed to include risk-rated commercial mortgages. Previously, commercial mortgages only included commercial mortgages under the slotting approach.

As part of our risk mitigation strategy, we may use credit protection purchases as a hedge against customer or industry sector concentration. As at October 31, 2020, we had credit protection purchased totalling $185 million (2019: $183 million) related to our business and government loans.

Oil and gas exposure

The following table provides a breakdown of our exposure to the oil and gas industry under the AIRB approach. Of these exposures, 64% are investment grade as at October 31, 2020 based on our internal risk rating, which incorporates security pledged (equivalent to S&P/Moody’s rating of BBB-/Baa3 or higher).

$ millions, as at October 31, 2020	Drawn		Undrawn commitments		Other off- balance sheet		OTC derivatives		Total (1)
Exploration and production	$	4,924	$	2,857	$	378	$	1,136	$	9,295
Midstream		2,241		3,107		43		401		5,792
Integrated		211		1,649		468		652		2,980
Petroleum distribution		1,391		393		106		110		2,000
Oil and gas services		347		218		15		5		585
Downstream		535		308		29		1		873
	$	9,649	$	8,532	$	1,039	$	2,305	$	21,525
October 31, 2019	$	9,048	$	8,606	$	913	$	3,246	$	21,813

(1) Oil and gas exposures under the standardized approach are not significant.

In addition, we have $40.0 billion (October 31, 2019: $39.9 billion) of retail exposure in the provinces of Alberta, Saskatchewan, and Newfoundland and Labrador, which together are responsible for the vast majority of Canada’s oil production.

60 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Credit quality of portfolios

Credit quality of risk-rated portfolios

The following table provides the credit quality of our risk-rated portfolios under the AIRB approach, net of collateral held for repo-style transactions.

The obligor grade is our assessment of the creditworthiness of the obligor, without respect to the collateral held in support of the exposure. The LGD estimate would reflect our assessment of the value of the collateral at the time of default of the obligor. For slotted exposures, the slotting category reflects our assessment of both the creditworthiness of the obligor, as well as the value of the collateral.

$ millions, as at October 31							2020		2019
	EAD
Obligor grade	Corporate		Sovereign		Banks		Total		Total
Investment grade	$	106,633	$	147,438	$	82,029	$	336,100	$	276,817
Non-investment grade		74,600		781		1,264		76,645		72,613
Watch list		2,730		–		–		2,730		1,239
Default		1,039		–		–		1,039		579
Total risk-rated exposure	$	185,002	$	148,219	$	83,293	$	416,514	$	351,248
LGD estimate	Corporate		Sovereign		Banks		Total		Total
Less than 10%	$	9,704	$	136,968	$	60,057	$	206,729	$	142,666
10%–25%		56,615		7,881		5,090		69,586		68,790
26%–45%		84,108		3,010		17,251		104,369		110,596
46%–65%		33,301		289		893		34,483		27,733
66%–100%		1,274		71		2		1,347		1,463
	$	185,002	$	148,219	$	83,293	$	416,514	$	351,248
Strong							$	265	$	246
Good								71		85
Satisfactory								20		21
Weak								–		–
Default								–		–
Total slotted exposure							$	356	$	352
Total business and government portfolios							$	416,870	$	351,600

The total exposures increased by $65.3 billion from October 31, 2019, due to increases in our deposits with sovereigns and securities holdings, as well as business growth in our North American lending portfolios. The investment grade category increased by $59.3 billion from October 31, 2019, while the non-investment grade category was up $4.0 billion. The increase in watch list and default exposures was largely attributable to credit migration of a number of exposures in the corporate lending portfolio, including exposures within the oil and gas portfolio.

Credit quality of the retail portfolios

The following table presents the credit quality of our retail portfolios under the AIRB approach.

$ millions, as at October 31							2020		2019
	EAD
Risk level	Real estate secured personal lending		Qualifying revolving retail		Other retail		Total		Total
Exceptionally low	$	201,050	$	49,755	$	3,816	$	254,621	$	239,875
Very low		31,927		4,469		4,335		40,731		34,018
Low		25,825		10,437		6,091		42,353		39,648
Medium		3,086		6,598		2,438		12,122		13,259
High		586		763		973		2,322		2,271
Default		443		35		70		548		505
	$	262,917	$	72,057	$	17,723	$	352,697	$	329,576

Securitization exposures

The following table provides details on securitization exposures in our banking book, by credit rating:

$ millions, as at October 31	2020		2019
	EAD
Exposures under the AIRB approach
S&P rating equivalent
AAA to BBB-	$	12,276	$	10,688
BB+ to BB-		–		–
Below BB-		–		–
Unrated		–		–
		12,276		10,688
Exposures under the standardized approach		3,509		3,511
Total securitization exposures	$	15,785	$	14,199

CIBC 2020 ANNUAL REPORT 61

Management’s discussion and analysis

CIBC client relief programs in response to COVID-19

CIBC has been actively engaged in lending activities to support our clients who are experiencing financial hardship caused by the COVID-19 pandemic.

For our personal banking clients impacted by the COVID-19 pandemic, the following client relief programs have been offered since the onset of the pandemic:

• Credit cards: lower interest rate of 10.99% on certain products was offered, in addition to the option to defer credit card payments for up to four months with the lower interest rate also applying over the deferral period.

• Residential mortgages: deferral of regular mortgage payments for up to six months.

• Loans and lines of credit: deferral of regular payments on certain secured personal loans for up to six months and on certain other loans and lines of credit for up to two months.

• Guaranteed investment certificates (GICs): on an exception basis, early withdrawal from eligible GICs.

For our corporate, commercial and business banking clients in Canada, the U.S. and other regions, client relief programs have also been offered on a case-by-case basis depending on the product and client including:

• New or increased credit facilities to provide additional liquidity;

• Covenant and borrowing base relief to provide financial flexibility;

• Principal and interest deferrals for loans, mortgages, lines of credit, authorized overdraft and credit cards;

• Early withdrawal of funds held in non-registered GICs; and

• Access to financial support through government programs.

On a case-by-case basis, with credit risk management approval, other unique modifications that met prudent standards could also be considered.

During the fourth quarter of 2020, the number of clients seeking relief under these payment deferral programs was considerably lower relative to the prior quarter, which resulted in a reduction in the outstanding balances for those programs in which the deferral periods were three months or less. As at October 31, 2020, the gross outstanding balance of loans for which CIBC provided payment deferrals was nil for credit cards in Canada (July 31, 2020: less than $10 million; April 30, 2020: $1.8 billion); $2.7 billion for residential mortgages in Canada (July 31, 2020: $33.3 billion; April 30, 2020: $35.5 billion); $0.3 billion for personal loans in Canada (July 31, 2020: $0.8 billion; April 30, 2020: $2.3 billion); $0.3 billion for various consumer loans in the Caribbean (July 31, 2020: $1.4 billion; April 30, 2020: $1.3 billion); and $2.5 billion for business and government loans (July 31, 2020: $6.2 billion; April 30, 2020: $10.0 billion), including $0.5 billion in Canada (July 31, 2020: $2.4 billion; April 30, 2020: $8.6 billion), $0.5 billion in the U.S. (July 31, 2020: $1.6 billion; April 30, 2020: $0.9 billion) and $1.5 billion in the Caribbean (July 31, 2020: $2.2 billion; April 30, 2020: $0.5 billion). Of the loans that were under payment deferrals as of October 31, 2020, the gross outstanding balance of loans that received an extension of an initial deferral or are in the process of being provided an extension was $1.2 billion.

Government lending programs in response to COVID-19

Since the second quarter of 2020, CIBC has been engaged in a number of government-initiated lending programs:

• CEBA program;

• Loan guarantee for small and medium-sized enterprises (EDC loan guarantee program);

• Co-lending program for small and medium-sized enterprises (BDC co-lend program); and

• U.S. PPP.

The CEBA program was launched in the second quarter of 2020 by the Government of Canada. The EDC funds all loans advanced under the CEBA program, including any payment defaults and principal forgiveness. The CEBA program was expanded during the third quarter of 2020 to facilitate the application of the program to certain borrowers that would have not otherwise qualified.

The Business Credit Availability Program (BCAP), which was introduced by the Government of Canada in the second quarter of 2020, includes two subprograms: (i) the EDC loan guarantee program for small and medium-sized enterprises and (ii) the BDC co-lending arrangement. Under the EDC loan guarantee program, EDC will guarantee 80% of qualifying term loans to small and medium-sized enterprises to help them meet their operating credit and cash flow requirements. Under the BDC co-lend program, BDC, as co-lender, finances 80% of the loans originated under this program, while CIBC finances the remaining 20%.

The PPP, introduced by the U.S. Small Business Administration, is a forgivable loan program. PPP loans are guaranteed by the U.S. Small Business Administration.

As at October 31, 2020, $2.9 billion of loans to CIBC clients were provided under the CEBA program and were accounted for as off-balance sheet loans. For further details, refer to the “Off-balance sheet arrangements” section. As at October 31, 2020, funded loans outstanding on our consolidated balance sheet under the EDC loan guarantee and BDC co-lend programs were $0.2 billion. In addition, US$1.9 billion of loans were made under the PPP as at October 31, 2020.

For further details regarding these programs, refer to Note 2 to our consolidated financial statements.

62 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Real estate secured personal lending

Real estate secured personal lending comprises residential mortgages, and personal loans and lines secured by residential property (HELOC). This portfolio is low risk, as we have a first charge on the majority of the properties and a second lien on only a small portion of the portfolio. We use the same lending criteria in the adjudication of both first lien and second lien loans.

Under the Bank Act (Canada), banks are limited to providing residential real estate loans of no more than 80% of the collateral value. An exception is made for mortgage loans with a higher LTV ratio if they are insured by either CMHC or a private mortgage insurer. Mortgage insurance protects banks from the risk of default by the borrower, over the term of the coverage. Mortgage insurers are subject to regulatory capital requirements, which aim to ensure that they are well capitalized. If a private mortgage insurer becomes insolvent, the Government of Canada has, provided certain conditions are met, obligations in respect of policies underwritten by certain insolvent private mortgage insurers as more fully described in the Protection of Residential Mortgage or Hypothecary Insurance Act (PRMHIA). There is a possibility that losses could be incurred in respect of insured mortgages if, among other things, CMHC or the applicable private mortgage insurer denies a claim, or further, if a private mortgage insurer becomes insolvent and either the conditions under the PRMHIA are not met or the Government of Canada denies the claim.

The following table provides details on our residential mortgage and HELOC portfolios:

	Residential mortgages (1)								HELOC (2)				Total
$ billions, as at October 31, 2020	Insured				Uninsured				Uninsured				Insured				Uninsured
Ontario (3)	$	29.4	26	%	$	82.1	74	%	$	10.4	100	%	$	29.4	24	%	$	92.5	76	%
British Columbia and territories (4)		10.2	24			32.9	76			4.1	100			10.2	22			37.0	78
Alberta		13.6	53			12.1	47			2.4	100			13.6	48			14.5	52
Quebec		6.0	38			10.0	62			1.2	100			6.0	35			11.2	65
Central prairie provinces (5)		3.7	51			3.6	49			0.7	100			3.7	46			4.3	54
Atlantic provinces (6)		4.1	49			4.3	51			0.7	100			4.1	45			5.0	55
Canadian portfolio (7)(8)		67.0	32			145.0	68			19.5	100			67.0	29			164.5	71
U.S. portfolio (7)		–	–			2.0	100			0.1	100			–	–			2.1	100
Other international portfolio (7)		–	–			2.0	100			–	–			–	–			2.0	100
Total portfolio	$	67.0	31	%	$	149.0	69	%	$	19.6	100	%	$	67.0	28	%	$	168.6	72	%
October 31, 2019	$	66.2	32	%	$	139.1	68	%	$	21.3	100	%	$	66.2	29	%	$	160.4	71	%

(1) Balances reflect principal values.

(2) We did not have any insured HELOCs as at October 31, 2020 and 2019.

(3) Includes $13.8 billion (2019: $14.1 billion) of insured residential mortgages, $53.4 billion (2019: $49.0 billion) of uninsured residential mortgages, and $6.1 billion (2019: $6.6 billion) of HELOCs in the Greater Toronto Area (GTA).

(4) Includes $4.5 billion (2019: $4.6 billion) of insured residential mortgages, $22.9 billion (2019: $22.1 billion) of uninsured residential mortgages, and $2.5 billion (2019: $2.7 billion) of HELOCs in the Greater Vancouver Area (GVA).

(5) Includes $1.8 billion (2019: $1.8 billion) of insured residential mortgages, $1.7 billion (2019: $1.7 billion) of uninsured residential mortgages, and $0.4 billion (2019: $0.4 billion) of HELOCs in Saskatchewan.

(6) Includes $1.3 billion (2019: $1.3 billion) of insured residential mortgages, $1.4 billion (2019: $1.4 billion) of uninsured residential mortgages, and $0.2 billion (2019: $0.2 billion) of HELOCs in Newfoundland and Labrador.

(7) Geographic location is based on the address of the property.

(8) 71% (2019: 72%) of insurance on Canadian residential mortgages is provided by CMHC and the remaining by two private Canadian insurers, both rated at least AA (low) by DBRS.

The average LTV ratios⁽¹⁾ for our uninsured residential mortgages and HELOCs originated and acquired during the year are provided in the following table.

For the year ended October 31				2020						2019
	Residential mortgages			HELOC			Residential mortgages			HELOC
Ontario (2)		63	%		68	%		63	%		67	%
British Columbia and territories (3)		60			65			61			64
Alberta		68			73			68			72
Quebec		68			73			68			73
Central prairie provinces		68			74			69			74
Atlantic provinces		71			74			72			74
Canadian portfolio (4)		63			68			64			68
U.S. portfolio (4)		65			63			69			63
Other international portfolio (4)		72	%		n/m			72	%		n/m

(1) LTV ratios for newly originated and acquired residential mortgages and HELOCs are calculated based on weighted average.

(2) Average LTV ratios for our uninsured GTA residential mortgages originated during the year were 62% (2019: 62%).

(3) Average LTV ratios for our uninsured GVA residential mortgages originated during the year were 58% (2019: 57%).

(4) Geographic location is based on the address of the property.

n/m Not meaningful.

CIBC 2020 ANNUAL REPORT 63

Management’s discussion and analysis

The following table provides the average LTV ratios on our total Canadian residential mortgage portfolio:

	Insured			Uninsured
October 31, 2020 (1)(2)		55	%		52	%
October 31, 2019 (1)(2)		55	%		54	%

(1) LTV ratios for residential mortgages are calculated based on weighted average. The house price estimates for October 31, 2020 and 2019 are based on the Forward Sortation Area (FSA) level indices from the Teranet – National Bank National Composite House Price Index (Teranet) as of September 30, 2020 and 2019, respectively. Teranet is an independent estimate of the rate of change in Canadian home prices.

(2) Average LTV ratio on our uninsured GTA residential mortgage portfolio was 48% (2019: 50%). Average LTV ratio on our uninsured GVA residential mortgage portfolio was 46% (2019: 47%).

The tables below summarize the remaining amortization profile of our total Canadian, U.S. and other international residential mortgages. The first table provides the remaining amortization periods based on the minimum contractual payment amounts. The second table provides the remaining amortization periods based upon current customer payment amounts, which incorporate payments other than the minimum contractual amount and/or a different frequency of payments.

Contractual payment basis

	0–5 years			>5–10 years			>10–15 years			>15–20 years			>20–25 years			>25–30 years			>30–35 years			>35 years
Canadian portfolio
October 31, 2020		–	%		1	%		2	%		7	%		54	%		36	%		–	%		–	%
October 31, 2019		–	%		1	%		2	%		6	%		49	%		42	%		–	%		–	%
U.S. portfolio
October 31, 2020		–	%		1	%		1	%		1	%		8	%		89	%		–	%		–	%
October 31, 2019		–	%		2	%		2	%		1	%		9	%		86	%		–	%		–	%
Other international portfolio
October 31, 2020		11	%		15	%		23	%		23	%		18	%		10	%		–	%		–	%
October 31, 2019		9	%		16	%		23	%		23	%		17	%		12	%		–	%		–	%

Current customer payment basis

	0–5 years			>5–10 years			>10–15 years			>15–20 years			>20–25 years			>25–30 years			>30–35 years			>35 years
Canadian portfolio
October 31, 2020		2	%		4	%		7	%		18	%		44	%		25	%		–	%		–	%
October 31, 2019		2	%		4	%		6	%		13	%		40	%		30	%		3	%		2	%
U.S. portfolio
October 31, 2020		2	%		3	%		7	%		10	%		10	%		68	%		–	%		–	%
October 31, 2019		1	%		4	%		11	%		10	%		13	%		61	%		–	%		–	%
Other international portfolio
October 31, 2020		7	%		13	%		22	%		23	%		19	%		14	%		2	%		–	%
October 31, 2019		7	%		13	%		23	%		24	%		18	%		14	%		1	%		–	%

We have two types of condominium exposures in Canada: mortgages and developer loans. Both are primarily concentrated in the Toronto and Vancouver areas. As at October 31, 2020, our Canadian condominium mortgages were $28.1 billion (2019: $25.2 billion), of which 31% (2019: 33%) were insured. Our drawn developer loans were $1.4 billion (2019: $1.3 billion), or 1.0% (2019: 1.0%) of our business and government portfolio, and our related undrawn exposure was $4.5 billion (2019: $4.0 billion). The condominium developer exposure is diversified across 107 projects.

We stress test our mortgage and HELOC portfolio to determine the potential impact of different economic events. Our stress tests can use variables such as unemployment rates, debt service ratios and housing price changes, to model potential outcomes for a given set of circumstances. The stress testing involves variables that could behave differently in certain situations. Our main tests use economic variables in a similar range to historical events when Canada experienced economic downturns. Our results show that in an economic downturn, our strong capital position should be sufficient to absorb mortgage and HELOC losses.

64 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Credit quality performance

As at October 31, 2020, total loans and acceptances after allowance for credit losses were $416.4 billion (2019: $398.1 billion). Consumer loans (comprising residential mortgages, credit cards, and personal loans, including student loans) constitute 66% (2019: 66%) of the portfolio, and business and government loans (including acceptances) constitute the remainder of the portfolio.

Consumer loans were up $9.0 billion or 3% from the prior year, primarily due to an increase in residential mortgages of $12.4 billion, offset by a decrease in personal loans and credit cards. Business and government loans (including acceptances) were up $9.2 billion or 7% from the prior year, mainly attributable to real estate and construction, financial institutions, utilities, education health and social services, as well as transportation.

Impaired loans

The following table provides details of our impaired loans and allowance for credit losses:

$ millions, as at or for the year ended October 31							2020									2019
	Business and government loans			Consumer loans			Total			Business and government loans			Consumer loans			Total
Gross impaired loans
Balance at beginning of year	$	911		$	955		$	1,866		$	621		$	859		$	1,480
Classified as impaired during the year		1,256			1,933			3,189			1,204			2,004			3,208
Transferred to performing during the year		(109	)		(580	)		(689	)		(134	)		(394	)		(528	)
Net repayments		(547	)		(543	)		(1,090	)		(239	)		(575	)		(814	)
Amounts written off		(157	)		(778	)		(935	)		(190	)		(940	)		(1,130	)
Recoveries of loans and advances previously written off		–			–			–			–			–			–
Disposals of loans (1)		–			–			–			(361	)		–			(361	)
Purchased credit-impaired loans		–			–			–			–			–			–
Foreign exchange and other		5			3			8			10			1			11
Balance at end of year	$	1,359		$	990		$	2,349		$	911		$	955		$	1,866
Allowance for credit losses – impaired loans
Balance at beginning of year	$	376		$	268		$	644		$	230		$	252		$	482
Amounts written off		(157	)		(778	)		(935	)		(190	)		(940	)		(1,130	)
Recoveries of amounts written off in previous years		9			183			192			13			181			194
Charge to income statement (2)		451			614			1,065			350			795			1,145
Interest accrued on impaired loans		(21	)		(24	)		(45	)		(18	)		(22	)		(40	)
Disposals of loans (1)		–			–			–			–			–			–
Transfers		–			–			–			–			–			–
Foreign exchange and other		(8	)		1			(7	)		(9	)		2			(7	)
Balance at end of year	$	650		$	264		$	914		$	376		$	268		$	644
Net impaired loans (3)
Balance at beginning of year	$	535		$	687		$	1,222		$	391		$	607		$	998
Net change in gross impaired		448			35			483			290			96			386
Net change in allowance		(274	)		4			(270	)		(146	)		(16	)		(162	)
Balance at end of year	$	709		$	726		$	1,435		$	535		$	687		$	1,222
Net impaired loans as a percentage of net loans and acceptances								0.34	%								0.31	%

(1) Includes loans with a par value of $116 million and ECL of $48 million that were derecognized as a result of a debt restructuring agreement completed with the Government of Barbados on October 31, 2018.

(2) Excludes provision for credit losses on impaired undrawn credit facilities and other off-balance sheet exposures.

(3) Net impaired loans are gross impaired loans net of stage 3 allowance for credit losses.

Gross impaired loans

As at October 31, 2020, gross impaired loans were $2,349 million, up $483 million from the prior year, primarily due to increases in the oil and gas, real estate and construction, and retail and wholesale sectors, as well as an increase in the Canadian residential mortgages portfolio.

60% of gross impaired loans related to Canada, of which the residential mortgages portfolio, retail and wholesale sector, personal lending portfolio and business services sector accounted for the majority.

25% of gross impaired loans related to the U.S., of which the oil and gas, real estate and construction, and business services sectors accounted for the majority.

The remaining gross impaired loans are primarily related to CIBC FirstCaribbean, of which the residential mortgages portfolio, real estate and construction sector and personal lending portfolio accounted for the majority.

See the “Supplementary annual financial information” section for additional details on the geographic distribution and industry classification of impaired loans.

Allowance for credit losses – impaired loans

Allowance for credit losses on impaired loans was $914 million, up $270 million from the prior year, primarily due to increases in the retail and wholesale, oil and gas, and business services sectors.

CIBC 2020 ANNUAL REPORT 65

Management’s discussion and analysis

Loans contractually past due but not impaired

This comprises loans where repayment of principal or payment of interest is contractually in arrears. The following table provides an aging analysis of the contractually past due loans. Most risk rated business and government loans that were contractually past due at the time relief was provided pursuant to payment deferral programs have been presented in the aging category that applied at the time deferrals were granted. Other business and government loans, credit cards, personal loans and residential mortgages that were subject to a payment deferral program have generally been presented in the aging category that applied as at March 31, 2020, which approximated the time when the majority of the deferrals were granted, except that Canadian residential mortgages and certain secured personal loans that were less than 29 days past due at that time have been treated as current. Loans that have exited a deferral program generally continue to age based on the status that was applied at the beginning of the program to the extent a payment has not been made.

$ millions, as at October 31	Less than 31 days		31 to 90 days		Over 90 days		2020 Total		2019 Total (1)
Residential mortgages	$	3,358	$	1,152	$	–	$	4,510	$	3,840
Personal		608		222		–		830		1,027
Credit card		485		189		132		806		838
Business and government		1,854		281		–		2,135		1,081
	$	6,305	$	1,844	$	132	$	8,281	$	6,786

(1) Certain prior year amounts related to loans contractually past due but not impaired in CIBC FirstCaribbean were restated.

During the year, gross interest income that would have been recorded if impaired loans were treated as current was $113 million (2019: $99 million), of which $69 million (2019: $46 million) was in Canada and $44 million (2019: $53 million) was outside Canada. During the year, interest recognized on impaired loans was $45 million (2019: $40 million), and interest recognized on loans before being classified as impaired was $67 million (2019: $58 million), of which $43 million (2019: $43 million) was in Canada and $24 million (2019: $15 million) was outside Canada.

Exposure to certain countries and regions

Europe

The following table provides our exposure to European countries, both within and outside the Eurozone.

Our direct exposures presented in the tables below comprise (A) funded – on-balance sheet loans (stated at amortized cost net of stage 3 allowance for credit losses, if any), deposits with banks (stated at amortized cost net of stage 3 allowance for credit losses, if any) and securities (stated at carrying value); (B) unfunded – unutilized credit commitments, letters of credit, and guarantees (stated at notional amount net of stage 3 allowance for credit losses, if any); and (C) derivative MTM receivables (stated at fair value) and repo-style transactions (stated at fair value).

Of our total direct exposures to Europe, approximately 47% (2019: 45%) is to entities in countries with Aaa/AAA ratings from at least one of Moody’s or S&P.

The following table provides a summary of our positions in this business:

Direct exposures
	Funded								Unfunded						Derivative MTM receivables and repo-style transactions (1)
$ millions, as at October 31, 2020	Corporate		Sovereign		Banks		Total funded (A)		Corporate		Banks		Total unfunded (B)		Corporate		Sovereign		Banks		Net exposure (C)		Total direct exposure (A)+(B)+(C)
Austria	$	–	$	593	$	315	$	908	$	–	$	–	$	–	$	–	$	–	$	2	$	2	$	910
Finland		56		–		447		503		122		10		132		–		–		16		16		651
France		45		44		147		236		266		56		322		–		2		7		9		567
Germany		407		1,257		602		2,266		190		97		287		49		6		31		86		2,639
Greece		1		–		–		1		–		–		–		–		–		–		–		1
Ireland		200		–		136		336		102		40		142		13		–		112		125		603
Luxembourg		124		–		1,631		1,755		100		90		190		12		–		158		170		2,115
Netherlands		384		446		146		976		256		238		494		42		–		29		71		1,541
Norway		237		413		53		703		610		–		610		–		1		–		1		1,314
Spain		1		–		6		7		–		24		24		–		–		1		1		32
Sweden		344		807		191		1,342		181		–		181		24		–		5		29		1,552
Switzerland		206		–		15		221		137		–		137		5		–		102		107		465
United Kingdom		2,206		31		1,293		3,530		3,086		312		3,398		642		10		363		1,015		7,943
Other European countries		64		7		175		246		13		101		114		1		73		9		83		443
Total Europe	$	4,275	$	3,598	$	5,157	$	13,030	$	5,063	$	968	$	6,031	$	788	$	92	$	835	$	1,715	$	20,776
October 31, 2019	$	3,033	$	3,781	$	5,320	$	12,134	$	5,235	$	580	$	5,815	$	789	$	116	$	462	$	1,367	$	19,316

(1) The amounts shown are net of CVA and collateral. Collateral on derivative MTM receivables was $1.8 billion (October 31, 2019: $1.0 billion), collateral on repo-style transactions was $30.3 billion (October 31, 2019: $20.5 billion), and both are comprised of cash and investment grade debt securities.

We have $639 million (2019: $589 million) of indirect exposure to European entities, as we hold debt or equity securities issued by European entities as collateral for derivative transactions and securities borrowing and lending activity from counterparties that are not in Europe.

66 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Selected exposures in certain activities

In response to the recommendations of the Financial Stability Board, this section provides information on a selected activity within our continuing and exited businesses that may be of particular interest to investors based on their risk characteristics and the current market environment.

U.S. real estate lending

In our U.S. Commercial Banking and Wealth Management SBU, we operate a full-service real estate platform. Once construction is complete, and the property is income producing, we may occasionally offer fixed-rate financing within a permanent financing program (typically with average terms of up to 10 years). This portfolio of permanent financing exposures, which is a small subset of our total U.S. real estate lending portfolio, serves as a warehouse for inclusion in future commercial mortgage-backed securities (CMBS) programs. We retain no exposure to those CMBS programs. As at October 31, 2020, the portfolio of permanent financing exposures was $276 million (2019: $114 million).

Settlement risk

Settlement risk is the risk that during an agreed concurrent exchange of currency or principal payments, the counterparty will fail to make its payment to CIBC. This risk can arise in general trading activities and from payment and settlement system participation.

Many global settlement systems offer significant risk reduction benefits through complex risk mitigation frameworks. Bilateral payment netting agreements may be put in place to mitigate risk by reducing the aggregate settlement amount between counterparties. Further, we participate in several North American payment and settlement systems, including a global foreign exchange multilateral netting system. We also use financial intermediaries to access some payment and settlement systems, and for certain trades, we may utilize an established clearing house to minimize settlement risk.

Transactions settled outside of payment and settlement systems or clearing houses require approval of credit facilities for counterparties, either as pre-approved settlement risk limits or payment-versus-payment arrangements.

Securitization activities

We engage in three types of securitization activities: we securitize assets that we originate, we securitize assets originated by third parties and we engage in trading activities related to securitized products.

We securitize assets that we originate principally as a funding mechanism. The credit risk on the underlying assets in these transactions is transferred to the structured entity, with CIBC retaining first loss exposure and other investors exposed to the remaining credit risk.

Securitization activities relating to assets originated by third parties can include the securitization of those assets through ABCP conduits (or similar programs) that we sponsor (includes both consolidated and non-consolidated SEs; see the “Off-balance sheet arrangements” section and Note 7 to our consolidated financial statements for additional details), or through direct exposure to a client-sponsored special purpose vehicle. Risks associated with securitization exposures to client-originated assets are mitigated through the transaction structure, which includes credit enhancements. For the transactions where we retain credit risk on the exposures that we hold, we earn interest income on these holdings. For the transactions in the ABCP conduits, we are also exposed to liquidity risk associated with the potential inability to roll over maturing ABCP in the market. We earn fee income for the services that we provide to these ABCP conduits.

We are also involved in the trading of ABS and ABCP to earn income in our role as underwriter and market maker. We are exposed to credit and market risk on the securities that we hold in inventory on a temporary basis until such securities are sold to an investor.

Capital requirements for exposures arising from securitization activities are determined using one of the following approaches: SEC-IRBA, SEC-ERBA, SEC-IAA, or SEC-SA.

The SEC-IAA process relies on internal risk ratings and is utilized for securitization exposures relating to ABCP conduits when external ratings are not available for the securitization exposures but the ABCP itself is externally rated. The internal assessment process involves an evaluation of a number of factors, including, but not limited to, pool characteristics, including asset eligibility criteria and concentration limits, transaction triggers, the asset seller’s risk profile, servicing capabilities, and cash flow stress testing. Cash flows are stress-tested based on historical asset performance using our internal risk rating models by asset type. These models are subject to our model risk mitigation policies and are independently reviewed by the Model Validation team in Risk Management. The stress test factors used to determine the transaction risk profile and required credit enhancement levels are tailored for each asset type and transaction based on the assessment of the factors described above and are done in accordance with our internal risk rating methodologies and guidelines. Internal risk ratings are mapped to equivalent external ratings of external credit assessment institutions (DBRS, Fitch, Moody’s and S&P) and are used to determine the appropriate risk weights for capital purposes. Securitization exposures and underlying asset performance are monitored on an ongoing basis. Risk Management serves as a second line of defence providing independent oversight regarding risk rating assumptions and adjudicating on the assignment of the internal risk ratings. SEC-IAA applies to various asset types in our ABCP conduits including, but not limited to, auto loans and leases, consumer loans, credit cards, dealer floorplan receivables, equipment loans and leases, fleet lease receivables, franchise loans, residential mortgages, and trade receivables.

Internal risk ratings determined for securitization exposures are also used in the estimation of ECL as required under IFRS 9, determining economic capital, and for setting risk limits.

CIBC 2020 ANNUAL REPORT 67

Management’s discussion and analysis

Market risk

Market risk is the risk of economic or financial loss in our trading and non-trading portfolios from adverse changes in underlying market factors, including interest rates, foreign exchange rates, equity market prices, commodity prices, credit spreads, and customer behaviour for retail products. Market risk arises in CIBC’s trading and treasury activities, and encompasses all market-related positioning and market-making activity.

The trading book consists of positions in financial instruments and commodities held to meet the near-term needs of our clients.

The non-trading book consists of positions in various currencies that are related to asset/liability management (ALM) and investment activities.

Governance and management

Market risk is managed through the three lines of defence model. The first line of defence comprises frontline businesses and governance groups that are responsible for managing the market risk associated with their activities.

The second line of defence is Risk Management, which has a dedicated market risk manager for each trading business, supplemented by regional risk managers located in all of our major trading centres, facilitating comprehensive risk coverage, including the measurement, monitoring and control of market risk.

Internal audit is the third line of defence providing reasonable assurance to senior management and the Audit Committee of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

Senior management reports material risk matters to the GRC and RMC at least quarterly, including material transactions, limit compliance, and portfolio trends.

Policies

We have comprehensive policies for the management of market risk. These policies are related to the identification and measurement of various types of market risk, their inclusion in the trading book, and to the establishment of limits within which we monitor, manage and report our overall exposures. Our policies also outline the requirements for the construction of valuation models, model review and validation, independent checking of the valuation of positions, the establishment of valuation adjustments, and alignment with accounting policies including MTM and mark-to-model methodologies.

Market risk limits

We have risk tolerance levels, expressed in terms of statistically based VaR measures, potential stress losses, and notional or other limits as appropriate. We use a multi-tiered approach to set limits on the amounts of risk that we can assume in our trading and non-trading activities, as follows:

• Board limits control consolidated market risk;

• Management limits control market risk for CIBC overall and are lower than the Board limits to allow for a buffer in the event of extreme market moves and/or extraordinary client needs;

• Tier 2 limits control market risk at the business unit level; and

• Tier 3 limits control market risk at the sub-business unit or desk level.

Management limits are established by the CRO, consistent with the risk appetite statement approved by the Board. Tier 2 and Tier 3 limits are approved at levels of management commensurate with risk assumed.

Process and control

Market risk exposures are monitored daily against approved risk limits, and processes are in place to monitor that only authorized activities are undertaken. We generate daily risk and limit-monitoring reports, based on the previous day’s positions. Summary market risk and limit compliance reports are produced and reviewed periodically with the GRC and RMC.

Risk measurement

We use the following measures for market risk:

• VaR enables the meaningful comparison of the risks in different businesses and asset classes. VaR is determined by the combined modelling of VaR for each of interest rate, credit spread, equity, foreign exchange, commodity, and debt specific risks, along with the portfolio effect arising from the interrelationship of the different risks (diversification effect):

• Interest rate risk measures the impact of changes in interest rates and volatilities on cash instruments and derivatives.

• Credit spread risk measures the impact of changes in credit spreads of provincial, municipal and agency bonds, sovereign bonds, corporate bonds, securitized products, and credit derivatives such as credit default swaps.

• Equity risk measures the impact of changes in equity prices and volatilities.

• Foreign exchange risk measures the impact of changes in foreign exchange rates and volatilities.

• Commodity risk measures the impact of changes in commodity prices and volatilities, including the basis between related commodities.

• Debt specific risk measures the impact of changes in the volatility of the yield of a debt instrument as compared with the volatility of the yield of a representative bond index.

• Diversification effect reflects the risk reduction achieved across various financial instrument types, counterparties, currencies and regions. The extent of diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time.

• Price sensitivity measures the change in value of a portfolio to a small change in a given underlying parameter, so that component risks may be examined in isolation, and the portfolio rebalanced accordingly to achieve a desired exposure.

• Stressed VaR enables the meaningful comparison of the risks in different businesses and asset classes under stressful conditions. Changes to rates, prices, volatilities, and spreads over a 10-day horizon from a stressful historical period are applied to current positions and determine stressed VaR.

• IRC measures the required capital due to credit migration and default risk for debt securities held in the trading portfolios.

• Back-testing validates the effectiveness of risk measurement through analysis of observed and theoretical profit and loss outcomes.

• Stress testing and scenario analysis provide insight into portfolio behaviour under extreme circumstances.

68 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

The following table provides balances on the consolidated balance sheet that are subject to market risk. Certain differences between accounting and risk classifications are detailed in the footnotes below:

$ millions, as at October 31										2020											2019
				Subject to market risk (1)											Subject to market risk
Consolidated balance sheet				Trading			Non- trading			Not subject to market risk		Consolidated balance sheet			Trading			Non- trading			Not subject to market risk		Non-traded risk primary risk sensitivity
Cash and non-interest-bearing deposits with banks	$	43,531		$	–		$	2,445		$	41,086	$	3,840		$	–		$	1,711		$	2,129		Foreign exchange
Interest-bearing deposits with banks		18,987			75			18,912			–		13,519			641			12,878			–		Interest rate
Securities		149,046			45,825			103,221			–		121,310			42,403			78,907			–		Equity, interest rate
Cash collateral on securities borrowed		8,547			–			8,547			–		3,664			–			3,664			–		Interest rate
Securities purchased under resale agreements		65,595			–			65,595			–		56,111			–			56,111			–		Interest rate
Loans
Residential mortgages		221,165			–			221,165			–		208,652			–			208,652			–		Interest rate
Personal		42,222			–			42,222			–		43,651			–			43,651			–		Interest rate
Credit card		11,389			–			11,389			–		12,755			–			12,755			–		Interest rate
Business and government		135,546			22,643	(2)		112,903			–		125,798			20,226	(2)		105,572			–		Interest rate
Allowance for credit losses		(3,540	)		–			(3,540	)		–		(1,915	)		–			(1,915	)		–		Interest rate
Derivative instruments		32,730			31,244			1,486			–		23,895			22,610			1,285			–		Interest rate,
																								foreign exchange
Customers’ liability under acceptances		9,606			–			9,606			–		9,167			–			9,167			–		Interest rate
Other assets		34,727			3,364			20,613			10,750		31,157			1,957			17,985			11,215		Interest rate, equity,
																								foreign exchange
	$	769,551		$	103,151		$	614,564		$	51,836	$	651,604		$	87,837		$	550,423		$	13,344
Deposits	$	570,740		$	484	(3)	$	510,788		$	59,468	$	485,712		$	44	(3)	$	437,634		$	48,034		Interest rate
Obligations related to securities sold short		15,963			13,795			2,168			–		15,635			14,721			914			–		Interest rate
Cash collateral on securities lent		1,824			–			1,824			–		1,822			–			1,822			–		Interest rate
Obligations related to securities sold under repurchase agreements		71,653			–			71,653			–		51,801			–			51,801			–		Interest rate
Derivative instruments		30,508			29,436			1,072			–		25,113			23,679			1,434			–		Interest rate,
																								foreign exchange
Acceptances		9,649			–			9,649			–		9,188			–			9,188			–		Interest rate
Other liabilities		22,167			2,386			10,926			8,855		19,069			2,096			8,111			8,862		Interest rate
Subordinated indebtedness		5,712			–			5,712			–		4,684			–			4,684			–		Interest rate
	$	728,216		$	46,101		$	613,792		$	68,323	$	613,024		$	40,540		$	515,588		$	56,896

(1) Fair value adjustments are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these fair value adjustments also excluded beginning from the second quarter of 2020 (see the “Continuous enhancement to regulatory capital requirements – Regulatory developments arising from the COVID-19 pandemic” section for further details).

(2) Excludes $291 million (2019: $115 million) of loans that are warehoused for future securitization purposes. These are considered non-trading for market risk purposes.

(3) Comprises FVO deposits which are considered trading for market risk purposes.

Trading activities

We hold positions in traded financial contracts to meet client investment and risk management needs. Trading revenue (net interest income or non-interest income) is generated from these transactions. Trading instruments are recorded at fair value and include debt and equity securities, as well as interest rate, foreign exchange, equity, commodity, and credit derivative products.

Value-at-risk

Our VaR methodology is a statistical technique that measures the potential overnight loss at a 99% confidence level. We use a full revaluation historical simulation methodology to compute VaR, stressed VaR and other risk measures.

Although a valuable guide to risk, VaR should always be viewed in the context of its limitations. For example:

• The use of historical data for estimating future events will not encompass all potential events, particularly those that are extreme in nature.

• The use of a one-day holding period assumes that all positions can be liquidated, or the risks offset in one day. This may not fully reflect the market risk arising at times of severe illiquidity, when a one-day period may be insufficient to liquidate or hedge all positions fully.

• The use of a 99% confidence level does not take into account losses that might occur beyond this level of confidence.

• VaR is calculated on the basis of exposures outstanding at the close of business and assumes no management action to mitigate losses.

The VaR table below presents market risks by type of risk and in aggregate. The risks are interrelated and the diversification effect reflects the reduction of risk due to portfolio effects among the trading positions. Our trading risk exposures to interest rates and credit spreads arise from activities in the global debt and derivative markets, particularly from transactions in the Canadian, U.S., and European markets. The primary instruments are government and corporate debt, and interest rate derivatives. The majority of the trading exposure to foreign exchange risk arises from transactions involving the Canadian dollar, U.S. dollar, Euro, pound sterling, Australian dollar, Chinese yuan, and Japanese yen, whereas the primary risks of losses in equities are in the U.S., Canadian, and European markets. Trading exposure to commodities arises primarily from transactions involving North American natural gas, crude oil products, and precious metals.

CIBC 2020 ANNUAL REPORT 69

Management’s discussion and analysis

VaR by risk type – trading portfolio

$ millions, as at or for the year ended October 31								2020										2019
	High		Low		As at			Average			High		Low		As at			Average
Interest rate risk	$	10.6	$	3.5	$	7.3		$	6.1		$	10.1	$	2.8	$	8.5		$	5.2
Credit spread risk		12.2		1.3		7.0			5.4			2.0		0.9		1.5			1.3
Equity risk		13.5		1.5		3.7			3.8			10.4		1.7		3.4			3.1
Foreign exchange risk		7.0		0.4		2.0			1.8			4.3		0.6		2.9			2.1
Commodity risk		7.9		1.1		2.4			3.1			5.0		1.1		3.9			2.4
Debt specific risk		3.9		1.5		3.0			2.5			2.4		1.3		1.9			1.7
Diversification effect (1)		n/m		n/m		(12.1	)		(14.2	)		n/m		n/m		(15.3	)		(10.1	)
Total VaR (one-day measure)	$	22.0	$	3.8	$	13.3		$	8.5		$	10.8	$	3.6	$	6.8		$	5.7

(1) Total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from a portfolio diversification effect.

n/m Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Average total VaR for the year ended October 31, 2020 was up $2.8 million from the prior year, driven primarily by increases in credit spread, interest rate, debt specific, commodity and equity risks due to the larger market shocks arising from the COVID-19 pandemic, with peak exposures occurring during March and April 2020.

Stressed VaR

The stressed VaR measure is intended to replicate the VaR calculation that would be generated for our current portfolio if the values of the relevant market risk factors were sourced from a period of stressed market conditions. The model inputs are calibrated to historical data from a continuous 12-month period of significant financial stress relevant to our current portfolio since December 2006. Our current stressed VaR period is from September 2, 2008 to August 31, 2009.

Stressed VaR by risk type – trading portfolio

$ millions, as at or for the year ended October 31								2020										2019
	High		Low		As at			Average			High		Low		As at			Average
Interest rate risk	$	41.0	$	8.4	$	33.7		$	20.2		$	37.0	$	8.9	$	26.4		$	19.4
Credit spread risk		22.6		6.1		7.1			11.5			18.1		7.9		11.1			12.1
Equity risk		26.3		–		6.9			4.2			20.2		1.4		2.2			3.9
Foreign exchange risk		22.0		1.0		9.1			7.8			29.5		0.6		6.5			10.4
Commodity risk		10.9		1.0		3.0			4.5			11.9		1.3		11.9			4.8
Debt specific risk		6.5		1.6		6.1			4.6			7.3		4.1		4.9			5.5
Diversification effect (1)		n/m		n/m		(35.7	)		(33.9	)		n/m		n/m		(42.0	)		(40.9	)
Stressed total VaR (one-day measure)	$	34.1	$	7.4	$	30.2		$	18.9		$	47.1	$	3.5	$	21.0		$	15.2

(1) Stressed total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from a portfolio diversification effect.

n/m Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.

Average stressed total VaR for the year ended October 31, 2020 was up $3.7 million from the prior year. The increase was driven by increases in interest rate and equity risks and reduced diversification benefit, partially offset by decreases in foreign exchange risk.

Incremental risk charge

IRC is a measure of default and migration risk for debt securities held in the trading portfolios. Our IRC methodology is a statistical technique that measures the risk of issuer migration and default over a period of one year by simulating changes in issuer credit rating. Validation of the model included testing of the liquidity horizon, recovery rate, correlation, and PD and migration.

IRC – trading portfolio

$ millions, as at or for the year ended October 31							2020								2019
	High		Low		As at		Average		High		Low		As at		Average
Default risk	$	205.6	$	80.4	$	102.6	$	126.7	$	268.8	$	124.0	$	132.1	$	180.2
Migration risk		104.9		49.0		72.7		71.2		111.2		45.5		67.7		72.2
IRC (one-year measure) (1)	$	279.5	$	141.8	$	175.3	$	197.9	$	371.4	$	186.5	$	199.8	$	252.4

(1) High and low IRC are not equal to the sum of the constituent parts, because the highs and lows of the constituent parts may occur on different days.

Average IRC for the year ended October 31, 2020 was down $54.5 million from the prior year due to a reduction in trading book bond inventory and an increase in diversification effect within our fixed income portfolio.

Back-testing

To determine the reliability of the trading VaR model, outcomes are monitored regularly through a back-testing process to test the validity of the assumptions and the parameters used in the trading VaR calculation. The back-testing process includes calculating a hypothetical or static profit and loss and comparing that result with calculated VaR. Static profit and loss represents the change in value of the prior day’s closing portfolio due to each day’s price movements, on the assumption that the portfolio remained unchanged. The back-testing process is conducted on a daily basis at the consolidated CIBC level as well as business lines and individual portfolios.

Static profit and loss in excess of the one-day VaR are investigated. The back-testing process, including the investigation of results, is performed by risk professionals who are independent of those responsible for development of the model.

Based on our back-testing results, we are able to ensure that our VaR model continues to appropriately measure risk.

During the year, there were six negative back-testing breaches of the total VaR measure at the consolidated CIBC level, driven by the extreme volatility observed in the second quarter of 2020 due to the COVID-19 pandemic and its impact on financial markets.

70 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Trading revenue

Trading revenue (TEB) comprises both trading net interest income and non-interest income and excludes underwriting fees and commissions. Trading revenue (TEB) in the charts below excludes certain exited portfolios.

During the year, trading revenue (TEB) was positive for 94.5% of the days. The largest gain of $47.7 million occurred on March 9, 2020, spread across multiple lines of business. The largest loss of $88.2 million occurred on March 24, 2020. It was mostly attributable to our precious metals trading business. Average daily trading revenue (TEB) was $6.4 million during the year, and the average daily TEB was $0.7 million. The large increase in VaR in March and April 2020 was a result of market volatility due to the COVID-19 pandemic.

Frequency distribution of daily 2020 trading revenue (TEB)⁽¹⁾

The histogram below presents the frequency distribution of daily trading revenue (TEB) for 2020.

Trading revenue (TEB) ⁽¹⁾ versus VaR ⁽²⁾

The trading revenue (TEB) versus VaR graph below shows the current year’s daily trading revenue (TEB) against the close of business day VaR measures.

(1) Excludes certain month-end transfer pricing and other miscellaneous adjustments.

(2) Fair value adjustments are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these fair value adjustments also excluded, beginning from the second quarter of 2020 (see the “Continuous enhancement to regulatory capital requirements – Regulatory developments arising from the COVID-19 pandemic” section for further details).

Stress testing and scenario analysis

Stress testing and scenario analysis is designed to add insight to possible outcomes of abnormal market conditions, and to highlight possible risk concentrations.

We measure the effect on portfolio values under a wide range of extreme moves in market risk factors. Our approach simulates the impact on earnings of extreme market events over a one-month time horizon, assuming that no risk-mitigating actions are taken during this period to reflect the reduced market liquidity that typically accompanies such events.

Scenarios are developed using historical market data during periods of market disruption, or are based on hypothetical impacts of economic events, political events, and natural disasters as predicted by economists, business leaders, and risk managers.

Among the historical scenarios are the 1994 period of U.S. Federal Reserve tightening, and the market events following the 2008 market crisis. The hypothetical scenarios include potential market crises originating in North America, Europe and Asia. In January 2020, the oil shock stress scenario was updated to reflect the escalation in the ongoing tensions between the U.S. and Iran. In February 2020, the Brexit “remains” scenario was discontinued. This scenario had been introduced in October 2019 to anticipate the possibility of the U.K. remaining in the European Union following a potential second Brexit referendum. However, the ratification of the U.K. withdrawal agreement by the European Parliament on January 29, 2020 had made this scenario obsolete. In August 2020, a pandemic first wave scenario was incorporated into our suite of stress scenarios. This scenario was modelled off the most substantial stress impacts from the first wave of the COVID-19 pandemic that resulted in severe disruption to financial markets between February 24 and March 23, 2020.

CIBC 2020 ANNUAL REPORT 71

Management’s discussion and analysis

Below are examples of the core stress test scenarios which are currently run on a daily basis to add insight into potential exposures under stress:

•   Subprime crisis traded	•   Canadian market crisis	•   Quantitative easing tapering and asset price correction
•   U.S. Federal Reserve tightening – 1994	•   U.S. protectionism
•   U.S. sovereign debt default and downgrade	•   Eurozone bank crisis	•   Oil crisis
•   Brexit “leaves” – hard Brexit	•   Pandemic first wave	•   Chinese hard landing

Stress testing scenarios are periodically reviewed and amended as necessary to ensure they remain relevant. Under stress limit monitoring, limits are placed on the maximum acceptable loss based on risk appetite in aggregate, at the detailed portfolio level, and for specific asset classes.

Non-exchange traded commodity derivatives

In the normal course of business, we trade non-exchange traded commodity derivative contracts. We control and manage our non-exchange traded commodity derivatives risk through the VaR and stress testing methodologies described above. We use modelling techniques or other valuation methodologies to determine the fair value of these contracts.

The following table provides the fair value, based upon maturity of non-exchange traded commodity contracts:

$ millions, as at October 31, 2020	Positive		Negative		Net
Maturity less than 1 year	$	979	$	1,413	$	(434	)
Maturity 1–3 years		1,343		680		663
Maturity 4–5 years		472		44		428
Maturity in excess of 5 years		96		35		61
	$	2,890	$	2,172	$	718

Non-trading activities

Structural Interest Rate Risk (SIRR)

SIRR primarily consists of the risk arising due to mismatches in assets and liabilities, which do not arise from trading and trading-related businesses. The objective of SIRR management is to lock in product margins and deliver stable and predictable net interest income over time, while managing the risk to the economic value of our assets arising from changes in interest rates.

SIRR results from differences in the maturities or repricing dates of assets and liabilities, both on- and off-balance sheet, as well as from embedded optionality in retail products, and other product features that could affect the expected timing of cash flows, such as options to pre-pay loans or redeem term deposits prior to contractual maturity. A number of assumptions affecting cash flows, product re-pricing and the administration of rates underlie the models used to measure SIRR. The key assumptions pertain to the expected funding profile of mortgage rate commitments, fixed rate loan prepayment behaviour, term deposit redemption behaviour, the treatment of non-maturity deposits and equity. All assumptions are derived empirically based on historical client behaviour, balance sheet composition and product pricing with the consideration of possible forward-looking changes. All models and assumptions used to measure SIRR are subject to independent oversight by Risk Management. A variety of cash instruments and derivatives, primarily interest rate swaps, are used to manage these risks.

The Board has oversight of the management of SIRR, approves the risk appetite and the associated SIRR risk limits. GALCO and its subcommittee, the Asset Liability Management Committee, regularly review structural market risk positions and provide senior management oversight.

In addition to Board-approved limits on earnings and economic value exposure, more granular management limits are in place to guide day-to-day management of this risk. The ALM group within Treasury is responsible for the ongoing management of structural market risk across the enterprise, with independent oversight and compliance with SIRR policy provided by Risk Management.

ALM activities are designed to manage the effects of potential interest rate movements while balancing the cost of any hedging activities on the current net revenue. To monitor and control SIRR, two primary metrics, net interest income risk and economic value of equity (EVE) risk, are assessed, in addition to stress testing, gap analysis and other market risk metrics. The net interest income sensitivity is a measure of the impact of potential changes in interest rates on the projected 12-month pre-tax net interest income of the bank’s portfolio of assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements with interest rates floored at zero. The EVE sensitivity is a measure of the impact of potential changes in interest rates on the market value of the bank’s assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements with interest rates floored at zero.

The following table shows the potential before-tax impact of an immediate and sustained 100 basis points increase and 25 basis points decrease in interest rates on projected 12-month net interest income and EVE for our structural balance sheet, assuming no subsequent hedging. While an immediate and sustained shock of 100 basis points is typically applied, and notwithstanding the possibility of negative rates, due to the low interest rate environment in both Canada and the U.S. at the end of the quarter, an immediate downward shock of 25 basis points was applied while maintaining a floor on market and client interest rates at zero. Prior period amounts have been revised to reflect the impact of a 25 basis point decrease in all interest rates.

Structural interest rate sensitivity – measures

$ millions (pre-tax), as at October 31				2020						2019
	CAD (1)			USD			CAD (1)			USD
100 basis point increase in interest rates
Increase (decrease) in net interest income	$	317		$	92		$	192		$	24
Increase (decrease) in EVE		(556	)		(348	)		(511	)		(307	)
25 basis point decrease in interest rates
Increase (decrease) in net interest income		(119	)		(42	)		(47	)		(7	)
Increase (decrease) in EVE		57			49			104			50

(1) Includes CAD and other currency exposures.

72 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Foreign exchange risk

Structural foreign exchange risk primarily consists of the risk inherent in: (a) net investments in foreign operations due to changes in foreign exchange rates; and (b) foreign currency denominated RWA and foreign currency denominated capital deductions. This risk, predominantly in U.S. dollars, is managed using derivative hedges and by funding the investments in matching currencies. We actively manage this position to ensure that the potential impact on our capital ratios is within an acceptable tolerance in accordance with the policy approved by the CRO, while giving consideration to the impact on earnings and shareholders’ equity. Structural foreign exchange risk is managed by Treasury under the guidance of GALCO with monitoring and oversight by Capital Markets Risk Management.

A 1% appreciation of the Canadian dollar would reduce our shareholders’ equity as at October 31, 2020 by approximately $150 million (2019: $153 million) on an after-tax basis.

Our non-functional currency denominated earnings are converted into the functional currencies through spot or forward foreign exchange transactions. Typically, there is no significant impact of exchange rate fluctuations on our consolidated statement of income.

We hedge certain foreign currency contractual expenses using derivatives which are accounted for as cash flow hedges. The net change in fair value of these hedging derivatives included in AOCI amounted to nil (2019: $3 million) on an after-tax basis.

Derivatives held for ALM purposes

Where derivatives are held for ALM purposes, and when transactions meet the criteria specified under IFRS, we apply hedge accounting for the risks being hedged, as discussed in Notes 13 and 14 to the consolidated financial statements. Derivative hedges that do not qualify for hedge accounting treatment are referred to as economic hedges and are recorded at fair value on the consolidated balance sheet with changes in fair value recognized in the consolidated statement of income.

Economic hedges for other than FVO financial instruments may lead to income volatility because the hedged items are recorded either on a cost or amortized cost basis or recorded at fair value on the consolidated balance sheet with changes in fair value recognized through OCI. This income volatility may not be representative of the overall risk.

Equity risk

Non-trading equity risk arises primarily in our strategy and corporate development activities and our merchant banking activities. The investments comprise public and private equities, investments in limited partnerships, and equity-accounted investments.

The following table provides the amortized cost and fair values of our non-trading equities:

$ millions, as at October 31		Cost		Fair value
2020	Equity securities designated at FVOCI	$	576	$	585
	Equity-accounted investments in associates (1)		71		93
		$	647	$	678
2019	Equity securities designated at FVOCI	$	533	$	602
	Equity-accounted investments in associates (1)		57		85
		$	590	$	687

(1) Excludes our equity-accounted joint ventures. See Note 26 to the consolidated financial statements for further details.

Pension risk

A number of defined benefit pension plans are operated globally. As at October 31, 2020, our consolidated defined benefit pension plans were in a net asset position of $185 million, compared with $116 million as at October 31, 2019. The change in the net asset position of our pension plans is disclosed in Note 19 to the consolidated financial statements.

Our Canadian pension plans represent approximately 92% of our pension plans, the most significant of which is our principal Canadian pension plan (the CIBC Pension Plan). The estimated impact on our Canadian defined benefit obligations of a 100 basis point change in the discount rate is disclosed in Note 19 to the consolidated financial statements.

The MRCC is responsible for sound governance and oversight, and delegates management authority to the Pension Benefits Management Committee (PBMC). An appropriate investment strategy for the CIBC Pension Plan is set through a statement of investment objectives, policies and procedures.

Within Treasury, the Pension Investment Management department is responsible for developing and implementing custom investment strategies to sustainably deliver pension benefits within manageable risk tolerances and capital impacts. Key risks include actuarial risks (such as longevity risk), interest rate risk, currency risk, market (investment) risk, and health-care cost inflation risks.

The CIBC Pension Plan principally manages these risk exposures through its liability-driven investment strategy, which includes the use of derivatives for risk management and rebalancing purposes, as well as the ability to enhance returns. The use of derivatives within the CIBC Pension Plan is governed by the plan’s derivatives policy that was approved by the PBMC. The fair value of derivatives held in the CIBC Pension Plan is disclosed in Note 19 to the consolidated financial statements.

A principal risk for the CIBC Pension Plan is interest rate risk which it mitigates through a combination of physical bonds and a bond overlay program funded through the use of repurchase agreements. The plan also operates a currency overlay strategy, which may use forwards or similar instruments, to manage and mitigate its currency risk. Investment risk is mitigated through a multi-asset portfolio construction process that diversifies across a variety of market risk drivers.

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Management’s discussion and analysis

Liquidity risk

Liquidity risk is the risk of having insufficient cash or its equivalent in a timely and cost-effective manner to meet financial obligations as they come due. Common sources of liquidity risk inherent in banking services include unanticipated withdrawals of deposits, the inability to replace maturing debt, credit and liquidity commitments, and additional pledging or other collateral requirements.

CIBC’s approach to liquidity risk management supports our business strategy, aligns with our risk appetite and adheres to regulatory expectations.

Our management strategies, objectives and practices are regularly reviewed to align with changes to the liquidity environment, including regulatory, business and/or market developments. Liquidity risk remains within CIBC’s risk appetite.

Governance and management

We manage liquidity risk in a manner that enables us to withstand a liquidity stress event without an adverse impact on the viability of our operations. Actual and anticipated cash flows generated from on- and off-balance sheet exposures are routinely measured and monitored to ensure compliance with established limits. CIBC incorporates stress testing into its management and measurement of liquidity risk. Stress test results assist with the development of our liquidity assumptions, identification of potential constraints to funding planning, and contribute to the design of CIBC’s contingency funding plan.

Liquidity risk is managed using the three lines of defence model, and the ongoing management of liquidity risk is the responsibility of the Treasurer, supported by guidance from GALCO.

The Treasurer is responsible for managing the activities and processes required for measurement, reporting and monitoring of CIBC’s liquidity risk position – this is the first line of defence.

The Liquidity and Non-Trading Market Risk group within Capital Markets Risk Management provides independent oversight of the measurement, monitoring and control of liquidity risk, as the second line of defence.

Internal audit is the third line of defence providing reasonable assurance to senior management and the Audit Committee of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

The GALCO governs CIBC’s liquidity risk management, ensuring the liquidity risk management methodologies, assumptions, and key metrics such as the Liquidity Horizon, are regularly reviewed and consider CIBC’s business activities. The Liquidity Risk Management Committee, a subcommittee of GALCO, is responsible for ensuring that CIBC’s liquidity risk profile is comprehensively measured and managed in alignment with CIBC’s strategic direction, risk appetite and regulatory requirements.

The RMC approves CIBC’s liquidity risk management policy, and recommends liquidity risk tolerance to the Board through the risk appetite statement.

Policies

Our liquidity risk management policy requires a sufficient amount of available unencumbered liquid assets and diversified funding sources to meet anticipated liquidity needs in both normal and stressed conditions. CIBC branches and subsidiaries possessing unique liquidity characteristics, due to distinct businesses or jurisdictional requirements, maintain local liquidity practices in alignment with CIBC’s liquidity risk management policy.

CIBC’s pledging policy sets out consolidated limits for the pledging of CIBC’s assets across a broad range of financial activities. These limits ensure unencumbered liquid assets are available for liquidity purposes.

We maintain a detailed global contingency funding plan that sets out the strategies for addressing liquidity shortfalls in emergency and unexpected situations, and delineates the requirements necessary to manage a range of stress conditions, establishes lines of responsibility, articulates implementation, and defines escalation procedures, and is aligned to CIBC’s risk appetite. In order to reflect CIBC’s organizational complexity, regional and subsidiary contingency funding plans are maintained to respond to liquidity stresses unique to the jurisdictions within which CIBC operates, and support CIBC as an enterprise.

Risk measurement

Our liquidity risk tolerance is defined by our risk appetite statement, which is approved annually by the Board, and forms the basis for the delegation of liquidity risk authority to senior management. We use both regulatory-driven and internally developed liquidity risk metrics to measure our liquidity risk exposure. Internally, our liquidity position is measured using the Liquidity Horizon, which combines contractual and behavioural cash flows to measure the future point in time when projected cumulative cash outflows exceed cash inflows under a combined CIBC-specific and market-wide stress scenario. Expected and potential anticipated inflows and outflows of funds generated from on- and off-balance sheet exposures are measured and monitored on a daily basis to ensure compliance with established limits. These cash flows incorporate both contractual and behavioural on- and off-balance sheet cash flows.

Our liquidity measurement system provides liquidity risk exposure reports that include the calculation of the internal liquidity stress tests and regulatory reporting such as the LCR, Net Stable Funding Ratio (NSFR) and Net Cumulative Cash Flow (NCCF). Our liquidity management also incorporates the monitoring of our unsecured wholesale funding position and funding capacity.

Risk appetite

CIBC’s risk appetite statement ensures prudent management of liquidity risk by outlining qualitative considerations and quantitative metrics including the LCR and Liquidity Horizon. Quantitative metrics are measured and managed to a set of limits approved by Risk Management.

Stress testing

A key component of our liquidity risk management, and complementing our assessments of liquidity risk exposure, is liquidity risk stress testing. Liquidity stress testing involves the application of name-specific and market-wide stress scenarios at varying levels of severity to assess the amount of available liquidity required to satisfy anticipated obligations as they come due. The scenarios model potential liquidity and funding requirements in the event of unsecured wholesale funding and deposit run-off, contingent liquidity utilization, and liquid asset marketability.

74 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Liquid assets

Available liquid assets include unencumbered cash and marketable securities from on- and off-balance sheet sources, that can be used to access funding in a timely fashion. Encumbered liquid assets, composed of assets pledged as collateral and those assets that are deemed restricted due to legal, operational, or other purposes, are not considered as sources of available liquidity when measuring liquidity risk.

Encumbered and unencumbered liquid assets from on- and off-balance sheet sources are summarized as follows:

$ millions, as at October 31		Bank owned liquid assets		Securities received as collateral		Total liquid assets		Encumbered liquid assets		Unencumbered liquid assets  (1)
2020	Cash and deposits with banks	$	62,518	$	–	$	62,518	$	133	$	62,385
	Securities issued or guaranteed by sovereigns, central banks, and multilateral development banks		112,403		92,202		204,605		108,425		96,180
	Other debt securities		4,798		4,288		9,086		2,603		6,483
	Equities		27,169		15,924		43,093		21,449		21,644
	Canadian government guaranteed National Housing Act mortgage-backed securities		40,592		895		41,487		13,084		28,403
	Other liquid assets (2)		10,909		2,109		13,018		5,441		7,577
		$	258,389	$	115,418	$	373,807	$	151,135	$	222,672
2019	Cash and deposits with banks	$	17,359	$	–	$	17,359	$	784	$	16,575
	Securities issued or guaranteed by sovereigns, central banks, and multilateral development banks		85,881		86,205		172,086		100,203		71,883
	Other debt securities		4,928		3,139		8,067		1,838		6,229
	Equities		26,441		15,766		42,207		23,623		18,584
	Canadian government guaranteed National Housing Act mortgage-backed securities		41,378		876		42,254		11,627		30,627
	Other liquid assets (2)		11,196		463		11,659		6,864		4,795
		$	187,183	$	106,449	$	293,632	$	144,939	$	148,693

(1) Unencumbered liquid assets are defined as on-balance sheet assets, assets borrowed or purchased under resale agreements, and other off-balance sheet collateral received less encumbered liquid assets.

(2) Includes cash pledged as collateral for derivatives transactions, select ABS and precious metals.

The following table summarizes unencumbered liquid assets held by CIBC (parent) and its domestic and foreign subsidiaries:

$ millions, as at October 31	2020		2019
CIBC (parent)	$	170,936	$	108,878
Domestic subsidiaries		12,355		8,588
Foreign subsidiaries		39,381		31,227
	$	222,672	$	148,693

Asset haircuts and monetization depth assumptions under a liquidity stress scenario are applied to determine asset liquidity value. Haircuts take into consideration those margins applicable at central banks – such as the Bank of Canada and the U.S. Federal Reserve Bank – historical observations, and securities characteristics including asset type, issuer, credit ratings, currency and remaining term to maturity, as well as available regulatory guidance.

Our unencumbered liquid assets increased $74.0 billion since October 31, 2019, primarily due to investments in liquid assets from funding proceeds, including deposit growth.

Furthermore, CIBC maintains access eligibility to the Bank of Canada’s Emergency Lending Assistance program and the U.S. Federal Reserve Bank’s Discount Window.

Asset encumbrance

In the course of CIBC’s day-to-day operations, securities and other assets are pledged to secure obligations, participate in clearing and settlement systems and other collateral management purposes.

The following table provides a summary of our total on- and off-balance sheet encumbered and unencumbered assets:

		Encumbered				Unencumbered				Total assets
$ millions, as at October 31		Pledged as collateral		Other (1)		Available as collateral		Other (2)
2020	Cash and deposits with banks	$	–	$	133	$	62,385	$	–	$	62,518
	Securities		127,974		678		132,493		–		261,145
	Loans, net of allowance (3)		7,946		42,291		34,103		322,441		406,781
	Other assets		4,950		–		2,731		69,382		77,063
		$	140,870	$	43,102	$	231,712	$	391,823	$	807,507
2019	Cash and deposits with banks	$	–	$	784	$	16,575	$	–	$	17,359
	Securities		121,349		283		102,867		–		224,499
	Loans, net of allowance (3)		2,000		40,204		35,073		310,688		387,965
	Other assets		6,186		–		1,815		56,218		64,219
		$	129,535	$	41,271	$	156,330	$	366,906	$	694,042

(1) Includes assets supporting CIBC’s long-term funding activities and assets restricted for legal or other reasons, such as restricted cash.

(2) Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral, however they are not considered immediately available to existing borrowing programs.

(3) Loans included as available as collateral represent the loans underlying National Housing Act mortgage-backed securities and Federal Home Loan Banks eligible loans.

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Management’s discussion and analysis

Restrictions on the flow of funds

Our subsidiaries are not subject to significant restrictions that would prevent transfers of funds, dividends or capital distributions. However, certain subsidiaries have different capital and liquidity requirements, established by applicable banking and securities regulators.

We monitor and manage our capital and liquidity requirements across these entities to ensure that resources are used efficiently and entities are in compliance with local regulatory and policy requirements.

Liquidity coverage ratio

The objective of the LCR is to promote short-term resilience of a bank’s liquidity risk profile, ensuring that it has adequate unencumbered high quality liquid resources to meet its liquidity needs in a 30-day acute stress scenario. Canadian banks are required to achieve a minimum LCR value of 100%. CIBC is in compliance with this requirement.

In accordance with the calibration methodology contained in OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, CIBC reports the LCR to OSFI on a monthly basis. The ratio is calculated as follows:

Total HQLA	³ 100%
Total net cash outflows over the next 30 calendar days

The LCR’s numerator consists of unencumbered HQLA, which follow an OSFI-defined set of eligibility criteria that considers fundamental and market-related characteristics, and relative ability to operationally monetize assets on a timely basis during a period of stress. CIBC’s centrally-managed liquid asset portfolio includes those liquid assets reported in the HQLA, such as central government treasury bills and bonds, central bank deposits and high-rated sovereign, agency, provincial, and corporate securities. Asset eligibility limitations inherent in the LCR metric do not necessarily reflect CIBC’s internal assessment of its ability to monetize its marketable assets under stress.

The ratio’s denominator reflects net cash outflows expected in the LCR’s stress scenario over the 30-calendar-day period. Expected cash outflows represent LCR-defined withdrawal or draw-down rates applied against outstanding liabilities and off-balance sheet commitments, respectively. Significant contributors to CIBC’s LCR outflows include business and financial institution deposit run-off, draws on undrawn lines of credit and unsecured debt maturities. Cash outflows are partially offset by cash inflows, which are calculated at LCR-prescribed inflow rates, and include performing loan repayments and maturing non-HQLA marketable assets.

During a period of financial stress, institutions may use their stock of HQLA, thereby falling below 100%, as maintaining the LCR at 100% under such circumstances could produce undue negative effects on the institution and other market participants.

The LCR is disclosed using a standard OSFI-prescribed disclosure template.

$ millions, average of the three months ended October 31, 2020		Total unweighted value (1)		Total weighted value (2)
HQLA
1	HQLA		n/a	$	187,227
Cash outflows
2	Retail deposits and deposits from small business customers, of which:	$	192,848		15,531
3	Stable deposits		69,388		2,082
4	Less stable deposits		123,460		13,449
5	Unsecured wholesale funding, of which:		192,148		95,577
6	Operational deposits (all counterparties) and deposits in networks of cooperative banks		58,055		13,953
7	Non-operational deposits (all counterparties)		108,089		55,620
8	Unsecured debt		26,004		26,004
9	Secured wholesale funding		n/a		4,437
10	Additional requirements, of which:		120,902		28,183
11	Outflows related to derivative exposures and other collateral requirements		20,664		9,371
12	Outflows related to loss of funding on debt products		3,165		3,165
13	Credit and liquidity facilities		97,073		15,647
14	Other contractual funding obligations		3,427		3,427
15	Other contingent funding obligations		302,688		5,990
16	Total cash outflows		n/a		153,145
Cash inflows
17	Secured lending (e.g. reverse repos)		72,304		9,622
18	Inflows from fully performing exposures		22,399		9,404
19	Other cash inflows		4,675		4,675
20	Total cash inflows	$	99,378	$	23,701
					Total adjusted value
21	Total HQLA		n/a	$	187,227
22	Total net cash outflows		n/a	$	129,444
23	LCR		n/a		145	%
$ millions, average of the three months ended July 31, 2020					Total adjusted value
24	Total HQLA		n/a	$	177,967
25	Total net cash outflows		n/a	$	118,553
26	LCR		n/a		150	%

(1) Unweighted inflow and outflow values are calculated as outstanding balances maturing or callable within 30 days of various categories or types of liabilities, off-balance sheet items or contractual receivables.

(2) Weighted values are calculated after the application of haircuts (for HQLA) and inflow and outflow rates prescribed by OSFI.

n/a Not applicable as per the LCR common disclosure template.

Our average LCR as at October 31, 2020 decreased to 145% from 150% in the prior quarter, mainly due to higher net cash outflows, partially offset by an increase in HQLA.

76 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

CIBC considers the impact of its business decisions on the LCR and other liquidity risk metrics that it regularly monitors as part of a robust liquidity risk management function. Variables that can impact the ratio month-over-month include, but are not limited to, items such as wholesale funding activities and maturities, strategic balance sheet initiatives, and transactions and market conditions affecting collateral. Furthermore, CIBC reports the LCR to OSFI in multiple currencies, and thus measures the extent of potential currency mismatch under the ratio. CIBC predominantly operates in major currencies with deep and fungible foreign exchange markets.

Reporting of the LCR is calibrated centrally by CIBC Treasury, in conjunction with CIBC’s SBUs and other functional groups.

Funding

CIBC funds its operations with client-sourced deposits, supplemented with a wide range of wholesale funding.

CIBC’s principal approach aims to fund its consolidated balance sheet with deposits primarily raised from personal and commercial banking channels. CIBC maintains a foundation of relationship-based core deposits, whose stability is regularly evaluated through internally developed statistical assessments.

We routinely access a range of short-term and long-term secured and unsecured funding sources diversified by geography, depositor type, instrument, currency and maturity. We raise long-term funding from existing programs including covered bonds, asset securitizations and unsecured debt.

CIBC continuously evaluates opportunities to diversify into new funding products and investor segments in an effort to maximize funding flexibility and minimize concentration and financing costs. We regularly monitor wholesale funding levels and concentrations to internal limits consistent with our desired liquidity risk profile.

GALCO and RMC review and approve CIBC’s funding plan, which incorporates projected asset and liability growth, funding maturities, and output from our liquidity position forecasting.

The following table provides the contractual maturity profile of CIBC’s wholesale funding sources at their carrying values:

$ millions, as at October 31, 2020	Less than 1 month		1–3 months		3–6 months		6–12 months		Less than 1 year total		1–2 years		Over 2 years		Total
Deposits from banks (1)	$	6,378	$	362	$	719	$	56	$	7,515	$	–	$	–	$	7,515
Certificates of deposit and commercial paper		7,375		10,391		6,283		25,712		49,761		141		–		49,902
Bearer deposit notes and bankers’ acceptances		636		1,311		1,168		73		3,188		–		–		3,188
Asset-backed commercial paper		–		–		–		–		–		–		–		–
Senior unsecured medium-term notes (2)		2,750		1,523		3,884		3,501		11,658		6,358		27,380		45,396
Senior unsecured structured notes		–		–		–		186		186		–		–		186
Covered bonds/asset-backed securities
Mortgage securitization		–		1,158		242		2,268		3,668		2,549		12,677		18,894
Covered bonds		–		655		374		2,576		3,605		8,325		7,667		19,597
Cards securitization		–		–		–		852		852		–		808		1,660
Subordinated liabilities		–		–		–		–		–		–		5,712		5,712
Other		–		–		–		–		–		275		9		284
	$	17,139	$	15,400	$	12,670	$	35,224	$	80,433	$	17,648	$	54,253	$	152,334
Of which:
Secured	$	–	$	1,813	$	616	$	5,696	$	8,125	$	10,874	$	21,152	$	40,151
Unsecured		17,139		13,587		12,054		29,528		72,308		6,774		33,101		112,183
	$	17,139	$	15,400	$	12,670	$	35,224	$	80,433	$	17,648	$	54,253	$	152,334
October 31, 2019	$	12,037	$	14,736	$	25,065	$	27,679	$	79,517	$	17,163	$	51,113	$	147,793

(1) Includes non-negotiable term deposits from banks.

(2) Includes wholesale funding liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.

CIBC’s wholesale funding is diversified by currency as demonstrated in the table that follows:

$ billions, as at October 31			2020					2019
CAD	$	50.8		33	%	$	49.2		33	%
USD		75.4		50			73.0		50
Other		26.1		17			25.6		17
	$	152.3		100	%	$	147.8		100	%

We manage liquidity risk in a manner that enables us to withstand severe liquidity stress events. Wholesale funding may present a higher risk of run-off in stress situations, and we maintain significant portfolios of unencumbered liquid assets to mitigate this risk. See the “Liquid assets” section for additional details.

Funding plan

Our funding plan is updated at least quarterly, or in response to material changes in underlying assumptions and business developments. The plan incorporates projected asset and liability growth from our ongoing operations, and the output from our liquidity position forecasting.

CIBC 2020 ANNUAL REPORT 77

Management’s discussion and analysis

Credit ratings

CIBC’s access to and cost of wholesale funding are dependent on multiple factors, among them credit ratings provided by rating agencies. Rating agencies’ opinions are based upon internal methodologies, and are subject to change based on factors including, but not limited to, financial strength, competitive position, macroeconomic backdrop and liquidity positioning. On April 3, 2020, Fitch revised the rating outlook for seven Canadian banks, including CIBC, from stable to negative due to the disruption to economic activity and financial markets from the COVID-19 pandemic.

Our credit ratings are summarized in the following table:

As at October 31, 2020	DBRS		Fitch		Moody’s		S&P
Deposit/Counterparty (1)		AA		AA		Aa2		A+
Legacy senior debt (2)		AA		AA		Aa2		A+
Senior debt (3)		AA(L)		AA-		A2		BBB+
Subordinated indebtedness		A(H)		A		Baa1		BBB+
Subordinated indebtedness – NVCC (4)		A(L)		A		Baa1		BBB
Limited recourse capital notes – NVCC (4)		BBB(H)		n/a		Baa3		BB+
Preferred shares – NVCC (4)		Pfd-2		n/a		Baa3		P-3(H)
Short-term debt		R-1(H)		F1+		P-1		A-1
Outlook		Stable		Negative		Stable		Stable

(1) DBRS Long-Term Issuer Rating; Moody’s Long-Term Deposit and Counterparty Risk Assessment Rating; S&P’s Issuer Credit Rating; Fitch Long-Term Deposit Rating and Derivative Counterparty Rating.

(2) Includes senior debt issued prior to September 23, 2018 as well as senior debt issued on or after September 23, 2018 which is not subject to bail-in regulations.

(3) Comprises liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.

(4) Comprises instruments which are treated as NVCC in accordance with OSFI’s CAR Guideline.

n/a Not applicable.

Additional collateral requirements for rating downgrades

We are required to deliver collateral to certain derivative counterparties in the event of a downgrade to our current credit risk rating. The collateral requirement is based on MTM exposure, collateral valuations, and collateral arrangement thresholds, as applicable. The following table presents the additional cumulative collateral requirements for rating downgrades:

$ billions, as at October 31	2020		2019
One-notch downgrade	$	0.1	$	0.1
Two-notch downgrade		0.2		0.2
Three-notch downgrade		0.3		0.3

Regulatory developments concerning liquidity

In April 2019, OSFI issued final NSFR guidelines following industry and public consultation, clarifying details of the NSFR implementation and its application to the Canadian financial sector. Derived from the BCBS’s Basel III framework and incorporated into OSFI’s LAR Guideline, the NSFR standard aims to promote long-term resilience of the financial sector by ensuring banks maintain a sustainable funding structure appropriate to the composition of their assets and off-balance sheet activities. D-SIBs were required to comply with the final NSFR guidelines beginning January 2020. In April 2019, OSFI also issued “Net Stable Funding Ratio Disclosure Requirements”, which requires public disclosures to be produced beginning in the first quarter of 2021. Consistent with the requirements, we submit the NSFR on a quarterly basis to OSFI and to the BCBS twice annually.

In December 2019, OSFI issued revisions to “Guideline B-6 – Liquidity Principles” for implementation on January 1, 2020. The guideline sets out the principles that provide the framework within which OSFI assesses the content and effectiveness of institutions’ management of liquidity risk. The changes aim to ensure that the guideline remains current and relevant and to provide additional clarity on OSFI’s expectations regarding institutions’ liquidity risk management practices. CIBC maintains a liquidity management framework that is periodically assessed to ensure it aligns with the bank’s risk appetite as well as the prudential standards outlined in the guideline.

Developments related to the COVID-19 pandemic

As a result of economic instability caused by the COVID-19 pandemic, global central banks and government agencies instituted a series of measures to support the continuous functioning of financial markets through the provision of liquidity. The Bank of Canada introduced the BAPF, the expansion of asset buyback programs, and increases in the size, frequency and collateral eligibility of term repo operations. In light of improving financial market conditions, the Bank of Canada recently pared back some of these temporary measures and discontinued the BAPF. The Bank of Canada continues to monitor market conditions and may revisit programs if warranted.

As part of the Government of Canada’s COVID-19 Economic Response Plan, the Insured Mortgage Purchase Program (IMPP) was revised to purchase up to $150 billion of insured mortgage pools through the CMHC.

In addition, the Bank of Canada introduced the Standing Term Liquidity Facility (STLF), a permanent program that complements existing tools to provide liquidity and enhance the resilience of the Canadian financial system.

Participation in these programs, as and when appropriate, complements CIBC’s liquidity and funding strategy, which includes the objective of maintaining the strength and soundness of our consolidated balance sheet. CIBC remains well positioned to meet cash flow expectations and the needs of our clients throughout the COVID-19 pandemic.

See the “Regulatory developments arising from the COVID-19 pandemic” section for additional details on announcements made by OSFI and the BCBS in response to changes in market conditions arising from the COVID-19 pandemic.

78 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Contractual obligations

Contractual obligations give rise to commitments of future payments affecting our short- and long-term liquidity and capital resource needs. These obligations include financial liabilities, credit and liquidity commitments, and other contractual obligations.

Assets and liabilities

The following table provides the contractual maturity profile of our on-balance sheet assets, liabilities and equity at their carrying values. Contractual analysis is not representative of CIBC’s liquidity risk exposure, however this information serves to inform CIBC’s management of liquidity risk, and provide input when modelling a behavioural balance sheet.

$ millions, as at October 31, 2020	Less than 1 month		1–3 months		3–6 months		6–9 months		9–12 months		1–2 years		2–5 years		Over 5 years		No specified maturity			Total
Assets
Cash and non-interest-bearing deposits with banks	$	43,531	$	–	$	–	$	–	$	–	$	–	$	–	$	–	$	–		$	43,531
Interest-bearing deposits with banks (1)		18,987		–		–		–		–		–		–		–		–			18,987
Securities		4,971		3,087		7,007		5,028		3,624		18,920		46,554		31,288		28,567			149,046
Cash collateral on securities borrowed		8,547		–		–		–		–		–		–		–		–			8,547
Securities purchased under resale agreements		35,089		13,080		12,751		2,666		2,009		–		–		–		–			65,595
Loans
Residential mortgages		1,606		3,336		8,242		12,057		11,511		47,032		128,430		8,302		649			221,165
Personal		955		646		1,171		1,223		1,148		450		3,183		3,219		30,227			42,222
Credit card		239		478		718		718		718		2,870		5,648		–		–			11,389
Business and government		15,539		5,463		6,908		7,116		6,806		25,055		43,212		16,687		8,760			135,546
Allowance for credit losses		–		–		–		–		–		–		–		–		(3,540	)		(3,540	)
Derivative instruments		2,052		4,700		2,436		1,807		1,267		3,651		6,292		10,525		–			32,730
Customers’ liability under acceptances		8,818		707		68		10		3		–		–		–		–			9,606
Other assets		–		–		–		–		–		–		–		–		34,727			34,727
	$	140,334	$	31,497	$	39,301	$	30,625	$	27,086	$	97,978	$	233,319	$	70,021	$	99,390		$	769,551
October 31, 2019	$	86,873	$	37,026	$	27,740	$	26,478	$	23,115	$	78,483	$	201,231	$	59,883	$	110,775		$	651,604
Liabilities
Deposits (2)	$	28,774	$	28,222	$	34,292	$	41,705	$	24,248	$	28,399	$	52,712	$	11,488	$	320,900		$	570,740
Obligations related to securities sold short		15,963		–		–		–		–		–		–		–		–			15,963
Cash collateral on securities lent		1,824		–		–		–		–		–		–		–		–			1,824
Obligations related to securities sold under repurchase agreements		41,136		6,904		21,607		81		425		1,500		–		–		–			71,653
Derivative instruments		1,969		4,645		2,792		2,049		1,800		3,079		5,542		8,632		–			30,508
Acceptances		8,861		707		68		10		3		–		–		–		–			9,649
Other liabilities		25		50		75		74		79		295		684		584		20,301			22,167
Subordinated indebtedness		–		–		–		–		–		–		–		5,712		–			5,712
Equity		–		–		–		–		–		–		–		–		41,335			41,335
	$	98,552	$	40,528	$	58,834	$	43,919	$	26,555	$	33,273	$	58,938	$	26,416	$	382,536		$	769,551
October 31, 2019	$	88,803	$	43,539	$	44,607	$	33,034	$	26,078	$	31,643	$	54,407	$	22,781	$	306,712		$	651,604

(1) Cash includes interest-bearing demand deposits with the Bank of Canada.

(2) Comprises $202.2 billion (2019: $178.1 billion) of personal deposits; $351.6 billion (2019: $296.4 billion) of business and government deposits and secured borrowings; and $17.0 billion (2019: $11.2 billion) of bank deposits.

The changes in the contractual maturity profile were primarily due to the natural migration of maturities and also reflect the impact of our regular business activities.

Credit-related commitments

The following table provides the contractual maturity of notional amounts of credit-related commitments. Since a significant portion of commitments are expected to expire without being drawn upon, the total of the contractual amounts is not representative of future liquidity requirements.

$ millions, as at October 31, 2020	Less than 1 month		1–3 months		3– 6 months		6–9 months		9–12 months		1–2 years		2–5 years		Over 5 years		No specified maturity  (1)		Total
Unutilized credit commitments	$	989	$	8,554	$	4,819	$	4,601	$	4,127	$	19,575	$	50,595	$	1,672	$	173,157	$	268,089
Securities lending (2)		33,483		2,779		2,924		–		–		–		–		–		–		39,186
Standby and performance letters of credit		2,769		2,567		2,070		3,567		2,140		785		625		42		–		14,565
Backstop liquidity facilities		3		10,480		1,361		627		145		278		13		–		–		12,907
Documentary and commercial letters of credit		81		71		14		3		15		–		12		–		–		196
Other		2,149		–		–		–		–		–		–		–		–		2,149
	$	39,474	$	24,451	$	11,188	$	8,798	$	6,427	$	20,638	$	51,245	$	1,714	$	173,157	$	337,092
October 31, 2019	$	42,113	$	21,669	$	9,059	$	8,063	$	5,825	$	14,784	$	50,210	$	2,979	$	158,076	$	312,778

(1) Includes $131.3 billion (2019: $122.0 billion) of personal, home equity and credit card lines, which are unconditionally cancellable at our discretion.

(2) Excludes securities lending of $1.8 billion (2019: $1.8 billion) for cash because it is reported on the consolidated balance sheet.

CIBC 2020 ANNUAL REPORT 79

Management’s discussion and analysis

Other contractual obligations

The following table provides the contractual maturities of other contractual obligations affecting our funding needs:

$ millions, as at October 31, 2020 (1)	Less than 1 month		1–3 months		3–6 months		6–9 months		9–12 months		1–2 years		2–5 years		Over 5 years		Total
Purchase obligations (2)	$	99	$	205	$	174	$	179	$	138	$	440	$	621	$	182	$	2,038
Future lease commitments		–		1		8		10		12		48		166		1,249		1,494
Investment commitments		1		4		–		1		4		–		8		194		212
Pension contributions (3)		17		33		49		49		50		–		–		–		198
Underwriting commitments		94		–		–		–		–		–		–		–		94
	$	211	$	243	$	231	$	239	$	204	$	488	$	795	$	1,625	$	4,036
October 31, 2019	$	222	$	335	$	399	$	365	$	344	$	981	$	1,882	$	3,582	$	8,110

(1) Effective November 1, 2019, this table excludes operating lease obligations that are accounted for under IFRS 16, which resulted in on-balance recognition for most operating lease commitments. Lease obligations that are not accounted for under IFRS 16, including those related to future starting lease commitments for which we have not yet recognized a lease liability and right-of-use asset, continue to be recognized in this table. Following our adoption of IFRS 16, this table also excludes operating and tax expenses relating to lease commitments. For further details about our transition to IFRS 16, see Note 8 to our consolidated financial statements.

(2) Obligations that are legally binding agreements whereby we agree to purchase products or services with specific minimum or baseline quantities defined at fixed, minimum or variable prices over a specified period of time are defined as purchase obligations. Purchase obligations are included through to the termination date specified in the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods and services include clauses that would allow us to cancel the agreement prior to expiration of the contract within a specific notice period. However, the amount above includes our obligations without regard to such termination clauses (unless actual notice of our intention to terminate the agreement has been communicated to the counterparty). The table excludes purchases of debt and equity instruments that settle within standard market time frames.

(3) Includes estimated minimum funding contributions for our funded defined benefit pension plans in Canada, the U.S., the U.K., and the Caribbean. Estimated minimum funding contributions are included only for the next annual period as the minimum contributions are affected by various factors, such as market performance and regulatory requirements, and therefore are subject to significant variability.

Other risks

Strategic risk

Strategic risk is the risk of ineffective or improper implementation of business strategies, including mergers, acquisitions and divestitures. It includes the potential financial loss due to the failure of organic growth initiatives or failure to respond appropriately to changes in the business environment. For additional details on corporate transactions, see the “Top and emerging risks” section.

Oversight of strategic risk is the responsibility of the ExCo and the Board. At least annually, the CEO outlines the process and presents the strategic business plan to the Board for review and approval. The Board reviews the plan in light of management’s assessment of emerging market trends, the competitive environment, potential risks and other key issues.

One of the tools for measuring, monitoring and controlling strategic risk is attribution of economic capital against this risk. Our economic capital models include a strategic risk component for those businesses utilizing capital to fund an acquisition or a significant organic growth strategy.

Insurance risk

Insurance risk is the risk of loss arising from the obligation to pay out benefits and expenses on insurance policies in excess of expected amounts. Unfavourable actual experience could emerge due to adverse fluctuations in timing, size and frequency of actual claims (e.g., mortality, morbidity), policyholder behaviour (e.g., cancellation of coverage), or associated expenses.

Insurance contracts provide financial compensation to the beneficiary in the event of an insured risk occurring in exchange for premiums. We are exposed to insurance risk in our life insurance business and in our reinsurance business within the respective subsidiaries.

Senior management of the insurance and reinsurance subsidiaries have primary responsibility for managing insurance risk with oversight by Risk Management. The insurance and reinsurance subsidiaries also have their own boards of directors, and an independent Appointed Actuary who provide additional input to risk management oversight. Processes and oversight are in place to manage the risk to our insurance business. Underwriting risk on business assumed is managed through risk policies that limit exposure to an individual life, to certain types of business and to regions.

Our risk governance practices ensure strong independent oversight and control of risk within the insurance businesses. The subsidiaries’ boards outline the internal risk and control structure to manage insurance risk, which includes risk, capital and control policies, processes as well as limits and governance. Senior management of the insurance and reinsurance subsidiaries and Risk Management attend the subsidiaries’ board meetings.

Operational risk

Operational risk is the risk of loss resulting from people, inadequate or failed internal processes and systems, or from external events.

As part of the normal course of business, CIBC is exposed to operational risks in its business activities and external environment. Our comprehensive Operational Risk Management Policy, supported by policies, tools, systems and governance structure, is used to mitigate operational risks. We continuously monitor our operational risk profile to ensure we are operating within CIBC’s approved risk appetite.

Governance and management

Operational risk is managed through the three lines of defence model and articulated in the Operational Risk Management Policy.

(i) As the first line of defence, CIBC’s SBUs and functional groups own the risks and are accountable and responsible for identifying and assessing risks inherent in their activities in accordance with the CIBC risk appetite. In addition, they establish and maintain controls to mitigate such risks. The first line of defence may include control groups within the relevant area to facilitate the control framework and other risk-related processes. Control groups provide subject matter expertise to the business lines and/or implement and maintain enterprise-wide control programs and activities. While control groups collaborate with the lines of business in identifying and managing risk, they also challenge risk decisions and risk mitigation strategies.

(ii) The second line of defence is independent from the first line of defence and provides an enterprise-wide view of specific risk types, guidance and effective challenge to risk and control activities. Risk Management is the primary second line of defence. Risk Management may leverage or rely on subject matter expertise of other groups (e.g., third parties or control groups) to better inform their independent assessments, as appropriate.

(iii) As the third line of defence, CIBC’s internal audit function provides reasonable assurance to senior management and the Audit Committee of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in accordance with its mandate as described in the Internal Audit Charter.

A strong risk culture and communication between the three lines of defence are important characteristics of effective risk management.

80 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Global Operational Risk Management (GORM) oversees CIBC’s operational risk exposures. The Head of GORM chairs the Operational Risk and Control Committee (ORCC), a subcommittee of the GRC, with representation from SBUs and functional groups. The ORCC is a management forum providing oversight of CIBC’s operational risk and internal control environment. Its Chair reports significant operational risk matters to the GRC and RMC.

Operational risk management approach

Information transparency, timely escalation, clear accountability and a robust internal control environment are the principles forming the basis of the Operational Risk Management Policy, which supports and governs the processes of identifying, measuring, mitigating, monitoring, and reporting operational risks. We mitigate operational losses by consistently applying risk-based approaches and employing risk-specific assessment tools. Regular review of our risk governance structure ensures clarity of, and ownership in, key risk areas.

Risk measurement

CIBC’s business lines regularly conduct reviews of operational risks inherent in their products, services or processes and assess ways to mitigate and manage them in alignment with CIBC’s risk appetite. These reviews include using business process maps, risk and control self-assessments, audit findings, operational risk scenarios, past internal and external loss events, key risk indicators trends, change initiative risk assessments and in-depth risk reviews to form a holistic operational risk profile for the business lines. Under the three lines of defence model, GORM and relevant control groups challenge business lines’ risk assessments and mitigation actions.

Operational loss is one of the key operational risk metrics informing us of areas of heightened risk. We collect and analyze internal operational loss event data for themes and trends. The occurrence of a material or potential material loss triggers an investigation to determine the root causes of the incident and the effectiveness of existing mitigating controls, as well as the identification of any additional mitigating actions. Additionally, we monitor the external environment for emerging or potential risks to CIBC. The analysis of material operational risk events is performed by the first line of defence and the outputs of the analysis are subject to formal independent challenge by our second line of defence. The analysis of material operational risk events forms one component of our ongoing operational risk reporting to senior management and the Board.

Business lines conduct change initiative risk assessment on risks inherent to the initiatives (for example, new product launches or major system changes). Identified inherent risks of the change initiative and related mitigation actions are challenged by GORM and other relevant second line of defence groups, as well as control groups, to ensure residual risks remain within the approved risk appetite.

We use the standardized method to quantify our operational risk exposure in the form of operational risk regulatory capital, as agreed with local regulators.

Risk mitigation

Our primary tool for mitigating operational risk exposure is a robust internal control environment. Our internal control framework outlines key principles, structure and processes underpinning CIBC’s approach to managing risks through effective controls. Under our framework, all key controls are subject to ongoing testing and review to ensure they effectively mitigate our operational risk exposures. In addition, our corporate insurance program affords extra protection from loss while our global business continuity management program ensures that under conditions of interruption or crisis, CIBC’s critical business functions could continue to operate and normal operations are restored in a highly effective and efficient manner.

Risk monitoring and reporting

Both forward-looking key risk indicators (KRIs) as well as backward-looking key performance indicators provide insight into CIBC’s risk exposure and are used to monitor the main drivers of exposure associated with key operational risks and their adherence to the operational risk appetite. KRIs assist in early detection of potential operational risk events by identifying unfavourable trends and highlighting controls that may not be designed or operating effectively. Business lines are required to identify and implement KRIs for material risk exposures on an ongoing basis. Escalation triggers are used to highlight risk exposures requiring additional attention from senior management and/or the Board. The second line of defence challenges the selection of KRIs and the appropriateness of thresholds.

Our risk monitoring processes support a transparent risk-reporting program, informing both senior management and the Board on our control environment, operational risk exposures, and mitigation strategies.

Technology, information and cyber security risk

We are also exposed to cyber threats and the associated financial, reputation and business interruption risks. For additional information on these risks and our mitigation strategies, see the “Top and emerging risks” section.

Reputation and legal risks

Our reputation and financial soundness are of fundamental importance to us and to our clients, shareholders and team members.

Reputation risk is the risk of negative publicity regarding our business conduct or practices which, whether true or not, could significantly harm our reputation as a leading financial institution, or could materially and adversely affect our business, operations or financial condition.

Legal risk is the risk of financial loss arising from one or more of the following factors: (a) civil, criminal or regulatory enforcement proceedings against us; (b) our failure to correctly document, enforce or comply with contractual obligations; (c) failure to comply with our legal obligations to clients, investors, team members, counterparties or other stakeholders; (d) failure to take appropriate legal measures to protect our assets or security interests; or (e) misconduct by our team members or agents.

Our Reputation Risk Management Framework, Global Reputation and Legal Risks Policy and business-specific procedures outline how we safeguard our reputation through identification, assessment, escalation and mitigation of potential reputation and legal risks. Proactive management of potential reputation and legal risks is a key responsibility of CIBC and all our team members.

Overall governance and oversight of reputation risk is provided by the Board, primarily through the RMC of the Board. Senior management oversight of reputation and legal risks is provided by the Reputation and Legal Risks Committee, which is a sub-committee of GRC and reports its activities regularly to the GRC.

CIBC 2020 ANNUAL REPORT 81

Management’s discussion and analysis

Conduct risk

Conduct risk is the risk that actions or omissions (i.e. behaviour) of the organization, team members and/or third parties: do not align with our desired culture and values; deliver poor or unfair outcomes for clients, team members or shareholders; result in adverse market practices and outcomes; impact CIBC’s reputation as a leading financial institution; or materially and adversely affect CIBC’s business, operations or financial condition.

Overall governance of conduct risk is provided by the Board and its committees, including the CGC, as well as senior management committees. Every team member is accountable for the identification and management of conduct risk.

Our Conduct and Culture Risk Framework describes how CIBC manages conduct risk through proactive identification, measurement and management of potential conduct risk. The overarching principles and requirements for maintaining appropriate conduct and addressing inappropriate conduct are covered in the Code of Conduct and other business specific and corporate-wide policies, frameworks, programs, processes and procedures. All team members must abide by the code, and CIBC policies and procedures in carrying out the accountabilities of their role.

Regulatory compliance risk

Regulatory compliance risk is the risk of CIBC’s potential non-conformance with applicable regulatory requirements.

Our regulatory compliance philosophy is to manage and mitigate regulatory compliance risk through the promotion of a strong risk culture within the parameters established by CIBC’s Risk Appetite Statement. The foundation of this approach is a comprehensive Regulatory Compliance Management (RCM) framework. The RCM framework, owned by the Senior Vice-President, Chief Compliance Officer and Global Regulatory Affairs, and approved by the RMC, maps regulatory requirements to internal policies, procedures and controls that govern regulatory compliance.

Our Compliance department is responsible for the development and maintenance of a comprehensive regulatory compliance program, including oversight of the RCM framework. This department is independent of business management and regularly reports to the RMC.

Primary responsibility for compliance with all applicable regulatory requirements rests with senior management of the business and functional groups, and extends to all employees. The Compliance department’s activities support those groups, with particular emphasis on regulatory requirements that govern the relationship between CIBC and its clients.

See the “Regulatory developments” section for further details.

Environmental and related social risk

Environmental and related social risk is the risk of financial loss or damage to reputation associated with environmental issues including related social issues, whether arising from our credit and investment activities or related to our own operations. Our corporate environmental policy, originally approved by the Board in 1993, with the most recent biennial update and approval by our CRO in 2019, commits CIBC to responsible conduct in all activities to protect and conserve the environment; safeguard the interests of all stakeholders from unacceptable levels of environmental risk; and support the principles of sustainable development.

Within CIBC’s Risk Management function, the Enterprise Risk Management group provides independent oversight of the measurement, monitoring and control of environmental risk. This group is led by the Senior Vice-President, Enterprise Risk Management, who has direct accountability to the CRO for environmental risk oversight.

Our environmental risk management team is responsible for developing environmental strategy, setting environmental performance standards and targets, and reporting on performance. There is also an enterprise-wide Environmental Management Committee, comprising senior executives from our SBUs and functional groups, that meets quarterly and provides input into our environmental strategy and provides oversight of CIBC’s environmental initiatives.

The corporate environmental policy is addressed by an integrated corporate environmental management program that is under the overall management of the environmental risk management team. Environmental and related social evaluations are integrated into our credit risk assessment processes, with environmental and related social risk management standards and procedures in place for all sectors. In addition, environmental and related social risk assessments in project finance, project-related corporate and bridge loans are required, in accordance with our commitment to the Equator Principles, which are a voluntary set of guidelines for financial institutions based on the screening criteria of the International Finance Corporation. We adopted the Equator Principles in 2003. An escalation process is in place for transactions with the potential to have significant environmental and related social risk, with escalation up to the Reputation and Legal Risks Committee for senior executive review, if required.

We also conduct ongoing research and benchmarking on environmental issues such as climate change as they may pertain to responsible lending practices. We are a participant in the CDP (formerly Carbon Disclosure Project) climate change program, which promotes corporate disclosure to the investment community on greenhouse gas emissions and climate change management.

We are also a supporter of the reporting framework developed by the TCFD, which provides guidance for voluntary, consistent climate-related risk disclosures. In 2019, CIBC published its first climate-related disclosure aligned to the TCFD recommendations and structured around its four core elements. Our TCFD report, available on our website, provides details as to how CIBC is identifying and managing both physical and transition risks associated with climate change. In addition, we are a member of the UNEP FI, which has a mission to promote sustainable finance and is guiding our approach to assessing climate change risks, as well as identifying opportunities associated with transitioning to a low-carbon economy.

In 2018, CIBC Asset Management Inc. became a signatory to the United Nations-supported Principles for Responsible Investment, which commit signatories to incorporate environmental and social issues into investment analysis and decision making across all investment classes.

The environmental risk management team works closely with our main business units and functional groups to ensure that high standards of environmental responsibility are applied to the banking services that we provide to our clients, the relationships we have with our stakeholders, and to the way we manage our facilities.

More information on our environmental governance, policy, management and performance can be found in our Sustainability Report, which is available on our website.

The information provided on our website does not form a part of this document.

82 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Accounting and control matters

Critical accounting policies and estimates

As discussed in the “Significant events” section, the COVID-19 pandemic and the restrictions imposed by government bodies around the world to limit its spread, including the closure of non-essential businesses and other physical distancing measures, have disrupted the global economy, resulted in volatility in financial markets, and negatively impacted the expectation for the financial performance of businesses around the world. Although the second half of 2020 has seen a resumption in activity in certain sectors as a result of the easing of physical distancing measures, the economy continues to operate below pre-pandemic levels. In addition, there is a risk that the recent retightening of physical distancing measures enacted by governments and businesses in the fourth quarter in response to the resurgence in infection rates could impact economic activity beyond levels that were previously anticipated. This gives rise to heightened uncertainty as it relates to our critical accounting estimates and increases the need to apply judgment in evaluating the economic and market environment and its impact on significant estimates. This particularly impacts estimates relating to impairment of financial assets, determining the fair value of financial instruments, estimating the allowance for credit losses, goodwill impairment, and asset impairment.

A summary of significant accounting policies is presented in Note 1 to the consolidated financial statements. Changes in the judgments and estimates required in the critical accounting policies discussed below could have a material impact on our financial results. We have established control procedures to ensure accounting policies are applied consistently and processes for changing methodologies are well controlled.

IFRS 16 “Leases”

CIBC adopted IFRS 16 “Leases” (IFRS 16) in place of International Accounting Standards (IAS) 17 “Leases” as of November 1, 2019. We applied IFRS 16 on a modified retrospective basis. As permitted, we did not restate our prior period comparative consolidated financial statements, which were reported under the prior guidance. The impact of adopting IFRS 16 is discussed in Note 8.

As a lessee, we recognize a right-of-use asset and a corresponding lease liability based on the present value of future lease payments, less any lease incentives receivable, when the lessor makes the leased asset available for use to CIBC, based on the non-cancellable portion of the lease term, adjusted for any renewal or termination options that are reasonably certain to be exercised. Measurement of the right-of-use asset also includes any initial direct costs of procuring the lease, and any lease payments made or lease incentives received prior to lease commencement. Discount rates are based on the rate implicit in the lease, if determinable, or on CIBC’s incremental borrowing rate. Where a property lease contains both a lease and non-lease component, we have elected not to allocate the consideration in the contract to each of the components. Subsequent to initial measurement, CIBC measures the lease liability by increasing the carrying amount to reflect interest on the lease liability based on the discount rate at the time of recognition and reducing the carrying amount to reflect lease payments made during the period, net of any remeasurements for lease reassessment or modifications.

The right-of-use asset is measured using the cost model and amortized on a straight-line basis over the lease term. Right-of-use assets and the corresponding lease liabilities are recognized in Property and equipment and Other liabilities, respectively, on our consolidated balance sheet. The right-of-use asset and the corresponding lease liability are remeasured when there is a change in lease term, a change in the assessment of an option to purchase a leased asset, a change in the expected residual value guarantee (if any), or a change in future lease payments due to a change in the index or rate applicable to the payment. Right-of-use assets are tested for impairment as required under IAS 36 “Impairment of Assets”. In addition, the evaluation of the useful life for depreciation is assessed under IAS 36.

Lease payments for low-value assets, short-term leases and variable leases are systematically recognized in Non-interest expenses based on the nature of the expense.

As an intermediate lessor, we classify a sublease as an operating or finance sublease based on whether substantially all of the risks and rewards related to the underlying right-of-use asset are transferred to the sub-lessee. If classified as a finance sublease, the related right-of-use asset is derecognized and an investment in sublease is recognized, with the difference recognized in the consolidated statement of income as a gain or loss. In measuring the investment in sublease, we apply the head lease discount rate unless the rate implicit in the sublease is determinable. Where a finance sublease includes lease and non-lease components, we allocate the total consideration in the contract to each component based on the standalone prices for each of these components. The investment in sublease is recognized in Other assets on our consolidated balance sheet, and is subsequently measured using the effective interest rate method, with interest income recognized over the term of the sublease. Rental income from operating subleases is recognized on a systematic basis over the lease term.

Previously, IAS 17 required lessors to classify leases as operating or finance, considering whether the underlying lease transfers substantially all risks and rewards incidental to ownership. Lease expenses related to operating leases were recognized through income on a systematic basis, based on the nature of the expense. Finance leases were recognized on-balance sheet through a finance asset and a finance liability, and the related lease expenses were recognized through income on a systematic basis.

Adoption of IFRS 16 reduced our CET1 ratio by 2 basis points at transition (see the “Capital management – Regulatory capital and ratios” section).

Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7

In September 2019, the International Accounting Standards Board (IASB) issued “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7”, which provides relief for specific hedge accounting requirements to address uncertainties in the period before the interest rate benchmark reform, and provides disclosure requirements related to interest rate benchmark reform.

Only the amendments to IAS 39 “Financial Instruments: Recognition and Measurement” (IAS 39) and IFRS 7 “Financial Instruments: Disclosures” apply to us because we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9 “Financial Instruments” (IFRS 9). The amendments are effective for annual periods beginning on or after January 1, 2020.

CIBC elected to early adopt the amendments effective November 1, 2019 to prepare for uncertainties that may increase relating to the timing or amount of benchmark-based cash flows of hedged items and hedging instruments. The relief provided in the amendments allows hedge accounting to continue during the period of uncertainty before the replacement of existing interest rate benchmarks with an alternative rate. Significant judgment is involved in identifying the hedge accounting relationships that are directly affected by interest rate benchmark reform as different jurisdictions are transitioning at different stages and may adopt different transition approaches.

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Management’s discussion and analysis

The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit London Interbank Offered Rate (LIBOR) rates after December 2021. This may cause LIBOR and other current benchmarks to disappear entirely or perform differently than in the past, create disincentives for market participants to continue to administer and contribute to certain benchmarks, or have other consequences which cannot be predicted. The FCA and the ICE Benchmark Administrator recently announced a consultation process that may lead to a change in the expected timing of cessation of certain currencies and tenors of LIBOR, which CIBC will closely monitor. As at November 1, 2019, the notional amount of our derivatives in designated hedge accounting relationships that were indexed to U.S. LIBOR and British pound sterling (GBP) LIBOR, with a maturity date beyond December 31, 2021, was $48 billion. We expect the derivatives indexed to the Euro Interbank Offered Rate (EURIBOR) and the Canadian Dollar Offered Rate (CDOR) that are in our designated hedge accounting relationships to continue beyond 2021 in conjunction with alternative rates that might be applied in the impacted markets. We also continue to monitor benchmark rates in other jurisdictions as they continue to evaluate benchmark reform.

In August 2020, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16”, which addresses issues that affect financial reporting once an existing rate is replaced with an alternative rate and provides specific disclosure requirements. The amendments are effective for annual periods beginning on or after January 1, 2021. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9, the amendments will apply to IAS 39, IFRS 7, IFRS 4 and IFRS 16 for us, mandatorily effective on November 1, 2021. Earlier application is permitted. We continue to evaluate the impact of the amendments on our consolidated financial statements.

We previously established an enterprise-wide transition program to assess the impact of interest rate benchmark reform and manage the process to transition to alternative benchmark rates. For details on this program, refer to the “Other regulatory developments” section.

International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments”

CIBC adopted International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments” (IFRIC 23) as at November 1, 2019. IFRIC 23 clarifies the accounting for uncertainties in income taxes. There was no impact to our

consolidated financial statements and no changes in our accounting policies as a result of adopting IFRIC 23.

IFRS 15 “Revenue from Contracts with Customers”

CIBC adopted IFRS 15 “Revenue from Contracts with Customers” (IFRS 15) as at November 1, 2018 in place of prior guidance, including IAS 18 “Revenue” and IFRIC 13 “Customer Loyalty Programmes”. We applied IFRS 15 on a modified retrospective basis. As permitted, we did not restate our prior period comparative consolidated financial statements. Amounts reported related to the year ended October 31, 2018 are reported under the prior guidance, including IAS 18 and IFRIC 13, and are therefore not comparable to the information presented for 2019 or 2020. The application of IFRS 15 did not significantly impact our critical accounting policies.

Use and classification of financial instruments

As a financial institution, our assets and liabilities primarily comprise financial instruments, which include deposits, securities, loans, derivatives, acceptances, repurchase agreements, and subordinated indebtedness.

We use these financial instruments for both trading and non-trading activities. Trading activities primarily include the purchase and sale of securities, transacting in foreign exchange and derivative instruments in the course of facilitating client trades and taking proprietary trading positions with the objective of income generation. Non-trading activities generally include the business of lending, investing, funding, and ALM.

The use of financial instruments may either introduce or mitigate exposures to market, credit and/or liquidity risks. See the “Management of risk” section for details on how these risks are managed.

Financial instruments are accounted for according to their classification. Judgment is applied in determining the appropriate classification of financial instruments under IFRS 9, in particular as it relates to the assessment of whether debt financial assets meet the solely payment of principal and interest (SPPI) test, and the assessment of the business model used to manage financial assets. For details on the accounting for these instruments under IFRS 9, see Note 1 to the consolidated financial statements.

Accounting for FVOCI securities under IFRS 9

FVOCI securities include debt securities that meet the SPPI criteria and the “Hold to collect and for sale” business model and equity securities that are designated at FVOCI upon initial recognition. Impairment of equity securities designated at FVOCI is not required under IFRS 9 because unrealized gains or losses are recognized in OCI and are directly reclassified to retained earnings upon disposition of the equity securities with no recycling to profit or loss.

FVOCI debt securities under IFRS 9 are measured at fair value, with the difference between the fair value and the amortized cost included in AOCI. However, FVOCI debt securities are subject to the ECL impairment model under IFRS 9. For more details, refer to the “Impairment of financial assets” section below and Note 1 to the consolidated financial statements.

Determination of fair value of financial instruments

Under IFRS 9, debt and equity securities mandatorily measured and designated at FVTPL, business and government loans mandatorily measured and designated at FVTPL, obligations related to securities sold short, derivative contracts, FVOCI securities and FVO financial instruments are carried at fair value. FVO financial instruments include certain debt securities, certain secured borrowings, obligations related to securities sold under repurchase agreements, structured deposits and business and government deposits. Retail mortgage interest rate commitments are also designated as FVO financial instruments.

IFRS 13 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability at the measurement date in an orderly arm’s-length transaction between market participants in the principal market under current market conditions (i.e., the exit price). Fair value measurements are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Level 1, 2 or 3). We have an established and documented process for determining fair value. Fair value is based on unadjusted quoted prices in an active market for the same instrument, where available (Level 1). If active market prices or quotes are not available for an instrument, fair value is then based on valuation models in which the significant inputs are observable (Level 2) or in which one or more of the significant inputs are non-observable (Level 3). Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available.

For instruments valued using internally developed models that use significant non-observable market inputs and are therefore classified within Level 3 of the hierarchy, the judgment used to estimate fair value is more significant than when estimating the fair value of instruments classified within Levels 1 and 2. To ensure that valuations are appropriate, a number of policies and controls are in place, including independent validation of valuation inputs to external sources such as exchange quotes, broker quotes or other management-approved independent pricing sources.

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Management’s discussion and analysis

The following table presents amounts, in each category of financial instruments, which are valued using valuation techniques based on Level 3 inputs. For further details of the valuation of and sensitivity associated with Level 3 financial assets and liabilities, see Note 3 to the consolidated financial statements.

$ millions, as at October 31				2020					2019
	Level 3			Total (1)			Level 3		Total (1)
Assets
Securities mandatorily measured and designated at FVTPL and loans mandatorily measured at FVTPL	$	802			0.9	%	$	1,034		1.4	%
Debt securities measured at FVOCI and equity securities designated at FVOCI		240			0.4			291		0.6
Derivative instruments		358			1.1			412		1.7
	$	1,400			0.8	%	$	1,737		1.1	%
Liabilities
Deposits and other liabilities (2)	$	(4	)		–	%	$	601		5.4	%
Derivative instruments		298			1.0			268		1.1
	$	294			0.4	%	$	869		1.7	%

(1) Represents the percentage of Level 3 assets and liabilities over total assets and liabilities for each reported category that are carried on the consolidated balance sheet at fair value.

(2) Includes FVO deposits and bifurcated embedded derivatives.

Note 3 to the consolidated financial statements presents the valuation methods used to determine fair value showing separately those financial instruments that are carried at fair value on the consolidated balance sheet and those that are not.

In order to reflect the observed market practice of pricing collateralized and uncollateralized derivatives, our valuation approach uses overnight indexed swap curves as the discount rate in the valuation of collateralized derivatives and market cost of funding in the valuation of uncollateralized derivatives. The use of a market cost of funds curve reduces the fair value of uncollateralized derivative assets incremental to the reduction in fair value for credit risk already reflected through the CVA. In contrast, the use of a market cost of funds curve reduces the fair value of uncollateralized derivative liabilities in a manner that generally includes adjustments for our own credit. As market practices continue to evolve in regard to derivative valuation, further adjustments may be required in the future.

Fair value adjustments

We apply judgment in establishing valuation adjustments that take into account various factors that may have an impact on the valuation of financial instruments that are carried at fair value on the consolidated balance sheet. Such factors include, but are not limited to, the bid-offer spread, illiquidity due to lack of market depth and other market risks, parameter uncertainty, model risk, and credit risk.

The establishment of fair value adjustments involves estimates that are based on accounting processes and judgments by management. We evaluate the adequacy of the fair value adjustments on an ongoing basis. The level of fair value adjustments could change as events warrant and may not reflect ultimate realizable amounts.

The COVID-19 pandemic has increased market volatility and has negatively impacted the trading levels of certain financial instruments. As a result and as part of our process to determine the fair value of financial instruments, since the onset of the pandemic, we have applied a heightened level of judgment to a broader population of financial instruments than would otherwise generally be required with the objective of determining the fair value that is most representative of those financial instruments. While there has been an improvement in conditions and price discovery in the third and fourth quarters of 2020 relative to the onset of the COVID-19 pandemic in the second quarter of 2020, including the narrowing of credit and funding spreads, the related valuation adjustments have not decreased to pre-COVID-19 levels.

As at October 31, 2020, the total valuation adjustments related to financial instruments carried at fair value on the consolidated balance sheet was $358 million (2019: $260 million), primarily related to credit risk, bid-offer spreads, and parameter uncertainty of our derivative assets and liabilities, as well as adjustments recognized for valuing our uncollateralized derivative assets and liabilities based on an estimated market cost of funds curve.

Impairment of financial assets

Under IFRS 9, we establish and maintain ECL allowances for all debt instrument financial assets classified as amortized cost or FVOCI. In addition, the ECL allowances apply to loan commitments and financial guarantees that are not measured at FVTPL.

ECL allowances represent credit losses that reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. The objective of IFRS 9 is to record lifetime losses on all financial instruments which have experienced a significant increase in credit risk since their initial recognition. As a result, ECL allowances are measured at amounts equal to either: (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments which have experienced a significant increase in credit risk since initial recognition or when there is objective evidence of impairment.

Key drivers of expected credit loss

The ECL impairment requirements of IFRS 9 require that we make judgments and estimates related to matters that are uncertain. In particular, the ECL requirements of IFRS 9 incorporate the following elements that are subject to a high level of judgment:

• Determining when a significant increase in credit risk of a loan has occurred;

• Measuring both 12-month and lifetime credit losses; and

• Forecasting forward-looking information for multiple scenarios and determining the probability weighting of each scenario.

In addition, the interrelationship between these elements is also subject to a high degree of judgment. Changes in the judgments and estimates related to IFRS 9 can have a significant impact on the level of ECL allowance recognized and the period-over-period volatility of the provision for credit losses. Changes in a particular period could have a material impact on our financial results.

The uncertainty created by the COVID-19 pandemic has increased the level of judgment applied in respect of all of these elements. See Note 6 to our consolidated financial statements for more information concerning the high level of judgment inherent in the estimation of ECL allowance under IFRS 9, including the impact of the COVID-19 pandemic.

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Management’s discussion and analysis

Use of the regulatory framework

Our ECL model leverages the data, systems and processes that are used to calculate Basel expected losses regulatory adjustments for the portion of our portfolios under the AIRB approach. Appropriate adjustments are made to the Basel parameters to meet IFRS 9 requirements, including the conversion of through-the-cycle and downturn parameters used in the Basel regulatory calculations to point-in-time parameters used under IFRS 9 that consider forward-looking information. In addition, credit losses under IFRS 9 are for 12 months for stage 1 financial instruments and lifetime for stage 2 and stage 3 financial instruments, as compared with 12 months for AIRB portfolios under Basel. The main adjustments necessary to Basel risk parameters are explained in the table below:

	Regulatory Capital	IFRS 9
PD	Through-the-cycle PD represents long-run average PD throughout a full economic cycle	Point-in-time 12-month or lifetime PD based on current conditions and relevant forward-looking assumptions
LGD	Downturn LGD based on losses that would be expected in an economic downturn and subject to certain regulatory floors Discounted using the cost of capital	Unbiased probability-weighted LGD based on estimated LGD including impact of relevant forward-looking assumptions such as changes in collateral value Discounted using the original effective interest rate
EAD	Based on the drawn balance plus expected utilization of any undrawn portion prior to default, and cannot be lower than the drawn balance	Amortization and repayment of principal and interest from the balance sheet date to the default date is also captured
Other		ECL is discounted from the default date to the reporting date

Attribution of provision for credit losses

We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs. Provision for credit losses recognized directly on our consolidated statement of income is in respect to financial instruments classified as loans and bankers’ acceptances. Provision for credit losses for FVOCI debt securities and amortized cost securities are recognized in gains (losses) from debt securities measured at FVOCI and amortized cost, net in the consolidated statement of income.

Hedge accounting

The IFRS 9 hedge accounting guidance is intended to better align the accounting with risk management activities. However, IFRS 9 allows the existing hedge accounting requirements under IAS 39 to continue in place of the hedge accounting requirements under IFRS 9. As permitted, we have elected to not adopt the IFRS 9 hedge accounting requirements and instead have retained the IAS 39 hedge accounting requirements. As required, we have adopted the hedge accounting disclosure requirements under amendments to IFRS 7 that were effective in 2018.

Securitizations and structured entities

Securitization of our own assets

Under IFRS 10 “Consolidated Financial Statements” (IFRS 10), judgment is exercised in determining whether an investor controls an investee including assessing whether the investor has: (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to affect those returns through its power over the investee.

We sponsor several SEs that have purchased and securitized our own assets including Cards II Trust, which we consolidate under IFRS 10.

We also securitize our own mortgage assets through a government-sponsored securitization program. We sell these securitized assets to a government-sponsored securitization vehicle that we do not consolidate, as well as to other third parties. IFRS 9 provides guidance on when to derecognize financial assets. A financial asset is derecognized when the contractual rights to receive cash flows from the asset have expired, or when we have transferred the rights to receive cash flows from the asset such that:

• We have transferred substantially all the risks and rewards of the asset; or

• We have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.

We have determined that our securitization activities related to residential mortgages and cards receivables are accounted for as secured borrowing transactions because we have not met the aforementioned criteria.

Securities lending and repurchase transactions generally do not result in the transfer of substantially all the risks and rewards of the securities and as a result do not result in derecognition of the securities.

We also sell certain U.S. commercial mortgages to third parties that qualify for derecognition because we have transferred substantially all the risks and rewards of the mortgages and have no continuous involvement after the transfer.

Securitization of third-party assets

We also sponsor several SEs that purchase pools of third-party assets. We consider a number of factors in determining whether CIBC controls these SEs. We monitor the extent to which we support these SEs, through direct investment in the debt issued by the SEs and through the provision of liquidity protection to the other debtholders, to assess whether we should consolidate these entities.

IFRS 10 also requires that we reconsider our consolidation assessment if facts and circumstances relevant to the entities indicate that there are changes to one or more of the three elements of control described above. Factors that trigger reassessment include, but are not limited to, significant changes in ownership structure of the entities, changes in contractual or governance arrangements, provision of a liquidity facility beyond the original terms, transactions with the entities that were not contemplated originally and changes in the financing structure of the entities.

Specifically, in relation to our multi-seller conduits, we would reconsider our consolidation assessment if our level of interest in the ABCP issued by the conduits changes significantly, or in the rare event that the liquidity facility that we provide to the conduits is drawn or amended.

A significant increase in our holdings of the outstanding commercial paper issued by the conduits would become more likely in a scenario in which the market for bank-sponsored ABCP suffered a significant deterioration such that the conduits were unable to roll their ABCP.

For additional information on the securitizations of our own assets and third-party assets, see the “Off-balance sheet arrangements” section and Note 7 to the consolidated financial statements.

86 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Asset impairment

Goodwill

As at October 31, 2020, we had goodwill of $5,253 million (2019: $5,449 million). Goodwill is not amortized, but is tested, at least annually, for impairment by comparing the recoverable amount of the cash-generating unit (CGU) to which goodwill has been allocated, with the carrying amount of the CGU including goodwill. Any deficiency is recognized as impairment of goodwill. The recoverable amount of a CGU is defined as the higher of its estimated fair value less cost to sell and its value in use. Goodwill is also required to be tested for impairment whenever there are indicators that it may be impaired.

Estimation of the recoverable amount is an area of significant judgment. Recoverable amounts are estimated using internally developed models which require the use of significant assumptions including forecasted earnings, discount rates, growth rates, forecasted regulatory capital requirements, and price-earnings multiples. Reductions in the estimated recoverable amount could arise from various factors, such as reductions in forecasted cash flows, an increase in the assumed level of required capital, and any adverse changes to the discount rate or terminal growth rates either in isolation or in any combination thereof. Where our estimated recoverable amount is not significantly in excess of the carrying amount of the CGU, additional judgment is required, and reductions in the recoverable amount are more likely to result in an impairment charge.

In the fourth quarter of 2020, we performed our annual impairment test. This assessment required the application of heightened judgment in light of the uncertainty regarding the ultimate economic impact of the COVID-19 pandemic, particularly in evaluating the impact on medium and long-term forecasted earnings. Implicit in our economic outlook is the assumption that the manner in which governments respond to the current second and subsequent waves of the virus, and the dissemination of an effective mass produced vaccine, will allow the U.S. and Canadian economies to continue to recover during 2021, with the economy returning to pre-COVID levels of economic activity in 2022 and pre-COVID levels of unemployment in 2023.

As discussed in Note 4 to our consolidated financial statements, in the second quarter of 2020 we recognized a goodwill impairment charge of $28 million on our CIBC FirstCaribbean CGU. In the fourth quarter of 2020, we concluded that held for sale accounting is no longer appropriate and we recognized an additional goodwill impairment charge of $220 million based on our revised estimate of the recoverable value of CIBC FirstCaribbean. This reduced the carrying amount of the goodwill relating to the CIBC FirstCaribbean CGU to $35 million (US$26 million) as at October 31, 2020.

Reductions in the estimated recoverable amount of the CIBC FirstCaribbean CGU could arise from various factors, including changes in market conditions.

For additional information, see Note 4 and Note 9 to our consolidated financial statements.

Other intangible assets and long-lived assets

As at October 31, 2020, we had other intangible assets with an indefinite life of $142 million (2019: $142 million). Acquired intangible assets are separately recognized if the benefits of the intangible assets are obtained through contractual or other legal rights, or if the intangible assets can be sold, transferred, licensed, rented, or exchanged. Determining the useful lives of intangible assets requires judgment and fact-based analysis.

Intangible assets with an indefinite life are not amortized but are assessed for impairment by comparing the recoverable amount to the carrying amount. An impairment test is required at least annually, or whenever there are indicators that these assets may be impaired.

Long-lived assets and other identifiable intangible assets with a definite life are amortized over their estimated useful lives. These assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount is higher than the recoverable amount. The recoverable amount is defined as the higher of the estimated fair value less cost to sell and value in use.

Determining the recoverable amount of intangible assets and long-lived assets is an area of judgment as we estimate the future cash flows expected to result from the use of the asset and, where appropriate, cash flows arising from the asset’s eventual disposition.

For additional details, see Note 9 to the consolidated financial statements.

Income taxes

We are subject to income tax laws in the various jurisdictions where we operate, and the tax laws in those jurisdictions are potentially subject to different interpretations by us and the relevant taxation authority, which gives rise to uncertainty. We use judgment in the estimation of income taxes and deferred tax assets and liabilities. As a result, management judgment is applied in the interpretation of the relevant tax laws and in estimating the provision for current and deferred income taxes. For tax positions where there is uncertainty regarding the ultimate determination of the tax impact, including positions which are under audit, dispute or appeal, we recognize provisions to consider this uncertainty based on our best estimate of the amount expected to be paid based on an assessment of the relevant factors.

Deferred tax assets or liabilities are determined for each temporary difference based on the tax rates that are expected to be in effect in the period that the assets are realized or the liabilities are settled. Deferred tax liabilities are generally recognized for all taxable temporary differences unless the temporary differences relate to our net investments in foreign operations (NIFOs) and will not reverse in the foreseeable future.

We are required to assess whether it is probable that our deferred tax assets will be realized prior to their expiration and, based on all of the available evidence, determine if any portion of our deferred tax assets should not be recognized. The factors used to assess the probability of realization are based on our past experience of income and capital gains, forecasts of future net income before income taxes, available tax planning strategies that could be implemented to realize the deferred tax assets, and the remaining expiration period of tax loss carryforwards. In addition, for deductible temporary differences arising from our NIFOs, we must consider whether the temporary difference will reverse in the foreseeable future. Although realization is not assured, we believe, based on all of the available evidence, it is probable that the recognized deferred tax assets will be realized.

Income tax accounting impacts all of our reporting segments. For further details on our income taxes, see Note 20 to the consolidated financial statements.

Contingent liabilities and provisions

Legal proceedings and other contingencies

In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount appears to be a better estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other amount, the mid-point in the range is accrued. In some instances, however, it is not possible to determine whether an obligation is probable or to reliably estimate the amount of loss, in which case no accrual can be made.

While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our consolidated financial

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Management’s discussion and analysis

statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting period. We regularly assess the adequacy of CIBC’s litigation accruals and make the necessary adjustments to incorporate new information as it becomes available.

CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.

A description of significant ongoing matters to which CIBC is a party can be found in Note 23 to the consolidated financial statements. The provisions disclosed in Note 23 include all of CIBC’s accruals for legal matters as at October 31, 2020, including amounts related to the significant legal proceedings described in that note and to other legal matters.

CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal proceedings, where it is possible to make such an estimate, is from nil to approximately $1.1 billion as at October 31, 2020. This estimated aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is involved, taking into account CIBC’s best estimate of such losses for those cases for which an estimate can be made. CIBC’s estimate involves significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the estimated range as at October 31, 2020 consist of the significant legal matters disclosed in Note 23 to the consolidated financial statements. The matters underlying the estimated range will change from time to time, and actual losses may vary significantly from the current estimate. For certain matters, CIBC does not believe that an estimate can currently be made as many of them are in preliminary stages and certain matters have no specific amount claimed. Consequently, these matters are not included in the range.

Restructuring

During the first quarter of 2020, we recognized a restructuring charge of $339 million in Corporate and Other associated with ongoing efforts to transform our cost structure and simplify our bank. This charge consisted primarily of employee severance and related costs and was recorded in Non-interest expenses – Employee compensation and benefits. For further details on our restructuring provision, see Note 23 to the consolidated financial statements.

Post-employment and other long-term benefit plan assumptions

We sponsor a number of benefit plans to eligible employees, including registered and supplemental pension plans, and post-retirement medical and dental plans (other post-employment benefit plans). We also continue to sponsor a long-term disability income replacement plan and associated medical and dental benefits (collectively, other long-term benefit plans). The long-term disability plan was closed to new claims effective June 1, 2004.

The calculation of net defined benefit plan expense and obligations depends on various actuarial assumptions such as discount rates, health-care cost trend rates, turnover of employees, projected salary increases, retirement age, and mortality rates. The actuarial assumptions used for determining the net defined benefit plan expense for a fiscal year are set at the beginning of the annual reporting period, are reviewed in accordance with accepted actuarial practice and are approved by management.

The discount rate assumption used in measuring the net defined benefit plan expense and obligations reflects market yields, as of the measurement date, on high quality debt instruments with a currency and term to maturity that match the currency and expected timing of benefit payments. Our discount rate is estimated by developing a yield curve based on high quality corporate bonds. While there is a deep market of high quality corporate bonds denominated in Canadian dollars with short and medium terms to maturity, there is not a deep market in bonds with terms to maturity that match the timing of all the expected benefit payments for all of our Canadian plans. As a result, for our Canadian pension, other post-employment and other long-term benefit plans, we estimate the yields of high quality corporate bonds with longer-term maturities by extrapolating current yields on bonds with short- and medium-term durations along the yield curve. Judgment is required in constructing the yield curve, and as a result, different methodologies applied in constructing the yield curve can give rise to different discount rates.

For further details of our annual pension and other post-employment expense and obligations, see Note 19 and Note 1 to the consolidated financial statements.

Accounting developments

Conceptual Framework for Financial Reporting

In March 2018, the IASB issued a revised version of its “Conceptual Framework for Financial Reporting” (Conceptual Framework). The Conceptual Framework sets out the fundamental concepts that underlie the preparation and presentation of financial statements and serves to guide the IASB in developing IFRS standards. The Conceptual Framework also assists entities in developing accounting policies when no IFRS standard applies to a particular transaction, and more broadly, the Conceptual Framework helps entities to understand and interpret the standards. The Conceptual Framework is effective for annual periods beginning on or after January 1, 2020, which for us will be on November 1, 2020.

The impact of the Conceptual Framework is not expected to be significant to our consolidated financial statements.

Transition to IFRS 17

IFRS 17 “Insurance Contracts” (IFRS 17), issued in May 2017, replaces IFRS 4 “Insurance Contracts”. In June 2020, the IASB issued amendments to IFRS 17 partly aimed at helping companies implement the standard. IFRS 17, incorporating the amendments, is effective for annual reporting periods beginning on or after January 1, 2023, which is a two-year deferral from the original effective date, and for us, will be November 1, 2023. IFRS 17 provides comprehensive guidance on the recognition, measurement, presentation and disclosure of insurance contracts we issue and reinsurance contracts we hold.

We continue to evaluate the impact of IFRS 17 on our consolidated financial statements and to prepare for its implementation. We have established an Executive Steering Committee and a project team to support the implementation of IFRS 17. This team continues to determine the required changes to our accounting and actuarial policies resulting from the adoption of IFRS 17, including the amendments issued in June 2020, and to evaluate the required technology solution to support the new requirements.

Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

Refer to discussions under the “Other regulatory developments” section for details.

88 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Other regulatory developments

Reforms to interest rate benchmarks

Various interest rate and other indices that are deemed to be “benchmarks” (including the LIBOR) are the subject of international regulatory guidance and proposals for reform. The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. This may cause LIBOR and other current benchmarks to disappear entirely or perform differently than in the past, create disincentives for market participants to continue to administer and contribute to certain benchmarks, or have other consequences which cannot be predicted. The FCA and the ICE Benchmark Administrator recently announced a consultation process that may lead to a change in the expected timing of cessation of certain currencies and tenors of LIBOR, which CIBC will closely monitor. The transition from current reference rates may adversely affect the value of, return on, or trading market for contracts linked to existing benchmarks.

A significant number of CIBC’s derivatives, and lending and deposit contracts reference various interest rate benchmarks, including contracts with maturity dates that extend beyond December 2021. CIBC also holds securities that reference interbank offered rates.

In response to the proposed reforms to interest rate benchmarks, CIBC has established an Enterprise IBOR Transition Program (the “Program”), which is supported by a formal governance structure and dedicated working groups that include stakeholders from frontline businesses as well as functional groups such as Treasury, Technology and Operations, Risk Management, Legal, and Finance, to assess the impact across all of our products and to manage the process through transition. A comprehensive initial impact assessment of contracts that reference various interbank offered rates has been completed to develop an enterprise-wide project plan to support the Program. Key features of this plan include:

• Development of detailed business-level remediation plans for affected contracts, processes and systems;

• An enterprise-wide communication strategy, which includes both external and internal stakeholders; and

• Formalization of an enterprise-wide exposure management process.

An IBOR Steering Committee has been established with responsibility for oversight and execution of the Program, including:

• Ensuring key project milestones are met;

• Providing direction and guidance on a holistic basis;

• Reviewing and resolving key issues and risks; and

• Ensuring that our transition strategies and any transition actions remain consistent with CIBC’s overall strategy, risk appetite, and control framework.

We continue to assess the impact of IBOR reform and prepare for the transition of existing IBOR based contracts to those that reference the new risk-free rates, which includes the development of supporting business processes. We also continue to engage with industry associations to incorporate recent developments into our project plan. The Program provides regular updates to senior management, including the ExCo.

Current and future accounting policy changes relating to interest rate benchmark reform

The IASB has addressed the interest rate benchmark reform and its effects on financial reporting in two phases. The first phase focuses on issues affecting financial reporting in the period before the interest rate benchmark reform, and the second phase focuses on issues that affect financial reporting once the existing rate is replaced with an alternative rate. In September 2019, the IASB finalized phase one through the issuance of “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7”. CIBC elected to early-adopt the phase one amendments effective November 1, 2019. As a result, we provided certain disclosures related to hedging derivatives that reference LIBOR.

In August 2020, IASB finalized phase two through the issuance of “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16”, which addresses issues that affect financial reporting once an existing rate is replaced with an alternative rate and provides specific disclosure requirements. The phase two amendments are effective for annual periods beginning on or after January 1, 2021. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9, the phase two amendments will apply to IAS 39, IFRS 7, IFRS 4 and IFRS 16 for us, mandatorily effective on November 1, 2021. Earlier application is permitted. We continue to evaluate the impact of the phase two amendments on our consolidated financial statements.

CIBC continues to actively engage with the industry through various working groups to ensure alignment with market developments in relevant jurisdictions, and will continue to monitor developments in this area including accounting developments intended to address interest rate benchmark reform.

Client Focused Reforms

In October 2019, the Canadian Securities Administrators published “Reforms to Enhance the Client-Registrant Relationship”, an amendment to National Instrument 31–103 and its companion policy (referred to as the “Client Focused Reforms”), which is intended to raise the standard of conduct required for registered dealers and advisors to ensure that registrants put client interests’ first. The Client Focused Reforms are supported by the introduction of a know-your-product provision and enhancements to the know-your-client, suitability, conflicts of interest, and relationship disclosure information requirements.

The Client Focused Reforms came into effect on December 31, 2019 and will be phased in over a two-year period, with the conflicts of interest provisions to be implemented by June 2021 and all remaining provisions by December 2021. These requirements will impact our Canadian Commercial Banking and Wealth Management and Canadian Personal and Business Banking SBUs and we expect to implement changes to our policies and procedures to comply with these requirements.

CDIC – Deposit protection modernization

In April 2019, the Canadian federal government approved changes to the Canada Deposit Insurance Corporation Act intended to strengthen and modernize deposit protection. The changes will occur in two phases. The first phase was effective on April 30, 2020, and included changes to extend CDIC coverage to foreign currency deposits and deposits with terms greater than five years and to eliminate coverage for travellers’ cheques. The second phase will be effective on April 30, 2022, and will include additional changes such as providing separate coverage for certain registered plans and introducing new requirements for deposits held in trust.

CIBC 2020 ANNUAL REPORT 89

Management’s discussion and analysis

Related-party transactions

We have various processes in place to ensure that the relevant related-party information is identified and reported to the CGC of the Board on a quarterly basis, as required by the Bank Act (Canada). The CGC has the responsibility for reviewing our policies and practices in identifying transactions with our related parties that may materially affect us, and reviewing the associated procedures for promoting compliance with the Bank Act (Canada).

In the ordinary course of business, we provide banking services and enter into transactions with related parties on terms similar to those offered to unrelated parties. Related parties include key management personnel⁽¹⁾, their close family members, and entities that they or their close family members control or jointly control. Related parties also include associates and joint ventures accounted for under the equity method, and post-employment benefit plans for CIBC employees. Loans to these related parties are made in the ordinary course of business and on substantially the same terms as for comparable transactions with unrelated parties. We offer a subsidy on annual fees and preferential interest rates on credit card balances to senior officers which is the same offer extended to all employees of CIBC. In addition, CIBC offers deferred share and other plans to non-employee directors, executives, and certain other key employees. Details of our compensation of key management personnel⁽¹⁾ and our investments in equity-accounted associates and joint ventures are disclosed in Notes 25, 18, 19 and 26 to the consolidated financial statements.

(1) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of CIBC directly or indirectly and comprise the members of the Board (referred to as directors), ExCo and certain named officers per the Bank Act (Canada) (collectively referred to as senior officers). Board members who are also ExCo members are included as senior officers.

Policy on the Scope of Services of the Shareholders’ Auditor

The “Policy on the Scope of Services of the Shareholders’ Auditor” sets out the parameters for the engagement of the shareholders’ auditor by CIBC that are consistent with applicable law, including the U.S. Sarbanes-Oxley Act of 2002 and SEC rules. The policy requires the Audit Committee’s pre-approval of all work performed by the shareholders’ auditor and prohibits CIBC from engaging the shareholders’ auditor for “prohibited” services. The Audit Committee is accountable for the oversight of the work of the shareholders’ auditor and for an annual assessment of the engagement team’s qualifications, performance and independence, including lead audit partner rotation. The Audit Committee is also responsible for conducting a periodic comprehensive review of the external auditor at least every five years. The Audit Committee’s oversight activities over the shareholders’ auditor are disclosed in our Management Proxy Circular.

Controls and procedures

Disclosure controls and procedures

CIBC’s disclosure controls and procedures are designed to provide reasonable assurance that relevant information is accumulated and communicated to CIBC’s management, including the President and CEO and the Chief Financial Officer (CFO), to allow timely decisions regarding required disclosure.

CIBC’s management, with the participation of the President and CEO and the CFO, has evaluated the effectiveness of CIBC’s disclosure controls and procedures as at October 31, 2020 (as defined in the rules of the SEC and the Canadian Securities Administrators). Based on that evaluation, the President and CEO and the CFO have concluded that such disclosure controls and procedures were effective.

Management’s annual report on internal control over financial reporting

CIBC’s management is responsible for establishing and maintaining adequate internal control over financial reporting for CIBC.

Internal control over financial reporting is a process designed by, or under the supervision of, the President and CEO and the CFO and effected by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. CIBC’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of CIBC; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures of CIBC are being made only in accordance with authorizations of CIBC’s management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of CIBC’s assets that could have a material effect on the consolidated financial statements.

All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements on a timely basis. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

CIBC’s management has used the Internal Control – Integrated Framework that was published in 2013 by the COSO as the basis to evaluate the effectiveness of CIBC’s internal control over financial reporting.

As at October 31, 2020, management assessed the effectiveness of CIBC’s internal control over financial reporting and concluded that such internal control was effective.

Ernst & Young LLP, the external auditor, has audited the consolidated financial statements of CIBC for the year ended October 31, 2020, and has also issued a report on internal control over financial reporting under standards of the Public Company Accounting Oversight Board (United States).

Changes in internal control over financial reporting

There have been no changes in CIBC’s internal control over financial reporting during the year ended October 31, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control.

90 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Supplementary annual financial information

Average balance sheet, net interest income and margin

		Average balance						Interest							Average rate
$ millions, for the year ended October 31		2020		2019		2018		2020		2019		2018			2020			2019			2018
Domestic assets (1)
Cash and deposits with banks		$	30,232	$	7,156	$	5,541	$	150	$	164	$	95			0.50	%		2.29	%		1.71	%
Securities			76,063		66,954		58,854		1,776		1,852		1,434			2.33			2.77			2.44
Securities borrowed or purchased under resale agreements			26,498		23,950		25,320		290		496		404			1.09			2.07			1.60
Loans	Residential mortgages		208,811		203,575		204,536		5,581		6,347		5,740			2.67			3.12			2.81
	Personal and credit card		51,948		53,490		52,314		3,433		4,012		3,731			6.61			7.50			7.13
	Business and government		68,072		63,131		54,298		2,043		2,434		1,824			3.00			3.86			3.36
Total loans			328,831		320,196		311,148		11,057		12,793		11,295			3.36			4.00			3.63
Other interest-bearing assets			5,194		3,837		2,041		62		128		12			1.19			3.34			0.59
Derivative instruments			14,334		10,248		11,660		–		–		–			–			–			–
Customers’ liability under acceptances			9,560		10,170		10,038		–		–		–			–			–			–
Other non-interest-bearing assets			19,641		17,386		15,007		–		–		–			–			–			–
Total domestic assets			510,353		459,897		439,609		13,335		15,433		13,240			2.61			3.36			3.01
Foreign assets (1)
Cash and deposits with banks			20,050		13,305		14,283		99		232		187			0.49			1.74			1.31
Securities			62,014		49,059		43,300		792		927		835			1.28			1.89			1.93
Securities borrowed or purchased under resale agreements			42,199		35,491		29,719		552		978		649			1.31			2.76			2.18
Loans	Residential mortgages		4,429		3,815		3,401		176		201		176			3.97			5.27			5.17
	Personal and credit card		1,309		1,435		1,266		97		105		98			7.41			7.32			7.74
	Business and government		66,015		55,443		47,117		2,416		2,819		2,319			3.66			5.08			4.92
Total loans			71,753		60,693		51,784		2,689		3,125		2,593			3.75			5.15			5.01
Other interest-bearing assets			701		555		265		55		2		1			7.85			0.36			0.38
Derivative instruments			20,629		13,419		12,387		–		–		–			–			–			–
Customers’ liability under acceptances			1		–		–		–		–		–			–			–			–
Other non-interest-bearing assets			7,792		7,297		7,094		–		–		–			–			–			–
Total foreign assets			225,139		179,819		158,832		4,187		5,264		4,265			1.86			2.93			2.69
Total assets		$	735,492	$	639,716	$	598,441	$	17,522	$	20,697	$	17,505			2.38	%		3.24	%		2.93	%
Domestic liabilities (1)
Deposits	Personal	$	172,913	$	157,537	$	148,143	$	1,405	$	1,861	$	1,299			0.81	%		1.18	%		0.88	%
	Business and government		178,476		153,092		134,382		2,019		3,033		1,378			1.13			1.98			1.03
	Bank		2,105		1,915		2,188		13		29		26			0.62			1.51			1.19
	Secured borrowings		39,076		39,111		43,085		668		1,037		952			1.71			2.65			2.21
Total deposits			392,570		351,655		327,798		4,105		5,960		3,655			1.05			1.69			1.12
Derivative instruments			14,398		10,790		11,207		–		–		–			–			–			–
Acceptances			9,563		10,171		10,039		–		–		–			–			–			–
Obligations related to securities sold short			16,794		15,412		14,708		251		285		269			1.49			1.85			1.83
Obligations related to securities lent or sold under repurchase agreements			27,374		15,995		13,699		220		477		329			0.80			2.98			2.40
Other liabilities			6,464		14,621		13,754		49		9		(7	)		0.76			0.06			(0.05	)
Subordinated indebtedness			4,891		4,549		3,645		152		193		170			3.11			4.24			4.66
Total domestic liabilities			472,054		423,193		394,850		4,777		6,924		4,416			1.01			1.64			1.12
Foreign liabilities (1)
Deposits	Personal		16,974		15,543		13,511		142		193		114			0.84			1.24			0.84
	Business and government		113,877		97,429		101,583		964		2,068		2,319			0.85			2.12			2.28
	Bank		13,891		12,277		12,543		100		197		152			0.72			1.60			1.21
	Secured borrowings		1,322		226		–		15		4		–			1.13			1.77			–
Total deposits			146,064		125,475		127,637		1,221		2,462		2,585			0.84			1.96			2.03
Derivative instruments			20,718		14,130		11,905		–		–		–			–			–			–
Acceptances			1		–		–		–		–		–			–			–			–
Obligations related to securities sold short			1,047		1,089		592		3		6		3			0.29			0.55			0.51
Obligations related to securities lent or sold under repurchase agreements			41,881		35,413		27,364		436		721		407			1.04			2.04			1.49
Other liabilities			13,706		3,014		2,420		34		28		25			0.25			0.93			1.03
Subordinated indebtedness			152		150		151		7		5		4			4.61			3.33			2.65
Total foreign liabilities			223,569		179,271		170,069		1,701		3,222		3,024			0.76			1.80			1.78
Total liabilities			695,623		602,464		564,919		6,478		10,146		7,440			0.93			1.68			1.32
Shareholders’ equity			39,682		37,072		33,336		–		–		–			–			–			–
Non-controlling interests			187		180		186		–		–		–			–			–			–
Total liabilities and equity		$	735,492	$	639,716	$	598,441	$	6,478	$	10,146	$	7,440			0.88	%		1.59	%		1.24	%
Net interest income and margin								$	11,044	$	10,551	$	10,065			1.50	%		1.65	%		1.68	%
Additional disclosures: Non-interest-bearing deposit liabilities
Domestic		$	59,862	$	48,478	$	47,879
Foreign			18,430		14,582		14,311

(1) Classification as domestic or foreign is based on domicile of debtor or customer.

CIBC 2020 ANNUAL REPORT 91

Management’s discussion and analysis

Volume/rate analysis of changes in net interest income

$ millions		2020/2019									2019/2018
		Increase (decrease) due to change in:									Increase (decrease) due to change in:
		Average balance			Average rate			Total			Average balance			Average rate			Total
Domestic assets (1)
Cash and deposits with banks		$	529		$	(543	)	$	(14	)	$	28		$	41		$	69
Securities			252			(328	)		(76	)		197			221			418
Securities borrowed or purchased under resale agreements			53			(259	)		(206	)		(22	)		114			92
Loans	Residential mortgages		163			(929	)		(766	)		(27	)		634			607
	Personal and credit card		(116	)		(463	)		(579	)		84			197			281
	Business and government		190			(581	)		(391	)		297			313			610
Total loans			237			(1,973	)		(1,736	)		354			1,144			1,498
Other interest-bearing assets			45			(111	)		(66	)		11			105			116
Change in domestic interest income			1,116			(3,214	)		(2,098	)		568			1,625			2,193
Foreign assets (1)
Cash and deposits with banks			118			(251	)		(133	)		(13	)		58			45
Securities			245			(380	)		(135	)		111			(19	)		92
Securities borrowed or purchased under resale agreements			185			(611	)		(426	)		126			203			329
Loans	Residential mortgages		32			(57	)		(25	)		21			4			25
	Personal and credit card		(9	)		1			(8	)		13			(6	)		7
	Business and government		538			(941	)		(403	)		410			90			500
Total loans			561			(997	)		(436	)		444			88			532
Other interest-bearing assets			1			52			53			1			–			1
Change in foreign interest income			1,110			(2,187	)		(1,077	)		669			330			999
Total change in interest income		$	2,226		$	(5,401	)	$	(3,175	)	$	1,237		$	1,955		$	3,192
Domestic liabilities (1)
Deposits	Personal	$	182		$	(638	)	$	(456	)	$	82		$	480		$	562
	Business and government		503			(1,517	)		(1,014	)		192			1,463			1,655
	Bank		3			(19	)		(16	)		(3	)		6			3
	Secured borrowings		(1	)		(368	)		(369	)		(88	)		173			85
Total deposits			687			(2,542	)		(1,855	)		183			2,122			2,305
Obligations related to securities sold short			26			(60	)		(34	)		13			3			16
Obligations related to securities lent or sold under repurchase agreements			339			(596	)		(257	)		55			93			148
Other liabilities			(5	)		45			40			–			16			16
Subordinated indebtedness			15			(56	)		(41	)		42			(19	)		23
Change in domestic interest expense			1,062			(3,209	)		(2,147	)		293			2,215			2,508
Foreign liabilities (1)
Deposits	Personal		18			(69	)		(51	)		17			62			79
	Business and government		349			(1,453	)		(1,104	)		(95	)		(156	)		(251	)
	Bank		26			(123	)		(97	)		(3	)		48			45
	Secured borrowings		19			(8	)		11			–			4			4
Total deposits			412			(1,653	)		(1,241	)		(81	)		(42	)		(123	)
Obligations related to securities sold short			–			(3	)		(3	)		3			–			3
Obligations related to securities lent or sold under repurchase agreements			132			(417	)		(285	)		120			194			314
Other liabilities			99			(93	)		6			6			(3	)		3
Subordinated indebtedness			–			2			2			–			1			1
Change in foreign interest expense			643			(2,164	)		(1,521	)		48			150			198
Total change in interest expense		$	1,705		$	(5,373	)	$	(3,668	)	$	341		$	2,365		$	2,706
Change in total net interest income		$	521		$	(28	)	$	493		$	896		$	(410	)	$	486

(1) Classification as domestic or foreign is based on domicile of debtor or customer.

92 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Analysis of net loans and acceptances

	Canada (1)															U.S. (1)
$ millions, as at October 31	2020			2019			2018			2017			2016			2020			2019			2018			2017			2016
Residential mortgages	$	216,215		$	204,383		$	203,930		$	203,787		$	184,610		$	2,000		$	1,527		$	1,152		$	902		$	–
Student		18			24			33			50			73			–			–			–			–			–
Personal		40,299			41,882			41,473			39,483			36,896			409			435			356			326			56
Credit card		10,550			12,143			12,060			11,805			11,755			27			35			36			35			36
Total net consumer loans		267,082			258,432			257,496			255,125			233,334			2,436			1,997			1,544			1,263			92
Non-residential mortgages		5,844			6,064			6,426			6,481			6,734			292			115			39			95			103
Financial institutions		9,434			7,565			6,885			5,403			4,831			7,560			8,111			5,529			3,248			2,100
Retail and wholesale		4,882			5,720			5,219			4,496			4,044			1,958			2,066			1,914			1,812			290
Business services		6,914			7,037			7,018			6,237			5,312			5,340			4,570			3,840			3,567			1,215
Manufacturing – capital goods		2,115			2,465			2,318			1,912			1,663			2,547			2,399			2,143			1,559			128
Manufacturing – consumer goods		3,326			3,972			3,294			3,019			2,663			1,057			958			695			702			28
Real estate and construction (2)		20,782			18,465			16,297			13,293			11,684			18,750			16,871			14,559			13,761			8,554
Agriculture		6,829			6,965			6,011			5,558			5,364			103			124			79			107			44
Oil and gas		5,328			5,222			5,064			4,762			4,532			3,066			3,190			2,375			2,198			1,951
Mining		610			1,024			824			668			722			142			154			60			87			242
Forest products		474			628			446			464			465			141			162			215			209			4
Hardware and software		518			651			575			539			267			1,694			1,215			1,082			883			165
Telecommunications and cable		108			191			275			281			444			1,015			314			887			756			30
Publishing, printing, and broadcasting		406			557			527			291			333			99			92			102			117			–
Transportation		2,218			2,193			1,880			1,818			1,630			1,283			1,263			893			602			288
Utilities		2,642			2,281			2,291			1,927			1,663			2,761			1,759			1,226			1,445			1,237
Education, health and social services		3,333			3,221			2,870			2,937			2,826			4,203			2,941			3,040			3,099			–
Governments		1,173			857			954			869			728			216			127			92			7			–
Others		–			–			–			–			–			–			–			–			12			17
Stage 1 and 2 allowance for credit losses (2017 and prior: Collective allowance allocated to business and government loans) (2)(3)		(341	)		(144	)		(98	)		(195	)		(215	)		(536	)		(138	)		(108	)		(83	)		(58	)
Total net business and government loans, including acceptances		76,595			74,934			69,076			60,760			55,690			51,691			46,293			38,662			34,183			16,338
Total net loans and acceptances	$	343,677		$	333,366		$	326,572		$	315,885		$	289,024		$	54,127		$	48,290		$	40,206		$	35,446		$	16,430

(1) Classification by country is primarily based on domicile of debtor or customer.

(2) Stage 3 allowance for credit losses (2017 and prior: individual allowance under IAS 39) is allocated to business and government loans, including acceptances, by category above.

(3) Stage 1 and 2 allowance (2017 and prior: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.

Analysis of net loans and acceptances (continued)

	Other (1)															Total
$ millions, as at October 31	2020			2019			2018			2017			2016			2020			2019			2018			2017			2016
Residential mortgages	$	2,587		$	2,531		$	2,453		$	2,379		$	2,467		$	220,802		$	208,441		$	207,535		$	207,068		$	187,077
Student		–			–			–			–			–			18			24			33			50			73
Personal		664			757			715			583			519			41,372			43,074			42,544			40,392			37,471
Credit card		145			157			159			152			155			10,722			12,335			12,255			11,992			11,946
Total net consumer loans		3,396			3,445			3,327			3,114			3,141			272,914			263,874			262,367			259,502			236,567
Non-residential mortgages		252			258			266			218			232			6,388			6,437			6,731			6,794			7,069
Financial institutions		2,227			2,103			2,043			841			1,723			19,221			17,779			14,457			9,492			8,654
Retail and wholesale		427			467			438			435			561			7,267			8,253			7,571			6,743			4,895
Business services		1,791			1,822			1,675			1,736			1,266			14,045			13,429			12,533			11,540			7,793
Manufacturing – capital goods		49			128			125			432			234			4,711			4,992			4,586			3,903			2,025
Manufacturing – consumer goods		97			61			92			111			114			4,480			4,991			4,081			3,832			2,805
Real estate and construction (2)		1,312			1,529			1,624			1,325			1,391			40,844			36,865			32,480			28,379			21,629
Agriculture		147			104			25			22			24			7,079			7,193			6,115			5,687			5,432
Oil and gas		623			253			440			555			268			9,017			8,665			7,879			7,515			6,751
Mining		507			642			710			784			928			1,259			1,820			1,594			1,539			1,892
Forest products		–			–			–			–			–			615			790			661			673			469
Hardware and software		74			–			–			20			–			2,286			1,866			1,657			1,442			432
Telecommunications and cable		140			185			208			301			359			1,263			690			1,370			1,338			833
Publishing, printing, and broadcasting		58			81			85			89			87			563			730			714			497			420
Transportation		3,033			2,012			1,642			1,847			1,326			6,534			5,468			4,415			4,267			3,244
Utilities		2,758			1,744			647			779			532			8,161			5,784			4,164			4,151			3,432
Education, health and social services		27			34			28			29			32			7,563			6,196			5,938			6,065			2,858
Governments		1,817			1,657			1,598			1,662			1,874			3,206			2,641			2,644			2,538			2,602
Others		–			–			–			–			300			–			–			–			12			317
Stage 1 and 2 allowance for credit losses (2017 and prior: Collective allowance allocated to business and government loans) (2)(3)		(151	)		(73	)		(90	)		(73	)		(65	)		(1,028	)		(355	)		(296	)		(351	)		(338	)
Total net business and government loans, including acceptances		15,188			13,007			11,556			11,113			11,186			143,474			134,234			119,294			106,056			83,214
Total net loans and acceptances	$	18,584		$	16,452		$	14,883		$	14,227		$	14,327		$	416,388		$	398,108		$	381,661		$	365,558		$	319,781

(1) Classification by country is primarily based on domicile of debtor or customer.

(2) Stage 3 allowance for credit losses (2017 and prior: individual allowance under IAS 39) is allocated to business and government loans, including acceptances, by category above.

(3) Stage 1 and 2 allowance (2017 and prior: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.

CIBC 2020 ANNUAL REPORT 93

Management’s discussion and analysis

Summary of allowance for credit losses

$ millions, as at or for the year ended October 31	2020			2019			2018 (1)			2017			2016
Balance at beginning of year under IAS 39		n/a			n/a		$	1,737		$	1,813		$	1,762
Impact of adopting IFRS 9 at November 1, 2017		n/a			n/a			63			n/a			n/a
Balance at beginning of year under IFRS 9	$	2,044		$	1,741			1,800			n/a			n/a
Provision for credit losses		2,489			1,286			870			829			1,051
Write-offs
Domestic (2)
Residential mortgages		15			22			19			21			13
Student		–			–			–			–			–
Personal and credit card		755			897			866			869			842
Other business and government		43			30			37			51			116
Foreign (2)
Residential mortgages		1			7			35			17			21
Personal and credit card		7			14			14			19			18
Other business and government		114			160			79			80			143
Total write-offs		935			1,130			1,050			1,057			1,153
Recoveries
Domestic (2)
Personal and credit card		170			173			174			168			163
Other business and government		4			6			6			15			8
Foreign (2)
Residential mortgages		6			2			–			–			–
Personal and credit card		7			6			4			5			6
Other business and government		5			7			6			5			6
Total recoveries		192			194			190			193			183
Net write-offs		743			936			860			864			970
Interest income on impaired loans		(45	)		(40	)		(23	)		(26	)		(29	)
Foreign exchange and other		(23	)		(7	)		(46	)		(15	)		(1	)
Balance at end of year	$	3,722		$	2,044		$	1,741		$	1,737		$	1,813
Comprises:
Loans	$	3,540		$	1,915		$	1,639		$	1,618		$	1,691
Undrawn credit facilities and other off-balance sheet exposures		182			129			102			119			122
Ratio of net write-offs during the year to average loans outstanding during the year		0.19	%		0.25	%		0.24	%		0.26	%		0.33	%

(1) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as impaired until payments were contractually 180 days in arrears.

(2) Classification as domestic or foreign is primarily based on domicile of debtor or customer.

n/a Not applicable.

Allowance for credit losses on impaired loans as a percentage of gross impaired loans

	Allowance for credit losses (1)										Allowance as a % of gross impaired loans
$ millions, as at October 31	2020		2019		2018 (2)		2017 (3)		2016 (3)		2020			2019			2018 (2)			2017 (3)			2016 (3)
Domestic (4)
Residential mortgages	$	69	$	61	$	54	$	22	$	20		10.8	%		10.5	%		10.9	%		7.5	%		8.0	%
Personal loans		80		98		79		110		105		60.2			62.4			57.7			94.8			85.4
Business and government		406		217		56		43		63		62.6			45.8			41.5			41.7			30.9
Total domestic		555		376		189		175		188		39.1			31.0			24.6			34.2			32.5
Foreign (4)
Residential mortgages		82		79		89		123		148		47.7			46.5			49.4			55.7			56.3
Personal loans		33		30		30		31		40		68.8			63.8			66.7			56.4			57.1
Business and government		244		159		174		148		196		34.4			36.4			35.8			28.3			26.2
Total foreign		359		268		293		302		384		38.6			41.0			41.2			37.8			35.6
Total allowance	$	914	$	644	$	482	$	477	$	572		38.9	%		34.5	%		32.6	%		36.4	%		34.5	%

(1) Excludes allowance on undrawn credit facilities and other off-balance sheet exposures.

(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as impaired until payments were contractually 180 days in arrears.

(3) Under IAS 39, comprises individual allowance, and collective allowance related to personal, scored small business, and mortgage impaired loans that are greater than 90 days delinquent.

(4) Classification as domestic or foreign is primarily based on domicile of debtor or customer.

94 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Allowance on performing loans as a percentage of net loans and acceptances

	Allowance for credit losses (1)(2)										Allowance as a % of net loans and acceptances
$ millions, as at October 31	2020		2019		2018 (3)		2017		2016		2020			2019			2018 (3)			2017			2016
Domestic
Residential mortgages	$	89	$	38	$	29	$	34	$	30		–	%		–	%		–	%		–	%		–	%
Personal loans		697		415		362		345		345		1.7			1.0			0.9			0.9			0.9
Credit cards		659		413		415		383		383		6.2			3.4			3.4			3.2			3.3
Business and government		341		144		98		187		205		0.4			0.2			0.1			0.3			0.4
Total domestic		1,786		1,010		904		949		963		0.5			0.3			0.3			0.3			0.3
Foreign
Residential mortgages		123		33		42		24		23		2.7			0.8			1.2			0.7			0.9
Personal loans		22		10		10		9		7		2.1			0.8			0.9			1.0			1.2
Credit cards		8		7		3		3		3		4.7			3.6			1.5			1.6			1.6
Business and government		687		211		198		156		123		1.0			0.4			0.4			0.3			0.4
Total foreign		840		261		253		192		156		1.2			0.4			0.5			0.4			0.5
Total stage 1 and 2 allowance (2017 and prior: total allowance)	$	2,626	$	1,271	$	1,157	$	1,141	$	1,119		0.6	%		0.3	%		0.3	%		0.3	%		0.3	%

(1) Excludes allowance on undrawn credit facilities and other off-balance sheet exposures.

(2) Stage 1 and 2 allowance (2017 and prior: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.

(3) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as impaired until payments were contractually 180 days in arrears.

Net loans and acceptances by geographic location ⁽¹⁾

$ millions, as at October 31	2020			2019			2018			2017			2016
Canada
Atlantic provinces	$	14,685		$	14,578		$	14,036		$	14,194		$	14,006
Quebec		30,916			30,113			28,598			27,027			25,471
Ontario		176,915			169,073			165,592			157,987			139,254
Prairie provinces		14,710			14,680			13,947			13,746			13,341
Alberta, Northwest Territories and Nunavut		46,133			45,103			44,896			44,354			43,308
British Columbia and Yukon		62,104			60,829			60,407			59,479			54,567
Stage 1 and 2 allowance (2017 and prior: collective allowance) allocated to Canada (2)		(1,786	)  (3)		(1,010	) (3)		(904	) (3)		(902	) (4)		(923	) (4)
Total Canada		343,677			333,366			326,572			315,885			289,024
U.S.		54,127			48,290			40,206			35,446			16,430
Other countries		18,584			16,452			14,883			14,227			14,327
Total net loans and acceptances	$	416,388		$	398,108		$	381,661		$	365,558		$	319,781

(1) Classification by country is primarily based on domicile of debtor or customer.

(2) Stage 1 and 2 allowance (2017 and prior: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.

(3) Stage 3 allowance for credit losses (2017 and prior: individual allowance under IAS 39) is allocated to provinces above, including acceptances.

(4) Under IAS 39, relates to collective allowance, except for: (i) residential mortgages greater than 90 days delinquent; and (ii) personal loans and scored small business loans greater than 30 days delinquent.

CIBC 2020 ANNUAL REPORT 95

Management’s discussion and analysis

Net impaired loans

	Canada (1)										U.S. (1)
$ millions, as at October 31	2020		2019		2018 (2)		2017		2016		2020		2019		2018 (2)		2017		2016
Gross impaired loans
Residential mortgages	$	637	$	581	$	497	$	292	$	251	$	17	$	16	$	13	$	9	$	–
Student		3		1		2		2		3		–		–		–		–		–
Personal		130		156		135		114		120		5		5		2		2		–
Total gross impaired consumer loans		770		738		634		408		374		22		21		15		11		–
Non-residential mortgages		15		3		3		7		4		–		–		–		–		–
Financial institutions		8		2		5		–		1		34		37		65		8		–
Retail, wholesale and business services		383		283		62		38		23		98		89		44		52		5
Manufacturing – consumer and capital goods		5		6		7		6		19		65		35		14		1		–
Real estate and construction		39		38		39		33		23		169		46		90		137		62
Agriculture		27		53		8		9		4		–		–		–		–		–
Resource-based industries		124		46		1		2		121		169		69		54		114		248
Telecommunications, media and technology		1		2		2		3		4		6		2		2		2		–
Transportation		4		4		3		2		1		–		–		1		–		–
Utilities		38		32		–		–		–		–		–		–		–		–
Other		5		5		5		3		4		21		23		56		45		–
Total gross impaired – business and government loans		649		474		135		103		204		562		301		326		359		315
Total gross impaired loans		1,419		1,212		769		511		578		584		322		341		370		315
Other past due loans (3)		127		96		100		337		362		–		–		–		–		–
Total gross impaired and other past due loans	$	1,546	$	1,308	$	869	$	848	$	940	$	584	$	322	$	341	$	370	$	315
Allowance for credit losses
Residential mortgages	$	69	$	61	$	54	$	22	$	20	$	3	$	3	$	2	$	–	$	–
Student		1		–		–		–		–		–		–		–		–		–
Personal		79		98		79		110		105		2		1		–		–		–
Total allowance – consumer loans		149		159		133		132		125		5		4		2		–		–
Non-residential mortgages		–		–		–		2		2		–		–		–		–		–
Financial institutions		4		1		–		–		–		8		1		14		–		–
Retail, wholesale and business services		289		151		26		18		16		24		28		27		16		4
Manufacturing – consumer and capital goods		3		4		4		5		7		29		–		1		–		–
Real estate and construction		11		16		15		9		10		58		28		41		41		20
Agriculture		22		24		4		–		1		–		–		–		–		–
Resource-based industries		56		11		1		2		21		53		34		5		8		8
Telecommunications, media and technology		–		–		1		2		3		2		–		–		–		–
Transportation		2		2		2		2		1		–		–		–		–		–
Utilities		17		5		–		–		–		–		–		–		–		–
Other		2		3		3		3		2		1		10		–		–		–
Total allowance – business and government loans		406		217		56		43		63		175		101		88		65		32
Total allowance	$	555	$	376	$	189	$	175	$	188	$	180	$	105	$	90	$	65	$	32
Net impaired loans
Residential mortgages	$	568	$	520	$	443	$	270	$	231	$	14	$	13	$	11	$	9	$	–
Student		2		1		2		2		3		–		–		–		–		–
Personal		51		58		56		4		15		3		4		2		2		–
Total net impaired consumer loans		621		579		501		276		249		17		17		13		11		–
Non-residential mortgages		15		3		3		5		2		–		–		–		–		–
Financial institutions		4		1		5		–		1		26		36		51		8		–
Retail, wholesale and business services		94		132		36		20		7		74		61		17		36		1
Manufacturing – consumer and capital goods		2		2		3		1		12		36		35		13		1		–
Real estate and construction		28		22		24		24		13		111		18		49		96		42
Agriculture		5		29		4		9		3		–		–		–		–		–
Resource-based industries		68		35		–		–		100		116		35		49		106		240
Telecommunications, media and technology		1		2		1		1		1		4		2		2		2		–
Transportation		2		2		1		–		–		–		–		1		–		–
Utilities		21		27		–		–		–		–		–		–		–		–
Other		3		2		2		–		2		20		13		56		45		–
Total net impaired – business and government loans		243		257		79		60		141		387		200		238		294		283
Total net impaired loans	$	864	$	836	$	580	$	336	$	390	$	404	$	217	$	251	$	305	$	283

(1) Classification by country is primarily based on domicile of debtor or customer.

(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as impaired until payments were contractually 180 days in arrears.

(3) Represents loans where repayment of principal or payment of interest is contractually in arrears between 90 and 180 days.

96 CIBC 2020 ANNUAL REPORT

Management’s discussion and analysis

Net impaired loans (continued)

	Other (1)										Total
$ millions, as at October 31	2020		2019		2018 (2)		2017		2016		2020		2019		2018 (2)		2017		2016
Gross impaired loans
Residential mortgages	$	155	$	154	$	167	$	212	$	263	$	809	$	751	$	677	$	513	$	514
Student		–		–		–		–		–		3		1		2		2		3
Personal		43		42		43		53		70		178		203		180		169		190
Total gross impaired consumer loans		198		196		210		265		333		990		955		859		684		707
Non-residential mortgages		11		17		15		17		17		26		20		18		24		21
Financial institutions		1		–		1		2		3		43		39		71		10		4
Retail, wholesale and business services		49		43		52		57		94		530		415		158		147		122
Manufacturing – consumer and capital goods		3		4		4		5		210		73		45		25		12		229
Real estate and construction		55		59		72		78		104		263		143		201		248		189
Agriculture		–		–		1		1		1		27		53		9		10		5
Resource-based industries		27		–		–		–		–		320		115		55		116		369
Telecommunications, media and technology		–		–		–		–		–		7		4		4		5		4
Transportation		2		2		3		4		2		6		6		7		6		3
Utilities		–		–		–		–		–		38		32		–		–		–
Other		–		11		12		–		1		26		39		73		48		5
Total gross impaired – business and government loans		148		136		160		164		432		1,359		911		621		626		951
Total gross impaired loans		346		332		370		429		765		2,349		1,866		1,480		1,310		1,658
Other past due loans (3)		5		3		3		3		3		132		99		103		340		365
Total gross impaired and other past due loans	$	351	$	335	$	373	$	432	$	768	$	2,481	$	1,965	$	1,583	$	1,650	$	2,023
Allowance for credit losses
Residential mortgages	$	79	$	76	$	87	$	123	$	148	$	151	$	140	$	143	$	145	$	168
Student		–		–		–		–		–		1		–		–		–		–
Personal		31		29		30		31		40		112		128		109		141		145
Total allowance – consumer loans		110		105		117		154		188		264		268		252		286		313
Non-residential mortgages		2		5		7		9		12		2		5		7		11		14
Financial institutions		1		–		1		–		2		13		2		15		–		2
Retail, wholesale and business services		21		18		28		29		48		334		197		81		63		68
Manufacturing – consumer and capital goods		2		2		3		3		45		34		6		8		8		52
Real estate and construction		29		30		39		39		54		98		74		95		89		84
Agriculture		–		–		1		1		1		22		24		5		1		2
Resource-based industries		13		–		–		–		–		122		45		6		10		29
Telecommunications, media and technology		–		–		–		–		–		2		–		1		2		3
Transportation		1		1		2		2		2		3		3		4		4		3
Utilities		–		–		–		–		–		17		5		–		–		–
Other		–		2		5		–		–		3		15		8		3		2
Total allowance – business and government loans		69		58		86		83		164		650		376		230		191		259
Total allowance	$	179	$	163	$	203	$	237	$	352	$	914	$	644	$	482	$	477	$	572
Net impaired loans
Residential mortgages	$	76	$	78	$	80	$	89	$	115	$	658	$	611	$	534	$	368	$	346
Student		–		–		–		–		–		2		1		2		2		3
Personal		12		13		13		22		30		66		75		71		28		45
Total net impaired consumer loans		88		91		93		111		145		726		687		607		398		394
Non-residential mortgages		9		12		8		8		5		24		15		11		13		7
Financial institutions		–		–		–		2		1		30		37		56		10		2
Retail, wholesale and business services		28		25		24		28		46		196		218		77		84		54
Manufacturing – consumer and capital goods		1		2		1		2		165		39		39		17		4		177
Real estate and construction		26		29		33		39		50		165		69		106		159		105
Agriculture		–		–		–		–		–		5		29		4		9		3
Resource-based industries		14		–		–		–		–		198		70		49		106		340
Telecommunications, media and technology		–		–		–		–		–		5		4		3		3		1
Transportation		1		1		1		2		–		3		3		3		2		–
Utilities		–		–		–		–		–		21		27		–		–		–
Other		–		9		7		–		1		23		24		65		45		3
Total net impaired – business and government loans		79		78		74		81		268		709		535		391		435		692
Total net impaired loans	$	167	$	169	$	167	$	192	$	413	$	1,435	$	1,222	$	998	$	833	$	1,086

(1) Classification by country is primarily based on domicile of debtor or customer.

(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as impaired until payments were contractually 180 days in arrears.

(3) Represents loans where repayment of principal or payment of interest is contractually in arrears between 90 and 180 days.

CIBC 2020 ANNUAL REPORT 97

Management’s discussion and analysis

Deposits

	Average balance						Interest						Rate
$ millions, for the year ended October 31	2020		2019		2018		2020		2019		2018		2020			2019			2018
Deposits in domestic bank offices (1)
Payable on demand
Personal	$	11,945	$	9,939	$	10,216	$	14	$	17	$	15		0.12	%		0.17	%		0.15	%
Business and government		50,683		43,539		42,784		305		585		432		0.60			1.34			1.01
Bank		5,761		4,517		4,632		1		3		1		0.02			0.07			0.02
Payable after notice
Personal		109,856		99,859		98,054		460		855		644		0.42			0.86			0.66
Business and government		56,758		44,691		38,621		659		927		606		1.16			2.07			1.57
Bank		276		256		415		2		4		6		0.72			1.56			1.45
Payable on a fixed date
Personal		55,164		51,522		43,561		969		1,040		676		1.76			2.02			1.55
Business and government		102,953		85,978		76,674		1,358		2,063		1,442		1.32			2.40			1.88
Bank		2,078		1,161		1,625		20		23		27		0.96			1.98			1.66
Secured borrowings		39,076		39,111		43,085		668		1,037		952		1.71			2.65			2.21
Total domestic		434,550		380,573		359,667		4,456		6,554		4,801		1.03			1.72			1.33
Deposits in foreign bank offices
Payable on demand
Personal		1,971		1,687		1,693		2		2		1		0.10			0.12			0.06
Business and government		20,454		15,687		14,149		32		70		33		0.16			0.45			0.23
Bank		31		13		10		1		–		–		3.23			–			–
Payable after notice
Personal		8,119		6,909		5,239		66		82		39		0.81			1.19			0.74
Business and government		12,825		9,544		7,740		83		185		96		0.65			1.94			1.24
Payable on a fixed date
Personal		2,832		3,164		2,891		36		58		38		1.27			1.83			1.31
Business and government		48,680		51,082		55,997		546		1,271		1,088		1.12			2.49			1.94
Bank		7,850		8,245		8,049		89		196		144		1.13			2.38			1.79
Secured borrowings		1,322		226		–		15		4		–		1.13			1.77			–
Total foreign		104,084		96,557		95,768		870		1,868		1,439		0.84			1.93			1.50
Total deposits	$	538,634	$	477,130	$	455,435	$	5,326	$	8,422	$	6,240		0.99	%		1.77	%		1.37	%

(1) Deposits by foreign depositors in our domestic bank offices amounted to $42.2 billion (2019: $29.3 billion; 2018: $32.3 billion).

Short-term borrowings

$ millions, as at or for the year ended October 31	2020			2019			2018
Amounts outstanding at end of year
Obligations related to securities sold short	$	15,963		$	15,635		$	13,782
Obligations related to securities lent or sold under repurchase agreements		73,477			53,623			33,571
Total short-term borrowings	$	89,440		$	69,258		$	47,353
Obligations related to securities sold short
Average balance	$	17,841		$	16,501		$	15,300
Maximum month-end balance		22,467			18,448			17,162
Average interest rate		1.42	%		1.76	%		1.78	%
Obligations related to securities lent or sold under repurchase agreements
Average balance	$	69,255		$	51,408		$	41,063
Maximum month-end balance		81,349			57,346			45,343
Average interest rate		0.95	%		2.33	%		1.79	%

Fees paid to the shareholders’ auditor

$ millions, for the year ended October 31	2020		2019		2018
Audit fees (1)	$	24.0	$	22.3	$	26.0
Audit-related fees (2)		2.2		1.7		2.5
Tax fees (3)		1.4		1.9		2.4
All other fees (4)		–		0.1		0.1
Total	$	27.6	$	26.0	$	31.0

(1) For the audit of CIBC’s annual financial statements and the audit of certain of its subsidiaries, as well as other services normally provided by the principal auditor in connection with CIBC’s statutory and regulatory filings. Audit fees also include the audit of internal control over financial reporting under standards of the Public Company Accounting Oversight Board (United States).

(2) For the assurance and related services that are reasonably related to the performance of the audit or review of CIBC’s consolidated financial statements, including accounting consultation, various agreed upon procedures and translation of financial reports.

(3) For tax compliance and advisory services.

(4) Includes fees for non-audit services.

98 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Consolidated financial statements

100	Financial reporting responsibility
101	(Intentionally Deleted)
105	Report of independent registered public accounting firm – Standards of the Public Company Accounting Oversight Board (United States)
108	Report of independent registered public accounting firm – Internal control over financial reporting
109	Consolidated balance sheet
110	Consolidated statement of income
111	Consolidated statement of comprehensive income
112	Consolidated statement of changes in equity
113	Consolidated statement of cash flows
114	Notes to the consolidated financial statements

Details of the notes to the consolidated financial statements

114	Note 1	–	Basis of preparation and summary of significant accounting policies
126	Note 2	–	Impact of COVID-19
128	Note 3	–	Fair value measurement
135	Note 4	–	Significant transactions
136	Note 5	–	Securities
138	Note 6	–	Loans
146	Note 7	–	Structured entities and derecognition of financial assets
149	Note 8	–	Property and equipment
150	Note 9	–	Goodwill, software and other intangible assets
152	Note 10	–	Other assets
153	Note 11	–	Deposits
153	Note 12	–	Other liabilities
153	Note 13	–	Derivative instruments
158	Note 14	–	Designated accounting hedges
162	Note 15	–	Subordinated indebtedness
163	Note 16	–	Common and preferred shares and other equity instruments

167	Note 17	–	Capital Trust securities
168	Note 18	–	Share-based payments
170	Note 19	–	Post-employment benefits
175	Note 20	–	Income taxes
177	Note 21	–	Earnings per share
178	Note 22	–	Commitments, guarantees and pledged assets
179	Note 23	–	Contingent liabilities and provisions
182	Note 24	–	Concentration of credit risk
183	Note 25	–	Related-party transactions
184	Note 26	–	Investments in equity-accounted associates and joint ventures
185	Note 27	–	Significant subsidiaries
186	Note 28	–	Financial instruments – disclosures
187	Note 29	–	Offsetting financial assets and liabilities
187	Note 30	–	Interest income and expense
188	Note 31	–	Segmented and geographic information
190	Note 32	–	Future accounting policy changes

CIBC 2020 ANNUAL REPORT 99

Consolidated financial statements

Financial reporting responsibility

Management of Canadian Imperial Bank of Commerce (CIBC) is responsible for the preparation, presentation, accuracy and reliability of the Annual Report, which includes the consolidated financial statements and management’s discussion and analysis (MD&A). The consolidated financial statements have been prepared in accordance with Section 308(4) of the Bank Act (Canada), which requires that the financial statements be prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The MD&A has been prepared in accordance with the requirements of applicable securities laws.

The consolidated financial statements and MD&A contain items that reflect the best estimates and judgments of the expected effects of current events and transactions with appropriate consideration to materiality. Financial information appearing throughout the Annual Report is consistent with the consolidated financial statements.

Management has developed and maintained effective systems, controls and procedures to ensure that information used internally and disclosed externally is reliable and timely. CIBC’s system of internal controls and supporting procedures are designed to provide reasonable assurance that transactions are authorized, assets are safeguarded and proper records are maintained. These internal controls and supporting procedures include the communication of policies and guidelines, the establishment of an organizational structure that provides appropriate and well-defined responsibilities and accountability, and the careful selection and training of qualified staff. Management has assessed the effectiveness of CIBC’s internal control over financial reporting as at year-end using the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based upon this assessment, we have determined that internal control over financial reporting is effective in all material respects and CIBC is in compliance with the requirements set by the U.S. Securities and Exchange Commission (SEC) under the U.S. Sarbanes-Oxley Act.

CIBC’s Chief Executive Officer and Chief Financial Officer have certified CIBC’s annual filings with the SEC under the U.S. Sarbanes-Oxley Act and with the Canadian Securities Administrators under Canadian securities laws.

The Internal Audit department reviews and reports on the effectiveness of CIBC’s internal control, risk management and governance systems and processes, including accounting and financial controls, in accordance with the audit plan approved by the Audit Committee. Our Chief Auditor has unfettered access to the Audit Committee.

The Board of Directors oversees management’s responsibilities for financial reporting through the Audit Committee, which is composed of independent directors. The Audit Committee reviews CIBC’s interim and annual consolidated financial statements and MD&A and recommends them for approval by the Board of Directors. Other key responsibilities of the Audit Committee include monitoring CIBC’s system of internal control, and reviewing the qualifications, independence and service quality of the shareholders’ auditor and the performance of CIBC’s internal auditors.

Ernst & Young LLP, the shareholders’ auditor, obtains an understanding of CIBC’s internal controls and procedures for financial reporting to plan and conduct such tests and other audit procedures as they consider necessary in the circumstances to express their opinions in the reports that follow. Ernst & Young LLP has unrestricted access to the Audit Committee to discuss their audit and related matters.

The Office of the Superintendent of Financial Institutions (OSFI) Canada is mandated to protect the rights and interest of depositors and creditors of CIBC. Accordingly, OSFI examines and enquires into the business and affairs of CIBC, as deemed necessary, to ensure that the provisions of the Bank Act (Canada) are being complied with and that CIBC is in sound financial condition.

Victor G. Dodig	Hratch Panossian
President and Chief Executive Officer	Chief Financial Officer	December 2, 2020

100 CIBC 2020 ANNUAL REPORT

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CIBC 2020 ANNUAL REPORT 101

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104 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Report of independent registered public accounting firm

To the shareholders and directors of Canadian Imperial Bank of Commerce

Opinion on the consolidated financial statements

We have audited the accompanying consolidated balance sheets of Canadian Imperial Bank of Commerce (CIBC) as of October 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended October 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of CIBC at October 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for each of the years in the three-year period ended October 31, 2020 in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

Report on internal control over financial reporting

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), CIBC’s internal control over financial reporting as of October 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 2, 2020 expressed an unqualified opinion thereon.

Basis for opinion

These consolidated financial statements are the responsibility of CIBC’s management. Our responsibility is to express an opinion on CIBC’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to CIBC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

CIBC 2020 ANNUAL REPORT 105

Consolidated financial statements

	Allowance for credit losses
Description of the matter	As more fully described in Note 1 and Note 6 to the consolidated financial statements, CIBC has used an expected credit loss (ECL) model to recognize $3.7 billion in allowances for credit losses on its consolidated balance sheet. ECL allowances represent an unbiased and probability-weighted amount, which is determined by evaluating a range of possible outcomes and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. Forward-looking information (FLI), which involves significant judgment, is explicitly incorporated into the estimation of ECL allowances. ECL allowances are measured at amounts equal to either (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments that have experienced a significant increase in credit risk (SICR) since initial recognition or when there is objective evidence of impairment. Auditing the allowance for credit losses was complex and required the involvement of specialists due to the inherent complexity of the models, the large volume of data used, assumptions, judgments, and the interrelationship of these variables in measuring the ECL. Significant assumptions and judgments with respect to the estimation of the allowance for credit losses include (i) the determination of when a loan has experienced a SICR; (ii) the forecast of FLI for multiple economic scenarios and the probability weighting of those scenarios; (iii) the calculation of both 12-month and lifetime credit losses; and (iv) the application of expert credit judgment. Management has applied a heightened use of judgment in the areas noted above when assessing the impact of COVID-19 on the allowance for credit losses. Specifically, management has applied judgment in assessing the potential impact of government support programs and client relief measures on the ECL, including estimation of the effects on borrower risk ratings and retail portfolio migration. The allowance for credit losses is a significant estimate for which variations in model methodology, assumptions and judgments can have a material effect on the measurement of expected credit losses.
How we addressed the matter in our audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls, including those related to technology, over the allowance for credit losses. The controls we tested included, amongst others, controls over model development and validation, economic forecasting, data completeness and accuracy, the determination of internal risk ratings for non-retail loans, and the governance and oversight controls over the review of the overall ECL, including the application of expert credit judgment. To test the allowance for credit losses, amongst other procedures, we assessed, with the assistance of our credit risk specialists, whether the methodology and assumptions used in significant models that estimate ECL are consistent with the requirements of IFRS, CIBC’s own historical data and industry standards. This included an assessment of the thresholds used to determine a SICR. For a sample of FLI variables, with the assistance of our economic specialists, we evaluated management’s forecasting methodology and compared management’s FLI to independently derived forecasts and publicly available information. We also evaluated the scenario probability weights used in the ECL models. With the assistance of our credit risk specialists, we assessed the application of management’s expert credit judgment by evaluating that the amounts recorded were reflective of underlying credit quality and macroeconomic trends, including the impact of COVID-19, amongst other factors. We tested the completeness and accuracy of data used in the measurement of the ECL and evaluated the non-retail borrower risk ratings against CIBC’s risk rating scale. On a sample basis, we recalculated the ECL to test the mathematical accuracy of management’s models. We also assessed the adequacy of the allowance for credit loss financial statement note disclosures.
	Fair value measurement of derivatives
Description of the matter	As more fully described in Note 3 and Note 13 of the consolidated financial statements, CIBC has recognized $32.7 billion in derivative assets and $30.5 billion in derivative liabilities. The portfolio of derivative instruments is presented by level within the fair value hierarchy, with the majority of the portfolio classified as Level 2. While derivative instruments classified as Level 1 have quoted market prices, those classified as Level 2 and 3 require valuation techniques that use observable and non-observable market inputs and involve the application of management judgment. Auditing the valuation of derivatives was complex and required the application of significant auditor judgment and involvement of valuation specialists where the fair value was determined based on complex models and/or significant non-observable market inputs, including any significant valuation adjustments. The inputs and assumptions used to determine fair value that were subject to significant auditor judgment included, amongst others, correlations, volatilities and credit spreads. The valuation of derivatives is sensitive to these inputs as they are forward-looking and could be affected by future economic and market conditions.
How we addressed the matter in our audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over the valuation of CIBC’s derivatives portfolio, including those related to technology. The controls we tested included, amongst others, controls over the development and validation of models used to determine the fair value of derivatives, controls over the independent price verification process, including the integrity of significant inputs described above, and controls over significant valuation adjustments applied. To test the valuation of these derivatives, our audit procedures included, amongst others, an evaluation of the methodologies and significant inputs used by CIBC. With the assistance of our valuation specialists, we performed an independent valuation for a sample of derivatives and valuation adjustments to assess the modelling assumptions and significant inputs used by CIBC to estimate the fair value. We independently obtained significant inputs and assumptions from external market data in performing our independent valuation. For a sample of models, and with the assistance of our valuation specialists, we assessed the valuation methodologies used by CIBC to determine fair value. We also assessed the adequacy of the disclosures related to the fair value measurement of derivatives.

106 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

	Measurement of uncertain tax provisions
Description of the matter	As more fully described in Note 20 of the consolidated financial statements, CIBC has disclosed its significant accounting judgments, estimates and assumptions in relation to accounting for uncertainty in income taxes. CIBC operates in a tax environment with constantly evolving and complex tax legislation for financial institutions. Uncertainty in tax positions may arise as tax legislation is subject to interpretation. Estimating uncertain tax provisions requires management judgment to be applied in the interpretation of tax laws across the various jurisdictions in which CIBC operates. This includes significant judgment in the determination of whether it is probable that CIBC’s tax filing positions will be sustained relating to certain complex tax positions and, when probable, the measurement of such provision when recognized. Auditing CIBC’s uncertain tax provisions required the involvement of our tax professionals and the application of judgment, including the interpretation of applicable tax legislation and jurisprudence.
How we addressed the matter in our audit	We obtained an understanding, evaluated the design, and tested the operating effectiveness of management’s controls over CIBC’s uncertain tax provisions. This included, amongst others, controls over management’s assessment of the technical merits of tax positions and the process related to the measurement of any related income tax provisions. With the assistance of our tax professionals, our audit procedures included, amongst others, an assessment of the technical merits of income tax positions taken by CIBC and the measurement of any related uncertain tax provisions recorded. We inspected and evaluated correspondence from the relevant income tax authorities, income tax advice obtained by CIBC from external advisors including income tax opinions, CIBC’s interpretations of tax laws and the assessment thereof with respect to uncertain tax positions. We evaluated the reasonability of CIBC’s treatment of any new information received during the year relating to the amounts recorded. We also assessed the adequacy of the disclosures related to uncertain tax positions.
	Goodwill impairment assessment of the U.S. Commercial Banking and Wealth Management Cash Generating Unit (U.S. CGU)
Description of the matter	As more fully described in Note 9 to the financial statements, CIBC has recognized goodwill of $4.1 billion related to the U.S. CGU. Goodwill is tested, at least annually, for impairment by comparing the recoverable amount of the U.S. CGU with the carrying amount of the U.S. CGU. The recoverable amount of the U.S. CGU is defined as the higher of its estimated fair value less cost to sell and its value-in-use. Goodwill is also required to be tested for impairment whenever there are indicators that it may be impaired. Auditing CIBC’s U.S. goodwill impairment test was complex and required the involvement of specialists due to the highly judgmental nature of key assumptions and significant estimation required to determine the recoverable amount of the U.S. CGU. In particular, the estimate of recoverable amount was sensitive to significant assumptions, including, amongst others, forecast earnings, discount rate, and the terminal growth rate, which are affected by expectations about future market or economic conditions, including the impact of COVID-19.
How we addressed the matter in our audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over CIBC’s goodwill impairment assessment process. These included, amongst others, controls over management’s review of the methodology and significant assumptions in the determination of the recoverable amount. Significant assumptions included forecast earnings, discount rate and the terminal growth rate. With the assistance of our valuation specialists, we tested the estimated recoverable amount of the U.S. CGU which was determined based on a value-in-use calculation. We performed audit procedures that included, amongst others, assessing the methodology applied, testing the significant assumptions discussed above and testing the completeness, accuracy and relevance of underlying data used by CIBC in its assessment. We compared the significant assumptions and inputs used by CIBC to externally available industry and economic trends, which considered the impact of COVID-19. We evaluated the reasonability of management’s estimates by performing a comparison of management’s prior year projections to actual results and current performance and performed sensitivity analysis over the significant assumptions. We also assessed the adequacy of CIBC’s disclosures related to the impairment testing of goodwill.

We have served as CIBC’s auditor since 2002.

/s/ Ernst & Young LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

December 2, 2020

CIBC 2020 ANNUAL REPORT 107

Consolidated financial statements

Report of independent registered public accounting firm

To the shareholders and directors of Canadian Imperial Bank of Commerce

Opinion on internal control over financial reporting

We have audited Canadian Imperial Bank of Commerce’s (CIBC) internal control over financial reporting as of October 31, 2020, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, CIBC maintained, in all material respects, effective internal control over financial reporting as of October 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of CIBC as of October 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended October 31, 2020, and the related notes and our report dated December 2, 2020 expressed an unqualified opinion thereon.

Basis for opinion

CIBC’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s annual report on internal control over financial reporting” section contained in the accompanying management’s discussion and analysis. Our responsibility is to express an opinion on CIBC’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to CIBC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chartered Professional Accountants

Licensed Public Accountants

Toronto, Canada

December 2, 2020

108 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Consolidated balance sheet

Millions of Canadian dollars, as at October 31	2020			2019
ASSETS
Cash and non-interest-bearing deposits with banks	$	43,531		$	3,840
Interest-bearing deposits with banks		18,987			13,519
Securities (Note 5)		149,046			121,310
Cash collateral on securities borrowed		8,547			3,664
Securities purchased under resale agreements		65,595			56,111
Loans (Note 6)
Residential mortgages		221,165			208,652
Personal		42,222			43,651
Credit card		11,389			12,755
Business and government		135,546			125,798
Allowance for credit losses		(3,540	)		(1,915	)
		406,782			388,941
Other
Derivative instruments (Note 13)		32,730			23,895
Customers’ liability under acceptances		9,606			9,167
Property and equipment (Note 8)		2,997			1,813
Goodwill (Note 9)		5,253			5,449
Software and other intangible assets (Note 9)		1,961			1,969
Investments in equity-accounted associates and joint ventures (Note 26)		658			586
Deferred tax assets (Note 20)		650			517
Other assets (Note 10)		23,208			20,823
		77,063			64,219
	$	769,551		$	651,604
LIABILITIES AND EQUITY
Deposits (Note 11)
Personal	$	202,152		$	178,091
Business and government		311,426			257,502
Bank		17,011			11,224
Secured borrowings		40,151			38,895
		570,740			485,712
Obligations related to securities sold short		15,963			15,635
Cash collateral on securities lent		1,824			1,822
Obligations related to securities sold under repurchase agreements		71,653			51,801
Other
Derivative instruments (Note 13)		30,508			25,113
Acceptances		9,649			9,188
Deferred tax liabilities (Note 20)		33			38
Other liabilities (Note 12)		22,134			19,031
		62,324			53,370
Subordinated indebtedness (Note 15)		5,712			4,684
Equity
Preferred shares and other equity instruments (Note 16)		3,575			2,825
Common shares (Note 16)		13,908			13,591
Contributed surplus		117			125
Retained earnings		22,119			20,972
Accumulated other comprehensive income (AOCI)		1,435			881
Total shareholders’ equity		41,154			38,394
Non-controlling interests		181			186
Total equity		41,335			38,580
	$	769,551		$	651,604

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.

Victor G. Dodig	Nicholas D. Le Pan
President and Chief Executive Officer	Director

CIBC 2020 ANNUAL REPORT 109

Consolidated financial statements

Consolidated statement of income

Millions of Canadian dollars, except as noted, for the year ended October 31	2020		2019		2018
Interest income (1)
Loans	$	13,863	$	16,048	$	13,901
Securities		2,568		2,779		2,269
Securities borrowed or purchased under resale agreements		842		1,474		1,053
Deposits with banks		249		396		282
		17,522		20,697		17,505
Interest expense
Deposits		5,326		8,422		6,240
Securities sold short		254		291		272
Securities lent or sold under repurchase agreements		656		1,198		736
Subordinated indebtedness		159		198		174
Other		83		37		18
		6,478		10,146		7,440
Net interest income		11,044		10,551		10,065
Non-interest income
Underwriting and advisory fees		468		475		420
Deposit and payment fees		781		908		877
Credit fees		1,020		958		851
Card fees		410		458		510
Investment management and custodial fees		1,382		1,305		1,247
Mutual fund fees		1,586		1,595		1,624
Insurance fees, net of claims		386		430		431
Commissions on securities transactions		362		313		357
Gains (losses) from financial instruments measured/designated at fair value through profit or loss (FVTPL), net		694		761		603
Gains (losses) from debt securities measured at fair value through other comprehensive income (FVOCI) and amortized cost, net (Note 5)		9		34		(35	)
Foreign exchange other than trading (FXOTT)		234		304		310
Income from equity-accounted associates and joint ventures (Note 26)		79		92		121
Other		286		427		453
		7,697		8,060		7,769
Total revenue		18,741		18,611		17,834
Provision for credit losses (Note 6)		2,489		1,286		870
Non-interest expenses
Employee compensation and benefits		6,259		5,726		5,665
Occupancy costs		944		892		875
Computer, software and office equipment		1,939		1,874		1,742
Communications		308		303		315
Advertising and business development		271		359		327
Professional fees		203		226		226
Business and capital taxes		117		110		103
Other (Notes 4 and 9)		1,321		1,366		1,005
		11,362		10,856		10,258
Income before income taxes		4,890		6,469		6,706
Income taxes (Note 20)		1,098		1,348		1,422
Net income	$	3,792	$	5,121	$	5,284
Net income attributable to non-controlling interests	$	2	$	25	$	17
Preferred shareholders and other equity instrument holders	$	122	$	111	$	89
Common shareholders		3,668		4,985		5,178
Net income attributable to equity shareholders	$	3,790	$	5,096	$	5,267
Earnings per share (EPS) (in dollars) (Note 21)
Basic	$	8.23	$	11.22	$	11.69
Diluted		8.22		11.19		11.65
Dividends per common share (in dollars) (Note 16)		5.82		5.60		5.32

(1) Interest income included $15.7 billion for the year ended October 31, 2020 (2019: $18.8 billion) calculated based on the effective interest rate method.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.

110 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Consolidated statement of comprehensive income

Millions of Canadian dollars, for the year ended October 31	2020			2019			2018
Net income	$	3,792		$	5,121		$	5,284
Other comprehensive income (loss) (OCI), net of income tax, that is subject to subsequent reclassification to net income
Net foreign currency translation adjustments
Net gains (losses) on investments in foreign operations		382			(21	)		635
Net gains (losses) on hedges of investments in foreign operations		(202	)		(10	)		(349	)
		180			(31	)		286
Net change in debt securities measured at FVOCI
Net gains (losses) on securities measured at FVOCI		254			244			(142	)
Net (gains) losses reclassified to net income		(22	)		(28	)		(29	)
		232			216			(171	)
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges		142			137			(25	)
Net (gains) losses reclassified to net income		19			(6	)		(26	)
		161			131			(51	)
OCI, net of income tax, that is not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans		80			(220	)		226
Net gains (losses) due to fair value change of fair value option (FVO) liabilities attributable to changes in credit risk		(56	)		28			(2	)
Net gains (losses) on equity securities designated at FVOCI		50			(2	)		29
		74			(194	)		253
Total OCI (1)		647			122			317
Comprehensive income	$	4,439		$	5,243		$	5,601
Comprehensive income attributable to non-controlling interests	$	2		$	25		$	17
Preferred shareholders and other equity instrument holders	$	122		$	111		$	89
Common shareholders		4,315			5,107			5,495
Comprehensive income attributable to equity shareholders	$	4,437		$	5,218		$	5,584

(1) Includes $44 million of gains for 2020 (2019: $44 million of gains; 2018: $19 million of losses) relating to our investments in equity-accounted associates and joint ventures.

Millions of Canadian dollars, for the year ended October 31	2020			2019			2018
Income tax (expense) benefit allocated to each component of OCI
Subject to subsequent reclassification to net income
Net foreign currency translation adjustments
Net gains (losses) on investments in foreign operations	$	42		$	–		$	(31	)
Net gains (losses) on hedges of investments in foreign operations		(46	)		(16	)		43
		(4	)		(16	)		12
Net change in debt securities measured at FVOCI
Net gains (losses) on securities measured at FVOCI		(59	)		(36	)		18
Net (gains) losses reclassified to net income		7			10			8
		(52	)		(26	)		26
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges		(51	)		(49	)		8
Net (gains) losses reclassified to net income		(7	)		2			9
		(58	)		(47	)		17
Not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans		(19	)		77			(87	)
Net gains (losses) due to fair value change of FVO liabilities attributable to changes in credit risk		20			(10	)		1
Net gains (losses) on equity securities designated at FVOCI		(17	)		–			(11	)
		(16	)		67			(97	)
	$	(130	)	$	(22	)	$	(42	)

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.

CIBC 2020 ANNUAL REPORT 111

Consolidated financial statements

Consolidated statement of changes in equity

Millions of Canadian dollars, for the year ended October 31	2020			2019			2018
Preferred shares and other equity instruments (Note 16)
Balance at beginning of year	$	2,825		$	2,250		$	1,797
Issue of preferred shares and limited recourse capital notes		750			575			450
Treasury shares		–			–			3
Balance at end of year	$	3,575		$	2,825		$	2,250
Common shares (Note 16)
Balance at beginning of year	$	13,591		$	13,243		$	12,548
Issued pursuant to the acquisition of The PrivateBank		–			–			194
Issued pursuant to the acquisition of Wellington Financial		–			–			47
Issue of common shares		371			377			555
Purchase of common shares for cancellation		(68	)		(30	)		(104	)
Treasury shares		14			1			3
Balance at end of year	$	13,908		$	13,591		$	13,243
Contributed surplus
Balance at beginning of year	$	125		$	136		$	137
Compensation expense arising from equity-settled share-based awards		14			16			31
Exercise of stock options and settlement of other equity-settled share-based awards		(20	)		(27	)		(32	)
Other		(2	)		–			–
Balance at end of year	$	117		$	125		$	136
Retained earnings
Balance at beginning of year before accounting policy changes	$	20,972		$	18,537		$	16,101
Impact of adopting IFRS 9 at November 1, 2017		n/a			n/a			(144	)
Impact of adopting IFRS 15 at November 1, 2018		n/a			6			n/a
Impact of adopting IFRS 16 at November 1, 2019 (Note 8)		148			n/a			n/a
Balance at beginning of year after accounting policy changes		21,120			18,543			15,957
Net income attributable to equity shareholders		3,790			5,096			5,267
Dividends and distributions (Note 16)
Preferred and other equity instruments		(122	)		(111	)		(89	)
Common		(2,592	)		(2,488	)		(2,356	)
Premium on purchase of common shares for cancellation		(166	)		(79	)		(313	)
Realized gains (losses) on equity securities designated at FVOCI reclassified from AOCI		93			18			49
Other (1)		(4	)		(7	)		22
Balance at end of year	$	22,119		$	20,972		$	18,537
AOCI, net of income tax
AOCI, net of income tax, that is subject to subsequent reclassification to net income
Net foreign currency translation adjustments
Balance at beginning of year	$	993		$	1,024		$	738
Net change in foreign currency translation adjustments		180			(31	)		286
Balance at end of year	$	1,173		$	993		$	1,024
Net gains (losses) on debt securities measured at FVOCI
Balance at beginning of year under International Accounting Standards (IAS) 39		n/a			n/a		$	60
Impact of adopting IFRS 9 at November 1, 2017		n/a			n/a			(28	)
Balance at beginning of year under IFRS 9	$	77		$	(139	)		32
Net change in securities measured at FVOCI		232			216			(171	)
Balance at end of year	$	309		$	77		$	(139	)
Net gains (losses) on cash flow hedges
Balance at beginning of year	$	113		$	(18	)	$	33
Net change in cash flow hedges		161			131			(51	)
Balance at end of year	$	274		$	113		$	(18	)
AOCI, net of income tax, that is not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans
Balance at beginning of year	$	(363	)	$	(143	)	$	(369	)
Net change in post-employment defined benefit plans		80			(220	)		226
Balance at end of year	$	(283	)	$	(363	)	$	(143	)
Net gains (losses) due to fair value change of FVO liabilities attributable to changes in credit risk
Balance at beginning of year	$	16		$	(12	)	$	(10	)
Net change attributable to changes in credit risk		(56	)		28			(2	)
Balance at end of year	$	(40	)	$	16		$	(12	)
Net gains (losses) on equity securities designated at FVOCI
Impact of adopting IFRS 9 at November 1, 2017		n/a			n/a		$	85
Balance at beginning of year under IFRS 9	$	45		$	65			85
Net gains (losses) on equity securities designated at FVOCI		50			(2	)		29
Realized gains (losses) on equity securities designated at FVOCI reclassified to retained earnings (2)		(93	)		(18	)		(49	)
Balance at end of year	$	2		$	45			65
Total AOCI, net of income tax	$	1,435		$	881		$	777
Non-controlling interests
Balance at beginning of year under IAS 39		n/a			n/a		$	202
Impact of adopting IFRS 9 at November 1, 2017		n/a			n/a			(4	)
Balance at beginning of year under IFRS 9	$	186		$	173			198
Net income attributable to non-controlling interests		2			25			17
Dividends		(15	)		(11	)		(31	)
Other		8			(1	)		(11	)
Balance at end of year	$	181		$	186		$	173
Equity at end of year	$	41,335		$	38,580		$	35,116

(1) In 2018, includes the recognition of loss carryforwards relating to foreign exchange translation amounts on CIBC’s net investment in foreign operations that were previously reclassified to retained earnings as part of our transition to IFRS in 2012.

(2) Includes nil reclassified to retained earnings (2019: nil; 2018: $11 million), relating to our investments in equity-accounted associates and joint ventures.

n/a Not applicable.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.

112 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Consolidated statement of cash flows

Millions of Canadian dollars, for the year ended October 31	2020			2019			2018
Cash flows provided by (used in) operating activities
Net income	$	3,792		$	5,121		$	5,284
Adjustments to reconcile net income to cash flows provided by (used in) operating activities:
Provision for credit losses		2,489			1,286			870
Amortization and impairment (1)		1,311			838			657
Stock options and restricted shares expense		14			16			31
Deferred income taxes		(228	)		108			69
Losses (gains) from debt securities measured at FVOCI and amortized cost		(9	)		(34	)		35
Net losses (gains) on disposal of property and equipment		4			(7	)		(14	)
Other non-cash items, net		(767	)		(229	)		(292	)
Net changes in operating assets and liabilities
Interest-bearing deposits with banks		(5,468	)		(208	)		(2,599	)
Loans, net of repayments		(18,891	)		(17,653	)		(16,155	)
Deposits, net of withdrawals		82,120			19,838			20,770
Obligations related to securities sold short		328			1,853			69
Accrued interest receivable		97			(122	)		(341	)
Accrued interest payable		(238	)		138			205
Derivative assets		(8,832	)		(2,484	)		2,780
Derivative liabilities		5,184			4,037			(2,084	)
Securities measured at FVTPL		(8,296	)		(1,826	)		(647	)
Other assets and liabilities measured/designated at FVTPL		1,563			1,222			(380	)
Current income taxes		1,287			(309	)		(301	)
Cash collateral on securities lent		2			(909	)		707
Obligations related to securities sold under repurchase agreements		19,852			20,961			2,869
Cash collateral on securities borrowed		(4,883	)		1,824			(453	)
Securities purchased under resale agreements		(9,394	)		(10,785	)		(1,195	)
Other, net		(742	)		(4,041	)		(18	)
		60,295			18,635			9,867
Cash flows provided by (used in) financing activities
Issue of subordinated indebtedness		1,000			1,500			1,534
Redemption/repurchase/maturity of subordinated indebtedness		(33	)		(1,001	)		(638	)
Issue of preferred shares and limited recourse capital notes, net of issuance cost		747			568			445
Issue of common shares for cash		163			157			186
Purchase of common shares for cancellation		(234	)		(109	)		(417	)
Net sale (purchase) of treasury shares		14			1			6
Dividends and distributions paid		(2,571	)		(2,406	)		(2,109	)
Repayment of lease liabilities		(307	)		–			–
		(1,221	)		(1,290	)		(993	)
Cash flows provided by (used in) investing activities
Purchase of securities measured/designated at FVOCI and amortized cost		(54,075	)		(42,304	)		(33,011	)
Proceeds from sale of securities measured/designated at FVOCI and amortized cost		11,883			13,764			12,992
Proceeds from maturity of debt securities measured at FVOCI and amortized cost		23,093			10,948			12,402
Cash used in acquisitions, net of cash acquired		–			(25	)		(315	)
Net cash provided by dispositions of investments in equity-accounted associates and joint ventures		–			–			200
Net sale (purchase) of property and equipment		(309	)		(272	)		(255	)
		(19,408	)		(17,889	)		(7,987	)
Effect of exchange rate changes on cash and non-interest-bearing deposits with banks		25			4			53
Net increase (decrease) in cash and non-interest-bearing deposits with banks during the year		39,691			(540	)		940
Cash and non-interest-bearing deposits with banks at beginning of year		3,840			4,380			3,440
Cash and non-interest-bearing deposits with banks at end of year (2)	$	43,531		$	3,840		$	4,380
Cash interest paid	$	6,716		$	10,008		$	7,235
Cash interest received		16,774			19,840			16,440
Cash dividends received		845			735			724
Cash income taxes paid		39			1,549			1,654

(1) Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets, and goodwill.

(2) Includes restricted cash of $463 million (2019: $479 million; 2018: $438 million) and interest-bearing demand deposits with Bank of Canada.

The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.

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Notes to the consolidated financial statements

Canadian Imperial Bank of Commerce (CIBC) is a diversified financial institution governed by the Bank Act (Canada). CIBC was formed through the amalgamation of the Canadian Bank of Commerce and Imperial Bank of Canada in 1961. Through our four strategic business units (SBUs) – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets – CIBC provides a full range of financial products and services to 10 million personal banking, business, public sector and institutional clients in Canada, the U.S. and around the world. Refer to Note 31 for further details on our business units. CIBC is incorporated and domiciled in Canada, with our registered and principal business offices located at Commerce Court, Toronto, Ontario.

Note  1 Basis of preparation and summary of significant accounting policies

Basis of preparation

The consolidated financial statements of CIBC have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). These consolidated financial statements also comply with Section 308(4) of the Bank Act (Canada) and the requirements of the Office of the Superintendent of Financial Institutions (OSFI).

CIBC has consistently applied the same accounting policies throughout all periods presented, except for the adoption of IFRS 15 “Revenue from Contracts with Customers” effective November 1, 2018, the adoption of IFRS 16 “Leases” effective November 1, 2019, the adoption of “Interest Rate Benchmark Reform: Phase 1 Amendments to IFRS 9, IAS 39 and IFRS 7” effective November 1, 2019, and the adoption of IFRIC 23 “Uncertainty over Income Tax Treatments” effective November 1, 2019, each of which were adopted without restatement of comparative periods as discussed below under the sections titled “Fee and commission income”, “Leases”, “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7”, and “International Financial Reporting Interpretations Committee 23: Uncertainty over Income Tax Treatments”.

These consolidated financial statements are presented in millions of Canadian dollars, unless otherwise indicated.

These consolidated financial statements were authorized for issue by the Board of Directors (the Board) on December 2, 2020.

Summary of significant accounting policies

The following paragraphs describe our significant accounting policies.

Use of estimates and assumptions

The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the recognized and measured amounts of assets, liabilities, net income, comprehensive income and related disclosures. Significant estimates and assumptions are made in the areas of the valuation of financial instruments, allowance for credit losses, the evaluation of whether to consolidate structured entities (SEs), asset impairment, income taxes, provisions and contingent liabilities, post-employment and other long-term benefit plan assumptions and valuation of self-managed loyalty points programs. Actual results could differ from these estimates and assumptions.

Basis of consolidation

We consolidate entities over which we have control. We have control over another entity when we have: (i) power to direct relevant activities of the entity; (ii) exposure, or rights, to variable returns from our involvement with the entity; and (iii) the ability to affect those returns through our power over the entity.

Subsidiaries

Subsidiaries are entities over which CIBC has control. Generally, CIBC has control of its subsidiaries through a shareholding of more than 50% of the voting rights, and has significant exposure to the subsidiaries based on its ownership interests of more than 50%. The effects of potential voting rights that CIBC has the practical ability to exercise are considered when assessing whether control exists. Subsidiaries are consolidated from the date control is obtained by CIBC and are deconsolidated from the date control is lost. Consistent accounting policies are applied for all consolidated subsidiaries. Details of our significant subsidiaries are provided in Note 27.

Structured entities

An SE is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the significant relevant activities are directed by contractual arrangements. SEs often have some or all of the following features or attributes: (i) restricted activities; (ii) a narrow and well-defined objective, such as to securitize our own financial assets or third-party financial assets to provide sources of funding or to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the SE to investors; (iii) insufficient equity to permit the SE to finance its activities without subordinated financial support; or (iv) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks. Examples of SEs include securitization vehicles, asset-backed financings, and investment funds.

When voting rights are not relevant in deciding whether CIBC has power over an entity, particularly for complex SEs, the assessment of control considers all facts and circumstances, including the purpose and design of the investee, its relationship with other parties and each party’s ability to make decisions over significant activities, and whether CIBC is acting as a principal or as an agent.

Consolidation conclusions are reassessed whenever there is a change in the specific facts and circumstances relevant to one or more of the three elements of control. Factors that trigger the reassessment include, but are not limited to, significant changes in ownership structure of the entities, changes in contractual or governance arrangements, provision of a liquidity facility beyond the original terms, transactions with the entities that were not contemplated originally and changes in the financing structure of the entities.

Transactions eliminated on consolidation

All intercompany transactions, balances and unrealized gains and losses on transactions are eliminated on consolidation.

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Non-controlling interests

Non-controlling interests are presented on the consolidated balance sheet as a separate component of equity that is distinct from CIBC’s shareholders’ equity. The net income attributable to non-controlling interests is presented separately in the consolidated statement of income.

Associates and joint ventures

We classify investments in entities over which we have significant influence, and that are neither subsidiaries nor joint ventures, as associates. Significant influence is presumed to exist where we hold, either directly or indirectly, between 20% and 50% of the voting rights of an entity, or, in the case of a limited partnership, where CIBC is a co-general partner. Significant influence also may exist where we hold less than 20% of the voting rights of an entity, for example if we have influence over policy-making processes through representation on the entity’s Board of Directors, or by other means. Where we are a party to a contractual arrangement whereby, together with one or more parties, we undertake an economic activity that is subject to joint control, we classify our interest in the venture as a joint venture.

Investments in associates and interests in joint ventures are accounted for using the equity method. Under the equity method, such investments are initially measured at cost, including attributable goodwill and intangible assets, and are adjusted thereafter for the post-acquisition change in our share of the net assets of the investment.

In applying the equity method for an investment that has a different reporting period from that of CIBC, adjustments are made for the effects of any significant events or transactions that occur between the reporting date of the investment and CIBC’s reporting date.

Foreign currency translation

Monetary assets and liabilities and non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies are translated into the functional currencies of operations at prevailing exchange rates at the date of the consolidated balance sheet. Revenue and expenses are translated using average monthly exchange rates. Realized and unrealized gains and losses arising from translation into functional currencies are included in the consolidated statement of income, with the exception of unrealized foreign exchange gains and losses on FVOCI equity securities, which are included in AOCI.

Assets and liabilities of foreign operations with a functional currency other than the Canadian dollar, including goodwill and fair value adjustments arising on acquisition, are translated into Canadian dollars at the exchange rates prevailing as at the consolidated balance sheet date, while revenue and expenses of these foreign operations are translated into Canadian dollars at the average monthly exchange rates. Exchange gains and losses arising from the translation of these foreign operations and from the results of hedging the net investment in these foreign operations, net of applicable taxes, are included in Net foreign currency translation adjustments, in AOCI.

Any accumulated exchange gains and losses, including the impact of hedging, and any applicable taxes in AOCI are reclassified into the consolidated statement of income when there is a disposal of a foreign operation, including a partial disposal of a foreign operation that involves the loss of control. On partial disposal of a foreign operation that does not involve the loss of control, the proportionate share of the accumulated exchange gains and losses, including the impact of hedging, and any applicable taxes previously recognized in AOCI are reclassified into the consolidated statement of income.

Accounting for financial instruments

Classification and measurement of financial instruments

All financial assets must be classified at initial recognition as financial instruments mandatorily measured at FVTPL (trading and non-trading), financial instruments measured at amortized cost, debt financial instruments measured at FVOCI, equity financial instruments designated at FVOCI, or financial instruments designated at FVTPL (fair value option), based on the contractual cash flow characteristics of the financial assets and the business model under which the financial assets are managed. All financial assets and derivatives are required to be measured at fair value with the exception of financial assets measured at amortized cost. Financial assets are required to be reclassified when and only when the business model under which they are managed has changed. All reclassifications are to be applied prospectively from the reclassification date.

The classification and measurement model requires that all debt instrument financial assets that do not meet a “solely payment of principal and interest” (SPPI) test, including those that contain embedded derivatives, be classified at initial recognition as FVTPL. The SPPI test is conducted to identify whether the contractual cash flows of a financial instrument are “solely payments of principal and interest” such that any variability in the contractual cash flows is consistent with a “basic lending arrangement”. “Principal” for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset, for example, due to repayments of principal or amortization of the premium/discount. “Interest” for the purpose of this test is defined as the consideration for the time value of money and credit risk, which are the most significant elements of interest within a lending arrangement. Contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. The intent of the SPPI test is to ensure that debt instruments that contain non-basic lending features, such as conversion options and equity-linked payouts, are measured at FVTPL.

For debt instrument financial assets that meet the SPPI test, classification at initial recognition is determined based on the business model under which these instruments are managed. Debt instruments that are managed on a “held for trading” or “fair value” basis are classified as FVTPL. Debt instruments that are managed on a “hold to collect and for sale” basis are classified as FVOCI for debt. Debt instruments that are managed on a “hold to collect” basis are classified as amortized cost. We consider the following in our determination of the applicable business model for financial assets:

I) The business purpose of the portfolio;

II) The risks that are being managed and the type of business activities that are being carried out on a day-to-day basis to manage the risks;

III) The basis on which performance of the portfolio is being evaluated; and

IV) The frequency and significance of sales activity.

All equity instrument financial assets are classified at initial recognition as FVTPL unless they are not held with the intent for short-term profit-taking and an irrevocable designation is made to classify the instrument as FVOCI for equities.

Financial liabilities, other than derivatives, obligations related to securities sold short and FVO liabilities, are measured at amortized cost. Derivatives, obligations related to securities sold short and FVO financial liabilities are measured at fair value.

Derivatives are measured at FVTPL, except to the extent that they are designated in a hedging relationship, in which case the IAS 39 “Financial Instruments: Recognition and Measurement” hedge accounting requirements continue to apply.

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Financial instruments mandatorily measured at FVTPL (trading and non-trading)

Trading financial instruments are mandatorily measured at FVTPL as they are held for trading purposes or are part of a managed portfolio with a pattern of short-term profit-taking. Non-trading financial assets are also mandatorily measured at fair value if their contractual cash flow characteristics do not meet the SPPI test or if they are managed together with other financial instruments on a fair value basis.

Trading and non-trading financial instruments mandatorily measured at FVTPL are remeasured at fair value as at the consolidated balance sheet date. Gains and losses realized on disposition and unrealized gains and losses from changes in fair value are included in Non-interest income as Gains (losses) from financial instruments measured/designated at FVTPL, net. Interest income and dividends earned on trading and non-trading securities and dividends and interest expense incurred on securities sold short are included in Interest income and Interest expense, respectively.

Financial instruments designated at FVTPL (fair value option)

Financial instruments designated at FVTPL are those that we voluntarily designate at initial recognition as instruments that we will measure at fair value through the consolidated statement of income that would otherwise fall into a different accounting category. The FVO designation, once made, is irrevocable and can only be applied if reliable fair values are available, when doing so eliminates or significantly reduces the measurement inconsistency that would otherwise arise from measuring assets or liabilities on a different basis and if certain OSFI requirements pertaining to certain loans are met. Financial liabilities may also be designated at FVTPL when they are part of a portfolio which is managed on a fair value basis, in accordance with our investment strategy, and are reported internally on that basis. Designation at FVTPL may also be applied to financial liabilities that have one or more embedded derivatives that would otherwise require bifurcation. We apply the FVO to certain mortgage commitments.

Gains and losses realized on dispositions and unrealized gains and losses from changes in the fair value of FVO financial instruments are treated in the same manner as financial instruments which are mandatorily measured at FVTPL, except that changes in the fair value of FVO liabilities that are attributable to changes in own credit risk are recognized in OCI. Dividends and interest earned and interest expense incurred on FVO assets and liabilities are included in Interest income and Interest expense, respectively.

Financial assets measured at amortized cost

Financial assets measured at amortized cost are debt financial instruments with contractual cash flows that meet the SPPI test and are managed on a “hold to collect” basis. These financial assets are recognized initially at fair value plus or minus direct and incremental transaction costs, and are subsequently measured at amortized cost, using the effective interest rate method, net of an allowance for expected credit losses (ECL).

Loans measured at amortized cost include residential mortgages, personal loans, credit cards and most business and government loans. Certain portfolios of treasury securities that are managed on a “hold to collect” basis are also classified as amortized cost. Most deposits with banks, securities purchased under resale agreements, cash collateral on securities borrowed and most customers’ liability under acceptances are accounted for at amortized cost.

Debt financial assets measured at FVOCI

Debt financial instruments measured at FVOCI are non-derivative financial assets with contractual cash flows that meet the SPPI test and are managed on a “hold to collect and for sale” basis.

FVOCI debt instruments are measured initially at fair value, plus direct and incremental transaction costs. Subsequent to initial recognition, FVOCI debt instruments are remeasured at fair value, with the exception that changes in ECL allowances in addition to related foreign exchange gains or losses are recognized in the consolidated statement of income. Cumulative gains and losses previously recognized in OCI are transferred from AOCI to the consolidated statement of income when the debt instrument is sold. Realized gains and losses on sale, determined on an average cost basis, and changes in ECL allowances, are included in Gains (losses) from debt securities measured at FVOCI and amortized cost, net in the consolidated statement of income. Interest income from FVOCI debt instruments is included in Interest income. FVOCI debt instruments include our treasury securities which are managed on a “hold to collect and for sale” basis.

A debt financial instrument is classified as impaired (stage 3) when one or more events that have a detrimental impact on the estimated future cash flows of that financial instrument have occurred after its initial recognition. Evidence of impairment includes indications that the borrower is experiencing significant financial difficulties, or a default or delinquency has occurred.

Equity financial instruments designated at FVOCI

Equity financial instruments are measured at FVTPL unless an irrevocable designation is made to measure them at FVOCI. Gains or losses from changes in the fair value of equity instruments designated at FVOCI, including any related foreign exchange gains or losses, are recognized in OCI. Amounts recognized in OCI will not be subsequently recycled to profit or loss, with the exception of dividends that are not considered a return of capital, which are recognized as interest income when received in the consolidated statement of income. Instead, cumulative gains or losses upon derecognition of the equity instrument will be transferred within equity from AOCI to retained earnings and presented in Realized gains (losses) on equity securities designated at FVOCI reclassified to retained earnings in the consolidated statement of changes in equity. Financial assets designated as FVOCI include non-trading equity securities, primarily related to our investment in private companies and limited partnerships.

Impairment of financial assets

ECL allowances are recognized on all financial assets that are debt instruments classified either as amortized cost or FVOCI and for all loan commitments and financial guarantees that are not measured at FVTPL. ECL allowances represent credit losses that reflect an unbiased and probability-weighted amount which is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. Forward-looking information is explicitly incorporated into the estimation of ECL allowances, which involves significant judgment (see Note 6 for additional details).

ECL allowances for loans and acceptances are included in allowance for credit losses on the consolidated balance sheet. ECL allowances for FVOCI debt securities are included as a component of the carrying value of the securities, which are measured at fair value. ECL allowances for other financial assets are included in the carrying value of the instrument. ECL allowances for guarantees and loan commitments are included in other liabilities.

ECL allowances are measured at amounts equal to either: (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments which have experienced a significant increase in credit risk since initial recognition or when there is objective evidence of impairment.

The calculation of ECL allowances is based on the expected value of three probability-weighted scenarios to measure the expected cash shortfalls, discounted at the effective interest rate. A cash shortfall is the difference between the contractual cash flows that are due and the cash flows that we expect to receive. The key inputs in the measurement of ECL allowances are as follows:

• The probability of default (PD) is an estimate of the likelihood of default over a given time horizon;

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• The loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time; and

• The exposure at default (EAD) is an estimate of the exposure at a future default date.

Lifetime ECL is the expected credit losses that result from all possible default events over the expected life of a financial instrument. 12-month ECL is the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on the financial instrument that are possible within the 12 months after the reporting date.

Stage migration and significant increase in credit risk

As a result of the requirements above, financial instruments subject to ECL allowances are categorized into three stages.

For performing financial instruments:

Stage 1 is comprised of all performing financial instruments which have not experienced a significant increase in credit risk since initial recognition. We recognize 12 months of ECL for stage 1 financial instruments. In assessing whether credit risk has increased significantly, we compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of its initial recognition.

Stage 2 is comprised of all performing financial instruments which have experienced a significant increase in credit risk since initial recognition. We recognize lifetime ECL for stage 2 financial instruments. In subsequent reporting periods, if the credit risk of the financial instrument improves such that there is no longer a significant increase in credit risk since initial recognition, then we revert to recognizing 12 months of ECL as the financial instrument has migrated back to stage 1.

We determine whether a financial instrument has experienced a significant increase in credit risk since its initial recognition on an individual financial instrument basis. Changes in the required ECL allowance, including the impact of financial instruments migrating between stage 1 and stage 2, are recorded in Provision for credit losses in the consolidated statement of income. Significant judgment is required in the application of significant increase in credit risk (see Note 6 for additional details).

Stage 3 financial instruments are those that we have classified as impaired. We recognize lifetime ECL for all stage 3 financial instruments. We classify a financial instrument as impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial instrument have occurred after its initial recognition. Evidence of impairment includes indications that the borrower is experiencing significant financial difficulties, or a default or delinquency has occurred. All financial instruments on which repayment of principal or payment of interest is contractually 90 days in arrears are automatically considered impaired, except for credit card loans, which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or enlistment of credit counselling services.

A financial instrument is no longer considered impaired when all past due amounts, including interest, have been recovered, and it is determined that the principal and interest are fully collectable in accordance with the original contractual terms or revised market terms of the financial instrument with all criteria for the impaired classification having been remedied.

Financial instruments are written off, either partially or in full, against the related allowance for credit losses when we judge that there is no realistic prospect of future recovery in respect of those amounts. When financial instruments are secured, this is generally after all collateral has been realized or transferred to CIBC, or in certain circumstances, when the net realizable value of any collateral and other available information suggests that there is no reasonable expectation of further recovery. In subsequent periods, any recoveries of amounts previously written off are credited to the provision for credit losses.

Purchased loans

Both purchased performing and purchased credit-impaired loans are initially measured at their acquisition date fair values. As a result of recording these loans at fair value, no allowance for credit losses is recognized in the purchase equation at the acquisition date. Fair value is determined by estimating the principal and interest cash flows expected to be collected and discounting those cash flows at a market rate of interest. At the acquisition date, we classify a loan as performing where we expect timely collection of all amounts in accordance with the original contractual terms of the loan and as credit-impaired where it is probable that we will not be able to collect all contractually required payments.

For purchased performing loans, the acquisition date fair value adjustment on each loan is amortized to interest income over the expected remaining life of the loan using the effective interest rate method. The remaining unamortized amounts relating to those loans are recorded in income in the period that the loan is repaid. ECL allowances are established in Provision for credit losses in the consolidated statement of income immediately after the acquisition date based on classifying each loan in stage 1, since the acquisition date is established as the initial recognition date of purchased performing loans for the purpose of assessing whether a significant increase in credit risk has occurred. Subsequent to the acquisition date, ECL allowances are estimated in a manner consistent with our significant increase in credit risk and impairment policies that we apply to loans that we originate.

For purchased credit-impaired loans, the acquisition date fair value adjustment on each loan consists of management’s estimate of the shortfall of principal and interest cash flows expected to be collected and the time value of money. The time value of money component of the fair value adjustment is amortized to interest income over the expected remaining life of the loan using the effective interest rate method. Subsequent to the acquisition date, we regularly re-estimate the expected cash flows for purchased credit-impaired loans. Decreases in the expected cash flows will result in an increase in our ECL allowance. Increases in the expected cash flows will result in a recovery of the ECL allowance. ECL allowances for purchased credit-impaired loans are reported in stage 3.

Originated credit impaired financial assets

The accounting for originated credit-impaired financial assets operates in a similar manner to the accounting for purchased credit-impaired loans in that originated credit-impaired assets are initially recognized at fair value with no initial ECL allowance as concerns about the collection of future cash flows are instead reflected in the origination date discount. The time value of money component of the discount is amortized to interest income over the expected remaining life of the financial asset using the effective interest rate method. Changes in expectation regarding the contractual cash flows for loans are recognized immediately in provision for credit losses and for securities are recognized in Gains (losses) from debt securities measured at FVOCI and amortized cost, net.

This accounting generally applies to financial assets that result from debt restructuring arrangements in which a previously impaired financial asset is exchanged for a new financial asset that is either recognized at a fair value that represents a deep discount to par or for which there are significant concerns over the ability to collect the contractual cash flows.

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Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in an orderly transaction in the principal market at the measurement date under current market conditions (i.e., the exit price). Fair value measurements are categorized into three levels within a fair value hierarchy (Level 1, 2 or 3) based upon the market observability of the valuation inputs used in measuring the fair value. See Note 3 for more details about fair value measurement subsequent to initial recognition by type of financial instrument.

Transaction costs

Transaction costs relating to financial instruments mandatorily measured or designated at FVTPL are expensed as incurred. Transaction costs are amortized over the expected life of the instrument using the effective interest rate method for instruments measured at amortized cost, and debt instruments measured at FVOCI. For equity instruments designated at FVOCI, transaction costs are included in the instrument’s carrying value.

Date of recognition of securities

We account for all securities transactions on our consolidated balance sheet using settlement date accounting.

Effective interest rate

Interest income and expense for all financial instruments measured at amortized cost and for debt securities measured at FVOCI is recognized in Interest income and Interest expense using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the net carrying value of the financial asset or liability upon initial recognition. When calculating the effective interest rate, we estimate future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

Fees relating to loan origination, including commitment, restructuring and renegotiation fees, are considered an integral part of the yield earned on the loan and are accounted for using the effective interest rate method. Fees received for commitments that are not expected to result in a loan are included in Non-interest income over the commitment period. Loan syndication fees are included in Non-interest income on completion of the syndication arrangement, provided that the yield on the portion of the loan we retain is at least equal to the average yield earned by the other lenders involved in the financing; otherwise, an appropriate portion of the fee is deferred as unearned income and amortized to interest income using the effective interest rate method.

Interest income is recognized on stage 1 and stage 2 financial assets measured at amortized cost by applying the effective interest rate to the gross carrying amount of the financial instrument. For stage 3 financial instruments, interest income is recognized using the rate of interest used to discount the estimated future cash flows for the purpose of measuring the impairment loss and applied to the net carrying value of the financial instrument.

Securitizations and derecognition of financial assets

Securitization of our own assets provides us with an additional source of liquidity. As we generally retain substantially all of the risks and rewards of the transferred assets, assets remain on the consolidated balance sheet and funding from these transactions is accounted for as Deposits – secured borrowing transactions.

Securitizations to non-consolidated SEs are accounted for as sales, with the related assets being derecognized, only where:

• Our contractual right to receive cash flows from the assets has expired;

• We transfer our contractual rights to receive the cash flows of the financial asset, and have: (i) transferred substantially all the risks and rewards of ownership, or (ii) neither retained nor transferred substantially all the risks and rewards, but have not retained control; or

• The transfer meets the criteria of a qualifying pass-through arrangement.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. If an existing financial liability is replaced by another liability from the same lender on substantially different terms, or the terms of the existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference in the respective carrying values is recognized in the consolidated statement of income. The repurchase of a debt instrument is considered an extinguishment of that debt instrument even if we intend to resell the instrument in the near term.

Financial guarantees

Financial guarantees are financial contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantee contracts issued by CIBC that are not classified as insurance contracts are initially recognized as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantees, which is generally the premium received or receivable on the date the guarantee was given. Subsequently, financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative amortization, and the applicable ECL allowances. A financial guarantee that qualifies as a derivative is remeasured at fair value as at each reporting date and reported as Derivative instruments in assets or liabilities, as appropriate.

Mortgage commitments

Mortgage interest rate commitments are extended to our retail clients in contemplation of borrowing to finance the purchase of homes under mortgages to be funded by CIBC in the future. These commitments are usually for periods of up to 120 days and generally entitle the borrower to receive funding at the lower of the interest rate at the time of the commitment and the rate applicable at the funding date. We use financial instruments, such as interest rate derivatives, to economically hedge our exposure to an increase in interest rates. Based on our estimate of the commitments expected to be exercised, a financial liability would be recognized on our consolidated balance sheet, to which we apply the FVO. We also carry the associated economic hedges at fair value on the consolidated balance sheet. Changes in the fair value of the FVO commitment liability and the associated economic hedges are included in gains (losses) from financial instruments measured/designated at FVTPL. In addition, since the fair value of the commitments is priced into the mortgage, the difference between the mortgage amount and its fair value at funding is recognized in the consolidated statement of income to offset the carrying value of the mortgage commitment that is released upon its expiry.

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Consolidated financial statements

Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset, and the amount presented net, when we have a legally enforceable right to set off the recognized amounts and intend to settle on a net basis or to realize the asset and settle the liability simultaneously.

Acceptances and customers’ liability under acceptances

Acceptances constitute a liability of CIBC on negotiable instruments issued to third parties by our customers. We earn a fee for guaranteeing and then making the payment to the third parties. The amounts owed to us by our customers in respect of these guaranteed amounts are reflected in assets as Customers’ liability under acceptances.

Securities purchased under resale agreements and obligations related to securities sold under repurchase agreements

Securities purchased under resale agreements are treated as collateralized lending transactions as they represent the purchase of securities affected with a simultaneous agreement to sell them back at a future date at a fixed price, which is generally near term. These transactions are classified and measured at amortized cost, as they meet the SPPI criteria and are managed under a hold to collect business model, unless they were classified at FVTPL or designated under the FVO. For Securities purchased under resale agreements that are classified at amortized cost, an ECL is applied. Interest income is accrued using the effective interest rate method and is included in Interest income – Securities borrowed or purchased under resale agreements in the consolidated statement of income.

Similarly, securities sold under agreements to repurchase are treated as collateralized borrowing transactions at amortized cost with interest expense accrued using the effective interest rate method and are included in Interest expense – Securities lent or sold under repurchase agreements in the consolidated statement of income. Certain obligations related to securities sold under repurchase agreements are designated at FVTPL under the FVO.

Cash collateral on securities borrowed and securities lent

The right to receive back cash collateral paid and the obligation to return cash collateral received on borrowing and lending of securities, which is generally near term, is recognized as cash collateral on securities borrowed and securities lent, respectively. These transactions are classified and measured at amortized cost as they meet the SPPI criteria and are managed under a hold to collect business model. For Cash collateral on securities borrowed classified at amortized cost, an ECL is applied. Interest income on cash collateral paid and interest expense on cash collateral received together with the security borrowing fees and security lending income are included in Interest income – Securities borrowed or purchased under resale agreements and Interest expense – Securities lent or sold under repurchase agreements, respectively. For securities borrowing and lending transactions where securities are pledged or received as collateral, securities pledged by CIBC remain on the consolidated balance sheet and securities received by CIBC are not recognized on the consolidated balance sheet.

Derivatives

We use derivative instruments for both asset/liability management (ALM) and trading purposes. The derivatives used for ALM purposes allow us to manage financial risks, such as movements in interest and foreign exchange rates, while our derivative trading activities are primarily driven by client trading activities. We may also take proprietary trading positions with the objective of earning income.

All derivative instruments are recognized initially, and are measured subsequently, at fair value and are reported as assets where they have a positive fair value and as liabilities where they have a negative fair value, in both cases as derivative instruments. Any realized and unrealized gains or losses on derivatives used for trading purposes were recognized immediately in Gains (losses) from financial instruments measured/designated at FVTPL, net. The accounting for derivatives used for ALM purposes depends on whether they qualify for hedge accounting as discussed below.

Fair values of exchange-traded derivatives are based on quoted market prices. Fair values of over-the-counter (OTC) derivatives, including OTC derivatives that are centrally cleared, are obtained using valuation techniques, including discounted cash flow models and option pricing models. See Note 13 for further information on the valuation of derivatives.

Derivatives used for ALM purposes that qualify for hedge accounting

As permitted at the time of transition to IFRS 9, we have elected to continue to apply the hedge accounting requirements of IAS 39. However, in 2018, we adopted the new hedge accounting disclosure requirements under the amendments to IFRS 7 “Financial Instruments: Disclosures.” Details of the additional disclosures are provided in Note 14.

We apply hedge accounting for derivatives held for ALM purposes that meet specified criteria. There are three types of hedges: fair value, cash flow and hedges of net investments in foreign operations (NIFOs). When hedge accounting is not applied, the change in the fair value of the derivative is recognized in the consolidated statement of income (see “Derivatives used for ALM purposes that are not designated for hedge accounting” below).

In order for derivatives to qualify for hedge accounting, the hedge relationship must be designated and formally documented at its inception in accordance with IAS 39. The particular risk management objective and strategy, the specific asset, liability or cash flow being hedged, as well as how hedge effectiveness is assessed, are documented. Hedge effectiveness requires a high correlation of changes in fair values or cash flows between the hedged and hedging items.

We assess the effectiveness of derivatives in hedging relationships, both at inception and on an ongoing basis. Ineffectiveness results to the extent that the change in the fair value of the hedging derivative differs from the change in the fair value of the hedged risk in the hedged item, or the cumulative change in the fair value of the hedging derivative exceeds the cumulative change in the fair value of expected future cash flows of the hedged item. The amount of ineffectiveness of hedging instruments is recognized immediately in the consolidated statement of income.

Fair value hedges

We designate fair value hedges primarily as part of interest rate risk management strategies that use derivatives to hedge changes in the fair value of financial instruments with fixed interest rates. Changes in fair value attributed to the hedged interest rate risk are accounted for as basis adjustments to the hedged financial instruments and are included in Net interest income. Changes in fair value from the hedging derivatives are also included in Net interest income. Any differences between the two represent hedge ineffectiveness that is included in Net interest income.

Similarly, for hedges of foreign exchange risk, changes in the fair value from the hedging derivatives and non-derivatives are included in FXOTT. Changes in the fair value of the hedged item from the hedged foreign exchange risk are accounted for as basis adjustments and are also included in FXOTT. Any difference between the two represents hedge ineffectiveness.

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If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated and the basis adjustment applied to the hedged item is amortized over the remaining term of the hedged item. If the hedged item is derecognized, the unamortized basis adjustment is recognized immediately in the consolidated statement of income.

Cash flow hedges

We designate cash flow hedges as part of interest rate risk management strategies that use derivatives to mitigate our risk from variable cash flows by effectively converting certain variable-rate financial instruments to fixed-rate financial instruments, and as part of foreign exchange rate risk management strategies to hedge forecasted foreign currency denominated cash flows. We also designate cash flow hedges to hedge changes in CIBC’s share price in respect of certain cash-settled share-based payment awards.

The effective portion of the change in fair value of the derivative instrument is recognized in OCI until the variability in cash flows being hedged is recognized in the consolidated statement of income in future accounting periods, at which time an appropriate portion of the amount that was in AOCI is reclassified into the consolidated statement of income. The ineffective portion of the change in fair value of the hedging derivative is included in Net interest income, FXOTT, or Non-interest expenses immediately as it arises.

If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the hedge relationship is terminated. Upon termination of the hedge relationship, any remaining amount in AOCI remains therein until it is recognized in the consolidated statement of income when the variability in cash flows hedged or the hedged forecast transaction is ultimately recognized in the consolidated statement of income. When the forecasted transaction is no longer expected to occur, the related cumulative gain or loss in AOCI is recognized immediately in the consolidated statement of income.

Hedges of NIFOs with a functional currency other than the Canadian dollar

We may designate NIFO hedges to mitigate the foreign exchange risk on our NIFOs with a functional currency other than the Canadian dollar.

These hedges are accounted for in a similar manner to cash flow hedges. The change in fair value of the hedging instrument relating to the effective portion is recognized in OCI. The change in fair value of the hedging instrument attributable to the forward points and relating to the ineffective portion is recognized immediately in FXOTT. Gains and losses in AOCI are reclassified to the consolidated statement of income upon the disposal or partial disposal of the investment in the foreign operation that involves the loss of control, as explained in the “Foreign currency translation” policy above.

Derivatives used for ALM purposes that are not designated for hedge accounting

The change in fair value of the derivatives not designated as accounting hedges but used to economically hedge FVO assets or liabilities is included in Gains (losses) from financial instruments measured/designated at FVTPL, net. The change in fair value of other derivatives not designated as accounting hedges but used for other economic hedging purposes is included in Non-interest income as FXOTT or Other, as appropriate, or in the case of economic hedges of cash-settled share-based payment obligations, in compensation expense.

Embedded derivatives

Derivatives embedded in financial liabilities are accounted for as separate derivatives when their economic characteristics and risks are not closely related to those of the host instrument and the terms of the embedded derivative represent those of a freestanding derivative in situations where the combined instrument is not classified as FVTPL or FVO. These embedded derivatives, which are classified together with the host instrument on the consolidated balance sheet, are measured at fair value, with changes therein included in the consolidated statement of income. The residual amount of the host liability is accreted to its maturity value through Interest income and Interest expense, respectively, using the effective interest rate method.

Gains at inception on derivatives embedded in financial instruments bifurcated for accounting purposes are not recognized at inception; instead they are recognized over the life of the residual host instrument. Where an embedded derivative is separable from the host instrument but the fair value, as at the acquisition or reporting date, cannot be reliably measured separately or is otherwise not bifurcated, the entire combined contract is measured at FVTPL.

Financial assets with embedded derivatives are classified in their entirety into the appropriate classification at initial recognition through an assessment of the contractual cash flow characteristics of the asset and the business model under which it is managed.

Accumulated other comprehensive income

AOCI is included on the consolidated balance sheet as a separate component of total equity, net of income tax. It includes net unrealized gains and losses on FVOCI debt and equity securities, the effective portion of gains and losses on derivative instruments designated within effective cash flow hedges under IAS 39, unrealized foreign currency translation gains and losses on foreign operations with a functional currency other than the Canadian dollar net of gains or losses on related hedges, net gains (losses) related to fair value changes of FVO liabilities attributable to changes in own credit risk, and net gains (losses) on post-employment defined benefit plans.

Treasury shares

Where we repurchase our own equity instruments, these instruments are treated as treasury shares and are deducted from equity at their cost with any gain or loss recognized in Contributed surplus or Retained earnings as appropriate. No gain or loss is recognized in the consolidated statement of income on the purchase, sale, issue or cancellation of our own equity instruments. Any difference between the carrying value and the consideration, if reissued, is also included in Contributed surplus.

Liabilities and equity

We classify financial instruments as a liability or equity based on the substance of the contractual arrangement. An instrument is classified as a liability if it is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities at potentially unfavourable terms. A contract is also classified as a liability if it is a non-derivative and could obligate us to deliver a variable number of our own shares or it is a derivative other than one that can be settled by the delivery of a fixed amount of cash or another financial asset for a fixed number of our own equity instruments. An instrument is classified as equity if it evidences a residual interest in our assets after deducting all liabilities. The components of a compound financial instrument are classified and accounted for separately as assets, liabilities, or equity as appropriate. Incremental costs directly attributable to the issuance of equity instruments are shown in equity, net of income tax.

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Property and equipment

Land is recognized initially at cost and is subsequently measured at cost less any accumulated impairment losses. Buildings, furniture, equipment and leasehold improvements are recognized initially at cost and are subsequently measured at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation commences when the assets are available for use and is recognized on a straight-line basis to depreciate the cost of these assets to their estimated residual value over their estimated useful lives. The estimated useful lives are as follows:

• Buildings – 40 years

• Computer equipment – 3 to 7 years

• Office furniture and other equipment – 4 to 15 years

• Leasehold improvements – over the estimated useful life

Depreciation methods, useful lives and residual values are reviewed at each annual reporting date and are adjusted if appropriate.

Gains and losses on disposal are included in Non-interest income – Other.

Prior to the adoption of IFRS 16 on November 1, 2019, we considered a portion of land and a building underlying a finance lease arrangement as investment property since we sub-lease this portion to third parties. Our investment property was recognized initially at cost and was subsequently measured at cost less accumulated depreciation and any accumulated impairment losses. Our investment property was depreciated on a straight-line basis over its estimated useful life, being the term of the lease.

Rental income is included in Non-interest income – Other.

Leases

CIBC adopted IFRS 16 “Leases” (IFRS 16) in place of IAS 17 “Leases” as of November 1, 2019. We applied IFRS 16 on a modified retrospective basis. As permitted, we did not restate our prior period comparative consolidated financial statements, which were reported under the prior guidance. The impact of adopting IFRS 16 is discussed in Note 8.

As a lessee, we recognize a right-of-use asset and a corresponding lease liability based on the present value of future lease payments, less any lease incentives receivable, when the lessor makes the leased asset available for use to CIBC, based on the non-cancellable portion of the lease term, adjusted for any renewal or termination options that are reasonably certain to be exercised. Measurement of the right-of-use asset also includes any initial direct costs of procuring the lease, and any lease payments made or lease incentives received prior to lease commencement. Discount rates are based on the rate implicit in the lease, if determinable, or on CIBC’s incremental borrowing rate. Where a property lease contains both a lease and non-lease component, we have elected not to allocate the consideration in the contract to each of the components. Subsequent to initial measurement, CIBC measures the lease liability by increasing the carrying amount to reflect interest on the lease liability based on the discount rate at the time of recognition and reducing the carrying amount to reflect lease payments made during the period, net of any remeasurements for lease reassessment or modifications. The right-of-use asset is measured using the cost model, and amortized on a straight-line basis over the lease term. Right-of-use assets and the corresponding lease liabilities are recognized in Property and equipment and Other liabilities, respectively, on our consolidated balance sheet.

The right-of-use asset and the corresponding lease liability are remeasured when there is a change in lease term, a change in the assessment of an option to purchase a leased asset, a change in the expected residual value guarantee (if any), or a change in future lease payments due to a change in the index or rate applicable to the payment. Right-of-use assets are tested for impairment as required under IAS 36 “Impairment of Assets”. In addition, the evaluation of the useful life for depreciation is assessed under IAS 36.

Lease payments for low-value assets, short-term leases and variable leases are systematically recognized in Non-interest expenses based on the nature of the expense.

As an intermediate lessor, we classify a sublease as an operating or finance sublease based on whether substantially all of the risks and rewards related to the underlying right-of-use asset are transferred to the sub-lessee. If classified as a finance sublease, the related right-of-use asset is derecognized and an investment in sublease is recognized, with the difference recognized in the consolidated statement of income as a gain or loss. In measuring the investment in sublease, we apply the head lease discount rate unless the rate implicit in the sublease is determinable. Where a finance sublease includes lease and non-lease components, we allocate the total consideration in the contract to each component based on the standalone prices for each of these components. The investment in sublease is recognized in Other assets on our consolidated balance sheet, and is subsequently measured using the effective interest rate method, with interest income recognized over the term of the sublease. Rental income from operating subleases is recognized on a systematic basis over the lease term.

Previously, IAS 17 required lessors to classify leases as operating or finance, considering whether the underlying lease transfers substantially all risks and rewards incidental to ownership. Lease expenses related to operating leases were recognized through income on a systematic basis, based on the nature of the expense. Finance leases were recognized on-balance sheet through a finance asset and a finance liability, and the related lease expenses were recognized through income on a systematic basis.

Goodwill, software and other intangible assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets, liabilities and contingent liabilities acquired in business combinations. Identifiable intangible assets are recognized separately from goodwill when they are separable or arise from contractual or other legal rights, and have fair values that can be reliably measured.

Goodwill is not amortized, but is subject to impairment review at least annually or more frequently if there are indicators that the goodwill may be impaired. Refer to the “Impairment of non-financial assets” policy below.

Intangible assets represent software and customer relationships, core deposit intangibles, investment management contracts, and brand names recognized as part of past acquisitions. Intangible assets with definite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Each intangible asset is assessed for legal, regulatory, contractual, competitive or other factors to determine if the useful life is definite. Intangible assets with definite useful lives are amortized over their estimated useful lives, which are as follows:

• Software – 5 to 10 years

• Contract-based intangibles – 8 to 15 years

• Core deposit and customer relationship intangibles – 3 to 16 years

Intangible assets with indefinite useful lives are measured at cost less any accumulated impairment losses. Indefinite-life intangible assets are tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Refer to the “Impairment of non-financial assets” policy below.

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Consolidated financial statements

Impairment of non-financial assets

The carrying values of non-financial assets with definite useful lives, including right-of-use assets, buildings and equipment, and intangible assets with definite useful lives are reviewed to determine whether there is any indication of impairment. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. If any such indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

For the purpose of reviewing non-financial assets with definite useful lives for impairment, asset groups are reviewed at their lowest level for which identifiable cash inflows are largely independent of cash inflows of other assets or groups of assets. This grouping is referred to as a cash-generating unit (CGU).

Corporate assets do not generate separate cash inflows. Corporate assets are tested for impairment at the minimum collection of CGUs to which the corporate asset can be allocated reasonably and consistently.

The recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future cash flows expected to be derived from the asset or CGU. When the carrying value exceeds its recoverable amount, an impairment loss equal to the difference between the two amounts is recognized in the consolidated statement of income. If an impairment subsequently reverses, the carrying value of the asset is increased to the extent that the carrying value of the underlying assets does not exceed the carrying value that would have been determined, net of depreciation or amortization, if no impairment had been recognized. Any impairment reversal is recognized in the consolidated statement of income in the period in which it occurs.

Goodwill is assessed for impairment based on the group of CGUs expected to benefit from the synergies of the business combination, and the lowest level at which management monitors the goodwill. Any potential goodwill impairment is identified by comparing the recoverable amount of the CGU grouping to which the goodwill is allocated to its carrying value including the allocated goodwill. If the recoverable amount is less than its carrying value, an impairment loss is recognized in the consolidated statement of income in the period in which it occurs. Impairment losses on goodwill are not subsequently reversed if conditions change.

Income taxes

Income tax comprises current tax and deferred tax. Income tax is recognized in the consolidated statement of income, except to the extent that it relates to items recognized in OCI or directly in equity, in which case it is recognized accordingly.

Current tax is the tax expected to be payable on the taxable profit for the year, calculated using tax rates enacted or substantively enacted as at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and liabilities are offset when CIBC intends to settle on a net basis and the legal right to offset exists.

Deferred tax is recognized on temporary differences between the carrying value of assets and liabilities on the consolidated balance sheet and the corresponding amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences unless the temporary differences relate to our NIFOs and will not reverse in the foreseeable future. Deferred tax assets, other than those arising from our NIFOs, are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilized. Deferred tax assets arising from our NIFOs are recognized for deductible temporary differences which are expected to reverse in the foreseeable future to the extent that it is probable that future taxable profits will be available against which these deductible temporary differences can be utilized. Deferred tax is not recognized for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income, or for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted as at the reporting date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same tax authority on the same taxable entity or tax reporting group.

We are subject to income tax laws in the various jurisdictions where we operate, and the tax laws in those jurisdictions are potentially subject to different interpretations by us and the relevant taxation authority, which gives rise to uncertainty. For tax positions where there is uncertainty regarding the ultimate determination of the tax impact, including positions which are under audit, dispute or appeal, we recognize provisions to consider this uncertainty based on our best estimate of the amount expected to be paid based on an assessment of the relevant factors.

Pension and other post-employment benefits

We are the sponsor of a number of employee benefit plans. These plans include both defined benefit and defined contribution pension plans, and various other post-employment benefit plans including post-retirement medical and dental benefits.

Defined benefit plans

The cost of pensions and other post-employment benefits earned by employees is actuarially determined separately for each plan using the projected unit credit method and our best estimate of salary escalation, retirement ages of employees, mortality and expected health-care costs. This represents CIBC’s defined benefit obligation, which is measured as at the reporting date. The discount rate used to measure the defined benefit obligation is based on the yield of a portfolio of high-quality corporate bonds denominated in the same currency in which the benefits are expected to be paid and with terms to maturity that, on average, match the terms of the defined benefit obligation.

Plan assets are measured at fair value as at the reporting date.

The net defined benefit asset (liability) represents the present value of the defined benefit obligation less the fair value of plan assets. The net defined benefit asset (liability) is included in Other assets and Other liabilities, respectively.

Current service cost reflects the cost of providing post-employment benefits earned by employees in the current period. Current service cost is calculated as the present value of the benefits attributed to the current year of service and is recognized in the consolidated statement of income. The current service cost is calculated using a separate discount rate to reflect the longer duration of future benefit payments associated with the additional year of service to be earned by the plan’s active participants.

Past service costs arising from plan amendments or curtailments are recognized in net income in the period in which they arise.

Net interest income or expense comprises interest income on plan assets and interest expense on the defined benefit obligation. Interest income is calculated by applying the discount rate to the plan assets, and interest expense is calculated by applying the discount rate to the defined benefit obligation. Net interest income or expense is recognized in the consolidated statement of income.

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Actuarial gains and losses represent changes in the present value of the defined benefit obligation which result from changes in actuarial assumptions and differences between previous actuarial assumptions and actual experience, and from differences between the actual return on plan assets and assumed interest income on plan assets. Net actuarial gains and losses are recognized in OCI in the period in which they arise and are not subject to subsequent reclassification to net income. Cumulative net actuarial gains and losses are included in AOCI.

When the calculation results in a net defined benefit asset, the recognized asset is limited to the present value of economic benefits available in the form of future refunds from the plan or reductions in future contributions to the plan (the asset ceiling). For plans where we do not have an unconditional right to a refund of surplus, we determine the asset ceiling by reference to future economic benefits available in the form of reductions in future contributions to the plan, in which case the present value of economic benefits is calculated giving consideration to minimum funding requirements for future service that apply to the plan. Where a reduction in future contributions to the plan is not currently realizable at the reporting date, we estimate whether we will have the ability to reduce contributions for future service at some point during the life of the plan by taking into account, among other things, expected future returns on plan assets. If it is anticipated that we will not be able to recover the value of the net defined benefit asset, after considering minimum funding requirements for future service, the net defined benefit asset is reduced to the amount of the asset ceiling.

When the payment in the future of minimum funding requirements related to past service would result in a net defined benefit surplus, or an increase in a net defined benefit surplus, the minimum funding requirements are recognized as a liability to the extent that the surplus would not be fully available as a refund or a reduction in future contributions. Any funded status surplus is limited to the present value of future economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

Defined contribution plans

Costs for defined contribution plans are recognized during the year in which the service is provided.

Other long-term employee benefits

CIBC sponsors a closed long-term disability plan that is classified as a long-term defined benefit arrangement. As the amount of the long-term disability benefit does not depend on the length of service, the obligation is recognized when an event occurs that gives rise to an obligation to make payments. CIBC also offers other medical and dental benefits to employees while on long-term disability.

The amount of other long-term employee benefits is actuarially calculated using the projected unit credit method. Under this method, the benefit is discounted to determine its present value. The methodology used to determine the discount rate used to value the long-term employee benefit obligation is consistent with that for pension and other post-employment benefit plans. Actuarial gains and losses and past service costs are recognized in the consolidated statement of income in the period in which they arise.

Share-based payments

We provide compensation to certain employees and directors in the form of share-based awards.

Compensation expense for share-based awards is recognized from the service commencement date to the earlier of the contractual vesting date or the employee’s retirement eligible date. For grants regularly awarded in the annual incentive compensation cycle (annual incentive grant), the service commencement date is considered to be the start of the fiscal year that precedes the fiscal year in which the grant is made. The service commencement date in respect of special awards granted outside of the annual cycle is the grant date. The amount of compensation expense recognized is based on management’s best estimate of the number of share-based awards expected to vest, including estimates of expected forfeitures, which are revised periodically as appropriate. For the annual incentive grant, compensation expense is recognized from the service commencement date based on the estimated fair value of the forthcoming grant with the estimated fair value adjusted to the actual fair value at the grant date.

Under the Restricted Share Award (RSA) plan, where grants are settled in the cash equivalent of common shares, changes in the obligation which arise from fluctuations in the market price of common shares, net of related hedges, are recognized in the consolidated statement of income as compensation expense in proportion to the award recognized. Under the Restricted Stock plan, where restricted stock is granted and settled in common shares, compensation expense is based on the grant date fair value. Compensation expense results in a corresponding increase to contributed surplus. When the restricted stock vests and is released from restriction, the amount recognized in Contributed surplus is credited to common share capital.

Under the Performance Share Unit (PSU) plan, where grants are settled in the cash equivalent of common shares, changes in the obligation which arise from fluctuations in the market price of common shares, and revised estimates of the performance factor, net of related hedges, are recognized in the consolidated statement of income as compensation expense in proportion to the award recognized. The performance factor ranges from 75% to 125% of the initial number of units awarded based on CIBC’s performance relative to the other major Canadian banks.

Compensation expense in respect of the Employee Stock Option Plan (ESOP) is based on the grant date fair value. Where the service commencement date precedes the grant date, compensation expense is recognized from the service commencement date based on the estimated fair value of the award at the grant date, with the estimated fair value adjusted to the actual fair value at the grant date. Compensation expense results in a corresponding increase to contributed surplus. If the ESOP award is exercised, the proceeds we receive, together with the amount recognized in Contributed surplus, are credited to common share capital. If the ESOP award expires unexercised, the compensation expense remains in Contributed surplus.

As part of our acquisition of Wellington Financial Fund V LP (Wellington Financial) in the first quarter of 2018, equity-settled awards in the form of exchangeable shares with specific service and non-market performance vesting conditions were issued to selected employees. Compensation expense in respect of the exchangeable shares is based on the grant date fair value, adjusted for changes in the estimated impact of the non-market performance conditions.

Compensation in the form of Deferred Share Units (DSUs) issued pursuant to the Deferred Share Unit Plan, the Deferred Compensation Plan (DCP), and the Directors’ Plan, entitle the holder to receive the cash equivalent of a CIBC common share. At the time DSUs are granted, the related expense in respect of the cash compensation that an employee or director would otherwise receive would have been fully recognized. Changes in the obligations which arise from fluctuations in the market price of common shares, net of related hedges, are recognized in the consolidated statement of income as compensation expense for employee DSUs and as Non-interest expense – Other for Directors’ DSUs.

Our contributions under the Employee Share Purchase Plan (ESPP) are expensed as incurred.

The impact due to our changes in common share price in respect of cash-settled share-based compensation under the RSA and PSU plans is hedged through the use of derivatives. We designate these derivatives within cash flow hedge accounting relationships. The effective portion of the change in fair value of these derivatives is recognized in OCI and is reclassified into compensation expense, within the consolidated statement of income, over the period that the hedged awards impact the consolidated statement of income. The ineffective portion of the change in fair value of the hedging derivatives is recognized in the consolidated statement of income immediately as it arises.

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Provisions and contingent liabilities

Provisions are liabilities of uncertain timing or amount. A provision is recognized when we have a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The provision is recognized as the best estimate of the amount required to settle the obligation at the reporting date, taking into account the risk and uncertainties related to the obligation. Where material, provisions are discounted to reflect the time value of money, and the increase in the obligation due to the passage of time is presented as Interest expense in the consolidated statement of income.

Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-occurrence, of one or more uncertain future events not wholly within the control of CIBC, or are present obligations that have arisen from past events but are not recognized because it is not probable that settlement will require the outflow of economic benefits.

Provisions and contingent liabilities are disclosed in the consolidated financial statements.

Earnings per share

We present basic and diluted EPS for our common shares.

Basic EPS is computed by dividing net income for the period attributable to CIBC common shareholders by the weighted-average number of common shares outstanding during the period.

Diluted EPS is computed by dividing net income for the period attributable to CIBC common shareholders by the weighted-average number of diluted common shares outstanding for the period. Diluted common shares reflect the potential dilutive effect of contingently issuable shares and the exercise of stock options based on the treasury stock method. The number of contingently issuable shares included in diluted EPS is based on the number of shares that would be issuable if the end of the reporting period were the end of the contingency period. For stock options, the treasury stock method determines the number of incremental common shares by assuming that outstanding stock options, whose exercise price is less than the average market price of common shares during the period, are exercised and then reduced by the number of common shares assumed to be repurchased with the exercise proceeds from the assumed exercise of the options. Instruments determined to have an antidilutive effect for the period are excluded from the calculation of diluted EPS.

Fee and commission income

CIBC adopted IFRS 15 “Revenue from Contracts with Customers” (IFRS 15) as at November 1, 2018 in place of prior guidance, including IAS 18 “Revenue” (IAS 18) and IFRIC 13 “Customer Loyalty Programmes” (IFRIC 13). We applied IFRS 15 on a modified retrospective basis. As permitted, we did not restate our prior period comparative consolidated financial statements. Amounts reported related to the year ended October 31, 2018 are reported under the prior guidance, including IAS 18 and IFRIC 13, and are therefore not comparable to the information presented for 2019 or 2020. The impact of adopting IFRS 15 was not significant (see “Transition impact from adoption of IFRS 15” section below).

IFRS 15 includes a five-step, principles-based recognition and measurement approach, as well as requirements for accounting for contract costs, and enhanced quantitative and qualitative disclosure requirements. The application of this guidance involves the use of judgment. IFRS 15 excludes from its scope revenue related to financial instruments, lease contracts and insurance contracts. As a result, the majority of our revenue was not impacted by the adoption of this standard, including net interest income, net gains (losses) from financial instruments measured/designated at FVTPL and net gains (losses) from debt securities measured at FVOCI.

Measurement differences resulting from the adoption of IFRS 15 include the upfront expensing of previously deferred mutual fund sales commissions. In addition, the adoption of IFRS 15 has resulted in the revaluation of our self-managed credit card loyalty points liability, which is now subject to both upward and downward remeasurement to reflect the expected cost of redemption as this expectation changes over time. Previously, under IFRIC 13, decreases in the expected cost of redemptions were only recognized as points were redeemed, while increases were recognized immediately.

In addition, the adoption of IFRS 15 has resulted in changes to the presentation of certain revenue and expense items in the consolidated statement of income. Presentation differences include the net presentation of certain expenditures where CIBC is deemed the agent rather than the principal and the gross presentation of certain expenditures where CIBC is deemed the principal rather than the agent. Our prior period comparative consolidated financial statements for the year ended October 31, 2018 are reported under the prior guidance, without restatement; however, the measurement and presentation differences in 2019 and 2020 are not significant.

Our accounting policies under both IFRS 15 and IAS 18 are provided below.

Fee and commission income (IAS 18 and IFRIC 13)

The recognition of fee and commission income was determined by the purpose of the fee or commission and the basis of accounting for any associated financial instrument. Income earned on completion of a significant act was recognized when the act was completed. Income earned from the provision of services was recognized as revenue as the services were provided. Income which formed an integral part of the effective interest rate of a financial instrument was recognized as an adjustment to the effective interest rate.

Fee and commission income (IFRS 15)

The recognition of fee and commission income is determined by the purpose of the fee or commission and the terms specified in the contract with the customer. Revenue is recognized when, or as, a performance obligation is satisfied by transferring control of the service to the customer, in the amount of the consideration to which we expect to be entitled. Revenue may therefore be recognized at a point in time upon completion of the service or over time as the services are provided. When revenue is recognized over time, we are generally required to provide the services each period, such that control of the services is transferred evenly to the customer, and we therefore measure our progress towards completion of the service based upon the time elapsed. For contracts where the transaction price includes variable consideration, revenue is only recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved, which typically occurs by the end of the reporting period. When another party is involved in providing a service to a customer, we determine whether the nature of our performance obligation is that of a principal or an agent. If we control the service before it is transferred to the customer, we are acting as the principal and present revenue separately from the amount paid to the other party; otherwise we are the agent and present revenue net of the amount paid to the other party. Our performance obligations typically have a term of one year or less, with payment received upon satisfaction of the performance obligation or shortly afterwards, and as a result there is no significant financing component and we do not typically capitalize the costs of obtaining contracts with our customers. Income which forms an integral part of the effective interest rate of a financial instrument continues to be recognized as an adjustment to the effective interest rate.

In addition to these general principles, the following specific policies applied under IAS 18 and IFRIC 13 in 2018, and IFRS 15 in 2019 and 2020:

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Underwriting and advisory fees are earned on debt and equity securities placements and transaction-based advisory services. Under IAS 18 and IFRS 15, underwriting fees are typically recognized at the point in time when the transaction is completed. Under IAS 18 and IFRS 15, advisory fees are generally recognized as revenue over the period of the engagement as the related services are provided or at the point in time when the transaction is completed.

Deposit and payment fees arise from personal and business deposit accounts and cash management services. Under IAS 18 and IFRS 15, monthly and annual fees are recognized over the period that the related services are provided. Under IAS 18 and IFRS 15, transactional fees are recognized at the point in time the related services are provided.

Credit fees consist of loan syndication fees, loan commitment fees, letter of credit fees, banker’s acceptance stamping fees, and securitization fees. Under IAS 18 and IFRS 15, credit fees are generally recognized over the period that the related services are provided, except for loan syndication fees, which are typically recognized at the point in time that the financing placement is completed.

Card fees primarily include interchange income, overlimit fees, cash advance fees, and annual fees. Under IAS 18 and IFRS 15, card fees are recognized at the point in time the related services are provided, except for annual fees, which are recognized over the 12-month period to which they relate. Under IFRIC 13 and IFRS 15, the cost of credit card loyalty points is recognized as a reduction of interchange income when the loyalty points are issued for both self-managed and third-party loyalty points programs. Under IFRIC 13, credit card loyalty points for self-managed loyalty programs were recognized as deferred revenue when the loyalty points were issued and as revenue when the loyalty points were redeemed. Under IFRS 15, credit card loyalty point liabilities are recognized for self-managed loyalty point programs and are subject to periodic remeasurement to reflect the expected cost of redemption as this expectation changes over time.

Commissions on securities transactions include brokerage commissions for transactions executed on behalf of clients, trailer fees and mutual fund sales commissions. Under IAS 18 and IFRS 15, brokerage commissions and mutual fund sales commissions are generally recognized at the point in time that the related transaction is executed. Under IAS 18 and IFRS 15, trailer fees are typically recognized over time based upon the daily net asset value of the mutual fund units held by clients.

Investment management fees are primarily based on the respective value of the assets under management (AUM) or assets under administration (AUA) and, under IAS 18 and IFRS 15, are recognized over the period that the related services are provided. Under IAS 18 and IFRS 15, investment management fees relating to our asset management and private wealth management business are generally calculated based on point-in-time AUM balances, and investment management fees relating to our retail brokerage business are generally calculated based on point-in-time AUM or AUA balances. Under IAS 18 and IFRS 15, custodial fees are recognized as revenue over the applicable service period, which is generally the contract term.

Mutual fund fees are earned on fund management services and, under IAS 18 and IFRS 15, are recognized over the period that the mutual funds are managed based upon the daily net asset values of the respective mutual funds. In certain circumstances, CIBC may, on a discretionary basis, elect to absorb certain expenses that would otherwise be payable by the mutual funds directly. Under IAS 18 and IFRS 15, these expenses are recognized in Non-interest expenses on the consolidated statement of income.

Transition impact from adoption of IFRS 15

As indicated above, CIBC adopted IFRS 15 as at November 1, 2018 in place of prior guidance, including IAS 18 and IFRIC 13. We applied IFRS 15 on a modified retrospective basis by recognizing a cumulative $6 million after-tax credit from the initial application in opening November 1, 2018 retained earnings. The impact of the initial adoption of IFRS 15 related to the upfront expensing of previously deferred mutual fund sales commissions and the revaluation of our self-managed credit card loyalty points.

Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7

In September 2019, the IASB issued “Interest Rate Benchmark Reform: Phase 1 Amendments to IFRS 9, IAS 39 and IFRS 7”, which provides relief for specific hedge accounting requirements to address uncertainties in the period before the interest rate benchmark reform, and provides disclosure requirements related to interest rate benchmark reform.

Only the amendments to IAS 39 “Financial Instruments: Recognition and Measurement” (IAS 39) and IFRS 7 “Financial Instruments: Disclosures” apply to us because we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9 “Financial Instruments” (IFRS 9). The amendments are effective for annual periods beginning on or after January 1, 2020.

CIBC elected to early adopt the phase 1 amendments effective November 1, 2019 to prepare for uncertainties that may increase relating to the timing or amount of benchmark-based cash flows of hedged items and hedging instruments. The relief provided in the amendments allows hedge accounting to continue during the period of uncertainty before the replacement of existing interest rate benchmarks with an alternative rate. Significant judgment is involved in identifying the hedge accounting relationships that are directly affected by interest rate benchmark reform as different jurisdictions are transitioning at different stages and may adopt different transition approaches.

The United Kingdom’s (U.K.’s) Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit London Interbank Offered Rate (LIBOR) rates after December 2021. This may cause LIBOR and other current benchmarks to disappear entirely or perform differently than in the past, create disincentives for market participants to continue to administer and contribute to certain benchmarks, or have other consequences which cannot be predicted. The FCA and the ICE Benchmark Administrator recently announced a consultation process that may lead to a change in the expected timing of cessation of certain currencies and tenors of LIBOR, which CIBC will closely monitor. As at November 1, 2019, the notional amount of our derivatives in designated hedge accounting relationships that were indexed to U.S. LIBOR and British pound sterling (GBP) LIBOR, with a maturity date beyond December 31, 2021, was $48 billion. We expect the derivatives indexed to the Euro Interbank Offered Rate (EURIBOR) and the Canadian Dollar Offered Rate (CDOR) that are in our designated hedge accounting relationships to continue beyond 2021 in conjunction with alternative rates that might be applied in the impacted markets. We also continue to monitor benchmark rates in other jurisdictions as they continue to evaluate benchmark reform.

As discussed in Note 32, in August 2020, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16”, which addresses issues that affect financial reporting once an existing rate is replaced with an alternative rate and provides specific disclosure requirements. The amendments are effective for annual periods beginning on or after January 1, 2021. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9, the amendments will apply to IAS 39, IFRS 7, IFRS 4 and IFRS 16 for us, mandatorily effective on November 1, 2021. Earlier application is permitted. We continue to evaluate the impact of the amendments on our consolidated financial statements.

We previously established an enterprise-wide transition program to assess the impact of interest rate benchmark reform and manage the process to transition to alternative benchmark rates. In response to the proposed reforms to interest rate benchmarks, CIBC has established an Enterprise IBOR Transition Program (the “Program”), which is supported by a formal governance structure and dedicated working groups that include stakeholders from frontline businesses as well as functional groups such as Treasury, Technology and Operations, Risk Management, Legal, and Finance, to assess the impact across all of our products and to manage the process through transition. An Interbank Offered Rate (IBOR) Steering Committee has been established with responsibility for oversight and execution of the Program. We also continue to engage with industry associations to incorporate recent developments into our project plan. The Program provides regular updates to senior management, including the Executive Committee.

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International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments” (IFRIC 23)

CIBC adopted IFRIC 23 as at November 1, 2019. IFRIC 23 clarifies the accounting for uncertainties in income taxes. There was no impact to our consolidated financial statements and no changes in our accounting policies as a result of adopting IFRIC 23.

Note 2 Impact of COVID-19

On March 11, 2020, the outbreak of COVID-19 was officially declared a pandemic by the World Health Organization. The COVID-19 pandemic continues to have a significant adverse impact on the global economy. Measures undertaken in the second quarter to contain the spread of the virus, including the closure of non-essential businesses, succeeded in curbing the initial spread of infection, allowing for the partial easing of these measures in the third and fourth quarters. As a result, certain sectors of the economy had seen a resumption of activity. However, there is a risk that the recent retightening of physical distancing measures enacted by governments and businesses in response to the resurgence in infection rates could impact economic activity beyond levels that were previously anticipated. The overall economy continues to operate below pre-pandemic levels in Canada, the U.S. and other regions where we operate, with continuing uncertainty related to economic growth and unemployment, which ultimately will only be resolved with the dissemination of an effective vaccine for COVID-19. As a result, we continue to operate in an uncertain macroeconomic environment.

Impact on estimates and assumptions

As disclosed in Note 1, the preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the recognized and measured amounts of assets, liabilities, net income, comprehensive income and related disclosures. Significant estimates and assumptions are made in the areas of the valuation of financial instruments, allowance for credit losses, the evaluation of whether to consolidate SEs, asset impairment, income taxes, provisions and contingent liabilities, post-employment and other long-term benefit plan assumptions and valuation of self-managed loyalty points programs. Actual results could differ from these estimates and assumptions.

The COVID-19 pandemic gives rise to heightened uncertainty as it relates to accounting estimates and assumptions and increases the need to apply judgment in evaluating the economic and market environment and its impact on significant estimates. This particularly impacts estimates and assumptions relating to allowance for credit losses, valuation of financial instruments, and asset impairment.

Allowance for credit losses

The uncertainty created by the COVID-19 pandemic has increased the level of judgment applied in estimating allowance for credit losses. See Note 6 for more information.

Valuation of financial instruments

Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available. The COVID-19 pandemic has increased market volatility and has negatively impacted the trading levels of certain financial instruments. As a result and as part of our process to determine the fair value of financial instruments, since the onset of the pandemic, we have applied a heightened level of judgment to a broader population of financial instruments than would otherwise generally be required with the objective of determining the fair value that is most representative of those financial instruments. While there has been an improvement in conditions and price discovery in the third and fourth quarter of 2020 relative to the onset of the COVID-19 pandemic in the second quarter of 2020, including the narrowing of credit and funding spreads, the related valuation adjustments have not decreased to pre-COVID-19 levels.

For further details of the valuation of our financial assets and liabilities, see Note 3.

Asset impairment

Given the disruption in economic and market activities caused by the COVID-19 pandemic, in the second and third quarters of 2020, we assessed whether there were indicators that goodwill may have been impaired. As a result, we recognized a goodwill impairment charge of $28 million on our FirstCaribbean International Bank Limited (CIBC FirstCaribbean) CGU in the second quarter of 2020. An additional goodwill impairment charge of $220 million was recognized in the fourth quarter of 2020 upon the discontinuance of held for sale accounting, as discussed in Note 4.

In the fourth quarter of 2020, we performed our annual impairment test for our other CGUs, which required the application of heightened judgment in light of the uncertainty regarding the ultimate economic impact of the COVID-19 pandemic, particularly in evaluating the impact on medium- and long-term forecasted earnings. Implicit in our economic outlook is the assumption that the manner in which governments respond to the second and subsequent waves of the virus, and the dissemination of an effective mass-produced vaccine, will allow the U.S. and Canadian economies to continue to recover during 2021, with the economy returning to pre-COVID levels of economic activity in 2022 and pre-COVID levels of unemployment in 2023. We concluded that the recoverable amounts of these CGUs were in excess of their carrying amounts. Actual experience may differ materially from these expectations, including in relation to the duration and severity of economic contraction and the ultimate timing and extent of a future recovery, which could lead to reductions in the recoverable amounts, which in turn could result in impairment charges.

For further details, see Note 4 and Note 9 to our consolidated financial statements.

Government lending programs in response to COVID-19

During the year, the Government of Canada introduced the Canada Emergency Business Account (CEBA) program and the Business Credit Availability Program (BCAP) to improve access to credit and financing for Canadian businesses facing operational cash flow and liquidity challenges during the current period of significant uncertainty caused by the COVID-19 pandemic. In addition, the U.S. federal government introduced the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Further details about the programs in which CIBC has more significant participation, and the associated accounting impacts, are described below.

Canada Emergency Business Account program

The purpose of the CEBA program is to provide interest-free, partially forgivable loans of up to $40,000 to qualifying small businesses and not-for-profit organizations to help cover their operating costs during a period when their revenues have been temporarily reduced. The CEBA program is underwritten by Export Development Canada (EDC) and is available to borrowers until December 31, 2020. The program utilizes the infrastructure of eligible financial institutions, including CIBC, to provide loans that are partially forgivable to existing clients of these financial institutions, including CIBC, that meet the underwriting standards of EDC. Loans advanced under the CEBA program are not recognized on our

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consolidated balance sheet because they are funded by EDC and all of the resulting cash flows and associated risks and rewards, including any exposure to payment defaults and principal forgiveness, are assumed by EDC. EDC provides a fee to participating financial institutions which is intended to reimburse the costs associated with administering the loans, which we recognize as a reduction of other non-interest expenses. The CEBA program was launched in the second quarter and expanded subsequently to facilitate the application of the program to certain borrowers that would not have otherwise qualified. As at October 31, 2020, loans of $2.9 billion had been provided to CIBC clients under the CEBA program.

Loan guarantee for small and medium-sized enterprises under BCAP

This program is designed to encourage lending to existing clients. Under this program, a subprogram under BCAP, EDC will guarantee 80% of new qualifying operating credit and cash flow term loans of up to $6.25 million to small and medium-sized enterprises. Loans provided under this program are recognized on our consolidated balance sheet as business and government loans classified at amortized cost. Similar to existing guarantee arrangements, the guarantee from EDC on these loans is reflected in our estimate of ECL. Associated fees paid or received under this program are accounted for over the expected life of the loan using the effective interest rate method. As at October 31, 2020, $252 million of loans have been authorized under this program, of which $175 million, net of repayments, was outstanding on our consolidated balance sheet.

Co-lending program for small and medium-sized enterprises (“co-lend program”) under BCAP

Under the co-lend program, a subprogram under BCAP, the Business Development Bank of Canada (BDC) and participating financial institutions co-lend term loans to help qualifying businesses meet their operational cash flow requirements. BDC finances 80% of the loans, with CIBC financing the remaining 20%. The program offers differing maximum financing amounts based on business revenues. Loans originated under this program would be interest-only for the first 12 months. We recognize our 20% interest in loans originated under this program on our consolidated balance sheet as business and government loans classified at amortized cost, to which ECL are applied. The remaining 80% interest financed by BDC is not recognized on our consolidated balance sheet as the risks and rewards, including all interest and credit losses, are passed to BDC. The servicing fee paid by BDC to CIBC for administering their share of the loans will be recognized over the servicing period. As at October 31, 2020, $368 million of loans have been authorized under this program, of which $73 million, representing CIBC’s 20% pro-rata share, remains outstanding on our consolidated balance sheet.

Paycheck Protection Program

In the U.S., the PPP was temporarily added to the U.S. Small Business Administration’s (SBA) Loan Program, under the U.S. federal government’s CARES Act, to help businesses to keep their workforces employed during the COVID-19 pandemic. Loans provided under the PPP will be forgivable by the SBA if employee and compensation levels are maintained, and the loan proceeds are primarily applied towards payroll, rent, mortgage interest, or utilities. The SBA will reimburse CIBC for all loans forgiven pursuant to the program and for all payment defaults. Loans originated under the PPP are recognized on our consolidated balance sheet as business and government loans classified at amortized cost. As the SBA’s guarantee is integral to the origination of these loans, it is reflected in our estimate of the ECL associated with these loans. As at October 31, 2020, the outstanding balance of loans provided to our clients under this program was US$1.9 billion.

CIBC client relief programs in response to COVID-19

Refer to Note 6 for details regarding programs offered by CIBC in response to the COVID-19 pandemic.

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Note 3 Fair value measurement

This note presents the fair values of financial instruments and explains how we determine those values. Note 1, “Basis of preparation and summary of significant accounting policies” sets out the accounting treatment for each measurement category of financial instruments.

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, between market participants in an orderly transaction in the principal market at the measurement date under current market conditions (i.e., the exit price). The determination of fair value requires judgment and is based on market information, where available and appropriate. Fair value measurements are categorized into three levels within a fair value hierarchy (Level 1, 2 or 3) based on the valuation inputs used in measuring the fair value, as outlined below.

• Level 1 – Unadjusted quoted market prices in active markets for identical assets or liabilities we can access at the measurement date. Bid prices, ask prices or prices within the bid and ask, which are the most representative of the fair value, are used as appropriate to measure fair value. Fair value is best evidenced by an independent quoted market price for the same instrument in an active market. An active market is one where transactions are occurring with sufficient frequency and volume to provide quoted prices on an ongoing basis.

• Level 2 – Quoted prices for identical assets or liabilities in markets that are inactive or observable market quotes for similar instruments, or use of valuation techniques where all significant inputs are observable. Inactive markets may be characterized by a significant decline in the volume and level of observed trading activity or through large or erratic bid/offer spreads. In instances where traded markets do not exist or are not considered sufficiently active, we measure fair value using valuation models.

• Level 3 – Non-observable or indicative prices or use of valuation techniques where one or more significant inputs are non-observable.

For a significant portion of our financial instruments, quoted market prices are not available because of the lack of traded markets, and even where such markets do exist, they may not be considered sufficiently active to be used as a final determinant of fair value. When quoted market prices in active markets are not available, we would consider using valuation models. The valuation model and technique we select maximizes the use of

observable market inputs to the extent possible and appropriate in order to estimate the price at which an orderly transaction would take place at the measurement date. In an inactive market, we consider all reasonably available information, including any available pricing for similar instruments, recent arm’s-length market transactions, any relevant observable market inputs, indicative dealer or broker quotations, and our own internal model-based estimates.

Valuation adjustments are an integral component of our fair valuation process. We apply judgment in establishing valuation adjustments that take into account various factors that may have an impact on the valuation. Such factors primarily include, but are not limited to, the bid-offer spreads, illiquidity due to lack of market depth, parameter uncertainty and other market risk, model risk and credit risk of our derivative assets and liabilities, as well as adjustments for valuing our uncollateralized derivative assets and liabilities based on an estimated market cost of funds curve.

Generally, the unit of account for a financial instrument is the individual instrument, and valuation adjustments are applied at an individual instrument level, consistent with that unit of account. In cases where we manage a group of financial assets and liabilities that consist of substantially similar and offsetting risk exposures, the fair value of the group of financial assets and liabilities is measured on the basis of the net open risks.

We apply judgment in determining the most appropriate inputs and the weighting we ascribe to each such input as well as in our selection of valuation methodologies. Regardless of the valuation technique we use, we incorporate assumptions that we believe market participants would make for credit, funding, and liquidity considerations. When the fair value of a financial instrument at inception is determined using a valuation technique that incorporates one or more significant inputs that are non-observable, no inception profit or loss (the difference between the determined fair value and the transaction price) is recognized at the time the asset or liability is initially recorded. Any gains or losses at inception are deferred and recognized only in future periods over the term of the instruments or when the inputs become significantly observable.

We have an ongoing process for evaluating and enhancing our valuation techniques and models. Where enhancements are made, they are applied prospectively, so that fair values reported in prior periods are not recalculated on the new basis. Valuation models used, including analytics for the construction of yield curves and volatility surfaces, are vetted and approved, consistent with our model risk policy.

To ensure that valuations are appropriate, we have established internal guidance on fair value measurement, which is reviewed periodically in recognition of the dynamic nature of markets and the constantly evolving pricing practices in the market. A number of policies and controls are put in place to ensure that the internal guidance on fair value measurement is being applied consistently and appropriately, including independent validation of valuation inputs to external sources such as exchange quotes, broker quotes or other management-approved independent pricing sources. Key model inputs, such as yield curves and volatilities, are independently verified. The results from the independent price validation and any valuation adjustments are reviewed by the Independent Price Verification Committee on a monthly basis. This includes, but is not limited to, reviewing fair value adjustments and methodologies, independent price verification results, limits and valuation uncertainty.

Due to the judgment used in applying a wide variety of acceptable valuation techniques and models, as well as the use of estimates inherent in this process, estimates of fair value for the same or similar assets may differ among financial institutions. The calculation of fair value is based on market conditions as at each consolidated balance sheet date and may not be reflective of ultimate realizable value.

Methods and assumptions

Financial instruments with fair value equal to carrying value

For financial instruments that are not carried on the consolidated balance sheet at fair value and where we consider the carrying value to be a reasonable approximation of fair value due to their short-term nature and generally negligible credit risk, the fair values disclosed for these financial instruments are assumed to equal their carrying values. These financial instruments are: cash and non-interest-bearing deposits with banks; short-term interest-bearing deposits with banks; cash collateral on securities borrowed; securities purchased under resale agreements; customers’ liability under acceptances; cash collateral on securities lent; obligations related to securities sold under repurchase agreements; acceptances; deposits with demand features; and certain other financial assets and liabilities.

Securities

The fair value of debt or equity securities and obligations related to securities sold short is based on quoted bid or ask market prices where available in an active market.

Securities for which quotes in an active market are not available are valued using all reasonably available market information as described below.

The fair value of government issued or guaranteed securities that are not traded in an active market is calculated by applying valuation techniques such as discounted cash flow models using implied yields derived from the prices of actively traded government securities and most recently observable spread differentials.

The fair value of corporate debt securities is determined using the most recently executed transaction prices, and where appropriate, adjusted to the price of these securities obtained from independent dealers, brokers, and third-party multi-contributor consensus pricing sources. When observable price quotations are not available, fair value is determined based on discounted cash flow models using observable discounting curves

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such as benchmark and government yield curves and spread differentials observed through independent dealers, brokers, and third-party multi-contributor consensus pricing sources.

Asset-backed securities (ABS) and mortgage-backed securities (MBS) not issued or guaranteed by a government are valued using discounted cash flow models making maximum use of market observable inputs, such as broker quotes on identical or similar securities and other pricing information obtained from third-party pricing sources adjusted for the characteristics and the performance of the underlying collateral. Other key inputs used include prepayment and liquidation rates, credit spreads, and discount rates commensurate with the risks involved. These assumptions factor information that is derived from actual transactions, underlying reference asset performance, external market research, and market indices, where appropriate.

Privately issued debt and equity securities, which include certain Community Reinvestment Act equity investments and Federal Home Loan Bank (FHLB) stock, are valued using recent market transactions, where available. Otherwise, fair values are derived from valuation models using a market or income approach. These models consider various factors, including projected cash flows, earnings, revenue or other third-party evidence as available. The fair value of limited partnership investments is based upon net asset values published by third-party fund managers and is adjusted for more recent information, where available and appropriate. The carrying value of Community Reinvestment Act equity investments and FHLB stock approximates fair value.

Loans

The fair value of variable-rate loans and loans for which interest rates are repriced or reset frequently is assumed to be equal to their carrying value. The fair value for fixed-rate loans is estimated using a discounted cash flow calculation that uses market interest rates.

The ultimate fair value of loans disclosed is net of the associated allowance for credit losses. The fair value of loans is not adjusted for the value of any credit derivatives used to manage the credit risk associated with them. The fair value of these credit derivatives is disclosed separately.

Other assets and other liabilities

Other assets and other liabilities mainly comprise accrued interest receivable or payable, brokers’ client accounts receivable or payable, precious metals and accounts receivable or payable.

The fair values of other assets and other liabilities are primarily assumed to be at cost or amortized cost as we consider the carrying value to be a reasonable approximation of fair value, except for the fair value of precious metals, which is quoted in an active market. Other assets also include investment in bank-owned life insurance carried at the cash surrender value, which is assumed to be a reasonable approximation of fair value.

Deposits

The fair values of floating-rate deposits and demand deposits are assumed to be equal to their amortized cost. The fair value of fixed-rate deposits is determined by discounting the contractual cash flows using either current market interest rates with similar remaining terms or rates estimated using internal models and broker quotes. The fair value of deposit notes issued to CIBC Capital Trust is determined by reference to the quoted market prices of CIBC Tier 1 Notes issued by CIBC Capital Trust. The fair value of deposit liabilities with embedded optionality includes the fair value of those options. The fair value of equity- and commodity-linked notes includes the fair value of embedded equity and commodity derivatives.

Certain deposits designated at FVTPL are structured notes that have coupons or repayment terms linked to the performance of commodities, debt or equity securities. Fair value of these structured notes is estimated using internally vetted valuation models for the debt and embedded derivative portions of the notes by incorporating market observable prices of the referenced securities or comparable securities, and other inputs such as interest rate yield curves, market volatility levels, foreign exchange rates and changes in our own credit risk, where appropriate. Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing other relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation and interpolation techniques. Appropriate market risk valuation adjustments for such inputs are assessed in all such instances.

The fair value of secured borrowings, which comprises liabilities issued by or as a result of activities associated with the securitization of residential mortgages, the Covered Bond Programme, and consolidated securitization vehicles, is based on identical or proxy market observable quoted bond prices or determined by discounting the contractual cash flows using maximum market observable inputs, such as market interest rates, or credit spreads implied by debt instruments of similar credit quality, as appropriate.

Subordinated indebtedness

The fair value of subordinated indebtedness is determined by reference to market prices for the same or similar debt instruments.

Derivative instruments

The fair value of exchange-traded derivatives such as options and futures is based on quoted market prices. OTC derivatives primarily consist of interest rate swaps, foreign exchange forwards, equity and commodity derivatives, interest rate and currency derivatives, and credit derivatives. For such instruments, where quoted market prices or third-party consensus pricing information are not available, valuation techniques are employed to estimate fair value on the basis of pricing models. Such vetted pricing models incorporate current market measures for interest rates, foreign exchange rates, equity and commodity prices and indices, credit spreads, corresponding market volatility levels, and other market-based pricing factors.

In order to reflect the observed market practice of pricing collateralized and uncollateralized derivatives, our valuation approach uses overnight indexed swap (OIS) curves as the discount rate for valuing collateralized derivatives and uses an estimated market cost of funds curve as the discount rate for valuing uncollateralized derivatives. For most collateralized derivatives that are cleared through central clearing houses, changes to market discounting conventions were implemented in 2020 to support the global market efforts to transition interbank offered rate (IBOR) to the new benchmark rates. Certain centrally cleared collateralized derivatives have transitioned to the use of the new benchmark replacement rates as the overnight index discount rates, including USD derivatives cleared through London Clearing House (LCH) or Chicago Mercantile Exchange (CME), which have transitioned their discounting from the US Fed Funds rate to the Secured Overnight Financing Rate (SOFR). Uncollateralized derivatives are valued based on an estimated market cost of funds curve, which reduces the fair value of uncollateralized derivative assets incremental to the reduction in fair value for credit risk already reflected through the credit valuation adjustment (CVA). In contrast, the use of a market cost of funds curve reduces the fair value of uncollateralized derivative liabilities in a manner that generally includes adjustments for our own credit. As market practices continue to evolve in regard to derivative valuation, further adjustments may be required in the future.

In determining the fair value of complex and customized derivatives, such as equity, credit, and commodity derivatives written in reference to indices or baskets of reference, we consider all reasonably available information including any relevant observable market inputs, third-party consensus pricing inputs, indicative dealer and broker quotations, and our own internal model-based estimates, which are vetted and pre-approved in accordance with our model risk policy, and are regularly and periodically calibrated. The model calculates fair value based on inputs specific to the type of contract, which may include stock prices, correlation for multiple assets, interest rates, foreign exchange rates, yield curves, and volatility surfaces. Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing other

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relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation and interpolation techniques. Appropriate parameter uncertainty and market risk valuation adjustments for such inputs and other model risk valuation adjustments are assessed in all such instances.

In addition to reflecting estimated market funding costs in our valuation of uncollateralized derivative receivables, we also consider whether a CVA is required to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. The CVA is driven off market-observed credit spreads or proxy credit spreads and our assessment of the net counterparty credit risk (CCR) exposure. In assessing this exposure, we also take into account credit mitigants such as collateral, master netting arrangements, and settlements through clearing houses. As noted above, the fair value of uncollateralized derivative liabilities based on market cost of funding generally includes adjustments for our own credit.

Mortgage commitments

The fair value of mortgage commitments designated at FVTPL is for fixed-rate residential mortgage commitments and is based on changes in market interest rates for the loans between the commitment and the consolidated balance sheet dates. The valuation model takes into account the expected probability that outstanding commitments will be exercised as well as the length of time the commitment is offered.

Fair value of financial instruments

		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
2020	Financial assets
	Cash and deposits with banks	$	61,570	$	948	$	–	$	–	$	62,518	$	62,518	$	–
	Securities		31,800		62,576		117		54,553		149,046		149,599		553
	Cash collateral on securities borrowed		8,547		–		–		–		8,547		8,547		–
	Securities purchased under resale agreements		58,090		7,505		–		–		65,595		65,595		–
	Loans
	Residential mortgages		220,739		63		–		–		220,802		222,920		2,118
	Personal		41,390		–		–		–		41,390		41,452		62
	Credit card		10,722		–		–		–		10,722		10,722		–
	Business and government		110,220		23,291		357		–		133,868		134,097		229
	Derivative instruments		–		32,730		–		–		32,730		32,730		–
	Customers’ liability under acceptances		9,606		–		–		–		9,606		9,606		–
	Other assets		15,940		–		–		–		15,940		15,940		–
	Financial liabilities
	Deposits
	Personal	$	199,593	$	–	$	2,559	$	–	$	202,152	$	202,345	$	193
	Business and government		301,546		–		9,880		–		311,426		312,279		853
	Bank		17,011		–		–		–		17,011		17,011		–
	Secured borrowings		39,560		–		591		–		40,151		40,586		435
	Derivative instruments		–		30,508		–		–		30,508		30,508		–
	Acceptances		9,649		–		–		–		9,649		9,649		–
	Obligations related to securities sold short		–		15,963		–		–		15,963		15,963		–
	Cash collateral on securities lent		1,824		–		–		–		1,824		1,824		–
	Obligations related to securities sold under repurchase agreements (1)		54,617		–		17,036		–		71,653		71,653		–
	Other liabilities		15,282		133		9		–		15,424		15,424		–
	Subordinated indebtedness		5,712		–		–		–		5,712		5,993		281
		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
2019	Financial assets
	Cash and deposits with banks	$	16,720	$	639	$	–	$	–	$	17,359	$	17,359	$	–
	Securities		20,115		53,984		413		46,798		121,310		121,453		143
	Cash collateral on securities borrowed		3,664		–		–		–		3,664		3,664		–
	Securities purchased under resale agreements		50,913		5,198		–		–		56,111		56,111		–
	Loans
	Residential mortgages		208,381		60		–		–		208,441		208,693		252
	Personal		43,098		–		–		–		43,098		43,120		22
	Credit card		12,335		–		–		–		12,335		12,335		–
	Business and government		103,885		21,182		–		–		125,067		125,160		93
	Derivative instruments		–		23,895		–		–		23,895		23,895		–
	Customers’ liability under acceptances		9,167		–		–		–		9,167		9,167		–
	Other assets		13,829		–		–		–		13,829		13,829		–
	Financial liabilities
	Deposits
	Personal	$	176,340	$	–	$	1,751	$	–	$	178,091	$	178,046	$	(45	)
	Business and government		248,367		–		9,135		–		257,502		257,872		370
	Bank		11,224		–		–		–		11,224		11,224		–
	Secured borrowings		38,680		–		215		–		38,895		39,223		328
	Derivative instruments		–		25,113		–		–		25,113		25,113		–
	Acceptances		9,188		–		–		–		9,188		9,188		–
	Obligations related to securities sold short		–		15,635		–		–		15,635		15,635		–
	Cash collateral on securities lent		1,822		–		–		–		1,822		1,822		–
	Obligations related to securities sold under repurchase agreements		51,801		–		–		–		51,801		51,801		–
	Other liabilities		14,066		114		12		–		14,192		14,192		–
	Subordinated indebtedness		4,684		–		–		–		4,684		4,925		241

(1) Includes obligations related to securities sold under repurchase agreements supported by bearer deposit notes that are pledged as collateral under the Bank of Canada Term Repo Facility.

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Fair value of derivative instruments

$ millions, as at October 31								2020									2019
		Positive			Negative			Net			Positive			Negative			Net
Held for trading
Interest rate derivatives
Over-the-counter	– Forward rate agreements	$	108		$	161		$	(53	)	$	67		$	241		$	(174	)
	– Swap contracts		12,296			9,309			2,987			8,528			7,697			831
	– Purchased options		109			–			109			92			–			92
	– Written options		–			129			(129	)		–			128			(128	)
			12,513			9,599			2,914			8,687			8,066			621
Exchange-traded	– Purchased options		4			–			4			4			–			4
			4			–			4			4			–			4
Total interest rate derivatives			12,517			9,599			2,918			8,691			8,066			625
Foreign exchange derivatives
Over-the-counter	– Forward contracts		6,655			6,358			297			5,152			5,711			(559	)
	– Swap contracts		3,469			3,613			(144	)		2,971			3,330			(359	)
	– Purchased options		303			–			303			214			–			214
	– Written options		–			214			(214	)		–			196			(196	)
Total foreign exchange derivatives			10,427			10,185			242			8,337			9,237			(900	)
Credit derivatives
Over-the-counter	– Credit default swap contracts – protection purchased		104			47			57			105			21			84
	– Credit default swap contracts – protection sold		2			100			(98	)		–			107			(107	)
Total credit derivatives			106			147			(41	)		105			128			(23	)
Equity derivatives
Over-the-counter			1,995			3,427			(1,432	)		1,262			2,561			(1,299	)
Exchange-traded			3,153			3,537			(384	)		2,384			1,825			559
Total equity derivatives			5,148			6,964			(1,816	)		3,646			4,386			(740	)
Precious metal derivatives
Over-the-counter			283			366			(83	)		287			167			120
Exchange-traded			–			–			–			69			45			24
Total precious metal derivatives			283			366			(83	)		356			212			144
Other commodity derivatives
Over-the-counter			2,604			1,806			798			1,289			1,517			(228	)
Exchange-traded			271			325			(54	)		314			253			61
Total other commodity derivatives			2,875			2,131			744			1,603			1,770			(167	)
Total held for trading			31,356			29,392			1,964			22,738			23,799			(1,061	)
Held for ALM
Interest rate derivatives
Over-the-counter	– Forward rate agreements		–			1			(1	)		2			1			1
	– Swap contracts		310			392			(82	)		439			256			183
	– Purchased options		17			–			17			14			–			14
	– Written options		1			–			1			–			–			–
Total interest rate derivatives			328			393			(65	)		455			257			198
Foreign exchange derivatives
Over-the-counter	– Forward contracts		14			14			–			31			28			3
	– Swap contracts		1,021			684			337			571			1,026			(455	)
Total foreign exchange derivatives			1,035			698			337			602			1,054			(452	)
Credit derivatives
Over-the-counter	– Credit default swap contracts – protection purchased		–			1			(1	)		–			3			(3	)
Total credit derivatives			–			1			(1	)		–			3			(3	)
Equity derivatives
Over-the-counter			8			24			(16	)		100			–			100
Total equity derivatives			8			24			(16	)		100			–			100
Other commodity derivatives
Over-the-counter			3			–			3			–			–			–
Total other commodity derivatives			3			–			3			–			–			–
Total held for ALM			1,374			1,116			258			1,157			1,314			(157	)
Total fair value			32,730			30,508			2,222			23,895			25,113			(1,218	)
Less: effect of netting			(19,347	)		(19,347	)		–			(14,572	)		(14,572	)		–
		$	13,383			$     11,161			$    2,222		$	9,323		$	10,541		$	(1,218	)

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Assets and liabilities not carried on the consolidated balance sheet at fair value

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 2020		Total 2019
$ millions, as at October 31	2020		2019		2020		2019		2020		2019
Financial assets
Amortized cost securities	$	–	$	–	$	31,773	$	20,242	$	580	$	524	$	32,353	$	20,766
Loans
Residential mortgages		–		–		–		–		222,857		208,633		222,857		208,633
Personal		–		–		–		–		41,452		43,120		41,452		43,120
Credit card		–		–		–		–		10,722		12,335		10,722		12,335
Business and government		–		–		–		–		110,449		103,978		110,449		103,978
Investment in equity-accounted associates (1)		10		9		–		–		83		76		93		85
Financial liabilities
Deposits
Personal	$	–	$	–	$	52,648	$	53,994	$	1,282	$	1,635	$	53,930	$	55,629
Business and government		–		–		132,016		123,144		2,302		2,508		134,318		125,652
Bank		–		–		10,048		6,113		–		–		10,048		6,113
Secured borrowings		–		–		38,275		36,049		1,720		2,959		39,995		39,008
Subordinated indebtedness		–		–		5,993		4,925		–		–		5,993		4,925

(1) See Note 26 for details of our equity-accounted associates.

Financial instruments carried on the consolidated balance sheet at fair value

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 2020			Total 2019
$ millions, as at October 31	2020			2019			2020			2019			2020			2019
Financial assets
Deposits with banks	$	–		$	–		$	948		$	639		$	–		$	–		$	948		$	639
Securities mandatorily measured and designated at FVTPL
Government issued or guaranteed		3,917			2,372			25,091	(1)		19,306	(1)		–			–			29,008			21,678
Corporate equity		27,919			25,852			47			684			16			7			27,982			26,543
Corporate debt		–			–			3,525			3,760			25			23			3,550			3,783
Mortgage- and asset-backed		–			–			2,018	(2)		2,220	(2)		135			173			2,153			2,393
		31,836			28,224			30,681			25,970			176			203			62,693			54,397
Loans mandatorily measured at FVTPL
Business and government		–			–			23,022			20,351			626	(3)		831	(3)		23,648			21,182
Residential mortgages		–			–			63			60			–			–			63			60
		–			–			23,085			20,411			626			831			23,711			21,242
Debt securities measured at FVOCI
Government issued or guaranteed		3,912			2,369			41,269			35,460			–			–			45,181			37,829
Corporate debt		–			–			6,224			5,621			–			–			6,224			5,621
Mortgage- and asset-backed		–			–			2,563			2,746			–			–			2,563			2,746
		3,912			2,369			50,056			43,827			–			–			53,968			46,196
Equity securities designated at FVOCI
Corporate equity		41			45			304			266			240			291			585			602
		41			45			304			266			240			291			585			602
Securities purchased under resale agreements measured at FVTPL		–			–			7,505			5,198			–			–			7,505			5,198
Derivative instruments
Interest rate		4			4			12,793			9,086			48			56			12,845			9,146
Foreign exchange		–			–			11,462			8,939			–			–			11,462			8,939
Credit		–			–			8			1			98			104			106			105
Equity		3,153			2,383			1,791			1,111			212			252			5,156			3,746
Precious metal		–			–			283			356			–			–			283			356
Other commodity		271			383			2,607			1,220			–			–			2,878			1,603
		3,428			2,770			28,944			20,713			358			412			32,730			23,895
Total financial assets	$	39,217		$	33,408		$	141,523		$	117,024		$	1,400		$	1,737		$	182,140		$	152,169
Financial liabilities
Deposits and other liabilities (4)	$	–		$	–		$	(13,176	)	$	(10,626	)	$	4		$	(601	)	$	(13,172	)	$	(11,227	)
Obligations related to securities sold short		(5,363	)		(7,258	)		(10,600	)		(8,377	)		–			–			(15,963	)		(15,635	)
Obligations related to securities sold under repurchase agreements		–			–			(17,036	)		–			–			–			(17,036	)		–
Derivative instruments
Interest rate		–			–			(9,964	)		(8,322	)		(28	)		(1	)		(9,992	)		(8,323	)
Foreign exchange		–			–			(10,883	)		(10,291	)		–			–			(10,883	)		(10,291	)
Credit		–			–			(41	)		(19	)		(107	)		(112	)		(148	)		(131	)
Equity		(3,537	)		(1,824	)		(3,288	)		(2,407	)		(163	)		(155	)		(6,988	)		(4,386	)
Precious metal		–			–			(366	)		(212	)		–			–			(366	)		(212	)
Other commodity		(325	)		(300	)		(1,806	)		(1,470	)		–			–			(2,131	)		(1,770	)
		(3,862	)		(2,124	)		(26,348	)		(22,721	)		(298	)		(268	)		(30,508	)		(25,113	)
Total financial liabilities	$	(9,225	)	$	(9,382	)	$	(67,160	)	$	(41,724	)	$	(294	)	$	(869	)	$	(76,679	)	$	(51,975	)

(1) Includes $57 million related to securities designated at FVTPL (2019: $56 million).

(2) Includes $60 million related to ABS designated at FVTPL (2019: $357 million).

(3) Includes $357 million related to loans designated at FVTPL (2019: nil).

(4) Comprises deposits designated at FVTPL of $13,419 million (2019: $10,458 million), net bifurcated embedded derivative assets of $389 million (2019: net bifurcated embedded derivative liabilities of $643 million), other liabilities designated at FVTPL of $9 million (2019: $12 million), and other financial liabilities measured at fair value of $133 million (2019: $114 million).

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Transfers between levels in the fair value hierarchy are deemed to have occurred at the beginning of the year in which the transfer occurred. Transfers between levels can occur as a result of additional or new information regarding valuation inputs and changes in their observability. During the year, we transferred $197 million of securities mandatorily measured at FVTPL (2019: $25 million) and $1,851 million of securities sold short (2019: $431 million) from Level 1 to Level 2, and nil of securities sold short (2019: $379 million) from Level 2 to Level 1 due to changes in the observability of the inputs used to value these securities. In addition, transfers between Level 2 and Level 3 were made during 2020 and 2019, primarily due to changes in the observability of certain market volatility inputs that were used in measuring the fair value of our embedded derivatives.

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	Opening balance			Realized (2)			Unrealized (2)(3)			Net unrealized gains (losses) included in OCI (4)			Transfer in to Level 3			Transfer out of Level 3			Purchases/ Issuances			Sales/ Settlements			Closing balance
2020
Securities mandatorily measured at FVTPL
Corporate equity	$	7		$	–		$	(8	)	$	–		$	7		$	–		$	10		$	–		$	16
Corporate debt		23			–			2			–			–			–			–			–			25
Mortgage- and asset-backed		173			–			–			–			–			–			118			(156	)		135
Securities designated at FVTPL
Asset-backed		–			–			–			–			–			–			–			–			–
Loans mandatorily measured at FVTPL
Business and government		831			–			–			3			–			–			1,270			(1,478	)		626
Debt securities measured at FVOCI
Government issued or guaranteed		–			–			–			–			–			–			–			–			–
Corporate debt		–			–			–			(3	)		20			–			1			(18	)		–
Mortgage- and asset-backed		–			–			–			–			–			–			–			–			–
Equity securities designated at FVOCI
Corporate equity		291			–			–			63			–			–			50			(164	)		240
Derivative instruments
Interest rate		56			–			32			–			–			–			6			(46	)		48
Credit		104			(7	)		1			–			–			–			–			–			98
Equity		252			–			(40	)		–			–			–			53			(53	)		212
Total assets	$	1,737		$	(7	)	$	(13	)	$	63		$	27		$	–		$	1,508		$	(1,915	)	$	1,400
Deposits and other liabilities (5)	$	(601	)	$	–		$	512		$	–		$	(42	)	$	29		$	(72	)	$	178		$	4
Derivative instruments
Interest rate		(1	)		–			(33	)		–			–			–			–			6			(28	)
Credit		(112	)		7			(2	)		–			–			–			–			–			(107	)
Equity		(155	)		–			14			–			–			–			(60	)		38			(163	)
Total liabilities	$	(869	)	$	7		$	491		$	–		$	(42	)	$	29		$	(132	)	$	222		$	(294	)
2019
Securities mandatorily measured at FVTPL
Corporate equity	$	6		$	–		$	1		$	–		$	–		$	–		$	–		$	–		$	7
Corporate debt		26			–			(3	)		–			–			–			–			–			23
Mortgage- and asset-backed		319			–			1			–			–			–			74			(221	)		173
Securities designated at FVTPL
Asset-backed		–			–			–			–			–			–			–			–			–
Loans mandatorily measured at FVTPL
Business and government		482			–			–			(1	)		–			–			856			(506	)		831
Debt securities measured at FVOCI
Government issued or guaranteed		–			–			–			–			–			–			–			–			–
Corporate debt		–			–			–			–			–			–			–			–			–
Mortgage- and asset-backed		–			–			–			–			–			–			–			–			–
Equity securities designated at FVOCI
Corporate equity		285			–			–			2			–			–			74			(70	)		291
Derivative instruments
Interest rate		–			–			59			–			–			–			2			(5	)		56
Credit		115			(9	)		(2	)		–			–			–			–			–			104
Equity		107			–			15			–			–			(24	)		202			(48	)		252
Total assets	$	1,340		$	(9)		$	71		$	1		$	–		$	(24	)	$	1,208		$	(850)		$	1,737
Deposits and other liabilities (5)	$	(423	)	$	–		$	(113	)	$	–		$	(100	)	$	117		$	(288	)	$	206		$	(601	)
Derivative instruments
Interest rate		(109	)		–			132			–			–			–			–			(24	)		(1	)
Credit		(131	)		9			3			–			–			–			–			7			(112	)
Equity		(119	)		–			(89	)		–			–			77			(70	)		46			(155	)
Total liabilities	$	(782	)	$	9		$	(67)		$	–		$	(100)		$	194		$	(358	)	$	235		$	(869	)

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

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

(4) Foreign exchange translation on loans mandatorily measured at FVTPL held by foreign operations and denominated in the same currency as the foreign operations is included in OCI.

(5) Includes deposits designated at FVTPL of $137 million (2019: $135 million) and net bifurcated embedded derivative assets of $141 million (2019: net bifurcated embedded derivative liabilities of $466 million).

CIBC 2020 ANNUAL REPORT 133

Consolidated financial statements

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	2020			Valuation techniques			Key non-observable inputs			Low			High
Securities mandatorily measured at FVTPL
Corporate equity	$	16			Valuation multiple			Earnings multiple			12.2			12.2
Corporate debt		25			Discounted cash flow			Discount rate			7.5	%		7.5	%
Mortgage- and asset-backed		135			Discounted cash flow			Credit spread			1.4	%		2.0	%
					Market proxy or direct broker quote			Market proxy or direct broker quote			0.5			0.5
Equity securities designated at FVOCI
Corporate equity
Limited partnerships and private companies		240			Adjusted net asset value	(1)		Net asset value	(3)		n/a			n/a
					Proxy share price			Proxy share price	(3)		n/a			n/a
Loans mandatorily measured at FVTPL
Business and government		626			Discounted cash flow			Credit spread			0.6	%		2.1	%
Derivative instruments
Interest rate		48			Proprietary model	(2)		n/a			n/a			n/a
					Option model			Market volatility			17.1	%		97.3	%
Credit		98			Market proxy or direct broker quote			Market proxy or direct broker quote			0.0	%		20.5	%
Equity		212			Option model			Market correlation			35.0	%		96.0	%
Total assets	$	1,400
Deposits and other liabilities	$	4			Option model			Market volatility			10.0	%		87.0	%
								Market correlation			(60.0	) %		100.0	%
Derivative instruments
Interest rate		(28	)		Proprietary model	(2)		n/a			n/a			n/a
					Option model			Market volatility			17.1	%		97.3	%
Credit		(107	)		Market proxy or direct broker quote			Market proxy or direct broker quote			0.0	%		20.5	%
Equity		(163	)		Option model			Market correlation			13.0	%		98.0	%
Total liabilities	$	(294	)

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

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

(3) The range of NAV price or proxy share price has not been disclosed due to the wide range and diverse nature of the investments.

n/a Not applicable.

Sensitivity of Level 3 financial assets and liabilities

The following section describes the significant non-observable inputs identified in the table above, the interrelationships between those inputs, where applicable, and the change in fair value if changing one or more of the non-observable inputs within a reasonably possible range would impact the fair value significantly.

The fair value of our limited partnerships is determined based on the net asset value provided by the fund managers, adjusted as appropriate. The fair value of limited partnerships is sensitive to changes in the net asset value, and by adjusting the net asset value within a reasonably possible range, the aggregate fair value of our limited partnerships would increase or decrease by $63 million (2019: $34 million).

While our standalone derivatives are recorded as derivative assets or derivative liabilities, our derivatives embedded in our structured note deposit liabilities or deposit liabilities designated at FVTPL are recorded within deposits and other liabilities. The determination of the fair value of certain Level 3 embedded derivatives and certain standalone derivatives requires significant assumptions and judgment to be applied to both the inputs and the valuation techniques employed. These derivatives are sensitive to long-dated market volatility and correlation inputs, which we consider to be non-observable. Market volatility is a measure of the anticipated future variability of a market price and is an important input for pricing options, which are inherent in many of our Level 3 derivatives. A higher market volatility generally results in a higher option price, with all else held constant, due to the higher probability of obtaining a greater return from the option, and results in an increase in the fair value of our Level 3 derivatives. Correlation inputs are used to value those derivatives where the payout is dependent upon more than one market price. For example, the payout of an equity basket option is based upon the performance of a basket of stocks, and the interrelationships between the price movements of those stocks. A positive correlation implies that two inputs tend to change the fair value in the same direction, while a negative correlation implies that two inputs tend to change the fair value in the opposite direction. Changes in market correlation could result in an increase or a decrease in the fair value of our Level 3 derivatives and embedded derivatives. By adjusting the non-observable inputs by reasonably alternative amounts, the fair value of our net Level 3 standalone derivatives and embedded derivatives would increase by $84 million or decrease by $74 million (2019: increase by $45 million or decrease by $33 million).

134 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Financial instruments designated at FVTPL

Financial assets designated at FVTPL include certain debt securities and loans that were designated at FVTPL on the basis of being managed together with derivatives to eliminate or significantly reduce financial risks.

Deposits and other liabilities designated at FVTPL include:

• Certain business and government deposit liabilities, certain secured borrowings and certain obligations related to securities sold under repurchase agreements that are economically hedged with derivatives and other financial instruments, and certain financial liabilities that have one or more embedded derivatives that significantly modify the cash flows of the host liability but are not bifurcated from the host instrument; and

• Our mortgage commitments to retail clients to provide mortgages at fixed rates that are economically hedged with derivatives and other financial instruments.

The carrying value of our securities designated at FVTPL represents our maximum exposure to credit risk related to these assets designated at FVTPL. The change in fair value attributable to change in credit risk of these assets designated at FVTPL during the year is insignificant (2019: insignificant). The fair value of a liability designated at FVTPL reflects the credit risk relating to that liability. For those liabilities designated at FVTPL for which we believe changes in our credit risk would impact the fair value from the note holders’ perspective, the related fair value changes were recognized in OCI. Changes in fair value attributable to changes in our own credit are measured as the difference between: (i) the period-over-period change in the present value of the expected cash flows using a discount curve adjusted for our own credit; and (ii) the period-over-period change in the present value of the same expected cash flows using a discount curve based on the benchmark curve adjusted for our own credit as implied at inception of the liability designated at FVTPL. The pre-tax impact of changes in CIBC’s own credit risk on our liabilities designated at FVTPL was losses of $76 million for the year and losses of $55 million cumulatively (2019: gains of $39 million for the year and gains of $21 million cumulatively). A net gain of $60 million, net of hedges, was realized for assets designated at FVTPL and liabilities designated at FVTPL, which is included in the consolidated statement of income under Gains (losses) from financial instruments measured/designated at FVTPL, net (2019: a net loss of $32 million).

The estimated contractual amount payable at maturity of deposits designated at FVTPL, which is based on the par value and the intrinsic value of the applicable embedded derivatives, is $786 million higher (2019: $283 million higher) than its fair value. The intrinsic value of the embedded derivatives reflects the structured payoff of certain FVO deposit liabilities, which we hedge economically with derivatives and other FVTPL financial instruments.

Note 4 Significant transactions

2020

Sale of FirstCaribbean International Bank Limited

On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of CIBC FirstCaribbean to GNB Financial Group Limited (GNB) for total consideration of approximately US$797 million, comprised of approximately US$200 million in cash and secured financing provided by CIBC for the remainder, subject to closing adjustments to reflect certain changes in CIBC FirstCaribbean’s book value. The closing of this transaction would result in CIBC retaining a 24.9% minority interest in CIBC FirstCaribbean, which would be accounted for as an investment in associate using the equity method.

In the fourth quarter of 2019, we recognized a goodwill impairment charge of $135 million as a result of the valuation implied from the definitive agreement with GNB. Commencing in the first quarter of 2020, the assets and liabilities of CIBC FirstCaribbean were treated as held for sale, and measured at the lower of their aggregate carrying amount and fair value less costs to sell, on the basis that the transaction was highly probable to close in 2020 subject to regulatory approvals. In the second quarter of 2020, we recognized an additional goodwill impairment charge of $28 million based on the estimated impact of the COVID-19 pandemic on the recoverable value of the 24.9% interest in CIBC FirstCaribbean that we expected to retain.

As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our revised expectations regarding the likelihood and timing of closing of a potential transaction, we concluded in the fourth quarter of 2020 that held for sale accounting is no longer appropriate. As a result, we were required to assess the recoverable amount of the remaining goodwill based on current market conditions rather than the definitive agreement with GNB. This assessment reflected revised expectations concerning the impact of the COVID-19 pandemic and led to the recognition of an additional goodwill impairment charge of $220 million. While we discontinued the application of held for sale accounting, we continue to pursue the transaction and the regulatory review process.

For additional information, see Note 9.

CIBC 2020 ANNUAL REPORT 135

Consolidated financial statements

2019

Acquisition of Cleary Gull

On September 9, 2019, we completed the acquisition of substantially all of the assets and operations of Cleary Gull Inc. (Cleary Gull), a Milwaukee-based boutique investment banking firm specializing in middle-market mergers and acquisitions, private capital placement and debt advisory across the U.S. Goodwill and intangible assets of $16 million were recognized as a result of the acquisition. The results of the acquired business have been consolidated from the date of close and are included in our Capital Markets SBU.

Acquisition of Lowenhaupt Global Advisors

On September 1, 2019, we completed the acquisition of substantially all of the assets and operations of Lowenhaupt Global Advisors, LLC (LGA), a wealth advisory firm in St. Louis and New York that provides independent advice on family wealth transfer, taxation, investment portfolio allocation and business structuring. Goodwill and intangible assets of $14 million were recognized as a result of the acquisition. The results of the acquired business have been consolidated from the date of close and are included in our U.S. Commercial Banking and Wealth Management SBU.

Finalization of arrangement with Air Canada

Air Canada’s acquisition of the Aeroplan loyalty business from Aimia Inc. closed on January 10, 2019. We now offer credit cards under Air Canada’s new loyalty program, which launched in November 2020. This program allows CIBC’s Aeroplan cardholders to transfer their existing Aeroplan Miles to Air Canada’s new Aeroplan loyalty program.

To secure our participation in Air Canada’s new Aeroplan loyalty program for a period of 10 years, we paid Air Canada $200 million plus applicable sales tax, which we recognized as an expense in the first quarter of 2019. In addition, we made a payment of $92 million plus applicable sales tax in the first quarter of 2019 as a prepayment to be applied towards future monthly payments in respect of Aeroplan Miles over a 10-year period.

Note  5 Securities

Securities

$ millions, as at October 31	2020		2019
Debt securities measured at FVOCI	$	53,968	$	46,196
Equity securities designated at FVOCI		585		602
Securities measured at amortized cost (1)		31,800		20,115
Securities mandatorily measured and designated at FVTPL		62,693		54,397
	$	149,046	$	121,310

(1) During the year, $47 million of amortized cost debt securities were disposed of shortly before their maturity resulting in a realized gain of $2 million (2019: a realized loss of less than $1 million).

136 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

	Residual term to contractual maturity
$ millions, as at October 31	Within 1 year					1 to 5 years					5 to 10 years					Over 10 years					No specific maturity							2020 Total					2019 Total
	Carrying value		Yield (1)			Carrying value		Yield (1)			Carrying value		Yield (1)			Carrying value		Yield (1)			Carrying value		Yield (1)			Carrying value		Yield (1)			Carrying value		Yield (1)
Debt securities measured at FVOCI
Securities issued or guaranteed by:
Canadian federal government	$	1,361		0.5	%	$	9,745		0.6	%	$	303		0.7	%	$	–		–	%	$	–		–	%	$	11,409		0.6	%	$	10,851		1.7	%
Other Canadian governments		330		0.4			10,853		0.9			4,132		1.2			–		–			–		–			15,315		1.0			12,271		1.9
U.S. Treasury and agencies		7,290		0.5			5,306		0.9			–		–			–		–			–		–			12,596		0.7			9,371		2.0
Other foreign governments		3,060		0.6			2,553		0.6			163		5.2			85		5.1			–		–			5,861		0.8			5,336		2.5
Mortgage-backed securities (2)		81		0.2			536		1.0			181		2.4			1,570		1.4			–		–			2,368		1.4			2,699		2.4
Asset-backed securities		–		–			–		–			66		2.2			129		1.6			–		–			195		1.8			47		2.4
Corporate debt		2,211		0.6			4,009		0.7			4		2.4			–		–			–		–			6,224		0.7			5,621		2.4
	$	14,333				$	33,002				$	4,849				$	1,784				$	–				$	53,968				$	46,196
Equity securities designated at FVOCI
Corporate public equity	$	–		–		$	–		–		$	–		–		$	–		–		$	42		n/m		$	42		n/m		$	46		n/m
Corporate private equity		–		–			–		–			–		–			–		–			543		n/m			543		n/m			556		n/m
	$	–				$	–				$	–				$	–				$	585				$	585				$	602
Securities measured at amortized cost
Securities issued or guaranteed by:
Canadian federal government	$	133				$	619				$	38				$	–				$	–				$	790				$	582
Other Canadian governments		452					4,518					6,102					–					–					11,072					6,748
U.S. Treasury and agencies		551					9,551					866					–					–					10,968					5,927
Other foreign governments		92					42					36					381					–					551					660
Mortgage-backed securities (3)		259					1,684					926					1,085					–					3,954					3,616
Asset-backed securities		–					234					396					32					–					662					463
Corporate debt		232					3,432					139					–					–					3,803					2,119
	$	1,719				$	20,080				$	8,503				$	1,498				$	–				$	31,800				$	20,115
Securities mandatorily measured and designated at FVTPL
Securities issued or guaranteed by:
Canadian federal government	$	3,996				$	4,073				$	1,085				$	2,501				$	–				$	11,655				$	7,203
Other Canadian governments		1,037					1,784					869					6,093					–					9,783					8,262
U.S. Treasury and agencies		269					2,504					2,177					646					–					5,596					5,074
Other foreign governments		1,230					683					29					32					–					1,974					1,139
Mortgage-backed securities (4)		108					1,326					141					7					–					1,582					1,175
Asset-backed securities		143					102					76					250					–					571					1,218
Corporate debt		882					1,920					568					180					–					3,550					3,783
	$	7,665				$	12,392				$	4,945				$	9,709				$	–				$	34,711				$	27,854
Corporate public equity		–					–					–					–					27,982					27,982					26,523
Corporate private equity		–					–					–					–					–					–					20
	$	–				$	–				$	–				$	–				$	27,982				$	27,982				$	26,543
Total securities (5)	$	23,717				$	65,474				$	18,297				$	12,991				$	28,567				$	149,046				$	121,310

(1) Represents the weighted-average yield, which is determined by applying the weighted average of the yields of individual fixed income securities.

(2) Includes securities backed by mortgages insured by the Canada Mortgage and Housing Corporation (CMHC), with amortized cost of $410 million (2019: $232 million) and fair value of $413 million (2019: $232 million); securities issued by Federal National Mortgage Association (Fannie Mae), with amortized cost of $888 million (2019: $1,127 million) and fair value of $918 million (2019: $1,136 million); securities issued by Federal Home Loan Mortgage Corporation (Freddie Mac), with amortized cost of $367 million (2019: $487 million) and fair value of $380 million (2019: $492 million); and securities issued by Government National Mortgage Association, a U.S. government corporation (Ginnie Mae), with amortized cost of $655 million (2019: $841 million) and fair value of $657 million (2019: $839 million).

(3) Includes securities backed by mortgage insured by the CMHC with amortized cost of $609 million (2019: $858 million) and fair value of $610 million (2019: $859 million); securities issued by Fannie Mae, with amortized cost of $1,165 million (2019: $1,037 million) and fair value of $1,197 million (2019: $1,048 million); securities issued by Freddie Mac, with amortized cost of $2,008 million (2019: $1,610 million) and fair value of $2,091 million (2019: $1,651 million); and securities issued by Ginnie Mae, with amortized cost of $69 million (2019: $98 million) and fair value of $71 million (2019: $99 million).

(4) Includes securities backed by mortgages insured by the CMHC of $1,547 million (2019: $1,135 million).

(5) Includes securities denominated in U.S. dollars with carrying value of $68.4 billion (2019: $54.4 billion) and securities denominated in other foreign currencies with carrying value of $2,616 million (2019: $1,813 million).

n/m Not meaningful.

Fair value of debt securities measured and equity securities designated at FVOCI

$ millions, as at October 31								2020									2019
	Cost/ Amortized cost  (1)		Gross unrealized gains		Gross unrealized losses			Fair value		Cost/ Amortized cost (1)		Gross unrealized gains		Gross unrealized losses			Fair value
Securities issued or guaranteed by:
Canadian federal government	$	11,379	$	32	$	(2	)	$	11,409	$	10,842	$	12	$	(3	)	$	10,851
Other Canadian governments		15,187		128		–			15,315		12,252		22		(3	)		12,271
U.S. Treasury and agencies		12,533		63		–			12,596		9,353		25		(7	)		9,371
Other foreign governments		5,825		38		(2	)		5,861		5,318		25		(7	)		5,336
Mortgage-backed securities		2,320		49		(1	)		2,368		2,688		15		(4	)		2,699
Asset-backed securities		197		–		(2	)		195		47		–		–			47
Corporate debt		6,194		31		(1	)		6,224		5,608		16		(3	)		5,621
		53,635		341		(8	)		53,968		46,108		115		(27	)		46,196
Corporate public equity (2)		30		15		(3	)		42		40		15		(9	)		46
Corporate private equity		546		43		(46	)		543		493		85		(22	)		556
		576		58		(49	)		585		533		100		(31	)		602
	$	54,211	$	399		$    (57	)	$	54,553	$	46,641	$	215	$	(58	)	$	46,798

(1) Net of allowance for credit losses for debt securities measured at FVOCI of $22 million (2019: $23 million).

(2) Includes restricted stock.

CIBC 2020 ANNUAL REPORT 137

Consolidated financial statements

Fair value of equity securities designated at FVOCI that were disposed of during the year was $88 million (2019: $20 million). Net realized cumulative after-tax gains of $93 million for the year (2019: $18 million) resulting from dispositions of equity securities designated at FVOCI and return on capital distributions from limited partnerships designated at FVOCI were reclassified from AOCI to retained earnings.

Dividend income recognized on equity securities designated at FVOCI that were still held as at October 31, 2020 was $5 million (2019: $9 million). Dividend income recognized on equity securities designated at FVOCI that were disposed of during the year was $2 million (2019: nil).

The table below presents profit or loss recognized on FVOCI securities:

$ millions, for the year ended October 31	2020			2019			2018
Realized gains	$	30		$	40		$	56
Realized losses		(1	)		(2	)		(13	)
Provision for credit losses on debt securities		(8	)		(3	)		(78	)
	$	21		$	35		$	(35	)

Allowance for credit losses

The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance for debt securities measured at FVOCI:

		Stage 1			Stage 2			Stage 3
$ millions, as at or for the year ended October 31		Collective provision 12-month ECL performing			Collective provision lifetime ECL performing			Collective and individual provision lifetime ECL credit-impaired			Total
2020	Debt securities measured at FVOCI
	Balance at beginning of year	$	14		$	3		$	6		$	23
	Provision for (reversal of) credit losses (1)(2)		5			2			1			8
	Write-offs		–			–			–			–
	Other		(1	)		(1	)		(7	)  (3)		(9	)
	Balance at end of year	$	18		$	4		$	–		$	22
2019	Debt securities measured at FVOCI
	Balance at beginning of year	$	15		$	3		$	5		$	23
	Provision for (reversal of) credit losses (1)		–			–			4			4
	Write-offs		–			–			(4	)		(4	)
	Other		(1	)		–			1			–
	Balance at end of year	$	14		$	3		$	6		$	23

(1) Included in the gains (losses) from debt securities measured at FVOCI and amortized cost, net on our consolidated statement of income.

(2) Excludes stage 3 provisions for credit loss of $14 million for originated credit-impaired amortized cost securities that are recognized in the gains (losses) from debt securities measured at FVOCI and amortized cost, net on our consolidated statement of income.

(3) Includes ECL of $8 million relating to Barbados U.S. dollar denominated securities that were derecognized in the third quarter of 2020 as a result of a U.S. dollar denominated debt restructuring agreement completed with the Government of Barbados.

Note  6 Loans⁽¹⁾⁽²⁾

$ millions, as at October 31									2020										2019
	Gross amount		Stage 3 allowance		Stages 1 and 2 allowance		Total allowance (3)		Net total		Gross amount		Stage 3 allowance		Stages 1 and 2 allowance		Total allowance (3)		Net total
Residential mortgages (4)	$	221,165	$	151	$	212	$	363	$	220,802	$	208,652	$	140	$	71	$	211	$	208,441
Personal		42,222		113		719		832		41,390		43,651		128		425		553		43,098
Credit card		11,389		–		667		667		10,722		12,755		–		420		420		12,335
Business and government (4)		135,546		650		1,028		1,678		133,868		125,798		376		355		731		125,067
	$	410,322	$	914	$	2,626	$	3,540	$	406,782	$	390,856	$	644	$	1,271	$	1,915	$	388,941

(1) Loans are net of unearned income of $530 million (2019: $469 million).

(2) Includes gross loans of $76.6 billion (2019: $69.5 billion) denominated in U.S. dollars and $8.4 billion (2019: $6.7 billion) denominated in other foreign currencies.

(3) Includes ECL allowances for customers’ liability under acceptances.

(4) Includes $63 million of residential mortgages (2019: $60 million) and $23,291 million of business and government loans (2019: $21,182 million) that are measured at FVTPL.

138 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Allowance for credit losses

The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance:

$ millions, as at or for the year ended October 31	2020
	Stage 1			Stage 2			Stage 3
	Collective provision 12-month ECL performing			Collective provision lifetime ECL performing			Collective and individual provision lifetime ECL credit-impaired  (1)			Total
Residential mortgages
Balance at beginning of year	$	28		$	43		$	140		$	211
Originations net of repayments and other derecognitions		9			(12	)		(17	)		(20	)
Changes in model		(3	)		30			–			27
Net remeasurement (2)		(21	)		123			73			175
Transfers (2)
– to 12-month ECL		61			(51	)		(10	)		–
– to lifetime ECL performing		(23	)		39			(16	)		–
– to lifetime ECL credit-impaired		–			(10	)		10			–
Provision for (reversal of) credit losses (3)		23			119			40			182
Write-offs (4)		–			–			(16	)		(16	)
Recoveries		–			–			6			6
Interest income on impaired loans		–			–			(19	)		(19	)
Foreign exchange and other		–			(1	)		–			(1	)
Balance at end of year	$	51		$	161		$	151		$	363
Personal
Balance at beginning of year	$	174		$	271		$	128		$	573
Originations net of repayments and other derecognitions		37			(51	)		(12	)		(26	)
Changes in model		(13	)		181			–			168
Net remeasurement (2)		(186	)		378			247			439
Transfers (2)
– to 12-month ECL		300			(292	)		(8	)		–
– to lifetime ECL performing		(108	)		126			(18	)		–
– to lifetime ECL credit-impaired		–			(67	)		67			–
Provision for (reversal of) credit losses (3)		30			275			276			581
Write-offs (4)		–			–			(353	)		(353	)
Recoveries		–			–			66			66
Interest income on impaired loans		–			–			(5	)		(5	)
Foreign exchange and other		–			–			1			1
Balance at end of year	$	204		$	546		$	113		$	863
Credit card
Balance at beginning of year	$	145		$	340		$	–		$	485
Originations net of repayments and other derecognitions		(3	)		(69	)		–			(72	)
Changes in model		(6	)		59			–			53
Net remeasurement (2)		(223	)		674			89			540
Transfers (2)
– to 12-month ECL		281			(281	)		–			–
– to lifetime ECL performing		(58	)		58			–			–
– to lifetime ECL credit-impaired		–			(209	)		209			–
Provision for (reversal of) credit losses (3)		(9	)		232			298			521
Write-offs (4)		–			–			(409	)		(409	)
Recoveries		–			–			111			111
Interest income on impaired loans		–			–			–			–
Foreign exchange and other		–			–			–			–
Balance at end of year	$	136		$	572		$	–		$	708
Business and government
Balance at beginning of year	$	239		$	158		$	378		$	775
Originations net of repayments and other derecognitions		51			(45	)		(20	)		(14	)
Changes in model		14			(1	)		(1	)		12
Net remeasurement (2)		264			594			349			1,207
Transfers (2)
– to 12-month ECL		113			(103	)		(10	)		–
– to lifetime ECL performing		(201	)		210			(9	)		–
– to lifetime ECL credit-impaired		(21	)		(121	)		142			–
Provision for (reversal of) credit losses (3)		220			534			451			1,205
Write-offs (4)		–			–			(157	)		(157	)
Recoveries		–			–			9			9
Interest income on impaired loans		–			–			(21	)		(21	)
Foreign exchange and other		(6	)		(9	)		(8	)		(23	)
Balance at end of year	$	453		$	683		$	652		$	1,788
Total ECL allowance (5)	$	844		$	1,962		$	916		$	3,722
Comprises:
Loans	$	735		$	1,891		$	914		$	3,540
Undrawn credit facilities and other off-balance sheet exposures (6)		109			71			2			182

(1) Includes the ECL allowance for purchased credit-impaired loans from the acquisition of The PrivateBank.

(2) Transfers represent stage movements of prior period ECL allowances to the current period stage classification. Net remeasurement represents the current period change in ECL allowances for transfers, net write-offs, changes in forecasts of forward-looking information, parameter updates, and partial repayments in the period.

(3) Provision for (reversal of) credit losses for loans and undrawn credit facilities and other off-balance sheet exposures is presented as Provision for (reversal of) credit losses on our consolidated statement of income.

(4) We generally continue to pursue collection on the amounts that were written off. The degree of collection efforts varies from one jurisdiction to another, depending on the local regulations and original agreements with customers.

(5) See Note 5 for the ECL allowance on debt securities measured at FVOCI. The table above excludes the ECL allowance on debt securities classified at amortized cost of $16 million as at October 31, 2020 (2019: $2 million), $14 million of which was stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (2019: nil). The ECL allowances for other financial assets classified at amortized cost were immaterial as at October 31, 2020 and were excluded from the table above. Financial assets other than loans that are classified at amortized cost are presented on our consolidated balance sheet net of ECL allowances.

(6) Included in Other liabilities on our consolidated balance sheet.

CIBC 2020 ANNUAL REPORT 139

Consolidated financial statements

$ millions, as at or for the year ended October 31	2019
	Stage 1			Stage 2			Stage 3
	Collective provision 12-month ECL performing			Collective provision lifetime ECL performing			Collective and individual provision lifetime ECL credit-impaired (1)			Total
Residential mortgages
Balance at beginning of year	$	27		$	44		$	143		$	214
Originations net of repayments and other derecognitions		4			(11	)		(23	)		(30	)
Changes in model		(2	)		(6	)		(5	)		(13	)
Net remeasurement (2)		(41	)		32			94			85
Transfers (2)
– to 12-month ECL		42			(30	)		(12	)		–
– to lifetime ECL performing		(3	)		22			(19	)		–
– to lifetime ECL credit-impaired		–			(7	)		7			–
Provision for (reversal of) credit losses (3)		–			–			42			42
Write-offs (4)		–			–			(29	)		(29	)
Recoveries		–			–			2			2
Interest income on impaired loans		–			–			(17	)		(17	)
Foreign exchange and other		1			(1	)		(1	)		(1	)
Balance at end of year	$	28		$	43		$	140		$	211
Personal
Balance at beginning of year	$	190		$	199		$	109		$	498
Originations net of repayments and other derecognitions		45			(50	)		–			(5	)
Changes in model		(14	)		30			–			16
Net remeasurement (2)		(194	)		283			309			398
Transfers (2)
– to 12-month ECL		183			(179	)		(4	)		–
– to lifetime ECL performing		(37	)		51			(14	)		–
– to lifetime ECL credit-impaired		–			(63	)		63			–
Provision for (reversal of) credit losses (3)		(17	)		72			354			409
Write-offs (4)		–			–			(395	)		(395	)
Recoveries		–			–			62			62
Interest income on impaired loans		–			–			(5	)		(5	)
Foreign exchange and other		1			–			3			4
Balance at end of year	$	174		$	271		$	128		$	573
Credit card
Balance at beginning of year	$	102		$	370		$	–		$	472
Originations net of repayments and other derecognitions		–			(50	)		–			(50	)
Changes in model		36			(48	)		–			(12	)
Net remeasurement (2)		(190	)		477			184			471
Transfers (2)
– to 12-month ECL		229			(229	)		–			–
– to lifetime ECL performing		(33	)		33			–			–
– to lifetime ECL credit-impaired		–			(215	)		215			–
Provision for (reversal of) credit losses (3)		42			(32	)		399			409
Write-offs (4)		–			–			(516	)		(516	)
Recoveries		–			–			117			117
Interest income on impaired loans		–			–			–			–
Foreign exchange and other		1			2			–			3
Balance at end of year	$	145		$	340		$	–		$	485
Business and government
Balance at beginning of year	$	180		$	147		$	230		$	557
Originations net of repayments and other derecognitions		32			(19	)		(21	)		(8	)
Changes in model		–			1			3			4
Net remeasurement (2)		(17	)		97			350			430
Transfers (2)
– to 12-month ECL		71			(64	)		(7	)		–
– to lifetime ECL performing		(21	)		25			(4	)		–
– to lifetime ECL credit-impaired		(2	)		(29	)		31			–
Provision for (reversal of) credit losses (3)		63			11			352			426
Write-offs (4)		–			–			(190	)		(190	)
Recoveries		–			–			13			13
Interest income on impaired loans		–			–			(18	)		(18	)
Foreign exchange and other		(4	)		–			(9	)		(13	)
Balance at end of year	$	239		$	158		$	378		$	775
Total ECL allowance (5)	$	586		$	812		$	646		$	2,044
Comprises:
Loans	$	526		$	745		$	644		$	1,915
Undrawn credit facilities and other off-balance sheet exposures (6)		60			67			2			129

(1) Includes the ECL allowance for purchased credit-impaired loans from the acquisition of The PrivateBank.

(2) Transfers represent stage movements of prior period ECL allowances to the current period stage classification. Net remeasurement represents the current period change in ECL allowances for transfers, net write-offs, changes in forecasts of forward-looking information, parameter updates, and partial repayments in the period.

(3) Provision for (reversal of) credit losses for loans and undrawn credit facilities and other off-balance sheet exposures is presented as Provision for (reversal of) credit losses on our consolidated statement of income.

(4) We generally continue to pursue collection on the amounts that were written off. The degree of collection efforts varies from one jurisdiction to another, depending on the local regulations and original agreements with customers.

(5) See Note 5 for the ECL allowance on debt securities measured at FVOCI. The table above excludes the ECL allowance on debt securities classified at amortized cost of $2 million as at October 31, 2019. The ECL allowances for other financial assets classified at amortized cost were immaterial as at October 31, 2019 and were excluded from the table above. Financial assets other than loans that are classified at amortized cost are presented on our consolidated balance sheet net of ECL allowances.

(6) Included in Other liabilities on our consolidated balance sheet.

140 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Inputs, assumptions and model techniques

Our ECL allowances are estimated using complex models that incorporate inputs, assumptions and model techniques that involve a high degree of management judgment. In particular, the following ECL elements are subject to a high level of judgment that can have a significant impact on the level of ECL allowances provided:

• Determining when a significant increase in credit risk (SICR) of a loan has occurred;

• Measuring both 12-month and lifetime credit losses; and

• Forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios driven by the changes in the macroeconomic environment.

In addition, the interrelationship between these elements is also subject to a high degree of judgment which can also have a significant impact on the level of ECL recognized.

The uncertainties inherent in the COVID-19 pandemic have increased the level of judgment applied in respect of all these elements as discussed below. Actual credit losses could differ materially from those reflected in our estimates.

Determining when a significant increase in credit risk has occurred

The determination of whether a loan has experienced a SICR has a significant impact on the level of ECL allowance as loans that are in stage 1 are measured at 12-month ECL, while loans in stage 2 are measured at lifetime ECL. Migration of loans between stage 1 and stage 2 can cause significant volatility in the amount of the recognized ECL allowances and the provision for credit losses in a particular period.

For the majority of our retail loan portfolios, we determine a SICR based on relative changes in the loan’s lifetime PD since its initial recognition. The PDs used for this purpose are the expected value of our upside, downside and base case lifetime PDs. Significant judgment is involved in determining the upside, downside and base case lifetime PDs through the incorporation of forward-looking information into long-run PDs, in determining the probability weightings of the scenarios, and in determining the relative changes in PDs that are indicative of a SICR for our various retail products. Increases in the expected PDs or decreases in the thresholds for changes in PDs that are indicative of a SICR can cause significant migration of loans from stage 1 to stage 2, which in turn can cause a significant increase in the amount of ECL allowances recognized. In contrast, decreases in the expected PDs or increases in the thresholds for changes in PDs that are indicative of a SICR can cause significant migration of loans from stage 2 to stage 1.

For the majority of our business and government loan portfolios, we determine a SICR based on relative changes in internal risk ratings since initial recognition. Significant judgment is involved in the determination of the internal risk ratings. Deterioration or improvement in the risk ratings or adjustments to the risk rating downgrade thresholds used to determine a SICR can cause significant migration of loans and securities between stage 1 and stage 2, which in turn can have a significant impact on the amount of ECL allowances recognized. While potentially significant to the level of ECL allowances recognized, the thresholds for changes in PDs that are indicative of a SICR for our retail portfolios and the risk rating downgrade thresholds used to determine a SICR for our business and government loan portfolios are not expected to change frequently.

All loans on which repayment of principal or payment of interest is contractually 30 days in arrears and all business and government loans that have migrated to the watch list are normally automatically migrated to stage 2 from stage 1.

As at October 31, 2020, if the ECL for the stage 2 performing loans were measured using stage 1 ECL as opposed to lifetime ECL, the expected credit losses would be $743 million lower than the total recognized IFRS 9 ECL on performing loans (2019: $305 million).

Impact of the COVID-19 pandemic

The determination of whether a SICR has occurred in the COVID-19 pandemic required a heightened application of judgment in a number of areas, including with respect to the evaluation of the evolving macroeconomic environment, the various client relief programs we have provided to our clients and the unprecedented level of government support being provided to individuals and businesses.

Consistent with guidance issued by the IASB, interest or principal deferments pursuant to various relief programs provided to both our retail and business and government clients have not automatically resulted in a SICR that would trigger migration to stage 2 by reason only that a deferral under the program was granted. However, the inclusion of a loan in a relief program did not preclude its migration to stage 2 if we determined that there was a SICR based on our assessment of the changes in the risk of a default occurring over the expected life of a loan.

For retail clients and consistent with our past practice, SICR was determined based on an evaluation of the relative increase in lifetime PDs using forward-looking indicators reflective of our expectations. However, we applied judgment in the degree that our forecasts of certain forward-looking indicators, including unemployment, should cause a SICR in light of the level of government support provided.

For the majority of our business and government clients, we continued to utilize risk ratings as the primary determinant of a SICR. We applied judgment in the determination of the industries most impacted by the COVID-19 pandemic and assessed the associated impact on risk ratings after considering the benefit of government support.

Measuring both 12-month and lifetime expected credit losses

Our ECL models leverage the PD, LGD, and EAD parameters, as well as the portfolio segmentation used to calculate Basel expected loss regulatory adjustments for the portion of our retail and business and government portfolios under the advanced internal ratings-based (AIRB) approach. Adjustments are made to the Basel parameters to meet IFRS 9 requirements, including the conversion of through-the-cycle and downturn parameters used in the Basel regulatory calculations to point-in-time parameters used under IFRS 9 that consider forward-looking information. For standardized business and government portfolios, available long-run PDs, LGDs and EADs are also converted to point-in-time parameters through the incorporation of forward-looking information for the purpose of measuring ECL under IFRS 9.

Significant judgment is involved in determining which forward-looking information variables are relevant for particular portfolios and in determining the extent by which through-the-cycle parameters should be adjusted for forward-looking information to determine point-in-time parameters. While changes in the set of forward-looking information variables used to convert through-the-cycle PDs, LGDs and EADs into point-in-time parameters can either increase or decrease ECL allowances in a particular period, changes to the mapping of forward-looking information variables to particular portfolios are expected to be infrequent. However, changes in the particular forward-looking information parameters used to quantify point-in-time parameters will be frequent as our forecasts are updated on a quarterly basis. Increases in the level of pessimism in the forward-looking information variables will cause increases in ECL, while increases in the level of optimism in the forward-looking information variables will cause decreases in ECL. These increases and decreases could be significant in any particular period and will start to occur in the period where our outlook of the future changes.

CIBC 2020 ANNUAL REPORT 141

Consolidated financial statements

With respect to the lifetime of a financial instrument, the maximum period considered when measuring ECL is the maximum contractual period over which we are exposed to credit risk. For revolving facilities, such as credit cards, the lifetime of a credit card account is the expected behavioural life. Significant judgment is involved in the estimate of the expected behavioural life. Increases in the expected behavioural life will increase the amount of ECL allowances, in particular for revolving loans in stage 2.

Impact of the COVID-19 pandemic

The measurement of ECL in the COVID-19 pandemic required a heightened application of judgment in a number of areas, including with respect to our expectations concerning the degree to which forward-looking information would correlate with credit losses in the current environment characterized by unprecedented levels of government support relative to the historical experience in our models. We applied judgment with respect to the degree that certain industries and portfolios would be negatively impacted by the COVID-19 pandemic and the degree that various government support programs are expected to limit credit losses.

Forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios

As indicated above, forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since its initial recognition and in our estimate of ECL. From analysis of historical data, our risk management function has identified and reflected in our ECL allowance those relevant forward-looking information variables that contribute to credit risk and losses within our retail and business and government loan portfolios. Within our retail loan portfolio, key forward-looking information variables include Canadian unemployment rates, housing prices and gross domestic product (GDP) growth. In many cases these variables are forecasted at the provincial level. Housing prices are also forecasted at the municipal level in some cases. Within our business and government loan portfolio, key drivers that impact the credit performance of the entire portfolio include S&P 500 growth rates, business credit growth rates, unemployment rates and credit spreads, while forward-looking information variables such as commodity prices and mining activity are significant for certain portfolios, and U.S. unemployment rates and U.S. GDP growth are significant for our U.S. portfolios.

For the majority of our loan portfolios, our forecast of forward-looking information variables is established from a “base case” or most likely scenario that is used internally by management for planning and forecasting purposes. For most of the forward-looking information variables related to our Canadian businesses, we have forecast scenarios by province. In forming the base case scenario, we consider the forecasts of international organizations and monetary authorities such as the Organisation for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF), and the Bank of Canada, as well as private sector economists. We then derive reasonably possible “upside case” and “downside case” scenarios using external forecasts that are above and below our base case and the application of management judgment. A probability weighting is assigned to our base case, upside case and downside case scenarios based on management judgment.

The forecasting process is overseen by a governance committee consisting of internal stakeholders from across our bank including Risk Management, Economics, Finance and the impacted SBUs and involves a significant amount of judgment both in determining the forward-looking information forecasts for our various scenarios and in determining the probability weighting assigned to the scenarios. In general, a worsening of our outlook on forecasted forward-looking information for each scenario, an increase in the probability of the downside case scenario occurring, or a decrease in the probability of the upside case scenario occurring will increase the number of loans migrating from stage 1 to stage 2 and increase the estimated ECL allowance. In contrast, an improvement in our outlook on forecasted forward-looking information, an increase in the probability of the upside case scenario occurring, or a decrease in the probability of the downside case scenario occurring will have the opposite impact. It is not possible to meaningfully isolate the impact of changes in the various forward-looking information variables for a particular scenario because of both the interrelationship between the variables and the interrelationship between the level of pessimism inherent in a particular scenario and its probability of occurring.

Impact of the COVID-19 pandemic

The forecasting of forward-looking information and the determination of scenario weightings in the COVID-19 pandemic required a heightened application of judgment in a number of areas as our forecast reflects numerous assumptions and uncertainties regarding the economic impact of the COVID-19 pandemic, which will ultimately depend on the speed at which an effective vaccine can be developed and administered on a mass scale, and the ability of governments, businesses and health-care systems to effectively limit the epidemiological and economic impacts of the resurgences of the virus in the intervening period.

Significant changes to our forecasts were made in the current year. The following table provides the base case, upside case and downside case scenario forecasts for select forward-looking information variables used to estimate our ECL.

	Base case						Upside case						Downside case
As at October 31, 2020	Average value over the next 12 months			Average value over the remaining forecast period (1)			Average value over the next 12 months			Average value over the remaining forecast period (1)			Average value over the next 12 months			Average value over the remaining forecast period (1)
Real GDP year-over-year growth
Canada (2)		1.6	%		3.8	%		3.6	%		4.6	%		0.03	%		2.0	%
United States		1.7	%		3.5	%		3.0	%		4.2	%		(0.6	)%		1.7	%
Unemployment rate
Canada (2)		8.7	%		6.7	%		7.4	%		5.9	%		9.5	%		8.4	%
United States		7.4	%		4.7	%		5.1	%		3.5	%		9.2	%		7.3	%
Canadian Housing Price Index growth (2)		2.4	%		3.0	%		11.2	%		10.4	%		(6.9	)%		(0.8	)%
S&P 500 Index growth rate		5.6	%		4.8	%		11.2	%		7.7	%		(3.5	)%		(5.3	)%
West Texas Intermediate Oil Price (US$)	$	42		$	53		$	51		$	60		$	34		$	39

(1) The remaining forecast period is generally two years.

(2) National-level forward-looking forecasts are presented in the table above, which represent the aggregation of the provincial-level forecasts used to estimate our ECL. Housing Price Index growth rates are also forecasted at the municipal level in some cases. As a result, the forecasts for individual provinces or municipalities reflected in our ECL will differ from the national forecasts presented above.

142 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

	Base case						Upside case						Downside case
As at October 31, 2019	Average value over the next 12 months			Average value over the remaining forecast period (1)			Average value over the next 12 months			Average value over the remaining forecast period (1)			Average value over the next 12 months			Average value over the remaining forecast period (1)
Canadian GDP year-over-year growth (2)		1.5	%		1.8	%		2.3	%		2.5	%		0.6	%		0.8	%
Canadian unemployment rate (2)		6.1	%		5.9	%		5.5	%		5.5	%		6.4	%		6.5	%
Canadian Housing Price Index growth (2)		1.6	%		2.2	%		4.8	%		4.0	%		(2.2	)%		(0.8	)%
S&P 500 Index growth rate		5.0	%		4.7	%		8.2	%		6.6	%		(3.7	)%		(10.3	)%
West Texas Intermediate Oil Price (US$)	$	60		$	60		$	67		$	74		$	47		$	43

(1) The remaining forecast period is generally two years.

(2) National-level forward-looking forecasts are presented in the table above, which represent the aggregation of the provincial-level forecasts used to estimate our ECL. Housing Price Index growth rates are also forecasted at the municipal level in some cases. As a result, the forecasts for individual provinces or municipalities reflected in our ECL will differ from the national forecasts presented above.

As required, the forward-looking information used to estimate expected credit losses reflects our expectations as at October 31, 2020 and October 31, 2019, respectively, and does not reflect changes in expectation as a result of economic forecasts that may have subsequently emerged. The base case, upside case and downside case amounts shown represent the average value of the forecasts over the respective projection horizons. Our economic forecasts are made in the context of the recovery currently underway from the severe downturn experienced in the second quarter of 2020. The underlying base case projection is characterized by a slow recovery in the first half of 2021, accelerating again thereafter and with the economy returning to the same level of economic activity experienced in the pre-COVID-19 period in 2022. Assumptions concerning the extent of the restrictions imposed by governments to limit the impact of subsequent waves of infection, including travel restrictions, the closure of certain businesses and other physical distancing requirements, and the timing of effective mass vaccinations, are material to these forecasts. The downside case forecast still reflects a recovery from the severe low experienced in the second calendar quarter of 2020, but to a much lower level of sustained economic activity. Meanwhile, the upside scenario continues to reflect a quicker recovery with the pre-pandemic level of activity reached in late 2021.

As at October 31, 2020, the average next 12 months real GDP growth rate in the table above is calculated based on the weighted average of the annualized calendar year 2020 and 2021 real GDP growth rates. This results in the next 12 months real GDP growth rate forecast to be lower than our calendar year 2021 real GDP growth rate forecast because the next 12 months real GDP growth rate is compared in part to a pre-pandemic level of real GDP, and the calendar year 2021 forecast also includes the strong growth rate expected in the fourth calendar quarter of 2021, after a vaccine is anticipated to be available. The relatively high forecasted real GDP growth in the remaining forecast period in the table above, relative to a year ago, is the result of the fact that we are forecasting to recover from relatively low levels of real GDP as shown in the charts below. The graphs below depict the actual and forecasted real GDP levels in Canada and the U.S. on a calendar quarter basis:

As indicated above, forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios involves a high degree of management judgment, particularly in light of the COVID-19 pandemic. If we were to only use our base case scenario for the measurement of ECL for our performing loans, our ECL allowance would be $204 million lower than the recognized ECL as at October 31, 2020 (2019: $63 million). If we were to only use our downside case scenario for the measurement of ECL for our performing loans, our ECL allowance would be $938 million higher than the recognized ECL as at October 31, 2020 (2019: $254 million). This sensitivity is isolated to the measurement of ECL and therefore did not consider changes in the migration of exposures between stage 1 and stage 2 from the determination of the SICR that would have resulted in a 100% base case scenario or a 100% downside case scenario. As a result, our ECL allowance on performing loans could exceed the amount implied by the 100% downside case scenario from the migration of additional exposures from stage 1 to stage 2.

Use of management overlays

Management overlays to ECL allowance estimates are adjustments which we use in circumstances where we judge that our existing inputs, assumptions and model techniques do not capture all relevant risk factors. The emergence of new macroeconomic, microeconomic or political events, along with expected changes to parameters, models or data that are not incorporated in our current parameters, internal risk rating migrations, or forward-looking information are examples of such circumstances.

Impact of the COVID-19 pandemic

To address the uncertainties inherent in the current environment, we utilized management overlays with respect to the impact that the COVID-19 pandemic will have on the migration of certain business and government exposures that we believe are the most susceptible to these risks and the resulting measurement of the ECL for those exposures. The mitigating impact of government support measures was considered in the determination of these overlays to the extent not already reflected in our models. In addition, management overlays were applied with respect to the impact of government support and client relief measures on the migration of retail exposures and the resulting measurement of the ECL for those exposures. In

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light of the unprecedented level of government support, the management overlays took into account our expectations concerning the degree to which forward-looking information would correlate with credit losses in the current environment relative to the historical experience in our models.

The use of management overlays requires the application of significant judgment that impacts the amount of ECL allowances recognized. Actual credit losses could differ materially from those reflected in our estimates.

The following tables provide the gross carrying amount of loans, and the contractual amounts of undrawn credit facilities and other off-balance sheet exposures based on the application of our 12-month point in time PDs under IFRS 9 to our risk management PD bands for retail exposures, and based on our internal risk ratings for business and government exposures. Refer to the “Credit risk” section of the MD&A for details on the CIBC risk categories.

Loans⁽¹⁾

$ millions, as at October 31							2020								2019
	Stage 1		Stage 2		Stage 3 (2)(3)(4)		Total		Stage 1		Stage 2		Stage 3 (2)(3)(4)		Total
Residential mortgages
– Exceptionally low	$	146,139	$	2	$	–	$	146,141	$	142,260	$	–	$	–	$	142,260
– Very low		45,678		1,166		–		46,844		37,140		–		–		37,140
– Low		12,491		6,042		–		18,533		17,315		1,010		–		18,325
– Medium		232		4,924		–		5,156		1,207		5,312		–		6,519
– High		–		1,054		–		1,054		11		1,162		–		1,173
– Default		–		–		654		654		–		–		597		597
– Not rated		1,810		818		155		2,783		2,251		233		154		2,638
Gross residential mortgages (5)(6)		206,350		14,006		809		221,165		200,184		7,717		751		208,652
ECL allowance		51		161		151		363		28		43		140		211
Net residential mortgages		206,299		13,845		658		220,802		200,156		7,674		611		208,441
Personal
– Exceptionally low		23,302		–		–		23,302		24,258		–		–		24,258
– Very low		1,618		157		–		1,775		4,321		1,353		–		5,674
– Low		8,662		2,497		–		11,159		4,955		1,582		–		6,537
– Medium		1,265		2,768		–		4,033		3,703		1,611		–		5,314
– High		331		769		–		1,100		302		613		–		915
– Default		–		–		140		140		–		–		164		164
– Not rated		513		159		41		713		720		29		40		789
Gross personal (6)		35,691		6,350		181		42,222		38,259		5,188		204		43,651
ECL allowance		179		540		113		832		160		265		128		553
Net personal		35,512		5,810		68		41,390		38,099		4,923		76		43,098
Credit card
– Exceptionally low		3,285		–		–		3,285		3,015		–		–		3,015
– Very low		1,388		–		–		1,388		1,142		83		–		1,225
– Low		2,340		–		–		2,340		5,619		274		–		5,893
– Medium		1,778		1,973		–		3,751		1,344		565		–		1,909
– High		–		472		–		472		10		538		–		548
– Default		–		–		–		–		–		–		–		–
– Not rated		135		18		–		153		158		7		–		165
Gross credit card		8,926		2,463		–		11,389		11,288		1,467		–		12,755
ECL allowance		125		542		–		667		129		291		–		420
Net credit card		8,801		1,921		–		10,722		11,159		1,176		–		12,335
Business and government
– Investment grade		49,418		1,071		–		50,489		46,800		251		–		47,051
– Non-investment grade		78,302		9,876		–		88,178		80,780		3,443		–		84,223
– Watchlist		416		4,443		–		4,859		374		1,575		–		1,949
– Default		–		–		1,359		1,359		–		–		866		866
– Not rated		218		49		–		267		752		79		45		876
Gross business and government (5)(7)		128,354		15,439		1,359		145,152		128,706		5,348		911		134,965
ECL allowance		380		648		650		1,678		209		146		376		731
Net business and government		127,974		14,791		709		143,474		128,497		5,202		535		134,234
Total net amount of loans	$	378,586	$	36,367	$	1,435	$	416,388	$	377,911	$	18,975	$	1,222	$	398,108

(1) The table excludes debt securities measured at FVOCI, for which ECL allowances of $22 million (2019: $23 million) were recognized in AOCI. In addition, the table excludes debt securities classified at amortized cost, for which ECL allowances of $16 million were recognized as at October 31, 2020 (2019: $2 million), $14 million of which was stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (2019: nil). Other financial assets classified at amortized cost were also excluded from the table above as their ECL allowances were immaterial as at October 31, 2020 and October 31, 2019. Financial assets other than loans that are classified as amortized cost are presented on our consolidated balance sheet net of ECL allowances.

(2) Includes purchased credit-impaired loans from the acquisition of The PrivateBank.

(3) Excludes foreclosed assets of $23 million (2019: $25 million), which were included in Other assets on our consolidated balance sheet.

(4) As at October 31, 2020, 93% (2019: 90%) of stage 3 impaired loans were either fully or partially collateralized.

(5) Includes $63 million (2019: $60 million) of residential mortgages and $23,291 million (2019: $21,182 million) of business and government loans that are measured at FVTPL.

(6) The internal risk rating grades presented for residential mortgages and certain personal loans do not take into account loan guarantees or insurance issued by the Canadian government (federal or provincial), Canadian government agencies, or private insurers, as the determination of whether a significant increase in credit risk has occurred for these loans is based on relative changes in the loans’ lifetime PD without considering collateral or other credit enhancements.

(7) Includes customers’ liability under acceptances of $9,606 million (2019: $9,167 million).

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Undrawn credit facilities and other off-balance sheet exposures

$ millions, as at October 31							2020								2019
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Retail
– Exceptionally low	$	124,690	$	8	$	–	$	124,698	$	106,696	$	120	$	–	$	106,816
– Very low		6,632		137		–		6,769		7,341		1,126		–		8,467
– Low		8,703		416		–		9,119		10,974		1,357		–		12,331
– Medium		909		692		–		1,601		1,737		752		–		2,489
– High		263		503		–		766		255		495		–		750
– Default		–		–		28		28		–		–		19		19
– Not rated		411		23		–		434		397		32		–		429
Gross retail		141,608		1,779		28		143,415		127,400		3,882		19		131,301
ECL allowance		36		36		–		72		30		55		–		85
Net retail		141,572		1,743		28		143,343		127,370		3,827		19		131,216
Business and government
– Investment grade		89,067		159		–		89,226		78,906		296		–		79,202
– Non-investment grade		55,288		5,103		–		60,391		52,379		1,282		–		53,661
– Watchlist		82		1,678		–		1,760		65		575		–		640
– Default		–		–		129		129		–		–		69		69
– Not rated		795		41		–		836		688		60		–		748
Gross business and government		145,232		6,981		129		152,342		132,038		2,213		69		134,320
ECL allowance		73		35		2		110		30		12		2		44
Net business and government		145,159		6,946		127		152,232		132,008		2,201		67		134,276
Total net undrawn credit facilities and other off-balance sheet exposures	$	286,731	$	8,689	$	155	$	295,575	$	259,378	$	6,028	$	86	$	265,492

Net interest income after provision for credit losses

$ millions, for the year ended October 31	2020		2019		2018
Interest income	$	17,522	$	20,697	$	17,505
Interest expense		6,478		10,146		7,440
Net interest income		11,044		10,551		10,065
Provision for credit losses		2,489		1,286		870
Net interest income after provision for credit losses	$	8,555	$	9,265	$	9,195

Modified financial assets and client relief programs

CIBC has been actively engaged in lending activities to support our clients who are experiencing financial hardship caused by the COVID-19 pandemic, including payment deferral options offered on cards, residential mortgages, personal lending products, and business and government loans. As of October 31, 2020, the gross outstanding balance of loans for which CIBC provided payment deferrals was nil for credit cards in Canada (July 31, 2020: less than $10 million; April 30, 2020: $1.8 billion); $2.7 billion for residential mortgages in Canada (July 31, 2020: $33.3 billion; April 30, 2020: $35.5 billion); $0.3 billion for personal loans in Canada (July 31, 2020: $0.8 billion; April 30, 2020: $2.3 billion); $0.3 billion for various consumer loans in the Caribbean (July 31, 2020: $1.4 billion; April 30, 2020: $1.3 billion); and $2.5 billion for business and government loans (July 31, 2020: $6.2 billion; April 30, 2020: $10.0 billion), including $0.5 billion in Canada (July 31, 2020: $2.4 billion; April 30, 2020: $8.6 billion); $0.5 billion in the U.S. (July 31, 2020: $1.6 billion; April 30, 2020: $0.9 billion) and $1.5 billion in the Caribbean (July 31, 2020: $2.2 billion; April 30, 2020: $0.5 billion). Modification gains or losses resulting from client relief programs were not significant.

As part of CIBC’s usual lending business, from time to time we may modify the contractual terms of loans classified as stage 2 and stage 3 for which the borrower has experienced financial difficulties, through the granting of a concession in the form of below-market rates or terms that we would not otherwise have considered.

During the year ended October 31, 2020, loans classified as stage 2 or stage 3 with an amortized cost of $10,498 million (2019: $346 million) were either modified through the granting of a financial concession in response to the borrower having experienced financial difficulties or were subject to the client relief programs in response to COVID-19, in each case before the time of modification or deferral. In addition, the gross carrying amount of previously modified or deferred stage 2 or stage 3 loans that have returned to stage 1 during the year ended October 31, 2020 was $5,287 million (2019: $15 million).

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Note  7 Structured entities and derecognition of financial assets

Structured entities

SEs are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are entities that are created to accomplish a narrow and well-defined objective. CIBC is involved with various types of SEs for which the business activities include securitization of financial assets, asset-backed financings, and asset management.

We consolidate an SE when the substance of the relationship indicates that we control the SE.

Consolidated structured entities

We consolidate the following SEs:

Multi-seller conduit

We sponsor a consolidated multi-seller conduit in Canada that purchases financial assets from clients and finances the purchases by issuing ABS. The sellers to the conduit continue to service the assets and are exposed to credit losses realized on these assets through the provision of credit enhancements. We hold all of the outstanding ABS.

Credit card securitization trusts

We sell an ownership interest in a revolving pool of credit card receivables generated under certain credit card accounts to Cards II Trust (Cards II), which purchases a proportionate share of credit card receivables on certain credit card accounts, with the proceeds received from the issuance of notes.

Our credit card securitizations are revolving securitizations, with credit card receivable balances fluctuating from month to month as credit card clients repay their balances and new receivables are generated.

The notes are presented as Secured borrowings within Deposits on the consolidated balance sheet.

As at October 31, 2020, $1.7 billion of credit card receivable assets with a fair value of $1.7 billion (2019: $2.9 billion with a fair value of $2.9 billion) supported associated funding liabilities of $1.7 billion with a fair value of $1.7 billion (2019: $2.9 billion with a fair value of $2.9 billion).

Covered bond guarantor

Under the Legislative Covered Bond Programme, we transfer a pool of conventional uninsured mortgages to the CIBC Covered Bond (Legislative) Guarantor Limited Partnership (the Guarantor LP). The Guarantor LP holds interest and title to these transferred mortgages and serves to guarantee payment of principal and interest to bondholders. The covered bond liabilities are on-balance sheet obligations that are fully collateralized by the mortgage assets over which bondholders enjoy a priority claim in the event of CIBC’s insolvency.

As at October 31, 2020, our Legislative Covered Bond Programme had outstanding covered bond liabilities of $19.6 billion with a fair value of $19.7 billion (2019: $18.9 billion with a fair value of $19.0 billion).

CIBC-managed investment funds

We establish and manage investment funds such as mutual funds and pooled funds. We act as an investment manager and earn market-based management fees, and for certain pooled funds, performance fees which are generally based on the performance of the funds. Seed capital is provided from time to time to CIBC-managed investment funds for initial launch. We consolidate those investment funds in which we have power to direct the relevant activities of the funds and in which our seed capital, or our units held, are significant relative to the total variability of returns of the funds such that we are deemed to be a principal rather than an agent. As at October 31, 2020, the total assets and non-controlling interests in consolidated CIBC-managed investment funds were $7 million and $3 million, respectively (2019: $23 million and $15 million, respectively). Non-controlling interests in consolidated CIBC-managed investment funds are included in Other liabilities as the investment fund units are mandatorily redeemable at the option of the investor.

Community-based tax-advantaged investments

We sponsor certain SEs that invest in community development projects in the U.S. through the issuance of below-market loans that generate a return primarily through the realization of tax credits. As at October 31, 2020, the program had outstanding loans of $75 million (2019: $55 million).

Non-consolidated structured entities

The following SEs are not consolidated by CIBC:

Single-seller and multi-seller conduits

We manage and administer a single-seller conduit and several CIBC-sponsored multi-seller conduits in Canada. The multi-seller conduits acquire direct or indirect ownership or security interests in pools of financial assets from our clients and finance the acquisitions by issuing asset-backed commercial paper (ABCP) to investors. The single-seller conduit acquires financial assets and finances these acquisitions through a credit facility provided by a syndicate of financial institutions. The sellers to the conduits may continue to service the assets and may be exposed to credit losses realized on these assets, typically through the provision of over-collateralization or another form of credit enhancement. The conduits may also obtain credit enhancement from third-party providers. As at October 31, 2020, the total assets in the single-seller conduit and multi-seller conduits amounted to $0.5 billion and $8.4 billion, respectively (2019: $0.5 billion and $7.1 billion, respectively).

We generally provide the multi-seller conduits with commercial paper backstop liquidity facilities, securities distribution, and provide both the single and multi-seller conduits with accounting, cash management, and operations services. The liquidity facilities for the managed and administered multi-seller conduits require us to provide funding, subject to the satisfaction of certain conditions with respect to the conduits, for ABCP not placed with external investors. We also may purchase ABCP issued by the multi-seller conduits for market-making purposes.

We are required to maintain certain short-term and/or long-term debt ratings with respect to the liquidity facilities that we provide to the sponsored multi-seller conduits. If we are downgraded below the level specified under the terms of those facilities, we must provide alternative satisfactory liquidity arrangements, such as procuring an alternative liquidity provider that meets the minimum rating requirements.

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We may also act as the counterparty to derivative contracts entered into by a multi-seller conduit in order to convert the yield of the underlying assets to match the needs of the multi-seller conduit’s investors or to mitigate the interest rate, basis, and currency risk within the conduit.

All fees earned in respect of activities with the conduits are on a market basis.

Third-party structured vehicles – continuing

We have investments in and provide loans, liquidity and credit facilities to third-party SEs. We also have investments in limited partnerships in which we generally are a passive investor of the limited partnerships as a limited partner, and in some cases, we are the co-general partner and have significant influence over the limited partnerships. Similar to other limited partners, we are obligated to provide funding up to our commitment level to these limited partnerships.

Pass-through investment structures

We have exposure to units of third-party or CIBC-managed investment funds. We enter into equity derivative transactions with third-party investment funds to pass-through the return of these referenced funds. These transactions provide the investors of the third-party managed investment funds with the desired exposure to the referenced funds in a tax efficient manner.

CIBC Capital Trust

We have issued senior deposit notes to CIBC Capital Trust, which funds the purchase of these notes through the issuance of CIBC Tier 1 Notes (Notes) that match the term of the senior deposit notes. The Notes are eligible for Tier 1 regulatory capital treatment and are subject to the phase-out rules for capital instruments that will be viewed as non-qualifying capital instruments. See Note 17 for additional details.

CIBC-managed investment funds

As indicated above, we establish investment funds, including mutual funds and pooled funds, to provide clients with investment opportunities and we may receive management fees and performance fees. We may hold insignificant amounts of fund units in these CIBC-managed funds. We do not consolidate these funds if we do not have significant variability of returns from our interests in these funds such that we are deemed to be an agent through our capacity as the investment manager, rather than a principal. We do not guarantee the performance of CIBC-managed investment funds. As at October 31, 2020, the total AUM in the non-consolidated CIBC-managed investment funds amounted to $125.2 billion (2019: $122.7 billion).

CIBC structured collateralized debt obligation (CDO) vehicles

We hold exposures to structured CDO vehicles through investments in, or written credit derivatives referencing, these structured vehicles. We may also provide liquidity facilities or other credit facilities. The structured vehicles are funded through the issuance of senior and subordinated tranches. We may hold a portion of those senior and/or subordinated tranches.

We previously curtailed our business activity in structuring CDO vehicles within our structured credit run-off portfolio. Our exposures to CDO vehicles mainly arose through our previous involvement in acting as structuring and placement agent for the CDO vehicles. As at October 31, 2020, the assets in the CIBC structured CDO vehicles have a total principal amount of $214 million (2019: $232 million).

Third-party structured vehicles – structured credit run-off

Similar to our structured activities, we also curtailed our business activities in third-party structured vehicles, within our structured credit run-off portfolio. These positions were initially traded as intermediation, correlation and flow trading, which earned us a spread on matching positions.

Community Reinvestment Act investments

We hold debt and equity investments in limited liability entities to further our U.S. Community Reinvestment Act initiatives with a carrying value of $328 million (2019: $279 million). These entities invest in qualifying community development projects, including affordable housing projects that generate a return primarily by the realization of tax credits. Similar to other limited investors in these entities, we are obligated to provide funding up to our commitment level to these limited liability entities. As at October 31, 2020, the total assets of these limited liability entities were $5.2 billion (2019: $4.8 billion).

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Our on-balance sheet amounts and maximum exposure to loss related to SEs that are not consolidated are set out in the table below. The maximum exposure comprises the carrying value of unhedged investments, the notional amounts for liquidity and credit facilities, and the notional amounts less accumulated fair value losses for unhedged written credit derivatives on SE reference assets. The impact of CVA is not considered in the table below.

$ millions, as at October 31, 2020	Single-seller and multi-seller conduits			Third-party structured vehicles – continuing		Structured vehicles run-off (1)			Other (2)
On-balance sheet assets at carrying value (3)
Securities	$	12		$	1,770	$	3		$	328
Loans		95			1,790		–			–
Investments in equity-accounted associates and joint ventures		–			–		–			12
	$	107		$	3,560	$	3		$	340
October 31, 2019	$	113		$	3,345	$	3		$	332
On-balance sheet liabilities at carrying value (3)
Deposits	$	–		$	–	$	–		$	303
Derivatives (4)		–			–		107			–
	$	–		$	–	$	107		$	303
October 31, 2019	$	–		$	–	$	112		$	302
Maximum exposure to loss, net of hedges
Investments and loans	$	107		$	3,560	$	3		$	340
Notional of written derivatives, less fair value losses		–			–		23			–
Liquidity, credit facilities and commitments		8,390	(5)		2,880		13			140
Less: hedges of investments, loans and written derivatives exposure		–			–		(27	)		–
	$	8,497		$	6,440	$	12		$	480
October 31, 2019	$	7,250		$	5,703	$	13		$	418

(1) Includes CIBC structured CDO vehicles and third-party structured vehicles.

(2) Includes pass-through investment structures, CIBC Capital Trust, and CIBC-managed investment funds and Community Reinvestment Act-related investment vehicles.

(3) Excludes SEs established by CMHC, Fannie Mae, Freddie Mac, Ginnie Mae, FHLB, Federal Farm Credit Bank, and Student Loan Marketing Association.

(4) Comprises written credit default swaps (CDS) and total return swaps (TRS) under which we assume exposures. Excludes foreign exchange derivatives, interest rate derivatives and other derivatives provided as part of normal client facilitation.

(5) Excludes an additional $2.1 billion (2019: $1.6 billion) relating to our backstop liquidity facilities provided to the multi-seller conduits as part of their commitment to fund purchases of additional assets. Also excludes $12 million (2019: $26 million) of our direct investments in the multi-seller conduits which we consider investment exposure.

We also hold investments in a variety of third-party investment funds, which include, but are not limited to, exchange-traded funds, mutual funds, and investment trusts. We buy and sell units of these investment funds as part of trading activities or client facilitation businesses that are managed as part of larger portfolios. We generally are a passive investor and are not the investment manager in any of these investment funds. We are not the sponsor of any third-party investment funds, nor do we have the power over key decision-making activities of the funds. Our maximum exposure to loss from our investments is limited to the carrying amounts of our investments and any unutilized commitment we have provided to these funds. In addition, we issue certain structured notes and enter into equity derivatives that are referenced to the return of certain investment funds. Accordingly, we do not include our interests in these third-party investment funds in the table above.

Derecognition of financial assets

We enter into transactions in the normal course of business in which we transfer recognized financial assets directly to third parties, but retain substantially all of the risks and rewards of those assets. The risks include credit, interest rate, foreign exchange, pre-payment and other price risks whereas the rewards include income streams associated with the assets. Due to the retention of risks, the transferred financial assets are not derecognized and such transfers are accounted for as secured borrowing transactions.

The majority of our financial assets transferred to non-consolidated entities that do not qualify for derecognition are: (i) residential mortgage loans under securitization transactions; (ii) securities held by counterparties as collateral under repurchase agreements; and (iii) securities lent under securities lending agreements.

Residential mortgage securitizations

We securitize fully insured fixed- and variable-rate residential mortgage pools through the creation of National Housing Act (NHA) MBS under the NHA MBS Program, sponsored by CMHC. Under the Canada Mortgage Bond Program, sponsored by CMHC, we sell MBS to a government-sponsored securitization trust that issues securities to investors. We do not consolidate the securitization trust. We may act as a counterparty in interest rate swap agreements where we pay the trust the interest due to investors and receive the interest on the MBS. We have also sold MBS directly to CMHC under the Government of Canada’s Insured Mortgage Purchase Program.

The sale of mortgage pools that comprise the NHA MBS does not qualify for derecognition as we retain pre-payment, credit, and interest rate risks associated with the mortgages, which represent substantially all the risks and rewards. As a result, the mortgages remain on our consolidated balance sheet and are carried at amortized cost. We also recognize the cash proceeds from the securitization as Deposits – Secured borrowings.

Securities held by counterparties as collateral under repurchase agreements

We enter into arrangements whereby we sell securities but enter into simultaneous arrangements to repurchase the securities at a fixed price on a future date thereby retaining substantially all the risks and rewards. As a result, the securities remain on our consolidated balance sheet.

Securities lent for cash collateral or for securities collateral

We enter into arrangements whereby we lend securities but with arrangements to receive the securities at a future date, thereby retaining substantially all the risks and rewards. As a result, the securities remain on our consolidated balance sheet.

148 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

The following table provides the carrying amount and fair value of transferred financial assets that did not qualify for derecognition and the associated financial liabilities:

$ millions, as at October 31			2020				2019
	Carrying amount		Fair value		Carrying amount		Fair value
Residential mortgage securitizations (1)	$	17,550	$	17,726	$	16,245	$	16,264
Securities held by counterparties as collateral under repurchase agreements (2)		36,720		36,720		15,663		15,663
Securities lent for cash collateral (2)		13		13		45		45
Securities lent for securities collateral (2)		20,226		20,226		21,789		21,789
	$	74,509	$	74,685	$	53,742	$	53,761
Associated liabilities (3)	$	75,853	$	76,080	$	54,591	$	54,734

(1) Consists mainly of Canadian residential mortgage loans transferred to Canada Housing Trust. Certain cash in transit balances related to the securitization process amounting to $1,148 million (2019: $738 million) have been applied to reduce these balances.

(2) Does not include over-collateralization of assets pledged. Repurchase and securities lending arrangements are conducted with both CIBC-owned and third-party assets on a pooled basis. The carrying amounts represent an estimated allocation related to the transfer of our own financial assets.

(3) Includes the obligation to return off-balance sheet securities collateral on securities lent and fair value hedge basis adjustments.

Note  8 Property and equipment

$ millions, as at or for the year ended October 31		Right-of- use assets (1)			Land and buildings			Computer equipment			Office furniture, equipment and other (2)			Leasehold improvements			Total
2020	Cost
	Balance at beginning of year		n/a		$	1,383		$	1,043		$	1,013		$	1,204		$	4,643
	Impact of adopting IFRS 16 (3)		1,733			(715	)		–			–			–			1,018
	Additions (4)		115			17			117			142			36			427
	Disposals (5)		(64	)		(6	)		(53	)		(29	)		(65	)		(217	)
	Adjustments (6)		6			2			2			3			3			16
	Balance at end of year	$	1,790		$	681		$	1,109		$	1,129		$	1,178		$	5,887
2019	Balance at end of year		n/a		$	1,383		$	1,043		$	1,013		$	1,204		$	4,643
2020	Accumulated depreciation
	Balance at beginning of year		n/a		$	669		$	819		$	521		$	821		$	2,830
	Impact of adopting IFRS 16		54			(376	)		–			–			–			(322	)
	Depreciation (5)		280			13			102			50			72			517
	Disposals (5)		(18	)		(2	)		(53	)		(18	)		(46	)		(137	)
	Adjustments (5)		–			1			1			–			–			2
	Balance at end of year	$	316		$	305		$	869		$	553		$	847		$	2,890
2019	Balance at end of year		n/a		$	669		$	819		$	521		$	821		$	2,830
	Net book value
	As at October 31, 2020	$	1,474		$	376		$	240		$	576		$	331		$	2,997
	As at October 31, 2019		n/a		$	714		$	224		$	492		$	383		$	1,813

(1) Includes right-of-use assets with a net book value of $49 million as at November 1, 2019 that are rented out through operating sublease arrangements.

(2) Includes $306 million (2019: $173 million) of work-in-progress not subject to depreciation.

(3) Includes $103 million related to leases that were previously classified as finance leases under IAS 17.

(4) Includes impact of lease modifications.

(5) Includes write-offs for properties that were vacated in the fourth quarter of 2020, and write-offs of fully depreciated assets.

(6) Includes foreign currency translation adjustments.

n/a Not applicable.

Cost of net additions and disposals during the year was: Canadian Personal and Business Banking net additions of $860 million (2019: net additions of $3 million); Canadian Commercial Banking and Wealth Management net additions of nil (2019: net additions of $3 million); U.S. Commercial Banking and Wealth Management net additions of $219 million (2019: net additions of $27 million); Capital Markets net additions of $166 million (2019: net additions of $1 million); and Corporate and Other net disposals of $17 million (2019: net disposals of $11 million).

CIBC 2020 ANNUAL REPORT 149

Consolidated financial statements

Transition to IFRS 16 “Leases”

CIBC adopted IFRS 16 as at November 1, 2019 in place of prior guidance, IAS 17 “Leases” (IAS 17). For lessees, the new standard required on-balance sheet recognition for most leases that were considered operating leases under IAS 17, which resulted in the gross-up of the balance sheet through the recognition of a right-of-use asset and a corresponding liability for the lease component of the future payments. Depreciation expense on the right-of-use asset and interest expense on the lease liability replaced the operating lease expense. Accounting for leases by lessors remains mostly unchanged from IAS 17; however, intermediate lessors are required to reassess subleases by reference to the right-of-use asset arising from the head lease which could result in on-balance sheet recognition for certain subleases previously classified as operating subleases. The application of IFRS 16 mainly applied to our office and banking centre leases, as well as certain subleases previously classified as operating subleases.

We applied IFRS 16 using the modified retrospective approach, without restatement of comparative periods. As at November 1, 2019, the adoption of IFRS 16 resulted in the recognition of approximately $1.7 billion of lease liabilities and $1.6 billion of right-of-use assets. The amount of the right-of-use assets recognized was determined based on the amount of the lease liabilities less the existing deferred rent liabilities as at October 31, 2019. Furthermore, the reassessment of certain subleases related to a previously recognized finance lease property, a portion of which is rented out and considered investment property, resulted in an increase in net assets as a result of the recognition of additional sublease-related assets, net of the derecognition of amounts related to the corresponding head lease. The after-tax impact to retained earnings as a result of adopting IFRS 16 was an increase of $0.1 billion.

In addition, the following permitted recognition exemptions and practical expedients have been applied:

• A single discount rate curve has been applied to portfolios of leases with reasonably similar characteristics at the date of application. The weighted average incremental borrowing rate applied on our existing lease portfolio was 2.31%.

• In contracts where we are the lessee, we have not reassessed contracts that were identified as finance leases under the previous accounting standard (IAS 17).

• We have elected to exclude leases of assets considered as low value and short-term leases with a remaining term of less than 12 months.

• We have applied the onerous lease provisions recognized as at October 31, 2019 as an alternative to performing an impairment review of our right-of-use assets as at November 1, 2019. Where an onerous lease provision was recorded on a lease, the right-of-use asset has been reduced by the amount of that provision on transition and no further impairment review was performed.

• We have elected not to separate lease and non-lease components of a lease contract when calculating the lease liability and corresponding right-of-use asset for certain classes of assets. Non-lease components may consist of, but are not limited to, common area maintenance expenses and utility charges. Other occupancy costs not within the scope of IFRS 16 will continue to be recorded as operating expenses.

The following table reconciles the operating lease commitments as at October 31, 2019 disclosed under IAS 17 to the opening lease liabilities under IFRS 16 as at the initial date of application, November 1, 2019.

$ millions
Operating lease commitments as at October 31, 2019	$	5,547
Less: Operating and tax expenses related to the lease commitments		(2,477	)
Less: Impact of future lease commitments not yet commenced (1)		(1,434	)
Adjustments as a result of renewal and termination assumptions		306
Impact of discounting		(230	)
Lease liability recognized as at November 1, 2019	$	1,712

(1) Mainly related to CIBC Square lease commitments that are expected to commence in 2021.

Note  9 Goodwill, software and other intangible assets

Goodwill

The carrying amount of goodwill is reviewed for impairment annually as at August 1 and whenever there are events or changes in circumstances which indicate that the carrying amount may not be recoverable. Goodwill is allocated to CGUs for the purposes of impairment testing based on the lowest level for which identifiable cash inflows are largely independent of cash inflows from other assets or groups of assets. The goodwill impairment test is performed by comparing the recoverable amount of the CGU to which goodwill has been allocated with the carrying amount of the CGU including goodwill, with any deficiency recognized as impairment to goodwill. The recoverable amount of a CGU is defined as the higher of its estimated fair value less cost to sell and value in use.

We have three significant CGUs to which goodwill has been allocated. The changes in the carrying amount of goodwill are allocated to each CGU as follows:

		CGUs
$ millions, as at or for the year ended October 31		CIBC FirstCaribbean			Canadian Wealth Management		U.S. Commercial Banking and Wealth Management		Other		Total
2020	Balance at beginning of year	$	278		$	884	$	4,084	$	203	$	5,449
	Impairment		(248	)		–		–		–		(248	)
	Foreign currency translation adjustments		5			–		47		–		52
	Balance at end of year	$	35		$	884	$	4,131	$	203	$	5,253
2019	Balance at beginning of year	$	413		$	884	$	4,078	$	189	$	5,564
	Acquisitions		–			–		4		14		18
	Impairment		(135	)		–		–		–		(135	)
	Foreign currency translation adjustments		–			–		2		–		2
	Balance at end of year	$	278		$	884	$	4,084	$	203	$	5,449

150 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Impairment testing of goodwill and key assumptions

CIBC FirstCaribbean

CIBC acquired a controlling interest in CIBC FirstCaribbean in December 2006 and now holds 91.7% of its shares. CIBC FirstCaribbean is a major Caribbean bank offering a full range of financial services in corporate and investment banking, retail and business banking, and wealth management. CIBC FirstCaribbean, which has assets of approximately US$12 billion, operates in the Caribbean and is traded on the stock exchanges of Barbados and Trinidad & Tobago. The results of CIBC FirstCaribbean, including goodwill impairment charges thereon, are included in Corporate and Other.

On November 8, 2019 and as discussed in Note 4, we announced that we had entered into a definitive agreement to sell 66.73% of CIBC FirstCaribbean’s outstanding shares to GNB Financial Group Limited (GNB). As a result of the valuation implied from the definitive agreement with GNB, we recognized a goodwill impairment charge of $135 million in the fourth quarter of 2019. Commencing in the first quarter of 2020, the assets and liabilities of CIBC FirstCaribbean were treated as held for sale, and measured at the lower of their aggregate carrying amount and fair value less costs to sell, on the basis that the transaction was highly probable to close in 2020, subject to regulatory approvals. In the second quarter of 2020, we recognized an additional goodwill impairment charge of $28 million based on the estimated impact of the COVID-19 pandemic on the recoverable value of the 24.9% interest in CIBC FirstCaribbean that we expected to retain.

As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our revised expectations regarding the likelihood and timing of closing of a potential transaction, we concluded in the fourth quarter of 2020 that held for sale accounting is no longer appropriate. As a result, we were required to assess the recoverable amount of the remaining goodwill based on current market conditions rather than the definitive agreement with GNB. This assessment reflected revised expectations concerning the impact of the COVID-19 pandemic and led to the recognition of an additional goodwill impairment charge of $220 million. Estimation of the recoverable amount is based on fair value less costs to sell, and is an area of significant judgment. The fair value measurement is categorized within level 3 of the fair value hierarchy as it includes certain unobservable inputs. Reductions in the estimated recoverable amount could arise from various factors, including changes in the impact of the COVID 19 pandemic and other market conditions.

See Note 4 for additional details.

Canadian Wealth Management

The recoverable amount of the Canadian Wealth Management CGU is based on a fair value less cost to sell calculation. The fair value is estimated using an earnings-based approach whereby the forecasted earnings are based on the Wealth Management internal plan which was approved by management and covers a three-year period. The calculation incorporates the forecasted earnings multiplied by an earnings multiple derived from observable price-to-earnings multiples of comparable wealth management institutions. The price-to-earnings multiples of those comparable wealth management institutions ranged from 7.9 to 13.7 as at August 1, 2020 (August 1, 2019: 8.0 to 10.9).

We have determined that the estimated recoverable amount of the Wealth Management CGU was well in excess of its carrying amount as at August 1, 2020. As a result, no impairment charge was recognized during 2020.

If alternative reasonably possible changes in key assumptions were applied, the result of the impairment test would not differ.

U.S. Commercial Banking and Wealth Management

The recoverable amount of the U.S. Commercial Banking and Wealth Management CGU (including The PrivateBank and Geneva Advisors) is based on a value in use calculation that is estimated using a ten-year cash flow projection, to reflect a recovery to more normal levels of economic growth following the COVID-19 pandemic. The cash flows projections are based on the financial plans approved by management, and an estimate of the capital required to be maintained to support ongoing operations. The determination of the medium- and long-term forecasted earnings requires the exercise of judgment in light of the uncertainty regarding the ultimate economic impact of the COVID-19 pandemic. Implicit in our economic outlook is the assumption that the manner in which governments respond to the second and subsequent waves of the virus, and the dissemination of an effective mass-produced vaccine, will allow the U.S. economy to continue to recover during 2021, with the economy returning to pre-COVID levels of economic activity in 2022 and pre-COVID levels of unemployment in 2023.

We have determined that for the impairment testing performed as at August 1, 2020, the estimated recoverable amount of the U.S. Commercial Banking and Wealth Management CGU was in excess of its carrying amount. As a result, no impairment charge was recognized during 2020.

A terminal growth rate of 4.0% as at August 1, 2020 (August 1, 2019: 3.5%) was applied to the years after the ten-year forecast. All of the forecasted cash flows were discounted at an after-tax rate of 10.2% as at August 1, 2020 (12.4% pre-tax) which we believe to be a risk-adjusted discount rate appropriate to U.S. Commercial Banking and Wealth Management (we used an after-tax rate of 9.0% as at August 1, 2019). The determination of a discount rate and a terminal growth rate require the exercise of judgment. The discount rate was determined based on the following primary factors: (i) the risk-free rate; (ii) an equity risk premium; and (iii) beta adjustment to the equity risk premium based on a review of betas of comparable publicly traded financial institutions in the region. The terminal growth rate was based on management’s expectations of real growth and forecast inflation rates.

Estimation of the recoverable amount is an area of significant judgment. The recoverable amounts is estimated using an internally developed model which requires the use of significant assumptions including forecasted earnings, a discount rate, a terminal growth rate and forecasted regulatory capital requirements. Reductions in the estimated recoverable amount could arise from various factors, such as reductions in forecasted cash flows, an increase in the assumed level of required capital, and any adverse changes to the discount rate or terminal growth rate either in isolation or in any combination thereof.

Other

The goodwill relating to the Other CGUs is comprised of amounts which individually are not considered to be significant. We have determined that for the impairment testing performed as at August 1, 2020, the estimated recoverable amount of these CGUs was in excess of their carrying amounts.

Allocation to strategic business units

Goodwill of $5,253 million (2019: $5,449 million) is allocated to the SBUs as follows: Canadian Commercial Banking and Wealth Management of $954 million (2019: $954 million), Corporate and Other of $98 million (2019: $327 million), U.S. Commercial Banking and Wealth Management of $4,131 million (2019: $4,084 million), Capital Markets of $63 million (2019: $77 million), and Canadian Personal and Business Banking of $7 million (2019: $7 million).

CIBC 2020 ANNUAL REPORT 151

Consolidated financial statements

Software and other intangible assets

The carrying amount of indefinite-lived intangible assets is provided in the following table:

$ millions, as at or for the year ended October 31		Contract based (1)		Brand name (2)		Total
2020	Balance at beginning of year	$	116	$	26	$	142
	Foreign currency translation adjustments		–		–		–
	Balance at end of year	$	116	$	26	$	142
2019	Balance at beginning of year	$	116	$	26	$	142
	Foreign currency translation adjustments		–		–		–
	Balance at end of year	$	116	$	26	$	142

(1) Represents management contracts purchased as part of past acquisitions.

(2) Acquired as part of the CIBC FirstCaribbean acquisition.

The components of finite-lived software and other intangible assets are as follows:

$ millions, as at or for the year ended October 31		Software (1)			Core deposit intangibles  (2)		Contract based (3)			Customer relationships  (4)			Total
2020	Gross carrying amount
	Balance at beginning of year	$	3,052		$	611	$	38		$	322		$	4,023
	Additions		481			–		–			–			481
	Disposals (5)		(28	)		–		–			(69	)		(97	)
	Adjustments (6)		3			8		(16	)		4			(1	)
	Balance at end of year	$	3,508		$	619	$	22		$	257		$	4,406
2019	Balance at end of year	$	3,052		$	611	$	38		$	322		$	4,023
2020	Accumulated amortization
	Balance at beginning of year	$	1,631		$	389	$	11		$	165		$	2,196
	Amortization and impairment (5)		371			64		5			36			476
	Disposals (5)		(20	)		–		–			(68	)		(88	)
	Adjustments (6)		1			4		(4	)		2			3
	Balance at end of year	$	1,983		$	457	$	12		$	135		$	2,587
2019	Balance at end of year	$	1,631		$	389	$	11		$	165		$	2,196
	Net book value
	As at October 31, 2020	$	1,525		$	162	$	10		$	122		$	1,819
	As at October 31, 2019	$	1,421		$	222	$	27		$	157		$	1,827

(1) Includes $620 million (2019: $515 million) of work-in-progress not subject to amortization.

(2) Acquired as part of the acquisitions of CIBC FirstCaribbean and The PrivateBank.

(3) Represents a combination of management contracts purchased as part of past acquisitions including The PrivateBank and Geneva Advisors in 2017, as well as LGA and Cleary Gull in 2019.

(4) Represents customer relationships associated with past acquisitions including The PrivateBank and Geneva Advisors in 2017, and LGA in 2019.

(5) Includes write-offs of fully amortized assets.

(6) Includes foreign currency translation adjustments and reclassification of certain contract-based assets to right-of-use assets in Property and equipment as a result of our adoption of IFRS 16 on November 1, 2019.

Net additions and disposals of gross carrying amount during the year were: Canadian Personal and Business Banking net additions of $1 million (2019: net disposals of $12 million); Canadian Commercial Banking and Wealth Management net disposals of nil (2019: net disposals of nil); U.S. Commercial Banking and Wealth Management net disposals of $8 million (2019: net additions of $10 million); Capital Markets net disposals of nil (2019: net disposals of $1 million); and Corporate and Other net additions of $459 million (2019: net additions of $81 million).

Note  10 Other assets

$ millions, as at October 31	2020		2019
Accrued interest receivable	$	1,317	$	1,414
Defined benefit asset (Note 19)		247		175
Precious metals (1)		2,731		1,815
Brokers’ client accounts		9,153		5,471
Current tax receivable		2,201		3,542
Other prepayments		557		745
Derivative collateral receivable		4,950		6,185
Accounts receivable		519		759
Other (2)		1,533		717
	$	23,208	$	20,823

(1) Includes gold and silver bullion that are measured at fair value using unadjusted market prices quoted in active markets.

(2) Includes investments in subleases of $749 million as at October 31, 2020, related to certain subleases we have re-assessed as finance subleases as part of the adoption of IFRS 16. For the year ended October 31, 2020, finance income related to our investment in sublease was $53 million. Future lease payments receivable are $506 million over the next five years, and $838 million thereafter until expiry of the subleases.

152 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Note  11 Deposits⁽¹⁾⁽²⁾

$ millions, as at October 31	Payable on demand (3)		Payable after notice (4)		Payable on a fixed date (5)(6)		2020 Total		2019 Total
Personal	$	13,704	$	132,152	$	56,296	$	202,152	$	178,091
Business and government (7)		85,604		82,477		143,345		311,426		257,502
Bank		6,837		126		10,048		17,011		11,224
Secured borrowings (8)		–		–		40,151		40,151		38,895
	$	106,145	$	214,755	$	249,840	$	570,740	$	485,712
Comprises:
Held at amortized cost							$	557,321	$	475,254
Designated at fair value								13,419		10,458
							$	570,740	$	485,712
Total deposits include (9):
Non-interest-bearing deposits
Canada							$	71,122	$	51,880
U.S.								13,833		7,876
Other international								5,798		4,647
Interest-bearing deposits
Canada								389,439		344,756
U.S.								66,399		56,844
Other international								24,149		19,709
							$	570,740	$	485,712

(1) Includes deposits of $185.2 billion (2019: $152.8 billion) denominated in U.S. dollars and deposits of $30.2 billion (2019: $30.0 billion) denominated in other foreign currencies.

(2) Net of purchased notes of $3,063 million (2019: $2,930 million).

(3) Includes all deposits for which we do not have the right to require notice of withdrawal. These deposits are generally chequing accounts.

(4) Includes all deposits for which we can legally require notice of withdrawal. These deposits are generally savings accounts.

(5) Includes all deposits that mature on a specified date. These deposits are generally term deposits, guaranteed investment certificates, and similar instruments.

(6) Includes $19,925 million (2019: $8,986 million) of deposits which are subject to the bank recapitalization (bail-in) conversion regulations issued by the Department of Finance (Canada). These regulations provide certain statutory powers to the Canada Deposit Insurance Corporation (CDIC), including the ability to convert specified eligible shares and liabilities of CIBC into common shares in the event that CIBC is determined to be non-viable.

(7) Includes $303 million (2019: $302 million) of Notes issued to CIBC Capital Trust.

(8) Comprises liabilities issued by or as a result of activities associated with the securitization of residential mortgages, covered bond programme, and consolidated securitization vehicles.

(9) Classification is based on geographical location of the CIBC office.

Note  12 Other liabilities

$ millions, as at October 31	2020		2019
Accrued interest payable	$	1,200	$	1,438
Defined benefit liability (Note 19)		676		737
Gold and silver certificates		133		114
Brokers’ client accounts		5,303		4,940
Derivative collateral payable		4,772		3,823
Negotiable instruments		1,110		991
Accrued employee compensation and benefits		2,174		2,281
Accounts payable and accrued expenses		2,153		2,062
Other (1)		4,613		2,645
	$	22,134	$	19,031

(1) Includes the carrying value of our lease liabilities, which was $1,866 million as at October 31, 2020, relating to our adoption of IFRS 16 in the current year. See Note 8 for additional details on the IFRS 16 transition. The carrying value includes $302 million related to leases that were previously classified as finance leases under IAS 17. The undiscounted cash flows related to the contractual maturity of our lease liabilities is $354 million for the period less than 1 year, $1,111 million between years 1-5, and $706 million thereafter until expiry of the leases. During the year ended October 31, 2020, interest expense on lease liabilities was $60 million.

Note  13 Derivative instruments

As described in Note 1, in the normal course of business, we use various derivative instruments for both trading and ALM purposes. These derivatives limit, modify or give rise to varying degrees and types of risk.

$ millions, as at October 31			2020				2019
	Assets		Liabilities		Assets		Liabilities
Trading (Note 3)	$	31,356	$	29,392	$	22,738	$	23,799
ALM (Note 3) (1)		1,374		1,116		1,157		1,314
	$	32,730	$	30,508	$	23,895	$	25,113

(1) Comprised of derivatives that qualify for hedge accounting under IAS 39 and derivatives used for economic hedges.

CIBC 2020 ANNUAL REPORT 153

Consolidated financial statements

Derivatives used by CIBC

The majority of our derivative contracts are OTC transactions, which consist of: (i) contracts that are bilaterally negotiated and settled between CIBC and the counterparty to the contract; and (ii) contracts that are bilaterally negotiated and then cleared through a central counterparty (CCP). Bilaterally negotiated and settled contracts are usually traded under a standardized International Swaps and Derivatives Association (ISDA) agreement with collateral posting arrangements between CIBC and its counterparties. Terms are negotiated directly with counterparties and the contracts have industry-standard settlement mechanisms prescribed by ISDA. Centrally cleared contracts are generally bilaterally negotiated and then novated to, and cleared through, a CCP. The industry promotes the use of CCPs to clear OTC trades. The central clearing of derivative contracts generally facilitates the reduction of credit exposures due to the ability to net settle offsetting positions. Consequently, derivative contracts cleared through CCPs generally attract less capital relative to those settled with non-CCPs.

The remainder of our derivative contracts are exchange-traded derivatives, which are standardized in terms of their amounts and settlement dates, and are bought and sold on organized and regulated exchanges. These exchange-traded derivative contracts consist primarily of options and futures.

Interest rate derivatives

Forward rate agreements are OTC contracts that effectively fix a future interest rate for a period of time. A typical forward rate agreement provides that at a pre-determined future date, a cash settlement will be made between the counterparties based upon the difference between a contracted rate and a market rate to be determined in the future, calculated on a specified notional principal amount. No exchange of principal amount takes place. Certain forward rate agreements are bilaterally transacted and then novated and settled through a clearing house which acts as a CCP.

Interest rate swaps are OTC contracts in which two counterparties agree to exchange cash flows over a period of time based on rates applied to a specified notional principal amount. A typical interest rate swap would require one counterparty to pay a fixed market interest rate in exchange for a variable market interest rate determined from time to time, with both calculated on a specified notional principal amount. No exchange of principal amount takes place. Certain interest rate swaps are bilaterally transacted and then novated and settled through a clearing house which acts as a CCP.

Interest rate options are contracts in which one party (the purchaser of an option) acquires from another party (the writer of an option), in exchange for a premium, the right, but not the obligation, to either buy or sell, on a specified future date or within a specified time, a specified financial instrument at a contracted price. The underlying financial instrument has a market price which varies in response to changes in interest rates. Options are transacted in both OTC and exchange-traded markets.

Interest rate futures are standardized contracts transacted on an exchange. They are based upon an agreement to buy or sell a specified quantity of a financial instrument on a specified future date, at a contracted price. These contracts differ from forward rate agreements in that they are in standard amounts with standard settlement dates and are transacted through an exchange.

Foreign exchange derivatives

Foreign exchange forwards are OTC contracts in which one counterparty contracts with another to exchange a specified amount of one currency for a specified amount of a second currency, at a future date or range of dates.

Foreign exchange futures contracts are similar in mechanics to foreign exchange forward contracts except that they are in standard currency amounts with standard settlement dates and are transacted through an exchange.

Foreign exchange swap contracts comprise foreign exchange swaps and cross-currency interest rate swaps. Foreign exchange swaps are transactions in which a currency is simultaneously purchased in the spot market and sold for a different currency in the forward market, or vice versa. Cross-currency interest rate swaps are transactions in which counterparties exchange principal and interest flows in different currencies over a period of time. These contracts are used to manage both currency and interest rate exposures.

Credit derivatives

Credit derivatives are OTC contracts designed to transfer the credit risk in an underlying financial instrument (usually termed as a reference asset) from one counterparty to another. The most common credit derivatives are CDS and certain TRS.

CDS contracts provide protection against the decline in value of a reference asset as a result of specified credit events such as default or bankruptcy. These derivatives are similar in structure to an option whereby the purchaser pays a premium to the seller of the CDS contract in return for payment contingent on the occurrence of a credit event. The protection purchaser has recourse to the protection seller for the difference between the face value of the CDS contract and the fair value of the reference asset at the time of settlement. Neither the purchaser nor the seller under the CDS contract has recourse to the entity that issued the reference asset. Certain CDS contracts are cleared through a CCP.

In credit derivative TRS contracts, one counterparty agrees to pay or receive cash amounts based on the returns of a reference asset, including interest earned on these assets in exchange for amounts that are based on prevailing market funding rates. These cash settlements are made regardless of whether there is a credit event. Upon the occurrence of a credit event, the parties may either exchange cash payments according to the value of the defaulted assets or exchange cash based on the notional amount for physical delivery of the defaulted assets.

Equity derivatives

Equity swaps are OTC contracts in which one counterparty agrees to pay, or receive from the other, cash amounts based on changes in the value of a stock index, a basket of stocks or a single stock in exchange for amounts that are based either on prevailing market funding rates or changes in the value of a different stock index, basket of stocks or a single stock. These contracts generally include payments in respect of dividends.

Equity options give the purchaser of the option, for a premium, the right, but not the obligation, to buy from or sell to the writer of an option, an underlying stock index, basket of stocks, or a single stock at a contracted price. Options are transacted in both OTC and exchange markets.

Equity index futures are standardized contracts transacted on an exchange. They are based on an agreement to pay or receive a cash amount based on the difference between the contracted price level of an underlying stock index and its corresponding market price level at a specified future date. There is generally no actual delivery of stocks that comprise the underlying index. These contracts are in standard amounts with standard settlement dates.

Precious metal and other commodity derivatives

We also transact in other derivative products, including commodity forwards, futures, swaps and options, such as precious metal and energy-related products in both OTC and exchange markets.

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Notional amounts

The notional amounts are not recorded as assets or liabilities, as they represent the face amount of the contract to which a rate or price is applied to determine the amount of cash flows to be exchanged. In most cases, notional amounts do not represent the potential gain or loss associated with market or credit risk of such instruments.

The following table presents the notional amounts of derivative instruments:

$ millions, as at October 31											2020					2019
	Residual term to contractual maturity
	Less than 1 year		1 to 5 years		Over 5 years		Total notional amounts		Trading		ALM (1)		Trading			ALM (1)
Interest rate derivatives
Over-the-counter
Forward rate agreements	$	10,175	$	3,444	$	–	$	13,619	$	10,593	$	3,026	$	8,591		$	2,480
Centrally cleared forward rate agreements		146,823		2,605		–		149,428		149,428		–		320,118			–
Swap contracts		72,315		138,145		83,576		294,036		264,184		29,852		275,418			40,177
Centrally cleared swap contracts		1,227,733		1,537,632		520,617		3,285,982		2,840,793		445,189		2,780,206			355,846
Purchased options		5,200		4,622		1,120		10,942		9,188		1,754		12,883			2,358
Written options		3,957		4,914		1,265		10,136		9,370		766		14,670			1,011
		1,466,203		1,691,362		606,578		3,764,143		3,283,556		480,587		3,411,886			401,872
Exchange-traded
Futures contracts		185,639		84,020		11		269,670		269,670		–		136,627			2,266
Purchased options		3,059		1		–		3,060		3,060		–		14,616			–
Written options		5,059		1		–		5,060		5,060		–		5,758			–
		193,757		84,022		11		277,790		277,790		–		157,001			2,266
Total interest rate derivatives		1,659,960		1,775,384		606,589		4,041,933		3,561,346		480,587		3,568,887			404,138
Foreign exchange derivatives
Over-the-counter
Forward contracts		1,058,942		18,898		2,334		1,080,174		1,071,423		8,751		892,117			12,840
Swap contracts		117,017		266,263		145,735		529,015		486,689		42,326		398,262			45,510
Purchased options		16,857		2,102		49		19,008		19,008		–		19,285			–
Written options		20,792		1,877		14		22,683		22,229		454		23,947			–
		1,213,608		289,140		148,132		1,650,880		1,599,349		51,531		1,333,611			58,350
Exchange-traded
Futures contracts		3		–		–		3		3		–		26			–
Total foreign exchange derivatives		1,213,611		289,140		148,132		1,650,883		1,599,352		51,531		1,333,637			58,350
Credit derivatives
Over-the-counter
Credit default swap contracts – protection purchased		16		925		995		1,936		1,907		29		940			102
Centrally cleared credit default swap contracts – protection purchased		58		835		1,691		2,584		2,424		160		973			158
Credit default swap contracts – protection sold		41		362		220		623		614		9		328			50
Centrally cleared credit default swap contracts – protection sold		–		819		490		1,309		1,309		–		181			–
Total credit derivatives		115		2,941		3,396		6,452		6,254		198		2,422			310
Equity derivatives
Over-the-counter		66,888		24,081		810		91,779		86,865		4,914		85,310	(2)		3,347
Exchange-traded		69,675		19,807		342		89,824		89,824		–		89,529			–
Total equity derivatives		136,563		43,888		1,152		181,603		176,689		4,914		174,839			3,347
Precious metal derivatives
Over-the-counter		9,263		418		–		9,681		9,681		–		9,814			–
Exchange-traded		524		–		–		524		524		–		3,235			–
Total precious metal derivatives		9,787		418		–		10,205		10,205		–		13,049			–
Other commodity derivatives
Over-the-counter		13,999		19,309		842		34,150		34,142		8		36,819			–
Centrally cleared commodity derivatives		41		14		–		55		55		–		102			–
Exchange-traded		12,411		6,008		281		18,700		18,700		–		23,086			–
Total other commodity derivatives		26,451		25,331		1,123		52,905		52,897		8		60,007			–
Total notional amount of which:	$	3,046,487	$	2,137,102	$	760,392	$	5,943,981	$	5,406,743	$	537,238	$	5,152,841		$	466,145
Over-the-counter (3)		2,770,117		2,027,265		759,758		5,557,140		5,019,902		537,238		4,879,964			463,879
Exchange-traded		276,370		109,837		634		386,841		386,841		–		272,877			2,266

(1) ALM: asset/liability management.

(2) Restated from amount previously presented.

(3) For OTC derivatives that are not centrally cleared, $1,984.6 billion (2019: $1,596.7 billion) are with counterparties that have two-way collateral posting arrangements, $44.9 billion (2019: $94.2 billion) are with counterparties that have one-way collateral posting arrangements, and $88.3 billion (2019: $184.8 billion) are with counterparties that have no collateral posting arrangements. Counterparties with whom we have more than insignificant OTC derivative portfolios and one-way collateral posting arrangements are either sovereign entities or supra national financial institutions.

CIBC 2020 ANNUAL REPORT 155

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Risk

In the following sections, we discuss the risks related to the use of derivatives and how we manage these risks.

Market risk

Derivatives are financial instruments where valuation is linked to changes in interest rates, foreign exchange rates, equity, commodity, credit prices or indices. Changes in value as a result of the aforementioned risk factors are referred to as market risk.

Market risk arising from derivative trading activities is managed in order to mitigate risk in line with CIBC’s risk appetite. To manage market risk, we set market risk limits and may enter into hedging transactions.

Credit risk

Credit risk arises from the potential for a counterparty to default on its contractual obligations and the possibility that prevailing market conditions are such that a loss would occur in replacing the defaulted transaction.

We limit the credit risk of OTC derivatives through the use of ISDA master netting agreements, collateral, CCPs and other credit mitigation techniques. We clear eligible derivatives through CCPs in accordance with various global initiatives. Where feasible, we novate existing bilaterally negotiated and settled derivatives to a CCP in an effort to reduce CIBC’s credit risk exposure. We establish counterparty credit limits and limits for CCP exposures based on a counterparty’s creditworthiness and the type of trading relationship with each counterparty (underlying agreements, business volumes, product types, tenors, etc.).

We negotiate netting agreements to contain the build-up of credit exposure resulting from multiple transactions with more active counterparties. Such agreements provide for the simultaneous close-out and netting of all transactions with a counterparty, in the case of a counterparty default. A number of these agreements incorporate a Credit Support Annex, which is a bilateral security agreement that, among other things, provides for the exchange of collateral between parties in the event that one party’s exposure to the other exceeds agreed upon thresholds.

Credit risk on exchange-traded futures and options is limited, as these transactions are standardized contracts executed on established exchanges, whose CCPs assume the obligations of both counterparties. Similarly, swaps that are centrally cleared represent limited credit risk because these transactions are novated to the CCP, which assumes the obligations of the original bilateral counterparty. All exchange-traded and centrally cleared contracts are subject to initial margin and daily settlement of variation margins, designed to protect participants from losses incurred from a counterparty default.

A CVA is determined using the fair value based exposure we have on derivative contracts. We believe that we have made appropriate fair value adjustments to date. The establishment of fair value adjustments involves estimates that are based on accounting processes and judgments by management. We evaluate the adequacy of the fair value adjustments on an ongoing basis. Market and economic conditions relating to derivative counterparties may change in the future, which could result in significant future losses.

The following table summarizes our credit exposure arising from derivatives, which includes the current replacement cost, credit equivalent amount and risk-weighted amount.

In the second quarter of 2020, we adopted the Internal Model Method (IMM) for the determination of the EAD amount for most of our derivatives portfolios. The EAD amount is based on effective expected positive exposure (EEPE) which computes, through simulation, the expected exposures with consideration to the expected movements in underlying risk factor and netting/collateral agreements. It is calculated as EEPE multiplied by the prescribed alpha factor of 1.4 and is reduced by CVA losses. The EAD amount is then multiplied by counterparty risk variables to arrive at the risk-weighted amount. The risk-weighted amount is used in determining the regulatory capital requirements for derivatives.

From the first quarter of 2019 to the second quarter of 2020, the Standardized Approach for Counterparty Credit Risk (SA-CCR) was used in calculating the replacement cost, EAD amount and risk-weighted assets. The current replacement cost was the estimated cost to replace all contracts that have a positive market value, representing an unrealized gain to us. The replacement cost of an instrument was dependent upon its terms relative to prevailing market prices. Replacement cost included the impact of certain collateral amounts and the impact of master netting agreements. The EAD amount was calculated as the sum of replacement cost and the potential future exposure, multiplied by an alpha of 1.4, and was reduced by CVA losses. The potential future exposure was an estimate of the amount by which the current replacement cost could increase over the remaining term of each transaction, based on a formula prescribed by OSFI. Similar to IMM, the EAD amount was then multiplied by counterparty risk variables to arrive at the risk-weighted amount.

156 CIBC 2020 ANNUAL REPORT

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$ millions, as at October 31									2020 (1)										2019
	Current replacement cost (2)						Credit equivalent amount  (3)		Risk- weighted amount		Current replacement cost  (2)						Credit equivalent amount (3)		Risk- weighted amount
	Trading		ALM		Total						Trading		ALM		Total
Interest rate derivatives
Over-the-counter
Forward rate agreements	$	–	$	16	$	16	$	135	$	12	$	–	$	13	$	13	$	69	$	9
Swap contracts		3,974		237		4,211		6,744		2,705		2,503		155		2,658		7,140		2,507
Purchased options (4)		17		6		23		35		26		11		–		11		56		38
Written options (4)		9		–		9		5		2		6		–		6		31		29
		4,000		259		4,259		6,919		2,745		2,520		168		2,688		7,296		2,583
Exchange-traded		–		–		–		309		9		4		–		4		192		5
		4,000		259		4,259		7,228		2,754		2,524		168		2,692		7,488		2,588
Foreign exchange derivatives
Over-the-counter
Forward contracts		851		364		1,215		4,974		1,423		939		4		943		7,136		1,737
Swap contracts		358		481		839		2,324		700		735		4		739		3,546		687
Purchased options (4)		116		1		117		182		65		71		–		71		365		119
Written options (4)		47		–		47		44		20		13		–		13		106		24
		1,372		846		2,218		7,524		2,208		1,758		8		1,766		11,153		2,567
Credit derivatives
Over-the-counter
Credit default swap contracts
– protection purchased		7		9		16		144		21		2		1		3		25		7
– protection sold		10		–		10		13		6		–		–		–		2		2
		17		9		26		157		27		2		1		3		27		9
Equity derivatives
Over-the-counter		275		55		330		3,100		658		265		5		270		4,832		1,018
Exchange-traded		579		–		579		3,929		120		682		–		682		3,593		103
		854		55		909		7,029		778		947		5		952		8,425		1,121
Precious metal derivatives
Over-the-counter		58		–		58		136		55		51		–		51		332		115
Exchange-traded		–		–		–		20		1		4		–		4		171		7
		58		–		58		156		56		55		–		55		503		122
Other commodity derivatives
Over-the-counter		1,293		25		1,318		2,365		866		697		62		759		3,928		1,195
Exchange-traded		3		–		3		1,291		52		9		–		9		1,200		48
		1,296		25		1,321		3,656		918		706		62		768		5,128		1,243
RWA related to non-trade exposures to central counterparties										213										245
RWA related to CVA charge										7,202										6,990
Total derivatives		7,597		1,194		8,791		25,750		14,156		5,992		244		6,236		32,724		14,885

(1) Effective in the second quarter of 2020, we adopted the IMM approach for CCR for qualifying derivative transactions which impacted the calculation of EAD and risk-weighted assets (RWA). Some derivatives are not eligible for IMM and remain under SA-CCR. Comparative amounts presented have not been restated.

(2) Current replacement cost reflects the current mark-to-market (MTM) value of derivatives offset by eligible financial collateral, where present.

(3) Under IMM, effective expected positive exposure (EEPE) is used, which computes through simulation, the expected exposures with consideration to the expected movements in underlying risk factor and netting/collateral agreements. The EAD is calculated as EEPE multiplied by the prescribed alpha factor of 1.4. The EAD under SA-CCR is calculated as the sum of replacement cost and potential future exposure, multiplied by the prescribed alpha factor of 1.4.

(4) Prior year amounts have been reclassified to conform to the presentation adopted in the current year.

The following table presents the current replacement cost of derivatives by geographic region based on the location of the derivative counterparty:

$ millions, as at October 31							2020								2019
	Canada		U.S.		Other countries		Total		Canada		U.S.		Other countries		Total
Derivative instruments
By counterparty type
Financial institutions	$	921	$	949	$	1,156	$	3,026	$	534	$	1,063	$	549	$	2,146
Governments		982		–		4		986		891		–		8		899
Corporate		1,823		1,774		1,182		4,779		951		1,017		1,223		3,191
Total derivative instruments	$	3,726	$	2,723	$	2,342	$	8,791	$	2,376	$	2,080	$	1,780	$	6,236

CIBC 2020 ANNUAL REPORT 157

Consolidated financial statements

Note 14 Designated accounting hedges

Hedge accounting

We apply hedge accounting as part of managing the market risk of certain non-trading portfolios arising from changes due to interest rates, foreign exchange rates, and equity market prices. See the shaded sections in “Non-trading activities” in the MD&A for further information on our risk management strategy for these risks. See Note 13 for further information on the derivatives used by CIBC.

Interest rate risk

The majority of our derivative contracts used to hedge certain exposures to benchmark interest rate risk are interest rate swaps. For fair value hedges, we convert our fixed interest rate exposures from the hedged financial instruments to floating interest rate exposures. For cash flow hedges, we convert certain exposures to cash flow variability from our variable rate instruments to fixed interest rate exposures.

Foreign currency risk

For our fair value hedges, we mainly use various combinations of cross-currency interest rate swaps and interest rate swaps to hedge our exposures to foreign currency risk together with interest rate risk, converting our fixed foreign currency rate exposures to floating functional currency rate exposures.

For our cash flow hedges, the majority of our derivative contracts are used to hedge our exposures to cash flow variability arising from fluctuations in foreign exchange rates, and mainly consist of cross-currency interest rate swaps. We also use foreign exchange forwards and synthetic forwards created from interest rate swaps to hedge certain foreign currency contractual expenses.

For NIFO hedges, we use a combination of foreign denominated deposit liabilities and foreign exchange forwards to manage our foreign currency exposure of our NIFOs with a functional currency other than the Canadian dollar.

Equity price risk

We use cash-settled total return swaps in designated cash flow hedge relationships to hedge changes in CIBC’s share price in respect of certain cash-settled share-based compensation awards. Note 18 provides details on our cash-settled share-based compensation plans.

For the hedge relationships above, hedge effectiveness is assessed at the inception of the hedge relationship and on an ongoing basis, primarily using the dollar offset method. The sources of hedge ineffectiveness are mainly attributed to the following:

• Utilization of hedging instruments that have a non-zero fair value at the inception of the hedge relationship;

• Differences in fixed rates, when contractual coupons of the fixed rate hedged items are designated;

• Differences in the discounting factors between the hedged item and the hedging instruments arising from different rate reset frequencies and timing of cash flows; and

• Differences in the discount curves to determine the basis adjustments of the hedged items and the fair value of the hedging derivatives, including from the application of OIS and CVA to the valuation of derivatives when they are applicable.

158 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Designated hedging instruments

The following table provides a summary of financial instruments designated as hedging instruments:

		Notional amount of the hedging instrument (1)(2)		Maturity range						Fair value of the hedging derivatives				Gains (losses) on changes in fair value used for calculating hedge ineffectiveness
$ millions, as at October 31				Less than 1 year		1-5 years		Over 5 years		Assets		Liabilities
2020	Cash flow hedges
	Foreign exchange risk
	Foreign exchange forwards	$	–	$	–	$	–	$	–	$	–	$	–	$	–
	Cross-currency interest rate swaps		7,329		3,692		3,637		–		134		161		43
	Interest rate risk
	Interest rate swaps		15,104		6,085		9,019		–		13		–		320
	Equity share price risk
	Equity swaps		1,171		1,012		159		–		5		23		(131	)
		$	23,604	$	10,789	$	12,815	$	–	$	152	$	184	$	232
	NIFO hedges
	Foreign exchange risk
	Foreign exchange forwards	$	247	$	247	$	–	$	–	$	–	$	–	$	(2	)
	Deposits (3)		20,409		20,409		–		–		n/a		n/a		(154	)
		$	20,656	$	20,656	$	–	$	–	$	–	$	–	$	(156	)
	Fair value hedges
	Interest rate risk
	Interest rate swaps	$	205,518	$	61,911	$	126,570	$	17,037	$	170	$	194	$	(815	)
	Foreign exchange / interest rate risk
	Cross-currency interest rate swaps		34,329		2,185		26,689		5,455		795		486		(26	)
	Interest rate swaps		17,025		–		14,311		2,714		–		5		66
		$	256,872	$	64,096	$	167,570	$	25,206	$	965	$	685	$	(775	)
		$	301,132	$	95,541	$	180,385	$	25,206	$	1,117	$	869	$	(699	)
2019	Cash flow hedges
	Foreign exchange risk
	Foreign exchange forwards	$	17	$	17	$	–	$	–	$	–	$	–	$	(7	)
	Cross-currency interest rate swaps		6,619		859		5,760		–		104		177		(168	)
	Interest rate risk
	Interest rate swaps		18,180		3,122		15,058		–		4		–		193
	Equity share price risk
	Equity swaps		1,203		1,030		173		–		93		–		(1	)
		$	26,019	$	5,028	$	20,991	$	–	$	201	$	177	$	17
	NIFO hedges
	Foreign exchange risk
	Foreign exchange forwards	$	598	$	598	$	–	$	–	$	7	$	2	$	–
	Deposits (3)		17,616		17,616		–		–		n/a		n/a		6
		$	18,214	$	18,214	$	–	$	–	$	7	$	2	$	6
	Fair value hedges
	Interest rate risk
	Interest rate swaps	$	194,398	$	63,723	$	114,455	$	16,220	$	291	$	219	$	(276	)
	Foreign exchange / interest rate risk
	Cross-currency interest rate swaps		34,627		7,226		20,597		6,804		339		682		41
	Interest rate swaps		16,477		2,937		10,158		3,382		155		–		142
		$	245,502	$	73,886	$	145,210	$	26,406	$	785	$	901	$	(93	)
		$	289,735	$	97,128	$	166,201	$	26,406	$	993	$	1,080	$	(70	)

(1) For some hedge relationships, we apply a combination of derivatives to hedge the underlying exposures; therefore, the notional amounts of the derivatives generally exceed the carrying amount of the hedged items.

(2) As at October 31, 2020, the notional amount of our derivatives in designated hedge accounting relationships that were indexed to U.S. LIBOR and GBP LIBOR, with a maturity date beyond December 31, 2021, was $59 billion. See “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” in Note 1 for details.

(3) Notional amount represents the principal amount of deposits as at October 31, 2020 and October 31, 2019.

n/a Not applicable.

CIBC 2020 ANNUAL REPORT 159

Consolidated financial statements

The following table provides the average rate or price of the hedging derivatives:

As at October 31			Average exchange rate  (1)			Average fixed interest rate  (1)			Average share price
2020	Cash flow hedges
	Foreign exchange risk
	Cross-currency interest rate swaps	AUD – CAD		0.97			n/a			n/a
		EUR – CAD		1.51			n/a			n/a
		GBP – CAD		1.68
	Interest rate risk
	Interest rate swaps			n/a	CAD		1.60	%		n/a
				n/a	USD		1.65	%		n/a
	Equity share price risk
	Equity swaps			n/a			n/a		$	105.11
	NIFO hedges
	Foreign exchange risk
	Foreign exchange forwards	AUD – CAD		0.93			n/a			n/a
		HKD – CAD		0.17			n/a			n/a
	Fair value hedges
	Interest rate risk
	Interest rate swaps			n/a	CAD		1.52	%		n/a
	Foreign exchange / interest rate risk
	Cross-currency interest rate swaps	EUR – CAD		1.41			0.12	%		n/a
		GBP – CAD		1.65			1.06	%		n/a
		USD – CAD		1.36			1.69	%		n/a
	Interest rate swaps			n/a	CHF		(0.41)	%		n/a
				n/a	EUR		0.00	%		n/a
				n/a	GBP		0.71	%		n/a
2019	Cash flow hedges
	Foreign exchange risk
	Foreign exchange forwards	USD – CAD		1.32			n/a			n/a
	Cross-currency interest rate swaps	AUD – CAD		0.99			n/a			n/a
		EUR – CAD		1.51			n/a			n/a
		GBP – CAD		1.66			n/a			n/a
		USD – CAD		1.32			n/a			n/a
	Interest rate risk
	Interest rate swaps			n/a	CAD		2.10	%		n/a
				n/a	USD		1.62	%		n/a
	Equity share price risk
	Equity swaps			n/a			n/a		$	108.59
	NIFO hedges
	Foreign exchange risk
	Foreign exchange forwards	AUD – CAD		0.90			n/a			n/a
		HKD – CAD		0.17			n/a			n/a
		USD – CAD		1.31			n/a			n/a
	Fair value hedges
	Interest rate risk
	Interest rate swaps			n/a	CAD		1.93	%		n/a
	Foreign exchange / interest rate risk
	Cross-currency interest rate swaps	EUR – CAD		1.30			0.12	%		n/a
		GBP – CAD		1.65			1.06	%		n/a
		USD – CAD		1.32			1.61	%		n/a
	Interest rate swaps			n/a	EUR		0.08	%		n/a
				n/a	GBP		0.71	%		n/a

(1) Includes average foreign exchange rates and interest rates relating to significant hedging relationships.

n/a Not applicable.

160 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Designated hedged items

The following table provides information on designated hedged items:

		Carrying amount of the hedged item				Accumulated amount of fair value hedge adjustments on the hedged item				Gains (losses) on change in fair value used for calculating hedge ineffectiveness
$ millions, as at or for the year ended October 31		Assets		Liabilities		Assets		Liabilities
2020	Cash flow hedges (1)
	Foreign exchange risk
	Forecasted expenses		n/a		n/a		n/a		n/a	$	–
	Deposits	$	–	$	3,132		n/a		n/a		(44	)
	Interest rate risk
	Loans		15,092		–		n/a		n/a		(320	)
	Equity share price risk
	Share-based payment		–		1,061		n/a		n/a		131
		$	15,092	$	4,193		n/a		n/a	$	(233	)
	NIFO hedges	$	20,656	$	–		n/a		n/a	$	156
	Fair value hedges (2)
	Interest rate risk
	Securities	$	33,319	$	–	$	1,347	$	–	$	783
	Loans		62,171		–		1,005		–		1,161
	Deposits		–		90,597		–		1,466		(1,019	)
	Subordinated indebtedness		–		4,632		–		202		(113	)
	Foreign exchange / interest rate risk
	Loans		5		–		–		–		–
	Deposits		–		17,331		–		81		(35	)
		$	95,495	$	112,560	$	2,352	$	1,749	$	777
2019	Cash flow hedges (1)
	Foreign exchange risk
	Forecasted expenses		n/a		n/a		n/a		n/a	$	7
	Deposits	$	–	$	2,860		n/a		n/a		168
	Interest rate risk
	Loans		18,169		–		n/a		n/a		(193	)
	Equity share price risk
	Share-based payment		–		1,169		n/a		n/a		1
		$	18,169	$	4,029		n/a		n/a	$	(17	)
	NIFO hedges	$	18,214	$	–		n/a		n/a	$	(6	)
	Fair value hedges (2)
	Interest rate risk
	Securities	$	25,763	$	–	$	633	$	–	$	1,013
	Loans		62,987		–		132		–		1,151
	Deposits		–		84,173		–		533		(1,750	)
	Subordinated indebtedness		–		3,761		–		89		(137	)
	Foreign exchange / interest rate risk
	Loans		6		–		–		–		–
	Deposits		–		17,222		–		57		(180	)
		$	88,756	$	105,156	$	765	$	679	$	97

(1) As at October 31, 2020, the amount remaining in AOCI related to discontinued cash flow hedges was $134 million (2019: immaterial).

(2) As at October 31, 2020, the accumulated fair value hedge net asset adjustment remaining on the consolidated balance sheet related to discontinued fair value hedges was $75 million (2019: net liability of $112 million).

n/a Not applicable.

Hedge accounting gains (losses) in the consolidated statement of comprehensive income

$ millions, for the year ended October 31		Beginning balance of AOCI – hedge reserve (after-tax)			Change in the value of the hedging instrument recognized in OCI (before-tax)			Amount reclassified from accumulated OCI to  income (before-tax) (1)			Tax benefit (expense)			Ending balance of AOCI hedge reserve (after-tax)			Hedge ineffectiveness gains (losses) recognized in income
2020	Cash flow hedges
	Foreign exchange risk	$	(2	)	$	4		$	(4	)	$	–		$	(2	)	$	(2	)
	Interest rate risk		98			320			(74	)		(65	)		279			–
	Equity share price risk		17			(131	)		104			7			(3	)		–
		$	113		$	193		$	26		$	(58	)	$	274		$	(2	)
	NIFO hedges – foreign exchange risk
	Hedges of net investment in foreign operations	$	(1,139)		$	(156	)	$	–		$	(46	)	$	(1,341	)	$	–
2019	Cash flow hedges
	Foreign exchange risk	$	5		$	(1	)	$	(8	)	$	2		$	(2	)	$	–
	Interest rate risk		(45	)		188			6			(51	)		98			–
	Equity share price risk		22			(1	)		(6	)		2			17			–
		$	(18	)	$	186		$	(8	)	$	(47	)	$	113		$	–
	NIFO hedges – foreign exchange risk
	Hedges of net investment in foreign operations	$	(1,129	)	$	6		$	–		$	(16	)	$	(1,139	)	$	–

(1) During the year ended October 31, 2020, the amount reclassified from AOCI to net income for cash flow hedges of forecasted transactions that were no longer expected to occur was immaterial (2019: immaterial).

CIBC 2020 ANNUAL REPORT 161

Consolidated financial statements

Hedge accounting gains (losses) in the consolidated statement of income

$ millions, for the year ended October 31		Gains (losses) on the hedging instruments			Gains (losses) on the hedged items attributable to hedged risk			Hedge ineffectiveness gains (losses) recognized in income
2020	Fair value hedges
	Interest rate risk	$	(815	)	$	812		$	(3	)
	Foreign exchange / interest rate risk		40			(35	)		5
		$	(775	)	$	777		$	2
2019	Fair value hedges
	Interest rate risk	$	(276	)	$	277		$	1
	Foreign exchange / interest rate risk		183			(180	)		3
		$	(93	)	$	97		$	4

Note  15 Subordinated indebtedness

The debt issues included in the table below are outstanding unsecured obligations of CIBC and its subsidiaries and are subordinated to the claims of depositors and other creditors as set out in their terms. Foreign currency denominated indebtedness funds foreign currency denominated assets. All redemptions are subject to regulatory approval.

Terms of subordinated indebtedness

$ millions, as at October 31																2020					2019
						Earliest date redeemable
Interest rate %			Contractual maturity date			At greater of Canada Yield Price (1) and par		At par		Denominated in foreign currency			Par value			Carrying value (2)			Par value		Carrying value (2)
	5.75	(3)		July 11, 2024	(4)						TT$175 million		$	35		$	35		$	34	$	34
	3.42	(5)(6)		January 26, 2026					January 26, 2021					1,000			1,001			1,000		991
	3.45	(5)(7)		April 4, 2028					April 4, 2023					1,500			1,568			1,500		1,533
	8.70			May 25, 2029	(4)									25			40			25		40
	2.95	(5)(8)		June 19, 2029					June 19, 2024					1,500			1,535			1,500		1,494
	2.01	(9)		July 21, 2030					July 21, 2025					1,000			1,000			–		–
	11.60			January 7, 2031			January 7, 1996							200			214			200		200
	10.80			May 15, 2031			May 15, 2021							150			160			150		149
	8.70			May 25, 2032	(4)									25			44			25		42
	8.70			May 25, 2033	(4)									25			45			25		44
	8.70			May 25, 2035	(4)									25			48			25		46
	Floating	(10)		July 31, 2084					July 27, 1990		US$44 million	(11)		59			59			85		85
	Floating	(12)		August 31, 2085					August 20, 1991		US$13 million	(13)		17			17			23		23
														5,561			5,766			4,592		4,681
	Subordinated indebtedness sold short (held) for trading purposes													(54	)		(54	)		3		3
													$	5,507		$	5,712		$	4,595	$	4,684

(1) Canada Yield Price: a price calculated at the time of redemption to provide a yield to maturity equal to the yield of a Government of Canada bond of appropriate maturity plus a pre-determined spread.

(2) Carrying values of fixed-rate subordinated indebtedness notes reflect the impact of interest rate hedges in an effective hedge relationship.

(3) Guaranteed Subordinated Term Notes in Trinidad and Tobago dollars issued on July 11, 2018 by FirstCaribbean International Bank (Trinidad & Tobago) Limited, a subsidiary of CIBC FirstCaribbean, and guaranteed on a subordinated basis by CIBC FirstCaribbean.

(4) Not redeemable prior to maturity date.

(5) Debentures are also subject to a non-viability contingent capital (NVCC) provision, necessary for the Debentures to qualify as Tier 2 regulatory capital under Basel III. As such, the Debentures are automatically converted into common shares upon the occurrence of a Trigger Event as described in the capital adequacy guidelines. In such an event, the Debentures are convertible into a number of common shares, determined by dividing 150% of the par value plus accrued and unpaid interest by the average common share price (as defined in the relevant prospectus supplements) subject to a minimum price of $5.00 per share (subject to adjustment in certain events as defined in the relevant prospectus supplements).

(6) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 2.57% above the three-month Canadian dollar bankers’ acceptance rate.

(7) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.00% above the three-month Canadian dollar bankers’ acceptance rate.

(8) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.18% above the three-month Canadian dollar bankers’ acceptance rate.

(9) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.28% above the three-month Canadian dollar bankers’ acceptance rate.

(10) Interest rate is based on the six-month US$ LIBOR plus 0.25%.

(11) US$21 million (2019: US$1 million) of this issue was repurchased and cancelled during the year.

(12) Interest rate is based on the six-month US$ LIBOR plus 0.125%.

(13) US$4 million (2019: nil) of this issue was repurchased and cancelled during the year.

162 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Note  16 Common and preferred shares and other equity instruments

The following table presents the number of common and preferred shares outstanding and dividends paid, other equity instruments and distributions paid thereon:

Common and preferred shares outstanding and other equity instruments

$ millions, except number of shares and per share amounts, as at or for the year ended October 31							2020								2019								2018
	Shares outstanding				Dividends and distributions paid				Shares outstanding				Dividends and distributions paid				Shares outstanding				Dividends and distributions paid
	Number of shares		Amount		Amount		$ per share		Number of shares		Amount		Amount		$ per share		Number of shares		Amount		Amount		$ per share
Common shares		446,932,750	$	13,892	$	2,592	$	5.82		445,325,744	$	13,589	$	2,488	$	5.60		442,823,361	$	13,242	$	2,356	$	5.32
Class A Preferred Shares
Series 39		16,000,000		400		15		0.93		16,000,000		400		16		0.96		16,000,000		400		16		0.98
Series 41		12,000,000		300		12		0.97		12,000,000		300		11		0.94		12,000,000		300		11		0.94
Series 43		12,000,000		300		10		0.87		12,000,000		300		11		0.90		12,000,000		300		11		0.90
Series 45		32,000,000		800		35		1.10		32,000,000		800		35		1.10		32,000,000		800		35		1.10
Series 47		18,000,000		450		20		1.13		18,000,000		450		20		1.13		18,000,000		450		16		0.88
Series 49		13,000,000		325		17		1.30		13,000,000		325		13		1.00		–		–		–		–
Series 51		10,000,000		250		13		1.29		10,000,000		250		5		0.53		–		–		–		–
			$	2,825	$	122					$	2,825	$	111					$	2,250	$	89
Treasury shares – common shares		152,579	$	16						15,931	$	2						3,019	$	1
Treasury shares – preferred shares		–		–						–		–						–		–
Other Equity Instruments
Limited recourse capital notes (1)			$	750							$	–							$	–

(1) See 4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness) section below for details.

Common shares

CIBC’s authorized capital consists of an unlimited number of common shares, without nominal or par value.

Common shares issued

$ millions, except number of shares, as at or for the year ended October 31				2020						2019						2018
	Number of shares			Amount			Number of shares			Amount			Number of shares			Amount
Balance at beginning of year		445,341,675		$	13,591			442,826,380		$	13,243			439,313,303		$	12,548
Issuance pursuant to:
Acquisition of The PrivateBank		–			–			–			–			1,689,450			194
Acquisition of Wellington Financial		–			–			–			–			378,848			47
Equity-settled share-based compensation plans (1)		823,502			87			511,567			52			999,675			95
Shareholder investment plan (2)		1,534,320			144			1,777,738			194			2,880,782			337
Employee share purchase plan		1,457,784			140			1,213,078			131			1,044,893			123
		449,157,281		$	13,962			446,328,763		$	13,620			446,306,951		$	13,344
Purchase of common shares for cancellation		(2,208,600	)		(68	)		(1,000,000	)		(30	)		(3,500,000	)		(104	)
Treasury shares		136,648			14			12,912			1			19,429			3
Balance at end of year (3)		447,085,329		$	13,908			445,341,675		$	13,591			442,826,380		$	13,243

(1) Includes the settlement of contingent consideration related to prior acquisitions.

(2) Commencing with the dividends paid on April 27, 2018, the shares for the Dividend Reinvestment Option and the Stock Dividend Option of the Shareholder Investment Plan (the Plan) were issued from Treasury without discount. Prior to this, these shares were issued at a 2% discount from average market price. The participants in the Share Purchase Option of the Plan continue to receive shares issued from Treasury with no discount.

(3) Excludes nil restricted shares as at October 31, 2020 (2019: nil; 2018: 60,764).

Common shares reserved for issue

As at October 31, 2020, 14,996,337 common shares (2019: 15,310,806) were reserved for future issue pursuant to stock option plans, 12,848,784 common shares (2019: 14,383,104) were reserved for future issue pursuant to the Shareholder Investment Plan, 8,183,815 common shares (2019: 9,772,134) were reserved for future issue pursuant to the ESPP and other activities, and 2,246,208,750 common shares (2019: 1,789,893,750) were reserved for future issue pursuant to instruments which include an NVCC provision requiring conversion into common shares upon the occurrence of a Trigger Event as described in the capital adequacy guidelines.

Normal course issuer bid

Our normal course issuer bid (NCIB) expired on June 3, 2020. During the year, we purchased and cancelled 2,208,600 common shares under the current bid at an average price of $106.03 for a total amount of $234 million.

On March 13, 2020, OSFI announced that it expects all federally regulated financial institutions to cease dividend increases and share buybacks for the time being, in order to ensure that the additional capital available is used to support Canadian lending activities.

The following table shows common shares purchased and cancelled under previously expired NCIBs.

$ millions, except number of shares, as at or for the year ended October 31

2020

2019

2018

TSX approval date

Number of shares

Amount

Number of shares

Amount

Number of shares

Amount

May 31, 2018 (1)

–

$

–

–

$

–

3,500,000

$

417

(1) Common shares were repurchased at an average price of $119.22 under this NCIB.

CIBC 2020 ANNUAL REPORT 163

Consolidated financial statements

Preferred shares and other equity instruments

CIBC is authorized to issue an unlimited number of Class A Preferred Shares and Class B Preferred Shares without nominal or par value, issuable in series, provided that, for each class of preferred shares, the maximum aggregate consideration for all outstanding shares, at any time does not exceed $10 billion. There are no Class B Preferred Shares currently outstanding.

Preferred share and other equity instruments rights and privileges

Class A Preferred Shares

Each series of Class A Preferred Shares bears quarterly non-cumulative dividends. Non-cumulative Rate Reset Class A Preferred Shares Series 39, 41, 43, 45, 47, 49, and 51 (NVCC) are redeemable, subject to regulatory approval if required, for cash by CIBC on or after the specified redemption dates at the cash redemption prices indicated in the terms of the preferred shares.

Non-cumulative Rate Reset Class A Preferred Shares Series 39 (NVCC) (Series 39 shares)

On June 11, 2014, we issued 16 million Series 39 shares with a par value of $25.00 per share, for gross proceeds of $400 million. For the initial five-year period to the earliest redemption date of July 31, 2019, the Series 39 shares paid quarterly cash dividends, as declared, at a rate of 3.90%. The dividend was reset to 3.713%, payable quarterly as and when declared by the Board, effective for the five-year period commencing July 31, 2019. On July 31, 2024, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.32%.

Holders of the Series 39 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 40 (NVCC) (Series 40 shares), subject to certain conditions, on July 31, 2019. As the conditions for conversion were not met, no Series 40 shares were issued, and all of the Series 39 shares remain outstanding. Holders of the Series 39 shares will have the right to convert their shares on a one-for-one basis into Series 40 shares, subject to certain conditions, on July 31, 2024 and on July 31 every five years thereafter. Holders of the Series 40 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 2.32%. Holders of the then outstanding Series 40 shares may convert their shares on a one-for-one basis into Series 39 shares, subject to certain conditions, on July 31, 2029 and on July 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 39 shares at par on July 31, 2024, and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 40 shares at par on July 31, 2029, and on July 31 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 41 (NVCC) (Series 41 shares)

On December 16, 2014, we issued 12 million Series 41 shares with a par value of $25.00 per share, for gross proceeds of $300 million. For the initial five-year period to the earliest redemption date of January 31, 2020, the Series 41 shares paid quarterly cash dividends, as declared, at a rate of 3.75%. The dividend was reset to 3.909%, payable quarterly as and when declared by the Board, effective for the five-year period commencing January 31, 2020. On January 31, 2025, and on January 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.24%.

Holders of the Series 41 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 42 (NVCC) (Series 42 shares), subject to certain conditions, on January 31, 2020. As the conditions for conversion were not met, no Series 42 shares were issued, and all of the Series 41 shares remain outstanding. Holders of the Series 41 shares will have the right to convert their shares on a one-for-one basis into Series 42 shares, subject to certain conditions, on January 31, 2025 and on January 31 every five years thereafter. Holders of the Series 42 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 2.24%. Holders of the then outstanding Series 42 shares may convert their shares on a one-for-one basis into Series 41 shares, subject to certain conditions, on January 31, 2030 and on January 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 41 shares at par on January 31, 2025 and on January 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 42 shares at par on January 31, 2030 and on January 31 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 43 (NVCC) (Series 43 shares)

On March 11, 2015, we issued 12 million Series 43 shares with a par value of $25.00 per share, for gross proceeds of $300 million. For the initial five-year period to the earliest redemption date of July 31, 2020, the Series 43 shares paid quarterly cash dividends, as declared, at a rate of 3.60%. The dividend was reset to 3.143%, payable quarterly as and when declared by the Board, effective for the five-year period commencing July 31, 2020. On July 31, 2025, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.79%.

Holders of the Series 43 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 44 (NVCC) (Series 44 shares), subject to certain conditions, on July 31, 2020. As the conditions for conversion were not met, no Series 44 shares were issued, and all of the Series 43 shares remain outstanding. Holders of the Series 43 shares will have the right to convert their shares on a one-for-one basis into Series 44 shares, subject to certain conditions, on July 31, 2025 and on July 31 every five years thereafter. Holders of the Series 44 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 2.79%. Holders of the then outstanding Series 44 shares may convert their shares on a one-for-one basis into Series 43 shares, subject to certain conditions, on July 31, 2030 and on July 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 43 shares at par on July 31, 2025 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 44 shares at par on July 31, 2030 and on July 31 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 45 (NVCC) (Series 45 shares)

On June 2, 2017, we issued 32 million Series 45 shares with a par value of $25.00 per share, for gross proceeds of $800 million. For the initial five-year period to the earliest redemption date of July 31, 2022, the Series 45 shares pay quarterly cash dividends, as declared, at a rate of 4.40%. On July 31, 2022, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.38%.

Holders of the Series 45 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 46 (NVCC) (Series 46 shares), subject to certain conditions, on July 31, 2022 and on July 31 every five years thereafter. Holders of the Series 46 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 3.38%. Holders of the then outstanding Series 46 shares may convert their shares on a one-for-one basis into Series 45 shares, subject to certain conditions, on July 31, 2027 and on July 31 every five years thereafter.

164 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 45 shares at par on July 31, 2022 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 46 shares at par on July 31, 2027 and on July 31 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 47 (NVCC) (Series 47 shares)

On January 18, 2018, we issued 18 million Non-cumulative Rate Reset Class A Preferred Shares Series 47 (NVCC) (Series 47 shares) with a par value of $25.00 per share, for gross proceeds of $450 million. For the initial five-year period to the earliest redemption date of January 31, 2023, the Series 47 shares pay quarterly cash dividends, as declared, at a rate of 4.50%. On January 31, 2023, and on January 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.45%.

Holders of the Series 47 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 48 (NVCC) (Series 48 shares), subject to certain conditions, on January 31, 2023 and on January 31 every five years thereafter. Holders of the Series 48 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 2.45%. Holders of the then outstanding Series 48 shares may convert their shares on a one-for-one basis into Series 47 shares, subject to certain conditions, on January 31, 2028 and on January 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 47 shares at par on January 31, 2023 and on January 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 48 shares at par on January 31, 2028 and on January 31 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 49 (NVCC) (Series 49 shares)

On January 22, 2019, we issued 13 million Non-cumulative Rate Reset Class A Preferred Shares Series 49 (NVCC) (Series 49 shares) with a par value of $25.00 per share, for gross proceeds of $325 million. For the initial five-year period to the earliest redemption date of April 30, 2024, the Series 49 shares pay quarterly cash dividends, as declared, at a rate of 5.20%. On April 30, 2024, and on April 30 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.31%.

Holders of the Series 49 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 50 (NVCC) (Series 50 shares), subject to certain conditions, on April 30, 2024 and on April 30 every five years thereafter. Holders of the Series 50 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 3.31%. Holders of the then outstanding Series 50 shares may convert their shares on a one-for-one basis into Series 49 shares, subject to certain conditions, on April 30, 2029 and on April 30 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 49 shares at par on April 30, 2024 and on April 30 every five years thereafter; we may redeem all or any part of the then outstanding Series 50 shares at par on April 30, 2029 and on April 30 every five years thereafter.

Non-cumulative Rate Reset Class A Preferred Shares Series 51 (NVCC) (Series 51 shares)

On June 4, 2019, we issued 10 million Non-cumulative Rate Reset Class A Preferred Shares Series 51 (NVCC) (Series 51 shares) with a par value of $25.00 per share, for gross proceeds of $250 million. For the initial five-year period to the earliest redemption date of July 31, 2024, the Series 51 shares pay quarterly cash dividends, as declared, at a rate of 5.15%. On July 31, 2024, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.62%.

Holders of the Series 51 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A Preferred Shares Series 52 (NVCC) (Series 52 shares), subject to certain conditions, on July 31, 2024 and on July 31 every five years thereafter. Holders of the Series 52 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of Canada Treasury Bill yield plus 3.62%. Holders of the then outstanding Series 52 shares may convert their shares on a one-for-one basis into Series 51 shares, subject to certain conditions, on July 31, 2029 and on July 31 every five years thereafter.

Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 51 shares at par on July 31, 2024 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 52 shares at par on July 31, 2029 and on July 31 every five years thereafter.

4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness) (the Notes)

On September 16, 2020 we issued $750 million principal amount of 4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness). The Notes mature on October 28, 2080, and bear interest at a fixed rate of 4.375% per annum (paid semi-annually) until October 28, 2025. Starting on October 28, 2025, and every 5 years thereafter until October 28, 2075, the interest rate will be reset to the then current five-year Government of Canada bond yield plus 4.000% per annum.

Concurrently with the issuance of the Notes, we issued Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares Series 53 (NVCC) (the Series 53 Preferred Shares) which are held in a newly formed trust (the Limited Recourse Trust) that is consolidated by CIBC and as a result the Series 53 Preferred Shares are eliminated in CIBC’s consolidated financial statements. In the event of non-payment by CIBC of the principal amount of, interest on, or redemption price for, the Notes when due, the sole remedy of each Note holder is limited to that holder’s proportionate share of the Series 53 Preferred Shares held in the Limited Recourse Trust.

Subject to regulatory approval we may redeem the Notes, in whole or in part, every five years during the period from September 28 to and including October 28, commencing in 2025, at par.

The Notes and the Series 53 Preferred Shares carry standard NVCC provisions necessary for them to qualify as Tier 1 regulatory capital under Basel III (see “NVCC conversion mechanics” below). Upon the occurrence of a Trigger Event, each Series 53 Preferred Share held in the Limited Recourse Trust will automatically and immediately be converted without the consent of Note holders into a variable number of common shares which will be delivered to Note holders in satisfaction of the principal amount of, and accrued and unpaid interest on, all of the Notes. All claims of Note holders against CIBC under the Notes will be extinguished upon receipt of such common shares.

The Notes are compound instruments with both equity and liability features as payments of interest and principal in cash are made at our discretion as the sole recourse of each Note holder in the event of non-payment will be limited to that holder’s proportionate share of the Series 53 Preferred Shares held in the Limited Recourse Trust. The liability component of the Notes has a nominal value and, as a result, the full proceeds received upon the issuance of the Notes have been presented as equity and any interest payments paid thereon are accounted for as equity distributions.

CIBC 2020 ANNUAL REPORT 165

Consolidated financial statements

NVCC conversion mechanics

Each series of Class A preferred shares discussed above are subject to an NVCC provision, necessary for the shares to qualify as regulatory capital under Basel III. As such, the shares are automatically converted into common shares upon the occurrence of a “Trigger Event”. As described in the Capital Adequacy Guidelines, a Trigger Event occurs when OSFI determines the bank is or is about to become non-viable and, if after conversion of all contingent instruments and consideration of any other relevant factors or circumstances, it is reasonably likely that its viability will be restored or maintained; or if the bank has accepted or agreed to accept a capital injection or equivalent support from a federal or provincial government, without which OSFI would have determined the bank to be non-viable. Each such share is convertible into a number of common shares, determined by dividing the par value of $25.00 ($1,000 in the case of the Series 53 Preferred Shares) plus declared and unpaid dividends (except for the Series 53 Preferred Shares while held in the Limited Recourse Trust) by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price of $5.00 per share (subject to adjustment in certain events as defined in the relevant prospectus supplement). We have recorded the Series 39, Series 41, Series 43, Series 45, Series 47, Series 49, and Series 51 shares as equity.

Terms of Class A Preferred Shares

Outstanding as at October 31, 2020	Quarterly dividends per share  (1)		Earliest specified redemption date		Cash redemption price per share
Series 39	$	0.232063		July 31, 2024	$	25.00
Series 41	$	0.244313		January 31, 2025	$	25.00
Series 43	$	0.196438		July 31, 2025	$	25.00
Series 45	$	0.275000		July 31, 2022	$	25.00
Series 47	$	0.281250		January 31 2023	$	25.00
Series 49	$	0.325000		April 30, 2024	$	25.00
Series 51	$	0.321875		July 31, 2024	$	25.00

(1) Quarterly dividends may be adjusted depending on the timing of issuance or redemption.

Restrictions on the payment of dividends

Under Section 79 of the Bank Act (Canada), a bank, including CIBC, is prohibited from declaring or paying any dividends on its preferred or common shares if there are reasonable grounds for believing that the bank is, or the payment would cause it to be, in contravention of any capital adequacy or liquidity regulation or any direction to the bank made by OSFI.

In conjunction with OSFI’s March 13, 2020 announcement to decrease the Domestic Stability Buffer to 1.0%, OSFI also announced that it expects all federally regulated financial institutions to cease dividend increases and share buybacks for the time being, in order to ensure that the additional capital available is used to support Canadian lending activities.

In addition, our ability to pay common share dividends is also restricted by the terms of the outstanding preferred shares. These terms provide that we may not pay dividends on our common shares at any time without the approval of holders of the outstanding preferred shares, unless all dividends to preferred shareholders that are then payable have been declared and paid or set apart for payment. Our Series 53 Preferred Shares, further limit the payment of dividends on the outstanding Class A Preferred Shares Series 39 to 51 in certain limited circumstances.

We have agreed that if CIBC Capital Trust fails to pay any interest payments on its $300 million of CIBC Tier 1 Notes – Series B, due June 30, 2108, we will not declare dividends of any kind on any of our preferred or common shares for a specified period of time. For additional details see Note 17.

Currently, these limitations do not restrict the payment of dividends on our preferred or common shares.

Capital

Objectives, policy and procedures

Our overall capital management objective is to employ a strong and efficient capital base. We manage capital in accordance with a capital policy approved by the Board, which includes specific guidelines that relate to capital strength, capital mix, dividends and return of capital, and the unconsolidated capital adequacy of regulated entities. Capital is monitored continuously for compliance.

Each year, a Capital Plan and three-year outlook are established as a part of the financial plan, and they encompass all material elements of capital: forecasts of sources and uses of capital including earnings, dividends, business growth, and corporate initiatives, as well as maturities, redemptions, and issuances of capital instruments. The Capital Plan is stress-tested to ensure that it is sufficiently robust under severe but plausible stress scenarios. The level of capital and capital ratios are monitored throughout the year including a comparison to the Capital Plan. There were no significant changes made to the objectives, policy, guidelines and procedures during the year.

Regulatory capital requirements under Basel III

Our regulatory capital requirements are determined in accordance with guidelines issued by OSFI, which are based on the capital standards developed by the Basel Committee on Banking Supervision (BCBS).

CIBC has been designated by OSFI as a D-SIB in Canada, and is subject to a CET1 surcharge equal to 1.0% of RWA. OSFI also currently expects D-SIBs to hold a Domestic Stability Buffer. On March 13, 2020, OSFI announced an immediate reduction in the Domestic Stability Buffer from 2.0% to 1.0%. This results in current targets, including all buffer requirements, for CET1, Tier 1 and Total capital ratios of 9.0%, 10.5%, and 12.5%, respectively. These targets may be higher for certain institutions at OSFI’s discretion.

166 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Regulatory capital and ratios

Regulatory capital under Basel III consists of CET1, Tier 1 and Tier 2 capital.

CET1 capital includes common shares, retained earnings, AOCI (excluding AOCI relating to cash flow hedges and changes to FVO liabilities attributable to changes in own credit risk), and qualifying instruments issued by a consolidated banking subsidiary to third parties, less regulatory adjustments for items such as goodwill and other intangible assets (net of related deferred tax liabilities), certain deferred tax assets, net assets related to defined benefit pension plans as reported on our consolidated balance sheet (net of related deferred tax liabilities), and certain investments. Additional Tier 1 (AT1) capital primarily includes NVCC preferred shares, Limited Recourse Capital Notes, qualifying instruments issued by a consolidated subsidiary to third parties, and non-qualifying innovative Tier 1 notes subject to phase-out rules for capital instruments. Tier 2 capital includes NVCC subordinated indebtedness, non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments, eligible collective allowance under the standardized approach, and qualifying instruments issued by a consolidated subsidiary to third parties.

Our capital ratios and leverage ratio are presented in the table below:

$ millions, as at October 31		2020			2019
CET1 capital (1)		$	30,876		$	27,707
Tier 1 capital	A		34,775			30,851
Total capital			40,969			35,854
Total RWA			254,871			239,863
CET1 ratio			12.1	%		11.6	%
Tier 1 capital ratio			13.6	%		12.9	%
Total capital ratio			16.1	%		15.0	%
Leverage ratio exposure	B	$	741,760		$	714,343
Leverage ratio	A/B		4.7	%		4.3	%

(1) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain adjustments and limitations until 2022.

During the years ended October 31, 2020 and 2019, we have complied with OSFI’s regulatory capital requirements.

Note  17 Capital Trust securities

CIBC Capital Trust is a trust wholly owned by CIBC and established under the laws of the Province of Ontario. CIBC Capital Trust has $300 million outstanding of CIBC Tier 1 Notes – Series B, due June 30, 2108 (the Notes), redeemable on or after June 30, 2014 at the Canada Yield Price; redeemable at par on June 30, 2039. CIBC Capital Trust is not consolidated by CIBC and the senior deposit notes issued by CIBC to CIBC Capital Trust are reported as Deposits – Business and government on the consolidated balance sheet.

The Notes were structured to achieve Tier 1 regulatory capital treatment and, as such, have features of equity capital, including the deferral of cash interest under certain circumstances (Deferral Events). In the case of a Deferral Event, holders of the Notes will be required to invest interest paid on the Notes in our perpetual preferred shares. Should CIBC Capital Trust fail to pay the semi-annual interest payments on the Notes in full, we will not declare dividends of any kind on any of our preferred or common shares for a specified period of time.

In addition, the Notes will be automatically exchanged for our perpetual preferred shares upon the occurrence of any one of the following events: (i) proceedings are commenced for our winding-up; (ii) OSFI takes control of us or our assets; (iii) we or OSFI are of the opinion that our Tier 1 capital ratio is less than 5% or our Total capital ratio is less than 8%; or (iv) OSFI directs us pursuant to the Bank Act (Canada) to increase our capital or provide additional liquidity and we elect such automatic exchange or we fail to comply with such direction. Upon such automatic exchange, holders of the Notes will cease to have any claim or entitlement to interest or principal against CIBC Capital Trust.

CIBC Tier 1 Notes – Series B was issued on March 13, 2009 and pays interest at a rate of 10.25%, semi-annually on June 30 and December 31, until June 30, 2039. On June 30, 2039, and on each five-year anniversary thereafter, the interest rate on the CIBC Tier 1 Notes – Series B will reset to the five-year Government of Canada bond yield at such time plus 9.878%. The Canada Yield Price is a price calculated at the time of redemption (other than an interest rate reset date applicable to the series) to provide a yield to maturity equal to the yield on a Government of Canada bond of appropriate maturity plus: (a) 1.645% if the redemption date is any time prior to June 30, 2039, or (b) 3.29% if the redemption date is any time on or after June 30, 2039.

Subject to the approval of OSFI, CIBC Capital Trust may, in whole or in part, on the redemption dates specified, and on any date thereafter, redeem the CIBC Tier 1 Notes Series B without the consent of the holders. Also, subject to the approval of OSFI, CIBC Capital Trust may redeem all, but not part of, the CIBC Tier 1 Notes Series B prior to the earliest redemption date specified without the consent of the holders, upon the occurrence of certain specified tax or regulatory events.

OSFI’s capital adequacy guidelines confirmed the adoption of Basel III in Canada and clarified the treatment of non-qualifying capital instruments. Non-qualifying capital instruments are subject to a 10% phase-out per annum commencing in 2013. Banks are expected to develop and maintain a redemption schedule for non-qualifying capital instruments that gives priority to redeeming instruments at their regular par redemption dates before exercising any regulatory event redemption rights. With the adoption of Basel III, innovative capital instruments such as the CIBC Tier 1 Notes are considered non-qualifying capital instruments. We expect to exercise our regulatory event redemption rights in fiscal 2022 in respect of the $300 million CIBC Tier 1 Notes – Series B.

CIBC 2020 ANNUAL REPORT 167

Consolidated financial statements

Note  18 Share-based payments

We provide the following share-based compensation to certain employees and directors in the form of cash-settled or equity-settled awards.

Restricted share award plan

Under the RSA plan, share unit equivalents (RSA units) are granted to certain key employees on an annual basis or during the year as special grants. RSA grants are made in the form of cash-settled awards which generally vest and settle in cash either at the end of three years or one-third annually beginning one year after the date of the grant. Dividend equivalents on RSA units are paid in cash or in the form of additional RSA units to the employees at the end of the vesting period or settlement date.

Grant date fair value of each cash-settled RSA unit granted is calculated based on the average closing price per common share on the TSX for the 10 trading days prior to a date specified in the grant terms. Upon vesting, each RSA unit is settled in cash based on the average closing price per common share on the TSX for the 10 trading days prior to the vesting date.

During the year, 2,864,000 RSAs were granted at a weighted-average price of $113.62 (2019: 2,666,888 granted at a weighted-average price of $113.01; 2018: 2,653,437 granted at a weighted-average price of $115.20) and the number of RSAs outstanding as at October 31, 2020 was 8,391,532 (2019: 8,343,235; 2018: 8,252,167). Compensation expense in respect of RSAs, before the impact of hedging, totalled $275 million in 2020 (2019: $319 million; 2018: $352 million). As at October 31, 2020, liabilities in respect of RSAs, which are included in Other liabilities, were $775 million (2019: $850 million; 2018: $858 million).

Performance share unit plan

Under the PSU plan, awards are granted to certain key employees on an annual basis in December. PSU grants are made in the form of cash-settled awards which vest and settle in cash at the end of three years. Dividend equivalents on PSUs, are provided in the form of additional PSUs.

Grant date fair value of each cash-settled PSU is calculated based on the average closing price per common share on the TSX for the 10 trading days prior to a date specified in the grant terms. The final number of PSUs that vest will range from 75% to 125% of the initial number awarded based on CIBC’s performance relative to the other major Canadian banks. Upon vesting, each PSU is settled in cash based on the average closing price per common share on the TSX for the 10 trading days prior to the vesting date.

During the year, 835,785 PSUs were granted at a weighted-average price of $115.30 (2019: 952,273 granted at a weighted-average price of $113.48; 2018: 894,040 granted at a weighted-average price of $115.23). As at October 31, 2020, the number of PSUs outstanding, before the impact of CIBC’s relative performance, was 2,967,248 (2019: 3,033,980; 2018: 2,920,695). Compensation expense in respect of PSUs, before the impact of hedging, totalled $90 million in 2020 (2019: $106 million; 2018: $123 million). As at October 31, 2020, liabilities in respect of PSUs, which are included in Other liabilities, were $286 million (2019: $319 million; 2018: $328 million).

Exchangeable shares

As part of our acquisition of Wellington Financial in the first quarter of 2018, equity-settled awards in the form of exchangeable shares, which vest over a period of up to 5 years and have specific service and non-market performance vesting conditions, were issued to selected employees. Employees receive dividend equivalents in the form of additional exchangeable shares upon vesting. Compensation expense in respect of the exchangeable shares is based on the grant date fair value, adjusted for the impact of best estimates on the satisfaction of the service requirements and non-market performance conditions. At the acquisition, each exchangeable share was granted at $123.99, and the number of exchangeable shares outstanding as at October 31, 2020 was 278,711 (2019: 386,010). Compensation expense in respect of exchangeable shares totalled $9 million in 2020 (2019: $8 million).

Deferred share unit plan/deferred compensation plan

Under the DSU plan and DCP plan, certain employees can elect to receive DSUs in exchange for cash compensation that they would otherwise be entitled to. In addition, certain key employees are granted DSUs during the year as special grants. DSUs are generally fully vested upon grant or vest in accordance with the vesting schedule defined in the grant agreement and settle in cash on a date within the period specified in the plan terms. Employees receive dividend equivalents in the form of additional DSUs.

Grant date fair value of each cash settled DSU that is not granted under the DCP is calculated based on the average closing price per common share on the TSX for the 10 trading days prior to a date specified in the grant terms. These DSUs are settled in cash based on the average closing price per common share on the TSX for the 10 trading days prior to the payout date and after the employee’s termination of employment. The grant date fair value for DCP grants is based on the closing stock price on the New York Stock Exchange (NYSE) on the last day of the quarter. Upon distribution, each DSU is settled in cash based on the average closing price per common share on the NYSE for the 10 trading days prior to the date of the distribution.

During the year, 183,941 DSUs were granted at a weighted-average price of $106.22 (2019: 173,089 granted at a weighted-average price of $110.53; 2018: 132,739 granted at a weighted-average price of $115.60) and the number of DSUs outstanding as at October 31, 2020 was 791,571 (2019: 617,281; 2018: 447,200). Compensation expense in respect of DSUs, before the impact of hedging, totalled $8 million in 2020 (2019: $17 million; 2018: $26 million). As at October 31, 2020, liabilities in respect of DSUs, which are included in Other liabilities, were $90 million (2019: $82 million; 2018: $64 million).

Directors’ plans

Each director who is not an officer or employee of CIBC may elect to receive the annual equity retainer as either DSUs or common shares, under the Director DSU/Common Share Election Plan and may elect to receive all or a portion of their remuneration in the form of cash, common shares or DSU’s under the Non-Officer Director Share Plan.

The value of DSUs credited to a director is payable when he or she is no longer a director or employee of CIBC or of an affiliate of CIBC, and for directors subject to section 409A of the U.S. Internal Revenue Code of 1986, as amended, the director is not providing any services to CIBC or any member of its controlled group as an independent contractor. In addition, under the Director DSU/Common Share Election Plan, the value of DSUs is payable only if the director is not related to, or affiliated with, CIBC as defined in the Income Tax Act (Canada).

Other non-interest expense in respect of the DSU components of these plans totalled nil in 2020 (2019: $3 million; 2018: $3 million). As at October 31, 2020, liabilities in respect of DSUs, which are included in Other liabilities, were $23 million (2019: $27 million; 2018: $25 million).

168 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Stock option plans

Under the ESOP, stock options are periodically granted to certain key employees. Options provide the employee with the right to purchase common shares from CIBC at a fixed price not less than the closing price of the shares on the trading day immediately preceding the grant date. In general, the options vest by the end of the fourth year and expire 10 years from the grant date.

The following tables summarize the activities of the stock options and provide additional details related to stock options outstanding and vested.

As at or for the year ended October 31				2020					2019					2018
	Number of stock options			Weighted- average exercise price (1)		Number of stock options			Weighted- average exercise price		Number of stock options			Weighted- average exercise price
Outstanding at beginning of year		5,176,962		$	96.93		4,713,163		$	91.05		4,876,673		$	84.28
Granted		818,290			109.87		894,324			111.50		756,516			120.02
Exercised (2)		(314,469	)		68.10		(393,055	)		58.60		(876,309	)		67.84
Forfeited		(672	)		70.66		(35,714	)		110.42		(42,443	)		103.98
Cancelled/expired		–			–		(1,756	)		45.63		(1,274	)		45.08
Outstanding at end of year		5,680,111		$	100.39		5,176,962		$	96.93		4,713,163		$	91.05
Exercisable at end of year		2,783,694		$	88.63		2,290,139		$	80.27		1,898,125		$	71.89
Available for grant		9,316,226					10,133,844					10,990,698
Reserved for future issue		14,996,337					15,310,806					15,703,861

(1) For foreign currency-denominated options granted and exercised during the year, the weighted-average exercise prices are translated using exchange rates as at the grant date and settlement date, respectively. The weighted-average exercise price of outstanding balances as at October 31, 2020 reflects the conversion of foreign currency-denominated options at the year-end exchange rate.

(2) The weighted-average share price at the date of exercise was $97.72 (2019: $106.94; 2018: $120.55).

As at October 31, 2020	Stock options outstanding						Stock options vested
Range of exercise prices	Number outstanding		Weighted- average contractual life remaining		Weighted- average exercise price		Number outstanding		Weighted- average exercise price
$11.00 – $55.00		239,891		1.84	$	31.19		239,891	$	31.19
$55.01 – $65.00		146,085		4.75		60.93		146,085		60.93
$65.01 – $75.00		158,106		1.13		71.43		158,106		71.43
$75.01 – $85.00		304,285		1.87		79.88		304,285		79.88
$85.01 – $95.00		362,400		3.28		90.97		362,400		90.97
$95.01 – $105.00		1,126,241		4.65		99.71		1,126,241		99.71
$105.01 – $115.00		2,602,275		7.70		110.74		446,686		110.77
$115.01 – $125.00		740,828		7.06		120.02		–		–
		5,680,111		5.91	$	101.11		2,783,694	$	88.63

The fair value of options granted during the year was measured at the grant date using the Black-Scholes option pricing model. Model assumptions are based on observable market data for the risk-free interest rate and dividend yield, contractual terms for the exercise price, and historical experience for expected life. Volatility assumptions are best estimates of market implied volatility matching the exercise price and expected life of the options.

The following weighted-average assumptions were used as inputs into the Black-Scholes option pricing model to determine the fair value of options on the date of grant:

For the year ended October 31	2020			2019			2018
Weighted-average assumptions
Risk-free interest rate		2.00	%		2.63	%		2.08	%
Expected dividend yield		6.80	%		5.87	%		5.15	%
Expected share price volatility		15.30	%		18.36	%		14.74	%
Expected life		6 years			6 years			6 years
Share price/exercise price	$	109.87		$	111.50		$	120.02

For 2020, the weighted-average grant date fair value of options was $3.90 (2019: $8.22; 2018: $7.06).

Compensation expense in respect of stock options totalled $5 million in 2020 (2019: $7 million; 2018: $7 million).

CIBC 2020 ANNUAL REPORT 169

Consolidated financial statements

Employee share purchase plan

Under our Canadian ESPP, qualifying employees can choose each year to have any portion of their eligible earnings withheld to purchase common shares. We match 50% of the employee contribution amount, up to a maximum contribution of 3% of eligible earnings, subject to a ceiling of $2,250 annually. CIBC contributions vest after employees have two years of continuous participation in the plan, and all subsequent contributions vest immediately. Similar programs exist in other regions globally, where each year qualifying employees can choose to have a portion of their eligible earnings withheld to purchase common shares and receive a matching employer contribution subject to each plan’s provisions. Employee contributions to our ESPP are used to purchase common shares from Treasury. CIBC FirstCaribbean operates an ESPP locally, in which contributions are used by the plan trustee to purchase CIBC FirstCaribbean common shares in the open market.

Our contributions are expensed as incurred and totalled $50 million in 2020 (2019: $48 million; 2018: $45 million).

Restricted stock plan

Under the restricted stock plan, awards were granted to certain key employees in the form of equity-settled awards as part of the acquisition of The PrivateBank in 2017. These restricted stocks were fully vested and released in 2019. Compensation expense in respect of restricted stock totalled nil in 2020 (2019: $1 million).

Note  19 Post-employment benefits

We sponsor pension and other post-employment benefit plans for eligible employees in a number of jurisdictions including Canada, the U.S., the U.K., and the Caribbean. Our pension plans include registered funded defined benefit pension plans, supplemental arrangements that provide pension benefits in excess of statutory limits, and defined contribution plans. We also provide certain health-care, life insurance, and other benefits to eligible employees and retired members. Plan assets and defined benefit obligations related to our defined benefit plans are measured for accounting purposes as at October 31 each year.

Plan characteristics, funding and risks

Pension plans

Pension plans include CIBC’s Canadian, U.S., U.K., and Caribbean pension plans. CIBC’s Canadian pension plans represent approximately 92% of our consolidated defined benefit obligation. All of our Canadian pension plans are defined benefit plans, the most significant of which is our principal Canadian pension plan (the CIBC Pension Plan), which encompasses approximately 64,000 active, deferred, and retired members.

The CIBC Pension Plan provides members with monthly pension income at retirement based on a prescribed plan formula which is based on a combination of maximum yearly pensionable earnings, average earnings at retirement and length of service recognized in the plan. There is a two-year waiting period for members to join the CIBC Pension Plan.

The CIBC Pension Plan is funded through a separate trust. Actuarial funding valuations are prepared by the Plan’s external actuary at least once every three years or more frequently as required by Canadian pension legislation to determine CIBC’s minimum funding requirements as well as maximum permitted contributions. Any deficits determined in the funding valuations must generally be funded over a period not exceeding fifteen years. CIBC’s pension funding policy is to make at least the minimum annual required contributions required by regulations. Any contributions in excess of the minimum requirements are discretionary.

The CIBC Pension Plan is registered with OSFI and the Canada Revenue Agency and is subject to the acts and regulations that govern federally regulated pension plans.

Other post-employment plans

Other post-employment plans include CIBC’s Canadian, U.S. and Caribbean post-retirement health-care benefit plans (referred to for disclosure purposes as other post-employment plans). CIBC’s Canadian other post-employment plan (the Canadian post-employment plan) represents more than 93% of our consolidated other post-employment defined benefit obligation.

The Canadian post-employment plan provides medical, dental and life insurance benefits to retirees that meet specified eligibility requirements, including specified age and service period eligibility requirements. CIBC reimburses 100% of the cost of benefits for eligible employees that retired prior to January 1, 2009, whereas the contribution level for medical and dental benefits for eligible employees that retire subsequent to this date has been fixed at a specified level. The plan is funded on a pay-as-you-go basis.

Benefit changes

There were no material changes to the terms of our Canadian defined benefit pension plans in 2020 or 2019. Certain plan amendments were made to our other pension and other post-employment plans in 2020, which resulted in a negative past service cost.

Risks

CIBC’s defined benefit plans expose the group to actuarial risks (such as longevity risk), currency risk, interest rate risk, market (investment) risk and health-care cost inflation risks.

The CIBC pension plan operates a currency overlay strategy, which may use forwards or similar instruments, to manage and mitigate its currency risk.

Interest rate risk is managed as part of the CIBC pension plan’s liability-driven investment strategy through a combination of physical bonds, overlays funded in the repo market, and/or derivatives.

Market (investment) risk is mitigated through a multi-asset portfolio construction process that diversifies across a variety of market risk drivers.

The use of derivatives within the CIBC pension plan is governed by its derivatives policy that was approved by the Pension Benefits Management Committee (PBMC) and permits the use of derivatives to manage risk at the discretion of the Pension Investment Committee (PIC). In addition to the management of interest rate risk, risk reduction and mitigation strategies may include hedging of currency, credit spread and/or equity risks. The derivatives policy also permits the use of derivatives to enhance plan returns.

170 CIBC 2020 ANNUAL REPORT

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Plan governance

All of CIBC’s pension arrangements are governed by local pension committees, senior management or a board of trustees. However, all significant plan changes require approval from the Management Resources and Compensation Committee (MRCC). For the Canadian pension plans, the MRCC is responsible for setting the strategy for the pension plans, reviewing material risks, performance including funded status, and approving material design or governance changes.

While specific investment policies are determined at a plan level to reflect the unique characteristics of each plan, common investment policies for all plans include the optimization of the risk-return relationship using a portfolio of multiple asset classes diversified by market segment, economic sector, and issuer. The objectives are to secure the benefits promised by our funded plans, to maximize long-term investment returns while not compromising the benefit security of the respective plans, manage the level of funding contributions in conjunction with the stability of the funded status, and implement all policies in a cost effective manner. Investments in quoted debt and equity (held either directly or indirectly through investment funds) represent the most significant asset allocations.

The use of derivatives is limited to the purposes and instruments described in the derivatives policy of the CIBC Pension Plan. These include the use of synthetic debt or equity instruments, currency hedging, risk reduction and enhancement of returns.

Investments in specific asset classes are further diversified across funds, managers, strategies, sectors and geographies, depending on the specific characteristics of each asset class.

The exposure to any one of these asset classes will be determined by our assessment of the needs of the plan assets and economic and financial market conditions. Factors evaluated before adopting the asset mix include demographics, cash-flow payout requirements, liquidity requirements, actuarial assumptions, expected benefit increases, and plan funding requirements.

Management of the assets of the various Canadian plans has been delegated primarily to the PIC, which is a committee that is composed of CIBC management. The PIC is responsible for the appointment and termination of individual investment managers (which includes CIBC Asset Management Inc., a wholly owned subsidiary of CIBC), who each have investment discretion within established target asset mix ranges as set by the PBMC. Should a fund’s actual asset mix fall outside specified ranges, the assets are re-balanced as required to be within the target asset mix ranges. On a periodic basis, an Asset-Liability Matching study is performed in which the consequences of the strategic investment policies are analyzed.

Management of the actuarial valuations of the various Canadian plans is primarily the responsibility of the PBMC. The PBMC is responsible for approving the actuarial assumptions for the valuations of the plans, and for recommending the level of annual funding for the Canadian plans to CIBC senior management.

Local committees with similar mandates manage our non-Canadian plans and annually report back to the MRCC on all material governance activities.

Amounts recognized on the consolidated balance sheet

The following tables present the financial position of our defined benefit pension and other post-employment plans for Canada, the U.S., the U.K., and our Caribbean subsidiaries. Other minor plans operated by some of our subsidiaries are not material and are not included in these disclosures.

	Pension plans						Other post-employment plans
$ millions, as at or for the year ended October 31	2020			2019			2020			2019
Defined benefit obligation
Balance at beginning of year	$	8,722		$	7,370		$	671		$	589
Current service cost		277			218			14			11
Past service cost (1)		(20	)		1			(77	)		–
Interest cost on defined benefit obligation		268			303			20			24
Employee contributions		5			5			–			–
Benefits paid		(369	)		(353	)		(26	)		(30	)
Loss on settlements		–			1			–			–
Special termination benefits		10			–			–			–
Foreign exchange rate changes		8			(1	)		1			–
Net actuarial (gains) losses on defined benefit obligation		238			1,178			6			77
Balance at end of year	$	9,139		$	8,722		$	609		$	671
Plan assets
Fair value at beginning of year	$	8,853		$	7,691		$	–		$	–
Interest income on plan assets (2)		277			323			–			–
Net actuarial gains (losses) on plan assets (2)		349			965			–			–
Employer contributions		227			229			26			30
Employee contributions		5			5			–			–
Benefits paid		(369	)		(353	)		(26	)		(30	)
Plan administration costs		(7	)		(6	)		–			–
Net transfer out		–			–			–			–
Foreign exchange rate changes		6			(1	)		–			–
Fair value at end of year	$	9,341		$	8,853		$	–		$	–
Net defined benefit asset (liability)		202			131			(609	)		(671	)
Valuation allowance (3)		(17	)		(15	)		–			–
Net defined benefit asset (liability), net of valuation allowance	$	185		$	116		$	(609	)	$	(671	)

(1) Includes amounts related to the restructuring charge, and gains related to plan amendments recognized in 2020. See Note 23 for additional details on the restructuring charge.

(2) The actual return on plan assets for the year was $626 million (2019: $1,288 million).

(3) The valuation allowance reflects the effect of asset ceiling on plans with a net defined benefit asset.

CIBC 2020 ANNUAL REPORT 171

Consolidated financial statements

The net defined benefit asset (liability), net of valuation allowance, included in other assets and other liabilities is as follows:

	Pension plans						Other post-employment plans
$ millions, as at October 31	2020			2019			2020			2019
Other assets	$	247		$	175		$	–		$	–
Other liabilities (1)		(62	)		(59	)		(609	)		(671	)
	$	185		$	116		$	(609	)	$	(671	)

(1) Excludes $5 million (2019: $7 million) of other liabilities for other post-employment plans of immaterial subsidiaries.

The defined benefit obligation and plan assets by region are as follows:

	Pension plans				Other post-employment plans
$ millions, as at October 31	2020		2019		2020		2019
Defined benefit obligation
Canada	$	8,384	$	7,982	$	568	$	620
U.S., U.K., and the Caribbean		755		740		41		51
Defined benefit obligation at the end of year	$	9,139	$	8,722	$	609	$	671
Plan assets
Canada	$	8,469	$	8,004	$	–	$	–
U.S., U.K., and the Caribbean		872		849		–		–
Plan assets at the end of year	$	9,341	$	8,853	$	–	$	–

Amounts recognized in the consolidated statement of income

The net defined benefit expense for our defined benefit plans in Canada, the U.S., the U.K., and the Caribbean is as follows:

	Pension plans									Other post-employment plans
$ millions, for the year ended October 31	2020			2019			2018			2020			2019		2018
Current service cost (1)	$	277		$	218		$	223		$	14		$	11	$	13
Past service cost (2)		(20	)		1			–			(77	)		–		–
Interest cost on defined benefit obligation		268			303			281			20			24		25
Interest income on plan assets		(277	)		(323	)		(294	)		–			–		–
Special termination benefits (2)		10			–			–			–			–		–
Plan administration costs		7			6			6			–			–		–
Loss on settlements		–			1			–			–			–		–
Net defined benefit plan expense recognized in net income	$	265		$	206		$	216		$	(43	)	$	35	$	38

(1) The 2020, 2019 and 2018 current service costs were calculated using separate discount rates of 3.14%, 4.14%, and 3.72%, respectively, to reflect the longer duration of future benefits payments associated with the additional year of service to be earned by the plan’s active participants.

(2) Includes amounts related to the restructuring charge, and gains related to plan amendments recognized in 2020. See Note 23 for additional details on the restructuring charge.

Amounts recognized in the consolidated statement of comprehensive income

The net remeasurement gains (losses) recognized in OCI for our defined benefit plans in Canada, the U.S., the U.K., and the Caribbean is as follows:

	Pension plans									Other post-employment plans
$ millions, for the year ended October 31	2020			2019			2018			2020			2019			2018
Actuarial gains (losses) on defined benefit obligation arising from changes in:
Demographic assumptions	$	148		$	–		$	4		$	13		$	–		$	46
Financial assumptions		(327	)		(1,133	)		488			(26	)		(78	)		67
Experience		(59	)		(45	)		(65	)		7			1			4
Net actuarial gains (losses) on plan assets		349			965			(234	)		–			–			–
Changes in asset ceiling excluding interest income		(1	)		(5	)		1			–			–			–
Net remeasurement gains (losses) recognized in OCI (1)	$	110		$	(218	)	$	194		$	(6	)	$	(77)		$	117

(1) Excludes net remeasurement gains/losses recognized in OCI in respect of immaterial subsidiaries not included in the disclosures totalling $5 million net losses (2019: $2 million of net losses; 2018: $2 million of net gains).

Canadian defined benefit plans

As the Canadian defined benefit pension and other post-employment benefit plans represent approximately 90% of our consolidated defined benefit obligation, they are the subject and focus of the disclosures in the balance of this note.

Disaggregation and maturity profile of defined benefit obligation

The breakdown of the defined benefit obligation for our Canadian plans between active, deferred and retired members is as follows:

	Pension plans				Other post-employment plans
$ millions, as at October 31	2020		2019		2020		2019
Active members	$	4,362	$	4,165	$	129	$	179
Deferred members		626		587		–		–
Retired members		3,396		3,230		439		441
Total	$	8,384	$	7,982	$	568	$	620

The weighted-average duration of the defined benefit obligation for our Canadian plans is as follows:

	Pension plans				Other post-employment plans
As at October 31	2020		2019		2020		2019
Weighted-average duration, in years		14.8		15.4		12.6		13.6

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Plan assets

The major categories of our defined benefit pension plan assets for our Canadian plans are as follows:

$ millions, as at October 31	2020					2019
Asset category (1)
Canadian equity securities (2)	$	540		6	%	$	547		7	%
Debt securities (3)
Government bonds		5,001		59			4,623		58
Corporate bonds		1,195		14			1,024		13
Inflation adjusted bonds		–		–			76		1
		6,196		73			5,723		72
Investment funds (4)
Canadian equity funds		30		–			28		–
U.S. equity funds		423		5			379		5
International equity funds (5)		32		–			32		–
Global equity funds (5)		961		12			907		12
Emerging markets equity funds		229		3			256		3
Fixed income funds		117		1			110		1
		1,792		21			1,712		21
Other (2)
Alternative investments (6)		1,281		16			1,095		13
Cash and cash equivalents and other		241		3			220		3
Obligations related to securities sold under repurchase agreements		(1,581	)	(19	)		(1,293	)	(16	)
		(59	)	–			22		–
	$	8,469		100	%	$	8,004		100	%

(1) Asset categories are based upon risk classification including synthetic exposure through derivatives. The fair value of derivatives as at October 31, 2020 was a net derivative liability of $41 million (2019: net derivative asset of $16 million).

(2) Pension benefit plan assets include CIBC issued securities and deposits of $7 million (2019: $8 million), representing 0.1% of Canadian plan assets (2019: 0.1%). All of the equity securities held as at October 31, 2020 and 2019 have daily quoted prices in active markets except hedge funds, infrastructure, and private equity.

(3) All debt securities held as at October 31, 2020 and 2019 are investment grade, of which $244 million (2019: $88 million) have daily quoted prices in active markets.

(4) $31 million (2019: $29 million) of the investment funds are directly held as at October 31, 2020 and have daily quoted prices in active markets.

(5) Global equity funds include North American and international investments, whereas International equity funds do not include North American investments.

(6) Comprised of private equity, infrastructure, private debt and real estate funds.

Principal actuarial assumptions

The weighted-average principal assumptions used to determine the defined benefit obligation for our Canadian plans are as follows:

	Pension plans						Other post-employment plans
As at October 31	2020			2019			2020			2019
Discount rate		2.8	%		3.1	%		2.7	%		3.0	%
Rate of compensation increase (1)		2.0	%		2.3	%		2.0	%		2.3	%

(1) Rates of compensation increase for 2020 and 2019 reflect the use of a salary growth rate assumption table that is based on the age and tenure of the employees. The table yields a weighted-average salary growth rate of approximately 2.0% per annum (2019: 2.3%).

Assumptions regarding future mortality have been based on published statistics and mortality tables. The current longevities underlying the values of the defined benefit obligation of our Canadian plans are as follows (in years):

As at October 31	2020		2019
Longevity at age 65 for current retired members
Males		23.4		23.3
Females		24.5		24.8
Longevity at age 65 for current members aged 45
Males		24.3		24.3
Females		25.4		25.7

The assumed health-care cost trend rates of the Canadian other post-employment plan providing medical, dental, and life insurance benefits are as follows:

For the year ended October 31	2020			2019
Health-care cost trend rates assumed for next year		5.2	%		5.3	%
Rate to which the cost trend rate is assumed to decline		4.0	%		4.0	%
Year that the rate reaches the ultimate trend rate		2040			2040

CIBC 2020 ANNUAL REPORT 173

Consolidated financial statements

Sensitivity analysis

Reasonably possible changes to one of the principal actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation of our Canadian plans as follows:

Estimated increase (decrease) in defined benefit obligation	Pension plans			Other post-employment plans
$ millions, as at October 31	2020			2020
Discount rate (100 basis point change)
Decrease in assumption	$	1,450		$	79
Increase in assumption		(1,185	)		(65	)
Rate of compensation increase (100 basis point change)
Decrease in assumption		(283	)		–
Increase in assumption		325			–
Health-care cost trend rates (100 basis point change)
Decrease in assumption		n/a			(28	)
Increase in assumption		n/a			32
Future mortality
1 year shorter life expectancy		(216	)		(18	)
1 year longer life expectancy		213			19

n/a Not applicable.

The sensitivity analyses presented above are indicative only, and should be considered with caution as they have been calculated in isolation without changing other assumptions. In practice, changes in one assumption may result in changes in another, which may magnify or counteract the disclosed sensitivities.

Future cash flows

Cash contributions

The most recently completed actuarial valuation of the CIBC Pension Plan for funding purposes was as at October 31, 2019. The next actuarial valuation of this plan for funding purposes will be effective as of October 31, 2020.

The minimum contributions for 2021 are anticipated to be $198 million for the Canadian defined benefit pension plans and $28 million for the Canadian other post-employment benefit plans. These estimates are subject to change since contributions are affected by various factors, such as market performance, regulatory requirements, and management’s ability to change funding policy.

Expected future benefit payments

The expected future benefit payments for our Canadian plans for the next 10 years are as follows:

$ millions, for the year ended October 31	2021		2022		2023		2024		2025		2026–2030		Total
Defined benefit pension plans	$	363	$	367	$	354	$	360	$	367	$	1,953	$	3,764
Other post-employment plans		28		29		30		31		31		163		312
	$	391	$	396	$	384	$	391	$	398	$	2,116	$	4,076

Defined contributions and other plans

We also maintain defined contribution plans for certain employees and make contributions to government pension plans. The expense recognized in the consolidated statement of income for these benefit plans is as follows:

$ millions, for the year ended October 31	2020		2019		2018
Defined contribution pension plans	$	33	$	29	$	27
Government pension plans (1)		137		121		124
	$	170	$	150	$	151

(1) Includes Canada Pension Plan, Quebec Pension Plan, and U.S. Federal Insurance Contributions Act.

174 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Note 20 Income taxes

Total income taxes

$ millions, for the year ended October 31	2020			2019			2018 (1)
Consolidated statement of income
Provision for current income taxes
Adjustments for prior years	$	(40	)	$	(125	)	$	(39	)
Current income tax expense		1,366			1,365			1,392
		1,326			1,240			1,353
Provision for deferred income taxes
Adjustments for prior years		37			107			32
Effect of changes in tax rates and laws		4			34			87
Origination and reversal of temporary differences		(269	)		(33	)		(50	)
		(228	)		108			69
		1,098			1,348			1,422
OCI		130			22			42
Total comprehensive income	$	1,228		$	1,370		$	1,464

(1) Excludes loss carryforwards that were recognized directly in retained earnings relating to foreign exchange translation amounts on CIBC’s net investment in foreign operations. These amounts were previously reclassified to retained earnings as part of our transition to IFRS in 2012.

Components of income tax

$ millions, for the year ended October 31	2020			2019		2018
Current income taxes
Federal	$	613		$	634	$	686
Provincial		420			428		467
Foreign		390			226		188
		1,423			1,288		1,341
Deferred income taxes
Federal		(67	)		30		54
Provincial		(44	)		20		36
Foreign		(84	)		32		33
		(195	)		82		123
	$	1,228		$	1,370	$	1,464

The combined Canadian federal and provincial income tax rate varies each year according to changes in the statutory rates imposed by each of these jurisdictions, and according to changes in the proportion of our business carried out in each province. We are also subject to Canadian taxation on income of foreign branches.

Earnings of foreign subsidiaries would generally only be subject to Canadian tax when distributed to Canada. Additional Canadian taxes that would be payable if all foreign subsidiaries’ retained earnings were distributed to the Canadian parent as dividends are estimated to be nil.

The effective rates of income tax in the consolidated statement of income are different from the combined Canadian federal and provincial income tax rates as set out in the following table:

Reconciliation of income taxes

$ millions, for the year ended October 31	2020					2019					2018
Combined Canadian federal and provincial income tax rate applied to income before income taxes	$	1,291		26.4	%	$	1,718		26.5	%	$	1,777		26.5	%
Income taxes adjusted for the effect of:
Earnings of foreign subsidiaries		(66	)	(1.3	)		(214	)	(3.3	)		(220	)	(3.3	)
Tax-exempt income		(134	)	(2.7	)		(131	)	(2.0	)		(203	)	(3.0	)
Disposition		–		–			–		–			(1	)	–
Changes in income tax rate on deferred tax balances		4		0.1			34		0.5			88		1.3
Impact of equity-accounted income		(18	)	(0.4	)		(23	)	(0.4	)		(29	)	(0.4	)
Other (including Enron settlement)		21		0.4			(36	)	(0.5	)		10		0.1
Income taxes in the consolidated statement of income	$	1,098		22.5	%	$	1,348		20.8	%	$	1,422		21.2	%

CIBC 2020 ANNUAL REPORT 175

Consolidated financial statements

Deferred income taxes

Sources of and movement in deferred tax assets and liabilities

Deferred tax assets

$ millions, for the year ended October 31		Allowance for credit losses			Property and equipment			Pension and employee benefits			Provisions			Financial instrument revaluation			Tax loss carry- forwards (1)			Other			Total assets
2020	Balance at beginning of year before accounting policy changes	$	170		$	47		$	567		$	20		$	1		$	24		$	157		$	986
	Impact of adopting IFRS 16 at November 1, 2019		–			–			–			–			–			–			(12	)		(12	)
	Balance at beginning of year after accounting policy changes		170			47			567			20			1			24			145			974
	Recognized in net income		143			(23	)		4			33			–			(1	)		114			270
	Recognized in OCI		–			–			(18	)		–			–			–			–			(18	)
	Other (2)		1			15			1			–			–			(4	)		(23	)		(10	)
	Balance at end of year	$	314		$	39		$	554		$	53		$	1		$	19		$	236		$	1,216
2019	Balance at beginning of year before accounting policy changes	$	298		$	12		$	437		$	16		$	66		$	38		$	127		$	994
	Impact of adopting IFRS 15 at November 1, 2018		–			–			–			–			–			–			3			3
	Balance at beginning of year after accounting policy changes		298			12			437			16			66			38			130			997
	Recognized in net income		(124	)		14			46			3			(32	)		(14	)		20			(87	)
	Recognized in OCI		–			–			83			–			(50	)		–			–			33
	Other (2)		(4	)		21			1			1			17			–			7			43
	Balance at end of year	$	170		$	47		$	567		$	20		$	1		$	24		$	157		$	986
2018	Balance at beginning of year under IAS 39	$	245		$	69		$	559		$	47		$	124		$	18		$	107		$	1,169
	Impact of adopting IFRS 9 at November 1, 2017		7			–			–			–			20			–			–			27
	Balance at beginning of year under IFRS 9		252			69			559			47			144			18			107			1,196
	Recognized in net income		31			(53	)		(45	)		(31	)		(60	)		20			22			(116	)
	Recognized in OCI		1			–			(87	)		–			(1	)		–			–			(87	)
	Other (2)		14			(4	)		10			–			(17	)		–			(2	)		1
	Balance at end of year	$	298		$	12		$	437		$	16		$	66		$	38		$	127		$	994

Deferred tax liabilities
$ millions, for the year ended October 31		Intangible assets			Property and equipment			Pension and employee benefits			Goodwill			Financial instrument revaluation			Other			Total liabilities
2020	Balance at beginning of year before accounting policy changes	$	(315	)	$	(68	)	$	(9	)	$	(84	)	$	(25	)	$	(6	)	$	(507	)
	Impact of adopting IFRS 16 at November 1, 2019 (3)		–			(39	)		–			–			–			–			(39	)
	Balance at beginning of year after accounting policy changes		(315	)		(107	)		(9	)		(84	)		(25	)		(6	)		(546	)
	Recognized in net income		13			(6	)		(5	)		(2	)		(24	)		(18	)		(42	)
	Recognized in OCI		–			–			(2	)		–			(13	)		–			(15	)
	Other (2)		(3	)		1			1			–			(1	)		6			4
	Balance at end of year	$	(305	)	$	(112	)	$	(15	)	$	(86	)	$	(63	)	$	(18	)	$	(599	)
2019	Balance at beginning of year before accounting policy changes	$	(287	)	$	(47	)	$	(11	)	$	(85	)	$	(12	)	$	6		$	(436	)
	Impact of adopting IFRS 15 at November 1, 2018		–			–			–			–			–			(5	)		(5	)
	Balance at beginning of year after accounting policy changes		(287	)		(47	)		(11	)		(85	)		(12	)		1			(441	)
	Recognized in net income		(16	)		(12	)		(1	)		(1	)		(4	)		13			(21	)
	Recognized in OCI		–			–			(6	)		–			–			(1	)		(7	)
	Other (2)		(12	)		(9	)		9			2			(9	)		(19	)		(38	)
	Balance at end of year	$	(315	)	$	(68	)	$	(9	)	$	(84	)	$	(25	)	$	(6	)	$	(507	)
2018	Balance at beginning of year under IFRS 9 (4)	$	(329	)	$	(52	)	$	(10	)	$	(93	)	$	(17	)	$	29		$	(472	)
	Recognized in net income		53			–			3			1			3			(13	)		47
	Recognized in OCI		–			–			(3	)		–			(2	)		13			8
	Other (2)		(11	)		5			(1	)		7			4			(23	)		(19	)
	Balance at end of year	$	(287	)	$	(47	)	$	(11	)	$	(85)		$	(12)		$	6		$	(436)
Net deferred tax assets as at October 31, 2020																				$	617
Net deferred tax assets as at October 31, 2019																				$	479
Net deferred tax assets as at October 31, 2018																				$	558

(1) The deferred tax effect of tax loss carryforwards includes $19 million (2019: $22 million; 2018: $38 million) that relate to operating losses (of which $13 million relate to Canada, and $6 million relate to the Caribbean) that expire in various years commencing in 2021, and nil (2019: $2 million, 2018: nil) that relate to U.S. capital losses.

(2) Includes foreign currency translation adjustments.

(3) Transition impact from the adoption of IFRS 16 at November 1, 2019 is reported net for lease liability and right-of-use assets.

(4) Transition impact from the adoption of IFRS 9 at November 1, 2017 was nil.

Deferred tax assets and liabilities are assessed by entity for presentation in our consolidated balance sheet. As a result, the net deferred tax assets of $617 million (2019: $479 million) are presented in the consolidated balance sheet as deferred tax assets of $650 million (2019: $517 million) and deferred tax liabilities of $33 million (2019: $38 million).

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Unrecognized tax losses

The amount of unused operating tax losses for which deferred tax assets have not been recognized was $1,855 million as at October 31, 2020 (2019: $1,908 million), of which $669 million (2019: $669 million) relates to the U.S. region and $1,186 million (2019: $1,239 million) relates to the Caribbean region. These unused operating tax losses expire within 10 years.

The amount of unused capital tax losses for which deferred tax assets have not been recognized was $611 million as at October 31, 2020 (2019: $611 million). These unused capital tax losses relate to Canada.

U.S. tax reforms

The U.S. Tax Cuts and Jobs Act (U.S. tax reforms) reduced the U.S. federal corporate income tax rate effective in 2018 and introduced other important changes to U.S. corporate income tax laws including a Base Erosion Anti-abuse Tax (BEAT) that subjects certain payments from a U.S. corporation to foreign related parties to additional taxes. The Internal Revenue Service periodically releases proposed and final regulations to implement aspects of the U.S. tax reforms, including BEAT. CIBC continues to evaluate the impact of these regulations on our U.S. operations.

Enron

In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related legal expenses (the Enron expenses). In January 2019, CIBC entered into a settlement agreement (the Agreement) with the CRA that provides certainty with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax recovery in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of the Enron expenses that are expected to be deductible in the United States (the U.S. deduction). The U.S. deduction has not been agreed to by the Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.

Dividend received deduction

The CRA has reassessed CIBC approximately $1,115 million of additional income tax by denying the tax deductibility of certain 2011 to 2015 Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. The dividends that were subject to the reassessments are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. It is possible that subsequent years may be reassessed for similar activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts have been accrued in the consolidated financial statements.

Note  21 Earnings per share

$ millions, except per share amounts, for the year ended October 31	2020		2019		2018
Basic EPS
Net income attributable to equity shareholders	$	3,790	$	5,096	$	5,267
Less: preferred share dividends and distributions on other equity instruments		122		111		89
Net income attributable to common shareholders		3,668		4,985		5,178
Weighted-average common shares outstanding (thousands)		445,435		444,324		443,082
Basic EPS	$	8.23	$	11.22	$	11.69
Diluted EPS
Net income attributable to common shareholders	$	3,668	$	4,985	$	5,178
Weighted-average common shares outstanding (thousands)		445,435		444,324		443,082
Add: stock options potentially exercisable (1) (thousands)		378		702		1,111
Add: restricted shares and equity-settled consideration (thousands)		208		431		434
Weighted-average diluted common shares outstanding (thousands)		446,021		445,457		444,627
Diluted EPS	$	8.22	$	11.19	$	11.65

(1) Excludes average options outstanding of 3,748,652 with a weighted-average exercise price of $111.53 (2019: 2,319,723 with a weighted-average exercise price of $114.29; 2018: 688,123 with a weighted-average exercise price of $120.02), as the options’ exercise prices were greater than the average market price of common shares.

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Note  22 Commitments, guarantees and pledged assets

Commitments

Credit-related arrangements

Credit-related arrangements are generally off-balance sheet instruments and are typically entered into to meet the financing needs of clients. In addition, there are certain exposures for which we could be obligated to extend credit that are not recorded on the consolidated balance sheet. Our policy of requiring collateral or other security to support credit-related arrangements and the types of security held is generally the same as for loans. The contract amounts presented below for credit-related arrangements represent the maximum amount of additional credit that we could be obligated to extend. The contract amounts also represent the additional credit risk amounts should the contracts be fully drawn, the counterparties default and any collateral held proves to be of no value. As many of these arrangements will expire or terminate without being drawn upon, the contract amounts are not necessarily indicative of future cash requirements or actual risk of loss.

$ millions, as at October 31	2020		2019
	Contract amounts
Securities lending (1)	$	39,186	$	44,220
Unutilized credit commitments (2)		268,089		241,038
Backstop liquidity facilities		12,907		10,870
Standby and performance letters of credit		14,565		13,489
Documentary and commercial letters of credit		196		224
Other commitments to extend credit		2,149		2,937
	$	337,092	$	312,778

(1) Excludes securities lending of $1.8 billion (2019: $1.8 billion) for cash because it is reported on the consolidated balance sheet.

(2) Includes $131.3 billion (2019: $122.0 billion) of personal, home equity and credit card lines, which are unconditionally cancellable at our discretion.

In addition, the client securities lending of the joint ventures which CIBC has with The Bank of New York Mellon totalled $78.1 billion (2019: $77.6 billion) of which $8.0 billion (2019: $6.7 billion) are transactions between CIBC and the joint ventures.

CIBC has provided indemnities to customers of the joint ventures in respect of securities lending transactions with third parties amounting to $64.3 billion (2019: $67.8 billion).

Securities lending

Securities lending represents our credit exposure when we lend our own or our clients’ securities to a borrower and the borrower defaults on the redelivery obligation. The borrower must fully collateralize the security lent at all times.

Unutilized credit commitments

Unutilized credit commitments are the undrawn portion of lending facilities that we have approved to meet the requirements of clients. These lines may include various conditions that must be satisfied prior to drawdown and include facilities extended in connection with contingent acquisition financing. The credit risk associated with these lines arises from the possibility that a commitment will be drawn down as a loan at some point in the future, prior to the expiry of the commitment. The amount of collateral obtained, if deemed necessary, is based on our credit evaluation of the borrower and may include a charge over the present and future assets of the borrower.

Backstop liquidity facilities

We provide irrevocable backstop liquidity facilities primarily to ABCP conduits. We are the financial services agent for some of these conduits, while other conduits are administered by third parties. The liquidity facilities for our sponsored ABCP programs, Safe Trust, Sure Trust, and Sound Trust, require us to provide funding, subject to the satisfaction of certain limited conditions with respect to the conduits, to fund non-defaulted assets.

Standby and performance letters of credit

These represent an irrevocable obligation to make payments to third parties in the event that clients are unable to meet their contractual financial or performance obligations. The credit risk associated with these instruments is essentially the same as that involved in extending irrevocable loan commitments to clients. The amount of collateral obtained, if deemed necessary, is based on our credit evaluation of the borrower and may include a charge over present and future assets of the borrower.

Documentary and commercial letters of credit

Documentary and commercial letters of credit are short-term instruments issued on behalf of a client, authorizing a third party, such as an exporter, to draw drafts on CIBC up to a specified amount, subject to specific terms and conditions. We are at risk for any drafts drawn that are not ultimately settled by the client; however, the amounts drawn are collateralized by the related goods.

Other commitments to extend credit

These represent other commitments to extend credit, and primarily include forward-dated securities financing trades in the form of securities purchased under resale agreements with various counterparties that are executed on or before the end of our reporting period and that settle shortly after period end, usually within five business days.

Other commitments

As an investor in merchant banking activities, we enter into commitments to fund external private equity funds. In connection with these activities, we had commitments to invest up to $212 million (2019: $258 million).

In addition, we act as underwriter for certain new issuances under which we alone or together with a syndicate of financial institutions purchase these new issuances for resale to investors. As at October 31, 2020, the related underwriting commitments were $94 million (2019: $60 million).

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Guarantees and other indemnification agreements

Guarantees

A guarantee is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor failed to make payment when due in accordance with the original or modified terms of a debt instrument. Guarantees include standby and performance letters of credit as discussed above, and credit derivatives protection sold, as discussed in Note 13.

Other indemnification agreements

In the ordinary course of operations, we enter into contractual arrangements under which we may agree to indemnify the counterparty to such arrangement from any losses relating to a breach of representations and warranties, a failure to perform certain covenants, or for claims or losses arising from certain external events as outlined within the particular contract. This may include, for example, losses arising from changes in tax legislation, litigation, or claims relating to past performance. In addition, we indemnify each of our directors and officers to the extent permitted by law, against any and all claims or losses (including any amounts paid in settlement of any such claims) incurred as a result of their service to CIBC. In most indemnities, maximum loss clauses are generally not provided for, and as a result, no defined limit of the maximum potential liability exists. Amounts are accrued when we have a present legal or constructive obligation as a result of a past event, when it is both probable that an outflow of economic benefits will be required to resolve the matter, and when a reliable estimate can be made of the amount of the obligation. We believe that the likelihood of the conditions arising to trigger obligations under these contract arrangements is remote. Historically, any payments made in respect of these contracts have not been significant. Amounts related to these indemnifications, representations, and warranties reflected within the consolidated financial statements as at October 31, 2020 and 2019 are not significant.

Pledged assets

In the normal course of business, on- and off-balance sheet assets are pledged as collateral for various activities. The following table summarizes asset pledging amounts and the activities to which they relate:

$ millions, as at October 31	2020		2019
Assets pledged in relation to:
Securities lending	$	41,042	$	46,242
Obligations related to securities sold under repurchase agreements		69,528		51,942
Obligations related to securities sold short		15,963		15,635
Securitizations		20,818		19,398
Covered bonds		21,073		20,206
Derivatives		14,410		12,952
Foreign governments and central banks (1)		133		784
Clearing systems, payment systems, and depositories (2)		605		2,400
Other		400		1,247
		$    183,972	$	170,806

(1) Includes assets pledged to maintain access to central bank facilities in foreign jurisdictions.

(2) Includes assets pledged in order to participate in clearing and payment systems and depositories.

Note  23 Contingent liabilities and provisions

In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount appears to be a better estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other amount, the mid-point in the range is accrued. In some instances, however, it is not possible either to determine whether an obligation is probable or to reliably estimate the amount of loss, in which case no accrual can be made.

While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our consolidated financial statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting period. We regularly assess the adequacy of CIBC’s litigation accruals and make the necessary adjustments to incorporate new information as it becomes available.

CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.

CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal proceedings, where it is possible to make such an estimate, is from nil to approximately $1.1 billion as at October 31, 2020. This estimated aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is involved, taking into account CIBC’s best estimate of such losses for those cases for which an estimate can be made. CIBC’s estimate involves significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the estimated range as at October 31, 2020 consist of the significant legal matters disclosed below. The matters underlying the estimated range will change from time to time, and actual losses may vary significantly from the current estimate. For certain matters, CIBC does not believe that an estimate can currently be made as many of them are in preliminary stages and certain matters have no specific amount claimed. Consequently, these matters are not included in the range.

The following is a description of CIBC’s significant legal proceedings, which we intend to vigorously defend.

Green v. Canadian Imperial Bank of Commerce, et al.

In July 2008, a shareholder plaintiff commenced this proposed class action in the Ontario Superior Court of Justice against CIBC and several former and current CIBC officers and directors. It alleges that CIBC and the individual officers and directors violated the Ontario Securities Act through material misrepresentations and non-disclosures relating to CIBC’s exposure to the U.S. sub-prime mortgage market. The plaintiffs instituted this action on behalf of all CIBC shareholders in Canada who purchased shares between May 31, 2007 and February 28, 2008. The action seeks

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damages of $5 billion. In July 2012, the plaintiffs’ motions for leave to file the statement of claim and for class certification were dismissed by the Ontario Superior Court of Justice. In February 2014, the Ontario Court of Appeal released its decision overturning the lower court and allowing the matter to proceed as a certified class action. In August 2014, CIBC and the individual defendants were granted leave to appeal to the Supreme Court of Canada. The defendants’ appeal to the Supreme Court of Canada was heard in February 2015. In December 2015, the Supreme Court of Canada upheld the Ontario Court of Appeal’s decision allowing the matter to proceed as a certified class action. The trial is scheduled to commence in September 2021.

Fresco v. Canadian Imperial Bank of Commerce

Gaudet v. Canadian Imperial Bank of Commerce

In June 2007, two proposed class actions were filed against CIBC in the Ontario Superior Court of Justice (Fresco v. CIBC) and in the Quebec Superior Court (Gaudet v. CIBC). Each makes identical claims for unpaid overtime for full-time, part-time, and retail frontline non-management employees. The Ontario action seeks $500 million in damages plus $100 million in punitive damages for all employees in Canada, while the Quebec action is limited to employees in Quebec and has been stayed pending the outcome of the Ontario action. In June 2009, in the Ontario action, the motion judge denied certification of the matter as a class action. In September 2010, the Ontario Divisional Court upheld the motion judge’s denial of the plaintiff’s certification motion and the award of costs to CIBC by a two-to-one majority. In January 2011, the Ontario Court of Appeal granted the plaintiff leave to appeal the decision denying certification. In June 2012, the Ontario Court of Appeal overturned the lower court and granted certification of the matter as a class action. The Supreme Court of Canada released its decision in March 2013 denying CIBC leave to appeal certification of the matter as a class action, and denying the plaintiff’s cross appeal on aggregate damages. The motions for summary judgment were heard in December 2019. In March 2020, the court found CIBC liable for unpaid overtime. CIBC is appealing the decision. A decision on remedies was released in August 2020 and the court certified aggregate damages as a common issue and directed that the availability and quantum, if any, of aggregate damages be determined at a later date. The plaintiffs’ claim for punitive damages was dismissed. In October 2020, the court released its decision on limitation periods finding that limitation periods cannot be determined on a class wide basis. CIBC is appealing the decisions on remedies and limitation periods.

Credit card class actions – Interchange fees litigation:

Bancroft-Snell v. Visa Canada Corporation, et al.

9085-4886 Quebec Inc. v. Visa Canada Corporation, et al.

Watson v. Bank of America Corporation, et al.

Fuze Salon v. BofA Canada Bank, et al.

1023926 Alberta Ltd. v. Bank of America Corporation, et al.

The Crown & Hand Pub Ltd. v. Bank of America Corporation, et al.

Hello Baby Equipment Inc. v. BofA Canada Bank, et al.

Since 2011 seven proposed class actions have been commenced against VISA Canada Corporation (Visa), MasterCard International Incorporated (MasterCard), CIBC and numerous other financial institutions. The actions, brought on behalf of all merchants who accepted payment by Visa or MasterCard from March 23, 2001 to the present, allege two “separate, but interrelated” conspiracies: one in respect of Visa and one in respect of MasterCard. The claims allege that Visa and MasterCard conspired with their issuing banks to set default interchange rate and merchant discount fees and that certain rules (Honour All Cards and No Surcharge) have the effect of increasing the merchant discount fees. The claims allege civil conspiracy, violation of the Competition Act, interference with economic interests and unjust enrichment. The claims seek unspecified general and punitive damages. The motion for class certification in Watson was granted in March 2014. The appeal of the decision granting class certification was heard in December 2014. In August 2015, the British Columbia Court of Appeal allowed the appeals in part, resulting in certain causes of action being struck and others being reinstated. The matter remains certified as a class action. The trial in Watson which was scheduled to commence in October 2020 has been adjourned. The motion for class certification in 9085-4886 Quebec Inc. (formerly Bakopanos) was heard in November 2017. In February 2018, the Court certified 9085-4886 Quebec Inc. as a class action. In May 2019, the plaintiffs’ appeal of the certification decision in 9085-4886 Quebec Inc. was heard and in July 2019, the Quebec Court of Appeal allowed the plaintiffs’ appeal.

Mortgage prepayment class actions:

Jordan v. CIBC Mortgages Inc.

Lamarre v. CIBC Mortgages Inc.

Sherry v. CIBC Mortgages Inc.

Haroch v. Toronto Dominion Bank, et al.

In 2011, three proposed class actions were filed in the Superior Courts of Ontario (Jordan), Quebec (Lamarre) and British Columbia (Sherry) against CIBC Mortgages Inc. The representative plaintiffs allege that since 2005, CIBC Mortgages Inc. wrongfully charged or overcharged mortgage prepayment penalties and that the calculation clauses in the mortgage contract that provide for discretion in applying the prepayment penalties are void and unenforceable at law. The motion for class certification in Sherry was granted in June 2014 conditional on the plaintiffs framing a workable class definition. In July 2014, CIBC filed a Notice of Appeal. CIBC’s appeal of the certification decision in Sherry was heard in April 2016. The court reserved its decision. In June 2016, the British Columbia Court of Appeal allowed the appeal in Sherry in part, resulting in certain causes of action being struck. Sherry remains certified as a class action, and continuation of the certification motion on the amended pleading was heard November 2017. In August 2018, the court certified certain of the plaintiffs’ causes of action in Sherry. The appeal in Sherry was heard in April 2019. In May 2020, the court dismissed CIBC’s appeal. The certification motion in Jordan was heard in August 2018. In February 2019, the court certified Jordan as a class action. CIBC’s motion for leave to appeal the certification decision in Jordan was denied in June 2019.

In May 2018, a new proposed class action, Haroch, was filed in the Superior Court of Quebec. The action is brought on behalf of Quebec residents who during the class period allegedly paid a mortgage prepayment charge in excess of three months’ interest. The plaintiffs allege that the defendants created complex prepayment formulas that are contrary to the Quebec Civil Code, the Quebec Consumer Protection Act and the Interest Act and seek damages back to 2015. Haroch and Lamarre have been consolidated. The motion for class certification in Haroch was heard in June 2019 and in July 2019, the court certified the matter as a class action against CIBC and CIBC Mortgages Inc. CIBC and CIBC Mortgages Inc. are seeking leave to appeal the certification decision. In January 2020, the court granted CIBC and CIBC Mortgages Inc. leave to appeal in Haroch.

Cerberus Capital Management L.P. v. CIBC

In October 2015, Securitized Asset Funding 2011-2, LTD., a special purpose investment vehicle affiliated with Cerberus Capital Management L.P. (collectively, “Cerberus”), commenced a Federal Court action in New York against CIBC seeking unspecified damages of “at least hundreds of millions of dollars”. The action relates to two transactions in 2008 and 2011 in which CIBC issued a limited recourse note and certificate to Cerberus

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which significantly reduced CIBC’s exposure to the U.S. residential real estate market. The complaint alleges that CIBC breached its contract with Cerberus by failing to appropriately calculate and pay with respect to two of the payment streams due under the 2008 note and 2011 certificate.

In November 2015, Cerberus voluntarily dismissed the Federal Court action and filed a new action asserting the same claims in New York State Court. In January 2016, CIBC served its Answer and Counterclaims. In March 2016, Cerberus filed a motion for summary judgment and sought to stay discovery. In April 2016, the court directed the parties to start discovery. In April 2018, the court denied the plaintiffs’ motion for summary judgment. The plaintiffs appealed the decision, which was heard in November 2018. In December 2018, the appellate court affirmed the lower court’s denial of the plaintiffs’ motion for summary judgment.

Valeant class actions:

Catucci v. Valeant Pharmaceuticals International Inc., et al.

Potter v. Valeant Pharmaceuticals International Inc., et al.

In March 2016, a proposed class action was filed in the Quebec Superior Court on behalf of purchasers of shares in Valeant Pharmaceuticals International Inc. against the issuer, its directors and officers, its auditors and the underwriting syndicates for six public offerings from 2013 to 2015. CIBC World Markets Corp. was part of the underwriting syndicate for three of the offerings (underwriting 1.5% of a US$1.6 billion offering in June 2013, 1.5% of a US$900 million offering in December 2013 and 0.625% of an offering comprising US$5.25 billion and €1.5 billion in March 2015). The proposed class action alleges various misrepresentations on the part of Valeant and the other defendants, including representations made in the prospectus of the public offerings, relating to Valeant’s relationships with various “specialty pharmacies” who were allegedly acting improperly in the distribution of Valeant’s products resulting in Valeant’s operational results, revenues, and share price during the relevant period being artificially inflated. In July 2016, a similar proposed class action (Potter v. Valeant Pharmaceuticals International Inc., et al.) was commenced in New Jersey Federal Court.

The motion for class certification in Catucci and motion to dismiss in Potter were heard in April 2017. In September 2017, the court certified Catucci as a class action. The defendants sought leave to appeal the certification decision, which was dismissed in December 2017. In Potter the court dismissed the action against the underwriters, without prejudice to the plaintiff to re-plead its allegations. In November 2020, the Catucci class action was settled. The underwriters did not contribute to the settlement.

Pilon v. Amex Bank of Canada, et al.

In January 2018 a proposed class action was commenced in Quebec against CIBC and several other financial institutions. The action alleges that the defendants breached the Quebec Consumer Protection Act and the Bank Act when they unilaterally increased the credit limit on the plaintiffs’ credit cards. The claim seeks the return of all over limit fees charged to Quebec customers beginning in January 2015 as well as punitive damages of $500 per class member. The motion for class certification was heard in April 2019. In August 2019, the court dismissed the certification motion. The plaintiffs’ appeal of the decision denying the certification motion is scheduled for February 2021.

Simplii privacy class actions:

Bannister v. CIBC (formerly John Doe v. CIBC)

Steinman v. CIBC

In June 2018, two proposed class actions were filed in the Ontario Superior Court against CIBC on behalf of Simplii Financial clients who allege their personal information was disclosed as a result of a security incident in May 2018. The actions allege that Simplii Financial failed to protect its clients’ personal information. The Bannister proposed class action seeks aggregated damages of approximately $550 million, while the Steinman proposed class action, which has been stayed, sought damages per class member plus punitive damages of $20 million. The motion for certification in Bannister, which was scheduled for December 2019, has been adjourned.

Order Execution Only class actions:

Pozgaj v. CIBC and CIBC Trust

Frayce v. BMO Investorline Inc., et al

Michaud v. BBS Securities Inc. et al

In September 2018, a proposed class action (Pozgaj) was filed in the Ontario Superior Court against CIBC and CIBC Trust. It alleges that the defendants should not have paid mutual fund trailing commissions to order-execution-only-dealers. The action is brought on behalf of all persons who held units of CIBC mutual funds through order-execution-only-dealers and seeks $200 million in damages.

In 2020, two proposed class action were filed in the Ontario Superior Court (Frayce) and the Supreme Court of British Columbia (Michaud) against CIBC Investor Services Inc. and several other dealers. The actions allege that the defendants should not have received and accepted trailing commissions for service and advice on mutual funds purchased through their respective order-execution-only-dealers. The action is brought on behalf of all persons who purchased units of mutual funds through an order-execution-only-dealer owned by one or more of the defendants and seeks unspecified compensatory and punitive damages. The motion for class certification in Frayce is scheduled for December 2021.

York County on Behalf of the County of York Retirement Fund v. Rambo, et al.

In February 2019, a class action complaint was filed in the Northern District of California against the directors, certain officers and the underwriters of several senior note offerings of the Pacific Gas and Electric Company (PG&E) that took place between March 2016 and April 2018, the total issuance amount for the series of offerings being approximately US$4 billion. CIBC World Markets Corp. was part of the underwriting syndicate for an offering, whereby CIBC World Markets Corp. underwrote 6% of a US$650 million December 2016 issuance of senior notes. The offering involved the issuance of two tranches of notes: US$400 million of 30-year senior notes maturing in December 2046 and US$250 million of one-year floating rate notes that matured and were repaid in November 2017. The complaint alleges that the disclosure documentation associated with the note offerings contained misrepresentations and/or omissions of material facts, including with respect to PG&E’s failure to comply with various safety regulations, vegetation management programs and requirements, as well as understating the extent to which its equipment has allegedly caused multiple fires in California, including before the wildfires that occurred in California in 2017 and 2018. In October 2019, the defendants filed a motion to dismiss.

Pope v. CIBC and CIBC Trust

In August 2020, a proposed class action was filed in the Supreme Court of British Columbia against CIBC and CIBC Trust. The action alleges that the defendants misrepresented their investment strategy and charged unitholders excess fees in relation to the CIBC Canadian Equity Fund and certain CIBC portfolio funds. The action is brought on behalf of all persons who hold or held units of these funds and seeks unspecified compensatory and punitive damages.

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Legal provisions

The following table presents changes in our legal provisions:

$ millions, for the year ended October 31	2020			2019
Balance at beginning of year	$	67		$	40
Additional new provisions recognized		92			39
Less:
Amounts incurred and charged against existing provisions		(5	)		(8	)
Unused amounts reversed		(3	)		(4	)
Balance at end of year	$	151		$	67

Restructuring

During the first quarter of 2020, we recognized a restructuring charge of $339 million in Corporate and Other associated with ongoing efforts to transform our cost structure and simplify our bank. The charge consisted primarily of employee severance and related costs and was recorded in Non-interest expenses – Employee compensation and benefits.

The following table presents changes in the restructuring provision:

$ millions, for the year ended October 31	2020			2019
Balance at beginning of year	$	26		$	71
Additional new provisions recognized		370			–
Less:
Amounts incurred and charged against existing provisions		(152	)		(45	)
Unused amounts reversed		(22	)		–
Balance at end of year	$	222		$	26

The amount of $222 million recognized represents our best estimate as at October 31, 2020 of the amount required to settle the obligation, including obligations related to ongoing payments as a result of the restructuring.

Note  24 Concentration of credit risk

Concentration of credit exposure may arise with a group of counterparties that have similar economic characteristics or are located in the same geographic region. The ability of such counterparties to meet contractual obligations would be similarly affected by changing economic, political or other conditions.

The amounts of credit exposure associated with our on- and off-balance sheet financial instruments are summarized in the following table:

Credit exposure by country of ultimate risk

$ millions, as at October 31							2020								2019
	Canada		U.S.		Other countries		Total		Canada		U.S.		Other countries		Total
On-balance sheet
Major assets (1)(2)(3)	$	512,542	$	151,337	$	70,945	$	734,824	$	444,317	$	120,286	$	55,844	$	620,447
Off-balance sheet
Credit-related arrangements
Financial institutions	$	48,236	$	13,482	$	12,737	$	74,455	$	47,815	$	13,526	$	12,318	$	73,659
Governments		9,860		10		7		9,877		9,208		10		14		9,232
Retail		142,351		554		434		143,339		130,544		510		432		131,486
Corporate		70,130		30,839		8,452		109,421		61,228		28,907		8,266		98,401
	$	270,577	$	44,885	$	21,630	$	337,092	$	248,795	$	42,953	$	21,030	$	312,778

(1) Major assets consist of cash and deposits with banks, loans and acceptances net of allowance for credit losses, securities, securities borrowed or purchased under resale agreements, and derivative instruments.

(2) Includes Canadian currency of $497.3 billion (2019: $426.0 billion) and foreign currencies of $237.5 billion (2019: $194.4 billion).

(3) No industry or foreign jurisdiction accounted for more than 10% of loans and acceptances net of allowance for credit losses, with the exception of the U.S., which accounted for 13% as at October 31, 2020 (2019: 12.1%).

See Note 13 for derivative instruments by country and counterparty type of ultimate risk. In addition, see Note 22 for details on the client securities lending of the joint ventures which CIBC has with The Bank of New York Mellon.

Also see shaded sections in “MD&A – Management of risk” for a detailed discussion on our credit risk.

182 CIBC 2020 ANNUAL REPORT

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Note  25 Related-party transactions

In the ordinary course of business, we provide banking services and enter into transactions with related parties on terms similar to those offered to unrelated parties. Related parties include key management personnel⁽¹⁾, their close family members, and entities that they or their close family members control or jointly control. Related parties also include associates and joint ventures accounted for under the equity method, and post-employment benefit plans for CIBC employees. Loans to these related parties are made in the ordinary course of business and on substantially the same terms as for comparable transactions with unrelated parties. As CIBC’s subsidiaries are consolidated, transactions with these entities have been eliminated and are not reported as related-party transactions. We offer a subsidy on annual fees and preferential interest rates on credit card balances to senior officers, which is the same offer extended to all employees of CIBC.

Key management personnel and their affiliates

As at October 31, 2020, loans to key management personnel⁽¹⁾ and their close family members and to entities that they or their close family members control or jointly control totalled $139 million (2019: $239 million), letters of credit and guarantees totalled $2 million (2019: $4 million), and undrawn credit commitments totalled $65 million (2019: $72 million).

These outstanding balances are generally unsecured and we have no provision for credit losses on impaired loans relating to these amounts for the years ended October 31, 2020 and 2019.

(1) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of CIBC directly or indirectly and comprise the members of the Board (referred to as directors), Executive Committee and certain named officers per the Bank Act (Canada) (collectively referred to as senior officers). Board members who are also Executive Committee members are included as senior officers.

Compensation of key management personnel

$ millions, for the year ended October 31			2020				2019
	Directors		Senior officers		Directors		Senior officers
Short-term benefits (1)	$	3	$	18	$	3	$	23
Post-employment benefits		–		3		–		3
Share-based benefits (2)		1		30		2		38
Termination benefits		–		4		–		–
Total compensation	$	4	$	55	$	5	$	64

(1) Comprises salaries, statutory and non-statutory benefits related to senior officers and fees related to directors recognized during the year. Also includes annual incentive plan payments related to senior officers on a cash basis.

(2) Comprises grant-date fair values of awards granted in the year.

Refer to the following Notes for additional details on related-party transactions:

Share-based payment plans

See Note 18 for details of these plans offered to directors and senior officers.

Post-employment benefit plans

See Note 19 for related-party transactions between CIBC and the post-employment benefit plans.

Equity-accounted associates and joint ventures

See Note 26 for details of our investments in equity-accounted associates and joint ventures.

CIBC 2020 ANNUAL REPORT 183

Consolidated financial statements

Note  26 Investments in equity-accounted associates and joint ventures

Joint ventures

CIBC is a 50/50 joint venture partner with The Bank of New York Mellon in two joint ventures: CIBC Mellon Trust Company and CIBC Mellon Global Securities Services Company, which provide trust and asset servicing, both in Canada. As at October 31, 2020, the carrying value of our investments in the joint ventures was $587 million (2019: $529 million), which was included in Corporate and Other.

As at October 31, 2020, loans to the joint ventures totalled nil (2019: nil) and undrawn credit commitments totalled $164 million (2019: $128 million).

CIBC, The Bank of New York Mellon, and CIBC Mellon have, jointly and severally, provided indemnities to customers of the joint ventures in respect of securities lending transactions. See Note 22 for additional details.

There was no unrecognized share of losses of any joint ventures, either for the year or cumulatively. In 2020 and 2019, none of our joint ventures experienced any significant restrictions to transfer funds in the form of cash dividends or distributions, or repayment of loans or advances.

The following table provides the summarized aggregate financial information related to our proportionate interest in the equity-accounted joint ventures:

$ millions, for the year ended October 31	2020		2019		2018
Net income	$	67	$	88	$	106
OCI		43		45		(12	)
Total comprehensive income	$	110	$	133	$	94

Associates

As at October 31, 2020, the total carrying value of our investments in associates was $71 million (2019: $57 million). These investments comprise: listed associates with a carrying value of $10 million (2019: $9 million) and a fair value of $10 million (2019: $9 million); and unlisted associates with a carrying value of $61 million (2019: $48 million) and a fair value of $83 million (2019: $76 million). Of the total carrying value of our investments in associates, $10 million (2019: $5 million) was included in Canadian Personal and Business Banking, $37 million (2019: $33 million) in Capital Markets, and $24 million (2019: $19 million) in Corporate and Other.

As at October 31, 2020, loans to associates totalled nil (2019: nil) and undrawn credit commitments totalled $79 million (2019: $79 million). We also had commitments to invest up to nil (2019: nil) in our associates.

There was no unrecognized share of losses of any associate, either for the year or cumulatively. In 2020 and 2019, none of our associates experienced any significant restrictions to transfer funds in the form of cash dividends or distributions, or repayment of loans or advances.

The following table provides the summarized aggregate financial information related to our proportionate interest in equity-accounted associates:

$ millions, for the year ended October 31	2020		2019			2018
Net income	$	12	$	4		$	15
OCI		1		(1	)		(7	)
Total comprehensive income	$	13	$	3		$	8

184 CIBC 2020 ANNUAL REPORT

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Note  27 Significant subsidiaries

The following is a list of significant subsidiaries in which CIBC, either directly or indirectly, owns 100% of the voting shares, except where noted.

$ millions, as at October 31, 2020
Subsidiary name (1)	Address of head or principal office		Book value of shares owned by CIBC	(2)
Canada and U.S.
CIBC Asset Management Inc.	Toronto, Ontario, Canada	$	444
CIBC BA Limited	Toronto, Ontario, Canada		–	(3)
CIBC Bancorp USA Inc.	Chicago, Illinois, U.S.		9,077
Canadian Imperial Holdings Inc.	New York, New York, U.S.
CIBC Inc.	New York, New York, U.S.
CIBC World Markets Corp.	New York, New York, U.S.
CIBC Bank USA	Chicago, Illinois, U.S.
CIBC Private Wealth Group, LLC	Atlanta, Georgia, U.S.
CIBC Delaware Trust Company	Wilmington, Delaware, U.S.
CIBC National Trust Company	Atlanta, Georgia, U.S.
CIBC Private Wealth Advisors, Inc.	Chicago, Illinois, U.S.
CIBC Investor Services Inc.	Toronto, Ontario, Canada		25
CIBC Life Insurance Company Limited	Toronto, Ontario, Canada		23
CIBC Mortgages Inc.	Toronto, Ontario, Canada		230
CIBC Securities Inc.	Toronto, Ontario, Canada		2
CIBC Trust Corporation	Toronto, Ontario, Canada		591
CIBC World Markets Inc.	Toronto, Ontario, Canada		306
CIBC Wood Gundy Financial Services Inc.	Toronto, Ontario, Canada
CIBC Wood Gundy Financial Services (Quebec) Inc.	Montreal, Quebec, Canada
INTRIA Items Inc.	Mississauga, Ontario, Canada		100
International
CIBC Australia Ltd	Sydney, New South Wales, Australia		19
CIBC Capital Markets (Europe) S.A.	Luxembourg		550
CIBC Cayman Holdings Limited	George Town, Grand Cayman, Cayman Islands		1,742
CIBC Cayman Bank Limited	George Town, Grand Cayman, Cayman Islands
CIBC Cayman Capital Limited	George Town, Grand Cayman, Cayman Islands
CIBC Cayman Reinsurance Limited	George Town, Grand Cayman, Cayman Islands
CIBC Investments (Cayman) Limited	George Town, Grand Cayman, Cayman Islands		2,820
FirstCaribbean International Bank Limited (91.7%)	Warrens, St. Michael, Barbados
CIBC Bank and Trust Company (Cayman) Limited (91.7%)	George Town, Grand Cayman, Cayman Islands
CIBC Fund Administration Services (Asia) Limited (91.7%)	Hong Kong, China
FirstCaribbean International Bank (Bahamas) Limited (87.3%)	Nassau, The Bahamas
Sentry Insurance Brokers Ltd. (87.3%)	Nassau, The Bahamas
FirstCaribbean International Bank (Barbados) Limited (91.7%)	Warrens, St. Michael, Barbados
FirstCaribbean International Finance Corporation (Leeward & Windward) Limited (91.7%)	Castries, St. Lucia
FirstCaribbean International Securities Limited (91.7%)	Kingston, Jamaica
FirstCaribbean International Bank (Cayman) Limited (91.7%)	George Town, Grand Cayman, Cayman Islands
FirstCaribbean International Finance Corporation (Netherlands Antilles) N.V. (91.7%)	Curacao, Netherlands Antilles
FirstCaribbean International Bank (Curacao) N.V. (91.7%)	Curacao, Netherlands Antilles
FirstCaribbean International Bank (Jamaica) Limited (91.7%)	Kingston, Jamaica
FirstCaribbean International Bank (Trinidad and Tobago) Limited (91.7%)	Maraval, Port of Spain, Trinidad & Tobago
FirstCaribbean International Trust Company (Bahamas) Limited (91.7%)	Nassau, The Bahamas
FirstCaribbean International Wealth Management Bank (Barbados) Limited (91.7%)	Warrens, St. Michael, Barbados
CIBC World Markets (Japan) Inc.	Tokyo, Japan		48

(1) Each subsidiary is incorporated or organized under the laws of the state or country in which the principal office is situated, except for Canadian Imperial Holdings Inc., CIBC Inc., CIBC Capital Corporation, CIBC World Markets Corp., CIBC Private Wealth Group, LLC, CIBC Private Wealth Advisors, Inc., and CIBC Bancorp USA Inc., which were incorporated or organized under the laws of the State of Delaware, U.S.; CIBC National Trust Company, which was organized under the laws of the U.S.; and CIBC World Markets (Japan) Inc., which was incorporated in Barbados.

(2) The book value of shares of subsidiaries is shown at cost and may include non-voting common and preferred shares. These amounts are eliminated upon consolidation.

(3) The book value of shares owned by CIBC is less than $1 million.

In addition to the above, we consolidate certain SEs where we have control over the SE. See Note 7 for additional details.

CIBC 2020 ANNUAL REPORT 185

Consolidated financial statements

Note  28 Financial instruments – disclosures

Certain disclosures required by IFRS 7 are provided in the shaded sections of the “MD&A – Management of risk”, as permitted by IFRS. The following table provides a cross referencing of those disclosures in the MD&A.

Description	Section
For each type of risk arising from financial instruments, an entity shall disclose: the exposure to risks and how they arise; objectives, policies and processes used for managing the risks; methods used to measure the risk; and description of collateral.	Risk overview
	Credit risk
	Market risk
	Liquidity risk
	Operational risk
	Reputation and legal risks Conduct risk
	Regulatory compliance risk
Credit risk: gross exposure to credit risk, credit quality and concentration of exposures.	Credit risk
Market risk: trading portfolios – Value-at-Risk (VaR); stressed VaR, incremental risk charge, non-trading portfolios – interest rate risk, foreign exchange risk and equity risk.	Market risk
Liquidity risk: liquid assets, maturity of financial assets and liabilities, and credit commitments.	Liquidity risk

We have provided quantitative disclosures related to credit risk consistent with Basel guidelines in the “Credit risk” section of the MD&A. The table below sets out the categories of the on-balance sheet exposures that are subject to the credit risk framework as set out in the Capital Adequacy Requirements (CAR) Guideline issued by OSFI under the different Basel approaches based on the carrying value of those exposures in our consolidated financial statements. The credit risk framework includes CCR exposures arising from OTC derivatives, repo-style transactions and trades cleared through CCPs, as well as securitization exposures. Items not subject to the credit risk framework include exposures that are subject to the market risk framework, amounts that are not subject to capital requirements or are subject to deduction from capital, and amounts relating to CIBC’s insurance subsidiaries, which are excluded from the scope of regulatory consolidation.

$ millions, as at October 31		AIRB approach			Standardized approach			Other credit risk (1)		Total subject to credit risk			Not subject to credit risk		Total consolidated balance sheet
2020	Cash and deposits with banks	$	50,407		$	10,207		$	1,822	$	62,436		$	82	$	62,518
	Securities		91,099			11,961			–		103,060			45,986		149,046
	Cash collateral on securities borrowed		8,543			4			–		8,547			–		8,547
	Securities purchased under resale agreements		65,595			–			–		65,595			–		65,595
	Loans		363,425			44,087			1,138		408,650			1,672		410,322
	Allowance for credit losses		(2,600	)		(940	)		–		(3,540	)		–		(3,540	)
	Derivative instruments		32,600			130			–		32,730			–		32,730
	Customers’ liability under acceptances		9,606			–			–		9,606			–		9,606
	Other assets		15,518			462			7,739		23,719			11,008		34,727
	Total credit exposures	$	634,193		$	65,911		$	10,699	$	710,803		$	58,748	$	769,551
2019	Total credit exposures	$	535,483		$	52,605		$	8,671	$	596,759		$	54,845	$	651,604

(1) Includes credit risk exposures arising from other assets that are subject to the credit risk framework but are not included in the standardized or AIRB frameworks, including other balance sheet assets which are risk-weighted at 100%, significant investments in the capital of non-financial institutions, and amounts below the thresholds for capital deduction that are risk-weighted at 250%.

186 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Note  29 Offsetting financial assets and liabilities

The following table identifies the amounts that have been offset on the consolidated balance sheet in accordance with the requirements of IAS 32 “Financial Instruments: Presentation”, and also those amounts that are subject to enforceable netting agreements but do not qualify for offsetting on the consolidated balance sheet either because we do not have a currently enforceable legal right to set-off the recognized amounts, or because we do not intend to settle on a net basis or to realize the asset and settle the liability simultaneously.

Financial assets

	Amounts subject to enforceable netting agreements
		Gross amounts of recognized financial assets		Gross amounts offset on the consolidated balance sheet	(1)				Related amounts not set-off on the consolidated balance sheet								Amounts not subject to enforceable netting agreements	(4)		Net amounts presented on the consolidated balance sheet
$ millions, as at October 31							Net amounts		Financial instruments	(2)		Collateral received	(3)		Net amounts
2020 Derivatives	$	59,024	$	(29,989	)	$	29,035	$	(19,347	)	$	(5,170	)	$	4,518	$	3,695		$	32,730
Cash collateral on securities borrowed		8,547		–			8,547		–			(8,267	)		280		–			8,547
Securities purchased under resale agreements		68,335		(2,740	)		65,595		–			(65,178	)		417		–			65,595
	$	135,906	$	(32,729	)	$	103,177	$	(19,347	)	$	(78,615	)	$	5,215	$	3,695		$	106,872
2019 Derivatives	$	42,156	$	(21,206	)	$	20,950	$	(14,572	)	$	(3,888)		$	2,490	$	2,945		$	23,895
Cash collateral on securities borrowed		3,664		–			3,664		–			(3,588	)		76		–			3,664
Securities purchased under resale agreements		59,131		(3,020	)		56,111		–			(55,721	)		390		–			56,111
	$	104,951	$	(24,226	)	$	80,725	$	(14,572	)	$	(63,197	)	$	2,956	$	2,945		$	83,670

Financial liabilities

	Amounts subject to enforceable netting agreements
		Gross amounts of recognized financial liabilities		Gross amounts offset on the consolidated balance sheet	(1)				Related amounts not set-off on the consolidated balance sheet								Amounts not subject to enforceable netting agreements	(4)		Net amounts presented on the consolidated balance sheet
$ millions, as at October 31							Net amounts		Financial instruments	(2)		Collateral pledged	(3)		Net amounts
2020 Derivatives	$	56,461	$	(29,989	)	$	26,472	$	(19,347	)	$	(5,883	)	$	1,242	$	4,036		$	30,508
Cash collateral on securities lent		1,824		–			1,824		–			(1,719	)		105		–			1,824
Obligations related to securities sold under repurchase agreements		74,393		(2,740	)		71,653		–			(71,368	)		285		–			71,653
	$	132,678	$	(32,729	)	$	99,949	$	(19,347	)	$	(78,970	)	$	1,632	$	4,036		$	103,985
2019 Derivatives	$	43,941	$	(21,206	)	$	22,735	$	(14,572	)	$	(6,840)		$	1,323	$	2,378		$	25,113
Cash collateral on securities lent		1,822		–			1,822		–			(1,779	)		43		–			1,822
Obligations related to securities sold under repurchase agreements		54,821		(3,020	)		51,801		–			(51,343	)		458		–			51,801
	$	100,584	$	(24,226	)	$	76,358	$	(14,572	)	$	(59,962)		$	1,824	$	2,378		$	78,736

(1) Comprises amounts related to financial instruments which qualify for offsetting. Derivatives cleared through the CME are considered to be settled-to-market and not collateralized-to-market. Derivatives which are settled-to-market are settled on a daily basis, resulting in derecognition, rather than offsetting, of the related amounts. As a result, settled-to-market amounts are not considered to be subject to enforceable netting arrangements. In the absence of this, an amount of $964 million as at October 31, 2020 (2019: $355 million) relating to derivatives cleared through CME would otherwise have been considered to be offset on the consolidated balance sheet.

(2) Comprises amounts subject to set-off under enforceable netting agreements, such as ISDA agreements, derivative exchange or clearing counterparty agreements, global master repurchase agreements, and global master securities lending agreements. Under such arrangements, all outstanding transactions governed by the relevant agreement can be offset if an event of default or other predetermined event occurs.

(3) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.

(4) Includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction, exchange-traded derivatives and derivatives which are settled-to-market.

The offsetting and collateral arrangements discussed above and other credit risk mitigation strategies used by CIBC are further explained in the “Credit risk” section of the MD&A. Certain amounts of securities received as collateral are restricted from being sold or re-pledged.

Note  30 Interest income and expense

The table below provides the consolidated interest income and expense by accounting categories.

$ millions, for the year ended October 31		Interest income		Interest expense
2020	Measured at amortized cost (1)(2)	$	15,055	$	6,062
	Debt securities measured at FVOCI (1)		685		n/a
	Other (3)		1,782		416
	Total	$	17,522	$	6,478
2019	Measured at amortized cost (1)(2)	$	17,871	$	9,824
	Debt securities measured at FVOCI (1)		960		n/a
	Other (3)		1,866		322
	Total	$	20,697	$	10,146
2018	Measured at amortized cost (1)(2)	$	15,275	$	7,139
	Debt securities measured at FVOCI (1)		749		n/a
	Other (3)		1,481		301
	Total	$	17,505	$	7,440

(1) Interest income for financial instruments that are measured at amortized cost and debt securities that are measured at FVOCI is calculated using the effective interest rate method.

(2) Effective November 1, 2019, includes interest income on sublease-related assets and interest expense on lease liabilities under IFRS 16.

(3) Includes interest income and expense and dividend income for financial instruments that are mandatorily measured and designated at FVTPL and equity securities designated at FVOCI.

n/a Not applicable.

CIBC 2020 ANNUAL REPORT 187

Consolidated financial statements

Note  31 Segmented and geographic information

CIBC has four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth Management, and Capital Markets. These SBUs are supported by Corporate and Other.

Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, products and services through banking centres, as well as through direct, mobile and remote channels.

Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services to middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to institutional investors.

U.S. Commercial Banking and Wealth Management delivers commercial banking and private wealth services across the U.S., as well as personal and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and high-net-worth families.

Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking solutions and top-ranked research to corporate, commercial, government and institutional clients around the world.

Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income statement and balance sheet items not directly attributable to the business lines.

Business unit allocations

Revenue, expenses, and other balance sheet resources related to certain activities are generally allocated to the lines of business within the SBUs.

Treasury activities impact the financial results of the SBUs. Each line of business within our SBUs is charged or credited with a market-based cost of funds on assets and liabilities, respectively, which impacts the revenue performance of the SBUs. Consistent with the changes discussed in the “Changes made to our business segments” section, this market-based cost of funds takes into account the cost of maintaining sufficient regulatory capital to support business requirements, including the cost of preferred shares. Once the interest and liquidity risks inherent in our client-driven assets and liabilities are transfer priced into Treasury, they are managed within CIBC’s risk framework and limits. The residual financial results associated with Treasury activities are reported in Corporate and Other, with the exception of certain Treasury activities in U.S. Commercial Banking and Wealth Management, which are reported in that SBU. Capital is attributed to the SBUs in a manner that is intended to consistently measure and align the costs with the underlying benefits and risks associated with SBU activities. Earnings on unattributed capital remain in Corporate and Other. As discussed in the “Changes made to our business segments” section, effective November 1, 2019, capital is attributed to the SBUs based on the estimated amount of regulatory capital required to support their businesses. We review our transfer pricing methodologies on an ongoing basis to ensure they reflect changing market environments and industry practices.

To measure and report the results of operations of the lines of business within our Canadian Personal and Business Banking and Canadian Commercial Banking and Wealth Management SBUs, we use a Product Owner/Customer Segment/Distributor Channel allocation management model. The model uses certain estimates and methodologies to process internal transfers between lines of business for sales, renewals and trailer commissions. Periodically, the sales, renewals and trailer commission rates paid to customer segments for certain products/services are revised and applied prospectively.

The non-interest expenses of the functional and support groups are generally allocated to the business lines within the SBUs based on appropriate criteria and methodologies. The basis of allocation is reviewed periodically to reflect changes in support to business lines. Other costs not directly attributable to business lines remain in Corporate and Other.

We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs.

Changes made to our business segments

2020

The following changes were made in the first quarter of 2020:

• We changed the way that we allocate capital to our SBUs. Previously, we utilized an economic capital model to attribute capital to our SBUs. Effective November 1, 2019, capital is now allocated to the SBUs based on the estimated amount of regulatory capital required to support their businesses.

• The transfer pricing methodology used by Treasury was enhanced to align with the changes that we made to our capital allocation methodology as discussed above. Concurrently with this change, we also made other updates and enhancements to our funds transfer pricing methodology as well as minor updates to certain allocation methodologies.

These changes impacted the results of our SBUs. Prior period amounts were revised accordingly. There was no impact on consolidated net income resulting from these changes.

188 CIBC 2020 ANNUAL REPORT

Consolidated financial statements

Results by reporting segments and geographic areas

$ millions, for the year ended October 31		Canadian Personal and Business Banking		Canadian Commercial Banking and Wealth Management		U.S. Commercial Banking and Wealth Management		Capital Markets			Corporate and Other			CIBC Total		Canada (1)		U.S. (1)		Caribbean (1)		Other countries (1)
2020	Net interest income (2)	$	6,294	$	1,248	$	1,433	$	1,910		$	159		$	11,044	$	8,449	$	1,583	$	890	$	122
	Non-interest income (3)(4)		2,194		2,873		621		1,577			432			7,697		5,243		1,167		616		671
	Total revenue		8,488		4,121		2,054		3,487			591			18,741		13,692		2,750		1,506		793
	Provision for (reversal of) credit losses		1,219		303		487		281			199			2,489		1,648		623		199		19
	Amortization and impairment (5)		230		30		126		10			915			1,311		805		174		312		20
	Other non-interest expenses		4,373		2,149		1,007		1,624			898			10,051		7,991		1,336		530		194
	Income (loss) before income taxes		2,666		1,639		434		1,572			(1,421	)		4,890		3,248		617		465		560
	Income taxes (2)		704		437		54		441			(538	)		1,098		700		165		89		144
	Net income (loss)	$	1,962	$	1,202	$	380	$	1,131		$	(883	)	$	3,792	$	2,548	$	452	$	376	$	416
	Net income (loss) attributable to:
	Non-controlling interests	$	–	$	–	$	–	$	–		$	2		$	2	$	–	$	–	$	2	$	–
	Equity shareholders		1,962		1,202		380		1,131			(885	)		3,790		2,548		452		374		416
	Average assets (6)	$	261,956	$	65,839	$	55,237	$	221,117		$	131,343		$	735,492	$	554,787	$	122,721	$	33,012	$	24,972
2019 (7)	Net interest income (2)	$	6,372	$	1,205	$	1,381	$	1,253		$	340		$	10,551	$	7,890	$	1,405	$	820	$	436
	Non-interest income (3)(4)		2,383		2,822		583		1,707			565			8,060		6,008		1,099		643		310
	Total revenue		8,755		4,027		1,964		2,960			905			18,611		13,898		2,504		1,463		746
	Provision for (reversal of) credit losses		896		163		73		153			1			1,286		1,111		173		1		1
	Amortization and impairment (5)		96		8		109		4			621			838		508		139		181		10
	Other non-interest expenses		4,649		2,098		1,010		1,512			749			10,018		7,985		1,290		556		187
	Income (loss) before income taxes		3,114		1,758		772		1,291			(466	)		6,469		4,294		902		725		548
	Income taxes (2)		825		471		90		337			(375	)		1,348		1,008		139		155		46
	Net income (loss)	$	2,289	$	1,287	$	682	$	954		$	(91	)	$	5,121	$	3,286	$	763	$	570	$	502
	Net income (loss) attributable to:
	Non-controlling interests	$	–	$	–	$	–	$	–		$	25		$	25	$	–	$	–	$	25	$	–
	Equity shareholders		2,289		1,287		682		954			(116	)		5,096		3,286		763		545		502
	Average assets (6)	$	259,089	$	62,552	$	47,495	$	184,566		$	86,014		$	639,716	$	501,066	$	99,152	$	27,086	$	12,412
2018 (7)	Net interest income (2)	$	6,151	$	1,091	$	1,231	$	1,432		$	160		$	10,065	$	7,963	$	1,204	$	793	$	105
	Non-interest income (3)(4)		2,444		2,745		529		1,503			548			7,769		6,030		895		567		277
	Total revenue		8,595		3,836		1,760		2,935			708			17,834		13,993		2,099		1,360		382
	Provision for (reversal of) credit losses		741		5		79		(30	)		75			870		740		57		75		(2	)
	Amortization and impairment (5)		98		9		107		4			439			657		469		136		44		8
	Other non-interest expenses		4,297		2,058		916		1,488			842			9,601		7,655		1,231		530		185
	Income (loss) before income taxes		3,459		1,764		658		1,473			(648	)		6,706		5,129		675		711		191
	Income taxes (2)		919		478		97		387			(459	)		1,422		1,021		288		72		41
	Net income (loss)	$	2,540	$	1,286	$	561	$	1,086		$	(189	)	$	5,284	$	4,108	$	387	$	639	$	150
	Net income (loss) attributable to:
	Non-controlling interests	$	–	$	–	$	–	$	–		$	17		$	17	$	–	$	–	$	17	$	–
	Equity shareholders		2,540		1,286		561		1,086			(206	)		5,267		4,108		387		622		150
	Average assets (6)	$	259,131	$	55,713	$	41,238	$	166,231		$	76,128		$	598,441	$	476,224	$	80,935	$	31,101	$	10,181

(1) Net income and average assets are allocated based on the geographic location where they are recorded.

(2) U.S. Commercial Banking and Wealth Management and Capital Markets net interest income and income taxes include taxable equivalent basis (TEB) adjustments of nil and $183 million, respectively (2019: $2 million and $177 million, respectively; 2018: $2 million and $278 million, respectively) with an equivalent offset in Corporate and Other.

(3) The fee and commission income within non-interest income consists primarily of underwriting and advisory fees, deposit and payment fees, credit fees, card fees, investment management and custodial fees, mutual fund fees and commissions on securities transactions. Underwriting and advisory fees are earned primarily in Capital Markets with the remainder earned in Canadian Commercial Banking and Wealth Management. Deposit and payment fees are earned primarily in Canadian Personal and Business Banking, with the remainder earned mainly in Canadian Commercial Banking and Wealth Management and Corporate and Other. Credit fees are earned primarily in Canadian Commercial Banking and Wealth Management, Capital Markets, and U.S. Commercial Banking and Wealth Management. Card fees are earned primarily in Canadian Personal and Business Banking, with the remainder earned mainly in Corporate and Other. Investment management and custodial fees are earned primarily in Canadian Commercial Banking and Wealth Management and U.S. Commercial Banking and Wealth Management, with the remainder earned mainly in Corporate and Other. Mutual fund fees are earned primarily in Canadian Commercial Banking and Wealth Management and U.S. Commercial Banking and Wealth Management. Commissions on securities transactions are earned primarily in Capital Markets and Canadian Commercial Banking and Wealth Management, with the remainder earned mainly in Canadian Personal and Business Banking.

(4) Includes intersegment revenue, which represents internal sales commissions and revenue allocations under the Manufacturer / Customer Segment / Distributor Management Model.

(5) Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets, and goodwill.

(6) Assets are disclosed on an average basis as this measure is most relevant to a financial institution and is the measure reviewed by management.

(7) Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.

CIBC 2020 ANNUAL REPORT 189

Consolidated financial statements

The following table provides a breakdown of revenue from our reporting segments:

$ millions, for the year ended October 31	2020			2019 (1)		2018 (1)
Canadian Personal and Business Banking	$	8,488		$	8,755	$	8,595
Canadian Commercial Banking and Wealth Management
Commercial banking	$	1,663		$	1,633	$	1,461
Wealth management		2,458			2,394		2,375
	$	4,121		$	4,027	$	3,836
U.S. Commercial Banking and Wealth Management (2)
Commercial banking (3)	$	1,432		$	1,353	$	1,194
Wealth management		622			611		566
	$	2,054		$	1,964	$	1,760
Capital Markets (2)
Global markets	$	2,143		$	1,729	$	1,694
Corporate and investment banking		1,344			1,231		1,241
	$	3,487		$	2,960	$	2,935
Corporate and Other (2)
International banking	$	734		$	798	$	657
Other		(143	)		107		51
	$	591		$	905	$	708

(1) Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.

(2) U.S. Commercial Banking and Wealth Management and Capital Markets revenue includes a TEB adjustment of nil and $183 million, respectively (2019: $2 million and $177 million, respectively; 2018: $2 million and $278 million, respectively) with an equivalent offset in Corporate and Other.

(3) Certain information has been reclassified to conform to the presentation adopted in the first quarter of 2020. Commercial banking now includes the Other line of business, which includes the treasury activities relating to CIBC Bank USA, as these activities primarily support the commercial banking line of business.

Note  32 Future accounting policy changes

Conceptual Framework for Financial Reporting

In March 2018, the IASB issued a revised version of its “Conceptual Framework for Financial Reporting” (Conceptual Framework). The Conceptual Framework sets out the fundamental concepts that underlie the preparation and presentation of financial statements and serves to guide the IASB in developing IFRS standards. The Conceptual Framework also assists entities in developing accounting policies when no IFRS standard applies to a particular transaction, and more broadly, the Conceptual Framework helps entities to understand and interpret the standards. The Conceptual Framework is effective for annual periods beginning on or after January 1, 2020, which for us will be on November 1, 2020.

The impact of the Conceptual Framework is not expected to be significant to our consolidated financial statements.

IFRS 17 “Insurance Contracts” (IFRS 17)

IFRS 17 “Insurance Contracts” (IFRS 17), issued in May 2017, replaces IFRS 4 “Insurance Contracts”. On June 25, 2020, the IASB issued amendments to IFRS 17 partly aimed at helping companies implement the standard. IFRS 17, incorporating the amendments, is effective for annual reporting periods beginning on or after January 1, 2023, which is a two-year deferral from the original effective date, and for us, will be November 1, 2023. IFRS 17 provides comprehensive guidance on the recognition, measurement, presentation and disclosure of insurance contracts we issue and reinsurance contracts we hold.

We continue to evaluate the impact of IFRS 17 on our consolidated financial statements and to prepare for its implementation. We have established an Executive Steering Committee and a project team to support the implementation of IFRS 17. This team continues to determine the required changes to our accounting and actuarial policies resulting from the adoption of IFRS 17, including the amendments issued in June 2020, and to evaluate the required technology solution to support the new requirements.

Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

In August 2020, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16”, which addresses issues that affect financial reporting once an existing rate is replaced with an alternative rate and provides specific disclosure requirements. The Phase 2 amendments provide relief for the modification of financial assets and financial liabilities, lease modifications, and specific hedge accounting requirements. The Phase 2 amendments are effective for annual periods beginning on or after January 1, 2021. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9, the amendments will apply to IAS 39, IFRS 7, IFRS 4 and IFRS 16 for us, mandatorily effective on November 1, 2021. Earlier application is permitted. We continue to evaluate the impact of the amendments on our consolidated financial statements.

190 CIBC 2020 ANNUAL REPORT

Quarterly review

Condensed consolidated statement of income

	2020									2019
Unaudited, $ millions, for the three months ended	Oct. 31		Jul. 31		Apr. 30			Jan. 31		Oct. 31		Jul. 31		Apr. 30		Jan. 31
Net interest income	$	2,792	$	2,729	$	2,762		$	2,761	$	2,801	$	2,694	$	2,460	$	2,596
Non-interest income		1,808		1,979		1,816			2,094		1,971		2,038		2,082		1,969
Total revenue		4,600		4,708		4,578			4,855		4,772		4,732		4,542		4,565
Provision for credit losses		291		525		1,412			261		402		291		255		338
Non-interest expenses		2,891		2,702		2,704			3,065		2,838		2,670		2,588		2,760
Income before income taxes		1,418		1,481		462			1,529		1,532		1,771		1,699		1,467
Income taxes		402		309		70			317		339		373		351		285
Net income	$	1,016	$	1,172	$	392		$	1,212	$	1,193	$	1,398	$	1,348	$	1,182
Net income (loss) attributable to non-controlling interests	$	1	$	2	$	(8	)	$	7	$	8	$	6	$	7	$	4
Preferred shareholders and other equity instrument holders		30		31		30			31		32		28		28		23
Common shareholders		985		1,139		370			1,174		1,153		1,364		1,313		1,155
Net income attributable to equity shareholders	$	1,015	$	1,170	$	400		$	1,205	$	1,185	$	1,392	$	1,341	$	1,178

Condensed consolidated balance sheet

	2020												2019
Unaudited, $ millions, as at	Oct. 31			Jul. 31			Apr. 30			Jan. 31			Oct. 31			Jul. 31			Apr. 30			Jan. 31
Assets
Cash and deposits with banks	$	62,518		$	68,422		$	55,471		$	20,731		$	17,359		$	16,699		$	14,407		$	16,572
Securities		149,046			144,344			133,806			129,349			121,310			119,699			121,547			109,027
Securities borrowed or purchased under resale agreements		74,142			62,060			71,706			63,904			59,775			55,422			54,085			56,848
Loans
Residential mortgages		221,165			216,469			213,254			209,792			208,652			207,531			207,396			207,657
Personal and credit card		53,611			53,150			53,541			55,565			56,406			56,321			55,758			55,143
Business and government		135,546			138,496			147,855			129,539			125,798			123,680			121,815			113,976
Allowance for credit losses		(3,540	)		(3,347	)		(3,064	)		(1,948	)		(1,915	)		(1,771	)		(1,751	)		(1,715	)
Derivative instruments		32,730			43,476			40,319			25,251			23,895			24,582			22,103			21,174
Customers’ liability under acceptances		9,606			9,689			8,993			9,505			9,167			9,679			9,727			10,011
Other assets		34,727			35,786			37,255			30,430			31,157			30,680			29,022			25,954
	$	769,551		$	768,545		$	759,136		$	672,118		$	651,604		$	642,522		$	634,109		$	614,647
Liabilities and equity
Deposits
Personal	$	202,152		$	197,409		$	194,080		$	182,773		$	178,091		$	175,196		$	174,662		$	172,836
Business and government		311,426			311,628			290,800			264,775			257,502			253,976			250,986			239,697
Bank		17,011			16,405			17,497			11,928			11,224			12,650			14,795			13,062
Secured borrowings		40,151			40,693			41,411			38,423			38,895			39,222			37,097			39,112
Derivative instruments		30,508			42,875			41,188			25,380			25,113			25,895			22,839			23,337
Acceptances		9,649			9,802			9,051			9,568			9,188			9,740			9,745			10,051
Obligations related to securities lent or sold short or under repurchase agreements		89,440			82,765			96,288			76,188			69,258			65,557			65,584			60,576
Other liabilities		22,167			21,047			23,750			19,158			19,069			16,656			17,017			15,731
Subordinated indebtedness		5,712			5,822			4,818			4,695			4,684			5,620			4,171			4,162
Equity		41,335			40,099			40,253			39,230			38,580			38,010			37,213			36,083
	$	769,551		$	768,545		$	759,136		$	672,118		$	651,604		$	642,522		$	634,109		$	614,647

CIBC 2020 ANNUAL REPORT 191

Select financial measures

	2020												2019
Unaudited, as at or for the three months ended	Oct. 31			Jul. 31			Apr. 30			Jan. 31			Oct. 31			Jul. 31			Apr. 30			Jan. 31
Return on common shareholders’ equity		10.7	%		12.1	%		4.0	%		13.1	%		12.9	%		15.5	%		15.8	%		13.8	%
Return on average assets		0.52	%		0.62	%		0.22	%		0.71	%		0.72	%		0.86	%		0.87	%		0.76	%
Average common shareholders’ equity ($ millions)	$	36,762		$	37,360		$	37,386		$	35,671		$	35,553		$	35,028		$	34,091		$	33,183
Average assets ($ millions)	$	778,933		$	757,589		$	725,701		$	679,531		$	655,971		$	648,537		$	633,556		$	620,599
Average assets to average common equity		21.2			20.3			19.4			19.0			18.5			18.5			18.6			18.7
Capital and leverage
CET1 ratio		12.1	%		11.8	%		11.3	%		11.3	%		11.6	%		11.4	%		11.2	%		11.2	%
Tier 1 capital ratio		13.6	%		13.0	%		12.5	%		12.5	%		12.9	%		12.7	%		12.6	%		12.7	%
Total capital ratio		16.1	%		15.4	%		14.5	%		14.5	%		15.0	%		15.2	%		14.5	%		14.7	%
Leverage ratio		4.7	%		4.6	%		4.5	%		4.3	%		4.3	%		4.3	%		4.3	%		4.2	%
Net interest margin		1.43	%		1.43	%		1.55	%		1.62	%		1.69	%		1.65	%		1.59	%		1.66	%
Efficiency ratio		62.9	%		57.4	%		59.1	%		63.1	%		59.5	%		56.4	%		57.0	%		60.5	%

Common share information

	2020												2019
Unaudited, as at or for the three months ended	Oct. 31			Jul. 31			Apr. 30			Jan. 31			Oct. 31			Jul. 31			Apr. 30			Jan. 31
Weighted-average basic shares outstanding (thousands)		446,321			445,416			444,739			445,248			445,357			444,868			444,028			443,033
Per share
– basic earnings	$	2.21		$	2.56		$	0.83		$	2.64		$	2.59		$	3.07		$	2.96		$	2.61
– diluted earnings		2.20			2.55			0.83			2.63			2.58			3.06			2.95			2.60
– dividends		1.46			1.46			1.46			1.44			1.44			1.40			1.40			1.36
– book value (1)		84.05			83.17			83.67			81.38			79.87			78.58			77.49			75.11
Closing share price (2)		99.38			92.73			82.48			107.92			112.31			103.83			112.81			111.41
Dividend payout ratio		66.2	%		57.1	%		176.0	%		54.6	%		55.6	%		45.7	%		47.3	%		52.2	%

(1) Common shareholders’ equity divided by the number of common shares issued and outstanding at end of period.

(2) The high and low price during the period, and closing price on the last trading day of the period, on the TSX.

192 CIBC 2020 ANNUAL REPORT

Ten-year statistical review

Condensed consolidated statement of income

Unaudited, $ millions, for the year ended October 31	2020		2019		2018		2017		2016		2015		2014			2013			2012		2011
Net interest income	$	11,044	$	10,551	$	10,065	$	8,977	$	8,366	$	7,915	$	7,459		$	7,453		$	7,326	$	7,062
Non-interest income		7,697		8,060		7,769		7,303		6,669		5,941		5,904			5,252			5,159		5,373
Total revenue		18,741		18,611		17,834		16,280		15,035		13,856		13,363			12,705			12,485		12,435
Provision for credit losses		2,489		1,286		870		829		1,051		771		937			1,121			1,291		1,144
Non-interest expenses		11,362		10,856		10,258		9,571		8,971		8,861		8,512			7,608			7,202		7,486
Income before income taxes		4,890		6,469		6,706		5,880		5,013		4,224		3,914			3,976			3,992		3,805
Income taxes		1,098		1,348		1,422		1,162		718		634		699			626			689		927
Net income	$	3,792	$	5,121	$	5,284	$	4,718	$	4,295	$	3,590	$	3,215		$	3,350		$	3,303	$	2,878
Net income (loss) attributable to non-controlling interests	$	2	$	25	$	17	$	19	$	20	$	14	$	(3	)	$	(2	)	$	9	$	11
Preferred shareholders and other equity instrument holders		122		111		89		52		38		45		87			99			158		177
Common shareholders		3,668		4,985		5,178		4,647		4,237		3,531		3,131			3,253			3,136		2,690
Net income attributable to equity shareholders	$	3,790	$	5,096	$	5,267	$	4,699	$	4,275	$	3,576	$	3,218		$	3,352		$	3,294	$	2,867

Condensed consolidated balance sheet

Unaudited, $ millions, as at October 31	2020			2019			2018			2017			2016			2015			2014			2013			2012			2011
Assets
Cash and deposits with banks	$	62,518		$	17,359		$	17,691		$	14,152		$	14,165		$	18,637		$	13,547		$	6,379		$	4,727		$	5,142
Securities		149,046			121,310			101,664			93,419			87,423			74,982			59,542			71,984			65,334			60,295
Securities borrowed or purchased under resale agreements		74,142			59,775			48,938			45,418			33,810			33,334			36,796			28,728			28,474			27,479
Loans
Residential mortgages		221,165			208,652			207,749			207,271			187,298			169,258			157,526			150,938			150,056			150,509
Personal and credit card		53,611			56,406			55,731			53,315			50,373			48,321			47,087			49,213			50,476			50,586
Business and government		135,546			125,798			109,555			97,766			71,437			65,276			56,075			48,207			43,624			39,663
Allowance for credit losses		(3,540	)		(1,915	)		(1,639	)		(1,618	)		(1,691	)		(1,670	)		(1,660	)		(1,698	)		(1,860	)		(1,803	)
Derivative instruments		32,730			23,895			21,431			24,342			27,762			26,342			20,680			19,947			27,039			28,270
Customers’ liability under acceptances		9,606			9,167			10,265			8,824			12,364			9,796			9,212			9,720			10,436			9,454
Other assets		34,727			31,157			25,714			22,375			18,416			19,033			16,098			14,588			14,813			14,163
	$	769,551		$	651,604		$	597,099		$	565,264		$	501,357		$	463,309		$	414,903		$	398,006		$	393,119		$	383,758
Liabilities and equity
Deposits
Personal	$	202,152		$	178,091		$	163,879		$	159,327		$	148,081		$	137,378		$	130,085		$	125,034		$	118,153		$	116,592
Business and government		311,426			257,502			240,149			225,622			190,240			178,850			148,793			134,736			125,055			117,143
Bank		17,011			11,224			14,380			13,789			17,842			10,785			7,732			5,592			4,723			4,177
Secured borrowings		40,151			38,895			42,607			40,968			39,484			39,644			38,783			49,802			52,413			51,308
Derivative instruments		30,508			25,113			20,973			23,271			28,807			29,057			21,841			19,724			27,091			28,792
Acceptances		9,649			9,188			10,296			8,828			12,395			9,796			9,212			9,721			10,481			9,489
Obligations related to securities lent or sold short or under repurchase agreements		89,440			69,258			47,353			43,708			24,550			20,149			23,764			20,313			21,259			21,730
Capital Trust securities (1)		n/a			n/a			n/a			n/a			n/a			n/a			n/a			n/a			1,678			1,594
Other liabilities		22,167			19,069			18,266			15,305			12,919			12,223			10,932			10,862			11,076			11,704
Subordinated indebtedness		5,712			4,684			4,080			3,209			3,366			3,874			4,978			4,228			4,823			5,138
Non-controlling interests		181			186			173			202			201			193			164			175			170			164
Shareholders’ equity		41,154			38,394			34,943			31,035			23,472			21,360			18,619			17,819			16,197			15,927
	$	769,551		$	651,604		$	597,099		$	565,264		$	501,357		$	463,309		$	414,903		$	398,006		$	393,119		$	383,758

(1) Commencing November 1, 2012, CIBC Capital Trust was deconsolidated.

n/a Not applicable.

CIBC 2020 ANNUAL REPORT 193

Select financial measures

Unaudited, as at or for the year ended October 31	2020			2019			2018			2017			2016			2015			2014			2013			2012			2011
Return on equity		10.0	%		14.5	%		16.6	%		18.3	%		19.9	%		18.7	%		18.3	%		21.4	%		22.2	%		22.2	%
Return on average assets		0.52	%		0.80	%		0.88	%		0.87	%		0.84	%		0.79	%		0.78	%		0.83	%		0.83	%		0.73	%
Average common shareholders’ equity ($ millions)	$	36,792		$	34,467		$	31,184		$	25,393		$	21,275		$	18,857		$	17,067		$	15,167		$	14,116		$	12,145
Average assets ($ millions)	$	735,492		$	639,716		$	598,441		$	542,365		$	509,140		$	455,324		$	411,481		$	403,546		$	397,155		$	394,527
Average assets to average common equity		20.0			18.6			19.2			21.4			23.9			24.1			24.1			26.6			28.1			32.5
Capital and leverage – Basel III
CET1 ratio		12.1	%		11.6	%		11.4	%		10.6	%		11.3	%		10.8	%		10.3	%		9.4	%		n/a			n/a
Tier 1 capital ratio		13.6	%		12.9	%		12.9	%		12.1	%		12.8	%		12.5	%		12.2	%		11.6	%		n/a			n/a
Total capital ratio		16.1	%		15.0	%		14.9	%		13.8	%		14.8	%		15.0	%		15.5	%		14.6	%		n/a			n/a
Leverage ratio		4.7	%		4.3	%		4.3	%		4.0	%		4.0	%		3.9	%		n/a			n/a			n/a			n/a
Basel II
Tier 1 capital ratio (1)		n/a			n/a			n/a			n/a			n/a			n/a			n/a			n/a			13.8	%		14.7	%
Total capital ratio (1)		n/a			n/a			n/a			n/a			n/a			n/a			n/a			n/a			17.3	%		18.4	%
Net interest margin		1.50	%		1.65	%		1.68	%		1.66	%		1.64	%		1.74	%		1.81	%		1.85	%		1.84	%		1.79	%
Efficiency ratio		60.6	%		58.3	%		57.5	%		58.8	%		59.7	%		63.9	%		63.7	%		59.9	%		57.7	%		60.2	%

(1) Capital measures for fiscal year 2011 are under Canadian GAAP and have not been restated for IFRS.

n/a Not applicable.

Condensed consolidated statement of changes in equity

Unaudited, $ millions, for the year ended October 31	2020			2019			2018			2017			2016			2015			2014			2013			2012			2011
Balance at beginning of year	$	38,580		$	35,116		$	31,237		$	23,673		$	21,553		$	18,783		$	17,994		$	16,367		$	16,091		$	14,799
Adjustment for change in accounting policy		148	(1)		6	(2)		(91	) (3)		–			–			–			–	(4)		7	(5)		(180	)		–
Premium on purchase of common shares		(166	)		(79	)		(313	)		–			(209	)		(9	)		(250	)		(422	)		(118	)		–
Premium on redemption of preferred shares		–			–			–			–			–			–			–			–			(30	)		(12	)
Changes in share capital
Preferred and other equity instruments		750			575			453			797			–			(31	)		(675	)		–			(1,050	)		(400	)
Common		317			348			695			4,522			213			31			29			(16	)		393			572
Changes in contributed surplus		(8	)		(11	)		(1	)		65			(4	)		1			(7	)		(3	)		(8	)		(5	)
Changes in OCI		647			122			317			(338	)		(248	)		933			145			325			(435	)		(171	)
Net income		3,790			5,096			5,267			4,699			4,275			3,576			3,218			3,352			3,294			2,867
Dividends and distributions
Preferred and other equity instruments		(122	)		(111	)		(89	)		(52	)		(38	)		(45	)		(87	)		(99	)		(128	)		(165	)
Common		(2,592	)		(2,488	)		(2,356	)		(2,121	)		(1,879	)		(1,708	)		(1,567	)		(1,523	)		(1,470	)		(1,391	)
Non-controlling interests		(5	)		13			(25	)		1			8			29			(11	)		5			8			(4	)
Other		(4	)		(7	)		22			(9	)		2			(7	)		(6	)		1			–			1
Balance at end of year	$	41,335		$	38,580		$	35,116		$	31,237		$	23,673		$	21,553		$	18,783		$	17,994		$	16,367		$	16,091

(1) Represents the impact of adoption of IFRS 16 “Leases”.

(2) Represents the impact of adoption of IFRS 15 “Revenue from Contracts with Customers”.

(3) Represents the impact of adoption of IFRS 9 “Financial Instruments”.

(4) Represents the impact of adoption of IFRS 10 “Consolidated Financial Statements”.

(5) Represents the impact of adoption of amendments to IAS 19 “Employee Benefits”.

194 CIBC 2020 ANNUAL REPORT

Common share information

Unaudited, as at or for the year ended October 31	2020			2019			2018			2017			2016			2015			2014			2013			2012			2011
Weighted-average number basic shares outstanding (thousands)		445,435			444,324			443,082	(1)		412,636			395,389			397,213			397,620			400,880			403,685			396,233
Per share
– basic earnings	$	8.23		$	11.22		$	11.69		$	11.26		$	10.72		$	8.89		$	7.87		$	8.11		$	7.77		$	6.79
– diluted earnings		8.22			11.19			11.65			11.24			10.70			8.87			7.86			8.11			7.76			6.71
– dividends		5.82			5.60			5.32			5.08			4.75			4.30			3.94			3.80			3.64			3.51
– book value (2)		84.05			79.87			73.83			66.55			56.59			51.25			44.30			40.36			35.83			32.88
Closing share price (3)		99.38			112.31			113.68			113.56			100.50			100.28			102.89			88.70			78.56			75.10
Dividend payout ratio		70.7	%		49.9	%		45.5	%		45.6	%		44.3	%		48.4	%		50.0	%		46.8	%		46.9	%		51.7	%

(1) Excludes 2,010,890 common shares which were issued and outstanding but which had not been acquired by a third party as at October 31, 2017. These shares were issued as a component of our acquisition of The PrivateBank.

(2) Common shareholders’ equity divided by the number of common shares issued and outstanding at end of year.

(3) The high and low price during the year, and closing price on the last trading day of the year, on the TSX.

Preferred shares and other equity instruments⁽¹⁾

Unaudited, for the year ended October 31

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Preferred shares

Class A

Series 18

$

–

$

–

$

–

$

–

$

–

$

–

$

–

$

–

$

1.3694

$

1.3750

Series 19

–

–

–

–

–

–

–

–

–

–

Series 23

–

–

–

–

–

–

–

–

–

–

Series 26

–

–

–

–

–

–

1.4375

1.4375

1.4375

1.4375

Series 27

–

–

–

–

–

0.3500

1.4000

1.4000

1.4000

1.4000

Series 28

–

–

–

–

–

–

–

–

–

0.0400

Series 29

–

–

–

–

–

0.6750

1.3500

1.3500

1.3500

1.3500

Series 30

–

–

–

–

–

–

–

–

–

0.9000

Series 31

–

–

–

–

–

–

–

–

0.2938

1.1750

Series 32

–

–

–

–

–

–

–

–

0.5625

1.1250

Series 33

–

–

–

–

–

–

1.0031

1.3375

1.3375

1.3375

Series 35

–

–

–

–

–

–

0.8125

1.6250

1.6250

1.6250

Series 37

–

–

–

–

–

–

1.2188

1.6250

1.6250

1.6250

Series 39

0.9283

0.9633

0.9750

0.9750

0.9750

0.9750

0.3793

–

–

–

Series 41

0.9673

0.9375

0.9375

0.9375

0.9375

0.8203

–

–

–

–

Series 43

0.8714

0.9000

0.9000

0.9000

0.9000

0.5764

–

–

–

–

Series 45

1.1000

1.1000

1.1000

0.4551

–

–

–

–

–

–

Series 47

1.1250

1.1250

0.8769

–

–

–

–

–

–

–

Series 49

1.3000

0.9990

–

–

–

–

–

–

–

–

Series 51

1.2875

0.5256

–

–

–

–

–

–

–

–

Other equity instruments

Limited Recourse Capital Notes

Series 1

–

–

–

–

–

–

–

–

–

–

(1) The dividends and distributions are adjusted for the number of days during the year that the share is outstanding at the time of issuance and redemption.

CIBC 2020 ANNUAL REPORT 195

Glossary

Allowance for credit losses

Under IFRS 9, allowance for credit losses represents 12 months of expected credit losses (ECL) for instruments that have not been subject to a significant increase in credit risk, while allowance for credit losses represents lifetime ECL for instruments that have been subject to a significant increase in credit risk, including impaired instruments. ECL allowances for loans and acceptances are included in allowance for credit losses on the consolidated balance sheet. ECL allowances for fair value through other comprehensive income (FVOCI) debt securities are included as a component of the carrying value of the securities, which are measured at fair value. Expected credit loss allowances for other financial assets are included in the carrying value of the instrument. ECL allowances for guarantees and loan commitments are included in other liabilities.

Under IAS 39, allowance for credit losses generally represented an allowance set up in the financial statements sufficient to absorb specifically identified and inherent credit-related losses in CIBC’s portfolio of loans, acceptances, letters of credit and guarantees. This allowance can be “collective”, assessed by reviewing a portfolio of loans with similar characteristics, or “individual”, assessed by reviewing the characteristics of an individual exposure.

Allowance for credit losses are adjusted for provisions for (reversals of) credit losses and are reduced by write-offs, net of recoveries.

Amortized cost

The amount at which a financial asset or financial liability is measured at initial recognition minus repayments, plus or minus any unamortized origination date premiums or discounts, plus or minus any basis adjustments resulting from a fair value hedge, and minus any reduction for impairment (directly or through the use of an allowance account). The amount of a financial asset or liability measured at initial recognition is the cost of the financial asset or liability including capitalized transaction costs and deferred fees.

Assets under administration (AUA)

Assets administered by CIBC that are beneficially owned by clients and are, therefore, not reported on the consolidated balance sheet. The services provided by CIBC are of an administrative nature, such as safekeeping of securities, client reporting and record keeping, collection of investment income, and the settlement of purchase and sale transactions. In addition, AUM amounts are included in the amounts reported under AUA.

Assets under management (AUM)

Assets managed by CIBC that are beneficially owned by clients and are, therefore, not reported on the consolidated balance sheet. The service provided in respect of these assets is discretionary portfolio management on behalf of the clients.

Average interest-earning assets

Average interest-earning assets include interest-bearing deposits with banks, securities, cash collateral on securities borrowed or securities purchased under resale agreements, loans net of allowances, and certain sublease-related assets.

Basis point

One-hundredth of a percentage point (0.01%).

Collateral

Assets pledged to secure loans or other obligations, which are forfeited if the obligations are not repaid.

Collateralized debt obligation (CDO)

Securitization of any combination of corporate debt, asset-backed securities (ABS), mortgage-backed securities or tranches of other CDOs to form a pool of diverse assets that are tranched into securities that offer varying degrees of risk and return to meet investor demand.

Collateralized loan obligation

Securitizations of diversified portfolios of corporate debt obligations and/or ABS that are tranched into securities that offer varying degrees of risk and return to meet investor demand.

Credit derivatives

A category of financial instruments that allow one party (the beneficiary) to separate and transfer the credit risk of nonpayment or partial payment of an underlying financial instrument to another party (the guarantor).

Credit valuation adjustment (CVA)

A valuation adjustment that is required to be considered in measuring fair value of over-the-counter (OTC) derivatives to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. In assessing the net counterparty credit risk (CCR) exposure, we take into account credit mitigants such as collateral, master netting arrangements, and settlements through clearing houses.

Current replacement cost

The estimated cost of replacing an asset at the present time according to its current worth.

Derivatives

A financial contract that derives its value from the performance of an underlying instrument, index or financial rate.

Dividend payout ratio

Common share dividends paid as a percentage of net income after preferred share dividends, premium on preferred share redemptions, and distributions on other equity instruments.

Dividend yield

Dividends per common share divided by the closing common share price.

196 CIBC 2020 ANNUAL REPORT

Effective interest rate method

A method of calculating the amortized cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.

Efficiency ratio

Non-interest expenses as a percentage of total revenue (net interest income and non-interest income). Efficiency ratio is used as a measure of productivity.

Exchange-traded derivative contracts

Standardized derivative contracts (e.g., futures contracts and options) that are transacted on an organized exchange and cleared through a central clearing house, and are generally subject to standard margin requirements.

Fair value

The price that would be received to sell an asset, or paid to transfer a liability, between market participants in an orderly transaction in the principal market at the measurement date under current market conditions.

Forward contracts

A non-standardized contract to buy or sell a specified asset at a specified price and specified date in the future.

Forward rate agreement

An OTC forward contract that determines an interest rate to be paid or received commencing on a specified date in the future for a specified period.

Full-time equivalent employees

A measure that normalizes the number of full-time and part-time employees, base plus commissioned employees, and 100% commissioned employees into equivalent full-time units based on actual hours of paid work during a given period, for individuals whose compensation is included in the Employee compensation and benefits line on the consolidated statement of income.

Futures

A standardized contract to buy or sell a specified commodity, currency or financial instrument of standardized quantity and quality at a specific price and date in the future. Futures contracts are traded on an exchange.

Guarantees and standby letters of credit

Primarily represent CIBC’s obligation, subject to certain conditions, to make payments to third parties on behalf of clients, if these clients cannot make those payments, or are unable to meet other specified contractual obligations.

Hedge

A transaction intended to offset potential losses/gains that may be incurred in a transaction or portfolio.

Loan loss ratio

The ratio is calculated as the provision for credit losses on impaired loans to average loans and acceptances, net of allowance for credit losses.

Mark-to-market

The fair value (as defined above) at which an asset can be sold or a liability can be transferred.

Net interest income

The difference between interest earned on assets (such as loans and securities) and interest incurred on liabilities (such as deposits and subordinated indebtedness).

Net interest margin

Net interest income as a percentage of average assets.

Normal course issuer bid

Involves a listed company buying its own shares for cancellation through a stock exchange or other published market, from time to time, and is subject to the various rules of the exchanges and securities commissions.

Notional amount

Principal amount or face amount of a financial contract used for the calculation of payments made on that contract.

Off-balance sheet financial instruments

A financial contract that is based mainly on a notional amount and represents a contingent asset or liability of an institution. Such instruments include credit-related arrangements.

Office of the Superintendent of Financial Institutions (OSFI)

OSFI supervises and regulates all banks, all federally incorporated or registered trust and loan companies, insurance companies, cooperative credit associations, fraternal benefit societies, and federal pension plans in Canada.

Operating leverage

Operating leverage is the difference between the year-over-year percentage change in revenue (on a taxable equivalent basis) and year-over-year percentage change in non-interest expenses.

CIBC 2020 ANNUAL REPORT 197

Options

A financial contract under which the writer (seller) confers the right, but not the obligation, to the purchaser to either buy (call option) or sell (put option) a specified amount of an underlying asset or instrument at a specified price either at or by a specified date.

Provision for credit losses

An amount charged or credited to income to adjust the allowance for credit losses to the appropriate level, for both performing and impaired financial assets. Provision for credit losses for loans and acceptances and related off-balance sheet loan commitments is included in the Provision for credit losses line on the consolidated statement of income. Provision for credit losses for debt securities measured at FVOCI or amortized cost is included in Gains (losses) from debt securities measured at FVOCI and amortized cost, net.

Return on average assets or average interest-earning assets

Net income expressed as a percentage of average assets or average interest-earning assets.

Return on common shareholders’ equity

Net income attributable to equity shareholders expressed as a percentage of average common shareholders’ equity.

Securities borrowed

Securities are typically borrowed to cover short positions. Borrowing requires the pledging of collateral by the borrower to the lender. The collateral may be cash or a highly rated security.

Securities lent

Securities are typically lent to a borrower to cover their short positions. Borrowing requires the pledging of collateral by the borrower to the lender. The collateral provided may be cash or a highly rated security.

Securities purchased under resale agreements

A transaction where a security is purchased by the buyer and, at the same time, the buyer commits to resell the security to the original seller at a specific price and date in the future.

Securities sold short

A transaction in which the seller sells securities that it does not own. Initially the seller typically borrows the securities in order to deliver them to the purchaser. At a later date, the seller buys identical securities in the market to replace the borrowed securities.

Securities sold under repurchase agreements

A transaction where a security is sold by the seller and, at the same time, the seller commits to repurchase the security from the original purchaser at a specific price and date in the future.

Structured entities (SEs)

Entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.

Swap contracts

A financial contract in which counterparties exchange a series of cash flows based on a specified notional amount over a specified period.

Taxable equivalent basis (TEB)

The gross-up tax-exempt revenue on certain securities to a TEB. There is an equivalent offsetting adjustment to the income tax expense.

Total shareholder return

The total return earned on an investment in CIBC’s common shares. The return measures the change in shareholder value, assuming dividends paid are reinvested in additional shares.

Risk and capital glossary

Advanced internal ratings-based (AIRB) approach for credit risk

Internal models based on historical experience of key risk assumptions such as probability of default (PD), loss given default (LGD) and exposure at default (EAD) are used to compute the capital requirements subject to OSFI approval. A capital floor based on the standardized approach is also calculated by banks under the AIRB approach for credit risk and an adjustment to risk-weighted assets (RWA) may be required as prescribed by OSFI.

Advanced measurement approach (AMA) for operational risk

A risk-sensitive approach to calculating the capital charge for operational risk based on internal risk measurement models, using a combination of quantitative and qualitative risk measurement techniques. Effective in the first quarter of 2020, the AMA approach for operational risk is no longer permitted, and banks must use the standardized approach to calculate operational risk capital requirements.

Asset/liability management (ALM)

The practice of managing risks that arise from mismatches between the assets and liabilities, mainly in the non-trading areas of the bank. Techniques are used to manage the relative duration of CIBC’s assets (such as loans) and liabilities (such as deposits), in order to minimize the adverse impact of changes in interest rates.

198 CIBC 2020 ANNUAL REPORT

Bail-in eligible liabilities

Bail-in eligible liabilities include long-term (i.e., original maturity over 400 days), unsecured senior debt issued on or after September 23, 2018 that is tradable and transferrable, and any preferred shares and subordinated debt that are not considered non-viability contingent capital (NVCC). Consumer deposits, secured liabilities (for example, covered bonds), certain financial contracts (for example, derivatives) and certain structured notes are not bail-in eligible.

Bank exposures

All direct credit risk exposures to deposit-taking institutions and regulated securities firms, and exposures guaranteed by those entities.

Business and government portfolio

A category of exposures that includes lending to businesses and governments, where the primary basis of adjudication relies on the determination and assignment of an appropriate risk rating that reflects the credit risk of the exposure.

Central counterparty (CCP)

A clearing house that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts.

Comprehensive approach for securities financing transactions

A framework for the measurement of CCR with respect to securities financing transactions, which utilizes a volatility adjusted collateral value to reduce the amount of the exposure.

Common Equity Tier 1 (CET1), Tier 1 and Total capital ratios

CET1, Tier 1 and total regulatory capital, divided by RWA, as defined by OSFI’s Capital Adequacy Requirements (CAR) Guideline, which is based on Basel Committee on Banking Supervision (BCBS) standards.

Corporate exposures

All direct credit risk exposures to corporations, partnerships and proprietorships, and exposures guaranteed by those entities.

Credit risk

The risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.

Drawn exposure

The amount of credit risk exposure resulting from loans already advanced to the customer.

Economic capital

Economic capital provides a framework to evaluate the returns of each strategic business unit, commensurate with risk assumed. Economic capital is a non-GAAP risk measure based upon an estimate of equity capital required by the businesses to absorb unexpected losses consistent with our targeted risk rating over a one-year horizon. Economic capital comprises primarily credit, market, operational and strategic risk capital.

Economic profit

A non-GAAP risk-adjusted performance measure used for measuring economic value added. It is calculated as earnings of each business less a charge for the cost of capital.

Exposure at default (EAD)

An estimate of the amount of exposure to a customer at the event of, and at the time of, default.

Incremental risk charge (IRC)

A capital charge applied in addition to market risk capital specifically to cover default and migration risk in unsecuritized credit assets of varying liquidity held in the trading book.

Internal Capital Adequacy Assessment Process (ICAAP)

A framework and process designed to provide a comprehensive view on capital adequacy, as defined by Pillar II of the Basel Accord, wherein we identify and measure our risks on an ongoing basis in order to ensure that the capital available is sufficient to cover all risks across CIBC.

Internal models approach (IMA) for market risk

Models, which have been developed by CIBC and approved by OSFI, for the measurement of risk and regulatory capital in the trading portfolio for general market risk, debt specific risk, and equity specific risk.

Internal model method (IMM) for counterparty credit risk

Models, which have been developed by CIBC and approved by OSFI, for the measurement of CCR with respect to OTC derivatives.

Internal ratings-based (IRB) approach for securitization exposures

This approach comprises two calculation methods available for securitization exposures that require OSFI approval: the Internal Ratings-Based Approach (SEC-IRBA) is available to the banks approved to use the IRB approach for underlying exposures securitized and the Internal Assessment Approach (SEC-IAA) is available for certain securitization exposures extended to asset-backed commercial paper (ABCP) programs.

Leverage ratio exposure

The leverage ratio exposure is defined under the OSFI rules as on-balance sheet assets (unweighted) less Tier 1 capital regulatory adjustments plus derivative exposures, securities financing transaction exposures with a limited form of netting under certain conditions, and other off-balance sheet exposures (such as commitments, direct credit substitutes, forward asset purchases, standby/trade letters of credit and securitization exposures).

CIBC 2020 ANNUAL REPORT 199

Until December 31, 2021, exposures arising from central bank reserves and sovereign-issued securities that qualify as High Quality Liquid Assets (HQLA) may be excluded from the exposure measure for leverage ratio purposes.

Leverage ratio

Defined as Tier 1 capital divided by the leverage ratio exposure determined in accordance with guidelines issued by OSFI, which are based on BCBS standards.

Liquidity coverage ratio (LCR)

Derived from the BCBS’s Basel III framework and incorporated into OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, the LCR is a liquidity standard that aims to ensure that an institution has an adequate stock of unencumbered HQLA that consists of cash or assets that can be converted into cash at little or no loss of value in private markets, to meet its liquidity needs for a 30-calendar-day liquidity stress scenario.

Liquidity risk

The risk of having insufficient cash or its equivalent in a timely and cost-effective manner to meet financial obligations as they come due.

Loss given default (LGD)

An estimate of the amount of exposure to a customer that will not be recovered following a default by that customer, expressed as a percentage of the EAD. LGD is generally based on through-the-cycle assumptions for regulatory capital purposes, and generally based on point-in-time assumptions reflecting forward-looking information for IFRS 9 ECL purposes.

Market risk

The risk of economic financial loss in our trading and non-trading portfolios from adverse changes in underlying market factors, including interest rates, foreign exchange rates, equity market prices, commodity prices, credit spreads and customer behaviour for retail products.

Master netting agreement

An industry standard agreement designed to reduce the credit risk of multiple transactions with a counterparty through the creation of a legal right of offset of exposures in the event of a default by that counterparty and through the provision for net settlement of all contracts through a single payment.

Net cumulative cash flow (NCCF)

The NCCF is a liquidity horizon metric defined under OSFI’s LAR Guideline as a monitoring and supervision tool for liquidity risk that measures an institution’s detailed cash flows in order to capture the risk posed by funding mismatches between assets and liabilities.

Net stable funding ratio (NSFR)

Derived from the BCBS’s Basel III framework and incorporated into OSFI’s LAR Guideline, the NSFR standard aims to promote long-term resilience of the financial sector by requiring banks to maintain a sustainable stable funding profile in relation to the composition of their assets and off-balance sheet activities.

Non-viability contingent capital (NVCC)

Effective January 1, 2013, in order to qualify for inclusion in regulatory capital, all non-common Tier 1 and Tier 2 capital instruments must be capable of absorbing losses at the point of non-viability of a financial institution. This will ensure that investors in such instruments bear losses before taxpayers where the government determines that it is in the public interest to rescue a non-viable bank.

Operational risk

The risk of loss arising from people, inadequate or failed internal processes, and systems or from external events.

Other off-balance sheet exposure

The amount of credit risk exposure resulting from the issuance of guarantees and letters of credit.

Other retail

This exposure class includes all loans other than qualifying revolving retail and real estate secured personal lending that are extended to individuals and small businesses under the regulatory capital reporting framework.

Over-the-counter derivatives exposure

The amount of credit risk exposure resulting from derivatives that trade directly between two counterparties, rather than through exchanges.

Probability of default (PD)

An estimate of the likelihood of default for any particular customer which occurs when that customer is not able to repay its obligations as they become contractually due. PD is generally based on through-the-cycle assumptions for regulatory capital purposes, and generally based on point-in-time assumptions reflecting forward-looking information for IFRS 9 ECL purposes.

Qualifying central counterparty (QCCP)

An entity that is licensed to operate as a CCP and is permitted by the appropriate regulator or oversight body to operate as such with respect to the products offered by that CCP.

Qualifying revolving retail

This exposure class includes credit cards, unsecured lines of credit and overdraft protection products extended to individuals. Under the standardized approach, these exposures would be included under “other retail”.

Real estate secured personal lending

This exposure class includes residential mortgages and home equity loans and lines of credit extended to individuals.

200 CIBC 2020 ANNUAL REPORT

Regulatory capital

Regulatory capital, as defined by OSFI’s CAR Guideline, is comprised of Common Equity Tier 1 (CET1), Additional Tier 1 (AT1) and Tier 2 capital. CET1 capital includes common shares, retained earnings, accumulated other comprehensive income (AOCI) (excluding AOCI relating to cash flow hedges and changes in fair value option liabilities attributable to changes in own credit risk) and qualifying instruments issued by a consolidated banking subsidiary to third parties, less regulatory adjustments for items such as goodwill and other intangible assets, deferred tax assets, net assets related to defined benefit pension plans, and certain investments. On March 27, 2020, OSFI introduced transitional arrangements for the capital treatment of expected loss provisioning, such that part of the allowances that would otherwise be included in Tier 2 capital will instead qualify for inclusion in CET1 capital subject to certain scalars and limitations until fiscal year 2022. AT1 capital primarily includes NVCC preferred shares, Limited Recourse Capital Notes, qualifying instruments issued by a consolidated subsidiary to third parties, and non-qualifying innovative Tier 1 notes which are subject to phase-out rules for capital instruments. Tier 1 capital is comprised of CET1 plus AT1. Tier 2 capital includes NVCC subordinated indebtedness, non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments, eligible general allowances, and qualifying instruments issued by a consolidated subsidiary to third parties. Total capital is comprised of Tier 1 capital plus Tier 2 capital. Qualifying regulatory capital instruments must be capable of absorbing loss at the point of non-viability of the financial institution; non-qualifying capital instruments are excluded from regulatory capital at a rate of 10% per annum commencing January 1, 2013 through to November 1, 2021.

Repo-style transactions exposure

The amount of credit risk exposure resulting from our securities bought or sold under resale agreements, as well as securities borrowing and lending activities.

Reputation risk

The risk of negative publicity regarding CIBC’s business conduct or practices which, whether true or not, could significantly harm CIBC’s reputation as a leading financial institution, or could materially and adversely affect CIBC’s business, operations, or financial condition.

Resecuritization

A securitization exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitization exposure.

Retail portfolios

A category of exposures that primarily includes consumer but also small business lending, where the primary basis of adjudication relies on credit-scoring models.

Risk-weighted assets

RWA consist of three components: (i) RWA for credit risk are calculated using the AIRB and standardized approaches. The AIRB RWA are calculated using PDs, LGDs, EADs, and in some cases maturity adjustments, while the standardized approach applies risk weighting factors specified in the OSFI guidelines to on- and off-balance sheet exposures; (ii) RWA for market risk in the trading portfolio are based on the internal models approved by OSFI with the exception of the RWA for traded securitization assets where we are using the methodology defined by OSFI; and (iii) RWA for operational risk relating to the risk of losses resulting from people, inadequate or failed internal processes, and systems or from external events are calculated under a standardized approach (for 2019 and prior: calculated under the AMA and standardized approaches). Since the introduction of Basel II in 2008, OSFI has prescribed a capital floor requirement for institutions that use the AIRB approach for credit risk. The capital floor is determined by comparing a capital requirement calculated by reference to the Basel II standardized approach against the Basel III calculation, as specified by OSFI. Any shortfall in the Basel III capital requirement is added to RWA.

Securitization

The process of selling assets (normally financial assets such as loans, leases, trade receivables, credit card receivables or mortgages) to trusts or other SEs. An SE normally issues securities or other forms of interests to investors and/or the asset transferor, and the SE uses the proceeds of the issue of securities or other forms of interest to purchase the transferred assets. The SE will generally use the cash flows generated by the assets to meet the obligations under the securities or other interests issued by the SE, which may carry a number of different risk profiles.

Sovereign exposures

All direct credit risk exposures to governments, central banks and certain public sector entities, and exposures guaranteed by those entities.

Standardized approach for credit risk

Applied to exposures when there is not sufficient information to allow for the use of the AIRB approach for credit risk. Credit risk capital requirements are calculated based on a standardized set of risk weights as prescribed in the CAR Guideline. The standardized risk weights are based on external credit assessments, where available, and other risk-related factors, including export credit agencies, exposure asset class, collateral, etc.

Standardized approach for operational risk

Capital is based on prescribed percentages that vary by business activity and is applied to the three-year average gross income.

Standardized approach for securitization exposures

This approach comprises the calculation methods available for securitization exposures that do not require OSFI approval: the External Ratings-Based Approach (SEC-ERBA) and the Standardized Approach (SEC-SA).

Strategic risk

The risk of ineffective or improper implementation of business strategies, including mergers and acquisitions. It includes the potential financial loss due to the failure of organic growth initiatives or failure to respond appropriately to changes in the business environment.

Stressed Value-at-Risk

A value-at-risk calculation using a one-year observation period related to significant losses for the given portfolio at a specified level of confidence and time horizon.

CIBC 2020 ANNUAL REPORT 201

Structural foreign exchange risk

Structural foreign exchange risk primarily consists of the risk inherent in net investments in foreign operations due to changes in foreign exchange rates, and foreign currency denominated RWA and foreign currency denominated capital deductions.

Structural interest rate risk

Structural interest rate risk primarily consists of the risk arising due to mismatches in assets and liabilities, which do not arise from trading and trading-related businesses.

Total loss absorbing capacity (TLAC) measure

The sum of Total capital and bail-in eligible liabilities that have a residual maturity greater than one year. Bail-in eligible liabilities include long-term (original maturity over 400 days), unsecured senior debt issued on or after September 23, 2018, that is tradable and transferrable, and any preferred shares and subordinated debt that are not NVCC. Consumer deposits, secured liabilities (for example, covered bonds), eligible financial contracts (for example derivatives) and certain structured notes are excluded from the bail-in power.

Transitional arrangements for capital treatment of expected loss provisioning

On March 27, 2020, OSFI introduced transitional arrangements for expected credit loss provisioning. This arrangement results in a portion of allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount of ECL allowances eligible for inclusion in CET1 capital is determined based on the increase in stage 1 and stage 2 allowances relative to balances as at January 31, 2020 as a baseline. This amount is then adjusted for tax effects and is subject to a scaling factor that will decrease over time. The scaling factor has been set at 70% for fiscal 2020, 50% for fiscal 2021, and 25% for fiscal 2022. For exposures under the internal ratings-based (IRB) approach, the lower of this amount and excess allowances eligible for inclusion in Tier 2 capital is included as CET1 capital under the transitional arrangements.

Undrawn exposures

The amount of credit risk exposure resulting from loans that have not been advanced to a customer, but which a customer may be entitled to draw in the future.

Value-at-Risk (VaR)

Generally accepted risk measure that uses statistical models to estimate the distribution of possible returns on a given portfolio at a specified level of confidence and time horizon.

202 CIBC 2020 ANNUAL REPORT

Shareholder information

Fiscal Year

November 1st to October 31st

Key Dates

Reporting dates 2021

First quarter results – Thursday, February 25, 2021

Second quarter results – Thursday, May 27, 2021

Third quarter results – Thursday, August 26, 2021

Fourth quarter results – Thursday, December 2, 2021

Annual Meeting of Shareholders 2021

CIBC’s Annual Meeting of Shareholders will be held on April 8, 2021. For more details, please visit our Annual Meeting webpage at https://www.cibc.com/en/about-cibc/investor-relations/annual-meeting.html.

Common shares of CIBC (CM) are listed on the Toronto Stock Exchange and the New York Stock Exchange. Preferred shares are listed on the Toronto Stock Exchange.

Dividends

Quarterly dividends were paid on CIBC common and preferred shares in 2020:

Common shares

Ex-dividend date	Record date	Payment date	Dividends per share	Number of common shares on record date
Sep 25/20	Sep 28/20	Oct 28/20	$1.46	446,423,900
Jun 26/20	Jun 29/20	Jul 28/20	$1.46	445,450,650
Mar 26/20	Mar 27/20	Apr 28/20	$1.46	444,565,420
Dec 24/19	Dec 27/19	Jan 28/20	$1.44	445,169,021

Preferred shares

Stock	Series 39	Series 41 (1)	Series 43 (2)	Series 45	Series 47	Series 49	Series 51
Ticker symbol	CM.PR.O	CM.PR.P	CM.PR.Q	CM.PR.R	CM.PR.S	CM.PR.T	CM.PR.Y
Quarterly dividend	$0.232063	$0.244313	$0.196438	$0.275000	$0.281250	$0.325000	$0.321875

⁽¹⁾ The dividend rate of Series 41 was reset in accordance with the share terms effective January 31, 2020.

⁽²⁾ The dividend rate of Series 43 was reset in accordance with the share terms effective July 31, 2020.

2021 dividend payment dates

(Subject to approval by the CIBC Board of Directors)

Record dates	Payment dates
December 29, 2020	January 28, 2021
March 29, 2021	April 28, 2021
June 28, 2021	July 28, 2021
September 28, 2021	October 28, 2021

Eligible dividends

CIBC designates any and all dividends paid or deemed for Canadian federal, provincial or territorial income tax purposes to be paid on or after January 1, 2006 to be “eligible dividends”, unless otherwise indicated in respect of dividends paid subsequent to this notification, and hereby notifies all recipients of such dividends of this designation.

Regulatory capital

Information on CIBC’s regulatory capital instruments and regulatory capital position may be found at www.cibc.com; About CIBC; Investor Relations; Regulatory Capital Instruments.

Credit ratings

Credit rating information can be found on page 78 in this Annual Report.

Shareholder investment plan

All Canadian and U.S. resident registered holders of CIBC common shares and designated Class A preferred shares may participate in one or more of the following options and pay no brokerage commissions or service charges:

Dividend reinvestment option – Canadian residents may have dividends reinvested in additional CIBC common shares.

Share purchase option – Canadian residents may purchase up to $50,000 of additional CIBC common shares during the fiscal year.

Stock dividend option – U.S. residents may elect to receive stock dividends on CIBC common shares.

Further information is available through AST Trust Company (Canada) (formerly CST Trust Company) and on the CIBC website at www.cibc.com.

Transfer agent and registrar

For information relating to shareholdings, shareholder investment plan, dividends, direct dividend deposit, dividend reinvestment accounts and lost certificates, or to eliminate duplicate mailings of shareholder material, please contact:

CIBC 2020 ANNUAL REPORT 203

AST Trust Company (Canada), P.O. Box 700, Postal Station B, Montreal, QC, H3B 3K3

416 682-3860 or 1 800 258-0499 (Canada and the U.S. only), Fax 1 888 249-6189, Email: inquiries@astfinancial.com,

Website: www.astfinancial.com/ca.

Common and preferred shares are transferable in Canada at the offices of our agent, AST Trust Company (Canada), in Toronto, Montreal, Calgary and Vancouver.

In the U.S., common shares are transferable at:

Computershare Inc., By Mail: P.O. Box 43078 Providence, RI 02940-3078; By Overnight Delivery: 150 Royall Street, Canton, MA 02021, 1 800 589-9836, Website: www.computershare.com/investor.

Registered shareholders can opt to have their shares recorded electronically in the Direct Registration System (DRS). Please contact our transfer agent for details.

How to reach us:

CIBC Head Office Commerce Court, Toronto, Ontario, Canada M5L 1A2 Telephone number: 416 980-2211 SWIFT code: CIBCCATT Website: www.cibc.com Investor Relations Email: investorrelations@cibc.com Corporate Secretary Call: 416 980-3096 Email: corporate.secretary@cibc.com Office of the CIBC Ombudsman Toll-free across Canada: 1 800 308-6859 Toronto: 416 861-3313 Email: ombudsman@cibc.com

CIBC Telephone Banking Toll-free across Canada: 1 800 465-2422 Communications and Public Affairs Email: corporatecommunications@cibc.com Client Care Toll-free across Canada: 1 800 465-2255 Email: client.care@cibc.com

Where to find more information

CIBC Annual Report 2020

Additional print copies of the Annual Report will be available in March 2021 and may be obtained by emailing investorrelations@cibc.com. The Annual Report is also available online at www.cibc.com/ca/investor-relations/annual-reports.html.

Des exemplaires supplémentaires du Rapport annuel seront disponibles en mars 2021 et peuvent être commandés par courriel à relationsinvestisseurs@cibc.com. Le Rapport annuel est aussi disponible à l’adresse www.cibc.com/ca/investor-relations/annual-reports-fr.html.

CIBC Sustainability Report and Public Accountability Statement 2020

This report reviews our economic, environmental, social and governance activities over the past year and will be available in March 2021 at https://www.cibc.com/en/about-cibc/corporate-responsibility.html.

Management Proxy Circular 2021

The Management Proxy Circular contains information for shareholders about CIBC’s annual meeting, including information relating to the election of CIBC’s directors, appointment of auditors and shareholder proposals, as well as other matters. The 2021 Proxy Circular will be available in March 2021 at www.cibc.com.

Corporate Governance

CIBC’s Statement of Corporate Governance Practices describes the governance framework that guides the Board and management in fulfilling their obligations to CIBC and our shareholders. This statement and other information on Corporate Governance at CIBC, including our CIBC Code of Conduct for all employees and CIBC Code of Ethics for Directors, can be found on our corporate website at www.cibc.com/ca/inside-cibc/governance/governance-practices.html.

Regulatory Filings

In Canada with the Canadian Securities Administrators at www.sedar.com.

In the U.S. with the U.S. Securities and Exchange Commission at www.sec.gov/edgar.shtml.

Incorporation

Canadian Imperial Bank of Commerce (CIBC) is a diversified financial institution governed by the Bank Act (Canada). CIBC was formed through the amalgamation of The Canadian Bank of Commerce and Imperial Bank of Canada in 1961.

The Canadian Bank of Commerce was originally incorporated as Bank of Canada by special act of the legislature of the Province of Canada in 1858. Subsequently, the name was changed to The Canadian Bank of Commerce and it opened for business under that name in 1867. Imperial Bank of Canada was incorporated in 1875 by special act of the Parliament of Canada and commenced operations in that year.

Trademarks

Trademarks used in this Annual Report which are owned by Canadian Imperial Bank of Commerce, or its subsidiaries in Canada and/or other countries include, “CIBC Agility”, “CIBC Bank USA Smart Account”, the CIBC logo, “CIBC eDeposit”, “CIBC FirstCaribbean International Bank”, “CIBC Foreign Cash Online”, “CIBC Global Money Transfer”, “CIBC Investor’s Edge”, “CIBC Miracle Day”, “CIBC Mobile Banking”, “CIBC Pace It”, “CIBC Personal Portfolio Services”, “CIBC Private Wealth Management”, “CIBC Smart”, “CIBC SmartBanking”, “CIBC Team Next”, “Remi Beta Bot”, “Simplii Financial” and “Wood Gundy”. All other trademarks mentioned in this annual report which are not owned by Canadian Imperial Bank of Commerce or its subsidiaries, are the property of their respective owners.

204 CIBC 2020 ANNUAL REPORT

Board of Directors:

The Hon. John P. Manley, P.C., O.C. Chair of the Board CIBC Senior Advisor, Bennett Jones LLP Ottawa, Ontario, Canada Joined in 2005	Brent S. Belzberg (CGC, RMC) Senior Managing Partner TorQuest Partners Toronto, Ontario, Canada Joined in 2005	Charles J. G. Brindamour (RMC) Chief Executive Officer Intact Financial Corporation Toronto, Ontario, Canada Joined in 2020	Nanci E. Caldwell (MRCC) Corporate Director Woodside, California, U.S.A. Joined in 2015
Michelle L. Collins (AC) President Cambium LLC Chicago, Illinois, U.S.A. Joined in 2017	Patrick D. Daniel (MRCC – Chair) Corporate Director Calgary, Alberta, Canada Joined in 2009	Luc Desjardins (AC) President and Chief Executive Officer Superior Plus Corp. Toronto, Ontario, Canada Joined in 2009	Victor G. Dodig President and Chief Executive Officer CIBC Toronto, Ontario, Canada Joined in 2014
Kevin J. Kelly (MRCC) Corporate Director Toronto, Ontario, Canada Joined in 2013	Christine E. Larsen (RMC) Corporate Director Montclair, New Jersey, U.S.A. Joined in 2016	Nicholas D. Le Pan (AC – Chair) Corporate Director Ottawa, Ontario, Canada Joined in 2008	Jane L. Peverett (AC, CGC) Corporate Director West Vancouver, British Columbia, Canada Joined in 2009
Katharine B. Stevenson (CGC – Chair, MRCC) Corporate Director Toronto, Ontario, Canada Joined in 2011	Martine Turcotte (CGC, MRCC) Corporate Director Verdun, Québec, Canada Joined in 2014	Barry L. Zubrow (RMC – Chair) President ITB LLC Far Hills, New Jersey, U.S.A. Joined in 2015

AC – Audit Committee

CGC – Corporate Governance Committee

MRCC – Management Resources and Compensation Committee

RMC – Risk Management Committee

CIBC 2020 ANNUAL REPORT 205

Sustainable banking

for a modern world

Sustainability is at the heart of CIBC’s purpose: to help make your ambitions a reality. Inspired by this purpose, we integrate sustainability into everything we do, focusing on environmental, social and governance (ESG) matters of importance to our stakeholders.

Building on responsible business practices that we have embedded across CIBC, we are taking action to further reduce environmental impacts across our value chain, support programs that foster an inclusive and healthy society, and integrate best-in-class governance practices to create a sustainable future.

CIBC supports and participates in many industry and global sustainability initiatives:

CIBC’s 2020 Sustainability Report will be available in March 2021 at www.cibc.com

www.cibc.com

EX-99.3

Exhibit 99.3

Notice of 2021 annual meeting of shareholders and notice of availability of our meeting materials

You are receiving this notice as a CIBC shareholder

The health and well-being of our team, clients, investors and communities remains our top priority. In line with the latest directives from public health and government authorities, this year’s meeting will be virtual by live webcast and telephone.

Notice-and-access

Protecting the environment – We are proud to let you know that we have furthered our commitment to protect the environment by reducing the amount of paper we send to our shareholders. You have told us how important environmental sustainability is to you as shareholders and we are listening.

Our Management Proxy Circular – Starting this year, we are using notice-and-access to send our registered and non-registered shareholders the 2021 management proxy circular (Circular) as permitted by the Canadian Securities Administrators and with the authorization of the Office of the Superintendent of Financial Institutions Canada. This means that our Circular will be posted online for you to access, rather than being printed and mailed to you. This notice includes information on how to access the Circular online and how to request a paper copy. We also enclose a proxy form (if you are a registered shareholder) or voting instruction form (if you are a non-registered shareholder). This form allows you to exercise your voting rights. For information on how to vote, see “Voting” below.

It is important that you read the Circular carefully before voting your shares.

Our Annual Financial Statements and Management’s Discussion and Analysis – The way we send you our annual financial statements and management’s discussion and analysis (MD&A) (together with our Circular, the “meeting materials”) depends on whether you are a registered shareholder or a non-registered shareholder (see definitions below). If you are a registered shareholder and you did not sign-up for e-delivery or opt out of receiving our annual financial statements, then we are required to send you our annual financial statements and you will receive a paper copy of our Annual Report with this notice. If you are a non-registered shareholder, then we will use notice-and-access to send you our annual financial statements and MD&A as permitted by securities law so that you can access this material online the same way as our Circular.

NOTICE OF MEETING
WHEN	Thursday, April 8, 2021, 10:30 a.m. (EDT)
VIRTUAL	Log in at
MEETING	https://cibc.pividal.tv/agm2021 at least 15 minutes before the meeting starts.
You may also listen to our meeting (but not vote) by calling 1 800 898-3989 passcode 6875673# (English) or 1 877 395-0279 passcode 9080240# (French).

Where you can access the

meeting materials

On the AST Trust Company (Canada) (AST) website:

www.meetingdocuments.com/astca/cibc

On our website:

www.cibc.com

On SEDAR:

www.sedar.com

On EDGAR:

www.sec.gov/edgar.shtml

Business of the meeting		For more information, please see:
1	Receiving our financial statements for the year ended October 31, 2020 and the auditors’ report on the statements	Page 1 of our Circular and our 2020 Annual Report
2	Electing directors	Pages 1 and 14-28 of our Circular
3	Appointing the auditors	Pages 1 and 37 of our Circular
4	Considering advisory resolution on our executive compensation approach	Pages 1 and 61-84 of our Circular
5	Considering shareholder proposals	Pages 1 and 6-13 of our Circular

The meeting may also consider other business that properly comes before it. Continued on reverse side

Notice of 2021 Annual Meeting of Shareholders | Notice of Availability of Meeting Materials

Voting

Please note that you cannot vote by returning this notice.

You may vote your shares before the meeting using one of the following methods:

Registered Shareholders	Non-registered shareholders

Your proxy form or voting instruction form explains how to vote using these methods. Please follow those instructions. We encourage you to vote before the meeting.

You may also vote during the virtual meeting at https://cibc.pividal.tv/agm2021. For more information on how to vote in real time by completing an online ballot, see “Voting” starting on page 2 of the Circular.

Registered shareholders

You are a registered shareholder if you hold a paper share certificate in your name or your shares are held through the direct registration system. To be counted, your proxy must be received by AST by 10:30 a.m. (EDT) on Wednesday, April 7, 2021.

Non-registered shareholders

You are a non-registered shareholder if your shares are registered in the name of an intermediary, such as a bank, broker or trust company. You must allow sufficient time for your intermediary to receive and act on your voting instructions by 10:30 a.m. (EDT) on Wednesday, April 7, 2021. Please check your voting instruction form for information on the deadline for returning your form.

If you are a non-registered shareholder and wish to attend and vote online at the virtual meeting, there are additional steps you MUST take.

Please see “Voting” starting on page 2 of the Circular for more information.

Non-registered shareholders who have not duly appointed themselves as proxyholder and registered with AST will not be able to vote at the meeting but will be able to participate as a guest.

How to request a paper copy of the meeting materials

Upon request, AST will provide a paper copy of the Circular or the Annual Report, free of charge, for a period of one year from the date the meeting materials were filed on SEDAR. Here is how you can request a paper copy.

BEFORE THE MEETING

Go to www.meetingdocuments.com/astca/cibc or call 1 888 433-6443 (toll free in Canada and the United States)

or 416 682-3801 (other countries) or email fulfilment@astfinancial.com.

If your request is made before April 8, 2021 (the date of our meeting), the meeting materials will be sent to you within three business days of your request.

Please note that you will not receive another proxy form or voting instruction form so please retain your original form to vote your shares.

To ensure receipt of the paper copy before the voting deadline and meeting date, we estimate that your request must be received by AST no later than 5:00 p.m. (EDT) on March 25, 2021. This reflects the three business day period for processing requests as well as typical mailing times.

AFTER THE MEETING

Call 1 888 433-6443 (toll free in Canada and the United States) or 416 682-3801 (other countries) or email fulfilment@astfinancial.com.

If your request is made on or after April 8, 2021, the meeting materials will be sent to you within ten calendar days of your request.

If you have any questions regarding this notice, notice-and-access or the virtual meeting, please call

1 800 258-0499 (toll free in Canada and the United States)

or 416 682-3860 (other countries).

Go paperless!

Sign up for electronic delivery of our meeting materials and other continuous disclosure documents for future years. Enrolling is easy and electronic delivery is secure, free, convenient and environmentally friendly.

Registered shareholders

Go to https://ca.astfinancial.com/edelivery, select Canadian Imperial Bank of Commerce, complete the consent form and hit “submit”.

Non-registered shareholders in Canada

Go to www.proxyvote.com and use the control number provided on your voting instruction form.

Notice of 2021 Annual Meeting of Shareholders | Notice of Availability of Meeting Materials

EX-99.4

Exhibit 99.4

  Proxy Form – Annual Meeting of Shareholders – April 8, 2021

Notes to Proxy Form

 1. As a shareholder, you have the right to appoint a proxyholder other than management’s nominees, to attend, vote and act on your behalf at the meeting. Your proxyholder does not have to be a shareholder. Simply insert the name of your proxyholder in the space provided. All proxy appointments must be registered with AST Trust Company (Canada) (AST), our transfer agent, by calling AST at 1 866 751-6315 (within North America) or 1 212 235-5754 (outside North America). AST will provide your proxyholder with a control number to vote during the meeting. If you do not insert a name in the box, then John P. Manley, Chair of the Board and Victor G. Dodig, President and Chief Executive Officer, will be appointed as your proxyholder.

 2. If you are an individual shareholder, this proxy must be signed by you or an attorney authorized by you in writing. If the shareholder is a corporation, the proxy should be signed by its authorized officer(s). Individuals signing on behalf of a corporation, trust, estate or under a power of attorney or similar authority, should state the capacity in which they sign. Proof of authority to sign may be required.

 3. This Proxy Form revokes any proxy previously given for the meeting.

 4. If this Proxy Form is not dated, it will be considered dated on the day it is mailed to the shareholder.

 5. The shares represented by a properly executed Proxy Form will be voted for or against or withheld from voting or the proxyholder may abstain, as applicable, in each case as instructed by the shareholder. This Proxy Form confers discretionary authority on the proxyholder to vote as he or she wishes on each matter set out on this Proxy Form, if no choice is specified, and on any amendments or other matters properly brought before the meeting. If you or your proxyholder do not give specific instructions, your shares will be voted FOR items 1, 2 and 3 and AGAINST item 4.

 6. If you mark the ABSTAIN box, you are directing your proxyholder to ABSTAIN from voting FOR or AGAINST that matter. An abstention will be counted as present for quorum purposes but will not be counted as a vote cast in determining whether the required majority of votes has approved the shareholder proposal. The number of abstentions will be reported in the voting results.

 7. For your shares to be voted (or withheld from voting), you must sign and return this Proxy Form or vote by one of the other methods described below.

 8. This Proxy Form should be read with the Notice of Meeting and Management Proxy Circular available at www.cibc.com, www.meetingdocuments.com/astca/cibc, www.sedar.com and www.sec.gov/edgar.shtml.

Method of Voting

	To vote by mail		To vote by fax		To vote by online
•  Complete, sign and date this Proxy Form •  Return it in the envelope provided		•  Complete, sign and date this Proxy Form •  Send it by fax to 1 866 781-3111 for calls in Canada and the US •  Send it by fax to 1 416 368-2502 for calls outside Canada and the US		•  Go to www.astvotemyproxy.com and follow the instructions. You will need the control number printed at the top of this Proxy Form. •  By email: Complete, sign and date this Proxy Form. Scan and email both sides to proxyvote@astfinancial.com

To ensure your vote is counted, proxies must be received by AST by 10:30 a.m. Eastern Daylight Time on April 7, 2021.

      This Proxy is solicited by and on behalf of Management of CIBC

Appointment of Proxyholder

I appoint John P. Manley, Chair of the Board, or failing him, Victor G. Dodig, President and Chief Executive Officer, (management’s nominees)

OR     I appoint (please print name in box)

as my proxyholder, with power of substitution, to attend, vote, withhold from voting or otherwise act on my behalf on all matters that properly come before the Annual Meeting of Shareholders on April 8, 2021 and any adjournment(s) of the meeting as directed herein if a choice is specified by the undersigned or, if no choice is specified, as the proxyholder sees fit, and with authority to act in the proxyholder’s discretion regarding any amendments or variations and other matters properly brought before the meeting.

Directors and management recommend shareholders vote FOR items 1, 2 and 3:

1.	Election of Directors
		For	Withhold		For	Withhold		For	Withhold
	Charles J. G. Brindamour	☐	☐	Victor G. Dodig	☐	☐	Jane L. Peverett	☐	☐
	Nanci E. Caldwell	☐	☐	Kevin J. Kelly	☐	☐	Katharine B. Stevenson	☐	☐
	Michelle L. Collins	☐	☐	Christine E. Larsen	☐	☐	Martine Turcotte	☐	☐
	Patrick D. Daniel	☐	☐	Nicholas D. Le Pan	☐	☐	Barry L. Zubrow	☐	☐
	Luc Desjardins	☐	☐	Mary Lou Maher	☐	☐

		For	Withhold
2.	Appointment of Ernst & Young LLP as auditors	☐	☐
		For	Against
3.	Advisory resolution on our executive   compensation approach	☐	☐

Directors and management recommend shareholders vote AGAINST item 4.

		For	Against	Abstain
4.	Shareholder Proposal 1	☐	☐	☐

Authorized Signature(s) – Sign Here – This section must be completed for your vote to be counted. Day / Month / Year

Quarterly Reports Request		Annual Report Waiver		To Consent to Electronic Delivery
☐	Mark this box if you WANT to receive (or continue to receive) quarterly financial statements and MD&A. If you do not mark this box, quarterly reports WILL NOT be sent to you in 2021.	☐	Mark this box if you DO NOT WANT to receive the annual financial statements and MD&A. If you do not mark this box, the Annual Report will continue to be sent to you.	Go to https://ca.astfinancial.com/edelivery, select Canadian Imperial Bank of Commerce, complete the consent form and hit “submit”.

CIBC’s quarterly and annual financial statements and MD&A are available at www.cibc.com on the day they are released.

We are permitted to deliver our Management Proxy Circular to you through notice-and-access as described in the Circular. If you wish to go digital and receive other materials prepared by CIBC, such as notices of meeting, proxy forms, quarterly and annual financial statements and MD&A, and other information by email instead of in hard copy, follow the steps “To Consent to Electronic Delivery” above.

Please see the notes on the reverse side of this Proxy Form.

If you receive more than one proxy, please follow the steps on the reverse side of this Proxy Form for each one.